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Castings PLC (CGS)

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Friday 13 November, 2020

Castings PLC

Half-year Report

RNS Number : 1900F
Castings PLC
13 November 2020
 

CASTINGS P.L.C.
INTERIM MANAGEMENT REPORT

Six months ended 30 September 2020

Overview

Sales for the six months ended 30 September 2020 were £41.7 million (2019 - £73.1 million) with loss before tax of £0.63 million (2019 - profit of £7.34 million).

The period has been significantly impacted by reduced demand as a result of the COVID-19 pandemic. Output reduced by approximately 80% during the first two months of the period as the commercial vehicle sector, which represents 70% of group revenue, closed production facilities and 80% of our workforce was placed on furlough leave under the Coronavirus Job Retention Scheme. During the following four months, there was a gradual increase in demand from the heavy-truck OEMs such that monthly demand levels were approximately 85% of pre-COVID levels at the end of the period.

The group completed on the sale of the Fradley site for £1.95 million (before disposal costs) on 22 September 2020, resulting in a profit of £0.66 million.

Foundry operations

Output during the period was down 43% at 14,350 tonnes (2019 - 25,200 tonnes) and external sales revenue decreased by 42% to £40.5 million.

The profit from the foundry segment of £0.8 million represents a decrease of 89% from the equivalent period last year ('previous period'). The margin has been negatively impacted by the lower production levels and significant disruption during the period resulting in production inefficiencies. However, assuming demand remains buoyant, productivity gains are due to be realised during the second half of the financial year and into 2021/22.

The strong group cash position has enabled the continued investment in foundry facilities during the period, including £1.6 million to support a production line upgrade and the introduction of a new in-house heat treatment plant.

Machining operation

CNC Speedwell generated external revenue of £1.2 million during the period, a decrease of 60% compared to the previous period, with a reported loss of £2.1 million compared to a profit of £0.1 million in the previous period. The significantly lower levels of demand have a particularly negative impact on such a well-invested business with a depreciation cost of £2.0 million in the period.

The focus on automation and productivity improvements has continued which makes up the majority of the capital investment of £0.8 million during the period.

Outlook

The current heavy-truck schedules suggest output returning to pre-COVID levels, albeit there continues to be uncertainty regarding the pandemic. Assuming these levels are realised, the group is well positioned to see the benefits of the productivity improvements in both the foundry and machining businesses.

The group has been successful in obtaining a number of new projects with our European truck customers that will commence production in 2021/22 and 2022/23. In addition to replacement work, these projects include additional platform volumes and also more value-add product solutions. 

The automation of finishing processes within the foundries is largely complete and the automation investment programme in the machining business will continue in the medium term.

The group maintains a strong balance sheet with cash levels of £35.2 million; an increase of £1.8 million during the period after the dividend payment of £5.0 million.

Dividend

An interim dividend of 3.57 pence per share has been declared and will be paid on 7 January 2021 to shareholders who are on the register at 27 November 2020.

Principal risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.

The directors consider that the principal risks and uncertainties remain substantially the same as those stated on pages 8 and 9 of the Annual Report for the year ended 31 March 2020.

The COVID-19 pandemic has caused significant disruption to the group during the period. Our commercial vehicle customers ceased production for a three to five week period during March and April 2020. However, since that time, demand levels have steadily improved, employees have returned from furlough leave and production levels have increased. Whilst we have not seen any further significant impact as a result of the pandemic, it does still have the potential to disrupt supply chains and future demand.

The negotiations on the UK's future trading relationship with the European Union remain ongoing. With over 70% of the group's sales revenue being generated in this market, there remains a potential risk. We maintain regular dialogue with suppliers and customers to ensure that supply risks are mitigated where possible.

Cautionary statement

This Interim Management Report ('IMR') has been prepared solely to provide additional information to shareholders to enable them to assess the group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose. This IMR contains certain forward-looking statements. These are made by the directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

The group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

The IMR has been prepared for the group as a whole and therefore gives greater emphasis to those matters which are significant to Castings P.L.C. and its subsidiary undertakings when viewed as a whole.

