Chamberlin Plc Regulatory News (CMH)

30 Nov 2005 07:01

Chamberlin & Hill PLC30 November 2005 30 November 2005 CHAMBERLIN & HILL plc ("the Company") Interim Results CHAIRMAN'S STATEMENT It is pleasing to report that in the six months ended 30 September 2005 Groupturnover increased by 4.7% to £21.16m (2004:£20.21m), while underlying operatingprofit grew 23.8% to £1.20m (2004:£0.97m). Underlying profit before tax grew26.5% to £1.14m (2004:£0.90m) and underlying earnings per share rose 26.2% to10.8p (2004:8.5p). Positive cash flows resulted in net cash of £0.24m (2004:netborrowing of £1.03m). The results are presented for the first time under International FinancialReporting Standards ("IFRS") which has affected both the content and thepresentation of the results for the period. Notes have been provided whereconsidered appropriate to assist in understanding the changes. Numbers forprior periods have been restated on an IFRS basis, and reconciliations topreviously reported results are given in note 10 to the interim financialstatements along with details of the significant changes. One of the mainchanges has been to increase the effect of the release of negative goodwill in2004 and so comparisons of the Group's results and earnings per share for thefirst six months this year should be made with the figures before goodwill andexceptional items for the same six months in 2004 and the full year to 31 March2005. The Board has decided to pay an unchanged interim dividend of 3.85p per sharepayable on 19 December 2005 to all shareholders registered on 9 December 2005. In our Foundry Division the improved demand seen in the second half of the lastyear continued during the first quarter along with high raw material prices,while the second quarter saw a small reduction in volume. Currently we facesubstantial increases in the price of electricity and gas; as a major energyuser this will put some pressure on margins as we seek to fully recover themfrom our customers, but to some extent this is offset by weaker raw materialprices. We have continued to develop our plans for the longer term integration of ourfoundries. The grey iron activities of the division will be consolidated atWalsall by the end of the current financial year, while ductile iron parts willbe produced in Leicester and Scunthorpe. This action is expected to be earningsenhancing in 2006/07, and ultimately to be cash generative. Furtherconsolidation in the division is now expected to take place in 2007/08. In our Engineering Division, further progress has been made in the strategicdevelopment of both companies with a focus on product development in thehazardous area lighting and Exidor product ranges. John Bather will retire from the Board at the end of the year after 41 yearsservice. On behalf of all shareholders I would like to record the Company'smost sincere thanks to John, and wish him a long and happy retirement. I am delighted to welcome Keith Jackson to the Board as a non-executive directorand look forward to the benefit of his considerable experience. We anticipate that our markets will remain at around their present levels and,if this is the case, we expect our growth to continue. The implementation ofthe foundry consolidations and the development of the growth plans for ourengineering businesses remain our focus, while seeking new and relevantopportunities to further enhance earnings supported by our positive cash flowsand strong balance sheet. We also continue to examine ways to mitigate thedeficit in our final salary pension scheme and to reduce its funding cost. Overall, despite increased energy costs and the other well publicised issuesaffecting the manufacturing sector in this country, the Board believes that theGroup's positioning and the current initiatives allow it to look to the futurewith confidence. TOM BROWNChairman Summarised Consolidated Income Statementfor the six months ended 30 September 2005 Note Unaudited Unaudited six month ended Year ended 31 March 2005 six 30 September 2004 (restated under (IFRS) months (restated under IFRS) ended Before Goodwill Total Before Goodwill Total 30 goodwill and goodwill and September and operating and operating 2005 operating exceptionals operating exceptionals exceptionals exceptionals £000 £000 £000 £000 £000 £000 £000Revenue fromcontinuing 41,970operations 21,157 20,213 - 20,213 41,970 -Operatingprofit fromcontinuing 1,205 973 416 1,389 2,071 292 2,363operationsFinance costs 2 (70) (76) - (76) (171) - (171)Profit before 1,135 897 416 1,313 1,900 292 2,192taxIncome tax 3 (341) (269) (125) (394) (570) (88) (658)expenseProfit for theperiod fromcontinuing 794 