TIDMCMH

RNS Number : 6750V

Chamberlin PLC

16 April 2021

AIM: CMH

16 April 2021

CHAMBERLIN plc

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

FINAL RESULTS

for the year ended 31 March 2020

Chamberlin plc (AIM: CMH.L) has today published the Company's Report and Accounts for the year ended 31 March 2020 ("FY2020 Accounts"). The Company has also published the Company's interim results for the six months to 30 September 2020 ("FY2021 Interim Results"). Upon publication of the FY2020 Accounts and the FY2021 Interim Results, the Company anticipates that suspension of trading in the Company's ordinary shares on AIM will be lifted with effect from 8.00am today.

The FY2020 Accounts, including Notice of the Company's AGM, are available on the Group's website, www.chamberlin.co.uk and will be posted to Shareholders on 19 April 2021. The AGM, which will be held as a closed meeting given the restrictions in relation to COVID-19, will be held on 8 June 2021 at Chuckery Road, Walsall, West Midlands, WS1 2DU.

Highlights

Financial

-- Revenue in the year to 31 March 2020 of GBP26.1m (2019: GBP33.0m) reflecting challenging automotive sector over the year

-- Underlying operating loss before tax* of GBP1.1m (2019: GBP1.0m) despite the 21% reduction in revenue

-- Non-underlying items in the year of GBP0.9m (2019: GBP3.4m) included GBP0.8m relating to the realignment of the cost base of the Group

   --         Net debt at 31 March 2020 decreased by GBP0.8m to GBP4.6m (2019: GBP5.4m) 

Post balance Sheet Events

-- The publication of the FY2020 Accounts was delayed due, in part, to the impact of COVID 19 on the business and the audit process. In addition, the Company announced the loss of a major contact in December 2020 which has impacted on the Company's future prospects.

-- Due to the inability to finalise the FY2020 Accounts, the Company had been unable to publish the FY2021 Interim Results.

   --       Trading in the Company's ordinary shares on AIM has been suspended since 4 January 2021 

-- The Company announced a GBP3.5m share placing and subscription on 26 March 2021 which has enabled the Company to proceed with finalising the FY2020 Accounts. The Company is now well positioned to take advantage of future growth opportunities.

* Underlying figures are stated before non-underlying costs (restructuring costs, hedge ineffectiveness, impairment, GMP equalization, onerous leases and share based payment costs) together with the associated tax impact.

Chairman, Keith Butler-Wheelhouse, commented:

"Management are confident that sales at Chamberlin will stabilise in the first half of the 2021/22 financial year and will then grow from the post BorgWarner low, with the growth gathering pace in the second half. The Board expects growth from all business units and a return to profitability and cash generation post our restructuring."

Enquiries

 
 Chamberlin plc                    T: 01922 707100 
  Kevin Nolan, Chief Executive 
  Neil Davies, Finance Director 
 
 Cenkos Securities plc             T: 020 7397 8900 
  (Nominated Adviser and Broker) 
  Russell Cook, Katy Birkin 
 Peterhouse Capital Limited        T: 020 7469 0930 
  (Joint Broker) 
  Heena Karani 
  Duncan Vasey 
 

Chairman's Statement

The year under review was a difficult period for Chamberlin. Revenue was 21% below the prior year, with a loss before tax of GBP2.3m, including GBP0.8m of restructuring costs. However, downsizing, cost reductions and careful cash management allowed the company to operate effectively.

The Board and Staff

In July 2019, Keith Jackson retired from the Board after 14 years, having joined as a Non-Executive Director in 2005. Keith continues in his role as Trustee Chairman of the Chamberlin and Hill Staff Pension and Life Assurance Scheme. David Flowerday has replaced Keith as Chair of the Audit Committee. On behalf of the Board, we would like to place on record our thanks to Keith for his many years of service to Chamberlin. He has made a significant contribution and we wish him well in the future. Subsequent to the year end the Board was strengthened by the appointment of Trevor Brown in March 2021. There have been no other changes to the Board.

As part of the overall restructuring mentioned above, there has been a consolidation of many positions - including senior roles - in order to reduce costs. On behalf of the Board, I would like to give our thanks to all our employees during what has been a difficult and challenging period.

Subsequent events

COVID-19 hit us very hard in April 2020 and to a lesser degree in the months since. In December 2020 our principal customer BorgWarner gave notice of the early termination of all existing contracts, dealing a body blow to the Company.

This required Chamberlin to seek additional finance in order to remain solvent and pursue substantial further restructuring. A share issue was successfully undertaken in March 2021 generating GBP3.5m before costs.

The publication of these accounts was delayed first by Covid, then by the loss of the BorgWarner contract and finally by the share issue.

Outlook

This outlook statement was first prepared in November 2020, prior to events concerning BorgWarner. As penned in November the outlook was uncertain, principally due to COVID 19.

As rewritten in April 2021 the market outlook is more positive, with all businesses enjoying sales levels above those of the prior year in recent months, excluding the effect of BorgWarner. Whilst the COVID 19 outlook in the UK is much brighter, things remain uncertain, particularly in Continental Europe where many of our customers are based.

The substantial further restructuring mentioned above will reduce the overhead structure and the direct workforce to that needed for the reduced turnover caused by the BorgWarner contract termination.

The Company continues to explore additional opportunities for all business units, including non- traditional products and e-commerce.

Management are confident that sales at Chamberlin will stabilise in the first half of the 2021/22 financial year and will then grow from the post BorgWarner low, with the growth gathering pace in the second half. The Board expects growth from all business units and a return to profitability and cash generation post our restructuring.

