Half Year Results

RNS Number : 0282S

Chamberlin PLC

27 November 2012

 



CMH

CHAMBERLIN PLC

("Chamberlin" or "the Group")

Half Year Results

For the six months to 30 September 2012

Key Points

·      Results show continuing progress despite softer market conditions, with profitability materially improved

·      Revenues of £22.6m (2011: £23.0m)

·      Underlying operating profit up 11% to £934,000 (2011: £841,000)

Statutory operating profit up 18% to £936,000 (2011: £796,000)

·      Underlying profit before tax up 15% to £914,000 (2011: £797,000)

Statutory profit before tax up 15% to £815,000 (2011: £710,000)

-     driven by improved operational processes and product profitability

·      Cash generated from operations increased by 62% to £1.53m (2011: £947,000)

·      Net debt reduced by 130% to £887,000 (2011: £2.04m)

·      Underlying earnings per share up 9% to 8.1p (2011: 7.4p)

Statutory earnings per share up 7% to 8.0p (2011: 7.5p)

·      Interim dividend up 25% to 1.25p (2011: 1.0p)

·      Foundry activities - focus to enhance operational performance and management across the three foundries

·      Engineering operations - revenues ahead in both businesses

·      Board anticipates both challenges and opportunities in 2013, given general economic uncertainties and remains confident about Chamberlin's long term prospects

All underlying figures are stated before net financing costs on pension obligations, share-based payment costs and associated tax impact.

Chairman, Keith Butler-Wheelhouse, commented, 

"I am pleased to report results for the six months to 30 September 2012, which show continued improvement in profitability, with underlying profit before tax up 15% to £914,000 despite revenues slightly lower due to a softening in market conditions. Chamberlin remains strongly cash generative, with cash generated from operations up 62% to £1.53m and this has enabled the Board to declare an increased interim dividend of 1.25 pence per share.

We continue to work on improving operational processes and product profitability, and have also strengthened our commercial management in each of our foundries. There are a number of uncertainties to the general economic outlook in 2013 but the Board believes that Chamberlin will respond well to the challenges and opportunities ahead." 

Enquiries

Chamberlin plc Tim Hair, Chief Executive Mark Bache, Finance Director		T: 020 3178 6378 (today) / 01922 707100
Charles Stanley Securities                              (Nominated Adviser and Broker) Russell Cook / Carl Holmes		T: 020 7149 6000
Biddicks (Financial PR) Katie Tzouliadis		T: 020 3178 6378

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report Chamberlin's results for the six months to 30 September 2012, which show a continuing improvement in the Group's profitability, with underlying profit before tax increased by 15% to £914,000, and strong cash generation. This has been achieved against softening market conditions as the European economies slowed and reflect in part our ongoing emphasis on improving the Group's operating performance. 

As we enter the second half of the financial year, we continue to develop the business and notwithstanding the softer conditions, believe that Chamberlin remains well-placed in its markets. 

Results

Revenues for the six months to 30 September 2012 were slightly down on the same period last year at £22.6m (2011: £23.0m). Nonetheless, the Group delivered a material improvement in profitability, generating underlying operating profit up 11% to £934,000 (2011: £841,000) and underlying profit before tax up 15% to £914,000 (2011: £797,000).  Diluted underlying earnings per share improved by 9% to 8.1p (2011: 7.4p).  All underlying figures are stated before net financing costs on pension obligations, share-based payment costs and associated tax impact.

On a statutory basis, profit before tax increased by 15% to £815,000 (2011: £710,000) and earnings per share increased by 7% to 8.0p (2011: 7.5p).

Chamberlin continues to generate strong cash flows and in the six months under review operating cash flow showed a 62% increase to £1,531,000 against the same period last year (2011: £947,000).  The high level of cash generation enabled us to reduce our overdraft and net borrowings at 30 September 2012 showed a substantial decrease of £1,152,000 to £887,000 against the same point last year (30 September 2011: £2,039,000 and 31 March 2012: £1,558,000).  The Group's borrowings continue to be financed by a £5.0m facility with HSBC.

Dividend

Given the continued improvement in operating profits and strong cash generation the Board is pleased to declare an increased interim dividend of 1.25p (2011: 1.0p).  The interim dividend will be paid on 17th December 2012 to shareholders on the register at the close of business on 7th December 2012.

