TIDMCGS
RNS Number : 1900F
Castings PLC
13 November 2020
CASTINGS P.L.C.
INTERIM MANAGEMENT REPORT
Six months ended 30 September 2020
Overview
Sales for the six months ended 30 September 2020 were GBP41.7
million (2019 - GBP73.1 million) with loss before tax of GBP0.63
million (2019 - profit of GBP7.34 million).
The period has been significantly impacted by reduced demand as
a result of the COVID-19 pandemic. Output reduced by approximately
80% during the first two months of the period as the commercial
vehicle sector, which represents 70% of group revenue, closed
production facilities and 80% of our workforce was placed on
furlough leave under the Coronavirus Job Retention Scheme. During
the following four months, there was a gradual increase in demand
from the heavy-truck OEMs such that monthly demand levels were
approximately 85% of pre-COVID levels at the end of the period.
The group completed on the sale of the Fradley site for GBP1.95
million (before disposal costs) on 22 September 2020, resulting in
a profit of GBP0.66 million.
Foundry operations
Output during the period was down 43% at 14,350 tonnes (2019 -
25,200 tonnes) and external sales revenue decreased by 42% to
GBP40.5 million.
The profit from the foundry segment of GBP0.8 million represents
a decrease of 89% from the equivalent period last year ('previous
period'). The margin has been negatively impacted by the lower
production levels and significant disruption during the period
resulting in production inefficiencies. However, assuming demand
remains buoyant, productivity gains are due to be realised during
the second half of the financial year and into 2021/22.
The strong group cash position has enabled the continued
investment in foundry facilities during the period, including
GBP1.6 million to support a production line upgrade and the
introduction of a new in-house heat treatment plant.
Machining operation
CNC Speedwell generated external revenue of GBP1.2 million
during the period, a decrease of 60% compared to the previous
period, with a reported loss of GBP2.1 million compared to a profit
of GBP0.1 million in the previous period. The significantly lower
levels of demand have a particularly negative impact on such a
well-invested business with a depreciation cost of GBP2.0 million
in the period.
The focus on automation and productivity improvements has
continued which makes up the majority of the capital investment of
GBP0.8 million during the period.
Outlook
The current heavy-truck schedules suggest output returning to
pre-COVID levels, albeit there continues to be uncertainty
regarding the pandemic. Assuming these levels are realised, the
group is well positioned to see the benefits of the productivity
improvements in both the foundry and machining businesses.
The group has been successful in obtaining a number of new
projects with our European truck customers that will commence
production in 2021/22 and 2022/23. In addition to replacement work,
these projects include additional platform volumes and also more
value-add product solutions.
The automation of finishing processes within the foundries is
largely complete and the automation investment programme in the
machining business will continue in the medium term.
The group maintains a strong balance sheet with cash levels of
GBP35.2 million; an increase of GBP1.8 million during the period
after the dividend payment of GBP5.0 million.
Dividend
An interim dividend of 3.57 pence per share has been declared
and will be paid on 7 January 2021 to shareholders who are on the
register at 27 November 2020.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical
results.
The directors consider that the principal risks and
uncertainties remain substantially the same as those stated on
pages 8 and 9 of the Annual Report for the year ended 31 March
2020.
The COVID-19 pandemic has caused significant disruption to the
group during the period. Our commercial vehicle customers ceased
production for a three to five week period during March and April
2020. However, since that time, demand levels have steadily
improved, employees have returned from furlough leave and
production levels have increased. Whilst we have not seen any
further significant impact as a result of the pandemic, it does
still have the potential to disrupt supply chains and future
demand.
The negotiations on the UK's future trading relationship with
the European Union remain ongoing. With over 70% of the group's
sales revenue being generated in this market, there remains a
potential risk. We maintain regular dialogue with suppliers and
customers to ensure that supply risks are mitigated where
possible.
Cautionary statement
This Interim Management Report ('IMR') has been prepared solely
to provide additional information to shareholders to enable them to
assess the group's strategies and the potential for those
strategies to succeed. The IMR should not be relied on by any other
party or for any other purpose. This IMR contains certain
forward-looking statements. These are made by the directors in good
faith based on the information available to them up to the time of
their approval of this report but such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
The group undertakes no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
The IMR has been prepared for the group as a whole and therefore
gives greater emphasis to those matters which are significant to
Castings P.L.C. and its subsidiary undertakings when viewed as a
whole.
