Final Results

RNS Number : 9746V

Chamberlin PLC

05 June 2008

 



CHAMBERLIN plc

FINAL RESULTS 

Chamberlin plc ('Chamberlin', the 'Company' or the 'Group') announces its audited results for the year ended 31 March 2008.

Financial highlights:

• Underlying profit before tax of £1.4m * (2007:£1.1m)

• Underlying earnings per share of 15.1p * (2007: 10.5p)

• Dividend maintained at 11.85p for the year (2007: 11.85p)

• Underlying return on equity of 10.0% * (2007: 7.1%)

	Year to	Year to
	31 March	31 March
	2008	2007
	£000	£000
Turnover	39,967	39,188
Underlying profit before taxation *	1,404	1,110
Operating profit/(loss)	829	(816)
Profit/(loss) before taxation	585	(831)
Underlying earnings per share *	15.1p	10.5p
Basic (loss)/earnings per share	8.0p	(4.4)p
Dividends per share (paid and proposed)	11.85p	11.85p

* Stated before exceptional costs of £494,000 and unrealised foreign exchange expenses of £325,000 (2007: Stated before non-recurring operating costs of £0.8m, exceptional costs of £1.1m and £0.4m of tax credits). 

Commenting on the outlook Chairman, Tom Brown, said 'Our work in 2007/08 has built effectively on the foundations laid during the previous year. Demand is currently robust, present trading is in line with management expectations, and although an economic slowdown cannot be ruled out we are well placed to take advantage of whatever opportunities the future presents. Meanwhile we remain determined to expand by acquisition, but will only do so when our criteria are met'.

Chamberlin plc

Tom Brown, Chairman            01922 707100

Tim Hair, Chief Executive      01922 707100

Landsbanki Securities (UK) Limited

Tom Hulme, NOMAD               020 7426 9000

Citigate Dewe Rogerson

Toby Mountford                 07710 356611  

Chairman's Statement

The development of Chamberlin plc under the new executive team has continued during the past year, with significant progress throughout the business. Upgraded controls and improved analysis of product profitability have brought new rigour to the operating units, subsidiary management has been strengthened and the move to a more urgent and customer focused management culture is now largely complete.

Results & Dividend

Profit before tax excluding exceptional items and an unrealised foreign exchange cost increased to £1.4m, a rise of 27% on last year, while earnings per share before all one-off costs rose 44% to 15.1p (2007: 10.5p), with the improved profit supported by a tax benefit from prior years.

Revenues increased slightly to £40.0m (2007: £39.2m), with the impact of prior year disposals from Petrel somewhat masking growth in continuing operations.

Exceptional costs in the year totalled £494,000 and include the £468,000 profit from the sale of a surplus property announced in our interim results, together with a provision of £897,000 relating to a long-running action for alleged nuisance which is described more fully in the Business Review.

Chamberlin retains a strong balance sheet, with net debt at year end of £1.0M (2007: £0.2M) and gearing at 8.5% (2007: 1.8%) despite capital expenditure of £1.6M, largely aimed at opportunities for future profits growth.

I am pleased to confirm that the Board is recommending an unchanged final dividend of 8.0p per share (11.85p total for the year) payable on 28 July 2008 to shareholders on the register on 5 July 2008.

Progress

Our foundries have progressed well during the year. Overall demand has been sustained, and the price differential in favour of low cost economies is reducing, which coupled with issues relating to their quality and service have led to the return to the UK of some work previously sourced abroad. Market prices for raw materials, especially pig iron and steel scrap, have risen sharply during the fourth quarter and we are currently in negotiation with customers to achieve recovery of these costs. All three foundry sites are improving performance and winning new customers, and we expect further progress in the coming year.

Our engineering companies continue to make a strong contribution to our results, generating 38% of Group trading profit (before shared costs) from a base of 18% of Group revenues. Both companies are respected players in their markets and we believe that they still have considerable potential.

Pensions

During the year, and after appropriate consultation with employees, the final salary pension scheme was closed to further accrual of benefits and the few remaining active members were transferred to a Group Personal Pension Scheme. All future pension benefits for employees will be provided on this basis. The final salary scheme underwent a triennial valuation, and at year end the pension deficit stood at £1.1m (2007: £2.2m).