Keith Butler-Wheelhouse

Chairman

Chief Executive's Review

Early in this financial year, Chamberlin's revenues suffered a reduction with several factors hitting hard in the first half:-

-- A reduction in European car production adversely affected both the Walsall foundry and machining facility

   --         The troubles at British Steel impacted our Scunthorpe heavy castings foundry 

-- Our emergency lighting business found many construction projects were delayed by uncertainties in the UK economy associated with Brexit.

Most importantly, and particularly for our dominant turbocharger market, the continuing lack of clarity over future tariffs on trade with the EU frustrated securing contracts on new models needed to replace contracts on older vehicles reaching the end of their production run.

This all reflected in first half revenues of GBP12.8m, a reduction of 26% compared with the previous year. This necessitated a substantial reduction in the cost base, which occurred during the first half, with the number of employees reducing in line with sales. The first half experienced a pre-tax loss of GBP1.8m which included GBP0.7m of restructuring costs.

The restructuring programme was designed to right-size the cost base to the expected future demand, with the latter buoyed in the second half by the successful negotiation of several new non-automotive contracts, and the potential to be further improved by additional automotive work now the future trading regime with the EU has been clarified.

In the second half, the increase in revenue from the new non-automotive contracts helped to out-weigh the continuing effect of automotive contracts winding down. Overall, second-half revenues were 4% above those in the first half. The lower cost base enabled the second-half pre-tax loss to be reduced to GBP0.5m, including a further GBP0.1m restructuring costs and a small initial COVID-19 effect in March 2020. Excluding both, profit before tax for the second half was essentially break-even.

Looking at the year, revenues at GBP26.1m were 21% below the prior year, with a loss before tax of GBP2.3m, including GBP0.8m restructuring costs. The lower activity enabled working capital to be reduced, capital spend was constrained to the diminished business opportunity and, despite the loss for the year, net debt decreased from GBP5.4m to GBP4.6m.

Kevin Nolan

Chief Executive

Finance Review

Overview

Revenue reduced by 21% during the year to GBP26.1m (2019: GBP33.0m) as trading conditions in our automotive market were challenging. Gross profit margin decreased to 9.6% from 11.4% in 2019.

Underlying operating loss before tax only increased slightly to GBP1.1m (2019: GBP1.0m) despite the 21% reduction in revenue.

Financing costs were 38% lower than 2019 at GBP0.3m (2019: GBP0.5m) as a result of a reduction in net debt and a reduced finance cost of pensions on a lower deficit.

Underlying loss before tax of GBP1.4m (2019: GBP1.5m loss) was 5% lower than 2019 due primarily to the lower financing costs.

The statutory loss before tax of GBP2.3m (2019: loss of GBP5.0m) was 53% lower than 2019 as an asset impairment charge of GBP3.0m taken in 2019 was not repeated.

Non-underlying items

Non-underlying items in the year of GBP0.9m (2019: GBP3.4m) included GBP0.8m relating to the realignment of the cost base of the Group and GBP0.1m of foreign currency related hedge ineffectiveness resulting from Covid-19 induced revenue reductions.

Tax

The effective rate of taxation on a statutory basis was 2% compared to the mainstream corporation tax rate of 19%, primarily as a result of not recognising deferred tax on trading losses due to the inherent uncertainty surrounding future profitability.

Diluted loss per share

Underlying diluted loss per share from continuing operations of 18.7p (2019: 19.5p loss) was 4% lower than 2019, with total diluted loss per share of 30.1p (2019: earnings of 18.2p).

Cash generation and financing

Operating cash inflow from continuing operations was GBP1.5m (2019: outflow of GBP3.4m). This included a contractually agreed advance payment from a customer of GBP1.5m and GBP0.4m of corporation tax refunds received during the year offset by restructuring costs of GBP0.7m.

Cash spent on property, plant and equipment and capitalised software and development costs in the year was GBP0.4m (2019: GBP1.2m).

Interest paid of GBP0.3m (2019: GBP0.4m) was lower than 2019 due to lower average net debt in 2020.

Lease payments of GBP1.1m (2019: GBP0.8m) primarily relate to assets at the Group's machining facility.

Net debt

Net debt at 31 March 2020 decreased by GBP0.8m to GBP4.6m (2019: GBP5.4m). The Group debt facility has two elements: a GBP6.0m invoice discounting facility limited to 90% of outstanding invoice value and finance leases of GBP3.1m. The invoice discounting facility has the following covenant at year-end, which was complied with:

- Without prior written consent of HSBC, no dividends are payable in the year ended 31 March 2020, and in subsequent years, prior written consent of HSBC is required for the payment of any dividends in excess of 50% of net profit after tax.

Foreign exchange

It is the Group's policy to minimise risk to exchange rate movements affecting sales and purchases by economically hedging or netting currency exposures at the time of commitment, or when there is a high probability of future commitment, using currency instruments (primarily forward exchange contracts). A proportion of forecast exposures are hedged depending on the level of confidence and hedging is topped up following regular reviews. On this basis up to 90% of the Group's annual exposures are likely to be hedged at any point in time and the Group's net transactional exposure to different currencies varies from time to time.

Approximately 63% of the Group's revenues are denominated in Euros. During the year to 31 March 2020, the average exchange rate used to translate into GBP Sterling was EUR1.15 (31 March 2019: EUR1.13).

Pension

The Group has one defined benefit pension scheme. It is closed to future accrual, with the Group operating a defined contribution pension scheme for its current employees. The deficit for the defined benefit pension scheme at 31 March 2020 was GBP2.0m (2019: GBP2.6m).

The Group's defined benefit pension scheme was closed to future accrual in 2007. During the year the latest triennial valuation, as at 31 March 2019, was concluded and contributions were set at GBP0.3m for 2021, GBP0.33m for 2022 and GBP0.36m for 2023. The next triennial valuation is due as at 31 March 2022.

