Chamberlin Plc Regulatory News (CMH)

23 Nov 2006 07:01

Chamberlin & Hill PLC23 November 2006 23 November 2006 CHAMBERLIN & HILL plc (the "Company" or the "Group") Interim Results HIGHLIGHTS • Underlying profit before tax and exceptionals £523k (2005: £1,135k) • Underlying earnings per share 4.9p (2005: 10.8p) • Net borrowing £1.2m, a gearing of 9.6% • Dividend maintained at 3.85p • New executive management appointed • Transfer to AIM completed The Chairman, Tom Brown, commented: "We expect underlying profit in the secondhalf to exceed that reported in these interim results and that this improvingtrend will be sustained into next year. We continue to believe that Chamberlin &Hill retains strong product and process expertise and is therefore well placedto compete in its chosen markets, and look forward to improved performance underits new executive leadership." CHAIRMAN'S STATEMENT At the Extraordinary General Meeting held on 23 October we cautioned thatcurrent year results were expected to fall short of the level achieved in thelast two years. In the event in the six months ended 30 September 2006 saleswere £19.03m (2005: £21.16m), while underlying profit before tax was £0.52m(2005: £1.14m), with underlying earnings per share of 4.9p (2005: 10.8p).Reduced operating cash flow coupled with increased capital spending resulted innet borrowing of £1.19m (2005: net cash of £0.24m). Gearing remains low at 9.6%. The Board has decided to pay an unchanged interim dividend of 3.85p per share,payable on 18 December 2006 to all shareholders registered on 8 December 2006. The Light Castings Division suffered some decline in revenue due to the closureof the Bloxwich foundry at the end of last financial year, although as plannedaround half of this work was successfully transferred to other foundries withinthe Group. In our last annual report I commented that this consolidation wasexpected to result in increased margins on grey iron castings in this Divisionand I am pleased to report that margins have started to improve, while customerdemand for continuing products has remained robust. The Heavy Castings Division suffered from reduced demand which did not recoveras expected, while increased costs of energy and raw materials continued to putpressure on margins. This division has also been particularly affected by thepreviously announced programme to consolidate the Leicester operation intoScunthorpe. As a result of all these factors profit declined significantlycompared with last year. Since the period end a new Managing Director has beenappointed to this Division, and the relocation project is being reviewed tooptimise its cost effectiveness. Improved performance is anticipated in thesecond half but this Division will remain a focus of management attention. The results of the Engineering Division were very similar to last year, both insales and profits. Duncombe successfully launched a new range of 'Exidor'emergency exit hardware designed for uPVC windows and doors, which has been wellreceived in the market. A new Managing Director is now being sought for thiscompany. At our electrical products company, PFP, a re-structuring has beenannounced since the half year end that will remove low-margin commodity productsand concentrate the business on the more attractive segments of lighting andcontrols for use in hazardous areas. Foundry restructuring caused most of the exceptional costs in the first half,which amounted to £0.42m. Completion of the current activity in the foundriesand further one-off costs including restructuring of PFP Electrical Products areexpected to result in further exceptional costs in the second half of the year. As shareholders will know, on 20 September we announced our intention to movethe Company from the Main Market of the London Stock Exchange to AIM. I ampleased to announce that following strong shareholder support this exercise hasbeen concluded, and trading on AIM commences today. As planned Nick Kuenssberg will be retiring from the Board at the end of theyear, and the search for his successor is progressing well. Nick has made amajor contribution over more than 7 years service with the Company as director,Chairman of the Audit Committee and Senior Independent Director and we aregrateful to him for this; I am pleased that he continues as Chairman of thePension Trustees. Following Nick's departure, Keith Jackson will become Chairmanof the Audit Committee and Senior Independent Director. As previously