Chamberlin Plc Regulatory News (CMH)

7 Jun 2007 07:00

Chamberlin & Hill PLC07 June 2007 CHAMBERLIN & HILL plc FINAL RESULTS Chamberlin & Hill plc ("Chamberlin & Hill", the "Company" or the "Group")announces its audited results for the year ended 31 March 2007. Financial highlights: • Underlying operating profit of £1.1m * (2006:£2.4m) • Underlying earnings per share of 10.5p * (2006: 21.5p) • Dividend maintained at 11.85p for the year (2006: 11.85p) • Dividend yield of 6.0% (2006: 5.6%) • Underlying return on equity of 7.1% * (2006: 11.7%) Year to Year to 31 March 31 March 2007 2006 £000 £000 Turnover 39,188 41,435 Underlying operating profit * 1,132 2,398 Operating (loss)/profit (809) 2,502 (Loss)/profit before taxation (831) 2,368 Underlying earnings per share * 10.5p 21.5p Basic (loss)/earnings per share (4.4)p 22.5p Dividends per share (paid and proposed) 11.85p 11.85p * Figures stated before non-recurring operating costs of £0.8m (as set out inthe Business Review), exceptional costs of £1.1m and £0.4m of tax credits. Chamberlin & Hill plcTom Brown, Chairman 01922 707100Tim Hair, Chief Executive 01922 707100 Teather & Greenwood LimitedTom Hulme, NOMAD 020 7426 9000 Chairman's Statement During the last year Chamberlin & Hill entered a new phase in its development.The appointment of Tim Hair as Chief Executive, together with Mark Bache asFinance Director, completed the planned evolution of the executive Board, whilethe appointment of Alan Howarth as a director in January 2007 completed thenon-executive side too. We have a substantially new team, which is alreadyengaging with the opportunities to progress in both strategic and operationalareas. Results & Dividend As expected, revenues were down slightly on the previous year at £39.2million(2006: £41.4 million), following the closure of the Bloxwich foundry and theplanned exit of the Group from certain low margin contracts. During the year we advised that the new executive team had identified a numberof issues, largely relating to balance sheet items, and these have beenaddressed in the financial statements. Profit before tax excluding exceptionalitems (PBTE) decreased to £0.3 million (2006: £2.3 million), after a charge totrading of £0.8 million for non-recurring and largely non-cash legacy costs.These non-recurring costs are further detailed in the Business Review. Theunderlying PBTE was therefore £1.1million. Earnings per share before all one-offcosts fell to 10.5p (2006: 21.5p). Exceptional costs in the year totalled £1.1m, principally due to the completionof the Bloxwich closure, restructuring at PFP, and to further consequences ofthe review by the new executive team. The Group's balance sheet remains strong. Net debt at the year-end was £0.2million (2006: net cash of £0.6 million) after capital expenditure of £1.6million. This represents a gearing of 1.8%. The Board is confident in the future of the Group, and is recommending anunchanged final dividend of 8.0p per share (11.85p total for the year), payableon 27 July 2007 to shareholders on the register at the close of business on 6July 2007. Progress Consolidation of the light castings business into the Walsall foundry hascreated a business focussed on complex high-volume castings, which are typicallyfor the automotive supply chain. Integration of the Bloxwich work has beencompleted, and as expected operating margins have been improved by theconsolidation. Previous plans to close our Leicester foundry and relocate the work toScunthorpe have been reappraised, with the result that we now intend to continueoperating Russell Ductile (heavy castings) on both sites. The performance ofthis business in the year has been disappointing but new leadership is in placeand, following progress in the fourth quarter, we expect significantimprovements in the coming year. Our engineering businesses have continued to progress. At Fred Duncombe a newManaging Director has been appointed, and a factory reorganisation has releaseda freehold property which was sold just after the year end, giving rise to anexceptional profit of £0.5m. A significant strategic reappraisal at PFP led tothe decision to exit a low margin product line and refocus the business. Bothbusinesses are now focussed on achieving organic growth in the current year. During the year the Board concluded that AIM offered a more appropriate marketgiven Chamberlin & Hill's size and strategy. The move from the Official Listwas successfully completed in November 2006 and I am pleased to note that sincethe move to AIM liquidity has been maintained. Pensions In valuing its final salary pension scheme the Group has had to adopt updatedmortality tables to reflect the increasing longevity of the general population.As a consequence the deficit has increased to £2.2 million (2006: £0.5 million). Strategy