Last checked at 4 Jun 2009 07:00
CHAMBERLIN plc
("Chamberlin", the "Company" or the "Group")
FINAL RESULTS
for the year ended 31 March 2009
·; Robust results in exceptionally difficult trading conditions - extreme downturn in H2 reversed gains of H1
Chairman, Tom Brown, commented,
"After a two year period of fundamental change at Chamberlin, during which the new management team substantially restructured and reorganised the business, modernising systems and business practices, the benefits were becoming evident in Chamberlin's financial results. The first half of the year showed a significant improvement in profitability. However, the autumn saw the most dramatic decline in the engineering economy in modern times and the second half of last year proved to be extremely difficult.
As a result, the achievements of the first half were reversed by the severe downturn in the second half.
Chamberlin remains a technically strong, well managed Group, with a sound balance sheet. Although the short term will continue to be very challenging we believe there will be opportunities for both organic and acquisitive growth in the medium term."
* stated before exceptional costs of £446,000 and unrealised foreign exchange expenses of £311,000 (2008: Stated before exceptional costs of £494,000 and unrealised foreign exchange expenses of £325,000).
Chamberlin plc T: 01922 707100
Tom Brown, Chairman
Tim Hair, Chief Executive
Charles Stanley Securities T: 020 7149 6000
(Nominated Adviser)
Russell Cook
Chairman's Statement
After a two year period of fundamental change at Chamberlin, during which the new management team substantially restructured and reorganised the business, modernising systems and business practices, the benefits were becoming evident in Chamberlin's financial results. The first half of the year showed a significant improvement in profitability. However, the autumn saw the most dramatic decline in the engineering economy in modern times and the second half of last year proved to be extremely difficult.
As a result, the achievements of the first half were reversed by the severe downturn in the second half. While this was extremely disappointing, the Board believe that the improvements made throughout the business since 2006 leave the Group better placed than many in our sector to weather the exceptionally difficult trading environment and I am pleased to report that this is proving to be the case.
Results & Dividend
For the year ended 31 March 2009, underlying profit before tax, excluding exceptional items and unrealised foreign exchange cost fell to £0.3m (2008: £1.4m). Underlying earnings per share before all one-off costs fell to 2.2p (2008: 15.1p) with both results adversely affected by the severe drop in demand in the second half of the year.
Overall revenues decreased slightly to £39.94m (2008: £39.97m).This result needs careful interpretation since it is the outcome of a combination of first half growth and second half contraction, coupled with price surcharge effects (described in more detail in the Business Review) and it masks an overall decrease in volume of 37% in the second half.
Exceptional costs in the year totalled £446,000 (2008: £494,000), with severance costs, which were unfortunately necessary in re-structuring the business during the downturn, accounting for £253,000 of this total. The remainder chiefly relates to the settlement of the nuisance claim described in our 2008 report and partially accounted for in that year.
Capital spending has been high in recent years as the new management team caught up on previous under-investment in key sites and the majority of the year's budget had already been committed before the downturn in the autumn. This spend has been a key factor in an increase of £2.23m in Group borrowings to £3.26m during the year. However, Chamberlin's balance sheet remains strong, with gearing at 34% at the year end and net assets at £9.46m. We have also recently renewed our £4.5m overdraft facility without onerous terms.
In our interim statement, I announced that we had taken the decision to reduce the Group's dividend to a level which we believed would be sustainable in current market conditions. However, since then, trading volumes have declined much further and in view of this and having paid an interim dividend of 1.2p per share, your Board has decided with regret to suspend dividends at the current time. We remain committed to a policy of progressive dividends and look forward to returning to paying a dividend when the Board believes there has been sufficient improvement in trading conditions.
The deficit in the Group's defined benefit pension scheme, closed to further accrual in December 2007, increased to £1.8m (2008: £1.1m) largely as a consequence of the stock market downturn.
Operations
The strong demand and improved profitability reported for the first half of the financial year was replaced during November 2008 with severe reductions in demand from many sectors, and this reduction was exacerbated by the de-stocking of supply chains. Our foundries at Walsall and Leicester were particularly badly hit and saw volume reductions of well over 50% from some customers. Our engineering businesses, which account for approximately 17% of total revenues, were affected less significantly but they also experienced reduced demand.