Operations

The material increase in profitability has resulted from two long standing initiatives; improved operational processes, especially in our foundries, and enhanced management of product profitability, which has been supported by upgrades to our business systems.

As part of our ongoing drive to improve the Group's operational performance, we have significantly strengthened our commercial management in each of the three foundry operations, upgrading skills and bringing in stronger commercial leadership. These changes will create an enhanced managerial structure and bring greater focus to each of the businesses. This shall in turn support our development in both our existing and new markets.  In general, the engineering economy has slowed during the current year but I am pleased with the Group's new business initiatives and am confident that the newer relationships we are developing have very good revenue potential as these relationships mature. 

Complex castings for the turbocharger industry continue to be an important area of focus for our business, and our Walsall foundry is a well-established supplier of bearing housings for both passenger car and commercial diesel turbochargers.  Our projects here for two major customers, Borg Warner and IHI, are proceeding into production in line with our expectations. The technology shift towards turbocharged petrol engines is continuing as expected, driven by emissions legislation and rising fuel prices.  Demand for turbochargers is forecast to continue to increase despite the lower growth expected in car volumes.  This trend for motor manufacturers to apply turbochargers to petrol engines has attracted new OEM entrants to the turbocharger market in recent years and we believe that, in time, there is scope to win business supplying these OEMs.  In the meantime, I am pleased to report that our existing strong customer relationships have enabled us to bid for and win orders for turbine casings.  These will be made in temperature-resistant iron at our Leicester foundry. The first of these casings has recently been approved by our customer and volume production will begin, on schedule, in the final quarter of this financial year. 

Our non-foundry businesses continue to make steady progress, with revenues in both operations higher than the same period last year.  Exidor continues to be the UK market leader in specialist emergency exit hardware and is making good progress in the door closer market, especially into its export markets.  Although certain sectors of this market are highly competitive, we are able to compete effectively in the premium part of the market. Petrel, our hazardous environments lighting business, has established a strong record for technical competence in this market but has not fully translated this reputation into revenue growth.  We have recently appointed a new Managing Director to Petrel who brings a strong commercial track record to the business and we expect to see the benefits of this reflected in Petrel's future performance.

Outlook

Strategically, our plan for Chamberlin is to concentrate management effort on increasing sales in the existing businesses to maximise the use of our capacity.  This, together with the improved productivity demonstrated in these results, will drive further increases in profitability.  In the short term there are a number of uncertainties to the general economic outlook for 2013, including slower growth rates in Europe and globally, and euro exchange rates. In this environment, technical expertise, operational excellence, sound management and a focus on customers are critical to success.  I am pleased to report that, in the months since I became Chairman, I have found these values embedded in the business and therefore I have no doubt Chamberlin will respond well to the challenges and opportunities ahead. 

Keith Butler-Wheelhouse

Chairman

26 November 2012

Consolidated Income Statement

for the six months ended 30 September 2012

Note		Unaudited six months ended 30 September 2012			Unaudited six months ended 30 September 2011			Year ended 31 March 2012
		Underlying	# Non-underlying	Total	Underlying	#Non-underlying	Total	Underlying	# Non-underlying	Total
		£000	£000	£000	£000	£000	£000	£000	£000	£000
Revenue		22,588	-	22,588	22,960	-	22,960	45,532	-	45,532
Cost of sales		(18,177)	-	(18,177)	(18,640)	-	(18,640)	(36,652)	-	(36,652)
Gross profit		4,411	-	4,411	4,320	-	4,320	8,880	-	8,880
Other operating expenses		(3,477)	-	(3,477)	(3,479)	-	(3,479)	(7,145)	-	(7,145)
Trading profit		934	-	934	841	-	841	1,735	-	1,735
Share based payment credit/(charge)		-	2	2	-	(45)	(45)	-	(148)	(148)
Operating profit/(loss)		934	2	936	841	(45)	796	1,735	(148)	1,587
Finance costs	3	(20)	(101)	(121)	(44)	(42)	(86)	(78)	(79)	(157)
Profit/(loss) before tax		914	(99)	815	797	(87)	710	1,657	(227)	1,430
Tax (expense)/credit	4	(203)	24	(179)	(165)	23	(142)	(242)	59	(183)
Profit/(loss) for the period from continuing operations attributable to equity holders of the Parent Company		711	(75)	636	632	(64)	568	1,415	(168)	1,247
Earnings per share:
Basic	5			8.0p			7.5p			16.1p
Underlying	5	8.9p			8.3p			18.3p
Diluted	5			7.2p			6.6p			14.5p
Diluted underlying	5	8.1p			7.4p			16.5p

^# Non- underlying items represent net financing costs on pension obligations, share based payment costs and associated tax impact.