Strategy

We have continued to explore opportunities to acquire businesses that fit our strategy of building a more broadly-based engineering Group around the theme of 'difficult things done well.' Although we have reviewed a number of businesses that appeared to meet our criteria none has proved appropriate, and we are continuing our search for suitable targets.  

Outlook

Our work in 2007/08 has built effectively on the foundations laid during the previous year. Demand is currently robust, present trading is in line with management expectations, and although an economic slowdown cannot be ruled out we are well placed to take advantage of whatever opportunities the future presents. Meanwhile we remain determined to expand by acquisition, but will only do so when our criteria are met.

 Tom Brown

Chairman

5 June 2008

Business Review

The turnaround process that we initiated some 18 months ago has progressed well, delivering the expected profit improvement of 27%. All subsidiaries are making good progress, run either by managers appointed by the new executive team or by ones who have responded well to the changed business culture; they are providing strong leadership to their businesses and reducing the reliance on direction from the centre.  

Finance

The underlying profit before tax and exceptional items (PBTE) for the year was £1.4m, an increase of 27% over the previous year. This is before the impact of revaluing forward currency contracts, which in the year resulted in a charge of £0.3m.

Chamberlin derives a proportion of its turnover from European customers who are invoiced in Euros. In order to reduce its exposure to foreign currency fluctuations the Group sells approximately 80% of expected Euro revenues on forward currency contracts of up to 12 months. IFRS requires that forward currency contracts are restated to the exchange rate prevailing at the balance sheet date, with the resulting unrealised profit or loss being credited/(charged) to the income statement. The Directors have therefore concluded that the clearest understanding of the trading performance of the Group can be derived from underlying earnings before foreign currency re-statement. The impact of currency adjustment is disclosed as a separate entry on the Income Statement.

The Group's balance sheet remains strong with net equity of £11.2m. Closing borrowing increased to £1.0m (2007: £0.2m), as a consequence of high capital expenditure of £1.6m and the timing of the Easter holidays delaying a number of debtor receipts until just after the year end. At £1.0m, average daily borrowings were down year on year by £0.7m.

Nuisance Claim

One of the Group's subsidiaries, Chamberlin & Hill Castings Ltd, has operated as a foundry in Walsall since 1890. In 2000 a housing development was built on a former industrial site close to the foundry, and in 2005 a nuisance claim, as noted first in the Annual Report for the year ended 31 March 2006, was commenced by certain residents of the new development.

On legal advice, the Group vigorously defended all aspects of the claim from its inception. However, lawyers for the claimants have been operating on 'no-win-no-fee' contracts with very significant success fees, and as a result the claimants face no financial risk in pursuing their action while the costs potentially faced by Chamberlin have escalated very rapidly. 

Whilst Chamberlin plc does not admit or accept liability under this claim, the Group has engaged in protracted mediation and negotiations with both the claimants and their legal counsel, with a view to reaching an agreed settlement at a level that we believe to be in shareholders' best interests.

A provision for £897,000 has been included in the accounts to cover the Group's own legal costs together with the offers made to the claimants and their lawyers. The vast majority of the expected cost of settlement relates to payments to claimants' solicitors.

Operations

Foundries

Our foundries have continued to enjoy sustained demand, and having generated increased capacity our casting sales rose 4.8% to £32.8m (2007: £31.3m). Input material costs have risen very significantly since last December and we are negotiating to pass these on to customers, so reported revenue in the foundries should grow faster in the coming year than underlying volume. The foundries operate at the most technically demanding areas of their respective markets, and are now experiencing only limited competition from low cost countries. 

Chamberlin & Hill Castings

A high-volume foundry, located in Walsall, Chamberlin & Hill Castings has continued to enjoy strong demand from its automotive customers, especially for turbocharger components. Our strategy to develop a presence in the hydraulics market has made good progress, with initial orders in place to supply many of the dominant hydraulics OEMs. We have also taken the opportunity to exit a number of unattractive low volume contracts.

Demand for automotive turbochargers remains strong and the main manufacturers are forecasting continued growth. The technology is well established on diesel engines with room for further growth, but in petrol applications is generally used only for performance vehicles. Pressure on fuel efficiency and increasing emissions controls are expected to extend the use of turbocharging for efficiency gains in petrol engines, increasing volumes in the future. OEMs have committed to increase turbocharger production capacity from 2010/11 and we are well placed to benefit from growth in this market.