Chamberlin & Hill has traditionally focussed on cast iron foundries withsecondary activities in engineering, historically with a link to castings.Although we expect our foundry businesses to remain attractive in coming years,we recognise that the Group must develop to meet future threats andopportunities. The Board has concluded that it is desirable to re-balance theGroup by expanding our engineering activities, largely by acquisition, creatinga more broadly based engineering Group. Further detail on our strategicthinking appears in the Business Review. Proposed change of name Given the new phase that the Group is entering, the above strategy and the splitof Chamberlin & Hill Castings Ltd away from its parent company in 2006, thedirectors believe it would be beneficial to change the name of the Group toChamberlin plc. A resolution supporting this change will be proposed at the AGM. Outlook Last year was one of transition, and our intention is now to build on the hardwork that has been done to achieve a result that moves us a step closer to thelevel which we believe is commensurate with the size and potential of thecurrent group. Demand is currently robust across most of the group, and presenttrading is in line with management expectations. We will also seek opportunities to develop the group strategically, but we willdo this with great care and will only commit to opportunities which we areconfident fit our criteria. Tom BrownChairman 7 June 2007 Business Review Finance The reported profit before tax and exceptional items (PBTE) for the year was£0.3 million, as shown in the Income Statement. This is however after chargesto trading for one-off costs of £0.8 million, and consequently the underlyingPBTE was £1.1 million. These non-recurring costs resulted from a comprehensivereview of the balance sheet and the Group's financial policies carried out byour new executive team, which identified a number of issues which wereindividually minor and are predominantly of a non-cash nature. Thesenon-recurring costs do not meet the definition of exceptional items but relateto the reassessment of previous accounting estimates across all subsidiariespredominantly in the area of provisions for stock and credit notes and fixedasset write downs. Given their non-recurring nature and their impact on the 2007results, the non-recurring costs have been separately identified within thefinancial highlights. Exceptional items in the year totalled £1.1 million. The majority resulted fromthe completion of the Bloxwich closure, re-structuring at PFP and the revisedintegration plans for Leicester and Scunthorpe, with the transfer to AIMcomprising the remainder. The Group's balance sheet remains strong with net equity of £10.9 million and aclosing overdraft of £0.2 million, representing gearing of 1.8%. Operations Foundries The foundry operating organisation was changed at the start of the year,creating two focussed subsidiaries and separating the operations from the PLClegal entity for the first time in our history. This structure has provided aclear management organisation for the foundries, defining responsibilities andcreating increased local ownership of the results. Overall foundry salesreduced to £31.3 million (2006: £33.6 million) and although much of thisreduction was the planned result of the Bloxwich closure, a significant part wasdue to poor performance in the Russell Ductile business. Chamberlin & Hill Castings Located in Walsall, this business is our high-volume foundry whose customers arepredominantly in the automotive supply chain. We are pleased to report that thebusiness has enjoyed strong demand for its products, especially turbochargercastings, throughout the past year. Although foundry operating margins have beenunder pressure from raw material and energy price rises during the year, goodrecovery through pricing has been achieved. Operating margins in the first halfwere depressed by integration of work following the closure of the Bloxwichsite, but recovered in the second half as expected. Chamberlin & Hill Castings has recently started implementation of leanmanufacturing techniques and exited from its remaining low-volume work. As aresult it is expected to deliver improved operating efficiencies in the comingyear. However, recent movements in the exchange rate will result in an adverseeffect on margins as sales in Euros account for 50% of Walsall activity.Forward currency contracts have now been put in place to cover 80% of ourexpected Euro exposure, and this will be updated on a rolling basis. Russell Ductile Castings Operating from sites in Scunthorpe and Leicester, Russell Ductile produces lowvolume castings across a wide size range, with particular expertise in complexshapes and specialist cast iron metallurgy. Following the acquisition