Chamberlin Plc Regulatory News (CMH)

CMH

CHAMBERLIN plc

("Chamberlin", the "Company" or the "Group")

FINAL RESULTS

for the year ended 31 March 2012

KEY POINTS

·; Revenues and earnings above pre-recession levels - aided by positive global engineering markets -

70% of sales are for export markets

·; Revenues increased by 14% to £45.5m (2011: £39.8m)

·; Underlying* profit before tax up 107% to £1.7m (2011: £0.8m) - with improved margins

Statutory profit before tax of £1.4m (2011: £0.3m)

·; Underlying* earnings per share up by 173% to 18.3p (2011: 6.7p)

Statutory earnings per share of 16.1p (2011: 1.3p)

·; Cash generated from operations up 36% to £2.4m (2011: £1.8m)

·; Net debt reduced by 46% to £1.6m (2011: £2.9m)

·; Proposed final dividend of 2.0p (2011: 1.0p), taking total dividend for year to 3.0p (2011: 1.0p)

·; Net assets increased to £9.0m at 31 March 2012 (2011: £7.8m)

·; Growth across all three foundries - trend expected to continue

·; Engineering activities boosted by addition of Jebron Ltd's assets

Added £2m of profitable sales

·; New Chairman, Keith Butler-Wheelhouse, appointed in March 2012

·; Board views prospects for new financial year very positively

Chairman, Keith Butler-Wheelhouse, commented,

"The Board has concentrated in recent years on the modernisation of the Group's businesses and tightened their focus on the technically demanding areas of the markets we serve under the theme "difficult things done well". This approach has delivered a strong foundation on which to build and our strategy for the future will focus on growing both top and bottom line by offering top class technology which is valued by our customers. We anticipate that growth will be achieved both organically and by acquisition and we will continue to explore opportunities which would be a logical extension to the Group.

I believe Chamberlin is well placed to achieve further improvement in results and look forward to leading the Board and supporting the Executive team to deliver sustained profitable growth in the years to come."

* Underlying items are stated before Non-Underlying items which represent business reorganisation costs, goodwill impairment costs, and net financing costs on pension obligations and share based payment costs.

Chairman's Statement

Introduction

Having been involved as Chairman for only the final month of this financial year, full credit must go to my predecessor Tom Brown, the Board and the Executive Team for the manner in which they have steered the Company through the recession with both profits and revenues now exceeding pre-downturn levels.

I believe Chamberlin is well placed to achieve further improvement in results and look forward to leading the Board and supporting the Executive team to deliver sustained profitable growth in the years to come.

Results

Revenues for the year ended 31 March 2012 rose by 14% to £45.5m (2011: £39.8m). Previous reports have noted that increasing revenues included a strong contribution from new business and I am encouraged to see that this trend is continuing.

Underlying operating profit increased by 92% to £1.7m (2011: £0.9m), with gross margins again increasing, to 19.5% (2011: 18.7%). The underlying profit before tax was up 107% to £1.7m (2011 £0.8m) and underlying earnings per share rose 2.7 times to 18.3p (2011: 6.7p).

The statutory results show statutory operating profit increased to £1.6m (2011: £0.5m), statutory profit before tax up to £1.4m (2011: £0.3m) and statutory earnings per share up to 16.1p (2011: 1.3p).

Chamberlin continues to be strongly cash generative and we remain focused on working capital control. Cash generated from operations rose by 36% to £2.4m (2011: £1.8m). This was significantly above underlying operating profit and allowed us to reduce net borrowing by 46% to £1.6m (2011: £2.9m). Gearing reduced to 17% (2011: 37%) and Chamberlin continues to be financed by a £5.0m overdraft facility from HSBC. In July 2011, a placing of shares with Diverse Income Trust plc, managed by MAM Funds plc, raised £0.5m (gross).

Dividend

With continued earnings growth and cash generation proceeding as expected, our balance sheet continues to strengthen. I am therefore pleased to announce that the Directors are recommending the payment of a final dividend of 2.0p per share, to be paid on 13 July 2012 to shareholders on the register at 29 June 2012. This takes the total dividend for the year to 3.0p (2011: 1.0p) and is in line with the progressive dividend policy we introduced last year when we restored the payment of dividends.