Administration costs of the defined benefit pension scheme were GBP0.2m in 2020 (2019: GBP0.2m) and are shown in other operating expenses. The Group cash contribution during the year was GBP0.3m (2019: GBP2.7m).

Audit Opinion

The auditors have reported on the accounts for the year ended 31 March 2020 and have given a modified audit opinion drawing attention to a material uncertainty regarding going concern. The Board has addressed these issues through the restructuring exercise referred to above and through GBP3.5m raised by the share issue in March 2021. As a consequence, the Directors have an expectation that, in the circumstances of a reasonably foreseeable downside scenario, the Group has adequate resources to continue to operate for the foreseeable future.

However, the rate at which new work can be secured to replace the lost BorgWarner activity is difficult to predict resulting in material uncertainty, as referred to in note 2 below. The Directors continue to adopt the going concern basis, whilst recognising there is material uncertainty relating to the above matter.

Neil Davies

Group Finance Director

Consolidated Income Statement

for the year ended 31 March 2020

 
                                      Year ended 31 March 2020                 Year ended 31 March 2019 
                               --------------------------------------  ---------------------------------------- 
                                                 (+) Non-                                (+) Non- 
                         Note   Underlying     underlying       Total   Underlying     underlying         Total 
                                    GBP000         GBP000      GBP000       GBP000         GBP000        GBP000 
 
Revenue                   3         26,143              -      26,143       32,958              -        32,958 
Cost of sales                     (23,632)              -    (23,632)     (29,192)              -      (29,192) 
Gross profit                         2,511              -       2,511        3,766              -         3,766 
 
Other operating 
 expenses                 6        (3,635)          (909)     (4,544)      (4,776)        (3,448)       (8,224) 
                               -----------  -------------  ----------  -----------  -------------  ------------ 
 
Operating loss                     (1,124)          (909)     (2,033)      (1,010)        (3,448)       (4,458) 
 
Finance costs             4          (310)              -       (310)        (499)              -         (499) 
                               -----------  -------------  ----------  -----------  -------------  ------------ 
 
Loss before 
 tax                               (1,434)          (909)     (2,343)      (1,509)        (3,448)       (4,957) 
 
Tax (expense)/ 
 credit                               (50)              -        (50)         (39)             87            48 
                               -----------  -------------  ----------  -----------  -------------  ------------ 
 
Loss for the 
 year from continuing 
 operations                        (1,484)          (909)     (2,393)      (1,548)        (3,361)       (4,909) 
 
Discontinued 
 operations               7 
 
Profit for the 
 year from discontinued 
 operations                              -              -           -            -          6,435         6,435 
                               -----------  -------------  ----------  -----------  -------------  ------------ 
 
(Loss)/ profit 
 for the year 
 attributable to 
 equity holders 
 of the parent company             (1,484)          (909)     (2,393)      (1,548)          3,074         1,526 
                               ===========  =============  ==========  ===========  =============  ============ 
 
Underlying loss 
 per share from 
 continuing operations: 
Basic                     5              -              -     (18.7)p            -              -       (19.5)p 
Diluted                   5              -              -     (18.7)p            -              -       (19.5)p 
 
Earnings per share 
 from discontinued 
 operations: 
Basic                     5              -              -           -            -              -         80.9p 
Diluted                   5              -              -           -            -              -         76.8p 
 
Total (loss) 
 /earnings per 
 share: 
Basic                     5              -              -     (30.1)p            -              -         19.2p 
Diluted                   5              -              -     (30.1)p            -              -         18.2p 
 

*Non-underlying items include restructuring costs, hedge ineffectiveness, impairment, GMP equalisation, onerous leases and share-based payment costs together with the associated tax impact. Underlying and non-underlying figures for the year ended 31 March 2019 have been restated as detailed in Note 10.

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2020

 
                                                        2020     2019 
                                             Note     GBP000   GBP000 
 
 (Loss) / profit for the year                        (2,393)    1,526 
 Other comprehensive income 
 Movements in fair value of cash flow 
  hedges taken to other comprehensive 
  income                                               (614)      134 
 Ineffective portion of movement in 
  cash flow hedges recycled to income 
  statement                                              138        - 
 Deferred tax on movement in cash 
  flow hedges                                             81     (23) 
                                                   ---------  ------- 
 Net other comprehensive (expense)/income 
  that may be recycled to profit and 
  loss                                                 (395)      111 
                                                   ---------  ------- 
 
 Re-measurement losses on pension 
  scheme assets and liabilities               9          460       76 
 Deferred tax expense on re-measurement 
  gain on pension scheme                                (87)     (15) 
 
 Net other comprehensive income that 
  will not be recycled to profit and 
  loss                                                   373       61 
 
 Other comprehensive (expense) / income 
  for the year net of tax                               (22)      172 
 
 Total comprehensive (expense) / income 
  for the year attributable to equity 
  holders of the parent company                      (2,415)    1,698 
                                                   =========  ======= 
 
 

Consolidated Balance Sheet

at 31 March 2020

 
                                    Note   31 March   31 March 
                                               2020       2019 
                                             GBP000     GBP000 
 Non-current assets 
  Property, plant and equipment               7,209      7,769 
  Intangible assets                             341        290 
  Deferred tax assets                           611        906 
                                          ---------  --------- 
                                              8,161      8,965 
 
 Current assets 
  Inventories                                 2,589      2,702 
  Trade and other receivables                 6,082      6,052 
  Cash at Bank                                  457        291 
                                              9,128      9,045 
 
 Total assets                                17,289     18,010 
                                          =========  ========= 
 
 Current liabilities 
  Financial liabilities              8        3,028      2,683 
  Trade and other payables                    7,481      4,600 
                                             10,509      7,283 
 