By order of the board

BRIAN J. COOKE
Chairman
13 November 2020

Castings p.l.c.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ

 

Consolidated Statement of Comprehensive Income

For six months ended 30 September 2020

 

 

Unaudited

Half year to

30 September

2020

£'000

Unaudited

Half year to

30 September

2019

£'000

Audited

Year to

31 March

2020

£'000

Revenue

41,748

73,135

138,667

Cost of sales

(36,593)

(57,349)

(109,186)

Gross profit

5,155

15,786

29,481

Distribution costs

(769)

(1,444)

(2,510)

Administrative expenses

(5,722)

(7,109)

(14,477)

(Loss)/profit before surplus on sale of property

(1,336)

7,233

12,494

Surplus on sale of property

658

-

-

(Loss)/profit from operations

(678)

7,233

12,494

Finance income

51

111

206

(Loss)/profit before income tax

(627)

7,344

12,700

Income tax credit/(expense)

121

(1,393)

(2,634)

(Loss)/profit for the period attributable to the equity holders
of the parent company

(506)

5,951

10,066

Other comprehensive income/(expense) for the period:

 

 

 

Items that will not be reclassified to profit and loss:

 

 

 

Movement in unrecognised surplus on defined benefit pension
schemes net of actuarial gains and losses

-

-

258

 

-

-

258

Items that may be reclassified subsequently to profit and loss:

 

 

 

Change in fair value of available for sale financial assets

(15)

30

(22)

Tax effect of items that may be reclassified

3

(5)

4

 

(12)

25

(18)

Total other comprehensive (losses)/income for the period
(net of tax)

(12)

25

240

Total comprehensive (loss)/income for the period attributable
to the equity holders of the parent company

(518)

5,976

10,306

Earnings per share attributable to the equity holders
of the parent company

 

 

 

Basic and diluted

(1.16)p 

13.64p

23.07p

 

 

 

Consolidated Balance Sheet

30 September 2020

 

 

Unaudited

30 September

2020

£'000

Unaudited

30 September

2019

£'000

Audited

31 March

2020

£'000

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

68,843

70,999

70,693

Financial assets

343

410

358

 

69,186

71,409

71,051

Current assets

 

 

 

Inventories

17,932

19,077

21,175

Trade and other receivables

30,777

36,954

28,661

Current tax asset

411

524

332

Cash and cash equivalents

35,217

25,835

33,401

 

84,337

82,390

83,569

Assets classed as held for sale

-

1,060

1,060

 

84,337

83,450

84,629

Total assets

153,523

154,859

155,680

LIABILITIES

 

 

 

Current liabilities

 

 

 

Trade and other payables

23,550

22,453

20,092

Current tax liabilities

-

-

-

 

23,550

22,453

20,092

Non-current liabilities

 

 

 

Deferred tax liabilities

3,807

3,560

3,930

Total liabilities

27,357

26,013

24,022

Net assets

126,166

128,846

131,658

Equity attributable to equity holders of the parent company

 

 

 

Share capital

4,363

4,363

4,363

Share premium account

874

874

874

Other reserve

13

13

13

Retained earnings

120,916

123,596

126,408

Total equity

126,166

128,846

131,658

 

 

 

 

Consolidated Cash Flow Statement

For six months ended 30 September 2020

 

Unaudited

Half year to

30 September

2020

£'000

Unaudited

Half year to

30 September

2019

£'000

Audited

Year to

31 March

2020

£'000

Cash flows from operating activities

 

 

 

(Loss)/profit before income tax

(627)

7,344

12,700

Adjustments for:

 

 

 

Depreciation

4,251

4,163

8,903

Profit on disposal of property, plant and equipment

-

-

(40)

Profit on disposal of held for sale asset

(658)

-

-

Finance income

(51)

(111)

(206)

Pension administrative costs

-

-

258

Decrease/(increase) in inventories

3,243

87

(2,011)

(Increase)/decrease in receivables

(712)

5,185

11,713

Increase/(decrease) in payables

3,458

(1,769)

(4,130)

Cash generated from operating activities

8,904

14,899

27,187

Tax paid

(78)

(3,685)

(4,355)

Interest received

41

101

186

Net cash generated from operating activities

8,867

11,315

23,018

Cash flows from investing activities

 

 

 

Dividends received from listed investments

10

10

20

Purchase of property, plant and equipment

(2,606)

(3,724)

(8,158)

Proceeds from disposal of property, plant and equipment

-

-

40

Proceeds from disposal of held for sale asset

1,923

-

-

Transfer from/(to) other current interest-bearing deposits

-

5,000

5,000

Repayments from pension schemes

-

-

3,525

Advances to pension schemes

(1,404)

