Chamberlin Plc Regulatory News (CMH)

RNS Number : 8949F

Chamberlin PLC

23 May 2017

 

 

CHAMBERLIN plc

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

 

FINAL RESULTS

for the year ended 31 March 2017

 

KEY POINTS

 

· Continued encouraging progress, both strategically and operationally

o underpins expected significant growth in the current year and beyond

 

· Revenues up 10% to £32.1m (2016: £29.1m)

 

· Underlying profit before tax* increased significantly to £0.6m (2016: £0.2m)

 

· Underlying diluted profit per share* more than tripled to 4.5p (2016: 1.4p)

IFRS diluted loss per share of 12.2p (2016: loss per share of 3.3p)

 

· Capital expenditure of £3.9m (2016: £1.4m), included establishment of new machining facility:

o opens up new long term growth opportunities

o positions Chamberlin as the only fully integrated supplier of grey iron bearing housings in Europe

 

· Net debt of £6.8m at year end, reflected machining facility investment

 

· Foundry operations grew revenues by 8% to £21.3m

o major new automotive contract commenced in H2 as expected, with volumes rising in 2017

o new machining facility opened in Q4 to support move into fully machined components

o Walsall foundry's promotion to 'Category A' supplier in Q1 is providing additional growth opportunities

 

· Engineering operations increased revenues by 15% to £10.8m

o initiatives in place to drive export sales and margins

 

· Board remains confident of delivering further progress through 2017

 

 

* Underlying figures are stated before exceptional items, administration costs of the pension scheme and net financing costs on pension obligations, share based payment costs and the associated tax impact of these items.

 

Chairman, Keith Butler-Wheelhouse, commented:

 

"Chamberlin made important strategic and operational progress over the year, which will help to support a significant new phase of growth. Revenue increased by 10% to £32.1m and the underlying profit before tax increased significantly to £0.6m. 

 

We have further developed Chamberlin's product offering with a significant investment in a machining facility in Walsall. Opened in the final quarter of the financial year, it improves our competitive positioning and will support further growth over the new financial year. It also underlines our ability to deliver a world class product at a globally competitive cost.

 

The Group remains well placed for further progress over the new financial year, supported by major new contracts."

 

 

Enquiries

Chamberlin plc (www.chamberlin.co.uk) Kevin Nolan, Chief Executive David Roberts, Finance Director		T: 01922 707100
Smith & Williamson Corporate Finance Limited (Nominated Adviser and Broker) Russell Cook, Katy Birkin		T: 020 7131 4000
KTZ Communications (Financial PR) Katie Tzouliadis, Emma Pearson		T: 020 3178 6378

 

 

Chairman's Statement

 

Introduction

 

The Group delivered a significantly strengthened performance in the second half of the year, as expected, and financial results for the year are encouraging, with revenue growth of 10% at £32.1m and underlying profit before tax significantly increased to £0.6m from £0.2m last year.

 

These improved results were supported by both our foundry and engineering operations. Operating profit across our foundry activities rose by 55%, driven mainly by our Walsall foundry, and our engineering operations increased operating profit by 20% year-on-year.

 

We took some important strategic decisions in the year. Most significantly, we invested in a new machining facility in Walsall. The investment supports Chamberlin's move into fully machined components for automotive turbochargers. It also positions the Group as the only fully integrated supplier of grey iron bearing housings in Europe and is expected to open up new long term growth opportunities, as we have previously reported. We started production at the new facility in early 2017 and held a successful Open Day at the end of March 2017 which was attended by both customers and stakeholders.

 

The Board took the difficult decision of closing our non-core foundry at Leicester, which was the least specialised of the Group's foundries, at the end of 2016, and production at Leicester stopped in February 2017. An orderly decommissioning process is now underway.

 

Exidor has delivered good growth and management are implementing further initiatives to improve profitability. Petrel is showing encouraging growth by continuing to access new markets outside of its core oil and gas customer base, helped by the successful introduction of new LED product ranges.

 

Prospects for the current financial year remain very encouraging. The actions we have completed over the last year help to improve Chamberlin's competitive positioning and we are continuing to focus on margin development across both areas of operations. The automotive turbocharger sector is a growth area and with our new machining capability in operation, we are well placed to expand further. Production volumes from last year's major new automotive contract win should increase over 2017 and will help to support growth in revenue and profitability.