Chamberlin products are supplied to end-users in a wide variety of industries and the breadth of our customer base has been beneficial in the downturn. Group sales are not overly exposed to any single sector, with the most significant being passenger car (13% of sales), construction equipment (12%), commercial vehicles (12%) and hydraulics (9%). It is encouraging that, in the current market conditions, we have continued to win new customers and these should stand us in good stead when demand begins to recover.
In September, we had prepared contingency plans in anticipation of a decline in demand. Although the extent of the downturn was beyond our expectations, these plans, which included redundancies, short-time working at all sites, wage freezes and rigorous spending control, allowed an immediate reaction to the downturn and limited the damage to the business. In addition to cost reductions, we also focused on improving efficiency, driving productivity, lean manufacturing and process improvements. Despite the acute problems due to lack of demand, our infrastructure remains intact and ready to respond in full to future restoration of demand.
Strategy
Despite the recession, we continue to pursue our strategy to broaden the Group's activities through the acquisition of engineering companies that meet our criteria and fit the principle of "difficult things done well". During the first half of the year, we made significant progress in our search for acquisitions and made some indicative offers though the price expectations of vendors proved excessive. Lately our focus has had to be on the existing businesses but we will again look actively for acquisitions as the economy becomes more stable and expect to see a wider range of more sensibly priced opportunities.
Outlook
In recent months, our main markets have been severely distorted by de-stocking. This has caused orders for the components we supply to fall to an excessively low level and certainly well below the level of sales of finished products to end customers. Inevitably there is a limit to this process as stocks are consumed. We are now seeing the first signs that some of our customers appear to have reached this point and we expect to see a progressive increase in sales in the coming months, assuming end-user demand remains at current levels. In addition, with capital spending now reduced, we expect the business to generate cash during the coming year so long as there is no further worsening in the economic situation.
Chamberlin remains a technically strong, well managed Group, with a sound balance sheet. Although the short term will continue to be very challenging we believe there will be opportunities for both organic and acquisitive growth in the medium term.
Tom Brown
Chairman
4 June 2009
Business Review
In our last report, we indicated that the turnaround of Chamberlin had progressed well and that the new management teams in our subsidiaries were providing strong leadership to their businesses. As the economy entered recession, the changes we had made to the business served Chamberlin well, allowing the business to manage the downturn effectively and ensuring that we are better positioned than many in our sector for the recovery when it arrives.
Financial Results
Revenues were broadly flat at £39.94m (2008: £39.97m) but included significant price and volume movements. Price surcharges, linked to increases in material costs earlier in the year, were off-set by an overall volume reduction of approximately 20% for the year as a whole. The fall in volume occurred in the second half when volumes reduced by 37% compared to the first half, as the global downturn caused a rapid decline in demand from November onwards and customers began to de-stock. This impact was particularly acute in the foundries in Walsall and Leicester.
The underlying profit before tax and exceptional items (PBTE) for the year was £259,000 (2008: £1,404,000). This is before the impact of revaluing forward currency contracts, which in the year resulted in a charge of £311,000 (2008: £325,000).
Group borrowings have increased by £2.23m in the year to £3.26m due to a combination of factors. Capital spend of £2.1m, the majority of which had been committed when recession struck, largely related to 'catch up' investment on key sites after years of previous underinvestment. Working capital was broadly flat, as the sudden cancellation of schedules prevented us from reducing stocks in line with demand. The substantial proportion of the nuisance claim costs were paid during the period and finally the dividends paid exceeded current earnings. However, gearing remains low at 34% (2008: 9%) and the balance sheet is strong with net assets of £9.46m.
Operations
After a good first half, the business environment in the second half was a complex mixture of reduced underlying demand, de-stocking, falling raw material prices and unreliable schedules and payments. Together, these created the most difficult trading conditions of recent years. However our subsidiaries responded to the challenges in their markets and performed creditably in these difficult times. Early reductions in capacity, redundancies, short-time working to retain skilled employees and rigorous control of spending have been implemented in all sites. Business improvement activity has been increased to take advantage of spare technical capacity and we continue to leverage our engineering leadership to win new business.