of theLeicester business in 2004, integration plans were developed and the Scunthorpesite was placed under the control of the Leicester management. Unfortunatelythis arrangement proved unsatisfactory, and both operations suffered from poorquality and delivery performance during the first half. Following a review by the Chief Executive, we announced in our Interim Statementthat Leicester could continue as a profitable low-overhead operation for sometime to come, hence saving the capital project to relocate its equipment toScunthorpe. A new Managing Director was appointed in November, and other keymanagers replaced in the final quarter. Improvement actions, including the exitof loss-making contracts, are underway and following performance improvementscustomer confidence is being rebuilt and new business won. Demand for castings remains positive, especially in the middle of the sizerange, and although earnings at Russell Ductile during the year have been badlyaffected we expect profitability to improve in 2008. Inevitably the earlymonths will be at lower margins until the improvements take their full effect. Engineering Fred Duncombe Located in Cannock this business produces Exidor branded emergency exitequipment and other architectural hardware. Although sales have been flat goodmargins have been maintained and initiatives to launch a new product range,increase sourcing from low cost countries, and re-organise the factory have beencompleted. A new Managing Director has been appointed and we anticipate thatincreased emphasis on sales will deliver profitable growth in the coming year. Petrel Previously trading as PFP Electrical Products, this business was restructured inthe fourth quarter, leading to the disposal of its socket box and conduitproduct lines which were under severe threat from low cost sources and interminal decline for UK producers. Our Petrel brand is well established in theUK hazardous area electrical market and the business now trades under that name.Now focussed on this technically demanding business, Petrel is working to growits sales by expanding product ranges and improving customer service, withencouraging initial results. Strategy Chamberlin & Hill started life as a cast iron foundry, and throughout itshistory has remained a foundry dominated business. In the past this strategyhas served the Group well, and our foundries remain profitable andcash-generative businesses. In the longer term however we must recognise thatthere are a number of potential threats to UK foundries. These includecompetition from low cost countries, currently constrained by the highlyengineered nature of our cast products; the increasing weight of environmentallegislation in the UK; and potential difficulty in attracting the nextgeneration of employees into heavy industry. We have therefore concluded thatChamberlin & Hill must create a strategy that reduces its reliance on foundriesand evolve into a more broadly based engineering Group. Success in UK engineering industry has not been easy to achieve in recent years,but its requirements can be simply stated. A successful UK-based engineeringbusiness must do difficult things and must do them well. We define "difficult things" as activities with high engineering content,delivering products or processes with the following types of characteristic: • High specification and demanding applications• High entry barriers and well defended intellectual property• Constant product development influencing customers designs• Customer or regulatory approval difficult and/or expensive• High degree of process know-how• Difficult to replicate or transfer• Serious consequences for product failure• Demanding logistics requiring closeness to the customer These characteristics provide a strong base, but to take profitable advantage ofthem it is essential that a business is properly managed and performs well.This means delivering outstanding customer service, notably in delivery andquality performance; pro-active product and technology development; acompetitive cost position; "Lean manufacturing" activity in all areas; and arigorous and analytically driven financial environment. We believe that an engineering business that can meet the "difficult things,done well" challenge will provide a profitable future for its shareholders, andintend to make this the core of our strategy for the future. The four existingGroup businesses all operate in difficult product or process areas, and althoughperformance has been below standard in some respects, improvement activity isunderway. Our strategy for the coming years will be to enhance shareholder value throughthe acquisition of engineering companies that operate in demanding areas andhave the potential for growth and performance improvement under our ownership,while continuing