Interim Results
Chamberlin & Hill PLC
30 November 2005
30 November 2005
CHAMBERLIN & HILL plc ('the Company')
Interim Results
CHAIRMAN'S STATEMENT
It is pleasing to report that in the six months ended 30 September 2005 Group
turnover increased by 4.7% to £21.16m (2004:£20.21m), while underlying operating
profit grew 23.8% to £1.20m (2004:£0.97m). Underlying profit before tax grew
26.5% to £1.14m (2004:£0.90m) and underlying earnings per share rose 26.2% to
10.8p (2004:8.5p). Positive cash flows resulted in net cash of £0.24m (2004:net
borrowing of £1.03m).
The results are presented for the first time under International Financial
Reporting Standards ('IFRS') which has affected both the content and the
presentation of the results for the period. Notes have been provided where
considered appropriate to assist in understanding the changes. Numbers for
prior periods have been restated on an IFRS basis, and reconciliations to
previously reported results are given in note 10 to the interim financial
statements along with details of the significant changes. One of the main
changes has been to increase the effect of the release of negative goodwill in
2004 and so comparisons of the Group's results and earnings per share for the
first six months this year should be made with the figures before goodwill and
exceptional items for the same six months in 2004 and the full year to 31 March
2005.
The Board has decided to pay an unchanged interim dividend of 3.85p per share
payable on 19 December 2005 to all shareholders registered on 9 December 2005.
In our Foundry Division the improved demand seen in the second half of the last
year continued during the first quarter along with high raw material prices,
while the second quarter saw a small reduction in volume. Currently we face
substantial increases in the price of electricity and gas; as a major energy
user this will put some pressure on margins as we seek to fully recover them
from our customers, but to some extent this is offset by weaker raw material
prices.
We have continued to develop our plans for the longer term integration of our
foundries. The grey iron activities of the division will be consolidated at
Walsall by the end of the current financial year, while ductile iron parts will
be produced in Leicester and Scunthorpe. This action is expected to be earnings
enhancing in 2006/07, and ultimately to be cash generative. Further
consolidation in the division is now expected to take place in 2007/08.
In our Engineering Division, further progress has been made in the strategic
development of both companies with a focus on product development in the
hazardous area lighting and Exidor product ranges.
John Bather will retire from the Board at the end of the year after 41 years
service. On behalf of all shareholders I would like to record the Company's
most sincere thanks to John, and wish him a long and happy retirement.
I am delighted to welcome Keith Jackson to the Board as a non-executive director
and look forward to the benefit of his considerable experience.
We anticipate that our markets will remain at around their present levels and,
if this is the case, we expect our growth to continue. The implementation of
the foundry consolidations and the development of the growth plans for our
engineering businesses remain our focus, while seeking new and relevant
opportunities to further enhance earnings supported by our positive cash flows
and strong balance sheet. We also continue to examine ways to mitigate the
deficit in our final salary pension scheme and to reduce its funding cost.
Overall, despite increased energy costs and the other well publicised issues
affecting the manufacturing sector in this country, the Board believes that the
Group's positioning and the current initiatives allow it to look to the future
with confidence.
TOM BROWN
Chairman
Summarised Consolidated Income Statement
for the six months ended 30 September 2005
Note Unaudited Unaudited six month ended Year ended 31 March 2005
six 30 September 2004 (restated under (IFRS)
months (restated under IFRS)
ended Before Goodwill Total Before Goodwill Total
30 goodwill and goodwill and
September and operating and operating
2005 operating exceptionals operating exceptionals
exceptionals exceptionals
£000 £000 £000 £000 £000 £000 £000
Revenue from
continuing 41,970
operations 21,157 20,213 - 20,213 41,970 -
Operating
profit from
continuing 1,205 973 416 1,389 2,071 292 2,363
operations
Finance costs 2 (70) (76) - (76) (171) - (171)
Profit before 1,135 897 416 1,313 1,900 292 2,192
tax
Income tax 3 (341) (269) (125) (394) (570) (88) (658)
expense
Profit for the
period from
continuing 794 628 291 919 1,330 204 1,534
operations
Attributable to
equity holders 794 919
of the parent 1,534
company
Earnings per
share
basic 5 10.8p 12.5p 20.9p
underlying 5 10.8p 8.5p 18.1p
diluted 5 10.7p 12.5p 20.9p
diluted 5 10.7p 8.5p 18.1p
underlying
An interim dividend of 3.85p per share has been declared by the directors,
payable on 19 December 2005 (note 4).