Foundries
Our foundry businesses, based in Walsall, Leicester and Scunthorpe, account for 83% of Group turnover.
Chamberlin & Hill Castings
This volume foundry, located in Walsall, is a leader in castings with complex internal passages and has continued to focus on winning business in markets where this is a critical skill, notably turbochargers and hydraulic equipment. In the past, turbocharger sales have been dominated by a single customer but we are pleased to report that supply to a second turbocharger manufacturer has now started and technical discussions are underway with further customers in this sector. The hydraulics market now accounts for 14% of sales, having grown from 3% two years ago, as the business has added a number of the leading hydraulics companies to its customer base.
The downturn in the automotive industry has caused a significant reduction in demand at Walsall. Sales of both passenger cars and trucks have declined and the removal of stock from the supply chain has greatly amplified the impact on our business in the short term. De-stocking in the passenger car sector appears to be coming to an end and we expect demand at the foundry to recover during the first half of the new financial year until it reflects the underlying level of demand in the marketplace. Demand in the truck sector supply chain continues to be low and we believe that there is further de-stocking required in this sector.
The lean manufacturing initiative started in 2008 has progressed well, yielding improvements in quality, productivity and customer service. We have made further investment in new equipment and this has reduced our break-even point and created a firm platform for profitable growth when demand recovers.
Automotive turbochargers remain an attractive sector despite the short term fall in volume. Currently, very few petrol engines are turbocharged but, in future, more will require turbo charging to meet emissions regulations. Chamberlin & Hill is currently working on prototype parts for both petrol engines and petrol-engine hybrids that will be launched in vehicles in 2010. With very few other foundries in Europe capable of developing these castings, we are well placed to take advantage of growth in this area.
Russell Ductile Castings
A specialist in highly-engineered, lower volume castings, Russell Ductile operates from two sites, in Leicester and Scunthorpe, supplying a diverse range of industries. The turnaround process of this business, started in 2007, has been successfully completed and Russell Ductile is now operating effectively. Unfortunately, the recent downturn has reduced demand for mid-range castings, especially in the construction equipment sector served by the Leicester site, preventing the business from delivering its full potential. Demand for the heaviest castings made in Scunthorpe has fallen back a little but so far this area has been least affected by the downturn.
Our programme to penetrate new markets has delivered some notable successes and Russell Ductile has now become a recognised supplier to manufacturers of defence equipment, specialist vehicles, hydraulics and railway rolling stock. The business is now working on opportunities in both transport and renewable energy where its specialist skills are in demand.
Engineering
Our two engineering businesses, Fred Duncombe and Petrel, account for 17% of the Group's turnover.
Fred Duncombe
Trading under the Exidor brand, this business is the second largest provider in the UK of emergency exit hardware. This makes up 80% of its business, with the remainder being in related hardware products. Although Duncombe is not exposed to the housing industry it does supply the construction industry and demand from this sector fell significantly during the year under review. We installed new management and a new sales team in the business in the previous financial year and we are pleased to report that their efforts have partially offset the downturn in the market, limiting the reduction in sales.
Petrel
A niche supplier of lighting and electrical controls for hazardous areas, Petrel has made good progress with both product offering and operational efficiencies, including upgrading its business systems during the year. Sales have been little impacted by recession during the year and we continue to view this as a growth business.