announced Simon Duckworth will be leaving the Group at the end ofDecember for family reasons, and I would like to wish him well for the future.Mark Bache has now joined us to succeed him as Finance Director, and will beworking closely with our recently appointed Chief Executive, Tim Hair, who isalready setting his stamp on the Group. I am very confident in the team that wenow have to complete the current consolidation phase and then take the Groupforward. We anticipate that the Light Division will continue to enjoy a strong market forgrey iron castings, and that the recent changes in the Heavy Division will indue course result in a significant improvement. We continue to believe that theEngineering businesses are capable of profits growth, organically andpotentially by acquisition. We expect underlying profit in the second half toexceed that reported in these interim results and that this improving trend willbe sustained into next year. We continue to believe that Chamberlin & Hillretains strong product and process expertise and is therefore well placed tocompete in its chosen markets, and look forward to improved performance underits new executive leadership. TOM BROWN Chairman Contacts Chamberlin & Hill plc: Tim Hair 01922 721411 07986 555868 Teather & Greenwood: Tom Hulme 0207 426 9593 Summarised Consolidated Income Statement for the six months ended 30 September 2006 Note Unaudited six months ended Unaudited Year ended 31 March 2006 30 September 2006 six months ended Before Operating Total 30 Before Operating Total operating exceptionals September operating exceptionals exceptionals (note 10) 2005 exceptionals £000 £000 £000 £000 £000 £000 £000Revenue from continuingoperations 19,028 - 19,028 21,157 41,435 - 41,435Operating profitfrom continuingoperations 521 (421) 100 1,205 2,398 104 2,502Finance costs 3 2 - 2 (70) (134) - (134)Profit before tax 523 (421) 102 1,135 2,264 104 2,368Income tax 4 (159) 126 (33) (341) (679) (31) (710)expenseProfit for theperiod fromcontinuing 364 (295) 69 794 1,585 73 1,658operationsAttributable toequity holders ofthe parentcompany 69 794 1,658 Earnings pershare: 6 0.9p 10.8p 22.5p basicunderlying 6 4.9p 10.8p 21.5pdiluted 6 0.9p 10.7p 22.4pdiluted 6 4.9p 10.7p 21.5punderlying An interim dividend of 3.85p per share has been declared by the directors,payable on 18 December 2006 (note 5). Summarised Consolidated Statement of Recognised Income and Expense for the six months ended 30 September 2006 Note Unaudited six Unaudited six months ended months ended Year ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000Actuarial gains /(losses) on pensionassets and 7 (929) 334 1,141liabilitiesDeferred tax onactuarial gains /(losses) 279 (100) (342)Net (expense) /income recogniseddirectly in equity (650) 234 799Profit for theperiod (beforedividend) 69 794 1,658Total recognisedincome and expensefor the period (581) 1,028 2,457 Summarised Consolidated Balance Sheet At 30 September 2006 Unaudited Unaudited 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000Non-current assets Property, plant and equipment 8,518 8,795 8,206 Intangible assets - goodwill 201 201 201 Intangible assets - software 61 43 53 Intangible assets - development costs 219 - 229 Deferred tax assets 782 930 497 9,781 9,969 9,186Current assets Inventories 5,192 5,094 5,308 Trade and other receivables 8,227 8,714 7,942 Cash and cash equivalents - 238 593 13,419 14,046 13,843Total assets 23,200 24,015 23,029 Capital and reserves Share capital 1,854 1,840 1,840 Share premium 829 743 743 Capital redemption reserve 109 109 109 Retained earnings 9,666 9,694 10,850Total equity 12,458 12,386 13,542Current liabilities Financial liabilities 1,192 - - Trade and other payables 7,004 6,612 7,501 Income taxes payable 55 943 237 8,251 7,555 7,738Non-current liabilities Defined benefit pension scheme deficit 1,218 2,923 487 Deferred tax liabilities 1,273 1,151 1,262 2,491 4,074 1,749 Total equity and liabilities 23,200 24,015 23,029 Summarised Consolidated Cash Flow Statement for the six months ended 30 September 2006 Unaudited six Unaudited six Year ended months ended months ended 31 March 30 September 30 September 2006 2006 2005 Operating activities £000 £000 £000 Operating Profit 100 1,205 2,502Adjustments for: Depreciation of property, 574 742 1,526 plant and equipment Amortisation of software 14 12 27Amortisation of capitalised 10 - -development costs Loss / (profit) on disposal of 32 - (1,040) plant and equipment Share