Final Results

RNS Number : 0571Z

Chamberlin PLC

24 May 2016

 

24 May 2016

AIM: CMH

CHAMBERLIN plc

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

FINAL RESULTS

for the year ended 31 March 2016

 

KEY POINTS

·      Results affected by tougher trading conditions and currency, in line with expectations

·      Revenues of £35.0m (2015: £40.8m) - reflects weak Euro and downturn in steel, oil and gas and mining sectors
 

·      Underlying profit before tax* of £0.7m (2015: £0.8m) - with £1.0m adverse impact from weak Euro  

Loss before tax on an IFRS basis of £0.2m (2015: profit of £0.1m)

·      Underlying diluted profit per share* of 5.5p (2015: 7.2p)

IFRS diluted loss per share of 3.3p (2015: profit per share of 0.2p)

·      Cash inflow from operations increased to £2.3m (2015: £1.3m)

·      Net debt at 31 March 2016 reduced to £3.2m (30 September 2015: £4.3m, 31 March 2015 £3.8m)

·    Major new automotive contract announced in February 2016 will commence delivery in H2 2017

·    Initiative to develop machining capability - will support new long term growth opportunities

·    Board remains committed to delivering further progress

*Underlying figures are stated before exceptional items, administration costs of the pension scheme and net financing costs on pension obligations, share based payment costs and the associated tax impact of these items.

Chairman, Keith Butler-Wheelhouse, commented: 

"Trading conditions over the year have been challenging, with a continuing slowdown in the Group's core markets and the strength of Sterling against the Euro a significant headwind. Revenues at £35.0m and underlying profit before tax at £0.7m are in line with market expectations, with this performance supported by both our tight focus on cost and our programme to improve efficiencies and improve processes. 

The Group has closed the financial year with major new contracts wins which support a return to profit growth as production volumes come on stream. This is encouraging and our accompanying initiative to establish a new machining facility will position the Group as the only fully integrated supplier of grey iron bearing housings in Europe. We remain very excited about the significant new long term growth opportunities this opens up.

While there is still work to be done, the Group is in a stronger position than it was two years ago and we remain committed to delivering further progress.  We will provide a further update on trading at the AGM."

Enquiries

Chamberlin plc (www.chamberlin.co.uk) Kevin Nolan, Chief Executive David Roberts, Finance Director		T: 01922 707100
Panmure Gordon (UK) Limited (Nominated Adviser and Broker) Adam James/ Peter Steel		T: 020 7886 2500
KTZ Communications (Financial PR) Katie Tzouliadis, Viktoria Langley, Emma Pearson		T: 020 3178 6378

Chairman's Statement

Introduction

Trading results have deteriorated in a challenging period. We have seen a continuing slowdown in the Group's core markets and the strength of Sterling against the Euro was a significant headwind. Revenues at £35.0m and underlying profit before tax at £0.7m are in line with market expectations, reflecting our trading update on 29 February 2016. This performance has been supported by both our tight focus on cost and our programme to improve efficiencies and improve processes. 

We reported in our half yearly results that we believed that the Group was better positioned to win profitable revenue and, in the last quarter, were delighted to announce that we had secured a major new automotive contract. In addition to demonstrating Walsall's ability to compete on a global basis in its specialisation, this new contract is strategically significant as it marks the Group's move into the supply of fully machined components. To support this, we are establishing a new machining facility which, when complete, will position the Group as the only fully integrated supplier of grey iron bearing housings in Europe. We remain very excited about the significant new long term growth opportunities this opens up for the Group.

Results

The Group generated revenues of £35.0m (2015: £40.8m) for the year to 31 March 2016, reflecting the severe downturn in key markets, including steel and oil and gas. In addition, adverse Euro/ Sterling currency accounted for £1.1m of the year-on-year reduction. Approximately 30% of Group sales are denominated in Euros which were transacted at an average rate of €1.34 (2015: €1.24).

Underlying profit before tax was £0.7m (2015: £0.8m). Diluted underlying profit per share was 5.5p (2015: 7.2p).

On an IFRS basis, the Group generated a loss before tax of £0.2m (2015: profit of £0.1m) after accounting for restructuring costs of £0.5m and administration and finance costs on the closed pension scheme of £0.4m. Diluted statutory loss per share was 3.3p (2015: profit per share of 0.2p).

