CHAMBERLIN PLC AIM: CMH
5 June 2018
CHAMBERLIN plc
('Chamberlin', the 'Company' or the 'Group')
FINAL RESULTS
for the year ended 31 March 2018
KEY POINTS
· Very encouraging revenue growth, which should continue into new financial year and beyond
o technical issues at foundry operations undermined margins although these issues are now largely resolved
· Revenues up 17% to £37.7m (2017: £32.1m)
· Gross margin decreased to 18.2% (2017: 21.6%) - however H2 gross margin improved by 4.4 percentage points over H1 from 15.9% to 20.3%
· Underlying operating profit before tax* decreased to £0.4m (2017: £0.7m)
· IFRS diluted loss per share reduced to 10.2p (2017: loss per share of 12.2p)
· Capital expenditure of £3.0m (2017: £3.7m), included further investment in new machining facility
· Net debt of £8.9m at year end (2017: £6.8m), which reflected machining facility investment
· Foundry operations grew revenues by 24% to £26.4m
o benefited from ramp up of new automotive contract, which commenced in H2 2017
o while the new machining facility experienced technical issues, which led to significant operational inefficiencies, the addition of this facility positions Chamberlin as the only fully integrated supplier of grey iron bearing housings in Europe, and supports expansion of existing contracts and additional opportunities
· Engineering operations increased revenues by 5% to £11.3m
o initiatives in place to drive export sales and margins
· Board is confident of delivering an improved operational performance in the new financial year
*Underlying operating figures are stated beforeinterest, exceptional items, administration costs of the pension scheme and net financing costs on pension obligations, share based payment costs and associated tax impact of these items.
Chairman, Keith Butler-Wheelhouse, commented:
'While the year has delivered on our revenue expectations, margins have suffered due to the difficulties we have encountered in the start-up of our new machining facility, and ramp up of the Walsall foundry to meet unexpected demand.
The technical issues at the new machining facility continue to improve. New products for machining are also being introduced.
The Group remains well placed for further progress over the new financial year as cost efficiencies are realised.'
Enquiries
Chamberlin plc (www.chamberlin.co.uk) Kevin Nolan, Chief Executive David Roberts, Finance Director | T: 01922 707100 | |
Smith & Williamson Corporate Finance Limited (Nominated Adviser and Broker) Russell Cook, Katy Birkin | T: 020 7131 4000 | |
KTZ Communications (Financial PR) Katie Tzouliadis, Emma Pearson | T: 020 3178 6378 |
Chairman's Statement
Introduction
While the year has delivered on our revenue expectations, the Group's results reflect the impact of the previously reported technical issues within our foundry activities, in particular with the new machining cells. The resulting operational inefficiencies meant that gross margins for the year reduced, from 21.6% in 2017 to 18.2%, and underlying operating profit decreased from £0.7m to £0.4m. As we made progress in resolving the technical issues, gross margins improved, recovering by 4.4 percentage points in the second half of the financial year (20.3%) over the first half (15.9%).
The Group's revenue performance demonstrates the wider picture of growth and development, with revenue up 17% year-on-year to £37.7m reflecting the strong position we have established in the automotive turbocharger sector. As we have previously highlighted, our investment in our new machining cells positions us as the only provider of fully machined, grey iron bearing housings in Europe. This stands us in very good stead to win additional turbocharger volumes, and opens up new long-term opportunities.
Our engineering businesses, Exidor and Petrel, also contributed to growth. Exidor increased revenues and we are implementing further initiatives to improve profitability. Petrel continued to expand its market share accessing new markets outside its core oil and gas customer base, helped by the ongoing development of its new LED product ranges.
Looking ahead over the new financial year, we are continuing to focus on improving margins across both our foundry and engineering operations. The automotive turbocharger sector remains a growth area and we expect production volumes from our existing contracts to increase over 2018. We therefore anticipate ongoing progress as the new financial year unfolds.
Results
Revenues for the year to 31 March 2018 increased by 17% to £37.7m (2017: £32.1m), with growth largely driven by the Walsall foundry and increased market share from our two engineering businesses. The new machining facility, which opened in early 2017, suffered from major technical problems and contributed revenues of £2.6m, and a maiden loss of £0.4m, net of compensation from our machine supplier.
