Last checked at 29 Nov 2016 07:00
29 November 2016
AIM: CMH
CHAMBERLIN PLC
("Chamberlin" or "the Company" or "the Group")
Half Year Results
For the six months to 30 September 2016
Key Points
· H1 results in line with management expectations - Group remains on track to achieve market expectations for the full year
· Revenues of £16.4m (2015: £18.0m) - with the reduction mainly in the Leicester foundry
· Gross margin percentage increased to 19.9% (2015: 17.5%)
· Underlying profit before tax of £8,000 (2015: £57,000)
Statutory loss after tax was £391,000 (2015: loss of £367,000)
· Underlying basic loss per share was 0.9p (2015: earnings per share of 0.2p)
Statutory basic loss per share was 4.9p (2015: loss of 4.6p)
· Major strategic investment of £3.8m in machining capability commenced:
o will support ongoing capacity utilisation at flagship foundry in Walsall
o will generate incremental sales from January 2017
· Walsall foundry promoted in June to "Category A" supplier by major customer, IHI Europe Ltd:
o one of only two suppliers to IHI Europe Ltd to hold this status
o opens up new opportunities
· Engineering division revenues increase by 8.2%. Order intake increase by 17%
· Post period, decision taken to commence orderly wind-down and closure of non-core Leicester foundry
· Board remains confident about upwards momentum in business performance
o underpinned by major new contracts entering production at Walsall foundry
Chairman, Keith Butler-Wheelhouse, commented:
"Results for the first half are in line with management expectations and reflect the anticipated picture across our foundry activities.
We recently took the difficult decision to close our non-core foundry at Leicester, the least specialised of the Group's three foundries, which has been suffering from reducing demand. We are now close to completing our initial investment in new machining capability at Walsall, which is opening up additional opportunities and underlines Walsall's ability to deliver a world class product at a globally competitive cost.
Looking ahead, we believe that the Group remains well placed to achieve existing market expectations of underlying profitability for the financial year. We also remain very encouraged about prospects for an upward trajectory in performance, underpinned by the major contract wins at Walsall which will enter production in January 2017.
We look forward to providing a further update on progress in due course."
Enquiries
Chamberlin plc Kevin Nolan, Chief Executive David Roberts, Finance Director |
| T: 020 3178 6378 (today) / 01922 707100
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Panmure Gordon (Nominated Adviser and Broker) Adam James, Peter Steel |
| T: 020 7886 2500 |
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KTZ Communications (Financial PR) Katie Tzouliadis, Viktoria Langley, Emma Pearson |
| T: 020 3178 6378 |
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
CHAIRMAN'S STATEMENT
Introduction
The Group's first half performance is in line with management expectations and, like last year, we anticipate that Chamberlin's overall full year performance will be strongly weighted towards the second half of the financial year. The underlying trading picture shows an ongoing and material improvement in profitability at our Walsall foundry which continues to underpin overall results from our foundries division. We expect the Walsall foundry to continue to make further progress, supported by our investment in new machining capability, and view prospects very positively. Revenues from the Group's engineering operations are growing as we focus on the technical development of our product and exports.
As recently announced, regretfully we have taken the difficult decision to wind-down and close our foundry at Leicester. Demand at this foundry, whose area of activity is the least specialised, has been subdued for many years and it is clear that production is no longer economically viable. We expect operations at Leicester to cease by the end of the year and, as reported previously, its closure is not expected to impact existing market forecasts for the Group's underlying profit before tax for the year.
The construction of the new machining facility to support our foundry activities continues to plan, and the new facility will be operational in January 2017. This initiative is an exciting development which we expect will open up significant new long term growth opportunities, with Walsall positioned as the only fully integrated supplier of grey iron bearing housings in Europe.
Results
The Group generated revenues of £16.4m for the six months to 30 September 2016 (2015: £18.0m), with the Leicester foundry accounting for £1.4m of the £1.6m reduction.
Approximately 40% of Group sales are denominated in Euros, which were transacted at an average rate of €1.31 over the six months to 30 September 2016 (2015: €1.34). This has contributed £0.1m to Group revenues and profits. As the pre-Brexit hedges unwind, we expect revenue in the second half will benefit from the current weak Sterling.