The net debt position at 31 March 2016 was reduced by £0.6m year-on-year to £3.2m (2015: £3.8m). The Group has debt facilities of £8.0m, of which £3.2m was available at 31 March 2016 for drawdown. 

Dividend

No dividend is proposed for the period under review (2015: nil).

Staff

In a very challenging year, our staff have demonstrated their commitment and dedication, and on behalf of the Board, I would like to thank everyone across the business for their hard work. The ongoing process of driving the business forward is underpinned by the talent and efforts of all our teams.

Strategy & Outlook

The Group has closed the financial year with major new contract wins which support a return to profit growth as production volumes come on stream. This is encouraging, as is our investment in new machining capability, which will strengthen our market positioning and widen opportunities.

While there is still work to be done, the Group is in a stronger position than it was two years ago and we remain committed to delivering further progress.  We will provide a further update on trading at the AGM.

Keith Butler-Wheelhouse

Chairman

23 May 2016

Chief Executive's Review

The Group's overall performance has been robust in difficult trading conditions and the outcome in underlying profits reflects our work over the last two years or so to realign the cost base and improve efficiencies and processes. Our focus remains on improving performance and in particular capturing the new opportunities that we have identified in the automotive sector.   

Foundries

While foundry revenues decreased year-on-year to £25.6m (2015: £30.4m), operating profit at £1.2m showed only a £0.1m reduction (2015: £1.3m).

The Group operates three foundries, at Walsall, Leicester and Scunthorpe, each with a different specialisation. Our foundry at Walsall is our flagship operation and drives approximately half the foundry division's sales. Walsall's expertise is in producing small castings, typically below 3kg in weight, which have complex internal geometry. The complex geometry is achieved through the use of innovative core assembly techniques and, importantly, the foundry is capable of producing these castings in high volumes. The automotive turbocharger segment is a major market for Walsall, with modern designs requiring precise alignment of cooling and lubrication passages to meet the increased performance demanded by modern engines. Legislation remains a major driver of this market, with the requirement to reduce CO₂ emissions promoting the introduction of smaller, turbocharged petrol engines. Turbochargers accounted for 44.4% of the Foundry Division sales over the year (2015: 40.3%). Walsall's award of a major new automotive contract in the final quarter of the financial year reflects the foundry's ability to compete internationally in its specialist area. The contract is also strategically important as we will be supplying turbo charger bearing housings which are fully machined in-house. To support this, we are investing an initial £1.6m in a new machining facility.  This initiative is an exciting development which we expect to open up significant new long term growth opportunities, with Walsall positioned as the only fully integrated supplier of grey iron bearing housings in Europe. 

Our foundry in Leicester produces mid-size castings typically around 20kg, with moderately complex internal shapes although typically with demanding metallurgy requirements around temperature, strength and wear resistance. The Scunthorpe foundry focuses on heavy castings weighing up to 6,000kg which have complex geometry and challenging metallurgy. These castings are used in applications where there is a requirement for high strength or high temperature performance, for instance in large process compressors, industrial gas turbines and mining, quarrying and construction equipment. Demand at both foundries remained subdued and we have taken action to reduce the cost base at both foundries to ensure a lower breakeven point.

Engineering

Revenues from the engineering operations, comprising our Exidor and Petrel businesses, decreased year-on-year to £9.4m (2015: £10.4m) and operating profit was £0.7m (2015: £1.0m). This Division now accounts for approximately 27% of Group revenues. 

Our Exidor business is the UK market leader in panic and emergency exit door hardware. The business operates in a highly regulated market as its products are for life-critical applications and its customers place great value upon the assurance of genuinely British designed, manufactured and certified product. The business performed well and we are pleased with its continuing progress in increasing export sales.  We remain focused on driving overseas sales while continuing to maintain Exidor's leading UK position.

Petrel Limited has a well established reputation for designing and manufacturing high quality lighting and control equipment for use in hazardous or demanding environments.  The business supplies customers across the UK and Europe as well as internationally. Sales at Petrel have been affected by the downturn in the oil & gas sector. However, the business is continuing to invest in developing its LED offering as well as its portable light fittings range to ensure that customers benefit from ongoing advances in technology. Approximately 11.8% of sales (2015: 11.6%) were generated from portable lighting and LED products over the year and we expect this percentage to continue to increase as the business transitions to LED. 

