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DIFFICULT
THINGS
DONE
WELL
ANNUAL REPORT
AND ACCOUNTS
for the year ended 31 March 2018
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DIFFICULT THINGS
DONE WELL
Success in UK engineering has not been easy to
achieve in recent years, but its requirements can be
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must do them well.
We define “difficult things” as activities with high engineering content
delivering technically demanding products or processes. To take
profitable advantage of them it is essential that a business is properly
managed and performs well.
Investment Proposition
Æ Operating in markets with high
Æ Growth opportunity in the
barriers to entry protected by process
know-how or market regulation
turbocharger castings market
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Æ (cid:50)p(cid:72)(cid:85)atin(cid:74) ac(cid:85)(cid:82)(cid:86)(cid:86) (cid:71)i(cid:89)(cid:72)(cid:85)(cid:86)ifi(cid:72)(cid:71) ma(cid:85)(cid:78)(cid:72)t(cid:86)
Æ Strong, credible management team
with sales driven by the global
engineering economy – 59% of sales
are exported
with a proven track record
Æ Focused UK manufacturing in
niche markets
chamberlin plc
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Visit us online
For more information on
Chamberlin Group operations
please visit our website at
www.chamberlin.co.uk
Overview
Chairman, Keith Butler–Wheelhouse, commented:
“ While the year has delivered on our revenue expectations, margins have
suffered due to the difficulties we have encountered in the start-up of
our new machining facility, and ramp up of our main foundry to meet
unexpected demand.
The technical issues at the company’s new machining facility continue to
improve. New products for machining are also being introduced.
The Group remains well placed for further progress over the new financial
year as cost efficiencies are realised.”
REVENUE
£37.7m
2018
2017
37.7
35.0
32.1
UNDERLYING PROFIT
BEFORE TAX
£(21)k
2018
(21)
2017
579
Chairman’s Statement
STATUTORY PROFIT
BEFORE TAX
(£0.5m)
2018
(0.5)
2017
UNDERLYING DILUTED
EARNINGS PER SHARE
(5.6)p
2018 (5.6)
0.1
2017
4.5
CASH GENERATED
FROM OPERATIONS
£1.3m
2018
2017
(0.1)
1.3
Highlights
Æ Very encouraging revenue growth,
which should continue into new
financial year and beyond
Æ Net debt of £8.9m at year end
(2017: £6.8m), which reflected
machining facility investment
Æ Revenues up 17% to £37.7m
Æ Foundry operations grew revenues
(2017: £32.1m)
by 24% to £26.4m
Æ Gross margin decreased to 18.2%
(2017: 21.6%) – however H2 gross
margin improved by 4.4 percentage
points over H1 from 15.9% to 20.3%
— benefited from ramp up of new
automotive contract, which
commenced in H2 2017
Æ Engineering operations increased
Æ Underlying operating profit
revenues by 5% to £11.3m
before tax* decreased to £0.4m
(2017: £0.7m)
Æ IFRS diluted loss per share reduced
to 10.2p (2017: loss per share
of 12.2p)
Æ Capital expenditure of £3.0m
(2017: £3.7m), included further
investment in new machining facility
— initiatives in place to drive export
sales and margins
Æ Board is confident of delivering an
improved operational performance
in new financial year
* Underlying operating figures are stated before interest, exceptional items, administration costs of
the pension scheme and net financing costs on pension obligations, share based payment costs and
associated tax impact of these items.
www.chamberlin.co.uk
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CONTENTS
OVERVIEW
Highlights
01
02
03
04-05
06
07
09
10-12
13-15
16-19
21
22-29
30
31-38
39-48
49-50
STRATEGIC REPORT
Group at a Glance
Chief Executive’s Review
Measurements and Targets
Principal Risks and Uncertainties
GOVERNANCE
The Board
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Report
FINANCIAL STATEMENTS
Introduction
Primary Statements
Section 1 – Basis of Preparation
Section 2 – Results of the Year
Section 3 – Operating Assets
and Liabilities
Section 4 – Capital Structure
Section 5 – Other Supporting Notes 51-67
Independent Auditor’s Report
68-75
Parent Company Financial Statements 76-78
Five Year Financial Summary
79
Notice of Annual General Meeting
80-82
Shareholder Information
Shareholder Notes
83
84
C
F
I
01
27/06/2018 10:22:08
CHAIRMAN’S
STATEMENT
Our engineering businesses, Exidor
and Petrel, also contributed to
growth. Exidor increased revenues
and we are implementing further
initiatives to improve profitability.
Petrel continued to expand its market
share accessing new markets outside
its core oil and gas customer base,
helped by the ongoing development
of its new LED product ranges.
Looking ahead over the new financial
year, we are continuing to focus on
improving margins across both our
foundry and engineering operations. The
automotive turbocharger sector remains
a growth area and we expect production
volumes from our existing contracts
to increase over 2018. We therefore
anticipate ongoing progress as the new
financial year unfolds.
Results
Revenues for the year to 31 March 2018
increased by 17% to £37.7m (2017:
£32.1m), with growth largely driven
by the Walsall foundry and increased
market share from our two engineering
businesses. The new machining facility,
which opened in early 2017, suffered from
major technical problems and contributed
revenues of £2.6m, and a maiden loss of
£0.4m, net of compensation from our
machine supplier.
Underlying operating profit before tax
decreased to £0.4m (2017: £0.7m).
On an IFRS basis, after accounting for
restructuring costs of £0.1m (2017:
£0.1m), administration and costs of the
closed pension scheme of £0.3m (2017:
£0.4m), the Group generated a loss of
£0.8m (2017: loss of £1.0m). Diluted
loss per share was 10.2p (2017: loss per
share of 12.2p).
The net debt position at 31 March 2018
was £8.8m (2017: £6.8m), reflecting the
investment in the new machining facility.
Dividend
In line with the current dividend policy,
the Directors are not proposing the
payment of a dividend for the period
under review (2017: nil).
The Board and Staff
There were two changes to the
composition of the Board of Directors
during the year. In December 2017,
David Nicholas retired as a Non-
executive Director and, in March
2018, we appointed David Flowerday.
Formerly Strategy Director at Smiths
Group PLC and a member of the
Chartered Institute of Management
Accountants, David Flowerday has
significant relevant experience and
has been appointed as Chairman
of the Company’s Remuneration
Committee and a member of the
Audit and Nomination Committees.
The Group is supported by committed
and hard-working teams and, on
behalf of the Board, I would like to
thank all our staff for their efforts
during the year. Their skills and
energy will help to drive Chamberlin’s
performance and future growth.
Outlook
We believe that the Group is well
positioned to deliver a further
improvement in performance during
the current financial year as we
recover margins.
We look forward to reporting further
progress at the Group’s AGM on
24 July 2018.
(cid:46)(cid:40)(cid:44)(cid:55)(cid:43) (cid:37)(cid:56)(cid:55)(cid:47)(cid:40)(cid:53)(cid:482)(cid:58)(cid:43)(cid:40)(cid:40)(cid:47)(cid:43)(cid:50)(cid:56)(cid:54)(cid:40)
CHAIRMAN
4 June 2018
(cid:46)(cid:40)(cid:44)(cid:55)(cid:43) (cid:37)(cid:56)(cid:55)(cid:47)(cid:40)(cid:53)(cid:482)(cid:58)(cid:43)(cid:40)(cid:40)(cid:47)(cid:43)(cid:50)(cid:56)(cid:54)(cid:40)
CHAIRMAN
Introduction
While the year has delivered on our
revenue expectations, the Group’s
results reflect the impact of the
previously reported technical issues
within our foundry activities, in particular
with the new machining cells. The
resulting operational inefficiencies
meant that gross margins for the
year reduced, from 21.6% in 2017 to
18.2%, and underlying operating profit
decreased from £0.7m to £0.4m. As we
made progress in resolving the technical
issues, gross margins improved,
recovering by 4.4 percentage points
in the second half of the financial year
(20.3%) over the first half (15.9%).
The Group’s revenue performance
demonstrates the wider picture of
growth and development, with revenue
up 17% year-on-year to £37.7m
reflecting the strong position we
have established in the automotive
turbocharger sector. As we have
previously highlighted, our investment
in our new machining cells positions us
as the only provider of fully machined,
grey iron bearing housings in Europe.
This stands us in very good stead to win
additional turbocharger volumes, and
opens up new long-term opportunities.
02
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Strategic Report
GROUP AT
A GLANCE
GROUP OVERVIEW
Product areas
Chamberlin operates across
five locations in the UK. The
Foundry Division specialises
in technically demanding
castings in complex shapes
and in specialist metallurgies.
Work is allocated across its two foundry
sites and one machining facility based on
size and metallurgy as follows:
Æ Light Castings based in Walsall
produce castings up to 5kg in
grey iron;
Æ Heavy Castings based in
Scunthorpe make 100kg and
6 tonne castings, again in a wide
variety of iron grades.
Æ The machining centre, opened in
2017, supports the light castings
made in Walsall.
The two engineering businesses supply
to regulated markets operating from two
sites in the West Midlands.
Global sales
Engineering activity outside
of the UK is a key driver of
demand.
4
3
5
1
2
6
Direct exports account for 59% of
output with our customers located
in Europe, America and Asia. Global
demand for engineered products is
strong and our customers are typically
leaders in their sectors.