In our last report we noted that Chamberlin & Hill Castings had started to implement lean manufacturing techniques and we are pleased to report that excellent progress has been made, driven to a large extent by the positive engagement of the employees. Improvements in quality, productivity and workflow have been achieved, and we look forward to further gains in the coming year.

Russell Ductile Castings

Supplying a wide range of highly engineered castings, Russell Ductile operates from sites in Leicester and Scunthorpe. In our 2007 annual report we commented that Russell Ductile was in recovery following integration problems under its previous management team, and we are pleased to report that the actions taken have improved performance during the year. Leicester performance has fully justified our decision to agree an extended lease for the site, and although the recovery at Scunthorpe is not yet complete, an investment of £400,000 in upgraded equipment is performing well now that the learning curve has been completed.

The two Russell Ductile foundries are winning profitable business in both UK and export markets, and although the demand for castings from the UK steel industry has declined sharply this has been offset by gains in the rail, construction equipment and heavy vehicle industries. We are particularly pleased to note that Russell Ductile has recently won contracts to supply both UK and Export customers with castings that were previously sourced from China.

Engineering

Fred Duncombe

Supplying emergency exit equipment and other architectural hardware from its base in Cannock, Fred Duncombe has been through a transitional year as a new Managing Director has replaced a poorly performing sales force, streamlined the organisation and increased the focus and urgency in the business. We face challenges from new entrants to the exit hardware market and a potential slowdown in the construction sector, but the business is now stronger and better positioned to meet these challenges.

Petrel

In the year since the disposal of a peripheral activity, Petrel has focussed on its core business of supplying lighting and controls for hazardous areas, making significant progress. Product ranges have been extended and refined, operational improvements delivered and a significant improvement in profit achieved from a lower asset base. We look forward to continued profitable growth from this business. 

Strategy

In our last report we commented at length on our strategy, summarising our thinking as the creation, by acquisition, of a broadly based engineering group with the theme 'difficult things done well'.  This thinking remains at the heart of our strategy, and we have developed acquisition criteria against which we benchmark the opportunities that are presented.  

During the year we have reviewed over 20 potential acquisitions but have not found any that meet our requirements. We will continue to seek acquisitions and will ensure that we continue our rigorous approach to judging their suitability.

Tim Hair                               Mark Bache

Chief Executive                        Finance Director

5 June 2008                            5 June 2008

Consolidated Income Statement

for the year ended 31 March 2008

			2008				2007
	Before exceptional items	Exceptional items	Total		Before exceptional items	Exceptional items	Total
	£000	£000	£000		£000	£000	£000
Revenue	39,967	-	39,967		39,188	-	39,188
Cost of sales	(33,134)	-	(33,134)		(33,007)	-	(33,007)
Gross profit	6,833	-	6,833		6,181	-	6,181
Other operating (expenses)/income	(5,510)	(494)	(6,004)		(5,856)	(1,141)	(6,997)
Operating profit/(loss) from continuing operations	1,323	(494)	829		325	(1,141)	(816)
Finance revenue	149	-	149		90	-	90
Finance costs	(68)	-	(68)		(112)	-	(112)
Profit/(loss) from continuing operations before tax and unrealised foreign currency (loss)/gain	1,404	(494)	910		303	(1,141)	(838)
Unrealised foreign currency (loss)/gain	(325)	-	(325)		7	-	7
Profit/(loss) from continuing operations before tax	1,079	(494)	585		310	(1,141)	(831)
Tax (expense)/ credit	(181)	190	9		292	216	508
Profit/(loss) for the year from continuing operations	898	(304)	594		602	(925)	(323)
Earnings/(loss) per share
basic			8.0p				(4.4)p
underlying	15.1p				8.1p
diluted			7.9p				(4.4)p
diluted underlying	14.9p				8.0p

Consolidated Statement of Recognised Income and Expense

for the year ended 31 March 2008

		2008		2007
		£000		£000
Actuarial gains/(losses) on pension assets and liabilities		729		(2,132)
Deferred tax (charge)/credit on actuarial gains/(losses)		(204)		640
Net income/(expense) recognised directly in equity		525		(1,492)
Profit/(loss) for the year		594		(323)
Total recognised income and expense for the year attributable to equity holders of the parent company		1,119		(1,815)