Underlying operating profit before tax decreased to £0.4m (2017: £0.7m).
On an IFRS basis, after accounting for restructuring costs of £0.1m (2017: £0.1m), administration and costs of the closed pension scheme of £0.3m (2017: £0.4m), the Group generated a loss of £0.8m (2017: loss of £1.0m). Diluted loss per share was 10.2p (2017: loss per share of 12.2p).
The net debt position at 31 March 2018 was £8.9m (2017: £6.8m), reflecting the investment in the new machining facility.
Dividend
In line with the current dividend policy, the Directors are not proposing the payment of a dividend for the period under review (2017: nil).
The Board and Staff
There were two changes to the composition of the Board of Directors during the year. In December 2017, David Nicholas retired as a Non-executive Director and, in March 2018, we appointed David Flowerday. Formerly Strategy Director at Smiths Group PLC and a member of the Chartered Institute of Management Accountants, David Flowerday has significant relevant experience and has been appointed as Chairman of the Company's Remuneration Committee and a member of the Audit and Nomination Committees.
The Group is supported by committed and hard-working teams and, on behalf of the Board, I would like to thank all our staff for their efforts during the year. Their skills and energy will help to drive Chamberlin's performance and future growth.
Outlook
We believe that the Group is well positioned to deliver a further improvement in performance during the current financial year as we recover margins.
We look forward to reporting further progress at the Group's AGM on 24 July 2018.
Keith Butler-Wheelhouse
Chairman
4 June 2018
Chief Executive's Review
The opening of our new machining operations in early 2017 was a strategically significant point for the Group and, while we experienced technical problems, which impacted results in the year under review, this investment will help to drive additional growth opportunities for our foundry activities. Both our engineering operations made encouraging progress although Petrel's traditional core market of oil and gas remains subdued. We remain focused on building export sales across both Petrel and Exidor.
Foundries
Foundry revenues increased by 24% year-on-year to £26.4m (2017: £21.3m). This included a first time contribution from the new machining facility of £2.6m, which started production in early 2018. However, reflecting the technical problems experienced across this segment particularly within machining, operating profit decreased to £0.5m (2017: £1.2m). This included a loss of £0.4m from the new machining facility, net of compensation from our machine supplier.
The Group now operates two foundries, at Walsall and Scunthorpe, each with a different specialisation.
Our foundry at Walsall is our flagship operation and drives the majority of the foundry division's sales. Walsall's expertise is in producing small castings, typically below 3kg in weight, that have complex internal geometry. The complex geometry is achieved through the use of innovative core design and assembly techniques and, importantly, the foundry is capable of producing these castings in high volumes.
The automotive turbocharger segment is a major market for Walsall, with modern designs requiring precise alignment of cooling and lubrication passages to meet the increased performance demanded by modern engines. Legislation is a major driver of this market, with the requirement to reduce nitrogen dioxide emissions promoting the introduction of smaller, turbocharged petrol engines. Approximately 74% of Walsall's casting production is for petrol engines.
Walsall is one of only four specialist foundries in Europe with the technical capability of supplying castings for turbochargers and, with our new machining capability, the foundry is now the only fully integrated supplier of grey iron bearing housings in Europe.
The Scunthorpe foundry specialises in heavy castings weighing up to 6,000kg that have complex geometry and challenging metallurgy. These castings are used in applications where there is a requirement for high strength or high temperature performance, for instance in large process compressors, industrial gas turbines and mining, quarrying and construction equipment, and the majority of customers are Original Equipment Manufacturers ('OEMs'). Demand at the foundry was in line with management expectations over the year and we continued to work to deepen and broaden customer relationships, and to focus on operational efficiency.
Engineering
Revenues from the engineering operations, comprising our Exidor and Petrel businesses, increased by 15% year-on-year to £11.3m (2017: £10.8m) and operating profit rose by 10% to £0.9m (2017: £0.8m).