 

Results

 

Revenues for the year to 31 March 2017 increased by 10% to £32.1m (2016: £29.1m), with growth coming from new, cast-only, work at the Walsall foundry and increased market share from our two engineering businesses. This offset the loss of an industrial vehicle contract at our Scunthorpe facility. Revenues from the new machining facility, which opened in early 2017, made only a marginal contribution, as expected.

 

Underlying profit before tax increased significantly to £0.6m (2016: £0.2m) and diluted underlying profit per share more than tripled to 4.5p (2016: 1.4p).

 

On an IFRS basis, after accounting for restructuring costs of £0.1m (2016: £0.1m), administration and costs of the closed pension scheme of £0.4m (2016: £0.4m) and impairment of Leicester of £1.5m (2016: £nil), the Group generated a loss of £1.0m (2016: loss of £0.3m). Diluted loss per share was 12.2p (2016: loss per share of 3.3p).

 

The net debt position at 31 March 2017 was £6.8m (2016: £3.2m), reflecting the investment in the new machining facility.

 

Dividend

 

In line with the current dividend policy, the Directors are not proposing the payment of a dividend for the period under review (2016: nil).

 

Staff

 

Our staff continue to demonstrate huge commitment and dedication as we develop the business, and on behalf of the Board, I would like to thank everyone for their hard work. The Group's improving business performance is supported by their talents and efforts.

 

 

Outlook

 

The Group is well positioned to deliver a further improvement in performance during the current financial year. Major new contract wins in the automotive turbocharger market support ongoing growth and our recently opened new machining plant helps to strengthen our market positioning and widen opportunities.

 

We look forward to reporting further progress at the Group's AGM on 20 July 2017.

 

 

Keith Butler-Wheelhouse

Chairman

22 May 2017

 

 

Chief Executive's Review

 

Chamberlin continues to make encouraging progress, building on our previous work to improve efficiencies and processes and to realign the cost base. The opening of our new machining operations in the fourth quarter of the financial year marked a high point for the Group and we remain excited about the additional growth opportunities the new facility brings. Our engineering operations are also progressing well and we intend to continue to focus on building export sales across both engineering businesses.

 

Foundries

 

Foundry revenues increased by 8% year-on-year to £21.3m (2016: £19.8m), with operating profit rising by 55% to £1.2m (2016: £0.8m).

 

Following our decision to close our non-core foundry at Leicester, the Group now operates two foundries, at Walsall and Scunthorpe, each with a different specialisation.

 

Our foundry at Walsall is our flagship operation and drives the majority of the foundry division's sales. Walsall's expertise is in producing small castings, typically below 3kg in weight, which have complex internal geometry. The complex geometry is achieved through the use of innovative core design and assembly techniques and, importantly, the foundry is capable of producing these castings in high volumes.

 

The automotive turbocharger segment is a major market for Walsall, with modern designs requiring precise alignment of cooling and lubrication passages to meet the increased performance demanded by modern engines. Legislation is a major driver of this market, with the requirement to reduce nitrogen dioxide emissions promoting the introduction of smaller, turbocharged petrol engines. Approximately 72% of Walsall's casting production is for petrol engines.

 

To support Chamberlin's growth in the automotive turbocharger market, we have invested an initial £2.1m in a machining facility near to our Walsall foundry which will enable us to supply turbo charger bearing housings which are fully machined in-house. This initiative is an exciting development which we expect to open up significant new long term growth opportunities. Walsall is one of only four specialist foundries in Europe with the technical capability of supplying castings for turbochargers and, with our new machining capability, the foundry is now the only fully integrated supplier of grey iron bearing housings in Europe.

 

The Scunthorpe foundry specialises in heavy castings weighing up to 6,000kg which have complex geometry and challenging metallurgy. These castings are used in applications where there is a requirement for high strength or high temperature performance, for instance in large process compressors, industrial gas turbines and mining, quarrying and construction equipment, and the majority of customers are Original Equipment Manufacturers ("OEMs"). Demand at the foundry was relatively subdued over the year but we have driven further operational improvement at the foundry and continue to work to deepen and broaden customer relationships.