(1,018)

(2,778)

Net cash used in investing activities

(2,077)

268

(2,351)

Cash flow from financing activities

 

 

 

Dividends paid to shareholders

(4,974)

(11,519)

(13,037)

Net cash used in financing activities

(4,974)

(11,519)

(13,037)

Net increase/(decrease) in cash and cash equivalents

1,816

64

7,630

Cash and cash equivalents at beginning of period

33,401

25,771

25,771

Cash and cash equivalents at end of period

35,217

25,835

33,401

Cash and cash equivalents:

 

 

 

Short-term deposits

33,394

23,362

28,610

Cash available on demand

1,823

2,473

4,791

 

35,217

25,835

33,401

 

 

 

 

Consolidated Statement of Changes in Equity
 

 

Equity attributable to equity holders of the parent

Unaudited

Share

capital

£'000

Share

premium

£'000

Other reserve

£'000

Retained

earnings

£'000

Total

equity

£'000

At 1 April 2020

4,363

874

13

126,408

131,658

Loss for the period

-

-

-

(506)

(506)

Other comprehensive income/(losses):

 

 

 

 

 

Change in fair value of available for sale assets

-

-

-

(15)

(15)

Tax effect of items taken directly to reserves

-

-

-

3

3

Total comprehensive loss for the period

ended 30 September 2020

-

-

-

(518)

(518)

Dividends

-

-

-

(4,974)

(4,974)

At 30 September 2020

4,363

874

13

120,916

126,166

 

Unaudited

£'000

£'000

£'000

£'000

£'000

At 1 April 2019

4,363

874

13

129,139

134,389

Profit for the period

-

-

-

5,951

5,951

Other comprehensive income/(losses):

 

 

 

 

 

Change in fair value of available for sale assets

-

-

-

30

30

Tax effect of items taken directly to reserves

-

-

-

(5)

(5)

Total comprehensive income for the period
ended 30 September 2019

-

-

-

5,976

5,976

Dividends

-

-

-

(11,519)

(11,519)

At 30 September 2019

4,363

874

13

123,596

128,846

 

Audited

£'000

£'000

£'000

£'000

£'000

At 1 April 2019

4,363

874

13

129,139

134,389

Profit for the year

-

-

-

10,066

10,066

Other comprehensive income/(losses):

 

 

 

 

 

Movement in unrecognised surplus on defined benefit pension schemes net of actuarial loss

-

-

-

258

258

Change in fair value of available for sale assets

-

-

-

(22)

(22)

Tax effect of items taken directly to reserves

-

-

-

4

4

Total comprehensive income for the year

ended 31 March 2020

-

-

-

10,306

10,306

Dividends

-

-

-

(13,037)

(13,037)

At 31 March 2020

4,363

874

13

126,408

131,658

 

Notes

1.  General information

Castings P.L.C. (the 'company') is a company domiciled in England. The condensed consolidated interim financial statements of the company for the six months ended 30 September 2020 comprise the company and its subsidiaries (together referred to as the 'group').

The principal activities of the group are the manufacture of iron castings and machining operations.

The financial information for the year ended 31 March 2020 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 March 2020 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for 2019 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498 (2) or (3) of the Companies Act 2006.

This report has not been audited and has not been reviewed by independent auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

2.  Accounting policies

The annual financial statements of Castings P.L.C. are prepared using the recognition and measurement principles of IFRSs as endorsed by the European Union. The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.

Basis of preparation

After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed consolidated interim financial statements.

The same accounting policies, presentation and methods of computation are followed in the condensed consolidated interim financial statements as applied in the group's latest annual audited financial statements.

3.  Seasonality of operations

The directors do not consider there to be any significant seasonality or cyclicality to the results of the group.

4.  Segment information

For internal decision making purposes, the group is organised into three operating companies which are considered to represent two operating segments of the group. Castings P.L.C. and William Lee Limited are aggregated into Foundry Operations and CNC Speedwell Limited is the Machining Operation.

Inter-segment transactions are entered into under the normal commercial terms and conditions that would be available to third parties.

The following shows the revenues, results and total assets by reportable segment for the half year to 30 September 2020.