UK Manufacturing
HEAD OFFICE
1 Walsall
FOUNDRIES
2 Chamberlin & Hill Castings, Walsall
3 Chamberlin & Hill Castings,
machining facility, Walsall
4 Russell Ductile Castings,
Scunthorpe
ENGINEERING
5 Exidor, Cannock
6 Petrel, Birmingham
REVENUE BY BUSINESS
DIRECT EXPORTS
MARKETS SERVED
55%
3%
11%
4%
10%
20%
15%
Light Castings
Heavy Castings
Security/safety
Hazardous Environments
Light Castings
Heavy Castings
Security/safety
Hazardous Environments
82%
3%
1%
10%
3%
8%
20%
3%
8%
42%
3%
Off road vehicles
Power generation
Civil engineering
General engineering
Passenger car turbo
Commercial diesel
Safety/security
Machining
Hydraulics
Hazardous environments
www.chamberlin.co.uk
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CHIEF
EXECUTIVE’S
REVIEW
Our foundry at Walsall is our flagship
operation and drives the majority of
the foundry division’s sales. Walsall’s
expertise is in producing small castings,
typically below 3kg in weight, that have
complex internal geometry. The complex
geometry is achieved through the use
of innovative core design and assembly
techniques and, importantly, the foundry
is capable of producing these castings in
high volumes.
The automotive turbocharger segment
is a major market for Walsall, with
modern designs requiring precise
alignment of cooling and lubrication
passages to meet the increased
performance demanded by modern
engines. Legislation is a major driver
of this market, with the requirement
to reduce nitrogen dioxide emissions
promoting the introduction of
smaller, turbocharged petrol engines.
Approximately 74% of Walsall’s casting
production is for petrol engines.
Walsall is one of only four specialist
foundries in Europe with the technical
capability of supplying castings for
turbochargers and, with our new
machining capability, the foundry is now
the only fully integrated supplier of grey
iron bearing housings in Europe.
The Scunthorpe foundry specialises in
heavy castings weighing up to 6,000kg
that have complex geometry and
challenging metallurgy. These castings
are used in applications where there is
a requirement for high strength or high
temperature performance, for instance
in large process compressors, industrial
gas turbines and mining, quarrying
and construction equipment, and the
majority of customers are Original
Equipment Manufacturers (“OEMs”).
Demand at the foundry was in line with
management expectations over the year
and we continued to work to deepen and
broaden customer relationships, and to
focus on operational efficiency.
Engineering
Revenues from the engineering
operations, comprising our Exidor and
Petrel businesses, increased by 15%
year-on-year to £11.3m (2017: £10.8m)
and operating profit rose by 10% to
£0.9m (2017: £0.8m).
Our Exidor business is the UK market
leader in panic and emergency exit door
hardware. Its products are for life-critical
applications and it operates in a highly
regulated market. Customers place
great value on Exidor’s heritage as a
British designer and manufacturer that
delivers high quality, certified products.
We are re-engineering the product range
to support our growth and continue to
target overseas sales while maintaining
Exidor’s leading position in the UK. The
business delivered good growth and we
are implementing lean manufacturing
initiatives, which will help to reduce costs
and improve margins.
Petrel has a well-established reputation
for designing and manufacturing high
quality lighting and control equipment
for use in hazardous or demanding
environments. It supplies customers
across the UK and Europe as well as
internationally. Revenue growth over
the year was very good and we are
encouraged by the progress being made
outside Petrel’s traditional markets
of oil & gas. The transition to LED
lighting remains a key focus as well as
developing the business’s portable light
fittings range. Approximately 46% of
sales (2017: 31%) were generated from
portable lighting and LED products over
the year and this percentage should rise
further. We have also expanded Petrel’s
commercial and technical resource to
support ongoing growth.
Outlook
A major focus in the new financial year is
on improving margins as well as driving
revenue growth and we expect to make
good progress in both areas.
KEVIN NOLAN CHIEF EXECUTIVE
The opening of our new machining
operations in early 2017 was a
strategically significant point for the
Group and, while we experienced
technical problems, which impacted
results in the year under review, this
investment will help to drive additional
growth opportunities for our foundry
activities. Both our engineering
operations made encouraging progress
although Petrel’s traditional core market
of oil and gas remains subdued. We
remain focused on building export sales
across both Petrel and Exidor.
Foundries
Foundry revenues increased by 24%
year-on-year to £26.4m (2017: £21.3m).
This included a first time contribution
from the new machining facility of
£2.6m, which started production in
early 2018. However, reflecting the
technical problems experienced
across this segment particularly
within machining, operating profit
decreased to £0.5m (2017: £1.2m). This
included a loss of £0.4m from the new
machining facility, net of compensation
from our machine supplier.
The Group now operates two foundries,
at Walsall and Scunthorpe, each with a
different specialisation.
04
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Strategic Report
PERFORMANCE
REVIEW
FOUNDRY OVERVIEW
ENGINEERING OVERVIEW
OUR TWO FOUNDRY SITES
CAST A RANGE OF PRODUCTS
RANGING FROM 1KG UP TO
6,000KG AND DELIVER CASTINGS
WITH COMPLEX GEOMETRY AND
CHALLENGING METALLURGY.
OUR TWO ENGINEERING SITES
PRODUCE EMERGENCY EXIT
HARDWARE, MECHANICAL AND
ELECTRICAL DOOR CLOSERS AND
LIGHTING AND CONTROL EQUIPMENT
FOR USE IN HAZARDOUS AND
EXPLOSIVE ENVIRONMENTS.
Operating Profit
Operating Profit
528
2018
2017
1,188
2018
2017
901
816
Revenue Split
79%
Revenue Split
67%
21%
33%
Light Castings
Heavy Castings
Security/safety
Hazardous environments
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MEASUREMENTS
AND TARGETS
Business performance is measured through Group wide
targets and improvement measures.
Each Chamberlin business unit participates in an annual round
of planning meetings with the Executive Management, during
which performance and future plans for that business are
reviewed and updated. These business plans are all aligned
with the group business strategy and include specific local and
divisional targets and key performance indicators (KPIs).
In addition, individual business reviews take place throughout
the year on a regular basis enabling the Board to assess
performance against tactical and strategic milestones.
Key Performance Indicators
Key performance indicators (“KPIs”) are used to
measure and evaluate Group performance against
targets and monitor various activities throughout
the Group. The main key performance indicators
employed in the Group are set out below:
KPI
DEFINITION
FOUNDRIES
ENGINEERING
3.0
3.0
2018
2017
8.0
5.6
2018
2017
8.0
7.6
GROUP
Year ended 31 March 2018
0.9
2018
0.9
2017
2.3
RETURN
ON SALES
(%)
RETURN ON
NET ASSETS
(%)
SALES PER
EMPLOYEE
(£000)
The ratio of the
segment’s trading
profit to the
segment’s sales.
The trading profit
is defined in the
segmental analysis
in note 3.
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.
4.1
2018
4.1
2017
10.1
24.8
2018
2017
24.8
23.6
2018
2017
11.3
11.3
102.1
109.5
100.2
2018
2017
102.1
101.1
2018
2017
109.5
106.8
2018
2017
19.2
100.2
99.7
ACCIDENT
FREQUENCY
RATE
The number of
accidents per
100,000 hours
worked averaged
for the full year.
15.8
2018
15.8
2017
6.8
4.9
2018
2017
12.3
4.9
5.1
2018
2017
12.3
6.3
The directors note that the KPIs reflect the trading conditions of the Group during the year. Current year KPIs exclude
discontinued operations. Prior year KPIs have been restated to exclude discontinued operations.
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 incorporate shared costs.
06
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Strategic Report
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 10 to 12
Risk
Description of Risk & Potential Impact
Mitigation
Brexit/Foreign currency
fluctuation
Approximately 50% of Group revenue is
derived in Euros. Significant Brexit disruptions
leading to exchange fluctuations could have a
material impact on the financial performance
of the Group.
Group sells Euros forward in order to provide
an effective hedge.
The Group continues to monitor and
assess the potential post-Brexit trading
relationships with EU member states.
Raw material pricing fluctuation
The price of many raw materials is dependent
upon movements in commodity prices,
especially iron.
The Group negotiates, where appropriate,
price surcharge arrangements into its
customer contracts.
Failure of our health, safety and
environmental (HSE) controls
resulting in harm to employees or
other stakeholders
IT failure/system collapse
and loss of data
We recognise that we have a duty of care
to our employees. We have made great
progress in recent years but understand
the impact on our employees from the
failure of this obligation. This could result
in injury or death to our employees or to
others and environmental damage with
the consequential impact of reputational
damage and risk of regulatory action.
Established processes are in place to ensure
that health, safety and environmental
matters are appropriately addressed and any
such risks are minimised including monthly
reporting to, and review at the Executive
Committee. Specialist HSE employees to
provide support and guidance to businesses
including the conduct of regular risk control
and health and safety audits.
We utilise a significant number of IT
systems to support the Group’s production,
technology, marketing, sales and financial
functions. Failure of any of the systems
corruptions or loss of data could have a
major impact on operations.
Development and regular testing of business
continuity plans.
Ensuring business continuity plans are robust
and address temporary unavailability of IT
systems.
Strategy to upgrade and replace key systems.
Market deterioration
We are a capitally intensive business with a
high level of fixed costs. Deterioration in our
key markets could have a material impact on
the financial performance of the Group.