The Board

After nine years of service to the Company, Tom Brown retired from Chamberlin on 1 March 2012, when he passed the role of Chairman of the Board to me. On behalf of the Board, I would like to thank Tom for his considerable contribution to Chamberlin over the years and to wish him well for the future.

Strategy & Outlook

In visiting Chamberlin's operations, I have been impressed by the skills and competence of everyone I have met. Also, there is a feeling of openness to change, coupled with a determination to drive the business forward. I will enjoy adding my experience in support of Chamberlin's efforts to achieve growth in the coming years.

The Board has concentrated in recent years on the modernisation of the Group's businesses and tightened their focus on the technically demanding areas of the markets we serve under the theme "difficult things done well". This approach has delivered a strong foundation on which to build and our strategy for the future will focus on growing both top and bottom line by offering first class technology which is valued by our customers. We anticipate that growth will be achieved both organically and by acquisition and we will continue to explore opportunities which would be a logical extension to the Group.

Keith Butler-Wheelhouse

Chairman

21 May 2012

Chief Executive's Review

Trading conditions continued to improve during the financial year to 31 March 2012 and revenues and earnings are now both above pre-recession levels. Indeed, these results represent our best performance for five years and demonstrate both our drive to revitalise the Group's prospects and improved global trading conditions. Exports, either direct or indirect, comprise over 70% of Chamberlin sales and engineering activity outside the UK continues to underpin our results.

Foundries

After the modernisation programme we began in 2007 our foundries have now passed a milestone where they all operate with improved equipment, upgraded processes and strengthened systems. However, we believe that there are significant improvements still attainable and that these are best achieved by benchmarking our operations, quality and logistics performance against the best in the wider engineering industry. We have therefore been recruiting from that skill base to deliver the next phase of improvement.

Chamberlin & Hill Castings ("CHC")

CHC incorporates our Walsall and Leicester sites which share a number of foundry processes but serve different markets.

Our expertise at the Walsall foundry lies in the development and production of small castings with complex internal geometry, especially for casings for the turbocharger market where complex passages are required for cooling and lubrication. The number of turbochargers fitted to passenger cars in Europe continues to grow and as petrol engines increasingly become turbocharged to meet EU emissions legislation, market forecasts predict volume growth of one third by 2016. We have strong relationships with two of the major turbocharger manufacturers worldwide, Borg Warner and IHI Charging Systems ("IHI"), and remain well placed to take advantage of growth in the turbocharger sector. I have previously commented on the development of a family of parts for IHI, some of which are now in production. We anticipate that the remaining elements will enter production in the new financial year, in line with our original expectations, and our Walsall engineers are currently working on new turbocharger projects which will deliver further growth in future years.

Walsall also produces bearing housing castings for use in commercial diesel turbochargers, the majority of which are supplied to Borg Warner in the UK. We have recently extended this relationship further, with the supply of our first fully finished component machined by a sub-contractor, and believe that there is further potential for us to supply machined components to this market.

Our existing customers account for less than 50% of the European market for turbochargers and we believe that established OEMs and new entrants represent an important source of growth. Our sales effort will be directed towards these areas while ensuring that our existing customers receive the high standards of service they require.

Leicester, which produces mid-size castings with complex metallurgy, has enjoyed good year-on-year sales growth, taking revenues to above £10m and reducing reliance on the construction sector. Unlike Walsall, where demand is driven by long term supply arrangements, a proportion of Leicester sales are related to contracts for supply to a discrete project. Typical of these is our supply of suspension components to a Singapore-based manufacturer of military vehicles, where Leicester has recently completed supplying the second project phase and has confirmed contracts for the third phase, with revenue in excess of £700,000, which will require supply in the second half of the new financial year.

In 2009 we combined the management of both the Walsall and Leicester foundries, achieving operational and overhead synergies. We have also made good progress in creating cross-selling opportunities between the two foundries. The most notable success here has been in the commercial diesel market, where the long-standing relationships from Walsall and metallurgical expertise from Leicester have enabled us to establish a credible position for the supply of turbine casings, the other major iron casting in a truck turbocharger. We look forward to receiving our first orders to supply these castings in the course of 2012/13.