By order of the board
BRIAN J. COOKE
Chairman
13 November 2020
Castings p.l.c.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Consolidated Statement of Comprehensive Income
For six months ended 30 September 2020
Unaudited
Unaudited Half Audited
Half year year Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------- ------------- ---------
Revenue 41,748 73,135 138,667
Cost of sales (36,593) (57,349) (109,186)
--------------------------------------------- ------------- ------------- ---------
Gross profit 5,155 15,786 29,481
Distribution costs (769) (1,444) (2,510)
Administrative expenses (5,722) (7,109) (14,477)
--------------------------------------------- ------------- ------------- ---------
(Loss)/profit before surplus on sale
of property (1,336) 7,233 12,494
Surplus on sale of property 658 - -
--------------------------------------------- ------------- ------------- ---------
(Loss)/profit from operations (678) 7,233 12,494
Finance income 51 111 206
--------------------------------------------- ------------- ------------- ---------
(Loss)/profit before income tax (627) 7,344 12,700
Income tax credit/(expense) 121 (1,393) (2,634)
--------------------------------------------- ------------- ------------- ---------
(Loss)/profit for the period attributable
to the equity holders
of the parent company (506) 5,951 10,066
Other comprehensive income/(expense)
for the period:
Items that will not be reclassified
to profit and loss:
Movement in unrecognised surplus
on defined benefit pension
schemes net of actuarial gains and
losses - - 258
--------------------------------------------- ------------- ------------- ---------
- - 258
Items that may be reclassified subsequently
to profit and loss:
Change in fair value of available
for sale financial assets (15) 30 (22)
Tax effect of items that may be reclassified 3 (5) 4
--------------------------------------------- ------------- ------------- ---------
(12) 25 (18)
--------------------------------------------- ------------- ------------- ---------
Total other comprehensive (losses)/income
for the period
(net of tax) (12) 25 240
--------------------------------------------- ------------- ------------- ---------
Total comprehensive (loss)/income
for the period attributable
to the equity holders of the parent
company (518) 5,976 10,306
--------------------------------------------- ------------- ------------- ---------
Earnings per share attributable to
the equity holders
of the parent company
Basic and diluted (1.16)p 13.64p 23.07p
--------------------------------------------- ------------- ------------- ---------
Consolidated Balance Sheet
30 September 2020
Unaudited Unaudited Audited
30 September 30 September 31 March
2020 2019 2020
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ------------- ---------
ASSETS
Non-current assets
Property, plant and equipment 68,843 70,999 70,693
Financial assets 343 410 358
-------------------------------------- ------------- ------------- ---------
69,186 71,409 71,051
-------------------------------------- ------------- ------------- ---------
Current assets
Inventories 17,932 19,077 21,175
Trade and other receivables 30,777 36,954 28,661
Current tax asset 411 524 332
Cash and cash equivalents 35,217 25,835 33,401
-------------------------------------- ------------- ------------- ---------
84,337 82,390 83,569
-------------------------------------- ------------- ------------- ---------
Assets classed as held for sale - 1,060 1,060
-------------------------------------- ------------- ------------- ---------
84,337 83,450 84,629
-------------------------------------- ------------- ------------- ---------
Total assets 153,523 154,859 155,680
-------------------------------------- ------------- ------------- ---------
LIABILITIES
Current liabilities
Trade and other payables 23,550 22,453 20,092
Current tax liabilities - - -
-------------------------------------- ------------- ------------- ---------
23,550 22,453 20,092
-------------------------------------- ------------- ------------- ---------
Non-current liabilities
Deferred tax liabilities 3,807 3,560 3,930
-------------------------------------- ------------- ------------- ---------
Total liabilities 27,357 26,013 24,022
-------------------------------------- ------------- ------------- ---------
Net assets 126,166 128,846 131,658
-------------------------------------- ------------- ------------- ---------
Equity attributable to equity holders
of the parent company
Share capital 4,363 4,363 4,363
Share premium account 874 874 874
Other reserve 13 13 13
Retained earnings 120,916 123,596 126,408
-------------------------------------- ------------- ------------- ---------
Total equity 126,166 128,846 131,658
-------------------------------------- ------------- ------------- ---------
Consolidated Cash Flow Statement
For six months ended 30 September 2020
Unaudited Unaudited
Half Half Audited
year year Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------- ------------- ---------
Cash flows from operating activities
(Loss)/profit before income tax (627) 7,344 12,700
Adjustments for:
Depreciation 4,251 4,163 8,903
Profit on disposal of property, plant