The Group sells into a wide variety of
different markets, selling a diversified
product range. We strive to work with our key
customer to introduce new products and are
constantly seeking to identify new business
segments and geographical locations into
which to sell our products..
Production failures
Due to the complex technical nature and
fine production tolerances of our products,
an unstable production process can result
in significant scrap which could have a
significantly adverse impact on results.
The Group seeks to employ a skilled
workforce backed by a highly experienced
technical and production team in order to
provide the relevant experience and skill set
to mitigate any production failures.
The Group’s approach to managing other financial risk is set out in note 25 to the financial statements.
The Strategic Report, which comprises pages 04 to 07, together with the commentary on the primary statements on pages 23 to
29, has been approved by the board of Directors and signed on their behalf by:
KEVIN NOLAN
CHIEF EXECUTIVE
4 June 2018
www.chamberlin.co.uk
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HEADING
HEADING
GOVERNANCE
The Board
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Report
09
10– 12
13 – 15
16 – 19
08
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Governance
THE BOARD
EXECUTIVE DIRECTORS
(cid:49)(cid:50)(cid:49)(cid:482)(cid:40)(cid:59)(cid:40)(cid:38)(cid:56)(cid:55)(cid:44)(cid:57)(cid:40) (cid:39)(cid:44)(cid:53)(cid:40)(cid:38)(cid:55)(cid:50)(cid:53)(cid:54)
KEVIN NOLAN
(cid:46)(cid:40)(cid:44)(cid:55)(cid:43) (cid:37)(cid:56)(cid:55)(cid:47)(cid:40)(cid:53)(cid:482)(cid:58)(cid:43)(cid:40)(cid:40)(cid:47)(cid:43)(cid:50)(cid:56)(cid:54)(cid:40)
KEITH JACKSON
Aged 72, Keith joined the Board and was
appointed Non-Executive Chairman in
March 2012. Previously Chief Executive of
Smiths Group plc, Saab Automobile Sweden
and Delta Motor Corporation South Africa.
He is currently Non-Executive Director of
Plastics Capital plc and previously served as a
Non-Executive Director with Atlas Copco AB,
General Motors Europe, J Sainsbury plc and
NIU Solutions.
Aged 69, Keith joined the Board in 2005. He
was previously Finance Director of Tarmac
Group Ltd, and was Finance Director of Cape
plc between 1989 and 1996. He is a Director
of EuroChem, as well as being Chairman of
a number of pension funds. Keith is Senior
Independent Director and Chairman of the
Audit Committee.
Aged 61, Kevin joined the Board and was
appointed Chief Executive on 9 September
2013. Kevin Nolan has 30 years’ senior level
experience in the engineering sector and
joined Chamberlin from global materials
engineering group, Wall Colmonoy Ltd, where
he was Managing Director. He previously
worked for Doncasters Group Ltd, the
international engineering group which
manufactures precision components and
assemblies where he successfully led the
expansion of a number of the group’s business
units and latterly was appointed Divisional
Managing Director of Doncasters’ largest
division, Doncasters Turbine Airfoils and
Structural Castings Division.
DAVID ROBERTS
DAVID FLOWERDAY
DAVID NICHOLAS
Aged 49, David joined the Board and was
appointed Finance Director and Company
Secretary on 1 September 2013. David
Roberts has substantial experience in senior
financial roles within the manufacturing and
engineering sectors. He was previously at
Titanium Metals Corporation, a global producer
of titanium melted and mill products, where he
was European Finance Director. Before this, he
worked for Britax International plc as Divisional
Finance Director of Rear Vision Systems,
a supplier of original equipment exterior
mirrors for passenger cars and light trucks to
automotive manufacturers worldwide.
www.chamberlin.co.uk
STOCK CODE: CMH
Aged 68, David was appointed a Director in
July 2016 and resigned on 28 November 2017.
Aged 65, David joined the Board in March
2018. He previously held positions of Strategy
Director, Group Financial Controller, and
Flex-tek Managing Director at Smiths Group
plc. He currently is a strategy consultant and
additionally is Chairman of Dartmouth Trust.
David is Chairman of the Remuneration
Committee and a member of both the Audit
and Nominations Committee.
09
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CORPORATE
GOVERNANCE REPORT
(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) 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.
(d) 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 re-appointments on retirement by
rotation. It comprises the non-executive directors and the
Chief Executive. The Chairman of the Committee is Keith
Butler-Wheelhouse.
(e) Re-election of directors
At the Annual General Meeting to be held on 24 July 2018 (see
the Notice of Annual General Meeting on pages 80 to 82), all
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 good
corporate governance provisions in respect of the re-election
of directors and consequently to require all directors to be
subject to re-election.
(f) Directors’ remuneration
The statement of the Company’s policy on executive directors’
remuneration and details of directors’ emoluments and service
contracts are contained in the Directors’ Remuneration Report
on pages 13 to 15.
Principles of good governance
The Group has set out its Governance Code as described
below and in the Directors’ Remuneration Report.
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.
Keith Butler-Wheelhouse is the 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.
The Board considers Keith Jackson (first appointed 1 October
2005) and David Flowerday (first appointed 26 March 2018)
to be independent non-executive directors. Given the length
of service the Board has determined they are independent in
character and judgement taking into account their range of
experience, qualifications and other sources of income.
10
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ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Governance
(g) 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 six 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.
(h) Audit Committee
The Audit Committee, which consists of the three non-
executive directors, Keith Jackson (Chairman), Keith Butler-
Wheelhouse and David Flowerday, 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.
(i) Remuneration Committee
The Remuneration Committee comprises the three non-
executive directors. Further details are shown in the Directors’
Remuneration Report.
(j) Annual General Meeting
All directors expect to attend the Annual General
Meeting and to be available to answer questions put to
them by shareholders.
Internal control
(k)
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 the Code. 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.
The Group’s Code has a requirement that the Company
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 internal control questionnaires, which when
combined with regular reviews performed by members of
the group finance function, gives the Board confidence that
internal controls are effective. There have been no identified
significant control failings during the year.
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.
There is an ongoing process to identify, evaluate and manage
the significant risks faced by the Group – this process has been
in place throughout the year under review and up to the date
of approval of the annual report and accounts. This process
is regularly reviewed by the board and accords with the FRC
Guidance on Internal Control.
www.chamberlin.co.uk
STOCK CODE: CMH
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CORPORATE
GOVERNANCE REPORT CONTINUED
Summary of attendance at meetings
Board
meetings
Nominations
Committee
Remuneration
Committee
Audit
Committee
Number of
meetings in the
year
David Flowerday*
David Nicholas**
Kevin Nolan
David Roberts
8
8
8
–
6
8
8
1
1
1
–
–
1
–
3
3
3
–
3
n/a
n/a
2
2
2
–
2
n/a
n/a
* appointed as a director on 26 March 2018
** resigned as a director on 28 November 2017
n/a – Indicates that a director was not a member of a particular committee.
DAVID ROBERTS
CHIEF EXECUTIVE
4 June 2018
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:
Æ Clear responsibilities on the part of line and financial
management for good financial controls in the production
of accurate and timely financial management information.
Keith Butler-
Wheelhouse
Æ The control of key financial risks through clearly laid down
Keith Jackson
authorisation levels and proper segregation of
accounting duties.
Æ 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.
Æ Reporting on compliance with internal financial controls
and procedures by each individual business unit under the
supervision of the Group Finance Director. 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.
12
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ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Governance
DIRECTORS’
REMUNERATION REPORT
Remuneration Committee
The Remuneration Committee comprises the three non-
executive directors: David Flowerday (Chairman), Keith Butler-
Wheelhouse 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 2018 the
bonus in respect of Kevin Nolan and David Roberts 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 a share option. The key
features of the scheme are summarised on page 15.
Service contracts
All executive directors who served during the year have rolling
service contracts terminable on no more than one 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.
Directors’ remuneration
Total remuneration
excluding pensions
2018
£000
2017
£000
249
174
378
263
75
30
20
–
–
548
75
30
21
–
9
776
776
Basic
salary
£000
Benefits
£000
Annual
bonus
£000
Executive
Kevin Nolan*
David Roberts
221
155
Non-
Executive
Keith Butler-
Wheelhouse
Keith Jackson
David
Nicholas**
David
Flowerday***
Alan
Howarth****
Total
Total 2017
75
30
20
–
–
501
504
2
1
–
–
–
–
–
3
3
26
18
–
–
–
–
–
44
266
* Highest paid director in 2018 and 2017.
** Resigned 28 November 2017
*** Appointed 26 March 2018
**** Resigned 22 July 2016
www.chamberlin.co.uk
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DIRECTORS’
REMUNERATION REPORT CONTINUED
Benefits include all assessable tax benefits arising from employment by the Company, and relate mainly to the provision of
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, or prior years, to directors under the Chamberlin & Hill Staff Pension and Life
Assurance Scheme (2017: nil) which is a closed defined benefit scheme.
Contributions into personal pension plans
K Nolan
D Roberts
Percentage of
basic salary
10%
10%
Contribution
paid
2018
£000
Contribution
paid
2017
£000
21
15
21
14
For directors who have served during the year, no other pension contributions were paid other than as disclosed above.