Russell Ductile Castings ("RDC")

RDC is located in Scunthorpe and specialises in heavyweight castings up to 6,000kg. The majority of these are used in demanding applications requiring high strength, corrosion resistance or high temperature capabilities and these all require the production of complex shapes in specialist grades of iron. RDC has a recognised expertise in manufacturing these challenging parts and the final objective of the foundry re-organisation in 2009 was to increase focus on this sector and deliver growth. I am therefore pleased to report that RDC revenues grew by over 20% during the course of the financial year.

Core markets for RDC are process equipment, mining, power generation and construction equipment but our expertise is relevant to a wide range of applications in other industries and I expect to see further growth in the business. This will include the production of a unique range of castings for the Crossrail project, where the most complex parts of the tunnel system are supported with cast iron lining segments. Crossrail is structured as three tunnelling projects, each requiring around £1.0m of castings. RDC is currently supplying castings for the first tunnelling project and we would hope to win more of these contracts as Crossrail progresses over the next few years.

Engineering

Exidor

Our door hardware business, located in Cannock, has made significant progress during the financial year and is well placed for growth. Exidor has a well established position in the market for emergency exit hardware, where it is market leader in the UK, and in February 2011 we acquired assets which allowed us to expand into door closers, a related market. The integration of these assets was completed on schedule with new routes to market, product certification and the relocation of manufacturing operations all complete by December 2011. The product range we acquired is well-regarded by customers who are responding positively to the high service standards to which Exidor operates. The new range has produced a strong first full year contribution and I am confident that we will see growth in both revenues and profitability in this business as we take market share.

Petrel

Petrel supplies lighting and control systems for hazardous environments in applications where the risk of explosion requires tightly regulated equipment. Overall the business is performing in line with expectations and we are investigating niche applications which create opportunities for specialist new products.

Outlook

Chamberlin continues to make progress in growing revenues and profitability, and we are confident that we can build on the progress we have already achieved.

Our focus in the new financial year remains on both driving sales and enhancing Chamberlin's operational performance. Currently, the opportunities we see ahead of us leave us well-placed for the first half and the Group remains in very good shape financially to support ongoing growth. I look forward to updating shareholders on our progress in due course.

Tim Hair

Chief Executive

21 May 2012

Finance Director's Review

Overview

Sales increased by 14% during the year to £45.5m (2011: £39.8m) as the business grew existing accounts and won new customers. Foundry division sales grew by 13% to £37.3m, driven by demand across all three sites. Sales in the Engineering Division increased by 22% to £8.2m, with the assets acquired in February 2011 contributing £2.0m of revenues. Margins also improved year on year with gross profit margin increasing to 19.5% (2011: 18.7%).

Underlying operating profit increased by 92% to £1.7m (2011: £0.9m). Financing costs reduced in the year, in line with borrowings, resulting in underlying profit before tax of £1.7m, a 107% improvement (2011: £0.8m). Underlying earnings per share improved by 173% to 18.3p (2011: 6.7p).

The statutory results also improved significantly over the previous year with statutory operating profit of £1.6m (2011: £0.5m), statutory profit before tax of £1.4m (2011: £0.3m) and statutory earnings per share of 16.1p (2011: 1.3p).

Tax

The Group's underlying tax charge for the year was £242,000 (2011: £305,000). The underlying effective rate of 15% (2011: 38%) was favourably affected by the recognition of brought forward tax losses within deferred tax and as a consequence, tax payable for the year will be £145,000. The statutory tax charge was £183,000 (2011: £235,000).

Cash generation and financing

Cash conversion was strong with cash generated from operations of £2.4m (2011: £1.8m), which equated to 140% of underlying operating profit. This reflects the high priority given to cash management throughout the business. During the past year working capital increases were limited to £157,000 (4%), on £5.5m (14%) higher sales. This continues a record of consistent positive cash generation, including during the recession and subsequent recovery.

In July 2011, we completed a placing of 370,370 new ordinary shares with Diverse Income Trust plc, which is managed by MAM Funds plc, at an 8% premium to the then market price, which raised £500,000 gross.

