C h a m b e r l i n p l c A n n u a l R e p o r t a n d A c c o u n t s f o r t h e y e a r e n d e d 3 1 M a r c h 2 0 1 1 Difficult things done well Chuckery Road, Walsall, West Midlands, WS1 2DU Tel: 01922 707100 Fax: 01922 638370 website: www.chamberlin.co.uk email: plc@chamberlin.co.uk 20453-04 14/06/2011 Proof 6 20453-04 14/06/2011 Proof 6 Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Small complex grey iron castings, principally for the automotive sector and hydraulic applications. Emergency exit equipment and traditional architectural hardware directed mainly at the DIY and construction markets. The Board believes that success in the foundry and engineering sector is achieved by businesses that operate in the most demanding area of their technology and provide an outstanding service to their customers – difficult things done well. Our existing activities meet these criteria and we will continue to invest in them and to seek acquisition opportunities that fit this model. Products associated with cable management. Lighting and switchgear associated with petrochemicals and construction applications. Large grey, ductile and alloyed iron castings for a range of applications including power generation, bearing housings, steelworks, construction and compressors. 20453-04 14/06/2011 Proof 6 20453-04 14/06/2011 Proof 6 CHAMBERLIN & HILL CASTINGS LTD Chuckery Road Walsall, WS1 2DU Tel: 01922 721411 Fax: 01922 614610 Bonchurch Street Leicester, LE3 5EP Tel: 0116 2992000 Fax: 0116 2998844 www.chcastings.co.uk EXIDOR LTD Progress Drive Cannock, WS11 0JE Tel: 01543 460030 Fax: 01543 573534 www.fredduncombe.co.uk PETREL LTD 22 Fortnum Close Kitts Green Birmingham, B33 0LB Tel: 0121 783 7161 Fax: 0121 783 5717 www.petrel-ex.co.uk RUSSELL DUCTILE CASTINGS LTD Trent Foundry Dawes Lane Scunthorpe, DN15 6UW Tel: 01724 862152 Fax: 01724 280461 www.russellcastings.co.uk Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 01 Investment Themes A leading operator in the UK – specialist skills and knowledge Modernisation programme has improved processes Downturn successfully navigated – recovery firmly established Growth linked to overseas engineering economy – 70% of product is ultimately exported Further cyclical recovery to come – and new sales opportunities identified Dividend payments recommended – supported by good cash generation Twin track growth strategy – acquisitions to augment organic development For more information on Chamberlin Group operations please visit our website at www.chamberlin.co.uk Contents Introduction Highlights Chairman’s Statement At a Glance Performance Chief Executive’s Review Finance Director’s Review Governance Board of directors Report of the Directors Corporate Governance Directors’ Remuneration Report Independent Auditors’ Report Financial Statements Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Parent Company Balance Sheet Consolidated Cash Flow Statement Parent Company Cash Flow Statement Statement of Changes in Equity Notes to the Accounts Notice of Annual General Meeting Shareholder Information 38 39 40 41 42 43 44 45–74 75–77 80 02–03 04–05 06–09 12–15 16–17 20 21–26 27–29 30–33 34–35 20453-04 15/06/2011 Proof 7 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 02 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Highlights “The financial year to 31 March 2011 marked a turning point for Chamberlin, with the Company returning to profit and recommencing the payment of dividends. Demand recovered throughout the year and the final quarter saw volumes at the Group’s Walsall and Scunthorpe foundries match or exceed pre-recession levels. Production at Chamberlin’s third foundry at Leicester was at 85% of pre-recession levels but volumes are continuing to build. Chamberlin is well positioned for growth, helped by the modernisation and investment programme completed prior to recession and we expect the Group to make progress over the financial year. With demand for our products linked to global engineering activity, we see powerful long term trends favouring our business.” Tom Brown Chairman HALF YEARLY TURNOVER £m . 0 9 1 . 2 0 2 . 6 9 1 . 4 0 2 . 5 3 2 . 5 1 2 . 3 8 1 . 4 6 1 . 2 4 1 . 2 4 1 H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10 H1 11 H2 11 HALF YEARLY TRADING PROFIT £000 1 1 6 9 1 6 1 2 5 5 0 9 4 0 7 H1 07 H2 07 H1 08 H2 08 H1 09 2 8 6 2 2 2 H1 11 H2 11 H2 09 H1 10 H2 10 5 4 4 5 3 6 8 8 2 * Underlying items are stated before Non-Underlying items which represent business reorganisation costs, goodwill impairment costs, and net financing costs on pension obligations and share based payment costs. In prior periods Non-Underlying items also included the movement in unrealised mark-to-market foreign currency gains and losses on monetary assets and liabilities and forward foreign currency contracts, net of realised losses on surplus foreign exchange contracts. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 03 Key Points Group returns to full year profitability and dividends restored Revenues increased by 40% to £39.801m (2010: £28.453m) — driven by continuing recovery across core business Underlying* operating profit of £0.904m (2010: loss of £0.895m) — H2 profit £0.682m versus H1 profit of £0.222m, a 306% improvement Statutory operating profit of £0.508m (2010: loss of £1.049m) Underlying* profit before tax of £0.804m (2010: loss before tax of £1.028m) Statutory profit before tax of £0.333m (2010: loss before tax of £1.421m) Cash generated from operations increased to £1.791m (2010: £0.502m) Net debt reduced to £2.88m (2010: £3.45m) — lowest level since March 2008 Underlying* earnings per share of 6.7p (2010: loss per share of 12.8p) Statutory earnings per share of 1.3p (2010: loss of 16.4p) Restoration of dividend payments, with proposed final dividend of 1.0p (2010: nil) Net assets of £7.8m at 31 March 2011 (2010: £7.9m) Foundry activities saw continuing recovery — light castings at 100% of pre-recession levels and heavy castings above pre-recession levels in quarter 4 February 2011, addition of assets and intellectual property of Jebron Ltd, UK engineering business. Expected to add over £1m of profitable sales annually Board expects continuing growth in new financial year Our Products in Action Breadth of Market The Group supplies a very broad range of sectors within the overall engineering economy. Our customer base is predominantly blue-chip engineering groups operating across the world. Some examples of this diversity include: Chamberlin supply critical turbocharger components to the automotive sector. This is an emissions legislation driven market with high growth prospects. The oil and gas industry as well as other sectors involving hazardous environments is a key market for the Group. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F The Group supply a wide variety of components into the construction equipment and other off-road vehicle markets. See case studies on page 8 20453-04 15/06/2011 Proof 7 04 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Chairman’s Statement “We expect Chamberlin to continue to make good progress over the new financial year and, with demand for our products linked to global engineering activity, we see powerful long term trends favouring our business. We view prospects for the year very positively.” At the half year stage, we were pleased to announce that Chamberlin had returned to profitability. We expected revenues and profits in the second half of the financial year to continue to build and this was the case, with operating profit in the second half at £682,000 against £222,000 in the first half, a 305% increase. For the year as a whole the Group delivered an underlying profit before tax of £804,000 (2010: underlying loss of £1,028,000). This is slightly ahead of market forecasts, which were upgraded in November 2010, and represents a turnaround of over £1.8m over the prior year. Results Demand recovered throughout the year, with revenues for the year ended 31 March 2011 rising to £39.8m (2010: £28.5m), a 40% improvement. Increased activity in our established customer base underpinned this recovery but I am encouraged to note that new business made a strong contribution, especially in the second half of the year, leaving Chamberlin well placed for the current financial year and beyond. The rise in gross profit margins of 3.0 percentage points to 18.7% from 15.7% is noteworthy and the Group delivered an underlying operating profit of £904,000 against an operating loss of £895,000 in the prior year. The underlying profit before tax was £804,000 (2010: underlying loss before tax of £1,028,000) and underlying earnings per share were 6.7p (2010: underlying loss per share of 12.8p). The statutory results show operating profit of £508,000 (2010: loss of £1,049,000), statutory profit before tax of £333,000 (2010: loss before tax of £1,421,000) and statutory earnings per share of 1.3p (2010: loss per share of 16.4p). The business continues to remain very cash generative. Chamberlin generated net cash from operations throughout the downturn and growing profitability in the second half year has accentuated this trend. Cash from operations was £1.41m in the second half, bringing the total cash generated from operations for the year to £1.79m (2010: £0.50m). As a result, during the year we reduced net borrowing by over £0.5m and at 31 March 2011, net debt stood at £2.88m (2010: £3.45m) the lowest point since March 2008. We remain well financed, with an overdraft facility of £5.0m with HSBC, which has recently been renewed with a reduced interest rate. Dividend In view of the Group’s return to profitability and our belief that we will see Chamberlin’s performance continue to strengthen, I am very pleased to announce that the Board proposes to return to the payment of dividends. The Directors are recommending the payment of a final dividend of 1.0p per share, to be paid on 14 July 2011 to shareholders on the register at 1 July 2011. In the future our dividend policy will be progressive and we will seek to pay regular dividends at a level covered adequately by earnings. Chamberlin produce performance critical components for the off-road vehicle sector 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 05 Turbocharger components is a rapidly growing sector that currently represent 21% of Group sales n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F Business performance and growth strategy It was very pleasing to see business volumes in our three foundries The Board I have been very pleased to lead the Board as Chairman since 2004, recover strongly over the course of the year. We closed the year with our after joining as a Non-Executive Director in 2003. Having overseen light castings foundry at Walsall operating at 100% of pre-recession Chamberlin through both a modernisation programme and a severe volumes and our heavy castings foundry at Scunthorpe exceeding recession, and now with the Company restored to profitability and pre-recession levels. Our medium castings operation at Leicester was at dividend payments and entering a new phase of development, I have 85% of pre-recession production but is continuing to recover. decided that it is an appropriate time for me to consider retiring from the Board. I intend to do this in due course once the Board’s succession Looking forward, we see very good growth opportunities across all our planning has been finalised. foundries and our engineering operations, Exidor and Petrel, which contribute about 20% of Group sales are also well positioned. Outlook The financial year to the end of March 2011 marked a turning point for With return to growth firmly established and Chamberlin in good Chamberlin, with the Company returning to profit and recommencing operational shape we are, as I noted in my previous statement, again looking at the expansion of the Group. In February 2011 we acquired the payment of dividends. Chamberlin has come through recession very robustly, helped by the modernisation and investment programme certain assets from the administrators of Jebron Ltd, a door closer completed prior to recession. We have continued to seek process manufacturer. This is an excellent fit with Exidor, extending the product improvements during the downturn and also maintained our skill base offering, and it should add over £1.0m of profitable sales on an and output capability. These factors stand us in good stead as volume annualised basis. recovery continues. In addition, Chamberlin’s very high level of technical skills means that we are very well positioned in our target markets. As we look for acquisitions, we are considering businesses which meet our theme ‘difficult things done well’ and which will complement our We expect Chamberlin to continue to make good progress over the new existing operations. Potential targets include foundry operations which financial year and, with demand for our products linked to global add to the capabilities already in the Group. engineering activity, we see powerful long term trends favouring our business. We view prospects for the year very positively. Tom Brown Chairman 23 May 2011 20453-04 15/06/2011 Proof 7 06 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH At a Glance Our Business Product Areas 37.9% Light Castings 24.2% Medium Castings 21.5% Heavy Castings 8.3% Hazardous Environments 8.1% Security/Safety The two engineering businesses supply to regulated markets operating from two sites in the West Midlands. Chamberlin operates across 5 locations in the UK. The foundry Division specialises in technically demanding castings in complex shapes and in specialist metallurgies. Work is allocated across its three foundry sites based on size and metallurgy as follows: a. Light castings based in Walsall produces castings up to 5kg in grey iron; b. Medium castings based in Leicester produce 5kg to 100kg castings in a wide variety of iron alloys; c. Heavy castings based in Scunthorpe make 100kg and 6 tonnes castings again in a wide variety of iron grades. Retail Engineering Business Revenue by business The Engineering Division currently comprises Exidor Ltd and Petrel Ltd. 51% Exidor 49% Petrel Exidor Based in Cannock, Staffordshire, Exidor is a long established and leading supplier of specialist emergency exit hardware, i.e. the crash bars fitted to fire escape doors that allow rapid opening in the event of an emergency. Its EXIDOR emergency exit product range is a leader in the exit and security door equipment market with an expanding range of equipment to satisfy a variety of access applications. Exidor has a strong management team, good distribution channels and an excellent reputation in its market. In February 2011 the intellectual property and certain assets of Jebron Ltd were acquired from the administrators. This has added a complementary product range and its integration into our Cannock site is proceeding smoothly to timeframe and budget. It is expected that this will add profitable sales of over £1m on an annualised basis. Petrel Petrel Ltd, based near the National Exhibition Centre to the East of Birmingham, concentrates on the development and production of certified lighting and control equipment for use in hazardous and explosive environments. This is a highly regulated market servicing a variety of sectors including the petrochemical and distilling industries. With its strong presence in a highly regulated market, Petrel has seen little reduction in demand during the recession. Petrel has recently strengthened its UK sales team and added an experienced agent to cover a territory in Germany, and this should help to stimulate ongoing growth. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 07 Foundry Business Revenue by business The Foundries Division currently comprises Chamberlin & Hill Castings Ltd and Russell Ductile Castings Ltd. Chamberlin & Hill Castings 44% Light castings 28% Medium castings Russell Ductile Castings 28% Heavy castings Chamberlin & Hill Castings (“CHC”) This subsidiary incorporates our Walsall and Leicester foundries with combined financial and sales functions. Walsall specialises in small castings with complex internal passages and has built a strong position in automotive turbochargers. Our Leicester foundry specialises in producing mid-size iron castings with complex metallurgy designed to give high strength, corrosion or wear resistance or low temperature capability and its expertise is relevant to many sectors. Russell Ductile Castings (“RDC”) RDC, which is based in Scunthorpe and specialises in heavy castings for a wide variety of industries. The majority of RDC customers are OEMs and the site is benefiting from the global demand for engineered products. z In 2010 we combined the management of our Leicester and Walsall operations and began the merger of their respective support functions. This process was completed in 2011 and is delivering a significant reduction in overheads. z During the second half we commenced volume production of the first castings for a major new customer to develop castings for a family of new turbochargers and anticipate that this will generate annual sales of approximately €6m once all castings are in production. z RDC announced a major contract win, worth £1.4m, with a UK manufacturer to supply castings for specialist compressors which will be exported to a natural gas installation in Asia. This contract is proceeding as expected and will be completed during the current financial year. 20453-04 15/06/2011 Proof 7 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 08 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH At a Glance Difficult Things Done Well “Chamberlin’s strategic focus on ‘difficult things done well’ and its diverse range of markets has helped it to occupy a favourable market position and presents a wide range of opportunities for future growth.” The following case studies demonstrate Chamberlin’s ability to recognise opportunities and solve client problems with innovative solutions. The company’s mix of resources coupled with technical know-how allows it to provide a full service that is difficult for competitors to emulate. Case Study Turbochargers for Petrol Engines Market opportunity In 2010 some 10% of petrol engines were turbocharged however, by 2015 approximately 80-90% of car petrol engines are expected to be turbocharged causing the existing market to grow by over 50%. Why Chamberlin? We are one of only four specialist foundries in Europe with the technical capability to develop and supply these castings. What difference has this made? This product has become a high growth area that currently represents 21% of Group sales. Chamberlin have supplied castings into the diesel turbocharger market for over 10 years. Recent EU emissions legislation has resulted in the car makers needing to turbo charge petrol engines in order to meet the new standards. Chamberlin has been working with a large turbocharger manufacturer for the last two years to take a critical part of the turbo from design to full production. This work is ongoing and further products will go into production over the next 18 months. Case Study Taking casting technology into new markets Market Opportunity Casting is the most cost effective method for forming complex metal shapes, and can be used to produce components previously made by forging or fabrication. A stairlift manufacturer approached Chamberlin to assist them in developing a cast solution to a key component of their core product. Why Chamberlin? Chamberlin has expertise in producing highly complex shapes with thin wall thicknesses for technically demanding applications. There are only a small number of foundries globally that have the technical capability to take such a complex component from design right through to production. What difference has this made? Chamberlin’s engineers worked with our client’s team to develop a very complex casting in a special grade of iron to replace an existing fabricated component. The resultant product is both stronger and more cost effective than the original fabrication. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 09 4 3 5 1 2 6 Our Markets Global sales Engineering activity outside of the UK is a key driver of demand: Exports 35% Direct 35% Indirect 30% UK Approximately 70% of output is ultimately exported. Direct exports account for 35% of output with our customers located in Europe, America and Asia. Indirect exports, where Chamberlin businesses supply products to UK-based equipment manufacturers whose products are then shipped worldwide, account for approximately 35% of our output. Against this, only some 30% of sales are driven by demand from the UK economy. Global demand for engineered products is strong and our UK customers, which include companies such as Siemens, Howden, CAT, JCB and Tata Steel, are typically leaders in their sectors. UK Manufacturing HEaD OFFICE 1 Walsall FOunDRIES 2 Chamberlin & Hill Castings, Walsall 3 Chamberlin & Hill Castings, Leicester 4 Russell Ductile Castings, Scunthorpe EnGInEERInG 5 Exidor, Cannock 6 Petrel, Birmingham Group Markets 21.1% Passenger Car 13.5% Commercial Diesel 9.0% Hydraulics 8.4% Construction Equipment 8.3% Hazardous Environments 8.1% Security/Safety 5.1% Mining/Quarrying/Minerals 3.6% Transportation Off Road 2.5% Process 2.3% Power Generation 2.2% Steel Industry 2.1% Oil & Gas 1.5% Rail 12.4% Other Worldwide Markets 20453-04 15/06/2011 Proof 7 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 10 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Performance Chief Executive’s Review Finance Director’s Review 12–15 16–17 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 11 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 12 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Chief Executive’s Review “The decade before the recession was marked by manufacturers in America and Europe transferring production to lower labour cost countries in the East ....... we are now seeing reversals to the model and a number of major manufacturers returning to European sourcing.” We are pleased with Chamberlin’s trading results and our recommendation to recommence the payment of dividends signals our confidence in the business and its growth prospects. Markets Recovery in demand has gathered pace during the past year and Chamberlin, having returned to profit in the first half of the year, delivered improving profitability in the second half. We ended the year with overall activity around pre-recession levels and with continuing growth opportunities in our key markets. The recession and subsequent recovery have highlighted features of our business and markets that are worth examining as we look to future growth and I discuss below some of the more important elements. Diverse markets Chamberlin serves a diverse range of markets including automotive, hydraulics, mining, hazardous environments, power generation and construction equipment. This diversity has benefited us during recession, reducing our exposure to any single market, and continues to do so by presenting a wide range of opportunities for future growth. In recent years we have focused our automotive activity on turbocharger castings, a high growth area that currently represents 21% of Group sales. As one of only four specialist foundries in Europe with the technical capability of supplying these castings for turbochargers we are in an excellent position to benefit from the increasing trend for car manufacturers to apply turbochargers to petrol engines. This trend is being driven by the need to comply with emissions regulations and to provide an indication of its scale, in 2010 some 10% of petrol engines were turbocharged however, by 2015 approximately 80-90% of car petrol engines are expected to be turbocharged causing the existing market to grow by over 50%. Direct and indirect export It is a notable feature of the business that c.70% of output is ultimately exported. Direct exports account for 35% of output with our customers located in Europe, America and Asia. Indirect exports, where Chamberlin businesses supply products to UK-based equipment manufacturers whose products are then shipped worldwide, account for approximately 35% of our output. Against this, only some 30% of sales are driven by demand from the UK economy. Global demand for engineered products is strong and our UK customers, which include companies such as Siemens, Howden, CAT, JCB and Tata Steel, are typically leaders in their sectors. Specialist lighting for hazardous and explosive environments 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 13 Train and railway infrastructure components n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F Extended supply chains The decade before the recession was marked by manufacturers in America customers’ products, and as more OEMs outsource engineering design to their supply base our technical strengths will become increasingly and Europe transferring production to lower labour cost countries in the important. I also believe that there will be opportunities to expand into East in an attempt to reduce cost. In the engineering sector this transfer machining our castings, supply logistics and possibly sub-assembly so started with simple parts but came to include more complex items, and creating new revenue streams for the Group. the supply chains typically involve fixed volume commitments, several months for transport by sea and stock buffers at the customer. During the recession many businesses suffered severe problems because of the length Operations In a year of recovery, we have focused on increasing volumes while and inflexibility of their supply chain and continuing difficulties from maintaining the tight cost and cash controls that were central to steering unreliable product quality. As a result we are now seeing reversals to the a successful course through the recession. Having retained our production model and a number of major manufacturers are returning to European capacity, backed by a skilled staff base, we were well placed to handle the sourcing, with some formally announcing changed sourcing policies. upturn in demand and all our operating sites returned to full-time working during the year. Engineering capability Historically, original equipment manufacturers (“OEMs”) were vertically All operations achieved process improvements during the recession and integrated, designing and assembling their products and making many of these have been maintained during recovery. The investment programme the component parts in-house. This model has changed over the years as carried out by management between 2007–2009 means that none of our OEMs, led by the automotive industry, have outsourced component sites currently requires further major investment and I look forward to manufacture to specialist suppliers while retaining their own core significant organic growth with capital spending now running at a level expertise. The recession appears to have accelerated this trend and in approximately equal to our depreciation cost. many industries OEMs are narrowing their focus even further, reducing their cost base by eliminating their own engineering expertise in component areas. Chamberlin already participates in the design of our 20453-04 15/06/2011 Proof 7 14 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Chief Executive’s Review continued Foundries Chamberlin & Hill Castings (“CHC”) This subsidiary incorporates our Walsall and Leicester foundries with delivering efficiency improvements and the combined sales approach is identifying new opportunities. I am confident that Leicester will see sustained profitable growth in the current financial year and beyond. combined financial and sales functions. Both foundries have recovered well and in the fourth quarter Walsall operated at 100% of pre-recession volumes while Leicester was at approximately 85%. Russell Ductile Castings (“RDC”) RDC, which is based in Scunthorpe and specialises in heavy castings for a wide variety of industries, has seen a robust recovery in demand which Walsall specialises in small castings with complex internal passages and started in the first half year. The site suffered significant disruption from has built a strong position in automotive turbochargers, and over the last the freezing weather in the third quarter of the financial year but two years has worked with a major new customer to develop castings for recovered well in the final quarter when we saw demand exceed a family of new turbochargers. I am pleased to report that during the pre-recession levels. second half we commenced volume production of the first castings for this contract, and that the development programme for the remaining The majority of RDC customers are OEMs and the site is benefiting parts is on schedule and will be completed over the coming 18 months. from the global demand for engineered products. In October 2010, we We anticipate that this will generate annual sales of approximately €6m announced a major contract win, worth £1.4m, with a UK manufacturer once all castings are in production. CHC continues to build on its to supply castings for specialist compressors which will be exported to a longstanding relationship with Borg Warner and we believe that in future natural gas installation in Asia. This contract is proceeding as expected there will be opportunities to add further value by machining the castings and will be completed during the current financial year. We continue to that we produce. win other OEM contracts and I am pleased to report that RDC customers have recently extended the timescale covered by their future orders. This Our Leicester foundry experienced a slow but sustained recovery over the is normally an indication that customers are expecting strong demand year as construction equipment manufacturers, which make up its largest and are therefore reserving future capacity. During the downturn the market, have seen volumes recover. The site specialises in producing casting operations were re-configured to create capacity and improve mid-size iron castings with complex metallurgy designed to give high efficiency, and significant growth can now be accommodated at our strength, corrosion or wear resistance, or low temperature capability and Scunthorpe site. its expertise is relevant to many sectors. In 2010 we combined the management of our Leicester and Walsall operations and began the merger of their respective support functions. This process was completed in 2011 and is delivering a significant reduction in overheads. At Leicester, the increased focus on operations is Wear parts to the minerals sector 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 15 Heavy weight castings for the marine sector n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F Engineering Exidor Exidor specialises in emergency exit hardware, i.e. the crash bars fitted to acquisition strategy We continue to pursue acquisitions opportunities that fit our criteria of ‘difficult things done well’. We have reviewed our target sectors in light of fire escape doors that allow rapid opening in the event of an emergency. the market developments discussed above and in general our acquisition These crash bars have both a safety and security function, as they are criteria remain unchanged. However, we believe that these developments required to provide protection against break-ins during normal have made foundry investments more attractive and have therefore conditions. increased our research in the sector. Exidor has a strong management team, good distribution channels and an excellent reputation in its market. Our acquisition of the intellectual Outlook Chamberlin has been tested by recession and emerged strongly. The property and certain assets of Jebron Ltd, from the administrators, in Group is continuing to see volume recovery and we believe that prospects February 2011 has added a complementary product range and its for growth in the current financial year are very encouraging. integration into our Cannock site is proceeding smoothly to timeframe and budget. We expect this will add profitable sales of over £1m on an annualised basis. Petrel Petrel, which produces lighting and controls for hazardous environments, serves a market which is very highly regulated and has seen little reduction in demand during the recession. We have recently strengthened our UK sales team and added an experienced agent to cover a territory in Germany, and this should help to stimulate ongoing growth. Tim Hair Chief Executive 23 May 2011 20453-04 15/06/2011 Proof 7 16 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Finance Director’s Review “Cash generated from operations was strong at £1,791,000 (2010: £502,000), reflecting the culture of robust cash management throughout the business. The Group has generated positive operating cashflow for each half year throughout the recession and the consequent recovery phase.” Tax The Group’s underlying tax charge for the year was £305,000 (2010: £77,000 credit). The underlying effective rate of 38% (2010: 7%) is adversely affected by a deferred tax change relating to the reduction in the rate of corporation tax. The Group has been able to utilise brought forward tax losses and as a consequence no tax will be payable for the year. The charge in the income statement represents deferred tax only. The statutory tax charge was £235,000 (2010: £201,000 credit). The effective rate of 70% is additionally impacted by goodwill impairment costs which are not tax allowable. Foreign exchange In order to protect against future exchange rate movements the Group enters into forward currency contracts covering 80% of its estimated Euro denominated sales for the coming year. On 1 April 2010, the Group adopted hedge accounting in relation to these foreign currency contracts, as explained in detail in Note 2 to the Financial Statements. During the period the movement in fair value of £250,000 in respect of effective hedges was recognised in equity. Overview Sales increased during the year by 40% to £39.8m (2010: £28.5m) as the business both recovered from recession and won new work. £1.5m of the increase in sales was as a consequence of increases in raw material surcharges, which pass onto customers certain rises in input costs at zero margin. Gross profit margin improved to 18.7%, from 15.7% in the previous year. Surcharges have the effect of diluting margins and excluding this impact, the gross profit improvement would have been 3.7% compared to the 3.0% reported. The Group returned to profit with an underlying operating result of £904,000, which equated to a £1,799,000 turnaround on the prior year (2010: £895,000 operating loss). Financing costs reduced in the year, in line with borrowings, resulting in underlying profit before tax of £804,000 (2010: £1,028,000 loss). Underlying earnings per share improved to 6.7p (2010: 12.8p loss). The statutory results also improved significantly over the previous year with statutory operating profit of £508,000 (2010: operating loss of £1,049,000); statutory profit before tax of £333,000 (2010: loss before tax of £1,421,000); and statutory earnings per share of 1.3p (2010: loss per share of 16.4p). Security and safety products supplied to the construction sector 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 17 Commercial vehicle components including key turbochargers n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F asset acquisition On 4 February 2011, the Group acquired certain fixed assets and Group borrowings reduced during the year by £568,000, to £2,881,000 (2010: £3,449,000). The Group is funded through a £5.0m overdraft inventory from the administrator of Jebron Ltd, a manufacturer of door facility, which is renewable annually and is not subject to financial controllers, for £162,000. Since that date, new staff have been recruited covenants. and production of door controllers started during March 2011. It is intended that this activity will be fully integrated into our Exidor business and consequently manufacture of these products will be transferred to Pension The Group’s defined benefit pension scheme was closed to future accrual our Cannock site during the coming months. in 2007, and now has 175 deferred and retired members. The triennial Reorganisation and impairment costs The cost of bringing the Jebron assets back into production after a period valuation as at 1 April 2010 and the associated recovery plan have now been agreed with the trustees. As a consequence contributions will increase by £50,000 per year to £308,000 per year in 2011/12 and by 3% of Administration and integrating the equipment into our Exidor facility, per year thereafter. Based on current assumptions this would eliminate at Cannock, is expected to total £121,000, and has been charged as a the deficit in approximately 10 years. non-underlying cost in the income statement. In order to create space for the Jebron assets at Cannock, the Group has decided to withdraw from The IAS 19 deficit at 31 March 2011 was £2.2m (2010: £2.4m). The door handle production. As a consequence, goodwill of £202,000 in reduction principally reflects the change from RPI to CPI in line with the relation to this small element of the Exidor business has been fully Government’s change in the standard inflation measure. impaired. Cash generation and financing Cash generated from operations was strong at £1,791,000 (2010: £502,000), Mark Bache Finance Director reflecting the culture of robust cash management throughout the business. 23 May 2011 The Group has generated positive operating cashflow for each half year throughout the recession and the consequent recovery phase. With year on year sales increasing by £11.0m, limiting working capital increases to £79,000 is a testament to the Group’s cash driven ethos. Capital expenditure restrictions introduced during the recession were lifted during the second half, with spend for the year increasing to £1,217,000 (2010: £610,000). This was marginally below depreciation and amortisation, and included £160,000 for the assets acquired from Jebron Ltd. 20453-04 15/06/2011 Proof 7 18 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Governance Board of Directors Report of the Directors Corporate Governance Directors’ Remuneration Report Independent Auditors’ Report 20 21–26 27–29 30–33 34–35 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 19 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Board of Directors Executive Directors Tim Hair Chief Executive Aged 51, Tim joined the Company in June 2006 Mark Bache Finance Director Aged 47, Mark joined the Company in and was appointed as Chief Executive in July November 2006 and was appointed Finance 2006. Tim was previously Managing Director Director in December 2006. He was previously of Sterling Hydraulics Limited and his career Finance Director of Pel Group Ltd and has held includes senior positions in a range of advanced engineering businesses. senior financial positions in a number of manufacturing groups since qualifying as a Chartered Accountant with PWC in 1988. Non-Executive Directors Tom Brown non-Executive Chairman Aged 62, Tom joined the Board in 2003 and Keith Jackson non-Executive Director Aged 62, Keith joined the Board in 2005. He was alan Howarth non-Executive Director Aged 65, Alan was appointed as a Director in was appointed independent Non-Executive previously Finance Director of Tarmac Group January 2007. Alan was previously a partner in Chairman in March 2004. He is also a Ltd, and was Finance Director of Cape plc Ernst & Young. He is Chairman of Cerillion Non-Executive Director of Northgate plc and a between 1989 and 1996. He is a director of Technologies Ltd, CRF Inc, and has further Director of a number of private companies. He EuroChem, as well as being Chairman of a non-executive interests in a range of private was previously Group Chief Executive of United number of pension funds. Keith is Senior companies. Alan is Chairman of the Industries plc and before that Group Managing Independent Director and Chairman of the Remuneration Committee. Director of Fenner plc. Audit Committee. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 21 Report of the Directors The Directors present their Annual Report and Accounts for the year ended 31 March 2011. Principal activities The principal activities of the Group are the production and sale of iron castings in a wide variety of sizes and metal grades, and the manufacture and sale of light engineering products, predominantly into safety and security markets. The Company is registered in England and its registration number is 76928. Review of the business A comprehensive analysis of the development and performance of the Company during the year, including its future prospects, is included in the Chairman’s Statement on pages 4 to 5, the Chief Executive’s Review on pages 12 to 15 and the Finance Director’s Review on pages 16 to 17. (a) Key Performance Indicators Key Performance Indicators (“KPIs”) used by the Group in monitoring its performance and that of its underlying businesses are set out below: Return on sales Return on net assets Sales per employee (£000) Foundries Engineering Group Foundries Engineering Group Foundries Engineering Group Year to 31 March 2011 4.0% 4.7% 2.1% 13.3% 16.1% 11.7% 107.8 67.8 96.1 Year to 31 March 2010 (2.2)% 3.0% (3.2)% (5.5)% 6.3% (11.8)% 76.0 81.4 75.5 Calculations are based on numbers disclosed in the segmental analysis in note 3 to the accounts and are shown before exceptional items as detailed in note 12 to the accounts. The Group percentages are different as they incorporate shared costs. The above KPIs are defined as follows: Return on sales The ratio of the segment’s trading profit to the segment’s sales. The trading profit is defined in the segmental Return on net assets Sales per employee The ratio of the segment’s trading profit to the segment’s net assets (as analysed in note 3). The ratio of the segment’s sales to the segment’s average number of employees. analysis in note 3. (b) Employees Staff numbers and associated costs are shown in note 5 to the accounts. The segmental split of the average number of employees is as follows: Foundries Engineering Head office* Group * Includes 3 non-executive Directors. Year to 31 March 2011 Year to 31 March 2010 307 99 8 414 295 74 8 377 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 22 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Report of the Directors continued The Group’s employment policy includes a commitment to the principles of equal opportunity for all, and specifically prohibits discrimination of every type. Our policy is always to ensure that all persons are treated fairly irrespective of their colour, race, sex, sexual orientation, age or youth, religion, political beliefs, trade union membership or non-membership, marital and physical or mental status or any other factors including pregnancy and maternity. In particular, the Group gives full consideration to applications for employment from disabled persons where the requirements of the job can be adequately fulfilled by a disabled person. We endeavour to provide those who have physical or mental disabilities with specific assistance, and arrangements are made to enable them to work for us wherever and whenever this is reasonably practical. We expect all employees to comply in every respect with the Group’s employment policies at all times. The Group has arrangements in place for the involvement of all employees in the activities of the business, including management/employee briefings, dialogue with trade union representatives and health and safety meetings. A Safety Policy is in place throughout the Group and all employees are required to be aware of their responsibilities under the Health and Safety at Work Act. A copy of the policy and all relevant Codes of Practice are available at the workplace. It is the policy of the Group to recognise that the training of employees is important to the efficiency of the business and each employee’s welfare and safety. Promotion is encouraged within the organisation and it is Group policy to promote from within wherever this is appropriate. (c) Environment The Board recognises that our operations have an effect on the local, regional and global environment, and as a consequence of this, the Board is committed to continuous improvements in environmental performance and the prevention of pollution. Specifically the Group has and will: z comply with the requirements of all relevant environmental legislation, meeting any set emission limits and standards laid down, and use best available techniques in order to control impacts on the environment; z maintain and develop environmental management policies and practices to continually monitor and progress the minimisation of the effects of the business on the environment. Environmental management is considered to be a key part of the business strategy at all levels within the Group; z actively encourage the minimisation of waste from all aspects of the business and promote the benefits of recycling and reuse; z as part of the Target 2010 climate change levy agreement, aim to meet the requirements to reduce energy use and emissions of carbon dioxide by increasing energy efficiency through all parts of the Group and to seek new opportunities of improving energy efficiency as part of the overall improvement of the business; z consider environmental factors in respect of the growth of the business, seeking as far as is practical to reduce harmful environmental impacts and to integrate new developments into the local environment; and z actively encourage the consideration of the environmental impact of all raw materials and services purchased by the business, and where practical to use the options with the least impact and to reduce the consumption of raw materials. (d) Research and development The Group’s research and development activities in the year, as in previous years, consist primarily of devising methods for achieving the casting of complex shaped and/or multi-cored products in the foundry businesses and the design and development of new products in our engineering businesses, principally hazardous area lighting and emergency exit hardware products. The Board views such activities as key to the future prosperity of the business. Expenditure expensed through the income statement is shown in note 7 and expenditure capitalised in note 14 to the accounts. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 23 Principal risks and uncertainties Management throughout the Group uses a common model to identify and assess the impact of risks to their businesses. The Group’s risk management process is described further in the corporate governance report on pages 27 to 29. The more significant risks and uncertainties faced by the Group are set out below: z Approximately 20% of the Group’s income is derived in Euros. In order to reduce the Group’s exposure to currency fluctuations the Group sells Euros forward in order to provide an effective hedge, as described in note 25. z The price of many raw materials is dependent upon movements in commodity prices, especially iron. In order to reduce its exposure to movements in raw material prices the Group negotiates, where appropriate, price surcharge arrangements into its customer contracts. z In common with other industrial businesses the Group is subject to risks associated with the environment. The Group manages these risks by continual review of its processes to identify opportunities for improvement, whilst ensuring that the conditions of its site operating licences are met or exceeded at all times. z The global economic recession has eased during the period and the Group has been exposed to additional risks associated with significant and rapid increases in demand. In order to mitigate this risk the Group maintains borrowing facilities which incorporate sufficient headroom to accommodate any working capital movements associated with such changes in demand. In addition the Group regularly monitors its forward order load and where practical takes action to adjust its cost base in line with demand. z The Group’s approach to managing other financial risks is set out in note 25 to the financial statements. Dividends The Directors recommend the payment of a 1.0p final dividend. No interim dividend has been paid during the year (2010: total dividend nil). Directors Details of the Directors of the Company during the year and their interests in the shares of the Company are shown below. The interests of the Directors in share options are shown in the Directors’ Remuneration Report on pages 30 to 33. Adam Vicary resigned from the Board on 17 May 2010 to pursue other career opportunities. All other Directors held office throughout the year. At the Annual General Meeting to be held on 14 July 2011 (see the Notice of Annual General Meeting on pages 75 to 77), all of the Directors will retire and, being eligible, offer themselves for re-election. No Director had a material interest during the year in any significant contract with the Company or with any subsidiary undertaking. The Group provides indemnities to the Directors in respect of liabilities or claims arising in the performance of their duties. Directors’ shareholdings Beneficial interests of the Directors in the shares of the Company, including those of their immediate families were: Tom Brown Tim Hair Mark Bache Adam Vicary Keith Jackson Alan Howarth There have been no changes in the interests of the Directors set out above between 1 April 2011 and 24 May 2011. at 31 March 2011 number of shares At 31 March 2010 Number of shares 35,000 33,000 15,000 n/a 13,525 11,300 20,000 33,000 5,000 15,000 7,525 5,300 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 24 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Report of the Directors continued Special Business at the annual General Meeting Directors’ authority to allot shares As in previous years, approval will be sought for a special resolution to renew the authority given to the Directors to allot shares in the Company. Authority will be sought to allot shares in the Company up to an aggregate nominal amount of £619,805 (which represents approximately 33% of the issued share capital of the Company as at 24 May 2011). This limit is in line with the guidelines issued by the Association of British Insurers. Authority will also be sought from shareholders to allow the Directors to issue new shares for cash to persons other than to existing members up to a maximum nominal amount of £92,971. This sum represents 371,883 ordinary shares of 25 pence each, being equivalent to 5% of the issued share capital of the Company at 24 May 2011. Authority to purchase own shares At the Annual General Meeting in 2010, the Board was given authority to purchase and cancel up to 743,700 of its own shares representing just under 10% of the Company’s then existing issued share capital, through market purchases on The London Stock Exchange. The maximum price to be paid on any exercise of the authority was restricted to 105% of the average of the middle market quotation for the shares for the five dealing days immediately preceding the day of a purchase. The minimum price which may be paid for each share is 25 pence. No purchases have been made. The current authority to make market purchases expires at the forthcoming Annual General Meeting. The Directors have resolved, if the right circumstances exist, to exercise the current authority which remains valid until the Annual General Meeting, and will continue to consider circumstances in which they may exercise this authority. They are now seeking the approval of shareholders for the renewal of this authority upon the same terms, to allow the Company to purchase and cancel up to 743,700 of its own shares, again representing just under 10% of its issued share capital at 24 May 2011. The authority is sought by way of a special resolution, details of which are also included at item 10 in the notice of meeting. This authority will only be exercised if the Directors, in the light of market conditions prevailing at the time, expect it to result in an increase in earnings per share, and if it is in the best interests of the shareholders generally. Account will also be taken of the effect on gearing and the overall position of the Company. Both authorities are to be for the period commencing on the date of passing of the resolution until the next Annual General Meeting. The proposed resolutions are set out as items 7 to 9 in the notice of meeting on pages 75 to 77. Substantial shareholders At 23 May 2011 the Company was aware of the following interests of 3% or more of the Company’s share capital, other than those of Directors: Rights and Issues Investment Trust PLC Henderson Global Investors Discretionary Unit Fund Schroder Institutional UK Smaller Companies Fund AXA Framlington Monthly Income Unit Trust Brewin Dolphin Securities Perfecta Assets Ltd Citi Quilter Number % of Issued of shares Share Capital 1,000,000 747,014 500,000 477,178 400,000 383,330 275,000 223,800 13.45% 10.04% 6.72% 6.42% 5.38% 5.15% 3.70% 3.01% 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 25 Statement of Directors’ responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cashflows of the Company and Group for that period. In preparing the Company and Group financial statements, the Directors are required to: z select suitable accounting policies in accordance with IAS 8: Accounting Policies Changes in Accounting Estimates and Errors, and then apply them consistently; z present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; z provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; z state that the Company and Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and z make judgements and estimates that are reasonable and prudent. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company and Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to ensure that the Company and Group financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 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 as set out in note 2 to the financial statements. For this reason, they continue to adopt the going concern basis in preparing the accounts. Directors’ statement as to disclosure of information to auditors The Directors who were members of the Board at the time of approving the Directors’ report are listed on page 20. Having made enquiries of fellow Directors and of the Company’s Auditors, each of these Directors confirms that: z to the best of each Director’s knowledge and belief, there is no information relevant to the preparation of their report of which the Company’s Auditors are unaware; and z each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company’s Auditors are aware of that information. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 26 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Report of the Directors continued Charitable and political donations Donations to UK charitable organisations amount to £750 (2010: £750). There were no political donations in the year (2010: £nil). Policy on payments to creditors The Group has a variety of payment terms with its suppliers. These are either negotiated along with other contract terms or conform to standard terms applied either by the relevant Group company or by the supplier. In respect of all its suppliers it is the Group’s policy to settle the terms of payment when entering a business relationship with a supplier, to ensure suppliers are aware of the terms of payment, and to abide by the terms of payment. The Group’s average creditor payment period at 31 March 2011 was 58 days (2010: 63 days) and that of the Company was 55 days (2010: 55 days). auditors A resolution will be proposed to reappoint Ernst & Young LLP as Auditors and to authorise the Directors to determine their remuneration. By order of the Board Mark Bache Secretary 23 May 2011 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 27 Corporate Governance Principles of good governance When the Company transferred to AIM in November 2006 the Directors committed to maintain levels of corporate governance in line with those previously adopted by the Group. Therefore, although The Financial Services Authority’s Listing Rules which incorporate the Combined Code of Corporate Governance (“the Code”) are not mandatory for AIM listed companies, the Group remains committed to high standards of corporate governance and has applied the principles set out in Section 1 of the Code as described below and in the Directors’ Remuneration Report, in a manner appropriate to the size and nature of the Group. The Group complied with the provisions set out in Section 1 of the Code, as stated at November 2006, throughout the year and up to the date of approval of the Annual Report and Accounts. The Board and its committees: (a) The Board The Board normally comprises a non-executive Chairman, two other non-executive Directors and at least two executive Directors. The Directors (including non-executive Directors) have a range of experience and are of sufficient calibre to bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct, which is vital to the success of the Group. The Board meets at least eight times a year and additionally when necessary. At each scheduled meeting of the Board, the Chief Executive reports on the Group’s operations and the Finance Director reports on the financial position of the Group. To enable the Board to discharge its duties, all Directors receive appropriate and timely information. Briefing papers are distributed by the Company Secretary to all Directors in advance of Board meetings. In addition the Board has adopted standard procedures and practices whereby significant issues affecting the Group are reviewed on a regular basis. All non-executive Directors are considered to be independent by the Board. Tom Brown is the independent non-executive Chairman and Keith Jackson is the senior independent non-executive Director. There is a schedule of matters which are reserved for decision by the Board and matters which are delegated to the various Board committees or to the executive Directors, along with monetary levels of authority for capital expenditure and other financial commitments. Following the appointment of new Directors, an appropriately tailored induction programme is arranged and the training needs of Directors are regularly considered. If appropriate, all Directors have the authority to take independent legal advice and have direct access to the Company Secretary. Evaluation of the performance of the Board and evaluation of the performance of individual Directors is conducted regularly on an annual cycle. (b) Chairman and Chief Executive The Chairman of the Company is a non-executive Director who is responsible for the running of the Board. The Board is responsible to shareholders for the overall direction and control of the Company, and the Chief Executive is responsible to the Board for management of the Company within the parameters set by the Board. There is a clear division of responsibilities between the two roles. (c) Service contracts See page 31 in the Directors’ Remuneration Report. (d) Supply of information The Board is satisfied that it is provided with information in an appropriate form and quality to enable it to discharge its duties. (e) Appointments to the Board The Nominations Committee makes recommendations to the Board on the composition of the Board generally and on the balance between executive and non-executive Directors. It also makes recommendations on the appointment of new Directors and subsequent reappointments on retirement by rotation. It comprises the non-executive Directors and the Chief Executive. The Chairman of the Committee is Tom Brown. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 28 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Corporate Governance continued (f) Re-election of Directors At the Annual General Meeting to be held on 14 July 2011 (see the Notice of Annual General Meeting on pages 75 to 77), all of the Directors will retire and, being eligible, offer themselves for re-election. Notwithstanding that Article 94 of the Articles of Association requires only a selection of the Directors to retire by rotation, the Directors have taken the decision to apply the good corporate governance provisions of the UK Corporate Governance Code in respect of the re-election of Directors as it applies to FTSE 350 companies and consequently to require all Directors to be subject to re-election. (g) Directors’ remuneration The statement of the Company’s policy on executive Directors’ remuneration and details of Directors’ emoluments are contained in the Directors’ Remuneration Report on pages 30 to 33. (h) Relations with shareholders Members of the Board hold meetings from time to time with major shareholders to discuss the Company’s strategy and financial performance. These are usually held after the public announcement of results each 6 months and usually involve the Company’s brokers, through whom feedback from institutional investors is obtained as necessary. The Board uses the Annual General Meeting to communicate with all private and institutional investors and welcomes their participation. (i) Audit Committee The Audit Committee, which consists of the three non-executive Directors, Keith Jackson (Chairman), Tom Brown and Alan Howarth, meets at least twice per year with the external Auditors in attendance when required. It has formal terms of reference and it assists the Board in ensuring that appropriate accounting policies, financial systems, internal controls and compliance procedures are in place. It also reviews the relationship between the Group and the external Auditors in terms of the provision of non-audit services and ensuring that Auditor independence and objectivity is maintained. The Auditors have direct access to the Chairman of the Audit Committee. A formal “whistle-blowing” policy is in operation, providing direct access to the Chairman of the Audit Committee, in relation to any concerns staff may have concerning the propriety of Group operations and activities. No issues or incidents have come to light as a result of this policy. All proposals for the provision of non-audit services by the external Auditor are pre-approved by the Audit Committee or its delegated member, the overriding consideration being to ensure that the provision of non-audit services does not impact the external Auditor’s independence and objectivity. (j) Remuneration Committee The Remuneration Committee comprises the three non-executive Directors. Further details are shown in the Directors’ Remuneration Report. (k) Annual General Meeting All Directors expect to attend the Annual General Meeting and to be available to answer questions put to them by shareholders. (l) Internal control The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness in accordance with the guidance set out in “Internal Control: Guidance for Directors on the Combined Code”, as stated at November 2006. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 29 The Code has a requirement that the Directors review the effectiveness of the Group’s system of internal controls. This includes internal financial controls and controls over financial, operational, compliance and risk management. The Directors of each business are required to complete an annual internal control questionnaire, which when combined with regular reviews gives the Board confidence that internal controls are effective. The Group also operates a risk management process whereby each business identifies its key risks, the probability of those risks occurring, their potential impact, and action needed to manage them. This is carried out as a specific exercise as part of the annual budgeting process, but is also part of the day to day management process of each business. The Group has established procedures for planning and budgeting and monitoring the operational and financial performance of all businesses in the Group, as well as their compliance with applicable laws and regulations. These procedures include: z Clear responsibilities on the part of line and financial management for good financial controls in the production of accurate and timely financial management information. z The control of key financial risks through clearly laid down authorisation levels and proper segregation of accounting duties. z Detailed monthly budgeting and reporting of trading results, balance sheets and cash flows with regular reviews of variances from budgets by management and the Board. z Reporting on compliance with internal financial controls and procedures by each individual business unit under the supervision of the Group Finance Director and at the year end by external Auditors. Interim and Annual Reports are reviewed by the Audit Committee prior to issue. The Board has undertaken an assessment of the need for a Group internal audit function. The Board considers that the control systems and procedures currently undertaken by the Group are adequately performed by the management and that the Group has not yet reached a size where a separate internal audit function would be an appropriate or cost effective method of ensuring compliance with Group policies. It therefore does not currently propose to introduce a Group internal audit function. This area will be kept under review as part of the Board’s assessment of the Group’s systems of internal control. Summary of attendance at meetings Number of meetings in the year Tom Brown Keith Jackson Alan Howarth Tim Hair Mark Bache Adam Vicary (Resigned 18 May 2010) n/a – Indicates that a Director was not a member of a particular committee. By order of the Board Mark Bache Secretary 23 May 2011 Board Nominations Remuneration Audit meetings Committee Committee Committee 10 10 10 10 10 10 1 1 1 1 1 1 n/a n/a 5 5 5 5 n/a n/a n/a 2 2 2 2 n/a n/a n/a n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 30 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Directors’ Remuneration Report Information not subject to audit Remuneration Committee The Remuneration Committee comprises the three non-executive Directors: Alan Howarth (Chairman), Tom Brown and Keith Jackson. The committee meets when necessary, usually at least twice per year, and is responsible for determining the remuneration packages of the executive Directors and of the Chairman. Policy on remuneration of Executive Directors and Senior Executives The committee aims to ensure that remuneration packages offered are designed to attract, maintain and motivate high calibre Directors and senior executives, without paying more than necessary for the purpose. The remuneration policy attempts to match the interests of the executives with those of shareholders by providing: (a) Basic salary and benefits Executive Directors’ basic salaries are reviewed each year, taking into account the performance of the individual and rates of salary for similar jobs in companies of comparable size. The main benefits provided are company cars and health insurance. The Company operates a number of defined contribution pension schemes for the majority of its employees, including executive Directors. No performance related bonuses nor benefits in kind are included in pensionable salary. (b) Annual performance related bonus scheme In order to link executive remuneration to Group performance, executive Directors participate in bonus schemes appropriate to their objectives. For the year ended 31 March 2011 the bonus in respect of Tim Hair and Mark Bache was linked to the profit performance of the Group and the achievement of personal objectives. The maximum amount of bonus payable is 100% of their basic salary. (c) Share options An incentive to achieve longer-term improvements in shareholder value is afforded through two share option schemes which were established in 2007. The key features of the schemes are summarised as follows: (i) A Performance Share Plan which grants nil cost options under an Enterprise Management Scheme (“EMI Options”). The EMI Options will normally become exercisable in three equal tranches on each of the third, fourth and fifth anniversaries of the date of grant subject to the satisfaction of a performance condition set by the Remuneration Committee of the Company. The proportion of awards that become exercisable under each tranche of the EMI Option varies on a straight line basis, from 25% to 100%, for average growth in underlying fully diluted EPS of between 5% p.a. and 10% p.a. above RPI over the period between grant and exercise dates. No options are exercisable if growth is below this range. (ii) Non-EMI qualifying options are also granted under the Performance Share Plan. Non-EMI options become exercisable on the third anniversary of the date of grant subject to the satisfaction of a performance condition set by the Remuneration Committee of the Company. The proportion of Non-EMI awards that become exercisable varies on a straight line basis from 25% to 100% based on the Company’s TSR ranking against a comparator group between the median and upper quartile ranking. No options are exercisable if growth is below this range. These options expire on the 10th anniversary of grant. (iii) A Share Option Plan (“SOP”) which issues options at the average quoted market price of the Company’s shares over a period of up to 90 trading days prior to grant. The options will normally become exercisable on or after the third anniversary of the date of grant subject to the satisfaction of performance conditions set by the Remuneration Committee of the Company. The proportion of awards that become exercisable varies on a straight line basis, from 25% to 100%, for average growth in Total Shareholder Return of between 23.8% and 50.7% per annum over the period between the grant and vesting dates. This is equivalent to achieving a share price in the range of 100p to 180p. No options are exercisable if growth is below this range. Certain options were granted under this scheme (as detailed on page 32) in parallel to the options outstanding under schemes (ii) and (iii) above. These parallel options are only tested against the above vesting conditions, and hence are potentially eligible to vest, in the event that the options that they are granted in parallel to fail to vest. Performance graph The following graph shows the Company’s performance compared to the performance of the FTSE Engineering and Machinery index over a five year period, measured by total shareholder return. This index has been selected as an appropriate benchmark because it represents the market sector in which the Company operates. Total shareholder return is calculated to show the theoretical growth in the value of a shareholding over a specified period, assuming that dividends are reinvested to purchase additional shares. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 31 Performance graph – Total Shareholder Return 300 250 200 150 100 50 0 0 1 o t d e s a b e r x e d n I n r u t e R m a e r t s a t a D FTSE Engineering & Machinery Chamberlin plc 0 M ar 06 M ay 06 Jul 06 Sep 06 N ov 06 Jan 07 M ar 07 M ay 07 Jul 07 Sep 07 N ov 07 Jan 08 M ar 08 Jul 08 Sep 08 N ov 08 Jan 09 M ar 09 M ay 09 Jul 09 Sep 09 N ov 09 Jan 10 M ar 10 M ay 10 Jul 10 Sep 10 N ov 10 Jan 11 M ar 11 Service contracts All executive Directors who served during the year have rolling service contracts terminable on no more than 1 year’s notice. non-executive Directors Remuneration of the non-executive Directors, apart from the Chairman, is approved each year by the Chairman and the executive Directors. The Chairman’s remuneration is approved by the Remuneration Committee. Tom Brown has entered into a letter of engagement with the Company, and Tom Brown & Company Limited has entered into a service agreement with the Company both originally dated 12 September 2003 and updated on 27 January 2005. The letter states that the term of his appointment by the Company will be three years from the date of the letter unless terminated by either party giving to the other three months notice, or one year in the event of a change in control of the Company. At the Board Meeting held on 24 April 2008 it was resolved to extend this for a further 3 year term and at the Board Meeting held on 24 March 2011 it was resolved to extend this for up to a further 1 year. The other non-executive Directors have comprehensive letters of appointment but do not have formal contracts. Information subject to audit Directors’ emoluments Executive Tim Hair Mark Bache Adam Vicary* (Resigned 17 May 2010) non-Executive Tom Brown† Keith Jackson Alan Howarth Total Total 2009 Basic salary £000 185 133 45 14 23 23 423 442 Fees £000 Benefits £000 — — — 43 — — 43 43 20 12 7 — — — 39 50 Annual Bonus £000 130 91 — — — — 221 142 Total emoluments excluding pensions 2011 £000 2010 £000 335 236 52 57 23 23 726 677 253 186 135 57 23 23 677 * Adam Vicary resigned from the Board on 17 May 2010, but remained employed by the Group as Managing Director of Chamberlin & Hill Castings Ltd until 30 September 2010, and the table includes all remuneration to that date. † Includes consultancy fees in respect of services provided to the Company. 20453-04 15/06/2011 Proof 7 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 32 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Directors’ Remuneration Report continued Benefits include all assessable tax benefits arising from employment by the Company, and relate mainly to the provision of company cars and private medical insurance. The figures above represent emoluments earned as Directors during the relevant financial year. Such emoluments are paid in the same financial year with the exception of bonuses which are paid in the year following that in which they are earned. The emoluments of other key management personnel are disclosed in note 26. Directors’ pensions No retirement benefits accrued during the year to Directors under the Chamberlin & Hill Staff Pension and Life Assurance Scheme (2010: nil) which is a closed defined benefit scheme. Contributions into personal pension plans T Hair M Bache A Vicary No other pension contributions were paid in respect of Directors other than as disclosed above. Directors’ options Contribution Contribution paid 2011 £000 19 10 4 paid 2010 £000 17 10 7 Percentage of basic salary 10% 8% 8% Granted Exercised surrendered Lapsed or Tim Hair Mark Bache Adam Vicary 31 March 2010 16,665 16,665 16,665 11,940 132,000 193,935 698,584 12,819 12,819 12,819 17,910 96,000 152,367 293,892 11,281 11,281 11,281 13,432 51,947 99,222 49,531 1,933,055 in year in year — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 31 March 2011 — 16,665 16,665 11,940 132,000 193,935 698,584 — 12,819 12,819 17,910 96,000 152,367 293,892 — — — — — — — Option exercise price nil nil nil nil nil 52.8p 52.8p nil nil nil nil nil 52.8p 52.8p nil nil nil nil nil 52.8p 52.8p Exercisable between Note 27.03.2010 – 27.03.2017 27.03.2011 – 27.03.2017 27.03.2012 – 27.03.2017 02.07.2011 – 02.07.2018 19.12.2011 – 19.12.2012 23.02.2013 – 23.02.2020 # 23.02.2013 – 23.02.2020 27.03.2010 – 27.03.2017 27.03.2011 – 27.03.2017 27.03.2012 – 27.03.2017 02.07.2011 – 02.07.2018 19.12.2011 – 19.12.2012 23.02.2013 – 23.02.2020 # 23.02.2013 – 23.02.2020 27.03.2010 – 27.03.2017 27.03.2011 – 27.03.2017 27.03.2012 – 27.03.2017 02.07.2011 – 02.07.2018 19.12.2011 – 19.12.2012 23.02.2013 – 23.02.2020 # 23.02.2013 – 23.02.2020 in year 16,665 — — — — — — 12,819 — — — — — — 11,281 11,281 11,281 13,432 51,947 99,222 49,531 277,459 1,655,596 Options marked # are granted in parallel to options in existence at 31 March 2009, as noted above. These options are only tested against the vesting conditions as set out on page 30 (and thus potentially become eligible to vest), in the event that the options that they are granted in parallel to fail to vest. Only the original options or the parallel options can vest, not both. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 33 Option grants are exercisable only upon the achievement of the performance targets explained on page 30. No consideration is payable for the grant of an option, which is exercisable at a price to be determined by the Remuneration Committee at the time when the option is granted as detailed above. No Directors exercised options during the year. 29,484 options lapsed as the vesting criteria were not met. 247,975 options in favour of Adam Vicary lapsed following his resignation from the Group. There have been no changes in the interests set out above between 1 April 2011 and 24 May 2011. The mid-market price of the shares at 31 March 2011 was 104.5p and ranged between 54.5p and 130.0p during the year. On behalf of the Board alan Howarth Chairman, Remuneration Committee 23 May 2011 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 34 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Independent Auditors’ Report to the members of Chamberlin plc We have audited the financial statements of Chamberlin plc for the year ended 31 March 2011 which comprise the Consolidated Income Statement, the Consolidated and Parent Company Statement of Comprehensive Income, the Consolidated and Parent Company Balance Sheet, the Consolidated and Parent Company Cash Flow Statement, the Group and Parent Company Statement of Changes in Equity and the related notes 1 to 26. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an Auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 25, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: z the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2011 and of the Group’s profit for the year then ended; z the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; z the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and z the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies act 2006 In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 35 Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: z adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or z the Parent Company financial statements are not in agreement with the accounting records and returns; or z certain disclosures of Directors’ remuneration specified by law are not made; or z we have not received all the information and explanations we require for our audit. Christopher Voogd (Senior statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Birmingham 23 May 2011 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 36 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 20453-04 14/06/2011 Proof 5 Financial Statements Financial Statements 38–74 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 37 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 14/06/2011 Proof 5 38 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Consolidated Income Statement for the year ended 31 March 2011 Year ended 31 March 2011 Non- Notes 3 Revenue Cost of sales Foreign currency gain Gross profit 39,801 (32,368) — 7,433 Other operating expense 4 (6,529) Trading profit/(loss) Business reorganisation costs Goodwill impairment Share-based payment charge Operating profit/(loss) Finance costs Profit/(loss) before tax Tax (expense)/credit Profit/(loss) for the year from continuing operations attributable to equity holders of the Parent Company Earnings/(loss) per share: basic underlying diluted diluted underlying 6 7 8 11 11 11 11 Underlying underlying* £000 £000 Year ended 31 March 2010 restated Non- Underlying underlying* £000 £000 Total £000 39,801 (32,368) — 7,433 28,453 (23,992) — 4,461 (6,529) (5,356) 904 (895) (121) (202) (73) 508 (175) 333 — — — (895) (133) (1,028) — — — — — — (121) (202) (73) (396) (75) (471) Total £000 28,453 (23,992) 430 4,891 (5,356) (465) (556) — (28) (1,049) (372) (1,421) — — 430 430 — 430 (556) — (28) (154) (239) (393) 70 (235) 77 124 201 904 — — — 904 (100) 804 (305) 499 (401) 98 (951) (269) (1,220) 6.7p 6.1p 1.3p 1.2p (12.8)p (12.8)p (16.4)p (16.4)p * Non-underlying items represent business reorganisation costs, goodwill impairment, net financing costs on pension obligations, share based payment costs and associated tax impact. In prior periods Non-underlying also included the movement in unrealised mark to market foreign currency gains and losses on monetary assets and liabilities and foreign currency contracts, net of realised losses on surplus foreign exchange contracts. Prior year 31 March 2010 has been restated to reclassify the share based expense in non-underlying items, to be consistent with the presentation for the current year. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 39 Consolidated Statement of Comprehensive Income for the year ended 31 March 2011 Profit/(loss) for the year Other comprehensive income Movements in fair value on cash flow hedges taken to equity Reclassification for cashflow hedge included in cost of sales Deferred tax on movement in fair value hedges Actuarial losses on pension assets and liabilities Deferred tax on actuarial losses Other comprehensive income for the period net of tax Total comprehensive income for the period attributable to equity holders of the Parent Company Notes 22 2011 £000 98 (108) (142) 65 (59) 16 (228) 2010 £000 (1,220) — — — (572) 160 (412) (130) (1,632) n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 40 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Consolidated Balance Sheet at 31 March 2011 31 March 2011 £000 Notes 31 March 2010 £000 8,319 650 923 9,892 3,294 6,358 9,652 19,544 3,449 5,731 48 9,228 92 2,366 2,458 8,170 494 763 9,427 2,969 9,588 12,557 21,984 2,881 8,952 85 11,918 85 2,202 2,287 14,205 11,686 1,859 862 109 (185) 5,134 7,779 1,859 862 109 — 5,028 7,858 21,984 19,544 13 14 18 15 16 17 17 17 18 22 19 Non-current assets Property, plant and equipment Intangible assets Deferred tax asset Current assets Inventories Trade and other receivables Total assets Current liabilities Financial liabilities Trade and other payables Provisions Non-current liabilities Deferred tax Defined benefit pension scheme deficit Total liabilities Capital and reserves Share capital Share premium Capital redemption reserve Hedging reserve Retained earnings Total equity Total equity and liabilities Tim Hair Mark Bache } Directors The accounts were approved by the Board of Directors on 23 May 2011. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 41 Parent Company Balance Sheet at 31 March 2011 31 March 2011 £000 Notes 31 March 2010 £000 1,032 — 8,159 698 9,889 119 — 8,605 8,724 1,038 3 8,159 596 9,796 150 14 7,898 8,062 17,858 18,613 4,224 557 1,942 6,723 66 34 2,202 2,302 9,025 1,859 862 109 6,003 8,833 4,556 275 1,942 6,773 66 38 2,366 2,470 9,243 1,859 862 109 6,540 9,370 17,858 18,613 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 13 14 21 18 16 16 16 17 17 17 18 18 22 19 Non-current assets Property, plant and equipment Intangible assets Investments Deferred tax asset Current assets Trade and other receivables Income taxes receivable Amounts due from subsidiary undertakings Total assets Current liabilities Financial liabilities Trade and other payables Amounts due to subsidiary undertakings Non-current liabilities Amounts due to subsidiary companies Deferred tax Defined benefit pension scheme deficit Total liabilities Capital and reserves Share capital Share premium Capital redemption reserve Retained earnings Total equity Tim Hair Mark Bache } Directors The accounts were approved by the Board of Directors on 23 May 2011. 20453-04 15/06/2011 Proof 7 42 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Consolidated Cash Flow Statement for the year ended 31 March 2011 Operating activities Profit/(loss) for the year Adjustments to reconcile profit/(loss) for the year to net cash inflow from operating activities: Taxation Net finance costs Depreciation of property, plant and equipment Amortisation of software Amortisation of development costs Goodwill impairment Profit on disposal of property, plant and equipment Share based payments Pension element of finance costs Difference between pension contributions paid and Hedge reserve impact on cashflow amounts recognised in the Income Statement Decrease/(increase) in inventories (Increase)/decrease in receivables Increase/(decrease) in payables Movement in provisions Cash generated from operations Net cash flow from operating activities Investing activities Purchase of property, plant and equipment Purchase of software Development costs Disposal of plant and equipment Net cash flow from investing activities Financing activities Interest paid Net cash flow from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the start of the year Cash and cash equivalents at the end of the year Cash and cash equivalents comprise: Financial liabilities Year ended 31 March 2011 £000 Year ended 31 March 2010 £000 98 (1,220) Note 13 14 14 7 20 6 13 14 14 6 17 235 175 1,101 63 83 202 (20) 73 (75) (223) 325 (3,215) 2,932 37 1,791 1,791 (1,026) (191) — 94 (1,123) (100) (100) 568 (3,449) (2,881) (2,881) (2,881) (201) 372 1,129 44 83 — (7) 28 (239) (34) 1,784 (354) (883) — 502 502 (523) (87) — 50 (560) (133) (133) (191) (3,258) (3,449) (3,449) (3,449) 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 43 Parent Company Cash Flow Statement for the year ended 31 March 2011 Operating activities Loss/profit for the year Adjustments to reconcile profit for the year to net cash inflow from operating activities: Taxation Net finance costs Depreciation of property, plant and equipment Amortisation of software Pension element of finance costs Share based payments Difference between pension contributions paid and amounts recognised in the Income Statement (Increase)/decrease in receivables Decrease/increase in payables Cash generated from operations Group relief Net cash flow from operating activities Investing activities Purchase of property, plant and equipment Purchase of Software Disposal of plant and equipment Net cash flow from investing activities Financing activities Interest paid Net cash flow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the start of the year Cash and cash equivalents at the end of the year Cash and cash equivalents comprise: Financial liabilities Year ended 31 March 2011 £000 Note (545) 100 215 50 — (75) 51 (223) 676 282 531 — 531 (63) (3) 7 (59) (140) (140) 332 (4,556) (4,224) (4,224) (4,224) 13 14 20 13 14 17 Year ended 31 March 2010 £000 2,593 43 356 51 3 (239) 28 (34) (5,127) (1,213) (3,539) 330 (3,209) (19) — 15 (4) (118) (118) (3,331) (1,225) (4,556) (4,556) (4,556) n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 44 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Statement of Changes in Equity Group Balance at 1 April 2009 Loss for the year Other comprehensive income for the year net of tax Share-based payment expense Balance at 1 April 2010 Profit for the year Other comprehensive income for the year net of tax Share-based payment expense Balance at 31 March 2011 Company Balance at 1 April 2009 Profit for the year Other comprehensive income for the year net of tax Recognition of share-based payments Balance at 1 April 2010 Loss for the year Other comprehensive income for the year net of tax Share-based expense Balance at 31 March 2011 Share capital £000 1,859 Capital redemption reserve £000 109 Share premium account £000 862 Hedging reserve £000 — — — 1,859 — — — 1,859 £000 1,859 — — 1,859 — — — 1,859 — — 109 — — — 109 £000 109 — — 109 — — — 109 — — 862 — — — 862 £000 862 — — 862 — — — 862 — — — — (185) — (185) £000 — — — — — — — — Attributable to Retained equity holders earnings of the Parent £000 6,632 (1,220) (412) 28 5,028 98 (43) 51 5,134 £000 4,331 2,593 (412) 28 6,540 (545) (43) 51 £000 9,462 (1,220) (412) 28 7,858 98 (228) 51 7,779 £000 7,161 2,593 (412) 28 9,370 (545) (43) 51 6,003 8,833 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 items from the Consolidated Statement of Comprehensive Income attributable to equity shareholders, less distributions to shareholders and share based compensation expense. 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. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 45 Notes to the Accounts at 31 March 2011 1 Authorisation of financial statements and statement of compliance with IFRS The Group’s and Company’s financial statements of Chamberlin plc (the ‘Company’) for the year ended 31 March 2011 were authorised for issue by the Board of the Directors on 23 May 2011 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 AIM within 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 principal accounting policies adopted by the Group and by the Company are set out in note 2. 2 Summary of significant accounting policies Basis of preparation The consolidated financial statements have been prepared on a historical cost basis and 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. Change of hedge accounting — IAS 39 Financial Instruments : Recognition and Measurement With effect from 1 April 2010 the Group adopted hedge accounting. Foreign currency forward contacts are being used to hedge the foreign currency risks on highly probable forecasted sales transactions. The fair value of forward currency contracts is calculated by reference to current market prices for contracts with similar maturity profiles. The proportion of the gain or loss on the hedging instrument that is determined as an effective hedge is recognised directly in equity through the statement of comprehensive income and the gain or loss on any ineffective component of a hedging instrument is recognised in profit and loss. Amounts initially recognised in equity are transferred to the income statement within cost of sales when the forecast hedged transaction occurs. Going concern The Group’s activities together with the factors likely to affect its future development, performance and financial position, including its cash flows, liquidity position and borrowing facilities, are described in the Chief Executive’s Review on pages 12 to 15 and the Finance Director’s Review on pages 16 to 17. In addition, Note 25 to the Group Financial Statements includes the Group’s objectives and policies for managing capital and financial risks in relation to currency, interest rates, credit and liquidity. The Group’s forecasts and projections, taking account of reasonably possible changes in trading conditions, show that the Group is able to operate within the level of its current bank facilities, the principal element of which is a £5m overdraft facility expiring in June 2012. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current economic uncertainty. 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. Presentation of the Consolidated Income Statement The Income Statement is allocated between Underlying items which relate to the trading activities of the business and Non-underlying items which are either non-recurring or are valued using market derived data which is outside of management’s control. The presentation of the Consolidated Income Statement has been changed to allocate share based payments as Non-underlying items. Due to the nature of the share schemes, the Directors believe it is helpful to strip out the charge from underlying results. The presentation of the Income Statement for the year ended 31 March 2010 has been restated to be consistent with this treatment. The Directors believe that this format sets out the performance of the Group more clearly. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 46 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 2 Summary of significant accounting policies continued New standards adopted The accounting policies adopted are consistent with those of the previous financial year. Amended IFRS that have become effective in the period have not had a material impact on the financial statements: New standards and interpretations not applied The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements. They have not been adopted early by the Group and the Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s reported income or net assets in the period of adoption. International Accounting Standards IFRS 1 – Amendments to IFRS 1 – Limited Exemption from comparative IFRS 7 disclosures IFRS 9 Financial Instruments IAS 24 – Related party disclosures (revised) IAS 32 – Amendment to IAS 32: Classification of Rights Issues Improvements to IFRS International Financial Reporting Interpretive Committee (IFRIC) IFRIC 14 – Amendment: Payment of a minimum funding requirement IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments Effective date 1 July 2010 1 January 2013 1 January 2011 1 February 2010 Various 1 January 2011 1 July 2010 Business combinations and goodwill Business combinations from 1 April 2010 Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree’s identifiable net assets is determined on a transaction by transaction basis. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity. Goodwill is initially measured at cost being the excess of the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) over the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination. Assets acquired and liabilities assumed in transactions separate to the business combinations, such as the settlement of pre-existing relationships or post-acquisition remuneration arrangements are accounted for separately from the business combination in accordance with their nature and applicable IFRSs. Identifiable intangible assets are recognised separately from goodwill. Contingent liabilities representing a present obligation are recognised if the acquisition-date fair value can be measured reliably. If the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) is lower than the fair value of the assets, liabilities and contingent liabilities and the fair value of any pre-existing interest held in the business acquired, the difference is recognised in profit and loss. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 47 2 Summary of significant accounting policies continued After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which goodwill is allocated shall represent the lowest level within the entity at which good will is monitored for internal management purposes and will not be larger than an operating segment before aggregation. Where goodwill forms part of an operation which is disposed of, the goodwill associated with that operation is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Business combinations prior to 1 April 2010 Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the cash paid, and the fair value of other assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The acquired identifiable assets, liabilities and contingent liabilities are measured at their fair value at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition. Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units acquired. Impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognised. When there is a partial disposal of a cash generating unit, goodwill relating to the operation disposed of is taken into account in determining the gain or loss on disposal of that operation. The amount of goodwill allocated to a partial disposal is measured on the basis of the relative values of the operation disposed of and the operation retained. Property, plant and equipment All classes of property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The initial cost of an asset comprises its purchase price or construction cost, and any costs directly attributable to bringing the asset into operation. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. The capitalised value of a finance lease is also included within property, plant and equipment. For property, where appropriate the deemed cost as at the date of transition to IFRS is the fair value at the date of the last valuation of these assets. With the exception of freehold land, depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: Freehold buildings and long leasehold property — over expected useful life (not exceeding 50 years) Short leasehold property Plant and other equipment Motor vehicles — over the term of the lease — 2 to 10 years — 4 years The estimated useful lives of property, plant and equipment are reviewed on an annual basis and, if necessary, changes in useful lives are accounted for prospectively. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 48 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 2 Summary of significant accounting policies continued The recoverable amount of property, plant and equipment is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognised in the income statement in the cost of sales line item or in the other operating expenses line item depending on the asset concerned. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised. Intangible assets Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses. Computer software, intellectual property rights and other intangible assets are initially recorded at cost. Where these assets have been acquired through a business combination, this will be the fair value allocated in the acquisition accounting. Where these have been acquired other than through a business combination, the initial cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Computer software and other intangible assets, such as capitalised development expenditure under IAS 38, are amortised over their useful lives on a straight-line basis. Estimated useful life is the shorter of legal duration and economic useful life, which represents the Directors’ best estimate of the period over which the asset may be used to generate significant economic benefits to the Group. Software has an estimated useful life of 3 to 10 years. Intangible assets are tested for impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment losses are measured on a similar basis to property, plant and equipment. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Research and development costs Research costs are expensed as incurred. Clearly defined and identifiable development projects in which the technical degree of exploitation, adequacy of resources and potential market or development possibility in the undertaking can be clearly demonstrated, and where it is the intention to produce, market or execute the project, are capitalised when a correlation exists between the costs incurred and future benefits. Costs not meeting such criteria are expensed as incurred. Amortisation is applied as set out for intangible assets above, the useful life being determined for individual development projects. For projects capitalised to date a useful life of 5 years was considered appropriate. The Company’s investments in subsidiaries Investments in subsidiaries are stated at cost and dividends from subsidiaries are taken to profit or loss when the right to receive payment is established. Inventories Inventories are valued at the lower of cost and net realisable value, which is arrived at as follows: — Raw materials; purchase cost on a first-in, first-out basis; — Finished goods and work-in progress; where detailed individual product costing information is available, actual cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Where considered appropriate, cost of finished goods and work in progress is arrived at from selling price less the calculated margin on the products concerned. This method is utilised within the engineering division in the absence of detailed individual product costing information. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 49 2 Summary of significant accounting policies continued Trade and other receivables Trade receivables, which generally have 30–60 day terms, are recognised and carried at original invoice amount less any provision for bad debts. A provision for impairment, in respect of trade receivables, is made when there is objective evidence (such as the probable insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amount due under the original terms of the invoice. The carrying amount of the receivable is reduced through a provision and impaired debts are derecognised when they are assessed as uncollectible. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash in hand and current balances with banks and similar institutions and short-term deposits with an original maturity of three months or less which are subject to insignificant risks of changes in value. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Leases Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Foreign currency translation, derivative financial instruments and hedging The functional and presentation currency of Chamberlin plc is Sterling (£). Transactions in foreign currencies are recorded in the functional currency at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. Any resulting exchange differences are taken to the income statement. The Group is exposed to foreign exchange risk on income streams denominated in foreign currencies. In order to reduce the Group’s exposure to currency fluctuations the Group sells a proportion of expected Euro revenues on forward contracts. With effect from 1 April 2010 the Group adopted hedge accounting in respect of certain sales denominated in foreign currencies. Foreign currency forward contacts are being used to hedge the foreign currency risks on highly probable forecasted sales transactions. The fair value of forward currency contracts is calculated by reference to current Market prices for contracts with similar maturity profiles. The proportion of the gain or loss on the hedging instrument that is determined as an effective hedge is recognised directly in equity through the statement of comprehensive income and the gain or loss on any ineffective component of a hedging instrument is recognised in profit and loss. Amounts initially recognised in equity are transferred to the income statement within cost of sales when the forecast hedged transaction occurs. At 31 March 2011 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. Prior to 1 April 2010 the movement on unrealised gains and losses on commercial hedges that were measured at fair value were taken to the income statement and presented within Non-underlying foreign currency gains/(losses). Realised gains and losses in the normal course of business are included in cost of sales. Employee benefits Wages, salaries, bonuses, social security contributions, paid annual leave and sick leave are accrued in the year in which the associated services are rendered by employees of the Group. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 50 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 2 Summary of significant accounting policies continued Pensions and other post-employment benefits The Group operates a number of defined contribution schemes, which require contributions to be made to administered funds separate from the Group. The Group also has a defined benefit pension scheme which is closed to future accrual. The scheme assets are measured at fair value and plan liabilities are measured on an actuarial basis, using the projected unit method. As the scheme is closed to future accrual, no service cost of providing pension to employees is charged to the income statement. The cost of making improvements to pension and other post-retirement benefits is recognised in the income statement on a straight-line basis over the period during which the increase in benefits vests. To the extent that any improvement in benefits vests immediately, the cost is recognised immediately. These costs are recognised as an expense. The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time, and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account material changes in the obligation during the year. The expected return on plan assets is based on an assessment made at the beginning of the year of long-term market returns on scheme assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost is recognised in the income statement as finance revenue or cost. Actuarial gains and losses may result from: differences between the expected return and the actual return on plan assets; differences between the actuarial assumptions underlying the plan liabilities and actual experience during the year; or changes in the actuarial assumptions used in the valuation of the plan liabilities. Actuarial gains and losses, and taxation thereon, are recognised in full in the period in which they occur, in the statement of other comprehensive income. For defined contribution plans, contributions payable for the year are charged to the income statement as an operating expense. Income taxes Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date. Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions: ●● where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; ●● in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and ●● deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the income statement. Revenue Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided in the normal course of business, net of discounts, customs duties and sales taxes. Dividends Dividend payments are recognised in the period in which they become a binding obligation on the Company, which for interim dividends is when they are paid and for final dividends is when they are approved at the AGM. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 51 2 Summary of significant accounting policies continued Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset, that necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed as interest payable in the income statement in the period in which they are incurred. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds. Share-based payments The Group grants equity-settled and cash settled share-based payments to certain Directors and employees in the form of share options. Equity settled share-based payments are measured at fair value at the date of grant using the Black–Scholes pricing model. Cash settled share-based payments are measured at fair value at the balance sheet date using the Black–Scholes pricing model. The fair value is then charged to the income statement over the vesting period of the options. In valuing equity settled payments, no account is taken of vesting conditions other than conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest. No credit is taken in respect of charges made in previous years for options which are cancelled or lapse. At each balance sheet date before vesting, the cumulative expense is calculated taking into account the extent to which the vesting period has expired and the Directors’ best estimate of the achievement or otherwise of relevant conditions and the number of shares expected to ultimately vest. The movement since the previous balance sheet date is recognised in the income statement. The values for the expected life of the options and the expected volatility of the share price used in the calculation model are based on the Directors’ best estimates, taking into account conditions for exercise, historic data and behavioural considerations. Operating profit Operating profit as referred to in the income statement is defined as being profit generated from underlying trading activities before finance costs and revenues and before taxation. Non-underlying items The Group presents as non-underlying items on the face of the income statement, those items of income and expenditure which, because they are either non-recurring or are valued using market derived data which is outside management’s control, merit separate presentation to allow shareholders to better understand the elements of financial performance in the year, so as to facilitate comparison with prior periods and to allow assessment of trends in financial performance. Non-underlying items include business reorganisation costs, goodwill impairment costs, share based payment costs, and unrealised foreign exchange gains/losses and net financing costs of pension obligations. Use of accounting estimates and judgements The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amount of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from those estimates and judgements. Where appropriate, details of estimates and assumptions used are set out in the relevant notes to the accounts. The key figures in the accounts that are most sensitive to such estimates and assumptions are: ●● Impairment of Goodwill and Development Costs – the Group determines whether goodwill and development costs are impaired on an annual basis or more frequently if there are indicators of impairment. Impairment testing requires an estimate of future cash flows and the choice of a suitable discount rate. ●● Defined benefit scheme pension liabilities – the cost of the closed defined benefit pension plan is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. ●● Valuation of Financial Instruments – the fair value of outstanding foreign currency contracts is dependent upon estimates of future market prices. ●● Dilapidations – the Group makes provision for dilapidation costs, in respect of leasehold premises, based on managements best estimate, based on external professional advice, of the costs of making good such dilapidations. ●● Restructuring provisions – the Group makes provision for restructuring costs, based on managements best estimate of the costs of implementing such a restructuring. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 52 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 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 operating segments disclosed in the financial statements are the same as reported to the Chief Operating Decision Maker. There are no transactions between operating segments. The Group’s geographical segments are determined by the location of the Group’s customers. (i) By operating segment Year ended Foundries Engineering Segment results Reconciliation of reported segmental operating profit/(loss) Segment operating profit/(loss) Shared cost Reorganisation and impairment costs (note 12) Net finance costs Foreign currency mark to market adjustments Profit/loss before tax Segmental assets Foundries Engineering Segmental liabilities Foundries Engineering Segmental net assets Unallocated net liabilities Total net assets Segmental revenue Segmental operating profit/(loss) 2011 £000 33,082 6,719 39,801 2010 £000 22,423 6,030 28,453 2011 £000 1,335 315 1,650 1,650 (818) (324) (175) — 333 14,490 6,045 20,535 (4,813) (3,612) (8,425) 12,110 (4,396) 7,714 2010 £000 (488) 178 (310) (310) (613) (556) (372) 430 (1,421) 12,188 5,561 17,749 (2,246) (2,702) (4,948) 12,801 (4,943) 7,858 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 53 3 Segmental analysis continued Capital expenditure, depreciation and amortisation Foundries Engineering Total 2010 £000 401 86 — 2011 £000 299 1 — 2010 £000 122 1 — 2011 £000 1,026 191 — Foundries Engineering Total 2010 £000 (940) (28) (57) 2011 £000 (172) (14) (26) 2010 £000 (189) (16) (26) 2011 £000 727 190 — 2011 £000 (930) (49) (57) Capital additions Property, plant and equipment (note 13) Software (note 14) Development costs (note 14) Depreciation and amortisation Property, plant and equipment (note 13) Software (note 14) Development costs (note 14) (ii) Geographical information Revenue by location of customer United Kingdom Rest of Europe Other countries 2010 £000 523 87 — 2010 £000 (1,129) (44) (83) 2010 £000 19,961 6,781 1,711 28,453 2010 £000 781 4,575 5,356 556 5,912 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 2011 £000 (1,102) (63) (83) 2011 £000 26,903 10,130 2,768 39,801 2011 £000 1,069 5,460 6,529 323 6,852 The Group’s assets and costs are all located within the United Kingdom. No individual customer represents more than 10% of Group revenue (2010: none). 4 Other operating expenses Distribution costs Administration and selling expenses Operating expenses before exceptional items Exceptional items (note 12) Operating expenses 20453-04 15/06/2011 Proof 7 54 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 5 Staff numbers and costs The average number of people employed by the Group during the year was: Management and administration Production Total employees 2011 Number 2010 Number 79 313 392 68 309 377 The aggregate employment costs of these employees including severance costs in wages and salaries of £nil (2010: £237,000) were as follows: Wages and salaries Social security costs Other pension costs Share-based payment expense Directors’ emoluments summary Directors’ emoluments Aggregate gains made by Directors on exercise of options Share-based payment charge of options granted to Directors (see note 20) Number of Directors accruing benefits under: Defined contribution pension schemes Directors’ emoluments are analysed in detail in the Directors’ Remuneration Report on pages 30 to 33. 6 Finance costs and finance revenue Finance costs Bank overdraft interest payable Finance cost of pensions (see note 22) 2011 £000 11,865 1,197 284 73 13,419 2011 £000 727 — 73 2010 £000 8,947 892 308 28 10,175 2010 £000 677 — 28 Number 3 Number 3 2011 £000 (100) (75) (175) 2010 £000 (133) (239) (372) 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 55 7 Operating profit/(loss) This is stated after charging/(crediting): Profit on disposal of fixed assets Depreciation of owned assets Amortisation of software Amortisation of development costs Cost of inventories recognised as an expense Business reorganisation costs (note 12) Goodwill impairment costs Stock written down Auditors’ remuneration: Group audit fees Audit fees in respect of subsidiaries Interim review fees Research and development expenditure (excluding capitalised development: note 14) Rentals under operating leases: Hire of plant and equipment Other 8 Tax expense/(credit) reported in the Consolidated Income Statement Current tax: UK Corporation tax at 28% (2010: 28%) based on taxable profit for the year Deferred taxation: Movement in the year (note 18) Amounts under provided in prior years Less element of movement shown in the Statement of Other Comprehensive Income Tax expense/(credit) reported in the Consolidated Income Statement 2011 £000 (20) 1,101 63 83 17,393 121 202 — 30 47 5 47 73 352 2011 £000 — — 218 1 16 235 235 2010 £000 (7) 1,129 44 83 11,758 397 — 159 30 47 5 55 93 370 2010 £000 — — (362) 1 160 (201) (201) The UK Chancellor of the Exchequer announced a number of tax reforms in the 2011 Budget. The key change to Corporation tax that will apply to the Group is the reduction in the main Corporation tax rate to 26% from 1 April 2011. The reduction in the Corporation tax rate to 26% was substantively enacted on the 29 March 2011. It is not anticipated that the subsequent reductions to 23%, once substantively enacted, will have a material effect on the Company’s future current or deferred tax charges. During the year the Group utilised brought forward tax losses of £99,000 (2010: £103,000). n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 56 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 8 Tax expense/(credit) reported in the Consolidated Income Statement continued Reconciliation of total tax charge Profit/loss on ordinary activities before tax Corporation tax credit at standard rate of 28% (2010: 28%) on loss before tax Adjusted by the effects of: Expenses not deductible for tax purposes Timing differences — unrecognised tax losses — other timing differences Amounts under provided in prior years — corporation tax — deferred tax Movement in deferred tax on change in corporation tax rate Total tax expense/(credit) reported in the income statement 9 Dividends paid and proposed Paid equity dividends on ordinary shares 2010 final dividend of 0.0p per share (2009: 0.0p per share) 2011 interim dividend of 0.0p per share (2010: 0.0p per share) Proposed final dividend subject to shareholder approval 2011 final dividend of 1.0p per share (2010: 0.0p per share) 10 Parent company transfer to reserves The loss dealt with in the accounts of the Parent Company was £445,000 (2010: profit £2,593,000). After dividends, the loss transferred to reserves was £445,000 (2010: profit £2,593,000). 2011 £000 2010 £000 333 (1,421) 93 93 — (9) 10 1 47 235 2011 £000 — — — 75 (398) 22 174 — — 1 — (201) 2010 £000 — — — — 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 57 11 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 business reorganisation costs, mark to market foreign currency movements and net financing cost of pension obligation less related tax thereon, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Reorganisation and exceptionals costs are detailed in note 12. Earnings/(loss) for basic earnings per share Reorganisation and exceptionals Taxation effect of operating exceptionals Mark to market foreign currency (gain)/loss Taxation effect of mark to market foreign currency (gain)/loss Net financing costs on pension obligations Taxation effect of pension obligation Share-based payment charge Taxation effect of share-based payments Earnings/(loss) for underlying earnings per share Weighted average number of ordinary shares Adjustment to reflect shares under options Weighted average number of ordinary shares — fully diluted 12 Reorganisation and exceptional costs Business reorganisation costs Goodwill impairment Restructuring and severance costs Inventory write down Taxation — tax effect of operating exceptionals 2011 £000 98 323 (31) — — 75 (20) 73 (19) 499 2011 000 7,438 762 8,200 2011 £000 (121) (202) — — (323) 34 34 2010 £000 (1,220) 556 (156) (430) 106 239 (67) 28 (7) (951) 2010 000 7,438 327 7,765 2010 £000 — — (397) (159) (556) 156 156 Business reorganisation costs relate to bringing the assets acquired from the administrator of Jebron Ltd back into production and integrating into equipment into Exidor. Goodwill impairment as a consequence of withdrawal from door handle production at Exidor (see note 14). Severance costs and restructuring costs relate to redundancies and other costs incurred in reorganising the business in response to the recession. Inventory write down relates to the cost of stock disposal, at a significant discount, on exit from a business stream within the Engineering Division. 