 Non-current liabilities 
  Financial liabilities              8        2,037      2,966 
  Deferred tax                                   39         53 
  Provisions                                    200        200 
  Defined benefit pension scheme 
   deficit                           9        1,959      2,640 
                                          ---------  --------- 
                                              4,235      5,859 
 
 Total liabilities                           14,744     13,142 
                                          ---------  --------- 
 
 Capital and reserves 
  Share capital                               1,990      1,990 
  Share premium                               1,269      1,269 
  Capital redemption reserve                    109        109 
  Hedging reserve                             (299)         96 
  Retained earnings                           (524)      1,404 
                                          ---------  --------- 
 Total equity                                 2,545      4,868 
 
 Total equity and liabilities                17,289     18,010 
                                          =========  ========= 
 
 

Consolidated Cash Flow Statement

for the year ended 31 March 2020

 
                                                    Year ended     Year ended 
                                                      31 March       31 March 
                                                          2020           2019 
                                                        GBP000         GBP000 
 Operating activities 
 
 Loss for the year before tax                          (2,343)        (4,957) 
 Adjustments to reconcile (loss) 
  for the year to net cash (outflow)/ 
  inflow from operating activities: 
 Net finance costs excluding pensions                      310            499 
 Impairment charge on property, 
  plant and equipment                                        -          3,043 
 Hedge ineffectiveness                                     138              - 
 Depreciation of property, plant 
  and equipment                                            980          1,688 
 Amortisation of software                                   52             59 
 Amortisation and impairment of 
  development costs                                         25             25 
 Profit on disposal of property, 
  plant and equipment                                     (12)              - 
 Foreign exchange rate movement                           (91)              - 
 Share based payments                                       59             40 
 One-off contribution to defined 
  benefit pension scheme                                     -        (2,500) 
 Difference between pension contributions 
  paid and amounts recognised in 
  the Consolidated Income Statement                      (279)             25 
 (Increase)/ Decrease in inventories                       113          (388) 
 Decrease/ (Increase) in receivables                      (95)            419 
 (Decrease)/ Increase in payables                        2,265        (1,332) 
 Corporation tax received                                  424              - 
                                              ----------------  ------------- 
 Cash inflow / (outflow) from continuing 
  operations                                             1,546        (3,379) 
 Cash inflow from discontinued operations                    -            491 
                                              ----------------  ------------- 
 Net cash inflow / (outflow) from 
  operating activities                                   1,546        (2,888) 
                                              ----------------  ------------- 
 
 Investing activities 
 Purchase of property, plant and 
  equipment                                              (316)        (1,188) 
 Purchase of software                                     (30)              - 
 Development costs                                        (20)           (22) 
 Disposal of property, plant and 
  equipment                                                 12              - 
 Proceeds from sale of subsidiary                            -          8,520 
 Cash and cash equivalents disposed                          -        (1,146) 
 Investing activities from discontinued 
  operations                                                 -          (125) 
 
 Net cash (outflow) / inflow from 
  investing activities                                   (354)          6,039 
                                              ----------------  ------------- 
 
 Financing activities 
 Interest paid                                           (252)          (387) 
 Net invoice finance inflow / (outflow)                    279        (1,832) 
 Import loan outflow                                         -          (873) 
 Principal element of lease payments                   (1,066)          (781) 
 Finance leases taken                                        -          1,291 
 Financing activities from discontinued 
  operations                                                 -            207 
 
 Net cash outflow from financing 
  activities                                           (1,039)        (2,375) 
                                              ----------------  ------------- 
 
 Net increase in cash and cash equivalents                 153            776 
 
 Cash and cash equivalents at the 
  start of the year                                        291          (485) 
 Impact of foreign exchange rate                            13              - 
  movements 
 
 Cash and cash equivalents at the 
  end of the year                                          457            291 
                                              ================  ============= 
 
 
 Cash and cash equivalents comprise: 
 Cash at bank                                              457            291 
                                              ----------------  ------------- 
                                                           457            291 
                                              ================  ============= 
 

Consolidated statement of changes in equity

 
                                                                                       Attributable 
                                                                                          to equity 
                                          Share       Capital                               holders 
                               Share    premium    redemption    Hedging    Retained         of the 
                             capital    account       reserve    reserve    earnings         parent 
                              GBP000     GBP000        GBP000     GBP000      GBP000         GBP000 
 
 Balance at 1 April 
  2018                         1,990      1,269           109       (15)       (197)          3,156 
 
 Profit for the year               -          -             -          -       1,526          1,526 
 Other comprehensive 
  income for the year 
  net of tax                       -          -             -        111          61            172 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Total comprehensive 
  income/ (expense)                -          -             -        111       1,587          1,698 
 
 Share-based payment               -          -             -          -          40             40 
 Deferred tax on 
  employee share options           -          -             -          -        (26)           (26) 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Total of transactions 
  with shareholders                -          -             -          -          14             14 
 
 Balance at 1 April 
  2019                         1,990      1,269           109         96       1,404          4,868 
 Loss for the year                 -          -             -          -     (2,393)        (2,393) 
 Other comprehensive 
  income for the year 
  net of tax                       -          -             -      (395)         373           (22) 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Total comprehensive 
  income                           -          -             -      (395)     (2,020)        (2,415) 
 
 Share-based payments              -          -             -          -          59             59 
 Deferred tax on 
  employee share options           -          -             -          -          33             33 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Total of transactions 
  with shareholders                -          -             -          -          92             92 
 
 Balance at 31 March 
  2020                         1,990      1,269           109      (299)       (524)          2,545 
                           =========  =========  ============  =========  ==========  ============= 
 
 

Share premium account

The share premium account balance includes the proceeds that were above the nominal value from issuance of the Company's equity share capital.

Capital redemption reserve

The capital redemption reserve has arisen on the cancellation of previously issued shares and represents the nominal value of those shares cancelled.