to respond to attractive bolt on opportunities that enhancecurrent activities, We will particularly look for acquisitions where thetechnology is rooted in mechanical engineering, with English as the workinglanguage and which are easily reached from our UK base. We would expect toavoid the upper tiers of the automotive supply chain, and will concentrate onopportunities that will make a significant addition to the Group. Summary Although the past year has been challenging, Chamberlin & Hill has emergedstronger, with upgraded management at all levels, improved systems and controlsand a clear strategy for the future supported by a strong balance sheet. Webelieve that current progress can be sustained, and that, given the rightopportunities, considerable strategic development can be anticipated. Tim Hair Mark Bache Chief Executive Finance Director7 June 2007 7 June 2007 Consolidated Income Statementfor the year ended 31 March 2007 2007 2006 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total £000 £000 £000 £000 £000 £000 Revenue 39,188 - 39,188 41,435 - 41,435Cost of sales (33,007) - (33,007) (33,515) - (33,515)Gross profit 6,181 - 6,181 7,920 - 7,920 Other operating (5,849) (1,141) (6,990) (5,522) 104 (5,418)(expenses)/incomeOperating (loss)/profit 332 (1,141) (809) 2,398 104 2,502from continuingoperationsFinance revenue 90 - 90 1 - 1Finance costs (112) - (112) (135) - (135) (Loss)/profit from 310 (1,141) (831)continuing operationsbefore tax 2,264 104 2,368 Tax credit/(expense) 292 216 508 (679) (31) (710)(Loss)/profit for the 602 (925) (323)year from continuingoperations 1,585 73 1,658 (Loss)/earnings persharebasic underlying 8.1p (4.4)p 21.5p 22.5pdiluted diluted underlying 8.0p (4.4)p 21.5p 22.4p Consolidated Statement of Recognised Income and Expensefor the year ended 31 March 2007 2007 2006 £000 £000Actuarial (losses)/gains on pension assets and (2,132) 1,141liabilitiesDeferred tax credit/(charge) on actuarial (losses)/gains 640 (342)Net (expense)/income recognised directly in equity (1,492) 799 (Loss)/ profit for the year (323) 1,658 Total recognised income and expense for the year (1,815) 2,457attributable to equity holders of the parent company Parent Company Statement of Recognised Income and Expensein the year ended 31 March 2007 2007 2006 £000 £000Actual (losses)/gains on pension assets and liabilities (2,132) 1,141Deferred tax credit/(charge) on actuarial (losses)/gains 640 (342)Net income/(expense) recognised directly in equity (1,492) 799 (Loss)/profit for the year (1,025) 42 Total recognised income and expense for the yearattributable to equity holders of the parent company (2,517) 841 Consolidated Balance Sheetat 31 March 2007 31 March 31 March 2007 2006 £000 £000Non-current assets Property, plant and equipment 7,954 8,206 Intangible assets 453 483 Deferred tax assets 975 497 9,382 9,186 Current assets Inventories 4,746 5,308 Trade and other receivables 7,370 7,942 Income taxes receivable 70 - Cash and cash equivalents - 593 Assets held for resale 219 - 12,405 13,843 Total assets 21,787 23,029 Current liabilities Financial liabilities 209 - Trade and other payables 7,738 7,501 Income taxes payable - 237 7,947 7,738 Non current liabilities Deferred tax 663 1,262Defined benefit pension scheme deficit 2,235 487 2,898 1,749 Total Liabilities 10,845 9,487 Capital and reserves Called up share capital 1,854 1,840 Share premium account 828 743 Capital redemption reserve 109 109 Retained earnings 8,151 10,850Total equity 10,942 13,542 Total equity and liabilities 21,787 23,029 Tim Hair ) ) Directors Mark Bache ) The accounts were approved by the Board of Directors on 7 June 2007 Parent Company Balance Sheetat 31 March 2007 31 March 31 March 2007 2006 £000 £000Non current assetsProperty, plant and equipment 1,112 1,085Intangible assets 7 10Investments 7,159 7,159Deferred tax assets 881 447 9,159 8,701 Current assetsTrade and other receivables 52 35Amounts due from subsidiary companies 3,874 5,041 3,926 5,076 Total assets 13,085 13,777 Current liabilities Financial liabilities 1,415 1,290 Trade and other payables 183 119 Amounts due to subsidiary companies 2,467 1,477 4,065 2,886 Non-current liabilities Amounts due to subsidiary companies 66 66 Deferred tax 497 814Defined benefit pension scheme 2,235 487 deficit 2,798 1,367 Total Liabilities 6,863 4,253 Capital and reservesCalled up share capital 1,854 1,840Share premium account 828 743Capital redemption reserve 109 109Retained earnings 3,431 6,832Total equity 6,222 9,524 13,085 13,777 Tim Hair ) ) Directors Mark Bache ) The accounts were approved by the Board of Directors on 7 June 2007 Consolidated Cash Flow Statementfor the year ended 31 March 2007 Year ended Year ended 31 March 31 March 2007 2006Operating activities £000 £000 Operating (loss)/profit (809) 2,502Adjustments