Capital expenditure for the year increased to £1.4m (2011: £1.2m) which was marginally above depreciation and amortisation. In addition to normal replacement and productivity related spend, £200,000 was invested in technical modelling and ERP software.

Group borrowings reduced during the year by £1.3m or 46%, to £1.6m (2011: £2.9m). As a result gearing was reduced to 17% from 37% at the previous year end. The Group is funded through a £5.0m overdraft facility, which is renewable annually and is not subject to financial covenants.

Asset acquisition

On 4 February 2011, the Group acquired certain fixed assets and inventory from the administrator of Jebron Ltd, a door controllers maker, for £162,000. The manufacture of door controllers started, in Wednesbury, during March 2011 and production was transferred to our Cannock site during the year. This activity is now fully integrated into our Exidor business and is delivering returns in line with expectations.

Foreign exchange

In order to protect against future exchange rate movements the Group enters into forward currency contracts covering 80% of its estimated Euro denominated sales for the coming year. The Group has adopted hedge accounting in relation to these foreign currency contracts, as explained in detail in Note 2 to the Financial Statements. During the period a movement in fair value of £493,000 in respect of effective hedges was recognised in equity.

Pension

The Group's defined benefit pension scheme, which now has 175 deferred and retired members, was closed to future accrual in 2007. Following the last triennial valuation, as at 1 April 2010, contributions were set at £308,000 per year for 2011/12 increasing by 3% per year thereafter. Based on current assumptions this would eliminate the deficit by 2020.

The IAS 19 deficit at 31 March 2012 was £3.1m (2011: £2.2m). The increase principally reflects the reduction in the discount rate used to calculate scheme liabilities, as a consequence of a fall in bond yields over the last year.

Mark Bache 

Finance Director

21 May 2012

Consolidated Income Statement

for the year ended 31 March 2012

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2012

Consolidated Balance Sheet

at 31 March 2012

Consolidated Cash Flow Statement

for the year ended 31 March 2012

STATEMENT OF CHANGES IN EQUITY

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 Comprehensive Income attributable to equity shareholders, less distributions to shareholders.

Hedging Reserve

The hedging reserve records the effective portion of the net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred.

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 2012 were authorised for issue by the board of directors on 21 May 2012 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 2006.

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the years to 31 March 2012 or 31 March 2011 but is derived from the 2012 Annual Report and Accounts. The Annual Report and Accounts for 2011 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2012 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 2012 and have given an unqualified report which does not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. The accounts for the year ended 31 March 2011 also received an unqualified audit report from Ernst & Young LLP.

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 408 of the Companies Act 2006 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.

Accounting policies

The preliminary announcement has been prepared on the same basis as the financial statements for the year ended 31 March 2011. No new standards or interpretations issued since 31 March 2011 have had a material impact on the accounting of the Group.

Presentation of the Consolidated Income Statement

The Income Statement is allocated between Underlying items which relate to the trading activities of the business and Non-underlying items which are either non-recurring or are valued using market derived data which is outside of management's control.

3. SEGMENTAL ANALYSIS

For management purposes, the Group is organised into two operating divisions: Foundries and Engineering.

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 their customers.

The Engineering segment provides manufactured and imported products to distributors and end-users operating in the safety and security markets. The products fall into the categories of door hardware, hazardous area lighting and control gear.

There are no transactions between operating segments.

The Group's geographical segments are determined by the location of the Group's customers.

(i) By operating segment

(ii) By geographical segment

4. FINANCE COSTS AND FINANCE REVENUE

5. DIVIDENDS PAID AND PROPOSED

6. 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 business reorganisation costs, goodwill impairment costs, share based payment expenses and net financing costs of pension obligation less related tax thereon, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Reorganisation and exceptional costs are detailed in note 7.

7. REORGANISATION AND GOODWILL IMPAIRMENT COSTS

Business reorganisation costs relate to bringing the assets acquired from the administrator of Jebron Ltd back in to production and integrating this equipment into Exidor.

Goodwill impairment is as a consequence of withdrawal from door handle production at Exidor.

8. 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.