628 291 919 1,330 204 1,534operationsAttributable toequity holders 794 919of the parent 1,534company Earnings persharebasic 5 10.8p 12.5p 20.9punderlying 5 10.8p 8.5p 18.1pdiluted 5 10.7p 12.5p 20.9pdiluted 5 10.7p 8.5p 18.1punderlying An interim dividend of 3.85p per share has been declared by the directors,payable on 19 December 2005 (note 4). Summarised Consolidated Statement of Recognised Income and Expensefor the six months ended 30 September 2005 Note Unaudited six Unaudited six months ended months ended Year ended 30 September 30 September 31 March 2005 2004 2005 (restated under (restated under IFRS) IFRS) £000 £000 £000Actuarialmovements onpension funding 334 (106) (312)Deferred tax onpension fundingmovement 6 (100) 32 94Net expenserecogniseddirectly in equity 234 (74) (218)Profit for theperiod (beforedividend) 794 919 1,534Total recognisedincome and expensefor the period 1,028 845 1,316 Dividends paid in 4 588 587 871the period Summarised Consolidated Balance SheetAt 30 September 2005 Unaudited Unaudited 31 March 30 September 30 September 2005 2005 2004 (restated under (restated under IFRS) IFRS) £000 £000 £000Non-current assets Intangible assets - goodwill 201 201 201 Intangible assets - software 43 36 52 Property, plant and 8,795 9,333 8,990 equipment Deferred tax assets 930 931 1,047 9,969 10,501 10,290Current assets Inventories 5,094 4,488 5,055 Trade and other 8,714 9,562 9,325 receivables Cash and cash equivalents 238 - 1 14,046 14,050 14,381Total assets 24,015 24,551 24,671 Capital and reserves Called up share capital 1,840 1,835 1,840 Share premium account 743 718 743 Capital redemption reserve 109 109 109 Retained earnings 9,694 9,055 9,246 Equity attributable to equity 12,386 11,717 11,938holders of the parent company Current liabilities Bank overdraft - 1,025 43 Trade and other payables 6,612 6,917 7,550 Current tax liabilities 943 331 638 7,555 8,273 8,231Non-current liabilities Trade and other payables - 274 - Retirement benefit 2,923 3,103 3,320 obligations Deferred tax liabilities 1,151 1,184 1,182 4,074 4,561 4,502 Total equity and liabilities 24,015 24,551 24,671 Summarised Consolidated Cash Flow Statementfor the six months ended 30 September 2005 Note Unaudited six Unaudited six Year ended months ended months ended 31 March 30 September 30 September 2005 2005 2004 (restated under (restated under IFRS) IFRS)Operating activities £000 £000 £000Profit for the period 794 919 1,534Adjustments for: Finance costs 70 76 171 Income tax expense 341 394 658 Amortisation of software 12 15 31 Depreciation of property, 742 845 1,623 plant and equipment Release of negative - (617) (617) goodwill Amortisation of Russell - Castings rent free period 100 200 Profit on disposal of plant - - (1) and equipment Pension element of finance (37) (56) (111) costs Share based payments 8 1 5 Actuarial movement on 334 (106) (312) Pension funding (Decrease)/Increase in (397) 52 269 provisionsOperating cash flow before movementsin working capital 1,867 1,623 3,450 (Increase)/Decrease in (39) (992) (674) inventories Decrease/(Increase) in 611 (2,806) (950) receivables (Decrease)/Increase in payables (938) 2,819 1,116Cash generated from operations 1,501 644 2,942 Interest received - - 10 UK Corporation Tax paid (50) (194) (278)Net cash from operating activites 1,451 450 2,674 Investing activities Acquisition of business and assets of Russell Castings 8 - (646) (1,117) Cash acquired on acquisition of Russell 8 - 1 1 Castings Purchase of software (3) (5) (37) Purchase of property, plant and equipment (558) (715) (1,211) Disposal of plant and 11 15 76 equipmentNet cash used in investing activities (550) (1,350) (2,288) Financing activities Interest paid (33) (20) (70) Equity dividends paid (588) (587) (870) Issue of shares (including - - 30 premium)Net cash used in financing activities (621) (607) (910) Net increase/(decrease) in cash andcash equivalents 280 (1,507) (524) Cash and cash equivalents at thestart of the period (42) 482 482Cash and cash equivalents at the endof the period 238 (1,025) (42) Notes to the interim financial statements 1 General information and accounting policies Basis of preparation From 2005 the Group will prepare its consolidated accounts in accordance withInternational Financial Reporting Standards ("IFRS") as adopted for use in theEuropean Union. The Group's first IFRS based results are its interim results forthe six months ended 30 September 2005 and the first Annual Report under IFRSwill be for the year ending 31 March 2006. As a result, the comparative amountsincluded in these Interim Financial Statements have been restated under IFRSfrom the UK