Summarised Consolidated Statement of Recognised Income and Expense
for the six months ended 30 September 2005
Note Unaudited six Unaudited six
months ended months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(restated under (restated under
IFRS) IFRS)
£000 £000 £000
Actuarial
movements on
pension funding 334 (106) (312)
Deferred tax on
pension funding
movement 6 (100) 32 94
Net expense
recognised
directly in equity 234 (74) (218)
Profit for the
period (before
dividend) 794 919 1,534
Total recognised
income and expense
for the period 1,028 845 1,316
Dividends paid in 4 588 587 871
the period
Summarised Consolidated Balance Sheet
At 30 September 2005
Unaudited Unaudited 31 March
30 September 30 September 2005
2005 2004 (restated under
(restated under IFRS)
IFRS)
£000 £000 £000
Non-current assets
Intangible assets - goodwill 201 201 201
Intangible assets - software 43 36 52
Property, plant and 8,795 9,333 8,990
equipment
Deferred tax assets 930 931 1,047
9,969 10,501 10,290
Current assets
Inventories 5,094 4,488 5,055
Trade and other 8,714 9,562 9,325
receivables
Cash and cash equivalents 238 - 1
14,046 14,050 14,381
Total assets 24,015 24,551 24,671
Capital and reserves
Called up share capital 1,840 1,835 1,840
Share premium account 743 718 743
Capital redemption reserve 109 109 109
Retained earnings 9,694 9,055 9,246
Equity attributable to equity 12,386 11,717 11,938
holders of the parent company
Current liabilities
Bank overdraft - 1,025 43
Trade and other payables 6,612 6,917 7,550
Current tax liabilities 943 331 638
7,555 8,273 8,231
Non-current liabilities
Trade and other payables - 274 -
Retirement benefit 2,923 3,103 3,320
obligations
Deferred tax liabilities 1,151 1,184 1,182
4,074 4,561 4,502
Total equity and liabilities 24,015 24,551 24,671
Summarised Consolidated Cash Flow Statement
for the six months ended 30 September 2005
Note Unaudited six Unaudited six Year ended
months ended months ended 31 March
30 September 30 September 2005
2005 2004 (restated under
(restated under IFRS)
IFRS)
Operating activities £000 £000 £000
Profit for the period 794 919 1,534
Adjustments for:
Finance costs 70 76 171
Income tax expense 341 394 658
Amortisation of software 12 15 31
Depreciation of property, 742 845 1,623
plant and equipment
Release of negative - (617) (617)
goodwill
Amortisation of Russell -
Castings rent free period 100 200
Profit on disposal of plant - - (1)
and equipment
Pension element of finance (37) (56) (111)
costs
Share based payments 8 1 5
Actuarial movement on 334 (106) (312)
Pension funding
(Decrease)/Increase in (397) 52 269
provisions
Operating cash flow before movements
in working capital 1,867 1,623 3,450
(Increase)/Decrease in (39) (992) (674)
inventories
Decrease/(Increase) in 611 (2,806) (950)
receivables
(Decrease)/Increase in payables (938) 2,819 1,116
Cash generated from operations 1,501 644 2,942
Interest received - - 10
UK Corporation Tax paid (50) (194) (278)
Net cash from operating activites 1,451 450 2,674
Investing activities
Acquisition of business and
assets of Russell Castings 8 - (646) (1,117)
Cash acquired on
acquisition of Russell 8 - 1 1
Castings
Purchase of software (3) (5) (37)
Purchase of property, plant
and equipment (558) (715) (1,211)
Disposal of plant and 11 15 76
equipment
Net cash used in investing activities (550) (1,350) (2,288)
Financing activities
Interest paid (33) (20) (70)
Equity dividends paid (588) (587) (870)
Issue of shares (including - - 30
premium)
Net cash used in financing activities (621) (607) (910)
Net increase/(decrease) in cash and
cash equivalents
280 (1,507) (524)
Cash and cash equivalents at the
start of the period
(42) 482 482
Cash and cash equivalents at the end
of the period
238 (1,025) (42)
Notes to the interim financial statements
1 General information and accounting policies
Basis of preparation
From 2005 the Group will prepare its consolidated accounts in accordance with
International Financial Reporting Standards ('IFRS') as adopted for use in the
European Union. The Group's first IFRS based results are its interim results for
the six months ended 30 September 2005 and the first Annual Report under IFRS
will be for the year ending 31 March 2006. As a result, the comparative amounts
included in these Interim Financial Statements have been restated under IFRS
from the UK Generally Accepted Accounting Practice ('UK GAAP') values originally
published by the Group.