Tim Hair Mark Bache
Chief Executive Finance Director
Consolidated Income Statement
for the year ended 31 March 2009
| 2009 | 2008 | |||||||
| Notes | Before excep-tional items | Excep-tional items | Total | Before Except-ional items | Excep-tional items | Total | ||
| £000 | £000 | £000 | £000 | £000 | £000 | |||
| Revenue | 3. | 39,940 | - | 39,940 | 39,967 | - | 39,967 | |
| Cost of sales | (33,783) | - | (33,783) | (33,134) | - | (33,134) | ||
| Gross profit | 6,157 | - | 6,157 | 6,833 | - | 6,833 | ||
| Other operating expenses | 4., 11. | (5,697) | (446) | (6,143) | (5,510) | (494) | (6,004) | |
| Operating profit/(loss) from continuing operations | 460 | (446) | 14 | 1,323 | (494) | 829 | ||
| Finance revenue | 6. | - | - | - | 149 | - | 149 | |
| Finance costs | 6. | (201) | - | (201) | (68) | - | (68) | |
| Profit/(loss) from continuing operations before tax and unrealised foreign currency loss | 259 | (446) | (187) | 1,404 | (494) | 910 | ||
| Unrealised foreign currency loss | (311) | - | (311) | (325) | - | (325) | ||
| (Loss)/profit from continuing operations before tax | (52) | (446) | (498) | 1,079 | (494) | 585 | ||
| Tax (expense)/ credit | 8., 11. | (5) | (346) | (351) | (181) | 190 | 9 | |
| (Loss)/profit for the year from continuing operations | (57) | (792) | (849) | 898 | (304) | 594 | ||
| Earnings/(loss) per share | ||||||||
| basic | 10. | (11.4)p | 8.0p | |||||
| basic underlying | 10. | 2.2p | 15.1p | |||||
| diluted | 10. | (11.4)p | 7.9p | |||||
| diluted underlying | 10. | 2.1p | 14.9p |
Consolidated Statement of Recognised Income and Expense
for the year ended 31 March 2009
| 2009 | 2008 | |||
| £000 | £000 | |||
| Actuarial (losses)/gains on pension assets and liabilities | (982) | 729 | ||
| Deferred tax credit/(charge) on actuarial (losses)/gains | 275 | (204) | ||
| Net (expense)/income recognised directly in equity | (707) | 525 | ||
| (Loss)/profit for the year | (849) | 594 | ||
| Total recognised income and expense for the year attributable to equity holders of the parent company | (1,556) | 1,119 | ||
Consolidated Balance Sheet
at 31 March 2009
| Notes | 2009 | 2008 | ||
| (Restated *) | ||||
| £000 | £000 | |||
| Non-current assets | ||||
| Property, plant and equipment | 8,968 | 8,349 | ||
| Intangible assets | 690 | 379 | ||
| Deferred tax assets | 809 | 692 | ||
| 10,467 | 9,420 | |||
| Current assets | ||||
| Inventories | 5,078 | 4,616 | ||
| Trade and other receivables | 6,004 | 8,719 | ||
| Income taxes receivable | - | 5 | ||
| 11,082 | 13,340 | |||
| Total assets | 21,549 | 22,760 | ||
| Current liabilities | ||||
| Financial liabilities | 3,258 | 1,031 | ||
| Trade and other payables | 6,614 | 8,151 | ||
| Provisions | 48 | 660 | ||
| 9,920 | 9,842 | |||
| Non current liabilities | ||||
| Deferred tax | 340 | 151 | ||
| Defined benefit pension scheme Deficit | 1,828 | 1,078 | ||
| 2,168 | 1,229 | |||
| Total Liabilities | 12,088 | 11,071 | ||
| Capital and reserves | ||||
| Called up share capital | 1,859 | 1,859 | ||
| Share premium account | 862 | 862 | ||
| Capital redemption reserve | 109 | 109 | ||
| Retained earnings | 6,631 | 8,859 | ||
| Total equity | 9,461 | 11,689 | ||
| Total equity and liabilities | 21,549 | 22,760 | ||
* Restated for deferred tax, see note 2
Consolidated Cash Flow Statement
for the year ended 31 March 2009
| 2009 | 2008 | |||
| Operating activities | £000 | £000 | ||
| (Loss)/profit for the year | (849) | 594 | ||
| Adjustments to reconcile (loss)/profit for the year to net cash inflow from operating activities: | ||||
| Taxation | 351 | (9) | ||
| Net finance costs/(income) | 201 | (81) | ||
| Depreciation of property, plant and equipment | 1,058 | 1,104 | ||
| Amortisation of software | 45 | 42 | ||
| Amortisation of development costs | 52 | 46 | ||
| Profit on disposal of property, plant and equipment | (11) | (471) | ||
| Share based payments | 12 | 27 | ||
| Pension element of finance (costs)/income | (39) | 149 | ||
| Difference between pension contributions paid and amounts recognised in the Income Statement | (231) | (428) | ||
| (Increase)/decrease in inventories | (462) | 130 | ||