 

Engineering

 

Revenues from the engineering operations, comprising our Exidor and Petrel businesses, increased by 15% year-on-year to £10.8m (2016: £9.4m) and operating profit rose by 20% to £0.8m (2016: £0.7m).

 

Our Exidor business is the UK market leader in panic and emergency exit door hardware. Its products are for life-critical applications and Exidor operates in a highly regulated market. Customers place great value on Exidor's heritage as a British designer and manufacturer, which delivers high quality, certified products. We are re-engineering the product range to support our growth drive and continue to target overseas sales while maintaining Exidor's leading position in the UK. The business delivered good growth and we are implementing lean manufacturing initiatives which will help to reduce costs and improve margins.

 

Petrel has a well-established reputation for designing and manufacturing high quality lighting and control equipment for use in hazardous or demanding environments. It supplies customers across the UK and Europe as well as internationally. Revenue growth over the year was very good and we are encouraged by the progress being made outside Petrel's traditional markets of oil & gas. The transition to LED lighting remains a key focus as well as developing the business's portable light fittings range. Approximately 31.3% of sales (2016: 11.8%) were generated from portable lighting and LED products over the year and this percentage should rise further. We have also expanded Petrel's commercial and technical resource to support ongoing growth.

 

 

Outlook

 

We expect further profitable revenue growth in the next financial year supported by major new contracts coming on stream.

 

 

 

Kevin Nolan

Chief Executive

22 May 2017

 

 

Finance Review

 

Overview

Sales increased by 10% during the year to £32.1m (2016: £29.1m). Gross profit margin increased to 21.6% from 20.3% in 2016.

 

Underlying profit before tax increased to £0.6m (2016: £0.2m). Diluted underlying earnings per share increased to 4.5p (2016: 1.4p).

 

The IFRS results show a loss of £1.0m (2016: £0.3m) and a statutory loss per share of 12.2p (2016: loss per share 3.3p).

 

The income statement has been presented to reflect that operations relating to the Leicester foundry are now discontinued, as required by IFRS 5.

 

Non-underlying exceptional items

Exceptional items in the year included £0.1m (2016: £0.5m) relating to the realignment of the cost base of the Group, and £1.5m (2016: nil) relating to the impairment of the Leicester assets and lease contracts.

 

Tax

The Group's underlying tax charge for the year was £0.2m (2016: £0.1m).

 

Cash generation and financing

Operating cash inflow from continuing operations was £0.3m (2016: £1.9m).

 

Capital expenditure for the year increased to £3.9m (2016: £1.4m). This was ahead of depreciation and amortisation of £1.2m (2016: £1.2m), reflecting the investment in the new machining facility.

 

Our overdraft and net borrowings at 31 March 2017 increased to £6.8m (2016: £3.2m).

 

Foreign exchange

It is the Group's policy to minimise risk to exchange rate movements affecting sales and purchases by economically hedging or netting currency exposures at the time of commitment, or when there is a high probability of future commitment, using currency instruments (primarily forward exchange contracts). A proportion of forecast exposures are hedged depending on the level of confidence and hedging is topped up following regular reviews. On this basis up to 50% of the Group's annual exposures are likely to be hedged at any point in time and the Group's net transactional exposure to different currencies varies from time to time.

 

Approximately 40% of the Group's revenues are denominated in Euros. During the year to 31 March 2017 the average exchange rate used to translate into GBP sterling was €1.26 (31 March 2016: €1.34).

 

Pension

The Group's defined benefit pension scheme was closed to future accrual in 2007. Following the last triennial valuation, as at 1 April 2013, contributions were set at £0.3m per year for the period under review increasing by 3% per year thereafter based on a deficit recovery period of 14 years. The triennial valuation as at 1 April 2016 has not yet been finalised. However, the Group is confident that this will not result in a materially increased deficit contribution, albeit at the expense of a longer deficit recovery period due to lower gilt yields.

 

The pension expense for the defined benefit scheme was £0.4m in 2017 (2016: £0.4m), and is shown in non-underlying. The Group cash contribution during the year was £0.3m (2016: £0.3m).