Directors’ options
Kevin Nolan
David Roberts
31 March
2017
120,732
120,732
120,731
207,363
79,268
79,268
79,269
142,637
950,000
Granted
in year
Exercised
in year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Lapsed or
forfeited
in year
120,732
120,732
120,731
31 March
2018
Option exercise
price
Exercisable between
–
–
–
97.65p
25.11.17 – 25.11.2024
97.65p
25.11.18 – 25.11.2024
97.65p
25.11.19 – 25.11.2024
–
207,363
Nil p
14.12.19 – 14.12.2026
79,268
79,268
79,269
–
600,000
–
–
–
142,637
350,000
97.65p
25.11.17 – 25.11.2024
97.65p
25.11.18 – 25.11.2024
97.65p
25.11.19 – 25.11.2024
Nil p
14.12.19 – 14.12.2026
14
chamberlin plc
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Governance
A Share Option Plan (“SOP”) has issued a third tranche of share
options after the first two tranches lapsed in the year. The third
tranche of share options are exercisable at nil p per share. 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 at time of granting. The proportion of awards
that become exercisable varies on a straight line basis, from
20% to 100%, based on shareholder return, calculated as the
average share price during the three month period ending on
the anniversary of the date of grant. A shareholder return of
80p is required for 20% of the options to be exercisable, with
a shareholder return of 120p necessary for 100% of options
to be exercised. No tranche of options are exercisable if
shareholder return is below this range.
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 share options have been exercised in 2018 or 2017.
There have been no changes in the interests set out above
between 1 April 2018 and 4 June 2018.
The mid-market price of the shares at 31 March 2018 was
63.5p and during the year ranged between 63.5p and 176.5p.
On behalf of the Board
DAVID FLOWERDAY
CHAIRMAN, REMUNERATION COMMITTEE
4 June 2018
www.chamberlin.co.uk
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DIRECTORS’ REPORT
The Directors present their report together with the audited
financial statements for the year ended 31 March 2018.
The Company is registered in England and its registration
number is 76928.
(a) 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
Year to
31 March
2018
Year to
31 March
2017
261
103
12
376
230
101
12
343
* Includes 3 non-executive directors
The Group’s employment policy includes a commitment to
the principles of equal opportunity for all, and specifically
prohibits discrimination of any 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.
(b) 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:
Æ 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;
Æ 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;
Æ actively encourage the minimisation of waste from all
aspects of the business and promote the benefits of
recycling and re-use;
Æ 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;
Æ 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
Æ 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.
(c) 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.
16
chamberlin plc
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Governance
Financial instruments
The Company’s policy in respect of financial instruments is
disclosed in note 25.
Dividends
The directors do not recommend the payment of a final
dividend (2017: nil p). No interim dividend (2017: nil p) has been
paid during the year.
Directors
Details of the directors of the Company at the year end 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 13 to 15.
See Board of Directors on page 09 for details of all directors
during the year, including appointments and resignations.
Directors’ shareholdings
Beneficial interests of the directors in the shares of the
Company, including those of their immediate families were:
At 31 March
2018
Number of
shares
At 31 March
2017
Number of
shares
Keith Butler-Wheelhouse
120,127
120,127
Kevin Nolan
David Roberts
Keith Jackson
David Flowerday (appointed
26 March 2018)
David Nicholas (resigned
28 November 2017)
–
5,000
13,525
–
–
–
5,000
13,525
–
–
There have been no changes in the interests of the directors
set out above between 1 April 2018 and 4 June 2018.
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 £663,177
(which represents approximately 33% of the issued share
capital of the Company as at 4 June 2018). 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
£99,476. This sum represents 397,906 ordinary shares of
25 pence each, being equivalent to 5% of the issued share
capital of the Company at 4 June 2018.
Authority to purchase own shares
At the Annual General Meeting in 2017, the Board was given
authority to purchase and cancel up to 795,812 of its own
shares representing just under 10% of the Company’s then
existing issued share capital, through market purchases on
The AIM Market. 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 795,812 of its own shares, again representing just under
10% of its issued share capital at 4 June 2018.
The authority is sought by way of a special resolution, details
of which are also included at item 11 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 9 to 11
in the notice of meeting on pages 80 to 82.
www.chamberlin.co.uk
STOCK CODE: CMH
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DIRECTORS’ REPORT CONTINUED
Substantial shareholders
At 4 June 2018 the Company was aware of the following
interests of 3% or more of the Company’s share capital, other
than those of directors:
Statement of directors’ responsibilities
The Directors are responsible for preparing the Strategic
Report, Directors’ Report and Financial Statements in
accordance with applicable law and regulations.
Number of
Shares
% of Issued
Share Capital
Discretionary Unit Fund Managers
1,000,000
Miton Asset Management
Janus Henderson Investors
Thornbridge Investment Management
Chelverton Asset Management
R J Keeling Esq
Schroder Institutional UK Smaller
Companies Fund
AXA Framlington
Charlton T W G Esq
Perfecta Assets Ltd
990,471
791,000
560,000
500,000
358,800
348,500
300,000
281,500
275,000
12.6
12.5
9.9
7.0
6.3
4.5
4.4
3.8
3.5
3.5
At the Annual General Meeting to be held on 24 July 2018
(see the Notice of Annual General Meeting on pages 80 to
82), 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. For all the directors serving during the year,
and up to the date of this annual report, there are indemnity
arrangements in place with each director in respect of costs
defending civil, criminal and regulatory proceedings brought
against them in their capacity as directors, where not covered
by insurance and subject always to the limitations set by the
Companies Act 2006.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the Group financial statements in
accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs). Under Company
law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs and profit or loss of the Company and the
Group for that period. In preparing these financial statements,
the Directors are required to:
Æ select suitable accounting policies and then apply them
consistently;
Æ make judgments and accounting estimates that are
reasonable and prudent;
Æ state whether applicable IFRSs have been followed, subject
to any material departures disclosed and explained in the
financial statements; and
Æ prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company and Group will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s
transactions and disclose, with reasonable accuracy at
any time, the financial position of the Group and enable
them to ensure that the financial statements comply with
the Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
18
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ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Governance
The Directors confirm that:
Æ so far as each Director is aware there is no relevant audit
information of which the Company’s auditor is unaware;
and
Æ the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is
aware of that information.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Group’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
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 09. Having
made enquiries of fellow directors and of the Company’s
auditors, each of these directors confirms that:
Æ 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
Æ 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.
Going concern
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, comprising a £7.0m invoice discounting facility
renewable in March 2019 (no indication that this won’t be
renewed in March 2019), £0.5m overdraft renewable in March
2019 (the Group is not reliant on this renewal), finance leases
of £2.5m repayable over 5 years and an import loan of £1.1m.
As a consequence, the Directors believe that the Group is well
placed to manage its business and financial risks successfully.
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.
Post balance sheet events
There have been no post balance sheet events.
Auditors
A resolution will be proposed to reappoint Grant Thornton UK
LLP as auditors and to authorise the directors to determine
their remuneration.
By order of the Board
DAVID ROBERTS
SECRETARY
4 June 2018
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FINANCIAL
STATEMENTS
Introduction
Primary Statements
Section 1
– Basis of Preparation
Section 2
– Results of the Year
Section 3
– Operating Assets and Liabilities
Section 4
– Capital Structure and Financing Costs
Section 5
– Other Supporting Notes
Independent Auditor’s Report
Parent Company Financial Statements
Five Year Financial Summary
Notice of Annual General Meeting
Shareholder Information
Shareholder Notes
21
22 – 29
30
31 – 38
39 – 48
49 – 50
51 – 67
68 – 75
76 – 78
79
80 – 82
83
84
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Financial Statements
INTRODUCTION
Introduction and
Table of Contents
These financial statements have
been presented in a manner which
attempts to make them less complex
and more relevant to shareholders. We
have grouped notes in sections under
five headings: ‘Basis of Preparation’,
‘Results for the Year’, ‘Operating Assets
and Liabilities’, ‘Capital Structure and
Financing Costs’ and ‘Other Notes’.
The purpose of this format is to provide
readers with a clearer understanding of
what drives the financial performance of
the Group.
Notes to the financial statements
provide additional information
required by statute or accounting
standards to explain a particular
feature of the financial statements.
The notes that follow will also provide
explanations and additional disclosure
to assist readers’ understanding and
interpretation of the Annual Report
and the financial statements.
DAVID ROBERTS FINANCE DIRECTOR
Welcome to the Financial Statements
section of our Annual Report.
The directors have included the annual
financial review on the following pages as
commentary on the primary statements.
Whilst the accounting policies adopted
by the Group are an important part of our
Annual Report, we recognise that many
readers of the Financial Statements
prefer to use these as a reference tool.
These policies are now included towards
the end of the Financial Statements,
rather than at the beginning.