Reconciliations of the Group's UK GAAP balance sheets to its preliminary IFRS
balance sheets at 1 April 2004 ('the opening balance sheet'), 30 September 2004
and 31 March 2005 together with reconciliations of the Group's UK GAAP profit
and loss accounts to its preliminary IFRS income statement for the six months to
30 September 2004 and year to 31 March 2005 are shown in note 10. These
preliminary IFRS financial statements will form the basis of the comparative
information in the Group's first IFRS Annual Report.
IFRS are subject to continuing review and amendment by the International
Accounting Standards Board ('IASB') and subsequent endorsement by the European
Commission and therefore are subject to change. Therefore, in determining the
Group's IFRS accounting policies, the Board of Directors has used its best
endeavours in making assumptions about those IFRS expected to be effective or
available for adoption when the first IFRS annual financial statements are
prepared for the year ending 31 March 2006. In particular, the Directors have
assumed that the European Commission will endorse the amendment to IAS 19
'Employee Benefits' - Actuarial Gains and Losses, Group Plans and Disclosures
issued by the International Accounting Standards Board in December 2004. In
addition, the Directors have taken advantage of the exemption available under
IFRS 1 to only apply IAS 32 'Financial Instruments: Disclosure and Presentation'
and IAS 39 'Financial Instruments: Recognition and Measurement' from 1 April
2005. As the accounting policies used to prepare the Interim Financial Statement
may need to be updated for any subsequent amendment to IFRS required for first
time adoption, or any new IFRS the Group may elect to adopt early, it is
possible that the preliminary opening balance sheet and IFRS comparatives may
require adjustment before being finalised.
These Interim Financial Statements have been prepared on the historic cost
basis, except that derivative financial instruments are stated at their fair
value.
The financial information for the six months ended 30 September 2005 and 30
September 2004 is summarised and unaudited and does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985.
A copy of the statutory accounts for the year ended 31 March 2005 as prepared
under UK GAAP has been delivered to the Registrar of Companies. The auditors'
report on those accounts was unqualified.
2 Finance costs
Unaudited six Unaudited six
months ended 30 months ended 30 Year ended 31
September September March
2005 2004 2005
(restated (restated
under IFRS) under IFRS)
£000 £000 £000
Net interest on bank accounts 33 20 60
Finance costs of pension scheme (note 6) 37 56 111
70 76 171
3 Income tax expense
An effective rate of tax for the six months to 30 September 2005 of 30% has been
used in respect of all income tax and deferred tax calculations in these interim
statements.
4 Dividends
Dividends proposed in respect of a period are not accrued in the balance sheet
under IFRS. Instead they are charged to the income statement in the period they
are paid.
Dividends comprise: Unaudited six Unaudited six
months ended 30 months ended 30 Year ended 31
September September March
2005 2004 2005
(restated (restated
under IFRS) under IFRS)
Pence
per share £000 £000 £000
2003/04 final dividend paid July 2004 8.00 587 587
2004/05 interim dividend paid December 2004 3.85 284
2004/05 final dividend paid July 2005 8.00 588
588 587 871
2005/06 interim dividend proposed 3.85 283
The interim dividend of 3.85 pence per share (2004: 3.85p) will be paid on 19
December 2005 to all shareholders on the register as at close of business on 9
December 2005.
5 Earnings per share
The calculation of basic earnings per share is based on the profit after tax of
£794,000 (Interim 2004: £919,000; Full year 2004/05: £1,534,000) and the
weighted average number of shares in issue of 7,359,658 (Interim 2004:
7,340,908; Full year 2004/05: 7,347,398).
The calculation of underlying earnings per share is based on profit before the
effects of goodwill and operating exceptionals, and is disclosed in addition to
basic earnings per share as the directors believe that it allows a better
comparison between the results of different periods, and therefore a better
assessment of the comparative trading performance of the Group. Operating
exceptionals comprise severance payments and related costs associated with
significant operational restructuring.
The profit used in calculating underlying earnings per share was £794,000
(Interim 2004: £628,000; Full year 2004/05: £1,330,000) and the weighted average
number of shares as for basic earnings per share above.
Diluted earnings per share and diluted underlying earnings per share use the
same profit figures as for basic or underlying earnings per share as
appropriate, but use a figure for number of shares that takes account of the
dilutive effect of outstanding share options. The figure used for number of
shares was 7,392,589 (Interim 2004: 7,345,908; Full year 2004/05: 7,354,288).