Generally Accepted Accounting Practice ("UK GAAP") values originallypublished by the Group. Reconciliations of the Group's UK GAAP balance sheets to its preliminary IFRSbalance sheets at 1 April 2004 ("the opening balance sheet"), 30 September 2004and 31 March 2005 together with reconciliations of the Group's UK GAAP profitand loss accounts to its preliminary IFRS income statement for the six months to30 September 2004 and year to 31 March 2005 are shown in note 10. Thesepreliminary IFRS financial statements will form the basis of the comparativeinformation in the Group's first IFRS Annual Report. IFRS are subject to continuing review and amendment by the InternationalAccounting Standards Board ("IASB") and subsequent endorsement by the EuropeanCommission and therefore are subject to change. Therefore, in determining theGroup's IFRS accounting policies, the Board of Directors has used its bestendeavours in making assumptions about those IFRS expected to be effective oravailable for adoption when the first IFRS annual financial statements areprepared for the year ending 31 March 2006. In particular, the Directors haveassumed that the European Commission will endorse the amendment to IAS 19 "Employee Benefits" - Actuarial Gains and Losses, Group Plans and Disclosuresissued by the International Accounting Standards Board in December 2004. Inaddition, the Directors have taken advantage of the exemption available underIFRS 1 to only apply IAS 32 "Financial Instruments: Disclosure and Presentation"and IAS 39 "Financial Instruments: Recognition and Measurement" from 1 April2005. As the accounting policies used to prepare the Interim Financial Statementmay need to be updated for any subsequent amendment to IFRS required for firsttime adoption, or any new IFRS the Group may elect to adopt early, it ispossible that the preliminary opening balance sheet and IFRS comparatives mayrequire adjustment before being finalised. These Interim Financial Statements have been prepared on the historic costbasis, except that derivative financial instruments are stated at their fairvalue. The financial information for the six months ended 30 September 2005 and 30September 2004 is summarised and unaudited and does not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 31 March 2005 as preparedunder UK GAAP has been delivered to the Registrar of Companies. The auditors'report on those accounts was unqualified. 2 Finance costs Unaudited six Unaudited six months ended 30 months ended 30 Year ended 31 September September March 2005 2004 2005 (restated (restated under IFRS) under IFRS) £000 £000 £000Net interest on bank accounts 33 20 60Finance costs of pension scheme (note 6) 37 56 111 70 76 171 3 Income tax expense An effective rate of tax for the six months to 30 September 2005 of 30% has beenused in respect of all income tax and deferred tax calculations in these interimstatements. 4 Dividends Dividends proposed in respect of a period are not accrued in the balance sheetunder IFRS. Instead they are charged to the income statement in the period theyare paid. Dividends comprise: Unaudited six Unaudited six months ended 30 months ended 30 Year ended 31 September September March 2005 2004 2005 (restated (restated under IFRS) under IFRS) Pence per share £000 £000 £000 2003/04 final dividend paid July 2004 8.00 587 5872004/05 interim dividend paid December 2004 3.85 2842004/05 final dividend paid July 2005 8.00 588 588 587 871 2005/06 interim dividend proposed 3.85 283 The interim dividend of 3.85 pence per share (2004: 3.85p) will be paid on 19December 2005 to all shareholders on the register as at close of business on 9December 2005. 5 Earnings per share The calculation of basic earnings per share is based on the profit after tax of£794,000 (Interim 2004: £919,000; Full year 2004/05: £1,534,000) and theweighted average number of shares in issue of 7,359,658 (Interim 2004:7,340,908; Full year 2004/05: 7,347,398). The calculation of underlying earnings per share is based on profit before theeffects of goodwill and operating exceptionals, and is disclosed in addition tobasic earnings per share as the directors believe that it allows a bettercomparison between the results of different periods, and therefore a betterassessment of the comparative trading performance of the Group. Operatingexceptionals comprise severance payments and related costs associated withsignificant operational restructuring. The profit used in calculating underlying earnings per share was £794,000(Interim 2004: £628,000; Full year 2004/05: £1,330,000) and the weighted averagenumber of shares as for basic earnings per share above. Diluted earnings per share and diluted underlying earnings per share use thesame profit figures as for basic or underlying earnings per share asappropriate, but use a figure for number of shares that takes account of thedilutive effect of outstanding share options. The figure used for number ofshares was 7,392,589 (Interim 2004: 7,345,908; Full year 2004/05: 7,354,288). 