We included 28 notes to the Group
Financial Statements in the previous
year and while all of this information
is necessary to ensure we comply
with International Financial Reporting
Standards, it does not always make it
easy to find what you are looking for. We
have therefore structured the notes into
five categories (as outlined in the table
of contents on the previous page) for
easier navigation.
www.chamberlin.co.uk
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CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2018
Revenue
Cost of sales
Gross profit
Other operating expense
Operating profit/ (loss)
Finance costs
(Loss)/ profit before tax
Tax (expense)/ credit
(Loss)/ profit for the year from continuing
operations
Discontinued operations
Profit/ (loss) for the year from discontinued
operations
(Loss)/ profit for the year attributable to equity
holders of the parent company
(Loss)/ earnings per share from continuing
operations:
basic
diluted
Earnings/ (loss) per share from discontinued
operations:
basic
diluted
Total (loss)/ earnings per share:
basic
diluted
Year ended 31 March 2018
Year ended 31 March 2017
Notes
Underlying
£000
3
37,670
(30,802)
6,868
(6,512)
356
(377)
(21)
(427)
4, 12
7
6
8
Non-
underlying+
£000
–
–
–
(324)
(324)
(126)
(450)
85
Total
£000
Underlying
£000
37,670
32,119
(30,802)
(25,173)
6,868
(6,836)
32
(503)
(471)
(342)
6,946
(6,203)
743
(164)
579
(205)
Non-
underlying+
£000
–
–
–
(365)
(365)
(160)
(525)
105
Total
£000
32,119
(25,173)
6,946
(6,568)
378
(324)
54
(100)
(448)
(365)
(813)
374
(420)
(46)
10
–
–
–
219
(1,146)
(927)
(448)
(365)
(813)
593
(1,566)
(973)
11
11
11
11
11
11
(10.2)p
(10.2)p
0.0 p
0.0 p
(10.2)p
(10.2)p
(0.6)p
(0.6)p
(11.6)p
(11.6)p
(12.2)p
(12.2)p
+ Non-underlying items represent exceptional items as disclosed in note 12, administration costs of the pension scheme and net financing costs on pension
obligations, share based payment costs and associated tax impact of these items.
22
chamberlin plc
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Financial Statements
COMMENTARY ON THE
CONSOLIDATED INCOME STATEMENT
Overview
Sales increased by 17% during the year to £37.7m (2017: £32.1m). Gross profit margin decreased to 18.2% from 21.6% in 2017.
Underlying operating profit before tax decreased to £0.4m (2017: £0.7m).
The IFRS results show a loss of £0.8m (2017: £1.0m) and a statutory loss per share of 10.2p (2017: loss per share 12.2p).
(cid:49)(cid:50)(cid:49)(cid:482)(cid:56)(cid:49)(cid:39)(cid:40)(cid:53)(cid:47)(cid:60)(cid:44)(cid:49)(cid:42) (cid:40)(cid:59)(cid:38)(cid:40)(cid:51)(cid:55)(cid:44)(cid:50)(cid:49)(cid:36)(cid:47) (cid:44)(cid:55)(cid:40)(cid:48)(cid:54)
Exceptional items in the year included £0.1m (2017: £0.1m) relating to the realignment of the cost base of the Group.
Tax
The Group’s underlying tax charge for the year was £0.4m (2017: £0.2m).
CASH GENERATION AND FINANCING
Operating cash inflow from continuing operations was £1.3m (2017: £0.3m).
Capital expenditure for the year decreased to £3.0m (2017: £3.7m). This was ahead of depreciation and amortisation of £1.4m
(2017: £1.2m), reflecting the investment in the new machining facility.
Our overdraft and net borrowings at 31 March 2017 increased to £8.8m (2017: £6.8m).
FOREIGN EXCHANGE
It is the Group’s policy to minimise risk to exchange rate movements affecting sales and purchases by economically hedging or
netting currency exposures at the time of commitment, or when there is a high probability of future commitment, using currency
instruments (primarily forward exchange contracts). A proportion of forecast exposures are hedged depending on the level of
confidence and hedging is topped up following regular reviews. On this basis up to 50% of the Group’s annual exposures are likely
to be hedged at any point in time and the Group’s net transactional exposure to different currencies varies from time to time.
Approximately 55% of the Group’s revenues are denominated in Euros. During the year to 31 March 2017 the average exchange
rate used to translate into GBP sterling was €1.26 (31 March 2017: €1.26).
PENSION
The Group’s defined benefit pension scheme was closed to future accrual in 2007. Following the last triennial valuation, as at 1
April 2016, contributions were set at £0.3m per year for the period under review increasing by 3% per year thereafter based on a
deficit recovery period of 22 years.
The pension expense for the defined benefit scheme was £0.3m in 2018 (2017: £0.4m), and is shown in non-underlying. The
Group cash contribution during the year was £0.3m (2017: £0.3m).
The Group operates a defined contribution pension scheme for its current employees. The cost of £0.4m (2017: £0.4m) is
included within underlying operating performance.
The IAS 19 deficit at 31 March 2017 was £5.1m (2017: £5.2m).
www.chamberlin.co.uk
STOCK CODE: CMH
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CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2018
Loss for the year
Other comprehensive income
Reclassification for cash flow hedge included in sales
Movements in fair value on cash flow hedges taken to other comprehensive income
Deferred tax on movement in cash flow hedges
Movement on deferred tax relating to rate change
Net other comprehensive income that may be recycled to profit and loss
Remeasurement losses on pension assets and liabilities
Deferred/ current tax on remeasurement losses on pension scheme
Movement on deferred tax on remeasurement losses relating to rate change
Net other comprehensive expense that will not be recycled to profit and loss
Other comprehensive expense for the year net of tax
Notes
8
8
22
8
8
2018
£000
(813)
(18)
87
(12)
–
57
(8)
2
–
(6)
51
2017
£000
(973)
(87)
419
(60)
(1)
271
(612)
122
(52)
(542)
(271)
Total comprehensive expense for the period attributable to equity holders of the
parent company
(762)
(1,244)
COMMENTARY ON THE
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Accounting Standards require certain gains and losses on assets and liabilities, instead of being recorded in the consolidated
income statement, to be credited or charged to reserves and recorded in the consolidated statement of other comprehensive
income. In accordance with the amendment to IAS1, these items are now allocated between those items that may and those
items that may not eventually be recycled to the consolidated income statement.
The settlement of net cash flow hedge derivatives, which are used to protect the Group from foreign exchange exposure
are subject to marked to market valuations, the movements of which are included within the consolidated statement of
comprehensive income. These items (including the related taxation effect) amounted to a profit of £0.1m in 2018
(2017: profit of £0.3m).
Re-measurement gains and losses in the Group’s defined benefit pension obligations are also booked to other comprehensive
income. These are explained in detail in section 5.
24
chamberlin plc
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Financial Statements
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Balance at 1 April 2016
Loss for the year
Other comprehensive income for the year net of tax
Total comprehensive income/ (expense)
Share based payment
Deferred tax on employee share options
Total of transactions with shareholders
Balance at 1 April 2017
Loss for the year
Other comprehensive income for the year net of tax
Total comprehensive income/ (expense)
Share based payment
Deferred tax on employee share options
Total of transactions with shareholders
Share
premium
account
£000
Capital
redemption
reserve
£000
Hedging
reserve
£000
Retained
earnings
£000
Attributable
to equity
holders of
the parent
£000
1,269
109
(343)
2,068
5,093
Share
capital
£000
1,990
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,990
1,269
109
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
271
271
–
–
–
(72)
–
57
57
–
–
–
(973)
(542)
(973)
(271)
(1,515)
(1,244)
28
1
29
582
(813)
(6)
(819)
46
(6)
40
28
1
29
3,878
(813)
51
(762)
46
(6)
40
Balance at 31 March 2018
1,990
1,269
109
(15)
(197)
3,156
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.
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.
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.
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STOCK CODE: CMH
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CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2018
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
Non current liabilities
Financial liabilities
Deferred tax
Provisions
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
KEVIN NOLAN
DAVID ROBERTS
DIRECTORS
The accounts were approved by the Board of Directors on 4 June 2018
31 March
2018
£000
31 March
2017
£000
Notes
13
14
18
15
16
17
17
18
18
18
22
19
11,703
427
1,136
13,266
3,551
7,985
11,536
24,802
6,989
7,465
14,454
1,889
23
200
5,080
7,192
21,646
1,990
1,269
109
(15)
(197)
3,156
24,802
10,179
461
1,498
12,138
3,347
7,556
10,903
23,041
5,520
6,899
12,419
1,308
27
200
5,209
6,744
19,163
1,990
1,269
109
(72)
582
3,878
23,041
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Financial Statements
COMMENTARY ON THE
CONSOLIDATED BALANCE SHEET
NET DEBT
Net Debt at the year end was £8.9m compared to £6.8m at the end of the previous year. Total committed bank facilities available
to the Group at the year end was £11.2m (2017: £10.6m), of which £8.9m (2017: £6.8m) was drawn.
(cid:51)(cid:53)(cid:50)(cid:51)(cid:40)(cid:53)(cid:55)(cid:60)(cid:15) (cid:51)(cid:47)(cid:36)(cid:49)(cid:55) (cid:36)(cid:49)(cid:39) (cid:40)(cid:52)(cid:56)(cid:44)(cid:51)(cid:48)(cid:40)(cid:49)(cid:55) (cid:480)(cid:51)(cid:51)(cid:40)(cid:481)
The net book value of the Group’s investment in PPE at 31 March 2018 was £11.7m. Capital Expenditure on PPE of £3.0m (2017:
£3.7m) represented 208% (2017: 312%) of depreciation of £1.4m (2017: £1.2m).
CASH GENERATION AND FINANCING
Operating cash inflow from continuing operations was £1.3m (2017: £0.3m).
Capital expenditure for the year decreased to £3.0m (2017: £3.9m). This was ahead of depreciation and amortisation of £1.4m
(2017: £1.2m), reflecting the continuing investment in the new machining facility.
Our overdraft and net borrowings at 31 March 2018 increased to £8.9m (2017: £6.8m).