for:Depreciation of property, plant and 1,166 1,526 equipment Amortisation of software 23 27Amortisation of development costs 34 -Loss/(profit) on disposal of property, plant 373 (1,040)and equipment Share based payments (6) 19 Special pension contribution - (1,500)Other pension contributions in excess of (384) (192)Income Statement charge Operating cash flow before movements in working capital 397 1,342 Decrease/(increase) in inventories 562 (253) Decrease/(increase) in receivables 572 1,383 Increase/(decrease) in payables 237 (49)Cash generated from operations 1,768 2,423 UK Corporation Tax paid (237) (823)Net cash flow from operating activities 1,531 1,600 Investing activities Interest received - 1Purchase of property, plant and (1,625) (1,415)equipment Purchase of software (27) (28) Development expenditure capitalised - (229) Disposal of plant and equipment 119 1,713Net cash flow from investing activities (1,533) 42Financing activities Interest paid (111) (64) Pension element of finance income/(costs) 90 (71) Equity dividends paid (878) (872) Issue of shares (including premium) 99 -Net cash flow from financing activities (800) (1,007) Net (decrease)/increase in cash and cash equivalents (802) 635 Cash and cash equivalents at the start of the year 593 (42) Cash and cash equivalents at the end of the year (209) 593 Cash and cash equivalents comprise: Cash and cash equivalents - 593 Financial liabilities (209) - (209) 593 Parent Company Cash Flow Statementfor the year ended 31 March 2007 Year ended Year ended 31 March 31 March 2007 2006Operating activities £000 £000 Operating (loss)/profit (825) 194Adjustments forDepreciation of property, plant and 54 852 equipment Amortisation of software 3 11Profit on disposal of property, plant (2) (1029) and equipment Share based payments (6) 19 Special pension contribution - (1,500)Other pension contributions in excess (384) (192) of Income Statement chargeOperating cash flow before movements in working capital (1,160) (1,645) Decrease in inventories - 333 Decrease in receivables 1,150 2,498 Increase in payables 1,054 352 Cash generated from operations 1,044 1,538 Group relief surrendered for nil consideration (289) (1)Net cash flow from operating activities 755 1,537 Investing activities Interest received - 1Purchase of property, plant and (96) (383) equipment Purchase of software - (19) Development expenditure capitalised - (130) Disposal of plant and equipment 17 1,678Disposal of foundry business to - (942) subsidiaryNet cash flow from investing activities (79) 205 Financing activities Interest paid (112) (64) Pension element of finance income/(costs) 90 (71) Equity dividends paid (878) (872) Issue of shares (including premium) 99 -Net cash flow from financing activities (801) (1,007) Net increase/(decrease) in cash and cash equivalents (125) 735 Cash and cash equivalents at the start of the year (1,290) (2,025) Cash and cash equivalents at the end of the year (1,415) (1,290) Cash and cash equivalents comprise: Cash and cash equivalents - - Financial liabilities (1,415) (1,290) (1,415) (1,290 NOTES TO THE PRELIMINARY ANNOUNCEMENT 1 Authorisation of financial statements and statement of compliancewith IFRS The Group's and Company's financial statements of Chamberlin & Hill plc (the 'Group' or the 'Company') for the year ended 31 March 2007 were authorised forissue by the board of the directors on 7 June 2007 and the balance sheets weresigned on the board's behalf by Tim Hair and Mark Bache. The Company is apublic limited company incorporated and domiciled in England & Wales. TheCompany's ordinary shares are traded on the AIM market of the London StockExchange. The Group's financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS). The Company's financialstatements have been prepared in accordance with IFRS as adopted by the EuropeanUnion and as applied in accordance with the provisions of the Companies Act1985. The financial information set out in this announcement does not constitute thestatutory accounts of the Group for the years to 31 March 2007 or 31 March 2006but is derived from the 2007 Annual Report and Accounts. The Annual Report andAccounts for 2006 have been delivered to the Registrar of Companies and theGroup Annual Report and Accounts for 2007 will be delivered to the Registrar ofCompanies in due course. The auditors, Ernst & Young LLP, have reported on theaccounts for the year to 31 March 2007 and have given an unqualified reportwhich does not contain a statement under Section 237(2) or 237(3) of theCompanies Act 1985. The accounts for the year ended 31 March 2006 also receivedan 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 valuesare rounded to the nearest thousand pounds (£000) except when otherwiseindicated. The Company has taken advantage of the exemption provided