Our Exidor business is the UK market leader in panic and emergency exit door hardware. Its products are for life-critical applications and it operates in a highly regulated market. Customers place great value on Exidor's heritage as a British designer and manufacturer that delivers high quality, certified products. We are re-engineering the product range to support our growth and continue to target overseas sales while maintaining Exidor's leading position in the UK. The business delivered good growth and we are implementing lean manufacturing initiatives, which will help to reduce costs and improve margins.
Petrel has a well-established reputation for designing and manufacturing high quality lighting and control equipment for use in hazardous or demanding environments. It supplies customers across the UK and Europe as well as internationally. Revenue growth over the year was very good and we are encouraged by the progress being made outside Petrel's traditional markets of oil & gas. The transition to LED lighting remains a key focus as well as developing the business's portable light fittings range. Approximately 46% of sales (2017: 31%) were generated from portable lighting and LED products over the year and this percentage should rise further. We have also expanded Petrel's commercial and technical resource to support ongoing growth.
Outlook
A major focus in the new financial year is on improving margins as well as driving revenue growth and we expect to make good progress in both areas.
Kevin Nolan
Chief Executive
4 June 2018
Finance Review
Overview
Sales increased by 17% during the year to £37.7m (2017: £32.1m). Gross profit margin decreased to 18.2% from 21.6% in 2017.
Underlying operating profit before tax decreased to £0.4m (2017: £0.7m).
The IFRS results show a loss of £0.8m (2017: £1.0m) and a statutory loss per share of 10.2p (2017: loss per share 12.2p).
Non-underlying exceptional items
Exceptional items in the year included £0.1m (2017: £0.1m) relating to the realignment of the cost base of the Group.
Tax
The Group's underlying tax charge for the year was £0.4m (2017: £0.2m).
Cash generation and financing
Operating cash inflow from continuing operations was £1.3m (2017: £0.3m).
Capital expenditure for the year decreased to £3.0m (2017: £3.7m). This was ahead of depreciation and amortisation of £1.4m (2017: £1.2m), reflecting the investment in the new machining facility.
Our overdraft and net borrowings at 31 March 2018 increased to £8.9m (2017: £6.8m).
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 50% 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 50% of the Group's revenues are denominated in Euros. During the year to 31 March 2018 the average exchange rate used to translate into GBP sterling was €1.26 (31 March 2017: €1.26).
Pension
The Group's defined benefit pension scheme was closed to future accrual in 2007. Following the last triennial valuation, as at 1 April 2018, contributions were set at £0.3m per year for the period under review increasing by 3% per year thereafter.
The pension expense for the defined benefit scheme was £0.3m in 2018 (2017: £0.4m), and is shown in non-underlying. The Group cash contribution during the year was £0.3m (2017: £0.3m).
The Group operates a defined contribution pension scheme for its current employees. The cost of £0.3m (2017: £0.4m) is included within underlying operating performance.
The IAS 19 deficit at 31 March 2018 was £5.1m (2017: £5.2m).
David Roberts
4 June 2018
Consolidated Income Statement
for the year ended 31 March 2018
Year ended 31 March 2018 | Year ended 31 March 2017 | |||||||
Note | Underlying | + Non- underlying | Total | Underlying | + Non- underlying | Total | ||
£000 | £000 | £000 | £000 | £000 | £000 | |||
Revenue | 3 | 37,670 | - | 37,670 | 32,119 | - | 32,119 | |
Cost of sales | (30,802) | - | (30,802) | (25,173) | - | (25,173) | ||
Gross profit | 6,868 | - | 6,868 | 6,946 | - | 6,946 | ||
Other operating expenses | 6 | (6,512) | (324) | (6,836) | (6,203) | (365) | (6,568) | |
Operating profit/ (loss) | 356 | (324) | 32 | 743 | (365) | 378 | ||
Finance costs | 4 | (377) | (126) | (503) | (164) | (160) | (324) | |
(Loss)/ profit before tax | (21) | (450) | (471) | 579 | (525) | 54 | ||