6 Pensions The Group operates a defined benefit pension scheme and a number of definedcontribution pension schemes on behalf of its employees. For definedcontribution schemes, contributions paid in the period are charged to the incomestatement. For the defined benefit scheme, actuarial calculations are performedin accordance with IAS 19 in order to arrive at the amounts to be charged in theincome statement and recognised in the statement of recognised income andexpenses. The defined benefit scheme is closed to new entrants. Under IAS 19, the Company recognises all movements in the actuarial fundingposition of the scheme in each period. This is likely to lead to increasedvolatility in shareholders' equity from period to period. The IAS 19 figures are based on a number of actuarial assumptions as set outbelow, which the actuaries have confirmed they consider appropriate. Theprojected unit credit actuarial cost method has been used in the actuarialcalculations. 30 September 30 September 31 March 2005 2004 2005 Discount rate 5.1% 5.5% 5.4%Long term rate of return on assets 5.9% 6.4% 6.4%Salary increases 2.7% 2.9% 2.9%Pension increases (pre '97) 2.5% 2.5% 2.5%Pension increases (post '97) 2.7% 2.9% 2.9%Inflation (RPI) 2.7% 2.9% 2.9% The demographic assumptions used are generally the same for each period, as usedin the last full actuarial valuation performed as at 1 April 2004. The defined benefit scheme funding has changed under IAS 19 as follows: 6 months to 6 months to Year to 30 September 30 September 31 MarchFunding status 2005 2004 2005 £000 £000 £000 Change in scheme assets Fair value at start of period 10,334 9,531 9,531 Expected return on scheme assets 333 290 581 Actuarial gains/(losses) 698 (80) 347 Employer's contributions 165 165 329 Member's contributions 65 65 130 Estimated benefits paid (320) (259) (584) Fair value at end of period 11,275 9,712 10,334 6 months to 6 months to Year to 30 September 30 September 31 March 2005 2004 2005Funding status £000 £000 £000 Change in benefit obligations at start of period 13,654 12,582 12,582Current service cost 65 55 110Past service cost - - 65Interest cost 370 346 692Members' contributions 65 65 130Actuarial loss 364 26 659Estimated benefits paid (320) (259) (584)Obligations at end of period 14,198 12,815 13,654 Balance sheet provision required (2,923) (3,103) (3,320) Less associated deferred tax asset 877 931 996Net balance sheet liability (2,046) (2,172) (2,324) Components of pension cost Current service cost 65 55 110 Past service cost - - 65 Charge to operating profit 65 55 175 Interest cost 370 346 692 Expected return on scheme assets (333) (290) (581) Charge to finance costs 37 56 111 Total charge to income statement 102 111 286 Actuarial gains/(losses) Gain on asset returns 698 (80) 347 Loss on calculation of obligations (364) (26) (659)Total credit/(charge) to SORIE 334 (106) (312) 7 Share based payments The Company has an Inland Revenue Approved and an Unapproved share option schemeused to incentivise directors and senior managers of the Group. Options areexercisable at a price equal to the average quoted market price of the Company'sshares over the 5 days prior to the date of grant. The vesting period is 3years and the options expire after 10 years from date of grant (for ApprovedOptions) or 7 years (for Unapproved Options). Options lapse if the employeeleaves the Group subject to certain exceptions set out in the scheme rules. Under the transitional arrangements in IFRS 1, only options granted after 7November 2002 are included in the share based payment calculations. TheBlack-Scholes method has been used. The fair value of options calculated by this method is charged to the incomestatement over the vesting period of the options (the three years after whichthey can be exercised under the scheme rules). The charge is recognised inoperating profit. Relevant options outstanding during the period were as follows:- Date of grant No. of shares Exercise Price Exercisable between 3 June 2004 10,000 155.5p 03.06.2007-02.06.201110 December 2004 14,575 205.5p 10.12.2007-09.12.201410 December 2004 35,425 205.5p 10.12.2007-09.12.201114 July 2005 25,000 231.5p 14.07.2008-13.07.201214 July 2005 25,000 231.5p 14.07.2008-13.07.2012 Based on the following assumptions, the total fair value of these options was£64,000, of which £8,000 was recognised as an expense in the period based on thenumber of days between grant and the period end (Interim 2004: £1,000; Full year2004/05: £5,000). 