Hedging reserve

The hedging reserve records the effective portion of the net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred.

Retained earnings

Retained earnings include the accumulated profits and losses arising from the Consolidated Income Statement and certain items from the Statement of Comprehensive Income attributable to equity shareholders, less distributions to shareholders.

NOTES TO THE PRELIMINARY ANNOUNCEMENT

   1.        AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS 

The Group and Company's financial statements of Chamberlin Plc for the year ended 31 March 2020 were authorised for issue by the board of directors on 15 April 2021 and the balance sheets were signed on the Board's behalf by Kevin Nolan and Neil Davies. The Company is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are admitted to trading on AIM, a market of the same name operated by the London Stock Exchange. However, as disclosed in Note 11 Subsequent Events, the Company's shares were suspended from trading on AIM with effect from 4 January 2021.

The Group's financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 as adopted by the European Union.

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the years to 31 March 2020 or 31 March 2019 but is derived from the 2020 Annual Report and Accounts. The Annual Report and Accounts for 2019 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2020 will be delivered to the Registrar of Companies in due course. The auditors, Grant Thornton UK LLP, have reported on the accounts for the year ended 31 March 2020 and have given a modified audit opinion drawing attention to a material uncertainty regarding going concern.

   2.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Basis of preparation

The consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (GBP000) except when otherwise indicated.

Basis of consolidation

The consolidated financial statements comprise the financial statements of Chamberlin plc and its subsidiaries as at 31 March each year. The financial statements of subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. All inter-Company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

Accounting policies

The preliminary announcement has been prepared on the same basis as the financial statements for the year ended 31 March 2020. There were no new accounting standards adopted in the year that have a material impact on the financial statements.

Going concern

The Group's detailed budget for the year ending 31 March 2022 and extended forecast for the six months to 30 September 2022 take into account the net proceeds of GBP3.3m raised from the Share Placing and Subscription announced on 26 March 2021 and the Director's view of most likely trading conditions. These forecasts and projections indicate that existing bank facilities are expected to remain adequate. The budget and extended forecast provides for significant revenue growth in the second half of the year to 31 March 2022 and the 6 months to 30 September 2022, which is needed to replace the lost BorgWarner contracts. The budget includes the significant but necessary benefits and costs of the restructuring that will be required to right-size the cost-base to the lower level of revenue. As the implementation and delivery of the restructuring benefits and costs are within the control of the Directors, no downside sensitivities have been applied in relation to these. The Directors have, however, applied reasonably foreseeable downside sensitivities to the budget and forecast, which assumes that sales growth from October 2021 onwards is only 3% above the first half average and the machine shop has no sales output. In the detailed budget, extended forecast and sensitised scenario, the possible receipt of compensation from BorgWarner has been entirely discounted, as has any sales of no-longer required machinery.

As a consequence, after making enquiries, the Directors have an expectation that, in the circumstances of a reasonably foreseeable downside scenario as described above, the Group and Company have adequate resources to continue in operational existence for the foreseeable future.

However, the rate at which new work can be secured to replace the lost BorgWarner activity is difficult to predict resulting in material uncertainty, which may cast significant doubt over the ability of the Group and Company to realise its assets and discharge its liabilities in the normal course of business and hence continue as a going concern.

The Directors continue to adopt the going concern basis, whilst recognising there is material uncertainty relating to the above matter.

   3.            SEGMENTAL ANALYSIS 

For management purposes, the Group is organised into two operating divisions according to the nature of the products and services. Operating segments within those divisions are combined on the basis of their similar long-term characteristics and similar nature of their products, services and end users as follows:

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 to their customers.

The Engineering segment supplies manufactured products to distributors and end-users operating in hazardous area and industrial lighting markets.

Management monitors the operating results of its divisions separately for the purposes of making decisions about resource allocation and performance assessment. The Chief Operating Decision Maker is the Chief Executive.

   (i)            By operating segment 
 
                                                                             Segmental operating 
                                              Segmental revenue                     profit 
 Year ended                                     2020            2019                 2020          2019 
                                              GBP000          GBP000               GBP000        GBP000 
 Foundries                                    23,106          29,343                 (84)         (211) 
 Engineering                                   3,037           3,615                 (45)           251 
                                         -----------  --------------  -------------------  ------------ 
 Segment results                              26,143          32,958                (129)            40 
                                         ===========  ==============  ===================  ============ 
 
 Reconciliation of reported segmental 
  operating (loss) / profit 
 Segment operating (loss) / profit                                                  (129)            40 
 Shared costs                                                                       (995)       (1,050) 
 Non-underlying costs                                                               (909)       (3,448) 
 Net finance costs                                                                  (310)         (499) 
 
 Loss before tax from continuing 
  operations                                                                      (2,343)       (4,957) 
 
 Segmental assets 
 
 Foundries                                                                         14,974        15,244 
 Engineering                                                                        1,247         1,402 
                                                                      -------------------  ------------ 
                                                                                   16,221        16,646 
                                                                      -------------------  ------------ 
 
 Segmental liabilities 
 Foundries                                                                        (6,880)       (3,840) 
 Engineering                                                                        (801)         (794) 
                                                                      -------------------  ------------ 
                                                                                  (7,681)       (4,634) 
                                                                      -------------------  ------------ 
 
 Segmental net assets                                                               8,540        12,012 
 Unallocated net liabilities                                                      (5,995)       (7,144) 
 
 Total net assets                                                                 2,545           4,868 
                                                                  =======================  ============ 
 
 

Unallocated net liabilities include the pension liability of GBP1,959,000 (2019: GBP2,640,000), financial liabilities of GBP4,608,000 (2019: GBP5,357,000) and deferred tax asset of GBP572,000 (2019: GBP853,000).