The Group's gross margin percentage has increased by over two percentage points to 19.9% or £3.3m (2015: 17.5% and £3.2m). This reflected both the favourable currency impact and cost reduction, with restructuring costs of £0.2m incurred during the period.
As expected, underlying profit before tax was £8,000 (2015: £57,000) and the underlying basic loss after tax per share was 0.9p (2015: earnings of 0.2p).
On a statutory basis the Group generated a loss of £0.4m (2015: loss of £0.4m). This is after restructuring costs of £0.2m (2015: £0.3m) and administration and finance costs on the closed pension schemes of £0.2m (2015: £0.2m). The diluted loss per share was 4.9p (2015: loss of 4.6p).
The net debt position at 30 September 2016 was £5.3m (30 September 2015: £4.3m and 31 March 2016: £3.2m). The Group has debt facilities of £8.6m. We invested £0.7m in the construction of the Group's new machining facility, which was funded through asset finance.
Operations
The three foundries at Walsall, Leicester and Scunthorpe generated total revenues of £11.3m over the half year (2015: £13.3m), with 70% (or £1.4m) of the year-on-year decrease reflecting the contraction in sales at the Leicester foundry. Despite this, the operating profit contribution from our foundry activities was 15% higher than last year at £0.4m (2015: £0.3m), which reflected continuing progress at Walsall. Gross operating margins increased to 3.1% from 2.3%, helped by our focus on continuous improvement and cost reductions.
As expected, revenues at the Walsall foundry, which produces small castings with complex internal geometry, decreased by 4.9% as the legacy turbo charger bearing housing work entered its final phase of life cycle. However, the major new contracts, announced in late 2015, for turbo charger bearing housings for diesel engines in passenger cars, will enter production in the second half of the financial year, with volumes expected to increase significantly in 2017.
As we have announced previously, we are investing in a machining capability for Walsall and the construction of the new facility is on track. The new facility will generate incremental sales from January 2017 onwards. We remain especially excited about the additional opportunities this new capability will open up for us over the medium term.
In June the Walsall foundry was promoted to 'Category A' supplier status by one of its major customers, IHI Europe Ltd, which provides charging systems in the European turbocharger sector. The foundry's promotion to this categorisation is significant because it means that Chamberlin will now be automatically included in quoting for all future bearing housing opportunities at IHI Europe Ltd. It is one of only two suppliers which holds this status.
The Scunthorpe foundry, which produces heavy castings, has been impacted by adverse trading conditions in the power, construction and mining sectors, and revenues were 8.6% lower year-on-year. We have implemented cost base reductions and have also continued to make operational improvements together with price increases. These measures moved the foundry back into profitability.
The foundry at Leicester, which produces medium castings, continued to be affected by its lack of specialisation and its relative inability to compete against low cost countries. Revenues in the first half decreased by 43.5% year-on-year and it is with regret that we have concluded it is no longer economically viable. An orderly wind-down is now underway and will be completed by the end of 2016.
In the financial year to 31 March 2016, the Leicester foundry contributed sales of £5.9m of sales and an underlying profit before tax of £420,000. In the first half of the current financial year, Leicester contributed sales of approximately £1.8m and an underlying profit before tax of approximately £46,000.
The engineering division, which comprises Exidor, the UK market leader in panic and emergency exit door hardware, and Petrel, which manufactures lighting and control equipment for use in hazardous areas, saw revenues increase by 8.2% to £5.1m (2015: £4.7m). The operating profit contribution was broadly flat at £0.3m (2015: £0.3m). Petrel is continuing to further extend its product range into LEDs and our focus at both Petrel and Exidor is on increasing export sales, with both businesses competitive against European suppliers. As a result order intake for the first half was up 16.6% at Exidor and 18.8% at Petrel.
Outlook
Looking ahead, we believe that the Group remains well placed to achieve existing market expectations of underlying profitability for the financial year. We also remain very encouraged about prospects for an upward trajectory in performance, underpinned by the major contract wins at Walsall which should enter production in 2017.
The completion of new machining capability at Walsall will mark an important milestone for the foundry, which has undergone a period of significant transformation as we have upgraded and improved processes. We believe it opens up new opportunities and underlines Chamberlin's ability to deliver world class product on a globally competitive basis.
We look forward to providing a further update on progress in due course.