20453-04 15/06/2011 Proof 7 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 58 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 13 Property, plant and equipment Group Cost At 1 April 2009 Additions Disposals At 31 March 2010 Additions Disposals At 31 March 2011 Depreciation At 1 April 2009 Charge for year Disposals At 31 March 2010 Charge for year Disposals At 31 March 2011 Net book value At 31 March 2011 At 31 March 2010 At 31 March 2009 Net book value of land and buildings comprises: Freehold Short leasehold (leasehold improvements) Company Cost At 1 April 2009 Additions Disposals At 31 March 2010 Additions Disposals At 31 March 2011 Land and buildings £000 Plant and machinery £000 Motor vehicles £000 5,175 59 — 5,234 49 — 5,283 1,434 118 — 1,552 115 — 24,561 410 — 24,971 801 (103) 25,669 19,597 907 — 20,504 887 (40) 1,667 21,351 3,616 3,682 3,741 4,318 4,467 4,964 Land and buildings £000 Plant and machinery £000 1,670 — — 1,670 — — 1,670 46 1 — 47 7 — 54 661 54 (137) 578 176 (112) 642 398 104 (94) 408 99 (101) 406 236 170 263 2011 £000 3,597 19 3,616 Motor vehicles £000 93 18 (40) 71 56 (17) Total £000 30,397 523 (137) 30,783 1,026 (215) 31,594 21,429 1,129 (94) 22,464 1,101 (141) 23,424 8,170 8,319 8,968 2010 £000 3,663 19 3,682 Total £000 1,809 19 (40) 1,788 63 (17) 110 1,834 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 59 13 Property, plant and equipment continued Company Depreciation At 1 April 2009 Charge for year Disposals At 31 March 2010 Charge for year Disposals At 31 March 2011 Net book value At 31 March 2011 At 31 March 2010 At 31 March 2009 Freehold land included above not subject to depreciation amounted to: 2011 2010 14 Intangible assets Goodwill Software Development costs Land and buildings £000 Plant and machinery £000 Motor vehicles £000 Total £000 730 51 (25) 756 50 (10) 796 1,038 1,032 1,079 14 6 — 20 6 — 26 28 27 32 37 18 (25) 30 17 (10) 37 73 41 56 Group £000 Company £000 743 743 Group Company 2010 £000 201 251 198 650 2011 £000 — 3 — 3 743 743 2010 £000 — — — — 679 27 — 706 27 — 733 937 964 991 2011 £000 — 379 115 494 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 60 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 14 Intangible assets continued Goodwill Cost At 1 April 2009 Additions At 31 March 2010 Additions At 31 March 2011 Impairment At 1 April 2009, 31 March 2010 Charge for year At 31 March 2011 Net book value At 31 March 2011 At 31 March 2010 At 31 March 2009 £000 201 — 201 — 201 — 201 201 — 201 201 Goodwill arose initially on the acquisition of the Webb Lloyd business which now forms part of Exidor Limited, within the Engineering Segment. The Directors have concluded that Webb Lloyd is no longer a core element of the Exidor product offering, and that in order to facilitate the full integration of the Jebron assets, they plan to exit from this part of the business. As a consequence the associated goodwill has been fully impaired. Software Cost At 1 April 2009 Additions At 31 March 2010 Additions At 31 March 2011 Amortisation/impairment At 1 April 2009 Charge for the year At 31 March 2010 Charge for year At 31 March 2011 Net book value At 31 March 2011 At 31 March 2010 At 31 March 2009 Group £000 Company £000 560 87 647 191 838 352 44 396 63 459 379 251 208 13 — 13 3 16 10 3 13 — 13 3 — 3 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 61 14 Intangible assets continued Software has an estimated useful life of between 3 and 10 years. Development costs capitalised Cost At 1 April 2009 Additions At 31 March 2010 Additions At 31 March 2011 Amortisation/impairment At 1 April 2009 Charge for year At 31 March 2010 Charge for year At 31 March 2011 Net book value At 31 March 2011 At 31 March 2010 At 31 March 2009 Group £000 Company £000 413 — 413 — 413 132 83 215 83 298 115 198 281 — — — — — — — — — — — — — Development costs capitalised relate to specific major projects which result in an asset being created which is then amortised over the primary income generating period of the associated product. For the above items this has been estimated at 5 years from the commencement of commercial sales. 15 Inventories Raw materials Work in progress Finished goods Group Company 2011 £000 1,113 1,296 560 2,969 2010 £000 966 1,508 820 3,294 2011 £000 — — — — 2010 £000 — — — — n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 62 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 16 Trade and other receivables Trade receivables Amounts due from subsidiary undertakings Other receivables Prepayments Trade receivables are denominated in the following currencies: Sterling Euro Group Company 2010 £000 6,013 — 60 285 6,358 2011 £000 — 7,898 121 29 8,048 Group Company 2010 £000 5,085 928 6,013 2011 £000 — — — 2010 £000 — 8,605 31 88 8,724 2010 £000 — — — 2011 £000 9,207 — 125 256 9,588 2011 £000 7,845 1,362 9,207 Out of the carrying amount of trade receivables of £9,207,000 (2010: £6,013,000), £2,145,000 (2010: £1,185,000) is against five major customers. Trade receivables are non-interest bearing and are generally on terms of 30 to 60 days and are shown net of a provision for impairment. As at 31 March 2011 trade receivables at a nominal value of £252,000 (2010: £243,000) were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows: At 1 April Charge for year Amounts written off At 31 March Group Company 2011 £000 243 181 (172) 252 2010 £000 238 87 (82) 243 2011 £000 — — — — 2010 £000 — — — — 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 63 16 Trade and other receivables continued As at 31 March 2011, the analysis of trade receivables that were past due but not impaired is as follows: Neither past due nor impaired £000 6,842 4,118 Total £000 9,207 6,013 Past due but not impaired <30 days 30–60 days 60–90 days 90–120 days > 120 days £000 1,922 1,514 £000 326 210 £000 94 69 £000 23 102 £000 — — 2011 2010 The credit quality of trade receivables that are neither past due nor impaired is assessed by reference to external credit ratings, where available, otherwise historical information relating to the counterparty default rates is used. Debtors where external credit ratings have been sought Debtors where internal credit assessments have been made Group Company 2011 £000 5,911 3,296 9,207 2010 £000 3,808 2,205 6,013 2011 £000 — — — 2010 £000 — — — Of the balance in respect of counterparties with internal ratings nil% (2010: nil%) is in respect of new customers, and 100% (2010: 100%) existing customers with no history of defaults. Amounts due from subsidiary companies are interest free and repayable on demand. Income taxes receivable UK corporation tax Group Company 2011 £000 — 2010 £000 — 2011 £000 14 2010 £000 — n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 64 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 17 Current liabilities Financial liabilities Bank overdraft Group Company 2011 £000 2,881 2010 £000 3,449 2011 £000 4,224 2010 £000 4,556 The overdraft is held with HSBC Bank plc as part of the Group facility of £5,000,000, is secured on the assets of the business, is repayable on demand and is renewable in June 2012. Interest is payable at 2.75% (2010: 2.75%) over base rate. Trade and other payables Trade creditors Amounts due to subsidiary undertakings Other taxation and social security Other creditors Accruals Fair value of derivative forward contracts Group Company 2011 £000 6,185 — 749 405 1,377 236 8,952 2010 £000 3,942 — 507 379 874 29 5,731 2011 £000 — 1,942 22 2 533 — 2,499 2010 £000 — 1,942 19 20 236 — 2,217 Trade payables are non-interest bearing and are normally on terms of 30 to 60 days. Amounts due to subsidiary companies are interest free and repayable by agreement with the Parent Company. Provisions As at 31 March 2009 New provisions Utilised As at 31 March 2010 New provisions Utilised As at 31 March 2011 Reorganisation Dilapidations £000 £000 Total £000 — — — — 85 — 85 48 48 (48) 48 — (48) — 48 48 (48) 48 85 (48) 85 Reorganisation Provision in respect of integrating the assets acquired from the administrators of Jebron Ltd into Exidor expected utilisation by March 2012. Dilapidations Provision in respect of dilapidations on leasehold property was fully utilised during the year. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 65 18 Non current liabilities Intra-group balances Group Company 2011 £000 — 2010 £000 — 2011 £000 66 The amount owed by the Company to non-trading subsidiary undertakings is non-interest bearing. Provisions for liabilities Deferred taxation Group Company 2011 £000 85 2010 £000 92 2011 £000 34 2010 £000 66 2010 £000 38 Deferred tax liabilities Group liabilities Temporary differences relating to capital allowances Capital gains rolled over Company liabilities Temporary differences relating to capital allowances Deferred tax assets Temporary differences relating to capital allowances Temporary differences relating to pension scheme deficit Temporary differences relating to fair value hedges Other temporary differences 2011 2010 Amount not provided £000 Amount provided £000 Amount not provided £000 Amount provided £000 — — — — 85 85 — — — — 92 92 2011 2010 Amount not provided £000 Amount provided £000 Amount not provided £000 Amount provided £000 — — 2011 £000 35 572 65 91 763 34 34 — — Group Company 2010 £000 76 662 — 185 923 2011 £000 — 572 — 24 596 38 38 2010 £000 — 662 — 36 698 Other temporary differences include a deferred tax asset of £nil (2010: £139,000), recognised in respect of carried forward trading losses. A deferred tax asset is recognised in respect of tax losses carried forward only to the extent that there is a reasonable expectation that the losses will be recoverable within the foreseeable future. Group tax losses not carried forward for which a deferred tax asset has not been recognised total £177,000 (2010: £188,000). n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 66 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 18 Non-current liabilities continued Deferred taxation Movement in net deferred taxation during the year Net asset brought forward Re pension provision movement Movement on other temporary differences Movement on change in corporation tax rate 19 Share capital Allotted, called up and fully paid 7,437,658 (2010: 7,437,658) Ordinary shares of 25p Group Company 2011 £000 (831) 46 125 47 (613) 2010 £000 (469) (151) (211) — (831) 2011 £000 (660) 46 8 43 (563) 2010 £000 (538) (151) 29 — (660) 2011 £000 2010 £000 1,859 1,859 During the year no shares (2010: nil) were issued to satisfy the exercise of options under the executive share option scheme. 277,459 share options lapsed (2010: 48,000). No options were granted (2010: 1,487,531) and no options were surrendered (2010: 862,958). 20 Share-based payments The Company has three share option schemes used to incentivise the Directors of the Group and certain subsidiary Company Directors as follows: i) Performance Share Plan which prior to 19 December 2008 granted nil cost options under an Enterprise Management Incentive Scheme. These will normally vest in 3 equal tranches on the third, fourth and fifth anniversary of grant subject to satisfaction of performance conditions set by the Remuneration Committee of the Company. These options expire on the tenth anniversary of grant. PSP option grants made after 19 December 2008 were not made under EMI scheme, and vest 3 years from grant and expire after a further year. ii) Share Option Scheme where options are exercisable at the average quoted market price of the Company’s shares over the three months prior to the date of grant. These will normally vest on the third anniversary of grant subject to satisfaction of performance conditions set by the Remuneration Committee of the Company and set out in the Remuneration committee report on pages 30 to 33. These options expire on the tenth anniversary of grant. iii) A Phantom share option plan, which issues cash settled options to certain key managers within the business. The options will normally become exercisable in February 2013 subject to the satisfaction of performance conditions set by the Remuneration Committee of the Company. Cash payments are made in three equal instalments in April of 2013, 2014 and 2015. Under all of the above, options lapse if the employee leaves the Group subject to certain exceptions set out in the scheme rules. Due to the small number of individual grants made, each individual option is priced using the Black–Scholes pricing model, rather than applying the model to weighted average figures for options granted in each year. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 67 20 Share based payments continued Relevant options outstanding during the year were as follows: At 31 March 2009 Granted Surrendered Lapsed At 31 March 2010 Lapsed At 31 March 2011 Weighted average Remaining Exercise contractual price life (years) 112.0p 52.8 176 — 41 — 44.4 7.6 9.9 7.0 4.0 8.6 4.4 7.4 No. of options 1,356,481 1,487,531 (862,958) (48,000) 1,933,054 (277,459) 1,655,595 Based on the following assumptions at 31 March 2011, the total fair value of options was £385,000, of which £73,000 was charged to the income statement (2010: charge of £28,000). The fair value of options granted in the year was £nil (2010: £190,000). The exercise price of options range from nil p to 52.8p. The key assumptions in relation to the valuation of all schemes are: Share price Expected volatility Expected life Risk free rate Expected dividend yield 2011 104.5p 30.0% 4.0 years 3.0% 2.3% 2010 64.5p 30.0% 4.0 years 3.0% 2.3% Expected volatility, to which the fair value is most sensitive, is based on movements in the share price during the year and taking account of the Directors’ expectations of future movements. The expected life has been arrived at based on the Directors’ best estimate taking into account exercise conditions and behavioural considerations. The mid-market price of the shares ranged between 54.5p and 130.0p during the year to 31 March 2011. 21 Fixed asset investments Shares in subsidiary undertakings Cost at 1 April 2010 Addition Cost at 1 April 2011 £000 8,159 — 8,159 Wholly owned operating subsidiaries Exidor Ltd Principal activity (formerly Fred Duncombe Ltd) Manufacture and sale of architectural hardware Petrel Ltd Manufacture and sale of lighting, switchgear and electrical installation products Russell Ductile Castings Ltd Manufacture and sale of engineering castings Chamberlin & Hill Castings Limited Manufacture and sale of engineering castings The Company owns 100% of the issued ordinary share capital of the above companies, all of whom operate principally in England and Wales. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 68 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 22 Pension 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 all of the Group schemes for 2011 was £284,000 (2010: £308,000) plus £75,000 of financing cost (2010: £239,000). The pension cost for the defined benefit scheme, providing benefits based on final salary has been projected forward, updated each 6 months by an independent qualified actuary, from the results of an actuarial valuation carried out as at 1 April 2010 using the projected unit method. The market value of the schemes total assets on that date was £12,400,000 and the value of these assets represented 82% of the benefits that had accrued to members allowing for expected future increases in salaries (which from 1 April 2002 have been limited to inflation). 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 £284,000 (2010: £308,000). The notes below relate to the defined benefit scheme. The service cost has been calculated using the Projected Unit method. The major assumptions used by the actuary were (in nominal terms): Rate of increase in salaries Rate of increase of pensions in payment – post 1997 accrual only Discount rate Inflation assumption At 31 March 2011 n/a 3.4% 5.5% 3.4% At 31 March At 31 March 2010 n/a 3.4% 5.6% 3.4% 2009 n/a 3.1% 7.0% 3.1% Demographic assumptions are all based on the S1NA mc mortality tables with a 1% annual increase. 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 pensioners relating to an employee retiring in 2032. Current pensioners at 65 — male Future pensioners at 65 — male — female — female 2011 Years 20.3 23.1 21.7 24.5 2010 Years 20.3 23.1 21.2 24.0 The scheme was closed to future accrual with effect from 30 November 2007, after which the Company’s regular contribution rate reduced to zero (previously the rate had been 9.1% of members’ pensionable salaries). In addition the past service “catch up” contribution have been renegotiated with the Trustees and with effect from 1 April 2011 will increase to £25,667 per month (previously £21,475 per month) designed to return the scheme to a fully funded position by April 2020. The contributions expected to be paid during the year to 31 March 2012 are £308,000. The scheme assets are stated at the market values at the respective balance sheet dates and overall expected rates of return are established by applying published brokers forecasts for each category of scheme asset. The rates quoted below are the expected net rates of return after allowance for expenses. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 69 22 Pension arrangements continued The assets and liabilities of the scheme and the expected rates of return were: As at 31 March 2011 As at 31 March 2010 Rate of return % 7.85 4.35 5.50 7.35 0.50 Value £000 6,782 2,022 2,514 1,024 90 12,432 (14,634) (2,202) 572 (1,630) Equities/diversified growth fund Gilts Bonds Property Cash Market value of assets Actuarial value of liability Recoverable deficit in scheme Related deferred tax asset Net pension liability Recognised as finance cost Expected return on pension scheme assets Interest on pension liabilities Net return disclosed in finance cost Analysis of amount recognised in Consolidated Statement of other Comprehensive Income Actual return less expected return on assets Other actuarial gain/(loss) on liabilities Actuarial loss recognised in the Statement of other Comprehensive Income Cumulative actuarial losses recognised in the Statement of other Comprehensive Income Rate of return % 8.05 4.55 5.55 7.55 Year to 31 March 2011 £000 722 (797) (75) Year to 31 March 2011 £000 (185) 126 (59) (796) Value £000 6,964 1,906 2,388 974 143 12,375 (14,741) (2,366) 662 (1,704) Year to 31 March 2010 £000 552 (791) (239) Year to 31 March 2010 £000 2,423 (2,995) (572) (737) The cumulative amount of actuarial gains and losses recognised since 1 January 2004 in the Group statement of other comprehensive income is £(796,000) (2010: £(737,000). The Directors are unable to determine how much of the pension scheme deficit recognised on transition to IFRSs, and taken directly to equity of £2,136,000 in the Group, is attributable to actuarial gains and losses since inception of those pension schemes. Consequently, the Directors are unable to determine the amount of actuarial gains and losses that would have been recognised in the Group statement of other comprehensive income before 1 January 2004. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 70 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 22 Pension arrangements continued Actual gain on plan assets Movement in deficit during the year Deficit in scheme at beginning of year Movement in year: Regular contributions Net expected return on assets Actuarial loss Deficit in scheme at end of year Movement in scheme assets Fair value at beginning of year Expected return on scheme assets Actuarial (losses)/gains Employer contributions Benefits paid Fair value at end of year Movement in scheme liabilities Benefit obligation at start of year Interest cost Actuarial (gain)/loss Benefits paid Benefit obligation at end of year Year to 31 March 2011 £000 537 Year to 31 March 2011 £000 Year to 31 March 2010 £000 2,990 Year to 31 March 2010 £000 (2,366) (1,828) 298 (75) (59) 273 (239) (572) (2,202) (2,366) Year to 31 March 2011 £000 12,375 722 (185) 298 (778) 12,432 Year to 31 March 2011 £000 14,741 797 (126) (778) 14,634 Year to 31 March 2010 £000 9,817 552 2,423 273 (690) 12,375 Year to 31 March 2010 £000 11,645 791 2,995 (690) 14,741 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 71 22 Pension arrangements continued Experience gains and losses Difference between expected and actual return on scheme assets £000 % of assets Experience gains on scheme liabilities Other gains/(losses) on scheme liabilities Net (losses)/gains £000 % of liabilities £000 % of liabilities £000 % of liabilities Year to 31 March 2011 (185) (1.5)% 100 1.0% (126) (0.9)% (59) (0.4)% Year to Year to Year to Year to 31 March 31 March 31 March 31 March 2010 2,423 19.6% — 0.0% 2,995 20.3% (572) (3.9)% 2009 (3,118) (31.8)% — 0.0% 2,136 18.3% (982) (8.4)% 2008 (1,856) (14.6)% 600 4.3% 1,985 14.4% 729 5.3% 2007 (38) (0.3)% — — (2,094) 12.9% (2,132) 13.2% 23 Contingent liabilities Cross guarantees exist between the Company and its subsidiary undertakings in respect of the Group’s bank overdrafts. The borrowings of the subsidiaries at 31 March 2011 amounted to £nil (2010: £nil). The German tax authorities have raised a query relating to the application of VAT in respect of sales to a German customer dating back to 2002. In the event that the VAT treatment is deemed to be incorrect interest and penalties could be applied by the German tax authorities. Discussions are at a very early stage and the financial impact, if any, cannot currently be quantified. 