Tax (expense)/ credit | (427) | 85 | (342) | (205) | 105 | (100) | ||
(Loss)/ profit for the year from continuing operations | (448) | (365) | (813) | 374 | (420) | (46) | ||
Discontinued operations | ||||||||
(Loss) / profit for the year from discontinued operations | - | - | - | 219 | (1,146) | (927) | ||
(Loss)/ profit for the year attributable to equity holders of the parent company | (448) | (365) | (813) | 593 | (1,566) | (973) | ||
(Loss)/ earnings per share from continuing operations: | ||||||||
Basic | 5 | (10.2)p | (0.6)p | |||||
Diluted | 5 | (10.2)p | (0.6)p | |||||
(Loss)/ earnings per share from discontinued operations: | ||||||||
Basic | 5 | 0.00p | (11.6)p | |||||
Diluted | 5 | 0.00p | (11.6)p | |||||
Total (Loss) per share: | ||||||||
Basic | 5 | (10.2)p | (12.2)p | |||||
Diluted | 5 | (10.2)p | (12.2)p | |||||
+ Non-underlying items represent exceptional items as disclosed in note 6, administration costs of the pension scheme and net financing costs on pension obligations, share based payment costs and the associated tax impact of these items. |
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2018
2018 | 2017 | |||
Note | £000 | £000 | ||
Loss for the year | (813) | (973) | ||
Other comprehensive income | ||||
Reclassification for cash flow hedge included in sales | (18) | (87) | ||
Movements in fair value on cash flow hedges taken to other comprehensive income | 87 | 419 | ||
Deferred tax on movement in cash flow hedges | (12) | (60) | ||
Movement on deferred tax relating to rate change | - | (1) | ||
Net other comprehensive income that may be recycled to profit and loss | 57 | 271 | ||
Re-measurement losses on pension assets and liabilities | 8 | (8) | (612) | |
Deferred/ current tax on re-measurement losses on pension scheme | 2 | 122 | ||
Movement on deferred tax on re-measurement losses relating to rate change | - | (52) | ||
Net other comprehensive loss that will not be recycled to profit and loss | (6) | (542) | ||
Other comprehensive loss for the year net of tax | 51 | (271) | ||
Total comprehensive loss for the period attributable to equity holders of the parent Company | (762) | (1,244) | ||
Consolidated Balance Sheet
at 31 March 2018
Note | 31 March 2018 | 31 March 2017 | ||
£000 | £000 | |||
Non-current assets | ||||
Property, plant and equipment | 11,703 | 10,179 | ||
Intangible assets | 427 | 461 | ||
Deferred tax assets | 1,136 | 1,498 | ||
13,266 | 12,138 | |||
Current assets | ||||
Inventories | 3,551 | 3,347 | ||
Trade and other receivables | 7,985 | 7,556 | ||
11,536 | 10,903 | |||
Total assets | 24,802 | 23,041 | ||
Current liabilities | ||||
Financial liabilities | 7 | 6,989 | 5,520 | |
Trade and other payables | 7,465 | 6,899 | ||
14,454 | 12,419 | |||
Non-current liabilities | ||||
Financial liabilities | 7 | 1,889 | 1,308 | |
Deferred tax | 23 | 27 | ||
Provisions | 200 | 200 | ||
Defined benefit pension scheme deficit | 8 | 5,080 | 5,209 | |
7,192 | 6,744 | |||
Total liabilities | 21,646 | 19,163 | ||
Capital and reserves | ||||
Share capital | 1,990 | 1,990 | ||
Share premium | 1,269 | 1,269 | ||
Capital redemption reserve | 109 | 109 | ||
Hedging reserve | (15) | (72) | ||
Retained earnings | (197) | 582 | ||
Total equity | 3,156 | 3,878 | ||
Total equity and liabilities | 24,802 | 23,041 | ||
Consolidated Cash Flow Statement
for the year ended 31 March 2018
Year ended 31 March 2018 | Year ended 31 March 2017 | |||
£000 | £000 | |||
Operating activities | ||||
(Loss)/ profit for the year before tax | (471) | 54 | ||
Adjustments to reconcile (loss)/ profit for the year to net cash inflow/ (outflow)from operating activities: | ||||
Net finance costs excluding pensions | 377 | 164 | ||
Depreciation of property, plant and equipment | 1,425 | 1,125 | ||
Amortisation of software | 64 | 90 | ||
Amortisation and impairment of development costs | 10 | 7 | ||
Profit on disposal of property, plant and equipment | (16) | (1) | ||
Share based payments | 46 | 28 | ||
Difference between pension contributions paid and amounts recognised in the Consolidated Income Statement | (137) | (95) | ||
Increase in inventories | (204) | (676) | ||
Increase in receivables | (429) | (1,664) | ||
Increase in payables | 635 | 1,220 | ||