undersection 230 of the Companies Act 1985 not to publish its individual incomestatement and related notes. Basis of consolidation The consolidated financial statements comprise the financial statements ofChamberlin & Hill plc and its subsidiaries as at 31 March each year. Thefinancial statements of subsidiaries are prepared for the same reporting year asthe parent company, using consistent accounting policies. All inter-companybalances and transactions, including unrealised profits arising from intra-grouptransactions, have been eliminated in full. Subsidiaries are consolidated fromthe date on which control is transferred to the Group and cease to beconsolidated from the date on which control is transferred out of the Group. 3. SEGMENTAL ANALYSIS For management purposes, the Group is organised into two operating divisions:Foundries and Engineering, which are the primary segments for reportingpurposes. 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 ownproducts or carry out further machining or assembly operations on the castingsbefore selling them on to such customers. The Engineering segment provides manufactured and imported products todistributors and end-users. The products fall into the categories of doorhardware, hazardous area lighting and control gear. Transfer prices between business segments are set on an arms length basis in amanner similar to transactions with third parties. The Group's geographical segments are determined by the location of the Group'scustomers. The Group's assets and costs incurred are all located within theUnited Kingdom. (i) By business segment Foundries Engineering TotalContinuing operations 2007 2006 2007 2006 2007 2006 £000 £000 £000 £000 £000 £000RevenueTotal sales 31,287 33,815 7,901 7,800 39,188 41,615Inter-segment sales - (180) - - - (180) Sales to third parties 31,287 33,635 7,901 7,800 39,188 41,435 ProfitTrading profit 681 2,328 157 552 838 2,880 Shared costs (506) (482)Exceptional items (1,141) 104Operating (loss)/profit (809) 2,502Net finance costs (22) (134)(Loss)/profit before tax (831) 2,368Tax credit/(expense) 508 (710)(Loss)/profit for the year from (323) 1,658continuing operations Net assetsSegmental assets 14,665 16,091 5,788 5,682 20,453 21,773Segmental liabilities (6,405) (6,428) (1,332) (1,149) (7,737) (7,577)Segmental net assets 8,260 9,663 4,456 4,533 12,716 14,196 Unallocated net liabilities (1,774) (654)Total net assets 10,942 13,542 Movements in fixed assetsCapital additions Property, plant and equipment 1,345 1,134 280 281 1,625 1,415 Software 27 24 - 4 27 28 Development costs - 130 - 99 - 229Depreciation and amortisationProperty, plant and (925) (1,231) (241) (295) (1,166) (1,526) equipment Software (17) (17) (6) (10) (23) (27) Unallocated net liabilities comprise goodwill, cash/overdraft, taxation, pensionprovisions, deferred tax balances, and head office fixed assets. (ii) By geographical segment 2007 2006Revenue by location of customer £000 £000 United Kingdom 30,680 32,730Rest of Europe 7,170 6,818Other countries 1,338 1,887 39,188 41,435 4. OTHER OPERATING EXPENSES 2007 2006 £000 £000 Distribution costs 1,414 1,430Administration and selling expenses 4,435 4,092Operating expenses before exceptional items 5,849 5,522Exceptional items (note 11) 1,141 (104)Operating expenses 6,990 5,418 5. STAFF NUMBERS AND COSTS 2007 2006 Number NumberThe average number of people employed by the Group during the year was: Management and administration 84 88 Production 394 447 Total employees 478 535 The aggregate employment costs of these employees including severance costs inwages and salaries of £224,000 (2006: £425,000) were as follows:- 2007 2006 £000 £000Wages and salaries 12,715 13,407Social security costs 1,354 1,261Other pension costs 489 444 14,558 15,112 Directors' emoluments summary 2007 2006 £000 £000Directors' emoluments 646 520Aggregate gains made by directors on exercise of options 16 - Notional cost of options granted to directors 10 19Credit for surrendered options previously granted to directors (16) -Number of directors accruing benefits under: Defined benefit pension schemes - 1 Defined contribution pension schemes 3 2 6. FINANCE COSTS AND FINANCE REVENUE 2007 2006 £000 £000Finance costsFinance cost of pensions - (71)Bank overdraft interest payable (112) (64) (112) (135)Finance revenueFinance revenue from pensions 90 -Bank interest receivable - 1 90 1 7. OPERATING PROFIT 2007 2006This is stated after charging/(crediting): £000 £000 Profit on disposal of fixed assets 373 (1,040) Depreciation of owned assets 1,166 1,526 Amortisation of software 23 27Net loss on foreign currency 65 25Cost of inventories recognised as expense 14,567 14,649Exceptional severance payments and related costs 224 925 (note 11)Stock written down 560 179Auditors' remuneration: -Group audit fees 