The Group debt facility has four elements: £7.0m invoice discounting facility, £0.5m overdraft, finance leases of £2.5m and an
import loan of £1.1m.
The facility has the following covenant at year end which was complied with:
Æ Without prior written consent of HSBC no dividends were payable in the year ended 31 March 2018 and in subsequent years
prior written consent of HSBC is required for the payment of any dividends in excess of 50% of net profit after tax.
WORKING CAPITAL
Working Capital, comprising Inventories, Trade and Other Receivables and Trade and Other Payables was 11% of annual sales
(2017: 12%) as at year end.
Robust credit control has maintained overdue receivables to 3.6% (2017: 3.2%).
PENSIONS
The Group has one defined benefit obligation scheme. It is closed to future accrual and the Group operated a defined
contribution pension scheme for its current employees.
The liability for the defined benefit obligations at 31 March 2018 was £5.1m (2017: £5.2m).
The Group’s defined benefit pension scheme was closed to future accrual in 2007. Following the last triennial valuation, as at 1
April 2016, contributions were set at £0.3m per year for the period under review increasing by 3% per year thereafter based on a
deficit recovery period of 22 years.
The pension expense for the defined benefit scheme was £0.3m in 2018 (2017: £0.4m), and is shown in non-underlying. The
Group cash contribution during the year was £0.3m (2017: £0.3m).
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CONSOLIDATED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2018
Operating activities
(Loss)/ profit for the year before tax
Adjustments to reconcile (loss)/ profit for the year to net cash inflow/ (outflow) from operating activities:
Net finance costs excluding pensions
Depreciation of property, plant and equipment
Amortisation of software
Amortisation and impairment of development costs
Profit on disposal of property, plant and equipment
Share based payments
Difference between pension contributions paid and amounts recognised in the Consolidated
Income Statement
Increase in inventories
Increase in receivables
Increase in payables
Income taxes received
Cash inflow from continuing operations
Cash outflow from discontinued operations
Net cash inflow/ (outflow) from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of software
Development costs
Disposal of plant and equipment
Net cash outflow from investing activities
Financing activities
Interest paid
Repayment of asset loan
Net invoice finance drawdown
Import loan facility drawdown
Import loan facility repayment
Finance leases taken out
Net cash inflow from financing activities
Net 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 included in discontinued operations
Cash and cash equivalents for continuing operations
Cash and cash equivalents comprise:
Bank overdraft
Year ended
31 March
2018
£000
Year ended
31 March
2017
£000
Note
(471)
54
6
13
14
14
7
20
13
14
14
6
18
17
17
17
17, 18
17
17
377
1,425
64
10
(16)
46
(137)
(204)
(429)
635
–
1,300
–
1,300
164
1,125
90
7
(1)
28
(95)
(676)
(1,664)
1,220
–
252
(358)
(106)
(2,958)
(3,732)
(16)
(24)
25
(41)
(133)
9
(2,973)
(3,897)
(377)
(200)
1,230
1,137
(1,235)
849
1,404
(269)
(216)
(485)
–
(485)
(485)
(485)
(164)
(162)
1,421
1,235
–
1,583
3,913
(90)
(126)
(216)
(332)
116
(216)
(216)
28
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ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Financial Statements
COMMENTARY ON
THE CONSOLIDATED
CASH FLOW STATEMENT
OPERATING CASH FLOW
The operating cash inflow for the total Group was £1.3m (2017: outflow of £0.1m), driven by depreciation and amortisation add
back of £1.5m (2017: increased working capital of £1.1m).
Net working capital balances were maintained (2017: increase of £1.0m) during the year.
Cash spent on property, plant and equipment and capitalised software and development costs in the year was £3.0m (2017:
£3.9m) which was equivalent to 198% (2017: 320%) of depreciation and amortisation thereon.
CLOSING NET DEBT
Opening net debt was £6.8m (2017: £3.2m). After the net debt increase in the year of £2.1m (2017: increase of £3.6m) closing
net debt was £8.9m (2017: £6.8m).
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SECTION 1
BASIS OF PREPARATION
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 2018 were
authorised for issue by the board of directors on 4 June 2018 and the balance sheets were signed on the board’s behalf by
Kevin Nolan and David Roberts. The Company is a public limited company incorporated and domiciled in England & Wales. The
Company’s ordinary shares are traded on AIM within the London Stock Exchange.
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
adopted by the European Union. 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 28.
2 NEW STANDARDS ADOPTED
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, amendments and interpretations with an effective date for annual
periods beginning after the date of these financial statements.
International Accounting Standards
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 17 Insurance Contracts
^Not adopted by the EU as at 31 March 2018
Effective date
1 January 2018
1 January 2018
1 January 2019^
1 January 2021^
There are other standards in issue which are not expected to have an impact on the Group and have therefore not been included
in the list above.
The standards and interpretations listed above and the annual improvements have not been adopted early by the Group. The
Directors expect the introduction of IFRS 16 Leases to have an impact on the Group’s reported disclosures, income or net assets
in the period of adoption; however this impact cannot yet be quantified and the Directors are still fully assessing. The Directors
expect the introduction of IFRS 9 Financial Instruments to have an impact on the Group’s reported disclosures, income or net
assets in the period of adoption; however this impact cannot yet be quantified and the Directors are still fully assessing.
IFRS15, Revenue from Contracts with Customers introduces a 5 step approach to the timing of revenue recognition based
on performance obligations in customer contracts. An assessment of the impact of IFRS 15 has been completed. Revenue
recognition under IFRS 15 is expected to be consistent with current practice for the Group’s revenue. Had the principles of IFRS
15 been applied in the current reporting period it would not have had an impact on the financial statements.
For all other standards, the Directors do not anticipate that the adoption of these standards, interpretations and other
improvements will have a material impact on the Group’s reported disclosures, income or net assets in the period of adoption.
30
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Financial Statements
SECTION 2
RESULTS OF THE YEAR
3 SEGMENTAL ANALYSIS
For management purposes, the Group is organised into two operating divisions according to the nature of the products and
services. Operating segments within those divisions are combined on the basis of their similar long term characteristics and
similar nature of their products, services and end users as follows:
The Foundries segment is a supplier of iron castings, in raw or machined form, to a variety of industrial customers who incorporate
the castings into their own products or carry out further machining or assembly operations on the castings before selling them
on to their customers.
The Engineering segment provides manufactured and imported products to distributors and end-users operating in the safety
and security markets. The products fall into the categories of door hardware, hazardous area lighting and control gear.
Management monitors the operating results of its divisions separately for the purposes of making decisions about resource
allocation and performance assessment. The Chief Operating Decision Maker is the Chief Executive.
(i) By operating segment
Year ended
Foundries
Engineering
Continuing operations
Discontinued operations (note 10)
Segment results
Reconciliation of reported segmental operating profit
Segment operating profit
Shared cost (excluding share based payment charge)
Exceptional and non-underlying costs (note 12)
Net finance costs (note 6)
Loss from discontinued operation (note 10)
(Loss)/ profit before tax from continuing operations
Segmental assets
Foundries
Engineering
Segmental liabilities
Foundries
Engineering
Segmental net assets
Unallocated net liabilities
Total net assets
Segmental revenue
Segmental operating profit
2018
£000
26,396
11,274
37,670
–
37,670
2017
£000
21,333
10,786
32,119
2,810
34,929
2018
£000
528
901
1,429
–
1,429
1,429
(1,073)
(324)
(503)
–
(471)
18,357
5,770
24,127
(5,522)
(2,141)
(7,663)
2017
£000
1,188
816
2,004
296
2,300
2,300
(1,261)
(365)
(324)
(296)
54
16,861
5,508
22,369
(5,051)
(2,048)
(7,099)
16,464
15,270
(13,308)
(11,392)
3,156
3,878
Unallocated net liabilities include the pension liability of £5,080,000 (2017: £5,209,000), financial liabilities of £8,878,000 (2017:
£6,828,000) and deferred tax asset of £650,000 (2017: £645,000).
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SECTION 2
RESULTS OF THE YEAR CONTINUED
3 SEGMENTAL ANALYSIS continued
Capital expenditure, depreciation, amortisation and impairment
Foundries
Engineering
Total
2018
£000
2017
£000
Capital additions
Property, plant and equipment (note 13)
2,720
3,611
Software (note 14)
Development costs (note 14)
Depreciation, amortisation and
impairment
9
–
Property, plant and equipment (note 13)
(1,208)
Software (note 14)
Development costs (note 14)
(54)
–
35
–
(984)
(81)
–
2018
£000
238
7
24
(217)
(10)
(10)
2017
£000
127
6
133
(213)
(12)
(7)
(ii) Geographical information
Revenue by location of customer
United Kingdom
Italy
Germany
Rest of Europe
Other countries
2018
£000
2,958
16
24
2017
£000
3,738
41
133
(1,425)
(1,197)
(64)
(10)
(93)
(7)
2018
£000
2017
£000
15,417
15,031
5,835
4,138
9,645
2,635
4,702
3,736
6,159
2,491
37,670
32,119
The Group’s assets and costs are all located within the United Kingdom.
The Group has one individual customer in Italy which represents more than 10% of Group revenue (2017: none), they account for
15.5% (2017: 14.6%) of Group Revenue.