 

The Group operates a defined contribution pension scheme for its current employees. The cost of £0.4m (2016: £0.3m) is included within underlying operating performance.

 

The IAS 19 deficit at 31 March 2017 was £5.2m (2016: £4.7m). The increase principally reflects the decrease in the discount rate used to calculate scheme liabilities, as a consequence of a fall in bond yields over the last year, partially offset by the over performance of assets against expected levels.

 

David Roberts

22 May 2017

 

 

Consolidated Income Statement

for the year ended 31 March 2017

 

		Year ended 31 March 2017				Year ended 31 March 2016
	Note	Underlying	+Non-underlying	Total		Underlying	+ Non- underlying	Total
		£000	£000	£000		£000	£000	£000
Revenue	3	32,119	-	32,119		29,120	-	29,120
Cost of sales		(25,173)	-	(25,173)		(23,208)	-	(23,208)
Gross profit		6,946	-	6,946		5,912	-	5,912
Other operating expenses	6	(6,203)	(365)	(6,568)		(5,529)	(427)	(5,956)
Operating profit/ (loss)		743	(365)	378		383	(427)	(44)
Finance costs	4	(164)	(160)	(324)		(150)	(142)	(292)
Profit/ (loss) before tax		579	(525)	54		233	(569)	(336)
Tax (expense)/ credit		(205)	105	(100)		(119)	104	(15)
Profit/ (loss) for the year from continuing operations		374	(420)	(46)		114	(465)	(351)
Discontinued operations
Profit/ (loss) for the year from discontinued operations		219	(1,146)	(927)		336	(246)	90
Profit/ (loss) for the year attributable to equity holders of the parent company		593	(1,566)	(973)		450	(711)	(261)
Earnings/ (loss) per share from continuing operations:
Basic	5			(0.6)p				(4.4)p
Underlying	5	4.7p				1.5p
Diluted	5			(0.6)p				(4.4)p
Diluted underlying	5	4.5p				1.4p
Earnings/ (loss) per share from discontinued operations:
Basic	5			(11.6)p				1.1p
Underlying	5	2.8p				4.2p
Diluted	5			(11.6)p				1.1p
Diluted underlying	5	2.6p				4.1p
Total earnings/ (loss) per share:
Basic	5			(12.2)p				(3.3)p
Underlying	5	7.5p				5.7p
Diluted	5			(12.2)p				(3.3)p
Diluted underlying	5	7.1p				5.5p

+ Non-underlying items represent exceptional items as disclosed in note 6, administration costs of the pension scheme and net financing costs on pension obligations, share based payment costs and the associated tax impact of these items.

 

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2017

 

		2017		2016
		£000		£000
Loss for the year		(973)		(261)
Other comprehensive income
Reclassification for cash flow hedge included in sales		(87)		(419)
Movements in fair value on cash flow hedges taken to other comprehensive income		419		(193)
Deferred tax on movement in cash flow hedges		(60)		123
Movement on deferred tax relating to rate change		(1)		(9)
Net other comprehensive income that may be recycled to profit and loss		271		(498)
Re-measurement losses on pension assets and liabilities		(612)		(254)
Deferred/ current tax on re-measurement losses on pension scheme		122		51
Movement on deferred tax on re-measurement losses relating to rate change		(52)		(93)
Net other comprehensive loss that will not be recycled to profit and loss		(542)		(296)
Other comprehensive loss for the year net of tax		(271)		(794)
Total comprehensive loss for the period attributable to equity holders of the parent Company		(1,244)		(1,055)

 

 

 

Consolidated Balance Sheet

at 31 March 2017

 