Keith Butler-Wheelhouse
Chairman
28 November 2016
Consolidated Income Statement
for the six months ended 30 September 2016
Note | Unauditedsix months ended30 September 2016 | Unauditedsix months ended30 September 2015 | Year ended31 March 2016 |
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| Underlying | # Non-underlying | Total | Underlying | # Non-underlying | Total | Underlying | # Non-underlying | Total | |
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| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
Revenue |
| 16,446 | - | 16,446 | 18,039 | - | 18,039 | 34,988 | - | 34,988 | |
Cost of sales |
| (13,172) | - | (13,172) | (14,879) | - | (14,879) | (27,657) | - | (27,657) | |
Gross profit |
| 3,274 | - | 3,274 | 3,160 | - | 3,160 | 7,331 | - | 7,331 | |
Other operating expenses | 7 | (3,172) | (316) | (3,488) | (3,011) | (412) | (3,423) | (6,501) | (746) | (7,247) | |
Operating profit/(loss) |
| 102 | (316) | (214) | 149 | (412) | (263) | 830 | (746) | 84 | |
Finance costs | 3 | (94) | (80) | (174) | (92) | (71) | (163) | (178) | (142) | (320) | |
Profit/(loss) before tax |
| 8 | (396) | (388) | 57 | (483) | (426) | 652 | (888) | (236) | |
Tax (expense)/credit | 4 | (82) | 79 | (3) | (38) | 97 | 59 | (202) | 177 | (25) | |
(Loss)/ profit for the period from continuing operations attributable to equity holders of the Parent Company |
|
(74) |
(317) |
(391) |
19 |
(386) |
(367) |
450 |
(711) |
(261) | |
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| |
(Loss)/ earnings per share: |
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Basic | 5 |
|
| (4.9)p |
|
| (4.6)p |
|
| (3.3)p | |
Underlying | 5 | (0.9)p |
|
| 0.2p |
|
| 5.7p |
|
| |
Diluted | 5 |
|
| (4.9)p |
|
| (4.6)p |
|
| (3.3)p | |
Diluted underlying | 5 | (0.9)p |
|
| 0.2p |
|
| 5.5p |
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| |
# Non- underlying items represent exceptional costs as disclosed in note 7, administration costs of the pension scheme and net financing costs on pension obligations, share based payment costs and associated tax impact of these items.
Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2016
| Unauditedsix months ended 30 September2016 | Unauditedsix months ended30 September2015 | Year ended31 March 2016 | |||
|
| £000 |
| £000 |
| £000 |
|
|
|
|
|
|
|
Loss for the period |
| (391) |
| (367) |
| (261) |
Other comprehensive income |
|
|
|
|
|
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Reclassification for cash flow hedges included in sales |
| (593) |
| (183) |
| (419) |
Movements in fair value on cash flow hedges taken to other comprehensive income |
| 253 |
| (59) |
| (193) |
Deferred tax on movements in cash flow hedges |
| 61 |
| 48 |
| 123 |
Movement on deferred tax relating to rate change
|
| - |
| - |
| (9) |
Net other comprehensive expense that may be recycled to profit and loss |
| (279) |
| (194) |
| (498) |
Re-measurement (losses)/ gains on pension assets and liabilities |
| (2,538) |
| 74 |
| (254) |
Deferred/ current tax on re-measurement (losses)/ gains on pension assets and liabilities
|
| 507 |
| (15) |
| 51 |
Movement on deferred tax on measurement losses relating to rate change
|
| - |
| - |
| (93) |
Net other comprehensive (expense)/income that will not be reclassified to profit and loss |
| (2,031) |
| 59 |
| (296) |
Other comprehensive expense for the period net of tax
|
| (2,310) |
| (135) |
| (794) |
Total comprehensive expense for the period attributable to equity holders of the Parent Company |
|
(2,701) |
|
(502) |
|
(1,055) |
Consolidated Balance Sheet
At 30 September 2016
|
| Unaudited30 September2016 |
| Unaudited30 September2015 |
| 31 March2016 |
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| £000 |
| £000 |
| £000 |
Non-current assets |
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Property, plant and equipment |
| 8,878 |
| 8,423 |
| 8,112 |
Intangible assets |
| 402 |
| 397 |
| 387 |
Deferred tax assets |
| 1,936 |
| 1,436 |
| 1,370 |
|
| 11,216 |
| 10,256 |
| 9,869 |
Current assets |
|
|
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Inventories |
| 3,165 |
| 3,480 |
| 2,899 |
Trade and other receivables |
| 7,047 |
| 6,889 |
| 6,195 |
|
| 10,212 |
| 10,369 |
| 9,094 |
Total assets |
| 21,428 |
| 20,625 |
| 18,963 |
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Current liabilities |