 

Foundry operations

£'000

Machining

£'000

Elimination

£'000

Total

£'000

Revenue from external customers

40,523

1,225

-

41,748

Inter-segmental revenue

4,099

4,767

-

8,866

Segmental result

776

(2,112)

-

(1,336)

Unallocated income:

Exceptional profit on disposal of held for sale asset

Finance income

 

 

 

 

658

 

 

 

51

Loss before income tax

 

 

 

(627)

Total assets

136,837

29,966

(13,280)

153,523

Non-current asset additions

1,784

822

-

2,606

Depreciation

2,246

2,005

-

4,251

Total liabilities

(26,214)

(9,299)

8,156

(27,357)

 

The following shows the revenues, results and total assets by reportable segment for the half year to 30 September 2019.

 

Foundry operations

£'000

 

Machining

£'000

 

Elimination

£'000

 

Total

£'000

Revenue from external customers

70,106

3,029

-

73,135

Inter-segmental revenue

9,609

10,325

-

19,934

Segmental result

7,094

139

-

7,233

Unallocated income:

Finance income

 

 

 

 

 

 

 

111

Profit before income tax

 

 

 

7,344

Total assets

137,691

31,430

(14,262)

154,859

Non-current asset additions

3,077

647

-

3,724

Depreciation

2,048

2,115

-

4,163

Total liabilities

(25,890)

(7,776)

7,653

(26,013)

 

The following shows the revenues, results and total assets by reportable segment for the year ended 31 March 2020.

 

Foundry operations

£'000

Machining

£'000

Elimination

£'000

Total

£'000

Revenue from external customers

133,626

5,041

-

138,667

Inter-segmental revenue

17,701

19,471

-

37,172

Segmental result

13,400

(667)

9

12,742

Unallocated income/(costs):

 

 

 

 

Exceptional credit for recovery of Icelandic bank deposits previously written off

 

 

 

10

Defined benefit pension costs

 

 

 

(258)

Finance income

 

 

 

206

Profit before income tax

 

 

 

12,700

Total assets

137,247

29,523

(11,090)

155,680

Non-current asset additions

5,651

2,507

-

8,158

Depreciation

4,406

4,497

-

8,903

Total liabilities

(23,135)

(6,744)

5,857

(24,022)

 

5.   Surplus on sale of property

During the period the group completed on the sale of a property that was previously classified as an asset held for sale. The surplus on the sale of the property was £658,000.

 

6.  Dividends

Amounts recognised as distributions to shareholders in the period:

 

Half year to

30 September

2020

£'000

Half year to

30 September

2019

£'000

Final dividend of 11.40p per share for the year ended 31 March 2020

(2019 - 11.40p per share)

4,974

4,974

Supplementary dividend of 15.00p per share for the year ended 31 March 2019

-

6,545

 

4,974

11,519

 

The directors have declared an interim dividend in respect of the financial year ending 31 March 2021 of 3.57p per share (2020 - 3.48p), which will be paid on 7 January 2021.

7.  Earnings per share and diluted earnings per share

Earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. The diluted earnings per share includes the outstanding share options within the weighted average number of shares figure.

 

Unaudited

Half year to

30 September

2020

Unaudited

Half year to

30 September

2019

Audited

 Year to

 31 March

2020

(Loss)/profit after tax (£'000)

(506)

5,951

10,066

Weighted average number of shares - basic earnings per share calculation

43,632,068

43,632,068

43,632,068

Weighted average number of shares - diluted earnings per share calculation

43,667,360

43,632,068

43,632,068

Earnings per share - basic and diluted

(1.16)p

13.64p

23.07p

 

8.  Pension schemes

The group operates two defined benefit pension schemes which are closed to new entrants and closed to future accruals on 6 April 2009. The assets of the schemes are independent of the finances of the group and are administered by trustees.

The pension schemes are related parties of the group and during the period £1,404,000 (2019 - £1,018,000) was paid by the group on behalf of the schemes in respect of pension payments and administration costs. At 30 September 2020, the outstanding balance of £4,182,000 (2019 - £4,543,000) is repayable within one year.

Payments made by the company on behalf of the schemes in the current period are repayable by 30 November 2021.

9.  Interim report

Copies of this interim management report will be available on the company's website, www.castings.plc.uk, and from the registered office.

Statement of Directors' Responsibilities


The directors confirm that the condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

The directors of Castings P.L.C. are listed on the back cover of this report.

By order of the board

S. J. Mant FCA
Group Finance Director
13 November 2020

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