| Decrease/(increase) in receivables | 2,715 | (1,349) | ||
| (Decrease)/increase in payables | (1,537) | 414 | ||
| Movement in provisions | (612) | 660 | ||
| Cash generated from operations | 693 | 828 | ||
| UK Corporation Tax received | - | 84 | ||
| Net cash flow from operating activities | 693 | 912 | ||
| Investing activities | ||||
| Purchase of property, plant and equipment | (1,725) | (1,579) | ||
| Purchase of software | (224) | (14) | ||
| Development costs | (184) | - | ||
| Disposal of plant and equipment | 59 | 769 | ||
| Net cash flow from investing activities | (2,074) | (824) | ||
| Financing activities | ||||
| Interest paid | (162) | (68) | ||
| Equity dividends paid | (684) | (881) | ||
| Issue of shares (including premium) | - | 39 | ||
| Net cash flow from financing activities | (846) | (910) | ||
| Net decrease in cash and cash equivalents | (2,227) | (822) | ||
| Cash and cash equivalents at the start of the year | (1,031) | (209) | ||
| Cash and cash equivalents at the end of the year | (3,258) | (1,031) | ||
| Cash and cash equivalents comprise: | ||||
| Financial liabilities | (3,258) | (1,031) | ||
| (3,258) | (1,031) |
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Authorisation of financial statements and statement of compliance with IFRS
The Group's and Company's financial statements of Chamberlin for the year ended 31 March 2009 were authorised for issue by the board of the directors on 4 June 2009 and the balance sheets were signed on the board's behalf by Tim Hair and Mark Bache. The Company is a public limited company incorporated and domiciled in England & Wales. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange.
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 1985.
The financial information set out in this announcement does not constitute the statutory accounts of the Group for the years to 31 March 2009 or 31 March 2008 but is derived from the 2009 Annual Report and Accounts. The Annual Report and Accounts for 2008 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2009 will be delivered to the Registrar of Companies in due course. The auditors, Ernst & Young LLP, have reported on the accounts for the year to 31 March 2009 and have given an unqualified report which does not contain a statement under Section 237(2) or 237(3) of the Companies Act 1985. The accounts for the year ended 31 March 2008 also received an unqualified audit report from Ernst & Young LLP.
The preliminary announcement has been prepared on the same basis as the financial statements for the year ended 31 March 2008.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated. The Company has taken advantage of the exemption provided under section 230 of the Companies Act 1985 not to publish its individual income statement and related notes.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Chamberlin plc and its subsidiaries as at 31 March each year. The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.
Restatement of deferred tax
After a detailed review of the Group's historic deferred tax provisions it has been concluded that liabilities in respect of capital gains rolled over into goodwill on the acquisition of Fred Duncombe Ltd in 1989 and Heyes Lighting Ltd (now part of Petrel Ltd) in 1987 have been incorrectly included within the financial statements in previous years. This gives rise to a restatement of the deferred tax liability, as at 31 March 2007 and 31 March 2008, reducing it by £443,000 and increasing retained earnings by a corresponding amount. The restatement as it affects the balance sheet is as follows:
| Group | Company | |||
| Restated | As previously reported | Restated | As previously reported | |
| £000 | £000 | £000 | ||
| Deferred tax liability | 151 | 594 | 11 | 377 |
| Retained earnings at 31 March 2007 | 8,594 | 8,151 | 3,797 | 3,431 |
| Retained earnings at 31 March 2008 | 8,859 | 8,416 | 4,721 | 4,355 |
3. SEGMENTAL ANALYSIS
For management purposes, the Group is organised into two operating divisions: Foundries and Engineering, which are the primary segments for reporting purposes. The secondary segmental format is geographical.