6 Pensions
The Group operates a defined benefit pension scheme and a number of defined
contribution pension schemes on behalf of its employees. For defined
contribution schemes, contributions paid in the period are charged to the income
statement. For the defined benefit scheme, actuarial calculations are performed
in accordance with IAS 19 in order to arrive at the amounts to be charged in the
income statement and recognised in the statement of recognised income and
expenses. The defined benefit scheme is closed to new entrants.
Under IAS 19, the Company recognises all movements in the actuarial funding
position of the scheme in each period. This is likely to lead to increased
volatility in shareholders' equity from period to period.
The IAS 19 figures are based on a number of actuarial assumptions as set out
below, which the actuaries have confirmed they consider appropriate. The
projected unit credit actuarial cost method has been used in the actuarial
calculations.
30 September 30 September 31 March
2005 2004 2005
Discount rate 5.1% 5.5% 5.4%
Long term rate of return on assets 5.9% 6.4% 6.4%
Salary increases 2.7% 2.9% 2.9%
Pension increases (pre '97) 2.5% 2.5% 2.5%
Pension increases (post '97) 2.7% 2.9% 2.9%
Inflation (RPI) 2.7% 2.9% 2.9%
The demographic assumptions used are generally the same for each period, as used
in the last full actuarial valuation performed as at 1 April 2004.
The defined benefit scheme funding has changed under IAS 19 as follows:
6 months to 6 months to Year to
30 September 30 September 31 March
Funding status 2005 2004 2005
£000 £000 £000
Change in scheme assets
Fair value at start of period 10,334 9,531 9,531
Expected return on scheme assets 333 290 581
Actuarial gains/(losses) 698 (80) 347
Employer's contributions 165 165 329
Member's contributions 65 65 130
Estimated benefits paid (320) (259) (584)
Fair value at end of period 11,275 9,712 10,334
6 months to 6 months to Year to
30 September 30 September 31 March
2005 2004 2005
Funding status £000 £000 £000
Change in benefit obligations at start of period 13,654 12,582 12,582
Current service cost 65 55 110
Past service cost - - 65
Interest cost 370 346 692
Members' contributions 65 65 130
Actuarial loss 364 26 659
Estimated benefits paid (320) (259) (584)
Obligations at end of period 14,198 12,815 13,654
Balance sheet provision required (2,923) (3,103) (3,320)
Less associated deferred tax asset 877 931 996
Net balance sheet liability (2,046) (2,172) (2,324)
Components of pension cost
Current service cost 65 55 110
Past service cost - - 65
Charge to operating profit 65 55 175
Interest cost 370 346 692
Expected return on scheme assets (333) (290) (581)
Charge to finance costs 37 56 111
Total charge to income statement 102 111 286
Actuarial gains/(losses)
Gain on asset returns 698 (80) 347
Loss on calculation of obligations (364) (26) (659)
Total credit/(charge) to SORIE 334 (106) (312)
7 Share based payments
The Company has an Inland Revenue Approved and an Unapproved share option scheme
used to incentivise directors and senior managers of the Group. Options are
exercisable at a price equal to the average quoted market price of the Company's
shares over the 5 days prior to the date of grant. The vesting period is 3
years and the options expire after 10 years from date of grant (for Approved
Options) or 7 years (for Unapproved Options). Options lapse if the employee
leaves the Group subject to certain exceptions set out in the scheme rules.
Under the transitional arrangements in IFRS 1, only options granted after 7
November 2002 are included in the share based payment calculations. The
Black-Scholes method has been used.
The fair value of options calculated by this method is charged to the income
statement over the vesting period of the options (the three years after which
they can be exercised under the scheme rules). The charge is recognised in
operating profit.
Relevant options outstanding during the period were as follows:-
Date of grant No. of shares Exercise Price Exercisable between
3 June 2004 10,000 155.5p 03.06.2007-02.06.2011
10 December 2004 14,575 205.5p 10.12.2007-09.12.2014
10 December 2004 35,425 205.5p 10.12.2007-09.12.2011
14 July 2005 25,000 231.5p 14.07.2008-13.07.2012
14 July 2005 25,000 231.5p 14.07.2008-13.07.2012
Based on the following assumptions, the total fair value of these options was
£64,000, of which £8,000 was recognised as an expense in the period based on the
number of days between grant and the period end (Interim 2004: £1,000; Full year
2004/05: £5,000).