Income taxes received | - | - | ||
Cash inflow from continuing operations | 1,300 | 252 | ||
Cash inflow/ outflow from discontinued operations | - | (358) | ||
Net cash inflow / (outflow) from operating activities | 1,300 | (106) | ||
Investing activities | ||||
Purchase of property, plant and equipment | (2,958) | (3,732) | ||
Purchase of software | (16) | (41) | ||
Development costs | (24) | (133) | ||
Disposal of plant and equipment | 25 | 9 | ||
Net cash outflow from investing activities | (2,973) | (3,897) | ||
Financing activities | ||||
Interest paid | (377) | (164) | ||
Repayment of asset loans | (200) | (162) | ||
Net invoice finance draw down | 1,230 | 1,421 | ||
Import loan facility draw down | 1,137 | 1,235 | ||
Import loan facility repayment | (1,235) | - | ||
Finance leases taken out | 849 | 1,583 | ||
Net cash inflow from financing activities | 1,404 | 3,913 | ||
Net decrease in cash and cash equivalents | (269) | (90) | ||
Cash and cash equivalents at the start of the year | (216) | (126) | ||
Cash and cash equivalents at the end of the year | (485) | (216) | ||
Cash and cash equivalents included in discontinued operations | - | (332) | ||
Cash and cash equivalents for continuing operations | (485) | 116 | ||
Cash and cash equivalents comprise: | ||||
Bank overdraft | (485) | (216) | ||
(485) | (216) |
Consolidated statement of changes in equity
Share capital | Share premium account | Capital redemption reserve | Hedging reserve | Retained earnings | Attributable to equity holders of the parent | |
£000 | £000 | £000 | £000 | £000 | £000 | |
Balance at 1 April 2016 | 1,990 | 1,269 | 109 | (343) | 2,068 | 5,093 |
Loss for the year | - | - | - | - | (973) | (973) |
Other comprehensive income for the year net of tax | - | - | - | 271 | (542) | (271) |
Total comprehensive income/ (expense) | - | - | - | 271 | (1,515) | (1,244) |
Share based payment | - | - | - | - | 28 | 28 |
Deferred tax on employee share options | - | - | - | - | 1 | 1 |
Total of transactions with shareholders | - | - | - | - | 29 | 29 |
Balance as at 1 April 2017 | 1,990 | 1,269 | 109 | (72) | 582 | 3,878 |
Loss for the year | - | - | - | - | (813) | (813) |
Other comprehensive income / (expense) for the year net of tax | - | - | - | 57 | (6) | 51 |
Total comprehensive income/ (expense) | - | - | - | 57 | (819) | (762) |
Share based payments | - | - | - | - | 46 | 46 |
Deferred tax on employee share options | - | - | - | - | (6) | (6) |
Total of transactions with shareholders | - | - | - | - | 40 | 40 |
Balance at 31 March 2018 | 1,990 | 1,269 | 109 | (15) | (197) | 3,156 |
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 comprising 25p shares.
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's and Company's financial statements of Chamberlin for the year ended 31 March 2018 were authorised for issue by the board of directors on 4 June 2018 and the balance sheets were signed on the Board's behalf by Kevin Nolan and David Roberts. The Company is a public limited company incorporated and domiciled in England & Wales. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange.
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.
The financial information set out in this announcement does not constitute the statutory accounts of the Group for the years to 31 March 2018 or 31 March 2017 but is derived from the 2018 Annual Report and Accounts. The Annual Report and Accounts for 2017 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2018 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 2018 and have given an unqualified report which does not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006 nor an emphasis of matter paragraph.
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 (£000) except when otherwise indicated. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes.
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 2018.
Going concern
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Financial Statements.
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 provides manufactured and imported products to distributors and end-users operating in the safety and security markets. The products fall into the categories of door hardware, hazardous area lighting and control gear.