Consolidated Statement of Comprehensive Income

for the six months ended 30 September 2012

	Unaudited six months ended  30 September 2012		Unaudited six months ended 30 September 2011		Year ended 31 March  2012
		£000		£000		£000
Profit for the period		636		568		1,247
Other comprehensive income
Movements in fair value on cash flow hedges taken to other comprehensive income		174		155		250
Reclassification for cash flow hedge included in sales		(249)		129		229
Deferred tax on movements in cash flow hedges		20		(70)		(120)
Actuarial losses on pension assets and liabilities		(323)		(870)		(1,206)
Deferred tax on actuarial losses		78		226		314
Movement on deferred tax on actuarial losses relating to tax rate change		(33)		(29)		(61)
Other comprehensive income for the period net of tax		(333)		(459)		(594)
Total comprehensive income for the period attributable to equity holders of the Parent Company		303		109		653

Consolidated Balance Sheet

At 30 September 2012

		Unaudited 30 September 2012		Unaudited 30 September 2011		31 March 2012
		£000		£000		£000
Non-current assets
Property, plant and equipment		8,137		8,046		8,121
Intangible assets		660		421		642
Deferred tax assets		1,157		984		1,056
		9,954		9,451		9,819
Current assets
Inventories		3,575		3,393		3,846
Trade and other receivables		8,071		9,213		8,959
		11,646		12,606		12,805
Total assets		21,600		22,057		22,624
Current liabilities
Financial liabilities		887		2,039		1,558
Trade and other payables		7,744		8,559		8,684
Provisions		-		19		-
Current tax		281		-		145
		8,912		10,617		10,387
Non-current liabilities
Defined benefit pension scheme deficit		3,282		2,903		3,061
Deferred tax liabilities		110		87		133
		3,392		2,990		3,194
Total liabilities		12,304		13,607		13,581
Capital and reserves
Share capital		1,987		1,952		1,987
Share premium		1,269		1,269		1,269
Capital redemption reserve		109		109		109
Hedging reserve		119		29		174
Retained earnings		5,812		5,091		5,504
Total equity		9,296		8,450		9,043
Total equity and liabilities		21,600		22,057		22,624

 Consolidated Cash Flow Statement

for the six months ended 30 September 2012

		Unaudited six months ended 30 September 2012		Unaudited six months ended 30 September 2011		Year ended 31 March 2012
		£000		£000		£000
Operating activities
Profit for the period before tax		815		710		1,430
Adjustments for:
Net finance costs excluding pensions		20		44		78
Depreciation of property, plant and equipment		576		631		1,219
Amortisation of software		53		52		79
Amortisation of development costs		29		33		48
(Profit)/loss on disposal of property plant          and equipment		(11)		(32)		(68)
Share based payments		(2)		45		148
Difference between pension contributions paid and amounts recognised in the Income Statement		(56)		(108)		(347)
Decrease/ (Increase)  in inventories		271		(424)		(877)
Decrease in receivables		813		375		873
Decrease in payables		(977)		(313)		(68)
Movement in provisions		-		(66)		(85)
Net cash flow from operating activities		1,531		947		2,430
Investing activities
Purchase of property, plant and equipment		(632)		(517)		(1,185)
Purchase of software		(41)		(12)		(243)
Development costs		(59)		-		(32)
Disposal of property, plant and equipment		51		42		83
Net cash outflow from investing activities		(681)		(487)		(1,377)
Financing activities
Interest paid		(20)		(44)		(78)
Proceeds from issue of share capital		-		500		500
Dividends paid		(159)		(74)		(152)
Net cash (outflow)/ inflow from financing activities		(179)		382		270
Net increase in cash and cash equivalents		671		842		1,323
Cash and cash equivalents at the start of the period		(1,558)		(2,881)		(2,881)
Cash and cash equivalents at the end of the period		(887)		(2,039)		(1,558)
Cash and cash equivalents compromise:
Financial liabilities		(887)		(2,039)		(1,558)