30 Sep 2005 30 Sep 2004 31 Mar 2005
Share Price 256.5p 178.5p 211.5p
Weighted average option price 212.8p 155.5p 197.2p
Expected volatility 30.0% 60.0% 50.0%
Expected life 3.8 years 4.8 years 4.3 years
Risk free rate 3.0% 3.0% 3.0%
Expected dividend yield 5.1% 6.6% 5.6%
Expected volatility is based on movements in the share price during the periods
concerned and the directors' expectations of future volatility. The expected
life has been arrived at based on the directors' best estimate taking into
account exercise conditions and behavioural considerations.
8 Adjustment to provisional goodwill on acquisition of the business and
assets of Russell Castings
On 2 April 2004, the Group, through its subsidiary company, Platt Malleable
Castings Limited, acquired the business and certain assets of Russell Castings,
a foundry business based in Leicester. Platt Malleable Castings Limited then
changed its name to Russell Castings Limited.
Details of assets acquired and consideration paid are given below:-
Book value Fair value Fair value of
adjustment assets acquired
£000 £000 £000
Property, plant and equipment (note (a) below) 1,275 (522) 753
Inventories (note (b) below) 1,075 (190) 885
Receivables 1,718 1,718
Cash and cash equivalents 1 1
Payables (1,823) (1,823)
Fair values previously reported 2,246 (712) 1,534
Additional asset re rent free period (note (c) below) 200 200
Revised fair values on acquisition 2,246 (512) 1,734
Revised discount on acquisition (617)
1,117
Consideration paid
- initial cash payment 500
- acquisition expenses 146
- deferred payment (paid 1 October 2004) 471
1,117
(a) Property, plant and equipment values were recalculated to fair
values based on their remaining useful lives.
(b) Inventories were revalued on a basis consistent with Group policy.
(c) The provisional fair values previously reported have now been reviewed and
the directors considered that an additional asset was required to be
recognised in respect of a one year rent free period negotiated as part of
the acquisition, as this had affected the total consideration paid. The
negative goodwill arising (known under IFRS as discount on acquisition)
therefore became £617,000 rather than the £417,000 previously reported.
The rent free period asset has been amortised to the income statement evenly
over the 2004/05 financial year. Under IFRS the discount on acquisition of
£617,000 has been released to the income statement immediately. The release
is identified as an operating exceptional in a separate column of the
consolidated income statement. The effect of this change on the previously
reported results has been identified separately in the reconciliations given
in note 10 below.
9 Consolidated statement of changes in equity
Unaudited six months Unaudited six months Year ended 31
ended 30 September ended 30 September March 2005
2005 2004 (restated under
(restated under IFRS)
IFRS)
£000 £000 £000
Equity at start of period 11,938 11,458 11,458
Profit for the period 794 919 1,534
Dividends paid (see note 4) (588) (587) (871)
Actuarial movements on pension funding (see 334 (106) (312)
note 6)
Deferred tax on actuarial pension movements (100) 32 94
Share based payments (see note 7) 8 1 5
Shares issued and allotted - - 30
Equity at end of period 12,386 11,717 11,938
10 Explanation of transition to IFRS
Set out below are certain reconciliations to show the effect on the reported
figures of the Group moving from UK Generally Accepted Accounting Practice ('UK
GAAP') to International Financial Reporting Standards ('IFRS'). An additional
reconciliation column is given in relation to the restatement of goodwill on
acquisition set out in note 8 above.
The reconciliations of equity at 1 April 2004 (the date of transition to IFRS),
at 31 March 2005 (the date of the last published UK GAAP financial statements)
and at 30 September 2004 (the end of the comparative interim six month period)
have been included to allow a comparison of the effects for each period. In
addition, a reconciliation of the UK GAAP profit for the six months ended 30
September 2004 and for the year ended 31 March 2005 to the profit under IFRS is
given to show the impact on the various elements of the income statement.
The individual standards giving rise to significant changes in the figures are
described below.
IFRS 2 Share-based payments
In accordance with IFRS 2, the Group has recognised a charge reflecting the fair
value of outstanding share options granted to employees since 7 November 2002
(see note 7). No such charge was recognised under UK GAAP.
The impact of this change has been a charge to operating profit of £8,000 in the
period (Interim 2004: £1,000; full year 2004/05: £5,000) and an associated
deferred tax credit of 30% of these charges.