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 revenue | Segmental operating profit | |||
Year ended | 2018 | 2017 | 2018 | 2017 |
£000 | £000 | £000 | £000 | |
Foundries | 26,396 | 21,333 | 528 | 1,188 |
Engineering | 11,274 | 10,786 | 901 | 816 |
Continuing operations | 37,670 | 32,119 | 1,429 | 2,004 |
Discontinued operations | - | 2,810 | - | 296 |
Segmental results | 37,670 | 34,929 | 1,429 | 2,300 |
Reconciliation of reported segmental operating profit | ||||
Segment operating profit | 1,429 | 2,300 | ||
Shared costs (excluding share based payment charge) | (1,073) | (1,261) | ||
Exceptional and non-underlying costs | (324) | (365) | ||
Net finance costs | (503) | (324) | ||
Loss from discontinued operation | - | (296) | ||
(Loss)/ profit before tax from continuing operations | (471) | 54 | ||
Segmental assets | ||||
Foundries | 18,357 | 16,861 | ||
Engineering | 5,770 | 5,508 | ||
24,127 | 22,369 | |||
Segmental liabilities | ||||
Foundries | (5,522) | (5,051) | ||
Engineering | (2,141) | (2,048) | ||
(7,663) | (7,099) | |||
Segmental net assets | 16,464 | 15,270 | ||
Unallocated net liabilities | (13,308) | (11,392) | ||
Total net assets | 3,156 | 3,878 | ||
Unallocated net liabilities include the pension liability of £5,080,000 (2017: £5,209,000), financial liabilities of £8,878,000 (2017: £6,828,000), and the deferred tax asset of £650,000 (2017: £645,000).
Capital expenditure, depreciation and amortisation and impairment | ||||||||||||
Capital additions | Foundries | Engineering | Total | |||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||
Property, plant and equipment | 2,720 | 3,611 | 238 | 127 | 2,958 | 3,738 | ||||||
Software | 9 | 35 | 7 | 6 | 16 | 41 | ||||||
Development costs | - | - | 24 | 133 | 24 | 133 | ||||||
Depreciation, amortisation and impairment | Foundries | Engineering | Total | |||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||
Property, plant and equipment | (1,208) | (984) | (217) | (213) | (1,425) | (1,197) | ||||||
Software | (54) | (81) | (10) | (12) | (64) | (93) | ||||||
Development costs | - | - | (10) | (7) | (10) | (7) | ||||||
(ii) By geographical segment
2018 | 2017 | |
Revenue by location of customer | £000 | £000 |
United Kingdom | 15,417 | 15,031 |
Italy | 5,835 | 4,702 |
Germany | 4,138 | 3,736 |
Rest of Europe | 9,645 | 6,159 |
Other countries | 2,635 | 2,491 |
37,670 | 32,119 |
4. FINANCE COSTS
2018 | 2017 | |
£000 | £000 | |
Bank overdraft interest payable | (377) | (164) |
Finance cost of pensions | (126) | (160) |
(503) | (324) |
5. (LOSS)/ EARNINGS PER SHARE
The calculation of (loss)/ earnings per share is based on the profit attributable to shareholders and the weighted average number of ordinary shares in issue. In calculating the diluted (loss)/ earnings per share, adjustment has been made for the dilutive effect of outstanding share options. Underlying (loss)/ earnings per share, which excludes 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. Exceptional costs are detailed in note 6.