4 OTHER OPERATING EXPENSES
Distribution costs
Administration and selling expenses
Operating expenses before exceptional items
Exceptional and non-underlying items (note 12)
Operating expenses
2018
£000
1,160
5,352
6,512
324
6,836
2017
£000
808
5,395
6,203
365
6,568
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Financial Statements
5 STAFF NUMBERS AND COSTS
The average number of people employed by the Group during the year was:
Management and administration
Production
Total employees
The aggregate employment costs, including redundancy, of these employees were as follows:
Wages and salaries
Social security costs
Other pension costs (note 22)
Share based payment expense (note 20)
The average number of people employed by the Company during the year was:
Management and administration
The aggregate employment costs, including redundancy, of these employees were as follows:
Wages and salaries
Social security costs
Other pension costs
Share based payment expense (note 20)
Directors’ remuneration summary
Directors’ remuneration
Company contributions to money purchase pension scheme
Share based payment charge/ (credit) of options granted to directors (see note 20)
Number of directors accruing benefits under:
Defined contribution pension schemes
2018
Number
2017
Number
64
312
376
2018
£000
12,831
1,339
369
46
79
264
343
2017
£000
12,132
1,162
353
28
14,585
13,675
2018
Number
12
2017
Number
12
2018
£000
993
126
50
46
2017
£000
1,155
140
49
28
1,215
1,372
2018
£000
548
36
46
2017
£000
773
35
28
Number
Number
2
2
Directors’ remuneration is analysed in detail in the Directors’ Remuneration Report on pages 13 to 15.
The total amount payable to the highest paid director in respect of remuneration was £250,000 (2017: £376,000). Company
pension contributions of £21,000 (2017: £21,000) were made to a money purchase pension scheme on his behalf.
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SECTION 2
RESULTS OF THE YEAR CONTINUED
6 FINANCE COSTS
Bank overdraft interest payable
Finance cost of pensions (see note 22)
(cid:26) (cid:50)(cid:51)(cid:40)(cid:53)(cid:36)(cid:55)(cid:44)(cid:49)(cid:42) (cid:51)(cid:53)(cid:50)(cid:41)(cid:44)(cid:55)(cid:483) (cid:480)(cid:47)(cid:50)(cid:54)(cid:54)(cid:481)
This is stated after charging/(crediting):
Profit on disposal of fixed assets
Depreciation of owned assets
Amortisation of software
Research and development expenditure (excluding capitalised development costs: note 14)
Amortisation of development costs
Cost of inventories recognised as an expense
Exceptional costs (note 12)
Exchange loss/ (gain)
Auditor’s remuneration:
Group audit fees
Audit fees for statutory accounts of subsidiaries
Audit related assurance services
Non-audit related services
Rentals under operating leases:
Hire of plant and equipment
Motor vehicles
Land and buildings
8 TAXATION
Current tax:
UK Corporation tax at 19% (2017: 20%)
Deferred tax:
Origination and reversal of temporary differences
Adjustments in respect of prior years
Change in tax rate
Tax expense reported in the consolidated income statement
2018
£000
(377)
(126)
(503)
2018
£000
(16)
1,425
64
55
10
2017
£000
(164)
(160)
(324)
2017
£000
(1)
1,197
93
33
7
15,352
12,257
60
127
24
40
6
–
117
95
205
2018
£000
138
(21)
21
40
5
–
188
87
398
2017
£000
(38)
212
430
(49)
(1)
380
342
(147)
(26)
61
(112)
100
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Financial Statements
The Corporation tax rate will fall to 17% from 1 April 2020, a rate change which was substantively enacted on 6 September 2015.
During the year the Group utilised brought forward tax losses of £nil (2017: £292,000) and wrote off £445,000 of deferred tax
assets relating to brought forward losses previously recognised.
In addition to the amount charged to the consolidated income statement, tax movements recognised through other
comprehensive income and equity were as follows:
Current tax:
Deferred tax:
Retirement benefit obligation
Fair value movements on cash flow hedges
Change in tax rate
Tax credit reported in the consolidated statement of comprehensive income
Current tax:
Deferred tax:
Employee share options
Tax (credit)/ charge reported in the consolidated statement of changes in equity
Reconciliation of total tax charge
(Loss)/ profit on ordinary activities before tax
Corporation tax charge at standard rate of 19% (2017: 20%) on (loss)/ profit before tax
Adjusted by the effects of:-
Expenses not deductible for tax purposes
Timing differences
Deferred tax asset write off
Amounts (over)/ under provided in prior years
– corporation tax
– deferred tax
Movement in deferred tax on change in corporation tax rate
Total tax expense reported in the consolidated income statement
2018
£000
–
(2)
12
–
10
10
2018
£000
–
6
6
2018
£000
(471)
(89)
51
(15)
445
–
(49)
(1)
342
2017
£000
–
(122)
60
53
(9)
(9)
2017
£000
–
(1)
(1)
2017
£000
54
11
69
(15)
–
–
(26)
61
100
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SECTION 2
Results of the Year CONTINUED
SECTION 2
RESULTS OF THE YEAR CONTINUED
9 DIVIDENDS PAID AND PROPOSED
Paid equity dividends on ordinary shares
Proposed final dividend subject to shareholder approval
2018
£000
–
–
2017
£000
–
–
10 DISCONTINUED OPERATIONS
On 24 February 2017 production ceased at Chamberlin & Hill Leicester Ltd, the Group’s Leicester foundry, with the final sales
being made in March 2017. As a result the results of Chamberlin & Hill Leicester Ltd are classified as a discontinued operation and
presented as such in these financial statements.
The operating profit of Chamberlin & Hill Leicester Ltd is summarised as follows:
Revenue
Cost of sales
Gross profit
Other operating expense
Operating profit/ (loss)
Finance costs
Profit/ (loss) before tax
Tax (expense)/ credit
Profit/ (loss) for the year from discontinued operations
2018
£’000
Underlying
2018
£’000
Non
Underlying
2018
£’000
Total
2017
£’000
Underlying
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,810
(1,942)
868
(572)
296
(22)
274
(55)
219
2017
£’000
Non
Underlying
–
–
–
(1,451)
(1,451)
–
2017
£’000
Total
2,810
(1,942)
868
(2,023)
(1,155)
(22)
(1,451)
(1,177)
305
(1,146)
Cash flows generated by Chamberlin & Hill Leicester Ltd for the reporting periods under review are as follows:
Operating activities
Investing activities
Financing activities
2018
£000
–
–
–
–
250
(927)
2017
£000
203
(7)
(554)
(358)
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Financial Statements
SECTION 3
Operating Assets and Liabilities
(cid:20)(cid:20) (cid:480)(cid:47)(cid:50)(cid:54)(cid:54)(cid:481)(cid:483) (cid:40)(cid:36)(cid:53)(cid:49)(cid:44)(cid:49)(cid:42)(cid:54) (cid:51)(cid:40)(cid:53) (cid:54)(cid:43)(cid:36)(cid:53)(cid:40)
The calculation of (loss)/ earnings per share is based on the (loss)/ profit attributable to shareholders and the weighted average
number of ordinary shares in issue.
In calculating the diluted (loss)/ earnings per share, adjustment has been made for the dilutive effect of outstanding share
options. Underlying (loss)/ earnings per share, as analysed below, which excludes non-underlying items as defined in note 28,
summary of significant accounting policies, has also been disclosed as the Directors believe this allows a better assessment of
the underlying trading performance of the Group.
Exceptional costs are detailed in note 12.
Continuing operations loss for basic earnings per share
Exceptional costs
Net financing costs and administration cost on pension obligations
Share based payment charge
Taxation effect of the above
Earnings for underlying earnings per share (continuing operations)
(Loss)/ earnings per share (pence) from continuing operations:
underlying
diluted underlying
Discontinued operations (loss)/ earnings for basic earnings per share
Exceptional costs
Taxation effect of the above
Earnings for underlying earnings per share (discontinued operations)
Earnings per share (pence) from discontinued operations:
underlying
diluted underlying
Total (loss)/ earnings per share (pence):
underlying
diluted underlying
Weighted average number of ordinary shares
Adjustment to reflect shares under options
Weighted average number of ordinary shares - fully diluted
2018
£000
(813)
60
344
46
(85)
(448)
(5.6)
(5.6)
2018
£000
–
–
–
–
–
–
(5.6)
(5.6)
2018
Number
’000
7,958
350
8,308
2017
£000
(46)
138
359
28
(104)
375
4.7
4.5
2017
£000
(927)
1,451
(305)
219
2.8
2.6
7.5
7.1
2017
Number
’000
7,958
350
8,308
As at 31 March 2018 and 31 March 2017, there is no adjustment in the total diluted loss per share calculation for the 350,000 and
160,300 shares respectively under option as they are required to be excluded from the weighted average number of shares for
diluted loss per share as they are anti-dilutive for the period then ended.
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SECTION 3
Operating Assets and Liabilities CONTINUED
SECTION 2
RESULTS OF THE YEAR CONTINUED
(cid:20)(cid:21) (cid:40)(cid:59)(cid:38)(cid:40)(cid:51)(cid:55)(cid:44)(cid:50)(cid:49)(cid:36)(cid:47) (cid:38)(cid:50)(cid:54)(cid:55)(cid:54) (cid:36)(cid:49)(cid:39) (cid:49)(cid:50)(cid:49)(cid:482)(cid:56)(cid:49)(cid:39)(cid:40)(cid:53)(cid:47)(cid:60)(cid:44)(cid:49)(cid:42)
Group reorganisation
Exceptional costs
Share based payment charge
Defined benefit pension scheme administration costs
Non-underlying other operating expenses
Non-underlying exceptional costs of discontinued operation
Taxation
– tax effect of exceptional and non-underlying costs
2018
£000
60
60
46
218
324
2017
£000
138
138
28
199
365
–
1,451
(52)
272
(363)
1,453
During 2017 and continuing into 2018 the Group continued to rationalise its operations. Group reorganisation costs, including
redundancy and recruitment, relate to this rationalisation.