30 Sep 2005 30 Sep 2004 31 Mar 2005 Share Price 256.5p 178.5p 211.5pWeighted average option price 212.8p 155.5p 197.2pExpected volatility 30.0% 60.0% 50.0%Expected life 3.8 years 4.8 years 4.3 yearsRisk free rate 3.0% 3.0% 3.0%Expected dividend yield 5.1% 6.6% 5.6% Expected volatility is based on movements in the share price during the periodsconcerned and the directors' expectations of future volatility. The expectedlife has been arrived at based on the directors' best estimate taking intoaccount exercise conditions and behavioural considerations. 8 Adjustment to provisional goodwill on acquisition of the business and assets of Russell Castings On 2 April 2004, the Group, through its subsidiary company, Platt MalleableCastings Limited, acquired the business and certain assets of Russell Castings,a foundry business based in Leicester. Platt Malleable Castings Limited thenchanged its name to Russell Castings Limited. Details of assets acquired and consideration paid are given below:- Book value Fair value Fair value of adjustment assets acquired £000 £000 £000 Property, plant and equipment (note (a) below) 1,275 (522) 753Inventories (note (b) below) 1,075 (190) 885Receivables 1,718 1,718Cash and cash equivalents 1 1Payables (1,823) (1,823)Fair values previously reported 2,246 (712) 1,534Additional asset re rent free period (note (c) below) 200 200Revised fair values on acquisition 2,246 (512) 1,734Revised discount on acquisition (617) 1,117 Consideration paid - initial cash payment 500 - acquisition expenses 146 - deferred payment (paid 1 October 2004) 471 1,117 (a) Property, plant and equipment values were recalculated to fair values based on their remaining useful lives. (b) Inventories were revalued on a basis consistent with Group policy. (c) The provisional fair values previously reported have now been reviewed and the directors considered that an additional asset was required to be recognised in respect of a one year rent free period negotiated as part of the acquisition, as this had affected the total consideration paid. The negative goodwill arising (known under IFRS as discount on acquisition) therefore became £617,000 rather than the £417,000 previously reported. The rent free period asset has been amortised to the income statement evenly over the 2004/05 financial year. Under IFRS the discount on acquisition of £617,000 has been released to the income statement immediately. The release is identified as an operating exceptional in a separate column of the consolidated income statement. The effect of this change on the previously reported results has been identified separately in the reconciliations given in note 10 below. 9 Consolidated statement of changes in equity Unaudited six months Unaudited six months Year ended 31 ended 30 September ended 30 September March 2005 2005 2004 (restated under (restated under IFRS) IFRS) £000 £000 £000Equity at start of period 11,938 11,458 11,458Profit for the period 794 919 1,534Dividends paid (see note 4) (588) (587) (871)Actuarial movements on pension funding (see 334 (106) (312)note 6)Deferred tax on actuarial pension movements (100) 32 94Share based payments (see note 7) 8 1 5Shares issued and allotted - - 30Equity at end of period 12,386 11,717 11,938 10 Explanation of transition to IFRS Set out below are certain reconciliations to show the effect on the reportedfigures of the Group moving from UK Generally Accepted Accounting Practice ("UKGAAP") to International Financial Reporting Standards ("IFRS"). An additionalreconciliation column is given in relation to the restatement of goodwill onacquisition set out in note 8 above. The reconciliations of equity at 1 April 2004 (the date of transition to IFRS),at 31 March 2005 (the date of the last published UK GAAP financial statements)and at 30 September 2004 (the end of the comparative interim six month period)have been included to allow a comparison of the effects for each period. Inaddition, a reconciliation of the UK GAAP profit for the six months ended 30September 2004 and for the year ended 31 March 2005 to the profit under IFRS isgiven to show the impact on the various elements of the income statement. The individual standards giving rise to significant changes in the figures aredescribed below. IFRS 2 Share-based payments In accordance with IFRS 2, the Group has recognised a charge reflecting the fairvalue of outstanding share options granted to