2018 | 2017 | |
£000 | £000 | |
Loss for basic earnings per share | (813) | (46) |
Exceptional costs- continuing operations | 60 | 138 |
Net financing costs and service cost on pension obligations | 344 | 372 |
Share based payment charge | 46 | 28 |
Taxation effect of the above | (85) | (104) |
Earnings for underlying earnings per share | (448) | 388 |
(Loss)/ earnings per share (pence) from continuing operations: | ||
Underlying | (5.6) | 4.7 |
Diluted underlying | (5.6) | 4.5 |
2018 | 2017 | |
£000 | £000 | |
Discontinued loss for basic earnings per share | - | (927) |
Exceptional costs | - | 1,451 |
Taxation effect of the above | - | (305) |
Earnings for underlying earnings per share | - | 219 |
Earnings per share (pence) from discontinued operations: | ||
Underlying | - | 2.8 |
Diluted underlying | - | 2.6 |
Total (loss)/ earnings per share (pence): | ||
Underlying | (5.6) | 7.5 |
Diluted underlying | (5.6) | 7.1 |
2018 | 2017 | |
Number '000 | Number '000 | |
Weighted average number of ordinary shares | 7,958 | 7,958 |
Adjustment to reflect shares under options | 350 | 350 |
Weighted average number of ordinary shares - fully diluted | 8,308 | 8,308 |
As at 31 March 2018 and 31 March 2017 there is no adjustment in the total diluted loss per share calculation for the 350,000 and 160,300 shares respectively under option as they are required to be excluded from the weighted average numberof shares for diluted loss per share as they are anti-dilutive for the period then ended.
6. EXCEPTIONAL AND NON-UNDERLYING COSTS
2018 | 2017 | |
£000 | £000 | |
Group reorganisation | 60 | 138 |
Exceptional costs | 60 | 138 |
Share based payment charge | 46 | 28 |
Defined benefit pension scheme administration costs | 218 | 199 |
Non-underlying other operating expenses | 324 | 365 |
Non-underlying exceptional costs of discontinued operations | - | 1,451 |
Taxation | ||
- tax effect of exceptional and non-underlying costs | (52) | (363) |
272 | 1,453 |
During 2017 and continuing into 2018 the Group continues to rationalise its cost base. Group reorganisation costs, including redundancy and recruitment, relate to this rationalisation.
During 2017 the Group took the decision to close the Leicester foundry. Non-underlying exceptional costs of discontinued operations, including assetimpairment, redundancy and site clean up costs, relate to this closure.
7. FINANCIAL LIABILITIES
2018 | 2017 | |
£000 | £000 | |
Current liabilities | ||
Bank overdraft | 485 | 216 |
Current instalments due on asset finance loans | - | 200 |
Invoice finance facility | 4,740 | 3,510 |
Import loan facility | 1,137 | 1,235 |
Current instalments due on finance leases | 627 | 359 |
6,989 | 5,520 | |
Non-current liabilities | ||
Instalments due on finance leases | 1,889 | 1,308 |
Total financial liabilities | 8,878 | 6,828 |
The overdraft is held with HSBC Bank plc as part of the Group facility of £500,000, is secured on all assets of the business, is repayable on demand and is renewable in March 2019. Interest is payable at 2.0% (2017: 2.0%) over base rate.
Asset finance loans were fully repaid during the year. Previously they were secured against various items of plant and equipment across the Group.
The import loan facility is used to facilitate the purchase of equipment for the new machine centre. Once each asset is commissioned the import loan facility is repaid in full, facilitated by a sale and lease back on finance lease. Interest is payable at 3.25% over base rate.
Other finance leases are secured against the specific item to which they relate. These leases are repayable by monthly instalments for a period of 5 years to March 2022. Interest is payable at fixed amounts that range between 3.1% and 6.1%.
Invoice finance balances are secured against the trade receivables of the Group and are repayable on demand. Interest is payable at 2.3% (2017: 2.3%) over base rate. The maximum facility as at 31 March 2018 is £7.0m (2017: £7.0m). Management have assessed the treatment of the financing arrangements and have determined it is appropriate to recognise trade receivables and invoice finance liabilities separately.
8. 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 2018 was£218,000 (2017: £199,000) plus £126,000 of financing cost (2017: £160,000).
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 £369,000 (2017: £353,000). 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 2018 | 31 March 2017 | 31 March 2016 | |
Salary increases | n/a | n/a | n/a |
Pension increases (post 1997) | 3.1% | 3.3% | 2.9% |
Discount rate | 2.5% | 2.5% | 3.5% |
Inflation assumption - RPI | 3.2% | 3.3% | 2.9% |
Inflation assumption - CPI | 2.2% | 2.3% | 2.1% |
Demographic assumptions are all based on the S2PA (2017: S2PA) mortality tables with a 1% 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 2032.
