CASTINGS P.L.C.
INTERIM MANAGEMENT REPORT
Six months ended 30 September 2022
Interim Management Report
Overview
Sales for the six months ended 30 September 2022 were £85.6 million (2021 – £69.7 million) with profit before tax of £7.5 million
(2021 – £5.4 million).
During the period, the underlying demand for heavy trucks has been strong and the conversion of forward schedules to actual sales has improved when compared with the same period in the previous year. Two of our largest commercial vehicle customers have introduced new engine platforms during the period on which the group has an increased share of parts. The simultaneous introduction has led to production challenges in the transition phase which are now largely behind us.
Input price changes continue to be passed onto our customers through both established escalators and additional price increases. The most significant increase came into effect on 1 October 2022, following the end of our fixed price electricity contract. The higher unit cost for power is being surcharged to our customers immediately and will therefore increase revenue in the second half of the year. This should not adversely affect group profit as it is a pass-through of a direct cost increase.
Foundry operations
Output during the period was up 3.3% at 25,100 tonnes (2021 – 24,300 tonnes) and external sales revenue was up by 24.3% to £84.7million. Of the output weight for the period, 57.4% related to machined castings compared to 52.4% in the previous period. This reflects a return to the sales mix for the year ended 31 March 2021, following a reduction last year due to the disrupted customer demand patterns.
The profit from the foundry segment of £7.8 million compares to £5.3 million in the equivalent period last year.
The strong group cash position has enabled the continued investment in foundry facilities during the period. The most significant investments include £0.8 million on the completion of an automated pouring process on one of our largest production lines and £0.6 million on automation of the foundry finishing processes.
Machining operation
CNC Speedwell generated external revenue of £0.9 million during the period, a reduction of 42.7% compared to the previous period, with a reported loss of £0.47 million compared to a profit of £0.05 million in the previous period.
The previously mentioned introduction of new engine platforms in the period has a particularly significant impact on the operational efficiency of the machining business. With the end of the transitional ramp down and ramp up period, it is pleasing to see that CNC Speedwell returned to profitability in the final month of the period.
Outlook
The long-term demand schedules continue to reflect the high build rates that the heavy truck OEMs require to satisfy their order books.
The group will see the benefit of the greater content won on the new customer platforms as these are now in production. Production efficiencies will also improve as the focus will be on the new parts that have been introduced.
The group maintains a strong balance sheet with cash levels of £25.6 million; a decrease of £10.2 million during the period after paying dividends totalling £12.0 million (including a supplementary dividend of £6.5 million).
Dividend
An interim dividend of 3.84 pence per share has been declared and will be paid on 5 January 2023 to shareholders who are on the register at 25 November 2022.
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 to 11 of the Annual Report for the year ended 31 March 2022.
Director changes
I have decided to step down as Chairman of the company with effect from 1 January 2023 and will not be seeking re-election as a director at the next Annual General meeting of the company to be held in August 2023. I am pleased to announce that Alec Jones, who is currently senior independent director, will succeed me as chairman of the company.
Mark Smith has been appointed as a non-executive director with effect from 16 November 2022. He is also appointed Chairman of the Audit and Risk Committee and a member of the Nomination and Remuneration Committees. Mark was a partner at PricewaterhouseCoopers LLP for 24 years until his retirement from the firm in September 2021. He was the Midlands Regional Chairman and a senior partner in the UK Audit and Risk business and has extensive experience of auditing public limited companies.