Consolidated Statement of Changes in Equity

for the six months ended 30 September 2012

	Share capital	Capital redemption reserve	Share premium	Hedging Reserve	Retained earnings	Attributable to equity holders of the parent
	£000	£000	£000	£000	£000	£000
At 1 April 2011	1,859	109	862	(185)	5,134	7,779
Profit for the period	-	-	-	-	568	568
Other comprehensive income for the period net of tax	-	-	-	214	(673)	(459)
Total comprehensive income	-	-	-	214	(105)	109
Share placement	93	-	407	-	-	500
Dividends paid	-	-	-	-	(74)	(74)
Share based payments	-	-	-	-	24	24
Deferred tax on employee share options	-	-	-	-	112	112
At 30 September 2011	1,952	109	1,269	29	5,091	8,450
Profit for the period	-	-	-	-	679	679
Other comprehensive income for the period net of tax	-	-	-	145	(280)	(135)
Total comprehensive income	-	-	-	145	399	544
Share options issued	35	-	-	-	(35)	-
Dividends paid	-	-	-	-	(78)	(78)
Share based payments	-	-	-	-	89	89
Deferred tax on employee share options	-	-	-	-	38	38
At 1 April 2012	1,987	109	1,269	174	5,504	9,043
Profit for the period	-	-	-	-	636	636
Other comprehensive income for the period net of tax	-	-	-	(55)	(278)	(333)
Total comprehensive income	-	-	-	(55)	358	303
Dividends paid	-	-	-	-	(159)	(159)
Share based payments	-	-	-	-	7	7
Deferred tax on employee share options	-	-	-	-	102	102
At 30 September 2012	1,987	109	1,269	119	5,812	9,296

Independent review report to Chamberlin plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2012 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and the related notes 1 to 7. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the Company's annual financial statements having regard to the accounting standards applicable to such annual financial statements.  

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2012 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 1, which comply with IFRSs as adopted by the European Union and in accordance with the AIM Rules issued by the London Stock Exchange.

Ernst & Young LLP,

Birmingham

26 November 2012

Notes to the interim financial statements

1          General information and accounting policies

This Interim Financial Report is unaudited, but has been reviewed by the Company's auditor having regard to the International Standard on Review Engagements (UK & Ireland) 2410 "Review of Financial Information Performed by the Independent Auditor of the Entity", issued by the Auditing Practices Board for use in the UK. A copy of their unqualified review opinion is attached.

The interim condensed consolidated financial statements do not comprise the Group's statutory accounts as defined by section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 March 2012 were approved by the board of directors on 21 May 2012 and were filed at Companies House.  The auditors' report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.  

Basis of preparation

The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

Accounting policies

The principal accounting policies, based on IFRS, applied in preparing the Interim Financial Statements are consistent with the policies set out in the Annual Report and Accounts for the year ended 31 March 2012. No new standards or interpretations issued since 31 March 2012 have had a material impact on the accounting of the Group

Hedge activities

At 30 September 2012 the Group held 12 foreign currency forward contracts designated as hedges of expected future sales to customers in Europe for which the Group has highly probable forecasted transactions.

Going concern

After making appropriate enquiries, the directors consider that the Group has adequate resources to continue in operation for the foreseeable future.  In forming this view the directors have reviewed budgets and other financial information.  For this reason, they continue to adopt the going concern basis in preparing the accounts.

2          Segmental analysis

For management purposes, the Group is organised into two operating divisions: Foundries and Engineering. The operating segments reporting format reflects the Group's management and internal reporting structures.

	Segmental revenue					Segmental operating  profit
	Unaudited  6 months ended 30 Sep 2012 £000	Unaudited 6 months ended 30 Sep 2011 £000		Year ended 31 March 2012 £000		Unaudited 6 months ended 30 Sep 2012 £000	Unaudited 6 months ended 30 Sep 2011 £000	Year ended 31 March 2012 £000
Foundries	18,231	18,922		37,354		1,225	1,148	2,076
Engineering	4,357	4,038		8,178		239	204	478
Segmental results	22,588	22,960		45,532		1,464	1,352	2,554
Reconciliation of reported segmental operating profit to profit before tax
Segmental operating profit						1,464	1,352	2,554
Shared costs						(528)	(556)	(967)
Net finance costs						(121)	(86)	(157)
Profit before tax						815	710	1,430

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.  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, cable management and general ironmongery.

Financing and income tax are managed on a Group basis and are not allocated to operating segments.