24 Financial commitments Group Company 2011 £000 2010 £000 2011 £000 Capital expenditure Contracted for but not provided in the accounts 40 — 40 Lease commitments The Group had total outstanding commitments under operating leases as follows: Future minimum payments due: Not later than one year After one year but not more than five years After five years Group 2011 £000 331 1,324 511 2,166 2010 £000 — 2010 £000 331 1,324 842 2,497 Leases on land and buildings comprise the lease for the Leicester foundry (£271,000 per annum with an end date, subject to earlier termination, of 31 March 2017), and a lease within the Engineering Division for £60,000 terminating in August 2019. The lease on the Leicester foundry is terminable by the Company only on 12 months notice. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 72 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 25 Derivatives and financial instruments The Group considers the use of derivatives to reduce financial risk in a number of areas noted below. The only area where the use of derivatives is considered appropriate at present is that of currency risk. Currency risk The Group’s functional currency is sterling but approximately 20% of revenues are denominated in foreign currencies, principally Euros in relation to castings exports. In order to reduce the Group’s exposure to currency fluctuations the Group sells approximately 80% of its expected Euro revenues on forward currency contracts of 12 months or less. At the year end it had net monetary assets denominated in Euros of £1,471,599 (2010: £818,000 assets). If these contracts were not in place and the Euro/Sterling exchange rate moved by plus or minus 5% the corresponding gain/loss would be £78,000 (2010: £39,000). At 31 March 2011, the Group held forward currency hedging contracts designated as hedges of expected future Euro exports for highly probable forecast sales transactions. The forward currency contracts are being used to hedge the foreign currency risk of highly probable forecast sales over the next year. The terms of the forward currency hedging contracts have been negotiated to match the terms of the commitments and the cash flow hedges of expected future sales were assessed to be highly effective. Forward currency contracts for the sale of Euros outstanding at the year end have been recorded at fair value with the difference being recognised directly in equity through the statement of comprehensive income. If these contacts were not in place and the Euro/Sterling exchange rate moved by plus or minus 5% the corresponding gain/loss to equity would be £260,000 (2010: nil) At 31 March 2011 At 31 March 2010 Contracted amount (Euros ‘000) 7,900 6,000 Weighted average contract rate 1.1779 1.126 Fair value at Contracted year end Unrealised amount £000 6,707 5,330 rate £000 6,441 5,359 loss £000 (266) (29) Interest rate risk The Group operates an overdraft facility with HSBC Bank plc and has no other borrowings. Exposure to interest rate risk is considered to be low and no derivatives are used to modify the Group’s interest rate risk profile. The impact of a 50 basis point increase in UK interest rates would be a £17,000 reduction in profit before tax (2010: £20,000). An equivalent decrease in rates would increase profit before tax by £17,000 (2010: £20,000). An analysis of interest bearing financial assets and liabilities is given below. Cash and cash equivalents/(bank overdraft) Bank overdraft (Sterling denominated) Bank overdraft (Euro denominated) Group Company 2011 £000 (2,795) (86) (2,881) 2010 £000 (3,232) (217) (3,449) 2011 £000 (4,224) — (4,224) 2010 £000 (4,556) — (4,556) Balances outstanding on the Group’s overdraft facility are subject to floating rate interest and are repayable on demand. Credit risk The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed in note 16. For transactions that do not occur in the UK, the Group does not offer credit terms without the approval of the operating business Finance Director. There are no significant concentrations of credit risk within the Group. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 73 25 Derivatives and financial instruments continued With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, the Group’s exposure to credit risk arises from default of the counterparty, with the maximum exposure equal to the carrying amount of the instrument. There are no material differences between the fair values and carrying values of the financial assets and liabilities. The bad debt charge for the year was £215,000 (2010: £135,000). Liquidity risk The Group aims to mitigate liquidity risk by managing the cash generation of its operating units, and applying cash generation targets across the Group. Investment is carefully controlled, with authorisation limits operating up to Group Board level and cash payback periods applied as part of the investment appraisal process. In this way the Group aims to maintain a good credit rating and operate within its existing facilities. The Group’s funding strategy is to maintain flexibility in managing its day to day working capital needs through the use of an overdraft facility, and to fund acquisitions and significant capital projects through the use of longer term funding including bank loans and equity. Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1 : quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly: and Level 3: techniques which use inputs have a significant effect on the recorded fair value that are not based on observable market data All derivative assets and liabilities are valued by level 1 techniques. The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2011 and 31 March 2010. Non-derivative financial liabilities On demand Less than 3 months 3 to 12 months At 31 March 2011 Bank overdraft Trade and other payables At 31 March 2010 Bank overdraft Trade and other payables The gross undiscounted future cash flows are analysed as follows: Derivative financial liabilities At 31 March 2011 Foreign Exchange forward contracts At 31 March 2010 Foreign Exchange forward contracts 2,881 — 2,881 3,449 — 3,449 — 6,185 6,185 — 3,942 3,942 — — — — — On demand Less than 3 months 3 to 12 months — — — — 1,286 1,286 1,332 1,332 5,421 5,421 3,998 3,998 Total 2,881 6,185 9,066 3,449 3,942 7,391 Total 6,707 6,707 5,330 5,330 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 74 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notes to the Accounts continued 25 Derivatives and financial instruments continued Capital management The Group defines capital as the total equity of the Group. The Group objective for managing capital is to deliver competitive, secure and sustainable returns to maximizes long-term shareholder value. Chamberlin is not subject to any externally-imposed capital requirements. The Group monitors capital on the basis of the gearing ratio, that is, the ratio of net debt to equity. Net debt is calculated as gross finance debt, as shown in the balance sheet, less cash and cash equivalents. All components of equity are included in the denominator of the calculation. The Directors believe that a net debt ratio in the range 30-50% provides an efficient capital structure and an appropriate level of financial flexibility. At 31 March 2011 the net debt ratio was 37% (2010: 44%). 26 Related party transactions Group All transactions between the Parent Company and subsidiary companies and between subsidiaries companies have been eliminated on preparation of the consolidated accounts. The Group has not entered into any other related party transactions. Company The Company provides certain management services to subsidiary companies. Certain payments in relation to items settled or provided on a central basis, principally corporation tax and insurance payments, are made by the Company and are then recharged to subsidiaries at cost. Compensation of key management personnel (including Directors) Short term employee benefits Share based payments Pension contributions Group Company 2011 £000 1,321 73 69 1,463 2010 £000 1,259 28 70 1,357 2011 £000 728 73 32 833 2010 £000 677 28 32 737 Key management, other than Directors of the Company, comprise the Managing Directors and Finance Directors of the main operating subsidiaries. 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 75 Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of the Company will be held on Thursday 14 July 2011 at the Registered Office, Chuckery Road, Walsall at 2.00 p.m. for the following purposes. Ordinary resolutions 1. To receive and adopt the Report of the Directors, Statement of Accounts and Report of the Auditors for the year ended 31 March 2011. 2. To declare a Final Dividend for the year ended 31 March 2011 of 1.0p paid to members whose names were on the register of members at the close of business on 1 July 2011. 3. To re-elect as a Director Tom Brown. 4. To re-elect as a Director Tim Hair. 5. To re-elect as a Director Mark Bache. 6. To re-elect as a Director Keith Jackson. 7. To re-elect as a Director Alan Howarth. 8. To approve the Directors’ Remuneration Report for the year ended 31 March 2011. 9. To reappoint Ernst & Young LLP as Auditors of the Company and to authorise the Directors to fix the remuneration of the Auditors. (Resolution 1) (Resolution 2) (Resolution 3) (Resolution 4) (Resolution 5) (Resolution 6) (Resolution 7) (Resolution 8) (Resolution 9) 10. That the Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies Act 2006 (in substitution for all existing authorities under section 551 of the Companies Act 2006 which, to the extent unused at the date of this resolution, are revoked with immediate effect) to exercise all the powers of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £619,805 provided that (unless previously revoked, varied or renewed) such authority shall expire at the earlier of the conclusion of the next Annual General Meeting of the Company or 29 October 2012, but so that this authority shall allow the Company to make, before the expiry of this authority, offers or agreements which would or might require shares to be allotted or rights to subscribe for or to convert any security into shares to be granted after such expiry and notwithstanding such expiry the Directors may allot shares or grant such rights in pursuance to such offers or agreements as if this authority had not expired. (Resolution 10) Special resolutions 11. That, subject to the passing of resolution 10 and pursuant to section 570 of the Companies Act 2006 the Directors be and are hereby generally empowered (in substitution for all existing powers under section 570 of the Companies Act 2006 which, to the extent unused at the date of this resolution, are revoked with immediate effect) to allot equity securities (as defined in Section 560 of the Companies Act 2006) for cash pursuant to the authority granted by resolution 10 as if Section 561(1) of the Companies Act 2006 did not apply to such allotment, provided that this power shall be limited to the allotment of equity securities: (a) in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise): (i) to holders of ordinary shares in the capital of the Company in proportion (as nearly as practicable) to the respective numbers of ordinary shares held by them; and (ii) to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject to such rights, as the Directors otherwise consider necessary, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the requirements of any regulatory body or stock exchange; and (b) otherwise than pursuant to paragraph (a) of this resolution, up to an aggregate nominal amount of £92,971 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 76 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Notice of Annual General Meeting continued and (unless previously revoked, varied or renewed) this power shall expire at the earlier of the conclusion of the next Annual General Meeting, of the Company or 29 October 2011, but so that this authority shall allow the Company to make, before the expiry of this authority, offers or agreements which would or might require shares to be allotted or rights to subscribe for or to convert any security into shares to be granted after such expiry and notwithstanding such expiry the Directors may allot shares or grant such rights in pursuance of such offers or agreements as if this authority had not expired. (Resolution 11) 12. That the Company be and hereby is generally and unconditionally authorised pursuant to section 701 of the Companies Act 2006 to make market purchases (within the meaning of section 693(4) of the Companies Act 2006) of Ordinary Shares of 25p each in the capital of the Company (“Ordinary Shares”) on such terms and in such manner as the Directors may from time to time determine provided that: (a) the maximum number of Ordinary Shares which may be purchased is 743,700; (b) the minimum price (exclusive of expenses) which may be paid for each Ordinary Share is 25 pence; (c) the maximum price which may be paid for each Ordinary Share is an amount equivalent to 105% of the average of the middle market quotations for an Ordinary Share as derived from the Daily Official List of the London Stock Exchange Plc for the five business days immediately preceding the day on which the Ordinary Share in question is purchased, and (unless previously revoked, varied or renewed) this authority shall expire at the earlier of the conclusion of the next Annual General Meeting of the Company or 29 October 2012, save that the Company may enter into a contract to purchase Shares before this authority expires under which such purchase will or may be completed or executed wholly or partly after this authority expires and may make a purchase of Shares pursuant to any such contract as if this authority had not expired. By order of the Board Mark Bache Company Secretary 23 May 2011 (Resolution 12) Chuckery Road Walsall WS1 2DU 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 77 General Information A member is entitled to appoint another person (whether a member or not) as his or her proxy to exercise all or any of his or her rights to attend and to speak and vote at the Meeting for which purpose a form of proxy is enclosed. Proxies must be lodged at the office of the Company’s Registrars, Neville Registrars Ltd, 18 Laurel Lane, Halesowen, West Midlands B63 3DA, not later than 2.00 p.m. on 12 July 2011 (or if the Meeting is adjourned, not later than 48 hours (excluding any part of a day that is not a working day) before the time of the adjourned meeting). Completion and return of the form of proxy in accordance with its instructions will not prevent a member from attending and voting at the Meeting instead of their proxy if they wish. A member may appoint more than one proxy in relation to the Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by the member. A member wishing to appoint more than one proxy should photocopy the proxy card and indicate on each copy the name of the proxy he appoints and the number of shares in respect of which that proxy is appointed. A failure to specify the number of shares each proxy appointment relates to or specifying a number in excess of those held by the member may result in the proxy appointment being invalid. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that: (a) if a corporate shareholder has appointed the Chairman of the Meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (b) if more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not appointed the Chairman of the Meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives at www.icsa.org.uk for further details of this procedure. The guidance includes a sample form of representation letter if the Chairman is being appointed as described in (a) above. There will be available for inspection at the Registered Office of the Company during normal business hours (Weekends and Public Holidays excepted) from the date of this notice until the conclusion of the Annual General Meeting copies of contracts of service of Directors (including letters of appointment of non-executive Directors) with the Company or with any of its subsidiary undertakings. Biographical details of all Directors who are offering themselves for re-election at the meeting are set out on page 20 of the enclosed annual report and accounts. An explanation of Resolutions 10, 11 and 12 is set out in the Report of the Directors on pages 21 to 26. Members should notify the Registrars without delay of any change of address. n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 78 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Shareholder Notes 20453-04 15/06/2011 Proof 7 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH 79 n o i t c u d o r t n I e c n a m r o f r e P e c n a n r e v o G s t n e m e t a t S l a i c n a n i F 20453-04 15/06/2011 Proof 7 80 Chamberlin plc Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH Shareholder Information Advisers Company Secretary Mark Bache Registered Office Chuckery Road, Walsall WS1 2DU Registered in England No. 76928 Auditors Ernst & Young LLP, Birmingham Solicitors DLA Piper, Birmingham Stockbrokers Charles Stanley Securities, London Financial PR Biddicks, London Bankers HSBC Bank plc, Birmingham Registrars Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA 20453-04 15/06/2011 Proof 7 Small complex grey iron castings, principally for the automotive sector and hydraulic applications. Emergency exit equipment and traditional architectural hardware directed mainly at the DIY and construction markets. The Board believes that success in the foundry and engineering sector is achieved by businesses that operate in the most demanding area of their technology and provide an outstanding service to their customers – difficult things done well. Our existing activities meet these criteria and we will continue to invest in them and to seek acquisition opportunities that fit this model. Products associated with cable management. Lighting and switchgear associated with petrochemicals and construction applications. Large grey, ductile and alloyed iron castings for a range of applications including power generation, bearing housings, steelworks, construction and compressors. 20453-04 14/06/2011 Proof 6 20453-04 14/06/2011 Proof 6 CHAMBERLIN & HILL CASTINGS LTD Chuckery Road Walsall, WS1 2DU Tel: 01922 721411 Fax: 01922 614610 Bonchurch Street Leicester, LE3 5EP Tel: 0116 2992000 Fax: 0116 2998844 www.chcastings.co.uk EXIDOR LTD Progress Drive Cannock, WS11 0JE Tel: 01543 460030 Fax: 01543 573534 www.fredduncombe.co.uk PETREL LTD 22 Fortnum Close Kitts Green Birmingham, B33 0LB Tel: 0121 783 7161 Fax: 0121 783 5717 www.petrel-ex.co.uk RUSSELL DUCTILE CASTINGS LTD Trent Foundry Dawes Lane Scunthorpe, DN15 6UW Tel: 01724 862152 Fax: 01724 280461 www.russellcastings.co.uk C h a m b e r l i n p l c A n n u a l R e p o r t a n d A c c o u n t s f o r t h e y e a r e n d e d 3 1 M a r c h 2 0 1 1 Difficult things done well Chuckery Road, Walsall, West Midlands, WS1 2DU Tel: 01922 707100 Fax: 01922 638370 website: www.chamberlin.co.uk email: plc@chamberlin.co.uk 20453-04 14/06/2011 Proof 6 20453-04 14/06/2011 Proof 6 Annual Report and Accounts for the year ended 31 March 2011 Stock code: CMH