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
16 November 2022
Castings P.L.C.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Consolidated Statement of Comprehensive Income
For six months ended 30 September 2022
| UnauditedHalf year to30 September2022£’000 | UnauditedHalf year to30 September2021£’000 | AuditedYear to31 March2022£’000 | |
| Revenue | 85,600 | 69,747 | 148,583 |
| Cost of sales | (68,265) | (55,798) | (118,105) |
| Gross profit | 17,335 | 13,949 | 30,478 |
| Distribution costs | (2,471) | (1,490) | (3,411) |
| Administrative expenses | (7,515) | (7,071) | (15,040) |
| Profit from operations | 7,349 | 5,388 | 12,027 |
| Finance income | 104 | 19 | 47 |
| Profit before income tax | 7,453 | 5,407 | 12,074 |
| Income tax expense | (1,414) | (1,025) | (3,522) |
| Profit for the period attributable to the equity holders of the parent company | 6,039 | 4,382 | 8,552 |
| Other comprehensive (losses)/income 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 | – | – | 119 |
| – | – | 119 | |
| Items that may be reclassified subsequently to profit and loss: | |||
| Change in fair value of financial assets | (77) | 26 | 88 |
| Tax effect of items that may be reclassified | 15 | (4) | (22) |
| (62) | 22 | 66 | |
| Total other comprehensive (losses)/income for the period (net of tax) | (62) | 22 | 185 |
| Total comprehensive income for the period attributable to the equity holders of the parent company | 5,977 | 4,404 | 8,737 |
| Earnings per share attributable to the equity holders of the parent company | |||
| Basic | 13.86p | 10.04p | 19.60p |
| Diluted | 13.83p | 10.03p | 19.57p |
Consolidated Balance Sheet
30 September 2022
| Unaudited30 September2022£’000 | Unaudited30 September2021£’000 | Audited31 March2022£’000 | |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 62,236 | 65,441 | 62,801 |
| Financial assets | 318 | 334 | 396 |
| 62,554 | 65,775 | 63,197 | |
| Current assets | |||
| Inventories | 24,699 | 20,275 | 25,889 |
| Trade and other receivables | 41,861 | 36,048 | 39,874 |
| Current tax asset | 556 | 251 | 489 |
| Cash and cash equivalents | 25,592 | 34,648 | 35,745 |
| 92,708 | 91,222 | 101,997 | |
| Total assets | 155,262 | 156,997 | 165,194 |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 24,611 | 24,528 | 28,477 |
| 24,611 | 24,528 | 28,477 | |
| Non-current liabilities | |||
| Deferred tax liabilities | 5,278 | 3,628 | 5,219 |
| Total liabilities | 29,889 | 28,156 | 33,696 |
| Net assets | 125,373 | 128,841 | 131,498 |
| Equity attributable to equity holders of the parent company | |||
| Share capital | 4,363 | 4,363 | 4,363 |
| Share premium account | 874 | 874 | 874 |
| Treasury shares | (231) | – | (79) |
| Other reserve | 13 | 13 | 13 |
| Retained earnings | 120,354 | 123,591 | 126,327 |
| Total equity | 125,373 | 128,841 | 131,498 |
Consolidated Cash Flow Statement
For six months ended 30 September 2022
| UnauditedHalf year to30 September2022£’000 | UnauditedHalf year to30 September2021£’000 | AuditedYear to31 March2022£’000 | |
| Cash flows from operating activities | |||
| Profit before income tax | 7,453 | 5,407 | 12,074 |
| Adjustments for: | |||
| Depreciation | 3,996 | 4,050 | 8,601 |
| Profit on disposal of property, plant and equipment | – | – | 62 |
| Finance income | (104) | (19) | (47) |
| Equity settled share-based payment expense | 59 | 74 | 74 |
| Pension administrative costs | – | – | 119 |
| Decrease/(increase) in inventories | 1,190 | (1,556) | (7,170) |
| (Increase)/decrease in receivables | (919) | 383 | (4,898) |
| (Decrease)/increase in payables | (3,866) | 157 | 4,106 |
| Cash generated from operating activities | 7,809 | 8,496 | 12,921 |
| Tax paid | (1,407) | (1,406) | (2,568) |
| Interest received | 95 | 9 | 28 |
| Net cash generated from operating activities | 6,497 | 7,099 | 10,381 |
| Cash flows from investing activities | |||