based payments (11) 8 19 Special pension contribution - - (1,500) Other pension payments in (148) (100) (263) excess of Income Statement chargeOperating cash flow before movementsin working capital 571 1,867 1,271 Decrease / (increase) in 116 (39) (253) inventories (Increase) / decrease in (285) 611 1,383 receivables (Decrease)/Increase in payables (496) (938) (49)Cash flow generated from operations (94) 1,501 2,352 UK Corporation Tax paid (210) (50) (823)Net cash flow from operating (304) 1,451 1,529activites Investing activities Interest received - - 1 Purchase of property, plant and equipment (916) (558) (1,415) Purchase of software (25) (3) (28) Development expenditure - - (229) capitalised Disposal of plant and - 11 1,713 equipmentNet cash flow from investing (941) (550) 42activitiesFinancing activities Interest paid (48) (33) (64) Equity dividends paid (592) (588) (872) Issue of shares (including 100 - - premium)Net cash used in financing activities (540) (621) (936) Net (decrease) / increase in cash andcash equivalents (1,785) 280 635 Cash and cash equivalents at thestart of the period 593 (42) (42) Cash and cash equivalents at the endof the period (1,192) 238 593 Notes to the interim financial statements 1 General information and accounting policies The abridged financial information set out above does not constitute the Group'sstatutory accounts as defined under Section 240 of the Companies Act 1985. Theauditors made a report under Section 235 of the Companies Act 1985 on thefinancial statements for the year ended 31 March 2006, as filed at CompaniesHouse, from which part of the financial information is extracted. The report ofthe auditors on the accounts for the year ended 31 March 2006 was unqualifiedand there was no statement under either section 237(2) or section 237(3). Basis of preparation The accounts have been prepared under International Financial ReportingStandards ("IFRS") in the form of a condensed interim financial report under IAS34. Accounting policies The principal accounting policies, based on IFRS, applied in preparing theInterim Financial Statements are consistent with the policies set out in theAnnual Report and Accounts for the year ended 31 March 2006. 2 Segmental analysis For management purpose, the Group is organised into two operating divisions:Foundries and Engineering, which are the primary segments for reportingpurposes. The secondary segmental format is geographical. Foundries Engineering Total Unaudited Unaudited Unaudited Unaudited 6 Unaudited Unaudited 6 months 6 months Year 6 months months Year 6 months 6 months Year ended ended ended ended ended ended ended ended ended 30 Sep 30 Sep 31 March 30 Sep 30 Sep 31 March 30 Sep 30 Sep 31 March 2006 2005 2006 2006 2005 2006 2006 2005 2006 £000 £000 £000 £000 £000 £000 £000 £000 £000 Revenue 15,029 17,175 33,635 3,999 3,982 7,800 19,028 21,157 41,435 Trading profit 712 1,302 2,328 270 282 552 982 1,584 2,880Shared costs (461) (379) (482) Exceptionals (421) - 104 Operating profit 100 1,205 2,502 Net assets Assets 16,391 16,953 16,091 5,745 5,653 5,682 22,136 22,606 21,773 Liabilities (5,687) (6,303) (6,428) (1,317) (1,216) (1,149) (7,004) (7,519) (7,577)Segmental net assets 10,704 10,650 9,663 4,428 4,437 4,533 15,132 15,087 14,196 Unallocatednet (2,674) (2,701) (654)liabilitiesTotal net 12,458 12,386 13,542assets Stockwritedowns 35 50 162 - - 17 35 50 179 CapitaladditionsPPE * 728 436 1,134 188 122 281 916 558 1,415 Software 25 - 24 - 3 4 25 3 28 Development - - 130 - - 99 - - 229 Capitalcommitments 326 - 298 - - 16 326 - 314 Depreciation /amortisationPPE * (432) (576) (1,231) (142) (166) (295) (574) (742) (1,526) Software (12) (8) (17) (2) (4) (10) (14) (12) (27) Development (6) - - (4) - - (10) - - • Property, plant and equipment The Foundries segment is a supplier of iron castings, in raw or machined form,to a variety of industrial customers who incorporate the castings into their ownproducts or carry out further machining or assembly operations on the castingsbefore selling them on to such customers. The Engineering segment providesmanufactured and imported products to distributors and end-users. The productsfall into the categories of door hardware, hazardous area lighting and controlgear, cable management and general ironmongery. Transactions between business segments are minimal and transfer prices are seton an arm's length basis in a manner similar to transactions with third parties.The Group's geographical segments