and equipment - - (40)
Profit on disposal of held for sale
asset (658) - -
Finance income (51) (111) (206)
Pension administrative costs - - 258
Decrease/(increase) in inventories 3,243 87 (2,011)
(Increase)/decrease in receivables (712) 5,185 11,713
Increase/(decrease) in payables 3,458 (1,769) (4,130)
------------------------------------------- ------------- ------------- ---------
Cash generated from operating activities 8,904 14,899 27,187
Tax paid (78) (3,685) (4,355)
Interest received 41 101 186
------------------------------------------- ------------- ------------- ---------
Net cash generated from operating
activities 8,867 11,315 23,018
Cash flows from investing activities
Dividends received from listed investments 10 10 20
Purchase of property, plant and equipment (2,606) (3,724) (8,158)
Proceeds from disposal of property,
plant and equipment - - 40
Proceeds from disposal of held for
sale asset 1,923 - -
Transfer from/(to) other current
interest-bearing deposits - 5,000 5,000
Repayments from pension schemes - - 3,525
Advances to pension schemes (1,404) (1,018) (2,778)
------------------------------------------- ------------- ------------- ---------
Net cash used in investing activities (2,077) 268 (2,351)
Cash flow from financing activities
Dividends paid to shareholders (4,974) (11,519) (13,037)
------------------------------------------- ------------- ------------- ---------
Net cash used in financing activities (4,974) (11,519) (13,037)
Net increase/(decrease) in cash and
cash equivalents 1,816 64 7,630
Cash and cash equivalents at beginning
of period 33,401 25,771 25,771
------------------------------------------- ------------- ------------- ---------
Cash and cash equivalents at end
of period 35,217 25,835 33,401
------------------------------------------- ------------- ------------- ---------
Cash and cash equivalents:
Short-term deposits 33,394 23,362 28,610
Cash available on demand 1,823 2,473 4,791
------------------------------------------- ------------- ------------- ---------
35,217 25,835 33,401
------------------------------------------- ------------- ------------- ---------
Consolidated Statement of Changes in Equity
Equity attributable to equity holders
of the parent
Share Share Other Retained Total
capital premium reserve earnings equity
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- --------- --------
At 1 April 2020 4,363 874 13 126,408 131,658
------------------------------------- -------- -------- -------- --------- --------
Loss for the period - - - (506) (506)
Other comprehensive income/(losses):
Change in fair value of available
for sale assets - - - (15) (15)
Tax effect of items taken
directly to reserves - - - 3 3
------------------------------------- -------- -------- -------- --------- --------
Total comprehensive loss
for the period
ended 30 September 2020 - - - (518) (518)
Dividends - - - (4,974) (4,974)
------------------------------------- -------- -------- -------- --------- --------
At 30 September 2020 4,363 874 13 120,916 126,166
------------------------------------- -------- -------- -------- --------- --------
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------- ------- ------- -------- --------
At 1 April 2019 4,363 874 13 129,139 134,389
------------------------------------- ------- ------- ------- -------- --------
Profit for the period - - - 5,951 5,951
Other comprehensive income/(losses):
Change in fair value of available
for sale assets - - - 30 30
Tax effect of items taken directly
to reserves - - - (5) (5)
------------------------------------- ------- ------- ------- -------- --------
Total comprehensive income for
the period
ended 30 September 2019 - - - 5,976 5,976
Dividends - - - (11,519) (11,519)
------------------------------------- ------- ------- ------- -------- --------
At 30 September 2019 4,363 874 13 123,596 128,846
------------------------------------- ------- ------- ------- -------- --------
Audited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------- ------- ------- -------- --------
At 1 April 2019 4,363 874 13 129,139 134,389
------------------------------------- ------- ------- ------- -------- --------
Profit for the year - - - 10,066 10,066
Other comprehensive income/(losses):
Movement in unrecognised surplus
on defined benefit pension schemes
net of actuarial loss - - - 258 258
Change in fair value of available
for sale assets - - - (22) (22)
Tax effect of items taken directly
to reserves - - - 4 4
------------------------------------- ------- ------- ------- -------- --------
Total comprehensive income for
the year
ended 31 March 2020 - - - 10,306 10,306
Dividends - - - (13,037) (13,037)
------------------------------------- ------- ------- ------- -------- --------
At 31 March 2020 4,363 874 13 126,408 131,658
------------------------------------- ------- ------- ------- -------- --------
Notes
1. General information
Castings P.L.C. (the 'company') is a company domiciled in
England. The condensed consolidated interim financial statements of
the company for the six months ended 30 September 2020 comprise the
company and its subsidiaries (together referred to as the
'group').