| Dividends received from listed investments | 9 | 10 | 19 |
| Purchase of property, plant and equipment | (3,430) | (2,379) | (4,379) |
| Proceeds from disposal of property, plant and equipment | – | – | 27 |
| Repayments from pension schemes | – | – | 2,496 |
| Advances to pension schemes | (1,068) | (1,073) | (2,114) |
| Net cash used in investing activities | (4,489) | (3,442) | (3,951) |
| Cash flow from financing activities | |||
| Dividends paid to shareholders | (12,009) | (5,101) | (6,698) |
| Purchase of own shares | (152) | – | (79) |
| Net cash used in financing activities | (12,161) | (5,101) | (6,777) |
| Net decrease in cash and cash equivalents | (10,153) | (1,444) | (347) |
| Cash and cash equivalents at beginning of period | 35,745 | 36,092 | 36,092 |
| Cash and cash equivalents at end of period | 25,592 | 34,648 | 35,745 |
| Cash and cash equivalents: | |||
| Short-term deposits | 11,627 | 19,080 | 17,065 |
| Cash available on demand | 13,965 | 15,568 | 18,680 |
| 25,592 | 34,648 | 35,745 |
Consolidated Statement of Changes in Equity
| Equity attributable to equity holders of the parent | ||||||
| Unaudited | Sharecapital£’000 | Sharepremium£’000 | Treasury shares£’000 | Other reserve£’000 | Retainedearnings£’000 | Totalequity£’000 |
| At 1 April 2022 | 4,363 | 874 | (79) | 13 | 126,327 | 131,498 |
| Profit for the period | – | – | – | – | 6,039 | 6,039 |
| Other comprehensive income/(losses): | ||||||
| Change in fair value of financial assets | – | – | – | – | (77) | (77) |
| Tax effect of items taken directly to reserves | – | – | – | – | 15 | 15 |
| Total comprehensive income for the periodended 30 September 2022 | – | – | – | – | 5,977 | 5,977 |
| Shares acquired during the period | – | – | (152) | – | – | (152) |
| Equity settled share-based payments | – | – | – | – | 59 | 59 |
| Dividends | – | – | – | – | (12,009) | (12,009) |
| At 30 September 2022 | 4,363 | 874 | (231) | 13 | 120,354 | 125,373 |
| Unaudited | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
| At 1 April 2021 | 4,363 | 874 | – | 13 | 124,214 | 129,464 |
| Profit for the period | – | – | – | – | 4,382 | 4,382 |
| Other comprehensive income/(losses): | ||||||
| Change in fair value of financial assets | – | – | – | – | 26 | 26 |
| Tax effect of items taken directly to reserves | – | – | – | – | (4) | (4) |
| Total comprehensive income for the period | ||||||
| ended 30 September 2021 | – | – | – | – | 4,404 | 4,404 |
| Equity settled share-based payments | – | – | – | – | 74 | 74 |
| Dividends | – | – | – | – | (5,101) | (5,101) |
| At 30 September 2021 | 4,363 | 874 | – | 13 | 123,591 | 128,841 |
| Audited | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
| At 1 April 2021 | 4,363 | 874 | – | 13 | 124,214 | 129,464 |
| Profit for the year | – | – | – | – | 8,552 | 8,552 |
| Other comprehensive income/(losses): | ||||||
| Movement in unrecognised surplus on defined benefit pension schemes net of actuarial gains and losses | – | – | – | – | 119 | 119 |
| Change in fair value of financial assets | – | – | – | – | 88 | 88 |
| Tax effect of items taken directly to reserves | – | – | – | – | (22) | (22) |
| Total comprehensive income for the year | – | – | – | – | 8,737 | 8,737 |
| Shares acquired in the year | – | – | (79) | – | – | (79) |
| Equity settled share-based payments | – | – | – | – | 74 | 74 |
| Dividends | – | – | – | – | (6,698) | (6,698) |
| At 31 March 2022 | 4,363 | 874 | (79) | 13 | 126,327 | 131,498 |
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 2022 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 2022 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 March 2022 have been filed with the Registrar of Companies. The Independent Auditors’ Report on the Annual Report and Financial Statements for 2022 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 adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the UK.