|
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Financial liabilities |
| 4,484 |
| 3,987 |
| 2,941 |
Trade and other payables |
| 6,262 |
| 5,975 |
| 5,727 |
|
| 10,746 |
| 9,962 |
| 8,668 |
Non-current liabilities |
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Financial liabilities |
| 823 |
| 348 |
| 251 |
Deferred tax liabilities |
| 59 |
| 66 |
| 59 |
Provisions |
| 200 |
| 200 |
| 200 |
Defined benefit pension scheme deficit |
| 7,182 |
| 4,417 |
| 4,692 |
|
| 8,264 |
| 5,031 |
| 5,202 |
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Total liabilities |
| 19,010 |
| 14,993 |
| 13,870 |
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Capital and reserves |
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Share capital |
| 1,990 |
| 1,990 |
| 1,990 |
Share premium |
| 1,269 |
| 1,269 |
| 1,269 |
Capital redemption reserve |
| 109 |
| 109 |
| 109 |
Hedging reserve |
| (622) |
| (39) |
| (343) |
Retained earnings |
| (328) |
| 2,303 |
| 2,068 |
Total equity |
| 2,418 |
| 5,632 |
| 5,093 |
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|
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|
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Total equity and liabilities |
| 21,428 |
| 20,625 |
| 18,963 |
Consolidated Cash Flow Statement
for the six months ended 30 September 2016
|
| Unauditedsix months ended30 September2016 |
| Unauditedsix months ended30 September2015 |
| Year ended31 March2016 |
|
| £000 |
| £000 |
| £000 |
Operating activities |
|
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Loss for the period before tax |
| (388) |
| (426) |
| (236) |
Adjustments for: |
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Net finance costs excluding pensions |
| 94 |
| 92 |
| 178 |
Depreciation of property, plant and equipment |
| 616 |
| 589 |
| 1,235 |
Amortisation of software |
| 35 |
| 59 |
| 97 |
Amortisation of development costs |
| 4 |
| 5 |
| 11 |
Profit on disposal of property plant and equipment |
| - |
| (8) |
| (12) |
Share based payments |
| 26 |
| 26 |
| 53 |
Difference between pension contributions paid and amounts recognised in the Income Statement |
|
(48) |
|
(53) |
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(106) |
(Increase)/ decrease in inventories |
| (266) |
| 526 |
| 1,107 |
(Increase)/ decrease in receivables |
| (852) |
| 735 |
| 1,421 |
Increase/ (decrease) in payables |
| 194 |
| (882) |
| (1,493) |
Cash (outflow)/ inflow from operations |
| (585) |
| 663 |
| 2,255 |
Income taxes received |
| - |
| - |
| 1 |
Net cash (outflow)/ inflow from operating activities |
| (585) |
| 663 |
| 2,256 |
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Investing activities |
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Purchase of property, plant and equipment |
| (1,392) |
| (1,125) |
| (1,468) |
Purchase of software |
| (2) |
| (9) |
| (31) |
Development costs |
| (52) |
| - |
| (12) |
Disposal of property, plant and equipment |
| 10 |
| 21 |
| 33 |
Net cash outflow from investing activities |
| (1,436) |
| (1,113) |
| (1,478) |
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Financing activities |
|
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Interest paid |
| (94) |
| (92) |
| (178) |
Repayment of asset loans |
| (100) |
| (100) |
| (200) |
Net invoice finance drawdown |
| 1,460 |
| 484 |
| (319) |
Finance leases taken out |
| 672 |
| 71 |
| 84 |
Net cash inflow/(outflow) from financing activities |
|
1,938 |
|
363 |
|
(613) |
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Net (decrease)/ increase in cash and cash equivalents |
|
(83) |
|
(87) |
|
165 |
|
|
|
|
|
|
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Cash and cash equivalents at the start of the period
|
|
(126) |
|
(291) |
|
(291) |
Cash and cash equivalents at the end of the period
|
|
(209) |
|
(378) |
|
(126) |
Cash and cash equivalents compromise: |
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(Overdraft)/ cash at bank |
|
(209) |
|
(378) |
|
(126) |
Consolidated Statement of Changes in Equity
for the six months ended 30 September 2016
| Share capital | Share premium | Capital redemption reserve | Hedging reserve | Retained earnings | Attributable to equity holders of the parent |
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| £000 | £000 | £000 | £000 | £000 | £000 |