The Foundries segment is a supplier of iron castings, in raw or machined form, to a variety of industrial customers who incorporate the castings into their own products or carry out further machining or assembly operations on the castings before selling them on to such customers.
The Engineering segment provides manufactured and imported products to distributors and end-users. The products fall into the categories of door hardware, hazardous area lighting and control gear.
Transfer prices between business segments are set on an arms length basis in a manner similar to transactions with third parties.
The Group's geographical segments are determined by the location of the Group's customers. The Group's assets and costs incurred are all located within the United Kingdom.
(i) By business segment
| Foundries | Engineering | Total | ||||||||||
| Continuing operations | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||
| £000 | £000 | £000 | £000 | £000 | £000 | |||||||
| Revenue | ||||||||||||
| Sales | 33,217 | 32,800 | 6,723 | 7,167 | 39,940 | 39,967 | ||||||
| Profit | ||||||||||||
| Segment profit | 723 | 1,079 | 260 | 671 | 983 | 1,750 | ||||||
| Shared costs | (523) | (427) | ||||||||||
| Exceptional items | (446) | (494) | ||||||||||
| Operating profit | 14 | 829 | ||||||||||
| Net finance (costs)/income | (201) | 81 | ||||||||||
| Unrealised foreign currency loss | (311) | (325) | ||||||||||
| (Loss)/profit before tax | (498) | 585 | ||||||||||
| Tax (expense)/credit | (351) | 9 | ||||||||||
| (Loss)/profit for the year | (849) | 594 | ||||||||||
| Net assets | ||||||||||||
| Segmental assets | 14,968 | 16,407 | 5,717 | 5,592 | 20,685 | 21,999 | ||||||
| Segmental liabilities | (4,150) | (6,717) | (2,537) | (2,097) | (6,687) | (8,814) | ||||||
| Segmental net assets | 10,818 | 9,690 | 3,180 | 3,495 | 13,998 | 13,185 | ||||||
| Unallocated net liabilities | (4,537) | (1,496) | ||||||||||
| Total net assets | 9,461 | 11,689 | ||||||||||
| Movements in fixed assets | ||||||||||||
| Capital additions | ||||||||||||
| Property, plant and equipment | 1,495 | 1,499 | 230 | 80 | 1,725 | 1,579 | ||||||
| Software | 135 | 14 | 89 | - | 224 | 14 | ||||||
| Development costs | 153 | - | 31 | - | 184 | - | ||||||
| Depreciation and amortisation | ||||||||||||
| Property, plant and equipment | (870) | (884) | (188) | (220) | (1,058) | (1,104) | ||||||
| Software | (29) | (38) | (16) | (4) | (45) | (42) | ||||||
| Development costs | (29) | (26) | (23) | (20) | (52) | (46) | ||||||
Unallocated net liabilities comprise cash/overdraft, taxation, pension provisions, deferred tax balances, and head office fixed assets.