 
       Capital expenditure, 
        depreciation, amortisation 
        and impairment 
 Capital additions                               Foundries                Engineering                   Total 
                                           2020         2019          2020         2019        2020        2019 
                                         GBP000       GBP000        GBP000       GBP000      GBP000      GBP000 
 Property, plant and 
  equipment                                 426        1,047             -            8         426       1,055 
 Software                                    97            -             1            -          98           - 
 Development costs                            -            -            30           22          30          22 
 
 Depreciation, amortisation                       Foundries                Engineering                   Total 
  and impairment 
                                           2020         2019          2020         2019        2020        2019 
                                         GBP000       GBP000        GBP000       GBP000      GBP000      GBP000 
 Property, plant and 
  equipment                               (965)      (4,563)          (15)         (49)       (980)     (4,612) 
 Software                                  (45)         (52)           (7)          (7)        (52)        (59) 
 Development costs                            -            -          (25)         (25)        (25)        (25) 
 
 
   (ii)          By geographical segment 
 
                                           2020         2019 
 Revenue by location of customer:        GBP000       GBP000 
 United Kingdom                           9,008       12,203 
 Italy                                    2,051        3,743 
 Germany                                  2,602        3,124 
 Rest of Europe                          11,863       13,024 
 Other countries                            619          864 
                                    -----------  ----------- 
                                         26,143       32,958 
                                    ===========  =========== 
 
   4.          FINANCE COSTS 
 
                                                      2020     2019 
                                                    GBP000   GBP000 
 Bank overdraft and invoice finance interest 
  payable                                            (164)    (335) 
 Interest expense on lease liabilities and other 
  interest payable                                    (88)     (52) 
 Finance cost of pensions                             (58)    (112) 
                                                   -------  ------- 
                                                     (310)    (499) 
                                                   =======  ======= 
 
   5.          (LOSS)/ EARNINGS PER SHARE 

The calculation of (loss)/ earnings per share is based on the (loss)/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 non-underlying items, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Non-underlying items are detailed in note 6.

 
                                                            2020         2019 
                                                          GBP000       GBP000 
 Continuing operations loss for basic earnings 
  per share                                              (2,393)      (4,909) 
 Non-underlying items                                        909        3,448 
 Taxation effect of the above                                  -         (87) 
 Loss for underlying loss per share                      (1,484)      (1,548) 
                                                       =========  =========== 
 
 Underlying loss per share (pence) from continuing 
  operations: 
 Basic                                                    (18.7)       (19.5) 
 Diluted                                                  (18.7)       (19.5) 
 
                                                            2020         2019 
                                                          GBP000       GBP000 
 Discontinued operations earnings for basic 
  earnings per share                                           -        6,435 
 Earnings for basic earnings per share (discontinued 
  operations)                                                  -        6,435 
                                                       =========  =========== 
 
 Earnings per share (pence) from discontinued 
  operations: 
 Basic                                                         -         80.9 
 Diluted                                                       -         76.8 
 
 Total (loss)/ earnings per share (pence): 
 Basic                                                    (30.1)         19.2 
 Diluted                                                  (30.1)         18.2 
 
                                                            2020         2019 
                                                          Number       Number 
                                                            '000         '000 
 Weighted average number of ordinary shares                7,958        7,958 
 Adjustment to reflect shares under options                  217          424 
                                                       ---------  ----------- 
 Weighted average number of ordinary shares 
  - fully diluted                                          8,175        8,382 
                                                       =========  =========== 
 
 

There is no adjustment in the total diluted loss per share calculation for the 217,000 (2019:424,000) shares under option as they are required to be excluded from the weighted average number of shares for diluted loss per share as they are anti-dilutive.

   6.          NON-UNDERLYING ITEMS 
 
                                            2020     2019 
                                          GBP000   GBP000 
 Group reorganisation                        712       54 
 Hedge ineffectiveness                       138        - 
 Asset impairment                              -    3,043 
 Onerous leases                                -       16 
 GMP equalisation                              -      295 
 Share-based payment charge                   59       40 
                                         -------  ------- 
 Non-underlying operating costs              909    3,448 
 Taxation 
  - tax effect of non-underlying costs         -     (87) 
                                         -------  ------- 
                                             909    3,361 
                                         -------  ------- 
 

During the year ended 31 March 2020, the Group undertook a Group-wide restructuring programme in order to realign the cost base to the reduced levels of revenue. Group reorganisation costs of GBP712,000, which include redundancy and related costs, relate to this restructuring programme.

The hedge ineffectiveness charge of GBP138,000 in 2020 arises from a short-term reduction in highly probable Euro denominated sales as a result of economic disruption to our customers caused by COVID-19.

The share-based payment charge in 2020 is GBP59,000 (2019: GBP40,000).

In 2019, the Group undertook an impairment review of two of its sites within the Foundry Division, which identified that the prior carrying value of its assets could not be supported by their future value to the business, resulting in the recognition of an impairment charge of GBP3,043,000.

Furthermore in 2019, a Guaranteed Minimum Pension (GMP) equalisation review was undertaken, which resulted in an increase in the pension liability of GBP295,000.

7. DISCONTINUED OPERATIONS

On 19 December 2018 the Group sold its entire interest in Exidor Limited. As a result the results of Exidor Limited were classified as a discontinued operation in the prior year and presented as such in the financial statements.