Parent Company Statement of Recognised Income and Expense

in the year ended 31 March 2008

		2008		2007
		£000		£000
Actual gains/(losses) on pension assets and liabilities		729		(2,132)
Deferred tax (charge)/credit on actuarial gains/(losses)		(204)		640
Net (expense)/income recognised directly in equity		525		(1,492)
Profit/(loss) for the year		1,254		(1,025)
Total recognised income and expense for the year attributable to equity holders of the parent company		1,779		(2,517)

 Consolidated Balance Sheet

at 31 March 2008

		31 March		31 March
		2008		2007
		£000		£000
Non-current assets
Property, plant and equipment		8,349		7,954
Intangible assets		379		453
Deferred tax assets		692		975
		9,420		9,382
Current assets
Inventories		4,616		4,746
Trade and other receivables		8,719		7,370
Income taxes receivable		5		70
Assets held for resale		-		219
		13,340		12,405
Total assets		22,760		21,787
Current liabilities
Financial liabilities		1,031		209
Trade and other payables		8,812		7,738
		9,843		7,947
Non current liabilities
Deferred tax		594		663
Defined benefit pension scheme    deficit		1,078		2,235
		1,672		2,898
Total Liabilities		11,515		10,845
Capital and reserves
Called up share capital		1,859		1,854
Share premium account		862		828
Capital redemption reserve		109		109
Retained earnings		8,415		8,151
Total equity		11,245		10,942
Total equity and liabilities		22,760		21,787

Tim Hair       )

               ) Directors

Mark Bache     )

The accounts were approved by the Board of Directors on 5 June 2008

  Parent Company Balance Sheet

at 31 March 2008

		31 March 2008		31 March 2007
		£000		£000
Non current assets
Property, plant and equipment		1,112		1,112
Intangible assets		6		7
Investments		7,159		7,159
Deferred tax assets		369		881
		8,646		9,159
Current assets
Trade and other receivables		36		52
Income taxes receivable		469		-
Amounts due from subsidiary companies		4,096		3,874
		4,601		3,926
Total assets		13,247		13,085
Current liabilities
Financial liabilities		1,275		1,415
Trade and other payables		565		183
Amounts due to subsidiary companies		2,701		2,467
		4,541		4,065
Non-current liabilities
Amounts due to subsidiary companies		66		66
Deferred tax		377		497
Defined benefit pension scheme deficit		1,078		2,235
		1,521		2,798
Total Liabilities		6,062		6,863
Capital and reserves
Called up share capital		1,859		1,854
Share premium account		862		828
Capital redemption reserve		109		109
Retained earnings		4,355		3,431
Total equity		7,185		6,222
		13,247		13,085

Tim Hair       )

               ) Directors

Mark Bache     )

The accounts were approved by the Board of Directors on 5 June 2008

  Consolidated Cash Flow Statement 

for the year ended 31 March 2008

		Year ended 31 March 2008		Year ended 31 March 2007
Operating activities		£000			£000
Profit/(loss) for the year		594			(323)
Adjustments to reconcile profit/(loss) for the year to net cash inflow from operating activities:
Taxation		(9)			(508)
Net finance (income)/costs		(81)			22
Depreciation of property, plant and equipment		1,104			1,166
Amortisation of software		42			23
Amortisation of development costs		46			34
(Profit)/loss on disposal of property,   plant and equipment		(471)			373
Share based payments		27			(6)
Difference between pension contributions paid and amounts recognised in the Income Statement		(428)			(384)
Decrease in inventories		130			562
(Increase)/decrease in receivables		(1,349)			572
Increase in payables		414			237
Movement in provisions		660			-
Cash generated from operations		679			1,768
UK Corporation Tax received/(paid)		84			(237)
Net cash flow from operating activities		763			1,531
Investing activities
Purchase of property, plant and equipment		(1,579)			(1,625)
Purchase of software		(14)			(27)
Disposal of plant and equipment		769			119
Net cash flow from investing activities		(824)			(1,533)
Financing activities
Interest paid		(68)			(111)
Pension element of finance income		149			90
Equity dividends paid		(881)			(878)
Issue of shares (including premium)		39			99
Net cash flow from financing activities		(761)			(800)
Net (decrease)/increase in cash and cash equivalents		(822)			(802)
Cash and cash equivalents at the start of the year		(209)			593
Cash and cash equivalents at the end of the year		(1,031)			(209)
Cash and cash equivalents comprise:
Financial liabilities		(1,031)			(209)
		(1,031)			(209)

