AGM Statement and Trading Update

RNS Number : 9921H

Chamberlin PLC

30 November 2022

 

30 November 2022

Chamberlin plc

("Chamberlin", the "Company" or the "Group")

AGM Statement and Trading Update

Chamberlin plc (AIM: CMH.L), the specialist castings and engineering group, announces that at the Company's Annual General Meeting this morning, Kevin Price, Chief Executive, will make the following statement regarding trading in the first half of the financial year ("H1 2023").

"I am pleased to report that trading across all of Chamberlin's businesses is in line with expectations in the first half of the financial year, as we continue to implement our strategy and build on the improved operational and financial performance achieved in the previous financial year. Despite orders and operational performance at Russell Ductile Castings and Petrel remaining buoyant, the Group's profitability in H1 2023 has been held back by a slower recovery at Chamberlin & Hill Castings ("CHC"). We have continued to take the necessary corrective actions in H1 2023 at CHC to improve its performance through cost savings and margin enhancement initiatives, with this business now entering H2 2023 at a broadly break-even position on a monthly basis. These actions, together with the profit contributions expected from the contract wins discussed below, give the Board confidence that CHC will deliver a strong, profitable performance in H2 2023 and enable the Group to meet market expectations for the year ending 31 May 2023.

Chamberlin & Hill Castings ("CHC")

Despite the uneven demand in automotive volumes in H1 2023 that has held back its performance, CHC has been successful in its strategy of diversification away from the automotive sector having secured a number of new orders in the last two months with a potential aggregate annualised revenue value of approximately £1.2m, in the construction, cast iron radiator and commercial vehicle markets. Production is expected to commence on all of these programmes by the end of the first quarter of the 2023 calendar year. A significant proportion of these new orders are the result of the concerted efforts of customers to source from local UK supply chains and CHC has the excess capacity and technical expertise to be able to benefit further from this trend.

In addition, CHC, through its Emba cookware brand, has entered into an agreement with a well-established cookware company to develop, market and sell, a jointly branded cookware range, through their substantial existing network of distributors and retailers. The product range is currently in development and is expected to be available for retail sale towards the end of March 2023. This arrangement is a promising and exciting development for the Group's Emba brand, providing access to a much wider customer base than could have been established with the Group's in-house resources and supporting the potential for Emba to become a more meaningful contributor to CHC's diversification strategy.

CHC's machining facility has also won a number of recent new orders that will see production ramp up over the next three months as these programmes gather momentum. These orders are expected to have an aggregate annualised revenue value of around £1.0m and will enable five out of the six machining cells to be fully occupied on a single shift basis for the first time in nearly two years by the end of March 2023.

These new contracts, in addition to a currently break-even trading position, provide CHC with the opportunity to deliver a strong end to the current financial year and ensure that it is well placed to make further progress in FY 2024.

Russell Ductile Castings ("RDC")

RDC has continued to perform well in H1 2023 and the Board is pleased to report that order intake and financial performance have continued to demonstrate resilience and consistency. RDC's order book has remained stable at around £4m throughout H1 2023 and remains on track to deliver to the Board's expectations for this financial year. Notably in the first half, RDC was successful in securing a significant contract in the renewable energy sector, which is a target market for RDC's future growth strategy.

The positive outlook for RDC is now also supported by the completion of the capacity expansion project in November 2022 that has increased RDC's ability to produce large castings over three tons by around 30%, providing the means to reduce customer lead-times and take advantage of its buoyant enquiry pipeline from new and existing customers. This investment demonstrates the Board's belief that RDC can continue to capitalise on its market leading position in the UK for the manufacture of specialist and highly technical large cast iron products.

Petrel

Petrel has made a positive contribution to the Group's results in H1 2023, at a run rate consistent with the previous financial year and delivering operating profit averaging around 17% of revenue. Order intake has remained elevated, enabling the order book to be maintained at a consistently healthy level. This includes a substantial order in the defence sector to supply lighting to a branch of His Majesty's Armed Forces.

Petrel has a significant opportunity to release its untapped potential and to increase its market share, having already earned a solid reputation with its existing product range and in-house capability to develop its products further and enter new markets. With this in mind, the Board has installed a new management team at Petrel in the first half, with the industry knowledge, vision and experience to exploit Petrel's true potential. As a result of this change, there will be an exceptional restructuring charge of approximately £0.1m in the income statement in the first half (unaudited). The Board continues to strongly believe that the Group being in control of its own destiny, through the ability to design, manufacture and market its own products is an important part of the Group's future strategy and Petrel's unique ability to be flexible and react quickly to customer needs means that it is well placed to be a material contributor to Group performance going forward.

Outlook

The green shoots of recovery that were evident from the Group's financial performance in the previous financial year, have continued into H1 2023. Although profitability will be second-half weighted due to the further efforts required to improve the performance of CHC in H1 2023, these actions have had the desired effect and give the Board the confidence that the Group will meet full year market expectations for the year ending 31 May 2023 should current market conditions remain unchanged. The Board, however, remains mindful of the demand on working capital that the expected growth in revenue in the second half from new orders at CHC and the capacity expansion at RDC will create, and continues to evaluate opportunities to strengthen the balance sheet, including in relation to the Group's property assets, in order to deliver on the Group's growth objectives."

Certain of the information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

Enquiries:

Chamberlin plc Kevin Price, Chief Executive Alan Tomlinson, Finance Director		T: 01922 707100
Cenkos Securities plc (Nominated Adviser and Broker) Katy Birkin Stephen Keys George Lawson		T: 020 7397 8900
Peterhouse Capital Limited (Joint Broker) Lucy Williams Duncan Vasey		T: 020 7469 0930

 

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