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At 1 April 2015 | 1,990 | 1,269 | 109 | 155 | 2,586 | 6,109 |
Loss for the period | - | - | - | - | (367) | (367) |
Other comprehensive (expense)/ income for the period net of tax | - | - | - | (194) | 59 | (135) |
Total comprehensive expense | - | - | - | (194) | (308) | (502) |
Share based payments | - | - | - | - | 26 | 26 |
Deferred tax on employee share options | - | - | - | - | (1) | (1) |
Total of transactions with shareholders | - | - | - | - | 25 | 25 |
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At 30 September 2015 | 1,990 | 1,269 | 109 | (39) | 2,303 | 5,632 |
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Profit for the period | - | - | - | - | 106 | 106 |
Other comprehensive expense for the period net of tax | - | - | - | (304) | (355) | (659) |
Total comprehensive expense | - | - | - | (304) | (249) | (553) |
Share based payments | - | - | - | - | 27 | 27 |
Deferred tax on employee share options | - | - | - | - | (13) | (13) |
Total of transactions with shareholders | - | - | - | - | 14 | 14 |
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At 1 April 2016 | 1,990 | 1,269 | 109 | (343) | 2,068 | 5,093 |
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Loss for the period | - | - | - | - | (391) | (391) |
Other comprehensive expense for the period net of tax | - | - | - | (279) | (2,031) | (2,310) |
Total comprehensive expense | - | - | - | (279) | (2,422) | (2,701) |
Share based payments | - | - | - | - | 26 | 26 |
Total of transactions with shareholders | - | - | - | - | 26 | 26 |
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At 30 September 2016 | 1,990 | 1,269 | 109 | (622) | (328) | 2,418 |
Independent review report to Chamberlin plc
Introduction
We have been engaged by the Company to review the financial information in the half-yearly financial report for the six months ended 30 September 2016 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows, Consolidated Statement of Changes in Equity and the related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 1.
Our responsibility
Our responsibility is to express to the Company a conclusion on the financial information in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1.
GRANT THORNTON UK LLPAUDITOR
Birmingham28 November 2016
Notes to the Interim Financial statements
1 General information and accounting policies
This Interim Financial Report is unaudited, but has been reviewed by the Company's auditor having regard to the International Standard on Review Engagements (UK & Ireland) 2410 "Review of Financial Information Performed by the Independent Auditor of the Entity", issued by the Auditing Practices Board for use in the UK. A copy of their unmodified review report is attached.
The interim condensed consolidated financial statements do not comprise the Group's statutory accounts as defined by section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2016 were approved by the board of directors on 23 May 2016 and were filed at Companies House. The auditor's report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.
Basis of preparation
The annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.
Accounting policies
The principal accounting policies applied in preparing the interim Financial Statements comply with IFRS as adopted by the European Union and are consistent with the policies set out in the Annual Report and Accounts for the year ended 31 March 2016.
No new standards or interpretations issued since 31 March 2016 have had a material impact on the accounting of the Group.
Hedge activities
At 30 September 2016 the Group held 18 months' worth of foreign currency forward contracts designated as hedges of expected future sales to customers in Europe for which the Group has highly probable forecasted transactions
Going concern
After making appropriate enquiries, the directors consider that the Group has adequate resources to continue in operation for the foreseeable future. In forming this view the directors have reviewed internal cashflow and profit forecasts in conjunction with the available headroom on the invoice finance and overdraft facility. For this reason, they continue to adopt the going concern basis in preparing the accounts.