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 2022.
| Foundry operations£’000 | Machining£’000 | Elimination£’000 | Total£’000 | |
| Revenue from external customers | 84,676 | 924 | – | 85,600 |
| Inter-segmental revenue | 10,309 | 9,773 | – | 20,082 |
| Segmental result | 7,818 | (469) | – | 7,349 |
| Unallocated income:Finance income | ||||
| 104 | ||||
| Profit before income tax | 7,453 | |||
| Total assets | 141,547 | 25,594 | (11,879) | 155,262 |
| Non-current asset additions | 2,820 | 610 | – | 3,430 |
| Depreciation | 2,381 | 1,615 | – | 3,996 |
| Total liabilities | (28,733) | (6,299) | 5,143 | (29,889) |
The following shows the revenues, results and total assets by reportable segment for the half year to 30 September 2021.
| Foundry operations£’000 | Machining£’000 | Elimination£’000 | Total£’000 | |
| Revenue from external customers | 68,132 | 1,615 | – | 69,747 |
| Inter-segmental revenue | 7,538 | 9,381 | – | 16,919 |
| Segmental result | 5,336 | 52 | – | 5,388 |
| Unallocated income:Finance income | ||||
| 19 | ||||
| Profit before income tax | 5,407 | |||
| Total assets | 141,272 | 28,119 | (12,394) | 156,997 |
| Non-current asset additions | 2,081 | 298 | – | 2,379 |
| Depreciation | 2,263 | 1,787 | – | 4,050 |
| Total liabilities | (27,328) | (6,997) | 6,169 | (28,156) |
The following shows the revenues, results and total assets by reportable segment for the year ended 31 March 2022.
| Foundry operations£’000 | Machining£’000 | Elimination£’000 | Total£’000 | |
| Revenue from external customers | 145,601 | 2,982 | – | 148,583 |
| Inter-segmental revenue | 17,037 | 19,488 | – | 36,525 |
| Segmental result | 13,084 | (894) | (50) | 12,140 |
| Unallocated costs: | ||||
| Exceptional credit for recovery of Icelandic bank deposits | ||||
| previously written off | 6 | |||
| Defined benefit pension cost | (119) | |||
| Finance income | 47 | |||
| Profit before income tax | 12,074 | |||
| Total assets | 148,554 | 26,741 | (10,101) | 165,194 |
| Non-current asset additions | 3,388 | 991 | – | 4,379 |
| Depreciation | 4,790 | 3,811 | – | 8,601 |
| Total liabilities | (31,561) | (6,977) | 4,842 | (33,696) |
5. Dividends
Amounts recognised as distributions to shareholders in the period:
| Half year to30 September2022£’000 | Half year to30 September2021£’000 | |
| Final dividend of 12.57p per share for the year ended 31 March 2022(2021 – 11.69p per share) | 5,475 | 5,101 |
| Supplementary dividend of 15.00p per share for the year ended 31 March 2022 | 6,534 | – |
| 12,009 | 5,101 |
The directors have declared an interim dividend in respect of the financial year ending 31 March 2023 of 3.84p per share (2022 – 3.66p), which will be paid on 5 January 2023.
6. 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.
| UnauditedHalf year to30 September2022 | UnauditedHalf year to30 September2021 | Audited Year to 31 March2022 | |
| Profit after tax (£’000) | 6,039 | 4,382 | 8,552 |
| Weighted average number of shares – basic calculation | 43,565,115 | 43,632,068 | 43,631,545 |
| Weighted average number of shares – diluted calculation | 43,675,024 | 43,699,509 | 43,698,986 |
| Earnings per share – basic | 13.86p | 10.04p | 19.60p |
| Earnings per share – diluted | 13.83p | 10.03p | 19.57p |
7. 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 £1,068,000 (2021 – £1,073,000) was paid by the group on behalf of the schemes in respect of pension payments and administration costs. At 30 September 2022, the outstanding balance of £3,182,000 (2021 – £3,569,000) is repayable within one year.
Payments made by the company on behalf of the schemes in the current period are repayable by 30 November 2022.
8. 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 and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.
By order of the board
S. J. MANT FCA
Group Finance Director
16 November 2022