 
 An analysis of the disposal calculation is 
  given below: 
                                                            GBP000 
 
 
 Property, plant and equipment                               1,135 
 Intangible assets                                              75 
 Deferred tax                                                   70 
 Inventories                                                 1,491 
 Trade and other receivables                                 1,882 
 Cash and cash equivalents                                   1,146 
 Trade and other payables                                  (3,508) 
                                               ------------------- 
 Net assets disposed                                         2,291 
                                               ------------------- 
 
 
 Consideration                                              10,000 
 Working capital adjustment                                   (98) 
 Debt adjustment                                             (639) 
 Claim retention                                             (350) 
                                                             8,913 
 Disposal costs                                              (393) 
                                               ------------------- 
 Net cash received relating to disposal                      8,520 
                                               =================== 
 
 
 Cash proceeds                                               8,520 
 Net assets disposed                                       (2,291) 
                                               ------------------- 
 Profit on disposal                                          6,229 
                                               =================== 
 

Included in the consideration is a retention of GBP350,000 relating to a customer claim. This claim has not yet been finalised and is still ongoing.

The results prior to 19 December 2018 for the discontinued operations included in the consolidated income statement were:

 
                                                     2019 
 
                                                     '000 
 Revenue                                            5,924 
                                                  ------- 
 Operating profit                                     305 
 Finance costs                                       (23) 
                                                  ------- 
 Profit before tax                                    282 
 Tax                                                 (76) 
 Profit on disposal                                 6,229 
 Profit after tax from discontinued operations      6,435 
                                                  ======= 
 

Exidor Limited contributed the following to the Group's cashflow:

 
                            2019 
 
                            '000 
 Operating activities        491 
 Investing activities      (125) 
 Financing activities        207 
                         ------- 
                             573 
                         ======= 
 
 
   8.          NET DEBT 
 
                                         2020     2019 
                                       GBP000   GBP000 
 Net cash                               (457)    (291) 
 Invoice finance facility               1,925    1,628 
 Lease liabilities                      1,103    1,055 
 Net debt due in less than one year     2,571    2,392 
 Non-current liabilities 
 Lease liabilities                      2,037    2,966 
 Total net debt                         4,608    5,358 
                                      -------  ------- 
 

Lease liabilities are secured against the specific item to which they relate. These leases are repayable by monthly instalments for a period of up to five years to February 2025. Interest is payable at fixed amounts that range between 3.1% and 9.4%.

Invoice finance balances are secured against the trade receivables of the Group and are repayable on demand. Interest is payable at 2.3% over base rate. The maximum facility as at 31 March 2020 was GBP6,000,000 (2019: GBP7,750,000). Management have assessed the treatment of the financing arrangements and have determined it is appropriate to recognise trade receivables and invoice finance liabilities separately.

   9.          PENSIONS ARRANGEMENTS 

During the year, the Group operated funded defined benefit and defined contribution pension schemes for the majority of its employees, these being established under trusts with the assets held separately from those of the Group. The pension operating cost for the Group defined benefit scheme for 2020 was GBP199,000 (2019: GBP124,000), with the increase being due to costs associated with the triennial valuation, together with GBP58,000 of financing cost (2019: GBP112,000).

The other schemes within the Group are defined contribution schemes and the pension cost represents contributions payable. The total cost of defined contribution schemes was GBP396,000 (2019: GBP423,000). The notes below relate to the defined benefit scheme.

The actuarial liabilities have been calculated using the Projected Unit method. The major assumptions used by the actuary were (in nominal terms):-

 
                                  31 March   31 March   31 March 
                                      2020       2019       2018 
 
 Salary increases                      n/a        n/a        n/a 
 Pension increases (post 1997)        2.6%       3.2%       3.1% 
 Discount rate                        2.3%       2.3%       2.5% 
 Inflation assumption - RPI           2.6%       3.3%       3.2% 
 Inflation assumption - CPI           1.7%       2.3%       2.2% 
 

Demographic assumptions are all based on the S3PA (2019: S2PA) mortality tables with a 1.25% annual increase. The post retirement mortality assumptions allow for expected increases in longevity. The current disclosures relate to assumptions based on longevity in years following retirement as of the balance sheet date, with future pensions relating to an employee retiring in 15 years from the balance sheet date.

 
                                            2020     2019 
                                           Years    Years 
 
 Current pensioner at 65 - male             21.0     20.9 
 
                          *    female       23.2     23.1 
 Future pensioner at 65 - male              21.9     21.8 
 
                          *    female       24.3     24.2 
 

The scheme was closed to future accrual with effect from 30 November 2007, after which the Company's regular contribution rate reduced to zero (previously the rate had been 9.1% of members' pensionable salaries).

The triennial valuation as at 31 March 2019 was completed during the year and concluded that Company contributions would increase to GBP300,000 for the year ended 31 March 2021, GBP330,000 for the year ended 31 March 2022 and GBP360,000 for the year ended 31 March 2023, with the deficit reduction period reducing to 2032. The Company has given security over the Group's land and buildings to the pension scheme. There will be a further triennial review with effect from 31 March 2022, which will establish future deficit payments.

The scheme assets are stated at the market values at the respective balance sheet dates. The assets and liabilities of the scheme were:

 
                                          2020         2019 
                                        GBP000       GBP000 
 
 Equities/ diversified growth 
  fund                                  12,534       14,286 
 Bonds                                   1,565        1,580 
 Insured pensioner assets                   24           26 
 Cash                                      415          173 
                                   -----------  ----------- 
 Market value of assets                 14,538       16,065 
 Actuarial value of liabilities       (16,497)     (18,705) 
                                   -----------  ----------- 
 Scheme deficit                        (1,959)      (2,640) 
 Related deferred tax asset                333          448 
                                   -----------  ----------- 
 Net pension liability                 (1,626)      (2,192) 
                                   -----------  ----------- 
 
 
 
 
   Net benefit expense recognised         2020       2019 
   in profit and loss                   GBP000     GBP000 
 
 Net interest cost                        (58)      (112) 
                                          (58)      (112) 
                                     ---------  --------- 
 
 
 
 Re-measurement losses/ (gains) in other                    2020        2019 
  comprehensive income                                    GBP000      GBP000 
 