Parent Company Cash Flow Statement

for the year ended 31 March 2008

		Year ended 31 March 2008		Year ended 31 March 2007
Operating activities		£000		£000
Profit/(loss) for the year		1,254		(847)
Adjustments to reconcile profit/(loss) for the year to net cash inflow from operating activities:
Taxation		(290)		-
Net finance (income)/costs		(27)		22
Depreciation of property, plant and equipment		54		54
Amortisation of software		2		3
Profit on disposal of property, plant and equipment		-		(2)
Share based payments		27		(6)
Difference between pension contributions paid and amounts recognised in the Income Statement		(428)		(384)
(Increase)/decrease in receivables		(206)		1,150
Increase in payables		616		1,054
Movement in provisions				-
Cash generated from operations		1,002		1,044
UK Corporation Tax received/(paid)		7		-
Group relief surrendered for nil consideration		-		(289)
Net cash flow from operating activities		1,009		755
Investing activities
Purchase of property, plant and equipment		(79)		(96)
Purchase of software		(1)		-
Disposal of plant and equipment		25		17
Net cash flow from investing activities		(55)		(79)
Financing activities
Interest paid		(121)		(112)
Pension element of finance income		149		90
Equity dividends paid		(881)		(878)
Issue of shares (including premium)		39		99
Net cash flow from financing activities		(814)		(801)
Net increase/(decrease) in cash and cash equivalents		140		(125)
Cash and cash equivalents at the start of the year		(1,415)		(1,290)
Cash and cash equivalents at the end of the year		(1,275)		(1,415)
Cash and cash equivalents comprise:
Financial liabilities		(1,275)		(1,415)
		(1,275)		(1,415)

NOTES TO THE PRELIMINARY ANNOUNCEMENT

1. Authorisation of financial statements and statement of compliance with IFRS

The Group's and Company's financial statements of Chamberlin plc (the 'Group' or the 'Company') for the year ended 31 March 2008 were authorised for issue by the board of the directors on 5 June 2008 and the balance sheets were signed on the board's behalf by Tim Hair and Mark Bache. The Company is a public limited company incorporated and domiciled in England & Wales. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange.

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 1985. 

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the years to 31 March 2008 or 31 March 2007 but is derived from the 2008 Annual Report and Accounts. The Annual Report and Accounts for 2007 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2008 will be delivered to the Registrar of Companies in due course. The auditors, Ernst & Young LLP, have reported on the accounts for the year to 31 March 2008 and have given an unqualified report which does not contain a statement under Section 237(2) or 237(3) of the Companies Act 1985.  The accounts for the year ended 31 March 2007 also received an unqualified audit report from Ernst & Young LLP.  

      2. Summary of significant accounting policies 

Basis of preparation

The consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.  The Company has taken advantage of the exemption provided under section 230 of the Companies Act 1985 not to publish its individual income statement and related notes.

Basis of consolidation

The consolidated financial statements comprise the financial statements of Chamberlin plc and its subsidiaries as at 31 March each year. The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

3.                SEGMENTAL ANALYSIS

For management purposes, the Group is organised into two operating divisions: Foundries and Engineering, which are the primary segments for reporting purposes. The secondary segmental format is geographical.

The Foundries segment is a supplier of iron castings, in raw or machined form, to a variety of industrial customers who incorporate the castings into their own products or carry out further machining or assembly operations on the castings before selling them on to such customers.

The Engineering segment provides manufactured and imported products to distributors and end-users. The products fall into the categories of door hardware, hazardous area lighting and control gear.

Transfer prices between business segments are set on an arms length basis in a manner similar to transactions with third parties.

The Group's geographical segments are determined by the location of the Group's customers. The Group's assets and costs incurred are all located within the United Kingdom.