IFRS 3 Business combinations
IFRS 3 required goodwill to be carried at cost less impairment, rather than it
being amortised as it was under UK GAAP. As permitted by IFRS 1, the Group has
chosen to apply IFRS 3 prospectively from the transition date of 1 April 2004
and not to restate previous business combinations. Goodwill is, therefore,
stated in the opening balance sheet at 1 April 2004 at its UK GAAP carrying
value at that date of £201,000. Subsequent amortisation has been reversed,
resulting in an increase in reported operating profit of £6,000 for the six
months to 30 September 2004 and £13,000 for the year to 31 March 2005.
Negative goodwill arose on the acquisition of the business and assets of Russell
Castings on 2 April 2004. Under UK GAAP a proportion of this negative goodwill
was released to operating profit in 2004/05 in proportion to realisation of the
assets acquired. Under IFRS 3, negative goodwill (also known as discount on
acquisition) must be released to profit immediately. This has resulted in an
increase in operating profit of £147,000 in the six months to 30 September 2004
and £105,000 in the year to 31 March 2005. A further adjustment relating to
restatement of the negative goodwill originally calculated on acquisition and
reported in the 31 March 2005 accounts is identified and its effect shown
separately below as it is not directly attributable to the change to IFRS.
IAS 7 Cash flow statements
The cash flow statement has been reformatted under IFRS and incorporates the
relevant adjustments made to the balance sheet and income statement.
IAS 10 Events after the balance sheet date
IAS 10 categorises events after the balance sheet date as 'adjusting events' or
'non-adjusting events'. In most instances this corresponds with UK GAAP, but in
the case of dividends proposed (accrued for under UK GAAP), IAS 10 states that
if an entity declares dividends after the balance sheet date, the entity shall
not recognise those dividends as a liability at the balance sheet date. This
results in a reduction in current liabilities of £587,000 at 1 April 2004,
£283,000 at 30 September 2004 and £588,000 at 31 March 2005.
IAS 12 Income taxes
IAS 12 requires deferred tax to be calculated based on differences between the
carrying value of assets or liabilities and their tax base value rather than on
the basis of timing differences. This has resulted in the Group having to make
provision under IFRS for deferred tax on a previously rolled over capital gain
where no provision was required under UK GAAP. This has resulted in an
additional provision of £475,000 in the accounts at 1 April 2004, 30 September
2004 and 31 March 2005.
In addition, a deferred tax asset relating to differences between the carrying
value of property, plant and equipment and their tax value at Russell Castings,
previously not recognised under UK GAAP has now been recognised. This amounts
to £50,000 as at 31 March 2005. As the change does not relate specifically to
the change to IFRS, it has been identified separately in the reconciliation
below.
Recognition of a pension scheme liability under IAS 19 (see below) has also
resulted in the recognition of an associated deferred tax asset under IAS 12.
This amounted to £915,000 at 1 April 2004, £931,000 at 30 September 2004 and
£996,000 at 31 March 2005. The major element of the movement in the pension
provision relates to actuarial adjustments to the return on assets and level of
pension obligations. As these amounts are disclosed in the statement of
recognised income and expense ('SORIE') rather than in the income statement, the
majority of the movement in the deferred tax asset is also shown in the SORIE,
and the remainder as part of the tax charge to the income statement for each
period. The amount credited to the SORIE in the year to 31 March 2005 relating
to deferred tax on the actuarial funding movement was £94,000.
Where required, deferred tax has been provided for on all other IFRS
adjustments. At 31 March 2005 this resulted in an additional deferred tax
credit/asset of £1,000 on share based payments, and an additional deferred tax
charge/liability of £31,000 relating to the additional release of negative
goodwill noted under IFRS 3 above.
Corporation tax and the associated current liability have been recalculated at
an effective rate of 30% to arrive at numbers for interim report purposes based
on IFRS profit in 2004 and 2005.
IAS 16 Property, plant and equipment
As permitted by IFRS 1, the Group has elected, where appropriate, to use the
revaluation carrying amount of certain properties as the 'deemed cost' on
transition to IFRS.
Software included in tangible fixed assets under UK GAAP is classified as an
intangible asset under IFRS. Amounts of £46,000 at 1 April 2004, £36,000 at 30
September 2004 and £52,000 at 31 March 2005 have been reclassified and shown
separately as 'Intangible assets - software' in the restated balance sheets.