employees since 7 November 2002(see note 7). No such charge was recognised under UK GAAP. The impact of this change has been a charge to operating profit of £8,000 in theperiod (Interim 2004: £1,000; full year 2004/05: £5,000) and an associateddeferred tax credit of 30% of these charges. IFRS 3 Business combinations IFRS 3 required goodwill to be carried at cost less impairment, rather than itbeing amortised as it was under UK GAAP. As permitted by IFRS 1, the Group haschosen to apply IFRS 3 prospectively from the transition date of 1 April 2004and not to restate previous business combinations. Goodwill is, therefore,stated in the opening balance sheet at 1 April 2004 at its UK GAAP carryingvalue at that date of £201,000. Subsequent amortisation has been reversed,resulting in an increase in reported operating profit of £6,000 for the sixmonths to 30 September 2004 and £13,000 for the year to 31 March 2005. Negative goodwill arose on the acquisition of the business and assets of RussellCastings on 2 April 2004. Under UK GAAP a proportion of this negative goodwillwas released to operating profit in 2004/05 in proportion to realisation of theassets acquired. Under IFRS 3, negative goodwill (also known as discount onacquisition) must be released to profit immediately. This has resulted in anincrease in operating profit of £147,000 in the six months to 30 September 2004and £105,000 in the year to 31 March 2005. A further adjustment relating torestatement of the negative goodwill originally calculated on acquisition andreported in the 31 March 2005 accounts is identified and its effect shownseparately below as it is not directly attributable to the change to IFRS. IAS 7 Cash flow statements The cash flow statement has been reformatted under IFRS and incorporates therelevant adjustments made to the balance sheet and income statement. IAS 10 Events after the balance sheet date IAS 10 categorises events after the balance sheet date as "adjusting events" or"non-adjusting events". In most instances this corresponds with UK GAAP, but inthe case of dividends proposed (accrued for under UK GAAP), IAS 10 states thatif an entity declares dividends after the balance sheet date, the entity shallnot recognise those dividends as a liability at the balance sheet date. Thisresults in a reduction in current liabilities of £587,000 at 1 April 2004,£283,000 at 30 September 2004 and £588,000 at 31 March 2005. IAS 12 Income taxes IAS 12 requires deferred tax to be calculated based on differences between thecarrying value of assets or liabilities and their tax base value rather than onthe basis of timing differences. This has resulted in the Group having to makeprovision under IFRS for deferred tax on a previously rolled over capital gainwhere no provision was required under UK GAAP. This has resulted in anadditional provision of £475,000 in the accounts at 1 April 2004, 30 September2004 and 31 March 2005. In addition, a deferred tax asset relating to differences between the carryingvalue of property, plant and equipment and their tax value at Russell Castings,previously not recognised under UK GAAP has now been recognised. This amountsto £50,000 as at 31 March 2005. As the change does not relate specifically tothe change to IFRS, it has been identified separately in the reconciliationbelow. Recognition of a pension scheme liability under IAS 19 (see below) has alsoresulted in the recognition of an associated deferred tax asset under IAS 12.This amounted to £915,000 at 1 April 2004, £931,000 at 30 September 2004 and£996,000 at 31 March 2005. The major element of the movement in the pensionprovision relates to actuarial adjustments to the return on assets and level ofpension obligations. As these amounts are disclosed in the statement ofrecognised income and expense ("SORIE") rather than in the income statement, themajority of the movement in the deferred tax asset is also shown in the SORIE,and the remainder as part of the tax charge to the income statement for eachperiod. The amount credited to the SORIE in the year to 31 March 2005 relatingto deferred tax on the actuarial funding movement was £94,000. Where required, deferred tax has been provided for on all other IFRSadjustments. At 31 March 2005 this resulted in an additional deferred taxcredit/asset of £1,000 on share based payments, and an additional deferred taxcharge/liability of £31,000 relating to the additional release of negativegoodwill noted under IFRS 3 above. Corporation tax and the associated current liability have been recalculated atan effective rate of 30% to arrive at numbers for interim report purposes basedon IFRS profit in 