Chamberlin Plc Regulatory News (CMH)

8 July 2022

Chamberlin plc

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

Full Year Trading Update and Notice of Results

Chamberlin plc (AIM: CMH.L), the specialist castings and engineering group, is pleased to announce the following trading update for the financial year ended 31 May 2022 ("FY 2022").

Key Points

FY 2022 Trading Performance

The Group expects to report revenues for FY 2022 of approximately £16.5 million (14 months ended 31 May 2021: £22.7 million), in line with market expectations and adjusted EBITDA* of £0.2 million, up 112% on the prior period (14 months ended 31 May 2021: £1.7 million loss). The Company also expects to report a profit after tax of £0.1 million (subject to audit), in line with market expectations.

Chamberlin & Hill Castings Ltd - Casting Facility and Machining Facility ("CHC")

Following the placing completed in February 2022, the Board has continued to implement the revised strategy in order to reduce sole reliance on the automotive industry, diversify the Group's customer base and pursue more attractive markets.

In relation to the Group's automotive products, well publicised global economic conditions such as inflation, escalating raw material costs, supply chain shortages and a slowdown in the automotive industry remain challenges to trading conditions. As a result, management continue to reduce costs, improve efficiencies, and optimise pricing at CHC in order to improve margins and restore sustainable profitability to the Group, however the division continues to operate at a loss and is not yet cash generative. Longer term demand for the Group's automotive products is however expected to improve in H1 FY 2023 and the Group has been successful in winning new contracts in the niche supercar market and the commercial vehicle sector.

The Group, as the sole UK based foundry manufacturer and distributor of UK made cast iron cookware, launched its Emba range at the end of November 2021, which continues to be very well received by consumers. The Group has utilised targeted marketing to businesses, subsequently entering into a number of small distribution deals, with traditional and digital retailers, for the Emba products, as well as focusing on more penetrative marketing strategies for sales direct to consumers including advertising through social media platforms, such as Instagram.

The Board was very encouraged by the rapid increase in sales, new leads and social media followers in the final quarter of FY 2022. With the in-house capability to design, manufacture and distribute new products into a global marketplace, the Board firmly believe that further development and investment in Emba cookware will position the brand to be a material contributor to growth over the coming months and years.

The Iron Foundry Weights ("IFW") brand was launched in May 2021 and the Board remains focused on direct selling to the consumer, where the Group can offer high-quality, bespoke UK made products that have a significantly reduced carbon footprint compared to products imported from overseas. Chamberlin has the existing capability to not only design and manufacture cast iron fitness products but is also actively investing in repurposing its state-of-the-art machining facility to be able to produce its new range of steel precision machined dumbbells.

Driven by the exciting progress of the consumer products brands and the feedback from consumers, Chamberlin has designed a number of new premium products to support the existing Emba and IFW offerings and plans to launch these products in FY 2023. Chamberlin has recently installed a new shotblast system at CHC to support the growth plans and ensure that it provides premium quality, competitively priced products.

Russell Ductile Castings Ltd ("RDC")

The Company's Scunthorpe foundry operation continues to operate at near full production levels in response to both a growing customer demand and pipeline of opportunities, with the current order book at sufficient levels to ensure H1 2023 management sales forecasts are met. Operating profitability at RDC significantly improved during FY 2022, with the Board expecting to report an increase of over 300 per cent. compared to the prior 14-month period. With planning permission expected in Summer 2022, the investment programme to expand production capacity by up to 40 per cent. and the types of product that can be manufactured at RDC's facilities to exploit new growth opportunities, including in the offshore and green energy generation markets, is expected to be completed in Autumn 2022.

Petrel Ltd

Petrel, Chamberlin's specialist lighting business, traded profitably during FY 2022 and has exceeded the Board's expectations significantly. The Company expects to report an increase in operating profitability of over 150 per cent. compared to the prior 14-month period. Petrel continues to benefit from a strong order book, reflecting recovery from COVID-19 and Brexit. Petrel is developing a pipeline of new and innovative products that can be brought to market swiftly and potentially move Petrel into a market leading position. Management are also investigating the provision of additional services (such as warranty, inspection and maintenance) to its customers that have a significant installed base of Petrel products. In addition, management continue to review and update Petrel's existing product range through in-house design and manufacture of new products as new technology evolves.

Balance Sheet and Financing

In May 2022, the Group refinanced the terms of its asset finance facility with HSBC, extending the repayment period to October 2025 at an interest rate of 6.5 per cent. 

On 5 May 2022, the Company announced details of a sale and leaseback of its freehold property at RDC with completion of the transaction occurring on 6 May 2022. The proceeds have been used to reduce the Company's pension fund deficit by £600k in satisfaction of the Chamberlin & Hill Life Assurance Scheme's charge over the property, with the balance of the proceeds being applied to the Group's growth strategies and to provide working capital. 

Net debt at 31 May 2022, including asset leases of £2.7 million (31 May 2021: £2.2 million), was £4.9 million (unaudited) (31 May 2021: £1.8 million) and current cash headroom is in line with management expectations at £0.8 million. The Board expects the Group's deficit in shareholder's funds on the balance sheet to be largely eliminated for FY 2022 (subject to audit), as a result of the restructuring actions taken by the Company, a reduction in the pension deficit and improved performance across the Group.

Outlook

Whilst the overall economic climate remains uncertain, in particular rising inflation impacting consumer spending, the Board is pleased to report that all three operating divisions have made a strong start to FY2023 with higher than expected levels of orders for Q1 2023 and strong ongoing order books.

The Group is well positioned to continue its recovery and expects to return to a more sustainable level of profitability, having taken the appropriate steps to reduce its cost base and invest in new growth strategies for each business.

This recovery is further supported by the Group's protection from any current or medium term energy price increases, having secured a 5 year fixed price contract for electricity in March 2020, placing the Group in an increasingly competitive position to win new orders.

Notice of Results

The Group expects to report its audited results for the financial year ended 31 May 2022 in September 2022.

* adjusted EBITDA defined as operating profit before interest, taxation, depreciation, amortisation and non-underlying items

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018.

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