(ii) By geographical segment
| 2009 | 2008 | |
| Revenue by location of customer | £000 | £000 |
| United Kingdom | 30,666 | 32,050 |
| Rest of Europe | 7,428 | 6,508 |
| Other countries | 1,846 | 1,409 |
| 39,940 | 39,967 |
4. OTHER OPERATING EXPENSES
| 2009 | 2008 | |
| £000 | £000 | |
| Distribution costs | 1,328 | 1,389 |
| Administration and selling expenses | 4,369 | 4,121 |
| Operating expenses before exceptional items | 5,697 | 5,510 |
| Exceptional items (note 11) | 446 | 494 |
| Operating expenses | 6,143 | 6,004 |
5. STAFF NUMBERS AND COSTS
| 2009 | 2008 | |
| Number | Number | |
| The average number of people employed by the Group during the year was: | ||
| Management and administration | 87 | 85 |
| Production | 377 | 387 |
| Total employees | 464 | 472 |
| The aggregate employment costs of these employees including severance costs in wages and salaries of £253,000 (2008: £54,000) were as follows:- | ||
| 2009 | 2008 | |
| £000 | £000 | |
| Wages and salaries | 12,086 | 12,259 |
| Social security costs | 1,200 | 1,329 |
| Other pension costs | 366 | 473 |
| Share based payment expense/(credit) | 12 | 27 |
| 13,664 | 14,088 | |
| Directors' emoluments summary | 2009 | 2008 |
| £000 | £000 | |
| Directors' emoluments | 533 | 522 |
| Aggregate gains made by directors on exercise of options | - | 4 |
| Notional cost of options granted to directors | 12 | 27 |
| Number of directors accruing benefits under | ||
| Defined contribution pension schemes | 3 | 3 |
6. FINANCE COSTS AND FINANCE REVENUE
| 2009 | 2008 | |
| £000 | £000 | |
| Finance costs | ||
| Bank overdraft interest payable | (162) | (68) |
| Finance cost of pensions | (39) | - |
| (201) | (68) | |
| Finance revenue | ||
| Finance revenue from pensions | - | 149 |
| - | 149 |
7. OPERATING PROFIT
| 2009 | 2008 | |
| This is stated after charging/(crediting): | £000 | £000 |
| Profit on disposal of fixed assets | (11) | (471) |
| Depreciation of owned assets | (1,058) | 1,104 |
| Amortisation of software | 45 | 42 |
| Amortisation of development costs | 52 | 46 |
| Net foreign currency gain | (269) | (31) |
| Cost of inventories recognised as expense | 14,610 | 15,252 |
| Exceptional severance payments and related costs (note 11) | 253 | - |
| Stock written down | 57 | 97 |
| Reversal of prior year inventory provisions | - | (7) |
| -Auditors' remuneration: | ||
| -Group audit fees | 28 | 25 |
| -Audit fees in respect of subsidiaries | 47 | 45 |
| -Interim review fees | 5 | 5 |
| -Taxation advice fees | 11 | 8 |
| Research and development expenditure | 56 | 81 |
| Rentals under operating leases: | ||
| Hire of plant and equipment | 50 | 108 |
| Other | 370 | 317 |
8. TAX EXPENSE/(CREDIT) REPORTED IN THE CONSOLIDATED INCOME STATEMENT
| 2009 | 2008 | ||
| £000 | £000 | ||
| Current tax: | |||
| UK Corporation tax at 28% (2008: 30%) based on taxable profit for the year | - | - | |
| Amounts under/(over) provided in prior years | 5 | (20) | |
| 5 | (20) | ||
| Deferred Taxation: | |||
| Movement in the year | 68 | 385 | |
| Amounts under/(over) provided in prior years | 3 | (170) | |
| Less element of movement shown in the Statement of Recognised Income and Expense | 275 | (204) | |
| 346 | 11 | ||
| Tax expense/(credit) reported in the consolidated income statement | 351 | (9) | |
| Reconciliation of total tax charge | |||
| (Loss)/profit on ordinary activities before tax | (498) | 585 | |
| Corporation tax (credit)/expense at standard rate of 28% (2008: 30%) on (loss)/profit before tax | (139) | 175 | |
| Adjusted by the effects of: | |||
| Expenses/(income) not deductible for tax purposes | 11 | (15) | |
| Timing differences | |||
| -change of taxation rate | - | 21 | |
| -abolition of IBAs | 471 | - | |
| Amounts under/(over) provided in prior years | |||
| -corporation tax | 5 | (20) | |
| -deferred tax | 3 | (170) | |
| Total tax expense/(credit) reported in the income statement | 351 | (9) | |
| The abolition of Industrial Buildings Allowances (IBAs) in the Finance Act 2008, has resulted in a deferred tax charge of £471,000. This has been included in exceptional items within the consolidated income statement. | |||
9. DIVIDENDS PAID AND PROPOSED
| 2009 | 2008 | |
| £000 | £000 | |
| Paid equity dividends on ordinary shares | ||
| 2008 final dividend of 8.00p (2007: 8.00p) per share | 595 | 595 |
| 2009 interim dividend of 1.20p (2008: 3.85p) per share | 89 | 286 |
| 684 | 881 | |
| Proposed final dividend subject to shareholder approval | ||
| 2009 final dividend of NIL (2008: 8.00p)per share | - | 595 |
10. EARNINGS PER SHARE
The calculation of earnings per share is based on the profit attributable to shareholders and the weighted average number of ordinary shares in issue. In calculating the diluted earnings per share adjustment has been made for the dilutive effect of outstanding share options. Underlying earnings per share, which excludes operating exceptionals and unrealised foreign currency movements, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Operating exceptionals are detailed in note 11.