2 Segmental analysis
For management purposes, the Group is organised into two operating divisions: Foundries and Engineering. The operating segments reporting format reflects the Group's management and internal reporting structures for the Chief Operating Decision Maker.
| Segmental revenue | Segmental operating profit | ||||||
| Unaudited six months ended 30 Sep 2016
£000 | Unaudited six months ended 30 Sep 2015
£000 |
Year ended 31 March 2016
£000 | Unaudited six months ended 30 Sep 2016
£000 | Unaudited six months ended 30 Sep 2015
£000 |
Year ended 31 March 2016
£000 | ||
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Foundries | 11,327 | 13,306 | 25,635 | 355 | 308 | 1,212 | ||
Engineering | 5,119 | 4,733 | 9,353 | 310 | 338 | 679 | ||
Segmental results | 16,446 | 18,039 | 34,988 | 665 | 646 | 1,891 | ||
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Reconciliation of reported segmental operating profit to (loss) before tax | ||||||||
|
|
|
| Unaudited six months ended 30 Sep 2016
£000 | Unaudited six months ended 30 Sep 2015
£000 |
Year ended 31 March 2016
£000 | ||
Segmental operating profit |
|
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| 665 | 646 | 1,891 | ||
Shared costs |
|
|
| (563) | (497) | (1,061) | ||
Exceptional and non-underlying costs |
|
|
| (316) | (412) | (746) | ||
Net finance costs |
|
|
| (174) | (163) | (320) | ||
Loss before tax |
|
|
| (388) | (426) | (236) | ||
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. The Engineering segment provides manufactured and imported products to distributors and end-users. The products fall into the categories of door hardware, hazardous area lighting and control gear and cable management.
Financing and income tax are managed on a Group basis and are not allocated to operating segments.
3 Finance income and costs
| Unauditedsix months ended30 September 2016 | Unauditedsix months ended30 September 2015 | Year ended31 March 2016 |
| £000 | £000 | £000 |
Interest on bank overdraft | (94) | (92) | (178) |
Net interest on net defined benefit pension liability | (80) | (71) | (142) |
| (174) | (163) | (320) |
4 Income tax expense
An effective rate of tax for the six months to 30 September 2016 of 1% (30 September 2015: 14%) has been used in these interim statements.
The effective rate of tax is lower than the standard rate because of utilising losses brought forward to reduce the tax charge. The 2015 effective rate of tax is lower than the standard rate because of non-deductible expenses reducing the overall tax credit in the period.
The corporation tax rate fell from 21% for the year ended 31 March 2015 to 20% for the year ended 31 March 2016. The corporation tax rate will reduce to 19% from 1 April 2017 and to 18% by 1 April 2020, rate changes which were substantively enacted on 26 October 2015. It is not anticipated that the subsequent reduction to 18% will have a material effect on the Company's future current or deferred tax charges.
5 (Loss)/ earnings per share
The calculation of (Loss)/ 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 (loss)/ earnings per share, adjustment has been made for the dilutive effect of outstanding share options. Underlying (loss)/ earnings per share, which excludes exceptional costs, net financing cost of pension obligation, administration costs of the pension scheme and share based compensation, less related tax thereon, as analysed below, has been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group.
| Unaudited six months ended 30 September 2016 | Unaudited six months ended 30 September 2015 |
Year ended 31 March 2016 |
| £000 | £000 | £000 |
(Loss)/ earnings for basic earnings per share | (391) | (367) | (261) |
Exceptional costs | 201 | 285 | 463 |
Net financing cost and service cost on pension obligation | 169 | 171 | 372 |
Share based payments charge | 26 | 27 | 53 |
Taxation effect of the above | (79) | (97) | (177) |
Earnings for underlying earnings per share |
(74) |
19 |
450 |
| Unaudited six months ended 30 September 2016 | Unaudited six months ended 30 September 2015 |
Year ended 31 March 2016 |
| 000 | 000 | 000 |
Weighted average number of ordinary shares | 7,958 | 7,958 | 7,958 |
Adjustment to reflect dilutive shares under option | - | 180 | 160 |
Diluted weighted average number of ordinary shares |
7,958 |
8,138 |
8,118 |
As at 30 September 2016 there is no adjustment to the 52,353 shares under option for the loss per share calculation as they are required to be excluded from the weighted average number of shares as they are anti-dilutive for the period then ended. As at 30 September 2015 and 31 March 2016 there is no adjustment for the 180,177 and 160,300 shares under option respectively for the diluted loss per share calculation 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 Pensions
The Group operates a defined benefit pension scheme and a number of defined contribution pension schemes on behalf of its employees. For defined contribution schemes, contributions paid in the period are charged to the income statement. For the defined benefit scheme, actuarial calculations are performed in accordance with IAS 19 in order to arrive at the amounts to be charged in the income statement and recognised in the statement of comprehensive income. The defined benefit scheme is closed to new entrants and future accrual.