2004 and 2005. IAS 16 Property, plant and equipment As permitted by IFRS 1, the Group has elected, where appropriate, to use therevaluation carrying amount of certain properties as the "deemed cost" ontransition to IFRS. Software included in tangible fixed assets under UK GAAP is classified as anintangible asset under IFRS. Amounts of £46,000 at 1 April 2004, £36,000 at 30September 2004 and £52,000 at 31 March 2005 have been reclassified and shownseparately as "Intangible assets - software" in the restated balance sheets. IAS 19 Employee benefits The Group had not adopted FRS 17 under UK GAAP before transition to IFRS, butwas using SSAP 24 with the additional disclosures required during the transitionto FRS 17. On transition to IFRS, therefore, the application of IAS 19 hasresulted in the creation of a provision for the actuarial deficit in the Group'sdefined benefit pension scheme (see note 6). The associated deferred tax assetis noted under IAS 12 above. The movements in actuarial valuations, notpreviously recognised under UK GAAP, have, from 1 April 2004 been recognised inthe SORIE. The charge to the income statement under IFRS reflects the servicecost for the period in operating profit and the net finance cost of the pensionscheme assets and liabilities in the finance cost line, as set out in note 6above. The change from the charges made under UK GAAP has resulted in increasedoperating profit of £110,000 in the six months to 30 September 2004 and £204,000in the year to 31 March 2005. Finance costs have increased by £56,000 in thesix months to 30 September 2004 and £111,000 in the year to 31 March 2005. Anamount has been charged/credited directly to retained profit relating to themovements in the actuarial funding position of the scheme, as identified in note6 above, amounting to a charge of £106,000 for the six months to 30 September2004, £312,000 for the year to 31 March 2005, and a credit of £334,000 for thesix months to 30 September 2005. IAS 32 Financial instruments: Disclosure and presentation, andIAS 39 Financial instruments: Recognition and measurement The Group has elected not to apply IAS 32 and IAS 39 to periods ended on orprior to 31 March 2005. No significant adjustments have been identified thatwould have been required to these periods had IAS 32 and IAS 39 been adopted andapplied retrospectively. Restatement of goodwill on acquisition of the business and assets of RussellCastings Following transition to IFRS as at 1 April 2004, the adjustment to goodwilloutlined in note 8 above has an impact on the restated IFRS numbers as set outin a separate column below. The recognition of the negotiated rent free periodfollowing acquisition has now been recognised as an asset on acquisition andamortised to the income statement over its useful life (i.e. the one year rentfree period). The fair value of that asset has been assessed as £200,000 basedon the actual rent subsequently negotiated. The associated increased negativegoodwill (discount on acquisition) has been released to profit immediately. The notional rent cost is a charge against underlying operating profit, whilstthe release of goodwill affects total operating profit, but is eliminated fromthe calculation of underlying operating profit. At 30 September 2004,therefore, the additional £200,000 of discount on acquisition has been releasedbut only £100,000 of notional rent has been charged. Operating profit for theperiod is increased by the net £100,000, but underlying operating profit isreduced by £100,000 being just the rent charge. At 31 March 2005, both the additional discount of £200,000 and the notional rentof £200,000 have been released/charged to profit. There is no net effect ontotal operating profit, but underlying operating profit has been reduced by the£200,000 rent. Earnings per share figures have been restated accordingly. Reconciliations The following tables reconcile the previously reported UK GAAP numbers withthose now prepared under IFRS, and identify separately the effect of thegoodwill restatement described above. Reconciliation of previously reported UK GAAP profit to IFRS profit as restatedfor the six months to 30 September 2004 UK GAAP Effect of IFRS Effect of Restated transition to adjusting IFRS IFRS goodwill on acquisition £000 £000 £000 £000 £000Revenue 20,213 - 20,213 - 20,213Operating profit 1,027 262 1,289 100 1,389Finance costs (20) (56) (76) (76)Profit before tax 1,007 206 1,213 100 1,313Income tax expense (322) (42) (364) (30) (394)Profit for the 685 164 849 70 919periodEarnings per share 9.3 2.2 11.5 1.0 12.5 basic p underlying p 8.7 0.8 9.5 -1.0 8.5 diluted p 9.3 2.2 11.5 