Outlook

We expect trading conditions to remain constrained in some of our key markets and, reflecting this, we remain focused on cost control and efficiencies. Nonetheless, we are also encouraged by the opportunities we see for our foundry activities at Walsall, underpinned by recent contract wins and our initiative to develop our machining capability.

Kevin Nolan

Chief Executive

23 May 2016

Finance Review

Overview

Sales decreased by 14.3% during the year to £35.0m (2015: £40.8m). Gross profit margin increased from 20.1% in 2015 to 21.0% in 2016. 

Underlying profit before tax was £0.7m (2015: £0.8m). Diluted underlying earnings per share was 5.5p (2015: 7.2p).

The IFRS results show an operating profit of £0.1m (2015: £0.4m), a loss before tax of £0.2m (2015: profit of £0.1m) and a statutory loss per share of 3.3p (2015: earnings per share 0.2p).

Exceptional items

Exceptional items in the year included £0.5m (2015: £0.4m) relating to the realignment of the cost base of the Group. As a result the headcount of the Group has been reduced by 9.8% from 399 to 360.

Tax

The Group's underlying tax charge for the year was £0.2m (2015: £0.2m) with an underlying effective rate of 31% (2015: 27%). The IFRS total tax charge for the year was nil (2015: £0.1m), an effective tax rate of 11% (2015: 79%). 

Cash generation and financing

Operating cash inflow was £2.3m (2015: £1.3m).

Capital expenditure for the year increased to £1.5m (2015: £1.4m). This was ahead of depreciation and amortisation of £1.3m (2015: £1.3m).

Our overdraft and net borrowings at 31 March 2016 decreased to £3.2m (2015: £3.8m). The Group debt facility has four elements: £7.0m invoice discounting facility, £0.5m overdraft, a £0.4m loan repayable over two years and other finance leases of £0.1m. The Group is now trading with a comfortable level of headroom within these facilities.

Foreign exchange

It is the Group's policy to minimise risk to exchange rate movements affecting sales and purchases by economically hedging or netting currency exposures at the time of commitment, or when there is a high probability of future commitment, using currency instruments (primarily forward exchange contracts). A proportion of forecast exposures are hedged depending on the level of confidence and hedging is topped up following regular reviews. On this basis up to 50% of the Group's annual exposures are likely to be hedged at any point in time and the Group's net transactional exposure to different currencies varies from time to time.

Approximately 30% of the Group's revenues are denominated in Euros. During the year to 31 March 2016 the average exchange rate used to translate into GBP sterling was €1.34 (31 March 2015: €1.24).

Pension

The Group's defined benefit pension scheme was closed to future accrual in 2007. Following the last triennial valuation, as at 1 April 2013, contributions were set at £0.3m per year for the period under review increasing by 3% per year thereafter based on a deficit recovery period of 14 years. 

The pension expense for the defined benefit scheme was £0.2m in 2016 (2015: £0.2m), and is shown in non-underlying.  The Group cash contribution during the year was £0.3m (2015: £0.3m).

The Group operates a defined contribution pension scheme for its current employees. The cost of £0.3m (2015: £0.3m) is included within underlying operating performance.

The IAS 19 deficit at 31 March 2016 was £4.7m (2015: £4.5m). The increase principally reflects the underperformance on assets against expected levels partially offset by the increase in the discount rate used to calculate scheme liabilities, as a consequence of a rise in bond yields over the last year.

David Roberts

23 May 2016

Consolidated Income Statement

for the year ended 31 March 2016

		Year ended 31 March 2016				Year ended 31 March 2015
	Note	Underlying	+  Non-underlying	Total		Underlying	+   Non- underlying	Total
		£000	£000	£000		£000	£000	£000
Revenue	3.	34,988	-	34,988		40,835	-	40,835
Cost of sales		(27,657)	-	(27,657)		(32,612)	-	(32,612)
Gross profit		7,331	-	7,331		8,223	-	8,223
Other operating expenses	7.	(6,501)	(746)	(7,247)		(7,236)	(583)	(7,819)
Operating profit/ (loss)		830	(746)	84		987	(583)	404
Finance costs	4.	(178)	(142)	(320)		(184)	(144)	(328)
Profit/ (loss) before tax		652	(888)	(236)		803	(727)	76
Tax (expense)/ credit		(202)	177	(25)		(213)	153	(60)
Profit /(loss) for the year from continuing operations attributable to equity holders of the parent Company		450	(711)	(261)		590	(574)	16
Earnings/ (loss) per share
Basic	6.			(3.3)p				0.2p
Basic underlying	6.	5.7p				7.4p
Diluted	6.			(3.3)p				0.2p
Diluted underlying	6.	5.5p				7.2p

+ Non-underlying items represent exceptional items as disclosed in note 7, administration costs of the pension scheme and net financing costs on pension obligations, share based payment costs and associated tax impact of these items.