The principal activities of the group are the manufacture of
iron castings and machining operations.
The financial information for the year ended 31 March 2020 does
not constitute the full statutory accounts for that period. The
Annual Report and Financial Statements for the year ended 31 March
2020 have been filed with the Registrar of Companies. The
Independent Auditors' Report on the Annual Report and Financial
Statements for 2019 was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
498 (2) or (3) of the Companies Act 2006.
This report has not been audited and has not been reviewed by
independent auditors pursuant to the Auditing Practices Board
guidance on Review of Interim Financial Information.
2. Accounting policies
The annual financial statements of Castings P.L.C. are prepared
using the recognition and measurement principles of IFRSs as
endorsed by the European Union. The condensed set of financial
statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the European Union.
Basis of preparation
After making enquiries, the directors have a reasonable
expectation that the company and the group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the half-yearly condensed consolidated interim financial
statements.
The same accounting policies, presentation and methods of
computation are followed in the condensed consolidated interim
financial statements as applied in the group's latest annual
audited financial statements.
3. Seasonality of operations
The directors do not consider there to be any significant
seasonality or cyclicality to the results of the group.
4. Segment information
For internal decision making purposes, the group is organised
into three operating companies which are considered to represent
two operating segments of the group. Castings P.L.C. and William
Lee Limited are aggregated into Foundry Operations and CNC
Speedwell Limited is the Machining Operation.
Inter-segment transactions are entered into under the normal
commercial terms and conditions that would be available to third
parties.
The following shows the revenues, results and total assets by
reportable segment for the half year to 30 September 2020.
Foundry
operations Machining Elimination Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- --------- ----------- --------
Revenue from external customers 40,523 1,225 - 41,748
Inter-segmental revenue 4,099 4,767 - 8,866
-------------------------------- ----------- --------- ----------- --------
Segmental result 776 (2,112) - (1,336)
-------------------------------- ----------- --------- ----------- --------
658
--------------------------------
Unallocated income:
Exceptional profit on disposal
of held for sale asset
Finance income 51
-------------------------------- ----------- --------- ----------- --------
Loss before income tax (627)
-------------------------------- ----------- --------- ----------- --------
Total assets 136,837 29,966 (13,280) 153,523
-------------------------------- ----------- --------- ----------- --------
Non-current asset additions 1,784 822 - 2,606
-------------------------------- ----------- --------- ----------- --------
Depreciation 2,246 2,005 - 4,251
-------------------------------- ----------- --------- ----------- --------
Total liabilities (26,214) (9,299) 8,156 (27,357)
-------------------------------- ----------- --------- ----------- --------
The following shows the revenues, results and total assets by
reportable segment for the half year to 30 September 2019.
Foundry
operations Machining Elimination Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ----------- ------------- ---------
Revenue from external customers 70,106 3,029 - 73,135
Inter-segmental revenue 9,609 10,325 - 19,934
-------------------------------- ----------- ----------- ------------- ---------
Segmental result 7,094 139 - 7,233
-------------------------------- ----------- ----------- ------------- ---------
Unallocated income:
Finance income 111
-------------------------------- ----------- ----------- ------------- ---------
Profit before income tax 7,344
-------------------------------- ----------- ----------- ------------- ---------
Total assets 137,691 31,430 (14,262) 154,859
-------------------------------- ----------- ----------- ------------- ---------
Non-current asset additions 3,077 647 - 3,724
-------------------------------- ----------- ----------- ------------- ---------
Depreciation 2,048 2,115 - 4,163
-------------------------------- ----------- ----------- ------------- ---------
Total liabilities (25,890) (7,776) 7,653 (26,013)
-------------------------------- ----------- ----------- ------------- ---------
The following shows the revenues, results and total assets by
reportable segment for the year ended 31 March 2020.
