CHAIRMAN'S STATEMENT

I am pleased to report that the pre-tax profit for the Group for the six month period ending 31st October 2018 was £7.8 million (2017 £6.1 million) an increase of 28% from a revenue of £67.5 million, which increased by 9%.

The current work load as at 31st October 2018 stands at £99 million, as compared to £84 million twelve months ago. The Group order book continues to improve not only in quantity but also in quality of earnings, both on the Mechanical Engineering side of the business and the Refractory Engineering side. The oil and gas order input is stable and the increase on the Mechanical Engineering side of the business relates to the new markets this division has been targeting, such as naval shipbuilding and nuclear waste reprocessing.

The order backlog represents about eight months of activity at current activity levels. Prior to the end of the first half of the calendar year 2019 the Group expects to win some substantial orders that will allow the Group activity level to take a step forward.

We recently replaced an existing Barclays' long term (5 year) banking agreement by moving to HSBC.  HSBC is now one of our two main bankers along with Lloyds. The package was on better terms.

Our Group employee numbers have started growing again and this is complemented by another group of 25 apprentices having started in September 2018. Our best weapon in times of shortage of skilled labour has always been to train our own people through our own in-house apprenticeship schemes.

Management report

Financial Highlights

Turnover

Sales revenue of £67,548,000 for the half year represents a 9% increase from the £61,893,000 achieved during the same period last year.

Profit Before Tax

Profit before tax for the six months of £7,804,000 is up 28% from the £6,108,000 achieved for the same six month period last year.

Key performance indicators

The key performance indicators for the business are listed below:

Alternative performance measures mentioned above are defined in note 29 on page 68 of the Group Annual accounts to 30th April 2018.

2019/20 Outlook

The Group activity and profitability levels are expected to increase over the next twelve months associated with the increased work load. Whilst the Group's pre-tax profitability in the first six months of the current financial year increased by 28% as stated in this half year's Chairman's Statement, the trading profit in this period actually increased by 73% compared to the same period last financial year.  This was a reflection of improving quality of orders, whereas last year there was a £1.6 million gain from selling the first Indian factory land site which we had purchased in 2003.

Whilst we have an increased work load, we expect the second half year pre-tax profits of this financial year to be similar to the first half of this financial year as it will take about six months to ramp up the activity levels and take the new work through first piece sample approvals. However, subject to significant new business being won, we expect 2019 / 2020 to be busier and more profitable than the current financial year.

Our activities in India continue to grow in this buoyant large economy and, to accommodate further growth of our pump and investment casting powder manufacturing activities there, we have in this first half of the year purchased 2.6 more acres of land adjacent to our 4 acre site to accommodate the further anticipated growth over the next three years.

Risks and Uncertainties

The Group, mainly through its centralised management structure, makes best endeavours to have in place internal control procedures to identify and manage the key risks and uncertainties affecting the Group. We would refer you to page 11 of the Group Annual Accounts to 30th April 2018 which describes the principal risks and uncertainties, and to note 20 (page 58) which describes in detail the key financial risks and uncertainties affecting the business such as credit risk and foreign exchange risk.

Judging the future relationship of the major currency pairs of the US Dollar, Sterling and the Euro continues to be a challenge.

Report on Expected Developments

This report describes the expected developments of the Group during the year ended 30th April 2019. The report may contain forward-looking statements and information based on current expectations, and assumptions and forecasts made by the Group. These expectations and assumptions are subject to various known and unknown risks, uncertainties and other factors, which could lead to substantial differences between the actual future results, financial performance and the estimates and historical results given in this report. Many of these factors are outside the Group's control. The Group accepts no liability to publicly revise or update these forward-looking statements or adjust them to future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

Going concern

Within the 30th April 2018 Chairman's Statement reference was made to an improvement in cash flow of £17 million and a gearing level of 11% as at the year end. Despite the increased dividend payment of £6 million and a further £5.7 million of capital expenditure during the first half of this financial year, the net debt as reported in note 12 has deteriorated only by a modest £946,000. There are essentially two aspects to the cash management performance in the first half of this financial year:

1)   The continued focus on controlling our investment in working capital.

2)   The increased levels of profitability. As can be seen from the first half year results, the post-tax profits at £5.7 million are significantly ahead of the £4.5 million reported for the same period last year and also pro-rata as against the post-tax profit figure for the year to 30th April 2018. Adding back the Group's non-cash charges of £3.8 million (October 2017 £3.7 million, year to 30th April 2018 £7.3 million) gives a feel for the cash-generating potential of the Group.

The Group's bank facilities, in terms of quantum, are materially unchanged from those reported within the full year accounts. We would refer you in particular to Note 20.b) on page 59 of those accounts where you can see that our unutilised facilities are significant. During December 2018, a 5-year revolving credit facility for £10 million expired (along with a bond line and an FX line). The Company has successfully negotiated the like-for-like replacement of these facilities with a new 5-year agreement on improved terms. The practical impact is that £5 million of debt under the old facility is shown as a current liability repayable within one year in these accounts for the period ended 31st October 2018. Any outstanding amount related to these new facilities will be reported as a non-current liability for the financial year ended 30th April 2019.

Given the profitability of the Group, the modest gearing levels and the bank facilities available to it, the Directors have concluded that drawing up the accounts on a going concern basis is appropriate.

Responsibility statement of the Directors in respect of the half-yearly financial report

The Directors confirm to the best of their knowledge that 1) this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that 2) the Interim Management Report and condensed financial statements include a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year) and 4.2.8R (being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

Condensed Consolidated Statement of Profit or Loss

for the half year to 31st October 2018