20 38 -Audit fees in respect of subsidiaries 40 45 -Interim review fees 2 2 -Taxation advice fees 8 6 -Corporate finance fees 36 - Research and development expenditure 42 40 Rentals under operating leases: Hire of plant and equipment 92 116 Other 328 296 8. TAX (CREDIT)/EXPENSE REPORTED IN THE CONSOLIDATED INCOME STATEMENT 2007 2006 £000 £000Current tax:UK Corporation tax at 30% (2006: 30%) based on taxable profit for the year - 422Prior year adjustment (70) - (70) 422Deferred Taxation:Movement in the year (1,077) 630Less element of movement shown in the Statement of Recognised Income and Expense 639 (342) (438) 288 Tax (credit)/expense reported in the consolidated income statement (508) 710 Reconciliation of total tax charge(Loss)/profit on ordinary activities before tax (831) 2,368 Corporation tax (credit)/expense at standard rate of 30% (2006: 30%) on profit (249) 710before taxAdjusted by the effects of:Expenses not deductible for tax purposes 41 11Timing differences -negative goodwill release - (31)Prior year adjustments -corporation tax (70) - -deferred tax (230) 20 Total tax (credit)/expense reported in the income statement (508) 710 9. DIVIDENDS PAID AND PROPOSED 2007 2006 £000 £000Paid equity dividends on ordinary shares 2006 final dividend of 8.00p (2005: 8.00p) per share 593 589 2007 interim dividend of 3.85p (2006: 3.85p) per share 285 283 878 872Proposed final dividend subject to shareholder approval 2007 final dividend of 8.00p (2006: 8.00p)per share (not recognised as aliability at 31 March 2007) 593 589 10. EARNINGS PER SHARE The calculation of earnings per share is based on the profit attributable toshareholders and the weighted average number of ordinary shares in issue. Incalculating the diluted earnings per share adjustment has been made for thedilutive effect of outstanding share options. Underlying earnings per share,which excludes operating exceptionals, as analysed below, has also beendisclosed as the Directors believe this allows a better assessment of theunderlying trading performance of the Group. Operating exceptionals compriseseverance payments and related costs associated with significant operationalrestructuring. 2007 2006 £000 £000(Loss)/earnings for basic earnings per share (323) 1,658Operating exceptionals 1,141 (104)Taxation effect of operating exceptionals (216) 31Earnings for underlying earnings per share 602 1,585 2006 2006 £000 £000Weighted average number of ordinary shares 7,402 7,360Adjustment to reflect shares under options 144 28Weighed average number of ordinary shares - fully diluted 7,546 7,388 11. EXCEPTIONAL ITEMS 2007 2006 2005 £000 £000 £000 Severance costs (224) (425) (325)Other closure costs (495) (500) -(Loss)/profit on sale of property, plant and equipment (302) 1,029 -Costs of transfer to AIM (120) - 617 (1,141) 104 292 Severance costs in 2007 relate predominantly to redundancies resulting from theclosure of Bloxwich foundry (commenced in 2006), the exit from the Switch andSocket business within Petrel and the transfer of certain production fromLeicester to Scunthorpe. Other closure costs relate to site clearance and disposal of certain stocks atbelow normal selling price, and the writing down of fixed assets and remainingstocks to their net book realisable values. The loss on disposal of equipment relates to the disposal of certain plantfollowing the reappraisal of the planned transfer of all Leicester operations toScunthorpe. 12. STATEMENT OF CHANGES IN EQUITY Attributable to equity holders Capital of the parent redemption Share reserve Share premium Retained capital earnings £000 £000 £000 £000 £000GroupBalance at 1 April 2005 1,840 109 743 9,246 11,938Total recognised income and expensefor the year to 31 March 2006 - - - 2,457 2,457Dividends paid - - - (872) (872)Share based payments - - - 19 19Balance at 31 March 2006 1,840 109 743 10,850 13,542Total recognised income and expensefor the year to 31 March 2007 - - - (1,815) (1,815)Dividends paid - - - (878) (878)Share based payments - - - (6) (6)Issue of shares 14 - 85 - 99Balance at 31 March 2007 1,854 109 828 8,151 10,942 Share Premium Account The share premium account balance included the proceeds that were above thenominal value from issuance of the Company's equity share capital comprising 25pshares. Capital redemption reserve The capital redemption reserve has arisen on the cancellation of previouslyissued shares and represents the nominal value of those shares cancelled. Retained earnings Retained earnings include the accumulated profits and losses arising from theConsolidated Income Statement and certain items from the Statement of RecognisedIncome and Expense attributable to equity shareholders, less distributions toshareholders. This information is provided by RNS The company news service from the London Stock Exchange