2018 Years | 2017 Years | ||
Current pensioner at 65 - male | 21.1 | 21.1 | |
- female | 23.0 | 22.9 | |
Future pensioner at 65 - male | 22.1 | 22.1 | |
- female | 24.1 | 24.0 |
The scheme was closed to future accrual with effect from 30th 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 1 April 2017 was completed in the year and concluded that in return for maintaining the previous contribution arrangements and extending the deficit reduction period to 2038, the Company has given security over the Group's land and buildings to the pension scheme. With effect from 1 April 2018deficit reduction contributions will increase to £22,547 per month (previously £21,890 per month), with a 3% annual increase thereafter.
The contributions expected to be paid during the year to 31 March 2018 are £271,000.
The scheme assets are stated at the market values at the respective balance sheet dates. The assets and liabilities of the scheme were:
2018 £000 | 2017 £000 | ||
Equities/ diversified growth fund | 11,802 | 12,325 | |
Bonds | 1,280 | 1,143 | |
Insured pensioner assets | 28 | 30 | |
Cash | 97 | 50 | |
Market value of assets | 13,207 | 13,548 | |
Actuarial value of liability | (18,287) | (18,757) | |
Scheme deficit | (5,080) | (5,209) | |
Related deferred tax asset | 864 | 886 | |
Net pension liability | (4,216) | (4,323) | |
Net benefit expense recognised in profit and loss | 2018 £000 | 2017 £000 | |
Operating costs | (126) | (160) | |
(126) | (160) | ||
Re-measurement losses/ (gains) in other comprehensive income | 2018 £000 | 2017 £000 | ||
Actuarial losses/ (gains) arising from changes in financial assumptions | (151) | 2,703 | ||
Actuarial gains arising from changes in demographic assumptions | (129) | (599) | ||
Experience adjustments | 291 | (254) | ||
Return on assets (excluding interest income) | (3) | (1,238) | ||
8 | 612 | |||
2018 £000 | 2017 £000 | |||
Actual return on plan assets | 334 | 1,673 | ||
Movement in deficit during the year | 2018 £000 | 2017 £000 | |
Deficit in scheme at beginning of year | (5,209) | (4,692) | |
Employer contributions | 263 | 255 | |
Net interest expense | (126) | (160) | |
Actuarial loss | (8) | (612) | |
Deficit in scheme at end of year | (5,080) | (5,209) | |
Movement in scheme assets | 2018 £000 | 2017 £000 | |
Fair value at beginning of year | 13,548 | 12,974 | |
Interest income on scheme assets | 331 | 435 | |
Return on assets (excluding interest income) | 3 | 1,238 | |
Employer contributions | 263 | 255 | |
Benefits paid | (938) | (1,354) | |
Fair value at end of year | 13,207 | 13,548 | |
Movement in scheme liabilities | 2018 £000 | 2017 £000 | |
Benefit obligation at start of year | 18,757 | 17,666 | |
Interest cost | 457 | 595 | |
Actuarial losses/ (gains) arising from changes in financial assumptions | (151) | 2,703 | |
Actuarial gains arising from changes in demographic assumptions | (129) | (599) | |
Experience adjustments | 291 | (254) | |
Benefits paid | (938) | (1,354) | |
Benefit obligation at end of year | 18,287 | 18,757 | |
The weighted average duration of the pension scheme liabilities are 14.0 years (2017: 14.5 years).
A quantitative sensitivity analysis for significant assumptions as at 31 March 2017 is as shown below:
Present value of scheme liabilities when changing the following assumptions: | 2018 £000 | ||
Discount rate increased by 1% p.a. | 16,111 | ||
RPI and CPI increased by 1% p.a. | 19,324 | ||
Mortality- members assumed to be their actual age as opposed to 1 year older | 19,102 | ||
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.
9. REPORT AND ACCOUNTS
Copies of the Annual Report will be available on the Group's website,www.chamberlin.co.ukfrom 26 June 2018 and from the Group's head office at Chuckery Road, Walsall, West Midlands, WS1 2DU. The AGM will be held on 24 July 2018 at Chuckery Road, Walsall, West Midlands, WS1 2DU.
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Chamberlin plc published this content on 05 June 2018 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 05 June 2018 06:12:02 UTC