	Note	31 March 2017		31 March 2016
		£000		£000
Non-current assets
Property, plant and equipment		10,179		8,112
Intangible assets		461		387
Deferred tax assets		1,498		1,370
		12,138		9,869
Current assets
Inventories		3,347		2,899
Trade and other receivables		7,556		6,195
		10,903		9,094
Total assets		23,041		18,963
Current liabilities
Financial liabilities	7	5,520		2,941
Trade and other payables		6,899		5,727
		12,419		8,668
Non-current liabilities
Financial liabilities	7	1,308		251
Deferred tax		27		59
Provisions		200		200
Defined benefit pension scheme deficit	8	5,209		4,692
		6,744		5,202
Total liabilities		19,163		13,870
Capital and reserves
Share capital		1,990		1,990
Share premium		1,269		1,269
Capital redemption reserve		109		109
Hedging reserve		(72)		(343)
Retained earnings		582		2,068
Total equity		3,878		5,093
Total equity and liabilities		23,041		18,963

 

Consolidated Cash Flow Statement

for the year ended 31 March 2017

 

		Year ended 31 March 2017		Year ended 31 March 2016
		£000		£000
Operating activities
Profit/ (loss) for the year before tax		54		(336)
Adjustments to reconcile profit/ (loss) for the year to net cash (outflow)/ inflow from operating activities:
Net finance costs excluding pensions		164		150
Depreciation of property, plant and equipment		1,125		1,104
Amortisation of software		90		97
Amortisation and impairment of development costs		7		11
Profit on disposal of property, plant and equipment		(1)		(12)
Share based payments		28		53
Difference between pension contributions paid and amounts recognised in the Consolidated Income Statement		(95)		(106)
(Increase)/ decrease in inventories		(676)		934
(Increase)/ decrease in receivables		(1,664)		880
Increase/ (decrease) in payables		1,220		(874)
Income taxes received		-		1
Cash inflow from continuing operations		252		1,902
Cash (outflow)/ inflow from discontinued operations		(358)		378
Net cash (outflow)/ inflow from operating activities		(106)		2,280
Investing activities
Purchase of property, plant and equipment		(3,732)		(1,418)
Purchase of software		(41)		(31)
Development costs		(133)		(12)
Disposal of plant and equipment		9		33
Net cash outflow from investing activities		(3,897)		(1,428)
Financing activities
Interest paid		(164)		(150)
Repayment of asset loans		(162)		(162)
Net invoice finance draw down/ (repayment)		1,421		(459)
Import loan facility draw down		1,235		-
Finance leases taken out		1,583		84
Net cash inflow/ (outflow) from financing activities		3,913		(687)
Net (decrease)/ increase in cash and cash equivalents		(90)		165
Cash and cash equivalents at the start of the year		(126)		(291)
Cash and cash equivalents at the end of the year		(216)		(126)
Cash and cash equivalents included in discontinued operations		(332)		(479)
Cash and cash equivalents for continuing operations		116		353
Cash and cash equivalents comprise:
Bank overdraft		(216)		(126)
		(216)		(126)

 

Consolidated statement of changes in equity

 

	Share capital	Share premium account	Capital redemption reserve	Hedging reserve	Retained earnings	Attributable to equity holders of the parent
	£000	£000	£000	£000	£000	£000
Balance at 1 April 2015	1,990	1,269	109	155	2,586	6,109
Loss for the year	-	-	-	-	(261)	(261)
Other comprehensive income for the year net of tax	-	-	-	(498)	(296)	(794)
Total comprehensive income/ (expense)	-	-	-	(498)	(557)	(1,055)
Share based payment	-	-	-	-	53	53
Deferred tax on employee share options	-	-	-	-	(14)	(14)
Total of transactions with shareholders	-	-	-	-	39	39
Balance as at 1 April 2016	1,990	1,269	109	(343)	2,068	5,093
Loss for the year	-	-	-	-	(973)	(973)
Other comprehensive income for the year net of tax	-	-	-	271	(542)	(271)
Total comprehensive income/ (expense)	-	-	-	271	(1,515)	(1,244)
Share based payments	-	-	-	-	28	28
Deferred tax on employee share options	-	-	-	-	1	1
Total of transactions with shareholders	-	-	-	-	29	29
Balance at 31 March 2017	1,990	1,269	109	(72)	582	3,878

 

 

Share premium account

The share premium account balance includes 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.

 

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.

 

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.