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2016

		2016		2015
		£000		£000
(Loss)/ profit for the year		(261)		16
Other comprehensive income
Reclassification for cash flow hedge included in sales		(419)		193
Movements in fair value on cash flow hedges taken to other comprehensive income		(193)		(162)
Deferred tax on movement in cash flow hedges		123		(6)
Movement on deferred tax relating to rate change		(9)		-
Net other comprehensive income that may be recycled to profit and loss		(498)		25
Re-measurement (losses) on pension assets and liabilities		(254)		(1,150)
Deferred/ current tax on re-measurement losses on pension scheme		51		242
Movement on deferred tax on re-measurement losses relating to rate change		(93)		-
Net other comprehensive (expense) that will not be recycled to profit or loss		(296)		(908)
Other comprehensive (expense) for the period net of tax		(794)		(883)
Total comprehensive expense for the year attributable to equity holders of the parent Company		(1,055)		(867)

 

Consolidated Balance Sheet

at 31 March 2016

		2016		2015
		£000		£000
Non-current assets
Property, plant and equipment		8,112		7,900
Intangible assets		387		452
Deferred tax assets		1,370		1,382
		9,869		9,734
Current assets
Inventories		2,899		4,006
Trade and other receivables		6,195		7,809
Current tax		-		1
		9,094		11,816
Total assets		18,963		21,550
Current liabilities
Financial liabilities		2,941		3,392
Trade and other payables		5,727		6,801
		8,668		10,193
Non current liabilities
Financial liabilities		251		400
Deferred tax		59		104
Provisions		200		200
Defined benefit pension scheme deficit		4,692		4,544
		5,202		5,248
Total liabilities		13,870		15,441
Capital and reserves
Called up share capital		1,990		1,990
Share premium account		1,269		1,269
Capital redemption reserve		109		109
Hedging reserve		(343)		155
Retained earnings		2,068		2,586
Total equity		5,093		6,109
Total equity and liabilities		18,963		21,550

Consolidated Cash Flow Statement

for the year ended 31 March 2016

		2016		2015
		£000		£000
Operating activities
(Loss)/ profit for the year before tax		(236)		76
Adjustments to reconcile profit for the year to net cash inflow from operating activities:
Net finance costs excluding pensions		178		184
Depreciation of property, plant and equipment		1,235		1,180
Amortisation of software		97		105
Amortisation and impairment of development costs		11		8
Profit on disposal of property, plant and equipment		(12)		(6)
Loss on disposal of intangibles		-		11
Share based payments		53		30
Difference between pension contributions paid and amounts recognised in the Consolidated Income Statement		(106)		(99)
Decrease/ (increase) in inventories		1,107		(272)
Decrease/ (increase) in receivables		1,421		(268)
(Decrease)/ increase in payables		(1,493)		160
Increase in provisions		-		174
Cash inflow from operations		2,255		1,283
Income taxes received		1		37
Net cash  inflow from operating activities		2,256		1,320
Investing activities
Purchase of property, plant and equipment		(1,468)		(1,261)
Purchase of software		(31)		(120)
Development costs		(12)		-
Disposal of plant and equipment		33		94
Net cash outflow from investing activities		(1,478)		(1,287)
Financing activities
Interest paid		(178)		(184)
Repayment of asset loans		(200)		(200)
Net invoice finance (repayment)/ draw down		(319)		217
Finance leases taken out		84		-
Net cash outflow from financing activities		(613)		(167)
Net increase/ (decrease) in cash and cash equivalents		165		(134)
Cash and cash equivalents at the start of the year		(291)		(157)
Cash and cash equivalents at the end of the year		(126)		(291)
Cash and cash equivalents comprise:
Bank overdraft		(126)		(291)
		(126)		(291)

 