IAS 19 Employee benefits
The Group had not adopted FRS 17 under UK GAAP before transition to IFRS, but
was using SSAP 24 with the additional disclosures required during the transition
to FRS 17. On transition to IFRS, therefore, the application of IAS 19 has
resulted in the creation of a provision for the actuarial deficit in the Group's
defined benefit pension scheme (see note 6). The associated deferred tax asset
is noted under IAS 12 above. The movements in actuarial valuations, not
previously recognised under UK GAAP, have, from 1 April 2004 been recognised in
the SORIE. The charge to the income statement under IFRS reflects the service
cost for the period in operating profit and the net finance cost of the pension
scheme assets and liabilities in the finance cost line, as set out in note 6
above. The change from the charges made under UK GAAP has resulted in increased
operating profit of £110,000 in the six months to 30 September 2004 and £204,000
in the year to 31 March 2005. Finance costs have increased by £56,000 in the
six months to 30 September 2004 and £111,000 in the year to 31 March 2005. An
amount has been charged/credited directly to retained profit relating to the
movements in the actuarial funding position of the scheme, as identified in note
6 above, amounting to a charge of £106,000 for the six months to 30 September
2004, £312,000 for the year to 31 March 2005, and a credit of £334,000 for the
six months to 30 September 2005.
IAS 32 Financial instruments: Disclosure and presentation, and
IAS 39 Financial instruments: Recognition and measurement
The Group has elected not to apply IAS 32 and IAS 39 to periods ended on or
prior to 31 March 2005. No significant adjustments have been identified that
would have been required to these periods had IAS 32 and IAS 39 been adopted and
applied retrospectively.
Restatement of goodwill on acquisition of the business and assets of Russell
Castings
Following transition to IFRS as at 1 April 2004, the adjustment to goodwill
outlined in note 8 above has an impact on the restated IFRS numbers as set out
in a separate column below. The recognition of the negotiated rent free period
following acquisition has now been recognised as an asset on acquisition and
amortised to the income statement over its useful life (i.e. the one year rent
free period). The fair value of that asset has been assessed as £200,000 based
on the actual rent subsequently negotiated. The associated increased negative
goodwill (discount on acquisition) has been released to profit immediately.
The notional rent cost is a charge against underlying operating profit, whilst
the release of goodwill affects total operating profit, but is eliminated from
the calculation of underlying operating profit. At 30 September 2004,
therefore, the additional £200,000 of discount on acquisition has been released
but only £100,000 of notional rent has been charged. Operating profit for the
period is increased by the net £100,000, but underlying operating profit is
reduced by £100,000 being just the rent charge.
At 31 March 2005, both the additional discount of £200,000 and the notional rent
of £200,000 have been released/charged to profit. There is no net effect on
total operating profit, but underlying operating profit has been reduced by the
£200,000 rent. Earnings per share figures have been restated accordingly.
Reconciliations
The following tables reconcile the previously reported UK GAAP numbers with
those now prepared under IFRS, and identify separately the effect of the
goodwill restatement described above.
Reconciliation of previously reported UK GAAP profit to IFRS profit as restated
for the six months to 30 September 2004
UK GAAP Effect of IFRS Effect of Restated
transition to adjusting IFRS
IFRS goodwill on
acquisition
£000 £000 £000 £000 £000
Revenue 20,213 - 20,213 - 20,213
Operating profit 1,027 262 1,289 100 1,389
Finance costs (20) (56) (76) (76)
Profit before tax 1,007 206 1,213 100 1,313
Income tax expense (322) (42) (364) (30) (394)
Profit for the 685 164 849 70 919
period
Earnings per share 9.3 2.2 11.5 1.0 12.5
basic p
underlying p 8.7 0.8 9.5 -1.0 8.5
diluted p 9.3 2.2 11.5 1.0 12.5
diluted p 8.7 0.8 9.5 -1.0 8.5
underlying
Reconciliation of previously reported UK GAAP profit to IFRS profit for the year
to 31 March 2005
UK GAAP Recognition Effect of IFRS Effect of Restated
of transition adjusting IFRS
deferred to IFRS goodwill on