 

 

 

 

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 2017 were authorised for issue by the board of directors on 22 May 2017 and the balance sheets were signed on the board's behalf by Kevin Nolan and David Roberts. 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) as adopted by the European Union. 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 2017 or 31 March 2016 but is derived from the 2017 Annual Report and Accounts. The Annual Report and Accounts for 2016 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2017 will be delivered to the Registrar of Companies in due course. The auditors, Grant Thornton UK LLP, have reported on the accounts for the year ended 31 March 2017 and have given an unqualified report which does not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006 nor an emphasis of matter paragraph.

 

 

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 2017.

 

Going concern

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Financial Statements.

 

 

3. SEGMENTAL ANALYSIS

 

For management purposes, the Group is organised into two operating divisions according to the nature of the products and services. Operating segments within those divisions are combined on the basis of their similar long term characteristics and similar nature of their products, services and end users as follows:

 

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.

 

Management monitors the operating results of its divisions separately for the purposes of making decisions about resource allocation and performance assessment. The Chief Operating Decision Maker is the Chief Executive.

 

(i) By operating segment

	Segmental revenue		Segmental operating profit
Year ended	2017	2016	2017	2016
	£000	£000	£000	£000
Foundries	21,333	19,767	1,188	764
Engineering	10,786	9,353	816	679
Continuing operations	32,119	29,120	2,004	1,443
Discontinued operations	2,810	5,868	296	448
Segmental results	34,929	34,988	2,300	1,891
Reconciliation of reported segmental operating profit
Segment operating profit			2,300	1,891
Shared costs (excluding share based payment charge)			(1,261)	(1,060)
Exceptional and non-underlying costs			(365)	(427)
Net finance costs			(324)	(292)
Loss from discontinued operation			(296)	(448)
Profit/ (loss) before tax from continuing operations			54	(336)
Segmental assets
Foundries			16,861	13,560
Engineering			5,508	4,768
			22,369	18,328
Segmental liabilities
Foundries			(5,051)	(4,313)
Engineering			(2,048)	(1,614)
			(7,099)	(5,927)
Segmental net assets			15,270	12,401
Unallocated net liabilities			(11,392)	(7,308)
Total net assets			3,878	5,093

 

Unallocated net liabilities include the pension liability of £5,209,000 (2016: £4,692,000), financial liabilities of £6,828,000 (2016: £3,192,000), deferred tax asset of £645,000 (2016: £564,000) and other assets of Nil (2016: £12,000).

 

 

	Capital expenditure, depreciation and amortisation and impairment
Capital additions		Foundries				Engineering			Total
		2017		2016		2017	2016		2017	2016
		£000		£000		£000	£000		£000	£000
Property, plant and equipment		3,611		1,381		127	87		3,738	1,468
Software		35		13		6	18		41	31
Development costs		-		-		133	12		133	12
Depreciation, amortisation and impairment		Foundries				Engineering			Total
		2017		2016		2017	2016		2017	2016
		£000		£000		£000	£000		£000	£000
Property, plant and equipment		(984)		(985)		(213)	(250)		(1,197)	(1,235)
Software		(81)		(85)		(12)	(12)		(93)	(97)
Development costs		-		-		(7)	(11)		(7)	(11)

 

 

(ii) By geographical segment

	2017	2016
Revenue by location of customer	£000	£000
United Kingdom	15,031	15,588
Italy	4,702	3,343
Germany	3,736	4,192
Rest of Europe	6,159	3,824
Other countries	2,491	2,173
	32,119	29,120

 

 

4. FINANCE COSTS

	2017	2016
	£000	£000
Bank overdraft interest payable	(164)	(150)
Finance cost of pensions	(160)	(142)
	(324)	(292)

 

5. EARNINGS/ (LOSS) PER SHARE

 

The calculation of earnings/ (loss) 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/ (loss) per share, adjustment has been made for the dilutive effect of outstanding share options. Underlying earnings/ (loss) per share, which excludes non-underlying items, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Exceptional costs are detailed in note 6.