 Actuarial (gains) / losses arising from 
  changes in financial assumptions                         (593)         622 
 Actuarial gains arising from changes 
  in demographic assumptions                               (244)       (151) 
 Experience adjustments                                    (931)          91 
 Loss / (return) on assets (excluding 
  interest income)                                         1,308       (638) 
                                                   -------------  ---------- 
 Total re-measurement gain shown in other 
  comprehensive income                                     (460)        (76) 
                                                   -------------  ---------- 
 
                                                            2020        2019 
                                                          GBP000      GBP000 
 
 Actual loss on plan assets                                (946)       (976) 
                                                   -------------  ---------- 
 
 
 
 
 Movement in deficit during the        2020      2019 
  year                               GBP000    GBP000 
 
 Deficit in scheme at beginning 
  of year                           (2,640)   (5,080) 
 Past service cost                        -     (295) 
 Employer contributions                 279     2,771 
 Net interest expense                  (58)     (112) 
 Actuarial gain                         460        76 
                                   --------  -------- 
 Deficit in scheme at end of 
  year                              (1,959)   (2,640) 
                                   --------  -------- 
 
 
 
 Movement in scheme assets                    2020         2019 
                                            GBP000       GBP000 
 
 Fair value at beginning of year            16,065       13,207 
 Interest income on scheme assets              362          338 
 Return on assets (excluding 
  interest income)                         (1,308)          638 
 Employer contributions                        279        2,771 
 Benefits paid                               (860)        (889) 
                                     -------------  ----------- 
 Fair value at end of year                  14,538       16,065 
                                     -------------  ----------- 
 
 
 
 
 Movement in scheme liabilities                     2020         2019 
                                                  GBP000       GBP000 
 
 Benefit obligation at start of year              18,705       18,287 
 Interest cost                                       420          450 
 Actuarial (gains)/ losses arising from 
  changes in financial assumptions                 (593)          622 
 Actuarial gains arising from changes 
  in demographic assumptions                       (244)        (151) 
 Experience adjustments                            (931)           91 
 Benefits paid                                     (860)        (889) 
 Past service cost                                     -          295 
                                           -------------  ----------- 
 Benefit obligation at end of year                16,497       18,705 
                                           -------------  ----------- 
 
 

The weighted average duration of the pension scheme liabilities are 13 years (2019: 13.5 years).

A quantitative sensitivity analysis for significant assumptions as at 31 March 2020 is as shown below:

 
                                                             2020 
   Present value of scheme liabilities when changing       GBP000 
   the following assumptions: 
 
 Discount rate increased by 1% p.a.                        14,635 
 RPI and CPI increased by 1% p.a.                          17,340 
 Mortality- members assumed to be their actual 
  age as opposed to one year older                         17,266 
 
 

The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the year.

   10.         RESTATEMENT OF COMPARATIVES 

During the year, a change has been made to the presentation of administration costs and interest costs associated with the Company's defined benefit pension scheme. Previously, these costs were shown as non-underlying items. Management is now of the view that such costs should be reported as part of underlying results reflecting the ongoing recurring nature of these costs. As a result of this presentational change, the underlying results in the comparative periods have been restated. There is no change to statutory results as a consequence of this presentational change.

 
 Impact on underlying loss for      As reported   Reclassification   As restated 
  the year ended 31 March 2019          GBP'000            GBP'000       GBP'000 
 
 Underlying operating loss                (886)              (124)       (1,010) 
 Underlying finance costs                 (387)              (112)         (499) 
 Underlying loss before taxation        (1,273)              (236)       (1,509) 
 Taxation                                  (63)                 24          (39) 
 Underlying loss from continuing 
  operations                            (1,336)              (212)       (1,548) 
 
   11.         SUBSEQUENT EVENTS 

On 16 December 2020, the Company announced that it had received notice from its major customer, BorgWarner Turbo Systems Worldwide Headquarters GmbH, of its intention to cancel all contracts with effect from 22 January 2021. Following this announcement, it became evident that the Company was not in a position to publish its 2020 Accounts by an agreed extended date of 31 December 2020 in accordance with AIM Rules. Consequently, the Company's shares were suspended from trading on AIM with effect from 4 January 2021.

The Board and its advisers immediately implemented measures to reduce costs and preserve cash whilst exploring options to strengthen the balance sheet in order to safeguard the Company's future. After evaluating a number of alternative options with its advisers, the Company issued a GBP200,000 unsecured convertible loan note to Mr Trevor Brown in February 2021 to provide immediate short-term working capital, which was converted into 3,333,333 Ordinary Shares following Shareholder approval at the General Meeting held on 8 March 2021. On that same date, Mr Trevor Brown was appointed to the Board of Chamberlin as a Non-Executive Director.

The Board continued to explore further funding possibilities and on 26 March 2021 announced that the Company had raised net proceeds of GBP3.3 million by way of a Share Placing and Subscription. The primary purpose of the Share Placing and Subscription was to fund working capital and to meet the restructuring costs associated with reducing the cost base to a level appropriate to the lower ongoing revenue of the Group. Following the publication and filing of the annual audited accounts for the year end 31 March 2020 and the publication of the interim results for the six months ended 30 September 2020, the Company will immediately apply for the suspension of trading of the Company's Ordinary Shares on AIM to be lifted by the London Stock Exchange.

   12.         REPORT AND ACCOUNTS 

The FY2020 accounts are available on the Group's website, www.chamberlin.co.uk and from the Group's head office at Chuckery Road, Walsall, West Midlands, WS1 2DU. The AGM, which will be a closed meeting given the current restrictions in relation to COVID-19, will be held on 8 June 2021 at Chuckery Road, Walsall, West Midlands, WS1 2DU.

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