are determined by the location of the Group'scustomers. The group's assets and costs incurred are all located within theUnited Kingdom. Unaudited six Unaudited six months ended 30 months ended 30 Year ended 31 September September MarchTurnover by geographical location 2006 2005 2006 £000 £000 £000 United Kingdom 15,120 16,659 32,730Rest of Europe 3,210 3,560 6,818 Other countries 698 938 1,887 19,028 21,157 41,435 3 Finance costs Unaudited six Unaudited six months ended 30 months ended 30 Year ended 31 September September March 2006 2005 2006 £000 £000 £000Net interest on bank accounts (48) (33) (63)Finance income / (costs) of pension scheme (note 7) 50 (37) (71) 2 (70) (134) 4 Income tax expense An effective rate of tax for the six months to 30 September 2006 of 30% has beenused in respect of all income tax and deferred tax calculations in these interimstatements. 5 Dividends Dividends comprise: Unaudited six Unaudited six months ended 30 months ended 30 Year ended 31 September September March 2006 2005 2006Pence per share £000 £000 £0002004/05 final dividend paid July 2005 8.00 588 5882005/06 interim dividend paid December 2005 3.85 2842005/06 final dividend paid July 2006 8.00 592 592 588 872 2006/07 interim dividend proposed 3.85 286 The interim dividend of 3.85 pence per share (2005: 3.85p) will be paid on 18December 2006 to all shareholders on the register as at close of business on 8December 2006. 6 Earnings per share The calculation of basic earnings per share is based on the profit after tax of£69,000 (Interim 2005: £794,000; Full year 2005/06: £1,658,000) and the weightedaverage number of shares in issue of 7,388,204 (Interim 2005: 7,359,658; Fullyear 2005/06: 7,359,658). The calculation of underlying earnings per share is based on profit before theeffects of operating exceptionals, and is disclosed in addition to basicearnings per share as the directors believe that it allows a better comparisonbetween the results of different periods, and therefore a better assessment ofthe comparative trading performance of the Group. Operating exceptionalscomprise severance payments and related costs associated with significantoperational restructuring. The profit used in calculating underlying earnings per share was £364,000(Interim 2005: £794,000; Full year 2005/06: £1,585,000) 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 7,402,435 (Interim 2005: 7,392,589; Full year 2005/06: 7,388,525). 7 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 volatility inshareholders' 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 2006 2005 2006 Discount rate 5.0% 5.1% 5.1%Salary increases 2.9% 2.7% 2.7%Pension increases (pre '97) 2.5% 2.5% 2.5%Pension increases (post '97) 2.9% 2.7% 2.7%Inflation (RPI) 2.9% 2.7% 2.7% 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 2006 2005 2006 £000 £000 £000 Change in scheme assets Fair value at start of period 13,690 10,334 10,334 Expected return on scheme assets 398 333 659 Actuarial (losses) / gains (342) 698 1,285 Employer's contributions 194 165 1,858 Members' contributions 45 65 94 Estimated benefits paid (628) (320) (540) Fair value at end of period 13,357 11,275 13,690 6 months to 6 months to Year to 30 September 30 September 31 MarchFunding status 2006 2005 2006 £000 £000 £000Change in defined benefit obligationsDefined benefit obligations at start of period 14,177 13,654 13,654Current service cost 46 65 95Interest cost 348 370 730Members' contributions 45 65 94Actuarial loss 587 364 144Estimated benefits paid (628) (320) (540)Defined benefit obligations at end of period 14,575 14,198 14,177 Deficit in the defined benefit scheme at the period (1,218) (2,923) (487)end Less associated deferred tax asset 365 877 146Net balance sheet liability (853) (2,046) (341) Components of pension cost Current service cost 46 65 95 Past service cost - - - Charge to operating profit 46 65 95 Interest cost on defined benefit obligations 348 370 730 Expected return on scheme assets (398) (333) (659) Income / (charge) to finance costs (50) 37 71Total income / (charge) to income statement (4) 102 166 Actuarial gains/(losses) Actual return less expected return on assets (342) 698 1,285 Experience loss on liabilities (587) (364) (144)Total (charge) / credit recognised in the SORIE (929) 334 1,141 8 Share based payments The Company has a HM Revenue & Customs Approved and an Unapproved share optionscheme used to incentivise directors and senior managers of the Group. Optionsare