3          Finance income and costs

	Unaudited six months ended 30 September 2012	Unaudited six months ended 30 September 2011	Year ended 31 March 2012
	£000	£000	£000
Interest on bank overdraft	(20)	(44)	(78)
Finance cost of pension scheme	(101)	(42)	(79)
	(121)	(86)	(157)

4          Income tax expense

An effective rate of tax for the six months to 30 September 2012 of 22% (30 September 2011: 20%) has been used in these interim statements.

The effective rate of tax is lower than the standard rate because of prior period research and development tax claims. The 2011 effective rate of tax was lower than the standard because of the utilisation of prior period losses.

On the 22 June 2011 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 28% to 23% over a period of 4 years.

The Corporation tax rate fell from 26% for the year ended 31 March 2012 to 24% for the year ended 31 March 2013. The Corporation tax rate will fall to 23% from 1 April 2013, a rate change which was substantively enacted on 3 July 2012. The Chancellor has announced progressive reductions to 22% in corporation tax rates, with a 1% fall from 1 April 2014 but this change has not been substantively enacted.

It is not anticipated that the subsequent reduction to 22%, once substantively enacted, will have a material effect on the Company's future current or deferred tax charges.

5          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 net financing cost of pension obligation and share based compensation, less related tax thereon, as analysed below, has been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group.

	Unaudited six months ended 30 September 2012	Unaudited six months ended 30 September 2011	Year ended 31 March 2012
	£000	£000	£000
Earnings for basic earnings per share	636	568	1,247
Net financing cost on pension obligation	101	42	79
Taxation effect of pension obligation	(24)	(11)	(21)
Share based payments charge	(2)	45	148
Taxation effect of share based payments	-	(12)	(38)
Earnings for underlying earnings per share	711	632	1,415

	Unaudited six months ended 30 September 2012	Unaudited six months ended 30 September 2011	Year ended 31 March 2012
	000	000	000
Weighted average number of ordinary shares	7,950	7,611	7,731
Adjustment to reflect shares under option	818	980	844
Diluted weighted average number of ordinary shares	8,768	8,591	8,575

6          Pensions

The Group operates a defined benefit pension scheme and a number of defined contribution pension schemes on behalf of its employees.  For defined contribution schemes, contributions paid in the period are charged to the income statement.  For the defined benefit scheme, actuarial calculations are performed in accordance with IAS 19 in order to arrive at the amounts to be charged in the income statement and recognised in the statement of comprehensive income.  The defined benefit scheme is closed to new entrants and future accrual.

Under IAS 19, the Company recognises all movements in the actuarial funding position of the scheme in each period.  This is likely to lead to volatility in shareholders' equity from period to period.

The IAS 19 figures are based on a number of actuarial assumptions as set out below, which the actuaries have confirmed they consider appropriate.  The projected unit credit actuarial cost method has been used in the actuarial calculations.

	30 September 2012	30 September 2011	31 March 2012
Salary increases	n/a	n/a	n/a
Pension increases (post 1997)	2.5%	2.9%	3.1%
Discount rate	4.4%	5.1%	4.7%
Inflation assumption - RPI	2.5%	3.0%	3.1%
Inflation assumption - CPI	1.7%	2.0%	2.0%

The demographic assumptions used for 30 September 2012, were the same as used in 31 March 2012, 30 September 2011 and the last full actuarial valuation performed as at 1 April 2010.

The defined benefit scheme funding has changed under IAS 19 as follows:

Funding status	Unaudited 6 months to 30 September 2012 £000	Unaudited 6 months to 30 September 2011 £000	Year to 31 March 2012 £000
Scheme assets at end of period	12,545	11,844	12,473
Benefit obligations at end of period	(15,828)	(14,747)	(15,534)
Deficit in scheme	(3,283)	(2,903)	(3,061)
Related deferred tax asset	755	726	735
Net pension liability	(2,528)	(2,177)	(2,326)

The increase in the net pension liability is mainly due to negative investment returns combined with an increase in the value of liabilities as a consequence of a reduction in the discount rate. In addition the reduction in assumed future inflation in respect of deferred benefits noted above has partially offset the increase in scheme liabilities.

7          Interim report

Copies of this interim results statement will be available on the Group's website, www.chamberlin.co.uk, and from the Group's headquarters at Chuckery Road, Walsall, West Midlands, WS1 2DU.

 

END

 

 

IR UNUVRUKAAUAA