(i)   By business segment

	Foundries			Engineering			Total
Continuing operations		2008	2007		2008	2007	2008	2007
		£000	£000		£000	£000	£000	£000
Revenue
Sales		32,800	31,287		7,167	7,901	39,967	39,188
Profit
Trading profit		1,079	681		671	157	1,750	831
Shared costs							(427)	(506)
Unrealised foreign currency (loss)/gain							(325)	7
Exceptional items							(494)	(1,141)
Operating profit/(loss)							504	(809)
Net finance costs							81	(22)
Profit/(loss) before tax							585	(831)
Tax credit							9	508
Profit/(loss) for the year from continuing operations							594	(323)
Net assets
Segmental assets		16,407	14,665		5,592	5,788	21,999	20,453
Segmental liabilities		(6,717)	(6,405)		(2,097)	(1,332)	(8,814)	(7,737)
Segmental net assets		9,690	8,260		3,495	4,456	13,185	12,716
Unallocated net liabilities							(1,940)	(1,774)
Total net assets							11,245	10,942

 

Movements in fixed assets
Capital additions
Property, plant and equipment			1,499	1,345	80	280	1,579	1,625
Software	14			27	-	-	14	27
Depreciation and amortisation
Property, plant and equipment		(884)		(925)	(220)	(241)	(1,104)	(1,166)
Software	(38)			(17)	(3)	(6)	(41)	(23)
Development costs	(26)			(19)	(20)	(15)	(46)	(34)

Unallocated net liabilities comprise cash/overdraft, taxation, pension provisions, deferred tax balances, and head office fixed assets.

(ii) By geographical segment

	2008	2007
Revenue by location of customer	£000	£000
United Kingdom	32,050	30,680
Rest of Europe	6,508	7,170
Other countries	1,409	1,338
	39,967	39,188
4.    OTHER OPERATING EXPENSES	2008	2007
	£000	£000
Distribution costs	1,389	1,414
Administration and selling expenses	4,121	4,435
Operating expenses before exceptional items	5,510	5,849
Exceptional items (note 11)	494	1,141
Operating expenses	6,004	6,990
5.   STAFF NUMBERS AND COSTS	2008	2007
	Number	Number
The average number of people employed by the Group during the year was:
Management and administration	85	84
Production	387	394
Total employees	472	478
The aggregate employment costs of these employees including severance costs in wages and salaries of £54,000 (2007: £224,000) were as follows:-
	2008	2007
	£000	£000
Wages and salaries	12,259	12,715
Social security costs	1,329	1,354
Other pension costs	473	489
Share based payment expense/(credit)	27	(6)
	14,088	14,552
Directors’ emoluments summary	2008	2007
	£000	£000
Directors’ emoluments	522	646
Aggregate gains made by directors on exercise of options	4	16
Notional cost of options granted to directors	27	10
Credit for surrendered options previously granted to directors	-	(16)
Number of directors accruing benefits under
Defined contribution pension schemes	3	3
6. FINANCE COSTS AND FINANCE REVENUE
	2008	2007
	£000	£000
Finance costs
Bank overdraft interest payable	(68)	(112)
	(68)	(112)
Finance revenue
Finance revenue from pensions	149	90
	149	90
7.    OPERATING PROFIT
	2008	2007
This is stated after charging/(crediting):	£000	£000
(Profit)/loss on disposal of fixed assets (including  £468,000 within exceptional items – see note 11)	(471)	373
Depreciation of owned assets	1,104	1,166
Amortisation of software	41	23
Net (gain)/loss on foreign currency	(31)	65
Cost of inventories recognised as expense	15,252	14,567
Exceptional severance payments and related costs (note 11)	-	224
Stock written down	97	560
Reversal of prior year inventory provisions	(7)	-
-Auditors’ remuneration:
–Group audit fees	25	20
-Audit fees in respect of subsidiaries	45	40
-Interim review fees	5	2
-Taxation advice fees	8	8
-Corporate finance fees	-	36
Research and development expenditure	81	42
Rentals under operating leases:
Hire of plant and equipment	108	92
Other	317	328
8.   TAX (CREDIT)/EXPENSE REPORTED IN THE CONSOLIDATED INCOME STATEMENT
	2008	2007
	£000	£000
Current tax:
UK Corporation tax at 30% (2007: 30%) based on taxable profit for the year	-	-
Amounts (over) provided in prior years	(20)	(70)
	(20)	(70)
Deferred Taxation:
Movement in the year	385	(847)
Amounts (over) provided in prior years	(170)	(230)
Less element of movement shown in the Statement of Recognised Income and Expense	(204)	639
	11	(438)
Tax expense/(credit) reported in the consolidated income statement	(9)	(508)
On 21 March the UK Chancellor of the Exchequer announced a number of tax reforms. The key change to Corporation tax that will apply to the Group is the reduction in the main Corporation tax rate, from 30% to 28%. Effective from 1 April 2008. This has resulted in an increase in the net assets in the consolidated balance sheet of £21,000.
Reconciliation of total tax charge
Profit/(loss) on ordinary activities before tax	585	(831)
Corporation tax expense/(credit) at standard rate of 30% (2007: 30%) on profit before tax	175	(249)
Adjusted by the effects of:
(Income)/expenses not deductible for tax purposes	(15)	41
Timing differences
-negative goodwill release	21	-
Amounts (over) provided in prior years
-corporation tax	(20)	(70)
-deferred tax	(170)	(230)
Total tax expense/(credit) reported in the income statement	(9)	(508)
9. DIVIDENDS PAID AND PROPOSED
	2008	2007
	£000	£000
Paid equity dividends on ordinary shares
2007 final dividend of 8.00p (2005: 8.00p) per share	595	593
2008 interim dividend of 3.85p (2006: 3.85p) per share	286	285
	881	878
Proposed final dividend subject to shareholder approval
2008 final dividend of 8.00p (2006: 8.00p)per share (not recognised as a liability at 31 March 2008)	595	593
10. EARNINGS PER SHARE
The calculation of earnings per share is based on the profit attributable to shareholders and the weighted average number of ordinary shares in issue. In calculating the diluted earnings per share adjustment has been made for the dilutive effect of outstanding share options. Underlying earnings per share, which excludes operating exceptionals and unrealised foreign currency movements, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Operating exceptionals are detailed in note 11.
	2008	2007
	£000	£000
Earnings/(loss) for basic earnings per share	594	(323)
Operating exceptionals	494	1,141
Taxation effect of operating exceptionals	(190)	(216)
Unrealised foreign currency loss/(gain)	325	(7)
Taxation effect of unrealised foreign currency loss/(gain)	(99)	2
Earnings for underlying earnings per share	1,124	597
	2008	2007
	£000	£000
Weighted average number of ordinary shares	7,432	7,402
Adjustment to reflect shares under options	132	144
Weighed average number of ordinary shares – fully diluted	7,564	7,546