tax asset acquisition
£000 £000 £000 £000 £000 £000
Revenue 41,970 - - 41,970
Operating profit 2,046 317 2,363
Finance costs (60) (111) (171)
Profit before tax 1,986 - 206 2,192
Income tax expense (665) 50 (43) (658)
Profit for the period 1,321 50 163 1,534
Earnings per share 18.0 0.7 2.2 20.9 20.9
basic p
underlying p 18.5 0.7 0.8 20.0 -1.9 18.1
diluted p 18.0 0.7 2.2 20.9 20.9
diluted p 18.4 0.7 0.9 20.0 -1.9 18.1
underlying
Reconciliation of UK GAAP equity shareholders' funds to IFRS equity
shareholders' funds at 1 April 2004
UK GAAP Effect of IFRS
transition to
IFRS
£000 £000 £000
Non-current assets
Intangible assets - goodwill 201 - 201
Intangible assets - software - 46 46
Property, plant and equipment 8,770 (46) 8,724
Deferred tax assets - 915 915
8,971 915 9,886
Current assets
Inventories 3,496 - 3,496
Trade and other receivables 6,656 - 6,656
Cash and cash equivalents 482 - 482
10,634 - 10,634
Total assets 19,605 915 20,520
Capital and reserves
Called up share capital 1,835 - 1,835
Share premium account 718 - 718
Capital redemption reserve 109 - 109
Revaluation reserve 583 (583) -
Retained earnings 10,237 (1,441) 8,796
Equity attributable to equity holders of the 13,482 (2,024) 11,458
parent company
Current liabilities 5,389 (587) 4,802
Non-current liabilities 734 475 1,209
Deferred tax liabilities
Retirement benefit obligations - 3,051 3,051
Total equity and liabilities 19,605 915 20,520
Reconciliation of UK GAAP equity shareholders' funds to IFRS equity
shareholders' funds at 30 September 2004
UK GAAP Effect of IFRS Effect of Restated
transition adjusting IFRS
to IFRS goodwill on
acquisition
£000 £000 £000 £000 £000
Non-current assets
Intangible assets - goodwill 46 155 201 201
Intangible assets - software - 36 36 36
Property, plant and equipment 9,369 (36) 9,333 9,333
Deferred tax assets - 931 931 931
9,415 1,086 10,501 - 10,501
Current assets
Inventories 4,488 - 4,488 4,488
Trade and other receivables 9,462 - 9,462 100 9,562
Cash and cash equivalents - - - -
13,950 - 13,950 100 14,050
Total assets 23,365 1,086 24,451 100 24,551
Capital and reserves
Called up share capital 1,835 - 1,835 1,835
Share premium account 718 - 718 718
Capital redemption reserve 109 - 109 109
Revaluation reserve 579 (579) - -
Retained earnings 10,643 (1,658) 8,985 70 9,055
Equity attributable to equity holders 13,884 (2,237) 11,647 70 11,717
Current liabilities 8,498 (255) 8,243 30 8,273
Non current liabilities
Trade and other payables 274 - 274 274
Deferred tax liabilities 709 475 1,184 1,184
Retirement benefit obligations - 3,103 3,103 3,103
Total equity and liabilities 23,365 1,086 24,451 100 24,551
Reconciliation of UK GAAP equity shareholders' funds to IFRS equity
shareholders' funds at 31 March 2005
UK GAAP Recognition of Effect of IFRS
deferred tax transition to
asset IFRS
£000 £000 £000 £000
Non-current assets
Intangible assets - goodwill 83 118 201
Intangible assets - software - 52 52
Property, plant and equipment 9,042 (52) 8,990
Deferred tax assets - 50 997 1,047
9,125 50 1,115 10,290
Current assets
Inventories 5,055 - 5,055
Trade and other receivables 9,325 - 9,325
Cash and cash equivalents 1 - 1
14,381 - 14,381
Total assets 23,506 50 1,115 24,671
Capital and reserves
Called up share capital 1,840 - 1,840
Share premium account 743 - 743
Capital redemption reserve 109 - 109
Revaluation reserve 575 (575) -
Retained earnings 10,694 50 (1,498) 9,246
Equity attributable to equity holders of parent 13,961 50 (2,073) 11,938
company
Current liabilities 8,819 (588) 8,231
Non-current liabilities
Deferred tax liabilities 676 506 1,182
Retirement benefit obligations 50 3,270 3,320
Total equity and liabilities 23,506 50 1,115 24,671
11 Post balance sheet events
In October 2005, the Company entered a consultation period which has led to a
decision to close the Bloxwich foundry and consolidate production in the three
remaining foundry sites. Grey iron production will be consolidated at the
nearby Walsall foundry and ductile iron production will move to the Leicester
and Scunthorpe sites. Closure of the Bloxwich site, which has the smallest
output of the foundries within the Group, is expected to be completed in the
current financial year.
For further information please contact:
Chamberlin & Hill PLC Tel: 01922 721 411
Barrie Williams, CEO
Simon Duckworth, Finance Director
This information is provided by RNS
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