 

	2017	2016
	£000	£000
Loss for basic earnings per share	(973)	(261)
Exceptional costs- continuing operations	138	143
Exceptional costs- discontinued operations	1,451	320
Net financing costs and service cost on pension obligations	359	372
Share based payment charge	28	54
Taxation effect of the above	(410)	(178)
Profit for the year from discontinued operations	(219)	(336)
Earnings for underlying earnings per share	374	114
	2017	2016
	Number '000	Number '000
Weighted average number of ordinary shares	7,958	7,958
Adjustment to reflect shares under options	350	160
Weighted average number of ordinary shares - fully diluted	8,308	8,118

As at 31 March 2017 and 31 March 2016 there is no adjustment in the total diluted loss per share calculation for the 350,000 and 160,300 shares respectively under option as they are required to be excluded from the weighted average number of shares for diluted loss per share as they are anti-dilutive for the period then ended.

 

 

6. EXCEPTIONAL COSTS AND NON-UNDERLYING

	2017	2016
	£000	£000
Group reorganisation	138	143
Exceptional costs	138	143
Share based payment charge	28	54
Defined benefit pension scheme administration costs	199	230
Non-underlying other operating expenses	365	427
Finance cost of pensions	160	142
Taxation
- tax effect of exceptional and non-underlying costs	(105)	(104)
	420	465

 

 

Non-underlying exceptional costs of discontinued operation	1,451	320
Tax effect of exceptional costs	(305)	(74)
	1,146	246

 

During 2016 and continuing into 2017 the Group continues to rationalise its cost base. Group reorganisation costs, including redundancy and recruitment, relate to this rationalisation.

 

During 2017 the Group took the decision to close the Leicester foundry. Non-underlying exceptional costs of discontinued operations, including asset impairment, redundancy and site clean up costs, relate to this closure.

 

 

7. FINANCIAL LIABILITIES

 

	2017	2016
	£000	£000
Current liabilities
Bank overdraft	216	126
Current instalments due on asset finance loans	200	200
Invoice finance facility	3,510	2,582
Import loan facility	1,235	-
Current instalments due on finance leases	359	33
	5,520	2,941
Non-current liabilities
Instalments due on asset finance loans	-	200
Instalments due on finance leases	1,308	51
Total financial liabilities	6,828	3,192

 

The overdraft is held with HSBC Bank plc as part of the Group facility of £500,000, is secured on all assets of the business, is repayable on demand and is renewable in March 2018. Interest is payable at 2.0% (2016: 2.0%) over base rate.

 

Asset finance loans are secured against various items of plant and machinery across the Group. These loans are repayable by monthly instalments for a period of one year to March 2018. Interest is payable at 3.25% over base rate.

 

The import loan facility is used to facilitate the purchase of equipment for the new machine centre. Once each asset is commissioned the import loan facility is repaid in full, facilitated by a sale and lease back on finance lease. Interest is payable at 3.25% over base rate.

 

Other finance leases are secured against the specific item to which they relate. These leases are repayable by monthly instalments for a period of 5 years to March 2022. Interest is payable at fixed amounts that range between 3.1% and 6.1%.

 

Invoice finance balances are secured against the trade receivables of the Group and are repayable on demand. Interest is payable at 2.3% over base rate. The maximum facility as at 31 March 2017 is £7.0m. Management have assessed the treatment of the financing arrangements and have determined it is appropriate to recognise trade receivables and invoice finance liabilities separately.

 

8. PENSIONS ARRANGEMENTS

 

During the year, the Group operated funded defined benefit and defined contribution pension schemes for the majority of its employees, these being established under trusts with the assets held separately from those of the Group. The pension operating cost for the Group defined benefit scheme for 2017 was £199,000 (2016: £230,000) plus £160,000 of financing cost (2016: £142,000).

 

The other schemes within the Group are defined contribution schemes and the pension cost represents contributions payable. The total cost of defined contributions schemes was £353,000 (2016: £331,000). The notes below relate to the defined benefit scheme.

 

The actuarial liabilities have been calculated using the Projected Unit method. The major assumptions used by the actuary were (in nominal terms):-

	31 March 2017	31 March 2016	31 March 2015
Salary increases	n/a	n/a	n/a
Pension increases (post 1997)	3.3%	2.9%	2.9%
Discount rate	2.5%	3.5%	3.2%
Inflation assumption - RPI	3.3%	2.9%	2.9%
Inflation assumption - CPI	2.3%	2.1%	1.8%

 

 

Demographic assumptions are all based on the S2PA (2016: S1NA) mortality tables with a 1% annual increase. The post retirement mortality assumptions allow for expected increases in longevity. The current disclosures relate to assumptions based on longevity in years following retirement as of the balance sheet date, with future pensions relating to an employee retiring in 2032.