exercisable at a price equal to the average quoted market price of theCompany's shares over the 5 days prior to the date of grant. The vesting periodis 3 years and the options expire after 10 years from date of grant (forApproved Options) or 7 years (for Unapproved Options). Options lapse if theemployee leaves the Group subject to certain exceptions set out in the schemerules. Under the transitional arrangements in IFRS 1, only options grantedafter 7 November 2002 are included in the share based payment calculations. TheBlack-Scholes valuation method has been used. The fair value of options expected to ultimately vest, calculated by thismethod, is charged to the income statement over the vesting period of theoptions (the three years after which they can be exercised under the schemerules). The charge is recognised in operating 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 - 02.06.201114 July 2005 25,000 231.5p 14.07.2008 - 13.07.201221 June 2006 13,900 215.5p 21.06.2009 - 20.06.201621 June 2006 56,100 215.5p 21.06.2009 - 20.06.2013 Options outstanding in respect of Simon Duckworth have not been classed asrelevant options as they will lapse on his leaving the employment of the Groupon 31 December 2006 and are not therefore expected to vest. Based on the following assumptions, the total fair value of relevant options was£47,000, of which £11,000 was recognised as a credit in the period based on thecumulative charge calculated at the end of the period less the amounts chargedin previous periods (Interim 2005: charge of £8,000; Full year 2005/06: chargeof £19,000). The credit results from the reversal of previous charges inrespect of the options held by Simon Duckworth. 30 Sep 2006 30 Sep 2005 31 Mar 2006 Share Price 218.0p 256.5p 211.5pWeighted average option price 213.6p 212.8p 212.8pExpected volatility 40% 30.0% 40%Expected life 3.8 years 3.8 years 3.8 yearsRisk free rate 3.0% 3.0% 3.0%Expected dividend yield 5.4% 5.1% 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. 9 Consolidated statement of changes in equity Unaudited six months Unaudited six months Year ended 31 ended 30 September ended 30 September March 2006 2005 2006 £000 £000 £000Equity at start of period 13,542 11,938 11,938Profit for the period 69 794 1,658Dividends paid (see note 5) (592) (588) (872)Actuarial movements on pension funding (see (929) 334 1,141note 6)Deferred tax on actuarial pension movements 279 (100) (342)Share based payments (see note 8) (11) 8 19Shares issued and allotted 100 - -Equity at end of period 12,458 12,386 13,542 Shares issued and allotted relate to shares issued to satisfy the exercise ofshare options during the period. 10 Exceptional operating costs Operating exceptionals, which relate to restructuring costs incurred in the sixmonths to 30 September 2006 and in the opinion of the directors do not form partof the underlying operating costs of the businesses, comprise: £000 Costs relating to the closure of the Bloxwich foundry of Chamberlin 164& Hill Castings LimitedCosts relating to the restructuring of Russell Ductile Castings Limited 207Costs relating to central management restructuring 50 421 Expenditure includes redundancy costs, plant relocation, asset provisions andgroup management overlap costs. 11 Post balance sheet events On 23 October 2006, a proposal made by the directors to transfer the Company'sshare listing from the Main Market of the London Stock Exchange to AIM receivedthe approval of shareholders and the transfer will be completed on 23 November2006. The costs of the transfer will be recognised in the second half of thecurrent financial year. In October 2006 the directors approved plans for a restructuring of PFPElectrical Products Limited which will involve the closure of the switch andsocket box manufacturing operation. Restructuring costs will be incurred in thesecond half of the current financial year, along with the ongoing restructuringactivity in relation to the foundry businesses. 12 Availability of Interim Report The Interim Report will be sent to shareholders shortly and will be available onthe Company's website www.chamberlin.co.uk and by application to the CompanySecretary at Chamberlin & Hill plc, Chuckery Foundry, Walsall WS1 2DU. A presentation to be made to institutional investors following announcement ofthe interim results will also be available shortly on the Company's website. This information is provided by RNS The company news service from the London Stock Exchange