Consolidated statement of changes in equity

	Share capital	Capital redemption reserve	Share premium	Hedging reserve	Retained earnings	Attributable to equity holders of the parent
	£000	£000	£000	£000	£000	£000
Balance at 31 March 2014	1,990	109	1,269	130	3,442	6,940
Profit for the year	-	-	-	-	16	16
Other comprehensive income for the year net of tax	-	-	-	25	(908)	(883)
Total comprehensive income	-	-	-	25	(892)	(867)
Share based payments	-	-	-	-	30	30
Deferred tax on employee share options	-	-	-	-	6	6
Total of transactions with shareholders	-	-	-	-	36	36
Balance as at 1 April 2015	1,990	109	1,269	155	2,586	6,109
Loss for the year	-	-	-	-	(261)	(261)
Other comprehensive income for the year net of tax	-	-	-	(498)	(296)	(794)
Total comprehensive income	-	-	-	(498)	(557)	(1,055)
Share based payments	-	-	-	-	53	53
Deferred tax on employee share options	-	-	-	-	(14)	(14)
Total of transactions with shareholders	-	-	-	-	39	39
Balance at 31 March 2016	1,990	109	1,269	(343)	2,068	5,093

Share premium account

The share premium account balance includes 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 Comprehensive Income attributable to equity shareholders, less distributions to shareholders.

Hedging reserve

The hedging reserve records the effective portion of the net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred.

 

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 for the year ended 31 March 2016 were authorised for issue by the board of directors on 23 May 2016 and the balance sheets were signed on the board's behalf by Kevin Nolan and David Roberts.  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 2006.

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the years to 31 March 2016 or 31 March 2015 but is derived from the 2016 Annual Report and Accounts. The Annual Report and Accounts for 2015 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2016 will be delivered to the Registrar of Companies in due course. The auditors, Grant Thornton UK LLP, have reported on the accounts for the year 31 March 2016 and have given an unqualified report which does not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006 nor an emphasis of matter paragraph. 

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 408 of the Companies Act 2006 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.

Accounting policies

The preliminary announcement has been prepared on the same basis as the financial statements for the year ended 31 March 2015.

Going Concern

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Financial Statements.

3.             SEGMENTAL ANALYSIS

For management purposes, the Group is organised into two operating divisions according to the nature of the products and services. Operating segments within those divisions are combined on the basis of their similar long term characteristics and similar nature of their products, services and end users as follows:

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 their customers.

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

Management monitors the operating results of its divisions separately for the purposes of making decisions about resource allocation and performance assessment. The Chief Operating Decision Maker is the Chief Executive.

(i)            By operating segment

	Segmental revenue		Segmental operating profit
Year ended	2016	2015	2016	2015
	£000	£000	£000	£000
Foundries	25,635	30,432	1,212	1,259
Engineering	9,353	10,403	679	988
Segmental results	34,988	40,835	1,891	2,247
Reconciliation of reported segmental operating profit
Segment operating profit			1,891	2,247
Shared costs (excluding share based payment charge)			(1,061)	(1,260)
Exceptional and non-underlying costs			(746)	(583)
Net finance costs			(320)	(328)
(Loss)/ profit before tax			(236)	76
Segmental assets
Foundries			13,560	15,221
Engineering			4,768	5,617
Segmental net assets			18,328	20,838
Segmental liabilities
Foundries			(4,313)	(4,844)
Engineering			(1,614)	(2,157)
Segmental net assets			(5,927)	(7,001)
Unallocated net liabilities			(7,308)	(7,728)
Total net assets			5,093	6,109

	Capital expenditure, depreciation and amortisation
Capital additions		Foundries				Engineering			Total
		2016		2015		2016	2015		2016	2015
		£000		£000		£000	£000		£000	£000
Property, plant and   equipment		1,381		937		87	324		1,468	1,261
Software		13		80		18	40		31	120
Development costs		-		-		12	-		12	-
Depreciation and amortisation
Property, plant and equipment		(985)		(941)		(250)	(239)		(1,235)	(1,180)
Software		(85)		(83)		(12)	(22)		(97)	(105)
Development costs		-		-		(11)	(8)		(11)	(8)

(ii)           By geographical segment

	2016	2015
Revenue by location of customer	£000	£000
United Kingdom	20,179	24,992
Germany	4,952	6,997
Rest of Europe	7,594	6,592
Other countries	2,263	2,254
	34,988	40,835