 

 

		2017 Years	2016 Years
Current pensioner at 65 - male		21.1	21.4
- female		22.9	23.7
Future pensioner at 65 - male		22.1	22.4
- female		24.0	24.8

 

The scheme was closed to future accrual with effect from 30th November 2007, after which the Company's regular contribution rate reduced to zero (previously the rate had been 9.1% of members' pensionable salaries).

 

The triennial valuation as at 1 April 2016 is currently being negotiated. The triennial valuation as at 1 April 2013 concluded that in return for maintaining the previous contribution arrangements and extending the deficit reduction period to 2028, the Company has given security over the Group's land and buildings to the pension scheme. With effect from 1 April 2017 deficit reduction contributions will increase to £21,890 per month (previously £21,252 per month), with a 3% annual increase thereafter.

 

The contributions expected to be paid during the year to 31 March 2018 are £263,000.

 

The scheme assets are stated at the market values at the respective balance sheet dates. The assets and liabilities of the scheme were:

 

		2017 £000	2016 £000
Equities/ diversified growth fund		12,325	11,719
Bonds		1,143	1,123
Insured pensioner assets		30	9
Cash		50	123
Market value of assets		13,548	12,974
Actuarial value of liability		(18,757)	(17,666)
Scheme deficit		(5,209)	(4,692)
Related deferred tax asset		886	845
Net pension liability		(4,323)	(3,847)

 

Net benefit expense recognised in profit and loss		2017 £000	2016 £000
Operating costs		(199)	(230)
Net interest expense		(160)	(142)
		(359)	(372)

 

 

Re-measurement losses/ (gains) in other comprehensive income			2017 £000	2016 £000
Actuarial losses/ (gains) arising from changes in financial assumptions			2,703	(575)
Actuarial gains arising from changes in demographic assumptions			(599)	-
Experience adjustments			(254)	(5)
Return on assets (excluding interest income)			(1,238)	834
			612	254
			2017 £000	2016 £000
Actual return on plan assets			1,673	(396)

 

Movement in deficit during the year		2017 £000	2016 £000
Deficit in scheme at beginning of year		(4,692)	(4,544)
Employer contributions		255	248
Net interest expense		(160)	(142)
Actuarial loss		(612)	(254)
Deficit in scheme at end of year		(5,209)	(4,692)

 

Movement in scheme assets		2017 £000	2016 £000
Fair value at beginning of year		12,974	14,008
Interest income on scheme assets		435	438
Return on assets (excluding interest income)		1,238	(834)
Employer contributions		255	248
Benefits paid		(1,354)	(886)
Fair value at end of year		13,548	12,974

 

Movement in scheme liabilities		2017 £000	2016 £000
Benefit obligation at start of year		17,666	18,552
Interest cost		595	580
Actuarial losses/ (gains) arising from changes in financial assumptions		2,703	(575)
Actuarial gains arising from changes in demographic assumptions		(599)	-
Experience adjustments		(254)	(5)
Benefits paid		(1,354)	(886)
Benefit obligation at end of year		18,757	17,666

The weighted average duration of the pension scheme liabilities are 14.0 years (2016: 14.5 years).

 

A quantitative sensitivity analysis for significant assumptions as at 31 March 2017 is as shown below:

 

Present value of scheme liabilities when changing the following assumptions:			2017 £000
Discount rate increased by 1% p.a.			16,443
RPI and CPI increased by 1% p.a.			19,859
Mortality- members assumed to be their actual age as opposed to 1 year older			19,575

The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the year.

 

 

9. REPORT AND ACCOUNTS

 

Copies of the Annual Report will be available on the Group's website, www.chamberlin.co.uk from 24 June 2017 and from the Group's head office at Chuckery Road, Walsall, West Midlands, WS1 2DU. The AGM will be held on 20 July 2017 at Chuckery Road, Walsall, West Midlands, WS1 2DU.

 

This information is provided by RNS

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