Under IAS 19, the Group recognises all movements in the actuarial funding position of the scheme in each period. This is likely to lead to volatility in shareholders' equity from period to period.
The IAS 19 figures are based on a number of actuarial assumptions as set out below, which the actuaries have confirmed they consider appropriate. The projected unit credit actuarial cost method has been used in the actuarial calculations.
| 30 September 2016 | 30 September 2015 | 31 March 2016 |
|
|
|
|
Salary increases | n/a | n/a | n/a |
Pension increases (post 1997) | 2.9% | 2.9% | 2.9% |
Discount rate | 2.2% | 3.7% | 3.5% |
Inflation assumption - RPI | 3.0% | 2.9% | 2.9% |
Inflation assumption - CPI | 2.2% | 1.8% | 2.1% |
The demographic assumptions used for 30 September 2016, were the same as used in 31 March 2016, 30 September 2015 and the last full actuarial valuation performed as at 1 April 2013. The triennial valuation as at 1 April 2016 is currently underway.
The defined benefit scheme funding has changed under IAS 19 as follows:
Funding status | Unaudited six months to 30 September 2016 £000 | Unaudited six months to 30 September 2015 £000 |
Year to 31 March 2016 £000 |
Scheme assets at end of period
| 13,220 | 12,824 | 12,974 |
Benefit obligations at end of period | (20,402) | (17,241) | (17,666) |
|
|
|
|
Deficit in scheme | (7,182) | (4,417) | (4,692) |
Related deferred tax asset | 1,293 | 883 | 845 |
Net pension liability | (5,889) | (3,534) | (3,847) |
|
|
|
|
The increase in the net pension liability since March 2016 is mainly due to an increase in the value of liabilities as a consequence of a decrease in bond yields reducing the discount rate.
7 Exceptional costs and non-underlying items
| Unaudited six months ended 30 September 2016 | Unaudited six months ended 30 September 2015 |
Year ended 31 March 2016 |
| £000 | £000 | £000 |
Group reorganisation | 202 | 285 | 463 |
Exceptional costs | 202 | 285 | 463 |
|
|
|
|
Share based payment charge | 26 | 27 | 53 |
Defined benefit pension scheme administration costs | 88 | 100 | 230 |
|
|
|
|
Non-underlying other operating expenses | 316 | 412 | 746 |
Taxation |
|
|
|
- tax effect of non-underlying other operating expenses | (63) | (82) | (149) |
|
|
|
|
| 253 | 330 | 597 |
During the year ended March 2016, the Group continued to rationalise operations given the reduced levels of turnover seen in the Leicester and Scunthorpe foundries. Group reorganisation costs, including redundancy and recruitment, relate to this rationalisation.
Further reorganisation and redundancy costs were incurred during the current period as a result of actions taken to reduce headcount in response to decreased revenues at the Leicester site.
8 Net debt
| Unaudited six months ended 30 September 2016 | Unaudited six months ended 30 September 2015 |
Year ended 31 March 2016 |
| £000 | £000 | £000 |
|
|
|
|
Financial liabilities |
|
|
|
Bank overdraft | 209 | 378 | 126 |
Current instalments due on finance leases | 33 | 24 | 33 |
Current instalments due on asset finance loans | 200 | 200 | 200 |
Invoice finance liability | 4,042 | 3,385 | 2,582 |
Financial liabilities due in less than one year | 4,484 | 3,987 | 2,941 |
|
|
|
|
Instalments due on finance leases in greater than one year | 723 | 48 | 51 |
Instalments due on asset finance loans in greater than one year | 100 | 300 | 200 |
Total financial liabilities | 823 | 348 | 251 |
|
|
|
|
Net debt | 5,307 | 4,335 | 3,192 |
|
|
|
|
Available facility | 6,960 | 6,178 | 5,836 |
Maximum available headroom | 1,653 | 1,843 | 2,644 |
9 Interim report
Copies of this interim results statement 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.