4.             FINANCE COSTS AND FINANCE REVENUE

	2016	2015
	£000	£000
Finance costs
Bank overdraft interest payable	(178)	(184)
Finance cost of pensions	(142)	(144)
	(320)	(328)

5.             DIVIDENDS PAID AND PROPOSED

	2016	2015
	£000	£000
Paid equity dividends on ordinary shares	-	-
Proposed final dividend subject to shareholder approval	-	-

6.             (LOSS)/ EARNINGS PER SHARE

The calculation of (loss)/ 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 (loss)/ earnings per share, adjustment has been made for the dilutive effect of outstanding share options. Underlying (loss)/ earnings per share, which excludes non-underlying items, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Exceptional costs are detailed in note 7.

	2016	2015
	£000	£000
(Loss)/ earnings for basic earnings per share	(261)	16
Exceptional costs	463	417
Net financing costs and service cost on pension obligations	372	280
Share based payment charge	53	30
Taxation effect of the above	(177)	(153)
Earnings for underlying earnings per share	450	590
	2016	2015
	Number '000	Number '000
Weighted average number of ordinary shares	7,958	7,958
Adjustment to reflect shares under options	160	212
Weighted average number of ordinary shares - fully diluted	8,118	8,170

As at 31 March 2016 there is no adjustment for the 160,300 shares under option as they are required to be excluded from the weighted average number of shares for diluted loss per share as they are anti-dilutive for the period then ended.

7.             EXCEPTIONAL COSTS AND NON-UNDERLYING

	2016	2015
	£000	£000
Group reorganisation	463	314
Environmental clean-up	-	103
Exceptional costs	463	417
Share based payment charge	53	30
Defined benefit pension scheme administration costs	230	136
Non-underlying other operating expenses	746	583
Finance cost of pensions	142	144
Taxation
- tax effect of exceptional and non-underlying costs	(177)	(153)
	711	574

During 2015 and continuing into 2016 the Group continues to rationalise its operations given the reduced levels of turnover seen in the Leicester and Scunthorpe foundries. Group reorganisation costs, including redundancy and recruitment, relate to this rationalisation.

Environmental clean-up costs relate to exceptional costs incurred in the clean-up of the Scunthorpe site.

8.             FINANCIAL LIABILITIES

	2016	2015
	£000	£000
Current liabilities
Bank overdraft	126	291
Current instalments due on asset finance loans	200	200
Invoice finance facility	2,582	2,901
Current instalments due on finance leases	33	-
	2,941	3,392
Non-current liabilities
Instalments due on asset finance loans	200	400
Instalments due on finance leases	51	-
Total financial liabilities	3,192	3,792

The overdraft is held with HSBC Bank plc as part of the Group facility of £500,000, is secured on all assets of the business, is repayable on demand and is renewable in March 2017. Interest is payable at 2.0% (2015: 2.0%) over base rate.

Asset finance loans are secured against various items of plant and machinery across the Group. These loans are repayable by monthly instalments for a period of two years to March 2018. Interest is payable at 3.25% over base rate. £200,000 is repayable within year 1-2.

Other finance leases are secured against the specific item to which they relate. These leases are repayable by monthly instalments for a period of three years to March 2019. £33,000 is repayable in 1-2 years and £18,000 within 2-5 years. Interest is payable at a fixed amount that ranges between 3.1% and 4.6%.

Invoice finance balances are secured against the trade receivables of the Group and are repayable on demand. Interest is payable at 2.3% over base rate. The maximum facility as at 31 March 2016 is £7.0m. Management have assessed the treatment of the financing arrangements and have determined it is appropriate to recognise trade receivables and invoice finance liabilities separately.

9.             PENSIONS ARRANGEMENTS

During the year, the Group operated funded defined benefit and defined contribution pension schemes for the majority of its employees, these being established under trusts with the assets held separately from those of the Group. The pension operating cost for the Group defined benefit scheme for 2016 was £230,000 (2015: £136,000) plus £142,000 of financing cost (2015: £144,000).

The other schemes within the Group are defined contribution schemes and the pension cost represents contributions payable. The total cost of defined contributions schemes was £331,000 (2015: £312,000). The notes below relate to the defined benefit scheme. 