1.0 12.5 diluted p 8.7 0.8 9.5 -1.0 8.5 underlying Reconciliation of previously reported UK GAAP profit to IFRS profit for the yearto 31 March 2005 UK GAAP Recognition Effect of IFRS Effect of Restated of transition adjusting IFRS deferred to IFRS goodwill on tax asset acquisition £000 £000 £000 £000 £000 £000Revenue 41,970 - - 41,970Operating profit 2,046 317 2,363Finance costs (60) (111) (171)Profit before tax 1,986 - 206 2,192Income tax expense (665) 50 (43) (658)Profit for the period 1,321 50 163 1,534Earnings per share 18.0 0.7 2.2 20.9 20.9 basic p underlying p 18.5 0.7 0.8 20.0 -1.9 18.1 diluted p 18.0 0.7 2.2 20.9 20.9 diluted p 18.4 0.7 0.9 20.0 -1.9 18.1 underlying Reconciliation of UK GAAP equity shareholders' funds to IFRS equityshareholders' funds at 1 April 2004 UK GAAP Effect of IFRS transition to IFRS £000 £000 £000Non-current assets Intangible assets - goodwill 201 - 201 Intangible assets - software - 46 46 Property, plant and equipment 8,770 (46) 8,724 Deferred tax assets - 915 915 8,971 915 9,886Current assets Inventories 3,496 - 3,496 Trade and other receivables 6,656 - 6,656 Cash and cash equivalents 482 - 482 10,634 - 10,634Total assets 19,605 915 20,520 Capital and reserves Called up share capital 1,835 - 1,835 Share premium account 718 - 718 Capital redemption reserve 109 - 109 Revaluation reserve 583 (583) - Retained earnings 10,237 (1,441) 8,796 Equity attributable to equity holders of the 13,482 (2,024) 11,458parent company Current liabilities 5,389 (587) 4,802Non-current liabilities 734 475 1,209 Deferred tax liabilities Retirement benefit obligations - 3,051 3,051 Total equity and liabilities 19,605 915 20,520 Reconciliation of UK GAAP equity shareholders' funds to IFRS equityshareholders' funds at 30 September 2004 UK GAAP Effect of IFRS Effect of Restated transition adjusting IFRS to IFRS goodwill on acquisition £000 £000 £000 £000 £000Non-current assets Intangible assets - goodwill 46 155 201 201 Intangible assets - software - 36 36 36 Property, plant and equipment 9,369 (36) 9,333 9,333 Deferred tax assets - 931 931 931 9,415 1,086 10,501 - 10,501Current assets Inventories 4,488 - 4,488 4,488 Trade and other receivables 9,462 - 9,462 100 9,562 Cash and cash equivalents - - - - 13,950 - 13,950 100 14,050Total assets 23,365 1,086 24,451 100 24,551 Capital and reserves Called up share capital 1,835 - 1,835 1,835 Share premium account 718 - 718 718 Capital redemption reserve 109 - 109 109 Revaluation reserve 579 (579) - - Retained earnings 10,643 (1,658) 8,985 70 9,055 Equity attributable to equity holders 13,884 (2,237) 11,647 70 11,717 Current liabilities 8,498 (255) 8,243 30 8,273 Non current liabilities Trade and other payables 274 - 274 274 Deferred tax liabilities 709 475 1,184 1,184 Retirement benefit obligations - 3,103 3,103 3,103 Total equity and liabilities 23,365 1,086 24,451 100 24,551 Reconciliation of UK GAAP equity shareholders' funds to IFRS equityshareholders' funds at 31 March 2005 UK GAAP Recognition of Effect of IFRS deferred tax transition to asset IFRS £000 £000 £000 £000Non-current assets Intangible assets - goodwill 83 118 201 Intangible assets - software - 52 52 Property, plant and equipment 9,042 (52) 8,990 Deferred tax assets - 50 997 1,047 9,125 50 1,115 10,290Current assets Inventories 5,055 - 5,055 Trade and other receivables 9,325 - 9,325 Cash and cash equivalents 1 - 1 14,381 - 14,381 Total assets 23,506 50 1,115 24,671 Capital and reserves Called up share capital 1,840 - 1,840 Share premium account 743 - 743 Capital redemption reserve 109 - 109 Revaluation reserve 575 (575) - Retained earnings 10,694 50 (1,498) 9,246 Equity attributable to equity holders of parent 13,961 50 (2,073) 11,938company Current liabilities 8,819 (588) 8,231Non-current liabilities Deferred tax liabilities 676 506 1,182 Retirement benefit obligations 50 3,270 3,320 Total equity and liabilities 23,506 50 1,115 24,671 11 Post balance sheet events In October 2005, the Company entered a consultation period which has led to adecision to close the Bloxwich foundry and consolidate production in the threeremaining foundry sites. Grey iron production will be consolidated at thenearby Walsall foundry and ductile iron production will move to the Leicesterand Scunthorpe sites. Closure of the Bloxwich site, which has the smallestoutput of the foundries within the Group, is expected to be completed in thecurrent financial year. For further information please contact: Chamberlin & Hill PLC Tel: 01922 721 411Barrie Williams, CEOSimon Duckworth, Finance Director This information is provided by RNS The company news service from the London Stock Exchange