Foundry
operations Machining Elimination Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- --------- ----------- --------
Revenue from external customers 133,626 5,041 - 138,667
Inter-segmental revenue 17,701 19,471 - 37,172
-------------------------------- ----------- --------- ----------- --------
Segmental result 13,400 (667) 9 12,742
-------------------------------- ----------- --------- ----------- --------
Unallocated income/(costs):
Exceptional credit for recovery
of Icelandic bank deposits
previously written off 10
Defined benefit pension costs (258)
Finance income 206
-------------------------------- ----------- --------- ----------- --------
Profit before income tax 12,700
-------------------------------- ----------- --------- ----------- --------
Total assets 137,247 29,523 (11,090) 155,680
-------------------------------- ----------- --------- ----------- --------
Non-current asset additions 5,651 2,507 - 8,158
-------------------------------- ----------- --------- ----------- --------
Depreciation 4,406 4,497 - 8,903
-------------------------------- ----------- --------- ----------- --------
Total liabilities (23,135) (6,744) 5,857 (24,022)
-------------------------------- ----------- --------- ----------- --------
5. Surplus on sale of property
During the period the group completed on the sale of a property
that was previously classified as an asset held for sale. The
surplus on the sale of the property was GBP658,000.
6. Dividends
Amounts recognised as distributions to shareholders in the
period:
Half Half
year year
to to
30 September 30 September
2020 2019
GBP'000 GBP'000
------------------------------------------- ------------- -------------
Final dividend of 11.40p per share for
the year ended 31 March 2020
(2019 - 11.40p per share) 4,974 4,974
Supplementary dividend of 15.00p per share
for the year ended 31 March 2019 - 6,545
------------------------------------------- ------------- -------------
4,974 11,519
------------------------------------------- ------------- -------------
The directors have declared an interim dividend in respect of
the financial year ending 31 March 2021 of 3.57p per share (2020 -
3.48p), which will be paid on 7 January 2021.
7. Earnings per share and diluted earnings per share
Earnings per share is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period. The
diluted earnings per share includes the outstanding share options
within the weighted average number of shares figure.
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 September 30 September 31 March
2020 2019 2020
----------------------------------------------------- ------------- ------------- ----------
(Loss)/profit after tax (GBP'000) (506) 5,951 10,066
----------------------------------------------------- ------------- ------------- ----------
Weighted average number of shares - basic earnings
per share calculation 43,632,068 43,632,068 43,632,068
----------------------------------------------------- ------------- ------------- ----------
Weighted average number of shares - diluted earnings
per share calculation 43,667,360 43,632,068 43,632,068
----------------------------------------------------- ------------- ------------- ----------
Earnings per share - basic and diluted (1.16)p 13.64p 23.07p
----------------------------------------------------- ------------- ------------- ----------
8. Pension schemes
The group operates two defined benefit pension schemes which are
closed to new entrants and closed to future accruals on 6 April
2009. The assets of the schemes are independent of the finances of
the group and are administered by trustees.
The pension schemes are related parties of the group and during
the period GBP1,404,000 (2019 - GBP1,018,000) was paid by the group
on behalf of the schemes in respect of pension payments and
administration costs. At 30 September 2020, the outstanding balance
of GBP4,182,000 (2019 - GBP4,543,000) is repayable within one
year.
Payments made by the company on behalf of the schemes in the
current period are repayable by 30 November 2021.
9. Interim report
Copies of this interim management report will be available on
the company's website, www.castings.plc.uk , and from the
registered office.
Statement of Directors' Responsibilities
The directors confirm that the condensed consolidated interim
financial statements have been prepared in accordance with IAS 34
as adopted by the European Union and that the interim management
report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R.
The directors of Castings P.L.C. are listed on the back cover of
this report.
By order of the board
S. J. Mant FCA
Group Finance Director
13 November 2020
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