The actuarial liabilities have been calculated using the Projected Unit method. The major assumptions used by the actuary were (in nominal terms):-

	31 March 2016	31 March 2015	31 March 2014
Salary increases	n/a	n/a	n/a
Pension increases (post 1997)	2.9%	2.9%	3.2%
Discount rate	3.5%	3.2%	4.3%
Inflation assumption - RPI	2.9%	2.9%	3.3%
Inflation assumption - CPI	2.1%	1.8%	2.2%

The post retirement mortality assumptions allow for expected increases in longevity. The current disclosures relate to assumptions based on longevity in years following retirement as of the balance sheet date, with future pensions relating to an employee retiring in 2032.

		2016 Years	2015 Years
Current pensioner at 65 -      male		21.4	21.3
-       female		23.7	23.6
Future pensioner at 65  -       male		22.4	22.3
-       female		24.8	24.8

The scheme was closed to future accrual with effect from 30th November 2007, after which the Company's regular contribution rate reduced to zero (previously the rate had been 9.1% of members' pensionable salaries).

During the previous year the triennial valuation as at 1 April 2013 was concluded. In return for maintaining the previous contribution arrangements and extending the deficit reduction period to 2028, the Company has given security over the Group's land and buildings to the pension scheme. With effect from 1 April 2016 deficit reduction contributions will increase to £21,252 per month (previously £20,633 per month), with a 3% annual increase thereafter.

The contributions expected to be paid during the year to 31 March 2017 are £255,000.

The scheme assets are stated at the market values at the respective balance sheet dates. The assets and liabilities of the scheme were:

		2016 £000	2015 £000
Equities/ diversified growth fund		11,719	12,451
Bonds		1,123	1,417
Insured pensioner assets		9	9
Cash		123	131
Market value of assets		12,974	14,008
Actuarial value of liability		(17,666)	(18,552)
Scheme deficit		(4,692)	(4,544)
Related deferred tax asset		845	909
Net pension liability		(3,847)	(3,635)

Net benefit expense recognised in profit and loss		2016 £000	2015 £000
Administration costs		-	(32)
Net interest expense		(142)	(144)
		(142)	(176)

Re-measurement losses/ (gains) in other comprehensive income		2016 £000	2015 £000
Actuarial (gains)/ losses arising from changes in financial assumptions		(575)	2,196
Actuarial losses arising from changes in demographic assumptions		-	-
Experience adjustments		(5)	208
Return on assets (excluding interest income)		834	(1,254)
		254	1,150

		2016 £000	2015 £000
Actual return on plan assets		(396)	1,762

Movement in deficit during the year		2016 £000	2015 £000
Deficit in scheme at beginning of year		(4,544)	(3,493)
Employer contributions		248	275
Net benefit expense		(142)	(176)
Actuarial (loss)/ gain		(254)	(1,150)
Deficit in scheme at end of year		(4,692)	(4,544)

Movement in scheme assets		2016 £000	2015 £000
Fair value at beginning of year		14,008	12,856
Interest income on scheme assets		438	540
Return on assets (excluding interest income)		(834)	1,254
Employer contributions		248	275
Benefits paid		(886)	(885)
Administrative costs		-	(32)
Fair value at end of year		12,974	14,008

Movement in scheme liabilities		2016 £000	2015 £000
Benefit obligation at start of year		18,552	16,349
Interest cost		580	684
Actuarial (gains)/ losses arising from changes in financial assumptions		(575)	2,196
Actuarial losses arising from changes in demographic assumptions		-	-
Experience adjustments		(5)	208
Benefits paid		(886)	(885)
Benefit obligation at end of year		17,666	18,552

The weighted average duration of the pension scheme liabilities are 14.5 years (2015: 14.5 years).

A quantitative sensitivity analysis for significant assumptions as at 31 March 2016 is as shown below:

Present value of scheme liabilities when changing the following assumptions:			2016 £000
Discount rate increased by 1% p.a.			15,575
RPI and CPI increased by 1% p.a.			18,538
Mortality- members assumed to be their actual age as opposed to 1 year older			18,320

The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the year.

10.          REPORT AND ACCOUNTS

Copies of the Annual Report will be available on the Group's website, www.chamberlin.co.uk from 24 June 2016 and from the Group's head office at Chuckery Road, Walsall, West Midlands, WS1 2DU. The AGM will be held on 22 July 2016 at Chuckery Road, Walsall, West Midlands.

 

END

 

 

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