| 2008 | 2008 | |
| £000 | £000 | |
| (Loss)/earnings for basic earnings per share | (849) | 594 |
| Operating exceptionals | 446 | 494 |
| Taxation effect of operating exceptionals | (125) | (190) |
| Unrealised foreign currency loss | 311 | 325 |
| Taxation effect of unrealised foreign currency loss | (87) | (99) |
| Deferred tax effect of the abolition of IBAs included in exceptional items | 471 | - |
| Earnings for underlying earnings per share | 167 | 1,124 |
| 2009 | 2008 | |
| £000 | £000 | |
| Weighted average number of ordinary shares | 7,438 | 7,432 |
| Adjustment to reflect shares under options | 508 | 132 |
| Weighed average number of ordinary shares - fully diluted | 7,946 | 7,564 |
11. EXCEPTIONAL ITEMS
| 2009 | 2007 | |
| £000 | £000 | |
| Severance costs | (253) | - |
| Profit on sale of property, plant and equipment | - | 468 |
| Legal claim and associated costs | (193) | (897) |
| Inventory write down | - | (65) |
| (446) | (494) | |
| Taxation | ||
| -tax effect of operating exceptionals | 125 | 190 |
| -abolition of IBAs | (471) | - |
| (346) | 190 |
Severance costs relate to redundancies incurred following the downturn in demand as advised in the Group's trading update issued on 18th November 2008.
Legal costs relate to the final costs of settling the claim for alleged nuisance which has been noted in the last two years accounts. This together with an amount provided at 31 March 2008, comprises the Group's own legal expenses plus the cost of settlement with the claimants and their lawyers.
12. STATEMENT OF CHANGES IN EQUITY
| Share capital | Capital redemption reserve | Share premium | Retained earnings | Attributable to equity holders of the parent | |
| (Restated *) | |||||
| £000 | £000 | £000 | £000 | £000 | |
| Group | |||||
| Balance at 1 April 2007 | 1,854 | 109 | 828 | 8,594 | 11,385 |
| Total recognised income and expense for the year to 31 March 2008 | - | - | - | 1,119 | 1,119 |
| Dividends paid | - | - | - | (881) | (881) |
| Share based payments | - | - | - | 27 | 27 |
| Issue of shares | 5 | - | 34 | - | 39 |
| Balance at 31 March 2008 | 1,859 | 109 | 862 | 8,859 | 11,689 |
| Total recognised income and expense for the year to 31 March 2009 | - | - | - | (1,556) | (1,556) |
| Dividends paid | - | - | - | (684) | (684) |
| Share based payments | - | - | - | 12 | 12 |
| Balance at 31 March 2009 | 1,859 | 109 | 862 | 6,631 | 9,461 |
* Restated for deferred tax, see note 2
Share Premium Account
The share premium account balance included the proceeds that were above the nominal value from issuance of the Company's equity share capital comprising 25p shares.
Capital redemption reserve
The capital redemption reserve has arisen on the cancellation of previously issued shares and represents the nominal value of those shares cancelled.
Retained earnings
Retained earnings include the accumulated profits and losses arising from the Consolidated Income Statement and certain items from the Statement of Recognised Income and Expense attributable to equity shareholders, less distributions to shareholders.
13. Report and accounts
Copies of the Annual Report will be available on the Group's website, www.chamberlin.co.uk and from the Group's headquarters at Chuckery Road, Walsall, West Midlands, WS1 2DU.