11. EXCEPTIONAL ITEMS

	2008	2007
	£000	£000
Severance costs	-	(224)
Other closure costs	-	(495)
Profit/(loss) on sale of property, plant and equipment	468	(302)
Costs of transfer to AIM	-	(120)
Legal claim and associated costs	(897)	-
Inventory write down	(65)	-
	(494)	(1,141)

On 4 April 2007 the Group disposed of a surplus property at Fred Duncombe Ltd for proceeds of £705,000. The net book value of the property was £219,000 and the costs of disposal amounted to £18,000.

The legal claim and associated costs figure relates to a provision against the alleged statutory nuisance in relation to the operation of the Walsall foundry, which has been noted in the last two years accounts. The Group's own legal expenses together with a provision for the offers made to the claimants and their lawyers are included in this amount. Further information in respect of this matter is included in the business review.

The inventory write down relates to items that had been incorrectly valued in Russell Ductile Castings Limited as at 31 March 2007.

12. STATEMENT OF CHANGES IN EQUITY

	Share capital	Capital redemption reserve	Share premium	Retained earnings	Attributable to equity holders of the parent
	£000	£000	£000	£000	£000
Group
Balance at 1 April 2006	1,840	109	743	10,850	13,542
Total recognised income and expense for the year to 31 March 2007	-	-	-	(1,815)	(1,815)
Dividends paid	-	-	-	(878)	(878)
Share based payments	-	-	-	(6)	(6)
Issue of shares	14	-	85	-	99
Balance at 31 March 2007	1,854	109	828	8,151	10,942
Total recognised income and expense for the year to 31 March 2008	-	-	-	1,119	1,119
Dividends paid	-	-	-	(881)	(881)
Share based payments	-	-	-	27	27
Issue of shares	5	-	34	-	39
Balance at 31 March 2008	1,859	109	862	8,415	11,245

Share Premium Account

The share premium account balance included the proceeds that were above the nominal value from issuance of the Company's equity share capital comprising 25p shares.

Capital redemption reserve

The capital redemption reserve has arisen on the cancellation of previously issued shares and represents the nominal value of those shares cancelled.

Retained earnings

Retained earnings include the accumulated profits and losses arising from the Consolidated Income Statement and certain items from the Statement of Recognised Income and Expense attributable to equity shareholders, less distributions to shareholders.

 

END

 

 

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