During 2017 the Group took the decision to close the Leicester foundry. Non-underlying exceptional costs of discontinued
operations, including asset impairment, redundancy and site clean up costs, relate to this closure.
38
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Financial Statements
Land and
buildings
£000
Plant and
machinery
£000
Motor
vehicles
£000
6,099
240
(35)
6,304
80
–
6,384
2,379
227
(7)
2,599
239
–
2,838
3,546
3,705
3,720
20,693
3,498
(1,731)
22,460
2,878
(167)
25,171
16,313
967
(1,294)
15,986
1,186
(158)
17,014
8,157
6,474
4,380
89
–
(41)
48
–
–
48
77
3
(32)
48
–
–
48
–
–
12
Total
£000
26,881
3,738
(1,807)
28,812
2,958
(167)
31,603
18,769
1,197
(1,333)
18,633
1,425
(158)
19,900
11,703
10,179
8,112
SECTION 3
OPERATING ASSETS AND LIABILITIES
13 PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 1 April 2016
Additions
Disposals
At 31 March 2017
Additions
Disposals
At 31 March 2018
Depreciation
At 1 April 2015
Charge for year
Disposals
At 31 March 2017
Charge for year
Disposals
At 31 March 2018
Net book value
At 31 March 2018
At 31 March 2017
At 1 April 2016
Included within plant and machinery is £nil (2017: £1,063,000) relating to assets under the course of construction which is
not depreciated.
Included within plant and machinery are assets with net book value of £2,962,000 (2017:£1,815,000) relating to assets held under
finance leases.
Included within prior year property, plant and equipment disposals is a cost amount of £1,669,000 and depreciation amount of
£1,205,000 which relates to the impairment of assets at the Leicester site which closed in the previous year.
Net book value of land and buildings comprises:
Freehold
Short leasehold (leasehold improvements)
2018
£000
3,433
113
3,546
2017
£000
3,592
113
3,705
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SECTION 3
Operating Assets and Liabilities CONTINUED
SECTION 3
OPERATING ASSETS AND LIABILITIES CONTINUED
13 PROPERTY, PLANT AND EQUIPMENT continued
Company
Cost
At 1 April 2016
Disposals
At 31 March 2017
Additions
Disposals
At 31 March 2018
Depreciation
At 1 April 2016
Charge for year
Disposals
At 31 March 2017
Charge for year
Disposals
At 31 March 2018
Net book value
At 31 March 2018
At 31 March 2017
At 1 April 2016
Freehold land included above not subject to depreciation amounted to:
2018
2017
Land and
buildings
£000
Plant and
machinery
£000
Motor
vehicles
£000
1,670
–
1,670
–
–
1,670
870
27
–
897
28
–
925
745
773
800
106
(13)
93
4
–
97
70
9
(13)
66
8
–
74
23
27
36
27
(27)
–
–
–
–
15
2
(17)
–
–
–
–
–
–
12
Total
£000
1,803
(40)
1,763
4
–
1,767
955
38
(30)
963
36
–
999
768
800
848
Group
£000
743
743
Company
£000
743
743
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Financial Statements
Impairment Testing
The Group has identified indications of impairment at one of its cash generating units (CGUs), Russell Ductile Castings Limited,
within the foundry segment, and as such has performed an impairment review on the carrying value of the property, plant and
equipment and intangible assets at this CGU. The decline in turnover and the losses generated at Russell Ductile Castings are the
impairment indications which have led to the impairment review being performed.
Impairment has been assessed by comparing the book value of assets against their recoverable amounts. The recoverable
amount of a CGU’s assets is the higher of its fair value less costs to sell and its value in use. Value in use is determined using
cash flow projections from financial budgets approved by the Board. The projected cash flows reflect the latest expectations of
demand for products in year 1 and 2 and are extrapolated to year 10 using a 2.0% growth rate that is the long-term growth rate of
the UK economy. The projected cash flows reflect an expected return to profitability in 2018/19 and a full realisation of cost saving
programmes that require a certain gestation period to fully mature. The key sensitivities around these projections are the return
of sales volumes and the full fruition of cost saving initiatives.
The key assumptions in these calculations are the long-term growth rates and discount rate applied to the forecast cash flows in
addition to the achievement of the forecasts themselves. The long term growth rate used is based on economic forecasts of the
long-term growth rate for the UK. The pre-tax discount rate used is based on the Group pre-tax weighted average cost of capital
of 7.9%.
It was concluded that the recoverable amount of the CGU was greater than the book value of the CGU’s assets and as such no
impairment charge is deemed necessary.
14 INTANGIBLE ASSETS
Software
Development costs
Group
Company
2018
£000
272
155
427
2017
£000
320
141
461
2018
£000
3
–
3
2017
£000
4
–
4
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SECTION 3
Operating Assets and Liabilities CONTINUED
SECTION 3
OPERATING ASSETS AND LIABILITIES CONTINUED
14 INTANGIBLE ASSETS continued
Software
Cost
At 1 April 2016
Additions
Disposals
At 31 March 2017
Additions
Disposals
At 31 March 2018
Amortisation/ impairment
At 1 April 2016
Charge for the year
Disposals
At 31 March 2017
Charge for year
Disposals
At 31 March 2018
Net Book Value
At 31 March 2018
At 31 March 2017
At 1 April 2016
Group
£000
Company
£000
1,021
41
(70)
992
16
–
1,008
649
93
(70)
672
64
–
736
272
320
372
22
5
–
27
–
–
27
22
1
–
23
1
–
24
3
4
–
Included within prior year software disposals is a cost amount of £70,000 and depreciation amount of £70,000 which relates to
the impairment of assets at the Leicester site which closed in the previous year.
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Financial Statements
Group
£000
Company
£000
267
133
400
24
424
252
7
–
259
10
269
155
141
15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Software has an estimated useful life of between 3 and 10 years.
Development costs capitalised
Cost
At 1 April 2016
Additions
At 31 March 2017
Additions
At 31 March 2018
Amortisation/ impairment
At 1 April 2016
Charge for year
Disposal
At 31 March 2017
Charge for year
At 31 March 2018
Net Book Value
At 31 March 2018
At 31 March 2017
At 1 April 2016
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
2018
£000
1,270
941
1,340
3,551
2017
£000
1,198
940
1,209
3,347
2018
£000
2017
£000
–
–
–
–
–
–
–
–
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SECTION 3
Operating Assets and Liabilities CONTINUED
SECTION 3
OPERATING ASSETS AND LIABILITIES CONTINUED
16 TRADE AND OTHER RECEIVABLES
Trade receivables
Amounts due from subsidiary undertakings
Other receivables
Prepayments
Group
Company
2018
£000
6,773
–
668
544
2017
£000
6,857
–
373
326
7,985
7,556
2018
£000
–
156
70
28
254
2017
£000
–
153
88
9
250
Invoice finance liabilities are directly secured against the trade receivables of the Group. The Group retains the risk and rewards,
such as default, associated with the holding of trade receivables. The Group has trade receivables as at 31 March 2018 of
£6,773,000 (2017: £6,857,000) of which an invoice finance liability of £4,740,000 (2017: £3,510,000) was secured against. The
total available invoice finance facility as at 31 March 2018 was £7,000,000 (2017: £7,000,000).
Trade receivables are denominated in the following currencies:
Sterling
Euro
US Dollar
Group
Company
2018
£000
3,728
2,955
90
6,773
2017
£000
4,178
2,547
132
6,857
2018
£000
2017
£000
–
–
–
–
–
–
–
–
Out of the carrying amount of trade receivables of £6,773,000 (2017: £6,857,000), £3,443,000 (2017: £2,988,000) 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 2018 trade receivables at a nominal value of £23,000 (2017: £6,000) 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
Provision release
At 31 March
Group
Company
2017
£000
16
9
(7)
(12)
6
2018
£000
2017
£000
–
–
–
–
–
–
–
–
2018
£000
6
17
–
–
23
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Financial Statements
The analysis of trade receivables that were past due but not impaired is as follows:
Neither past
due nor
impaired
£000
6,528
6,638
Total
£000
6,773
6,857
Past due but not impaired
<30 days
£000
30-60 days
£000
60-90 days
£000
90-120 days
£000
> 120 days
£000
207
239
21
(20)
2
–
14
–
1
–
2018
2017
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
2018
£000
6,680
93
6,773
2017
£000
6,608
249
6,857
2018
£000
–
–
–
2017
£000
–
–
–
Of the balance in respect of counterparties with internal ratings 2% (2017: 1%) is in respect of new customers, and 98% (2017:
99%) 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
2018
£000
–
2017
£000
–
2018
£000
107
2017
£000
101
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SECTION 4
Capital Structure CONTINUED
SECTION 3
OPERATING ASSETS AND LIABILITIES CONTINUED
17 CURRENT LIABILITIES
Financial liabilities
Bank overdraft
Current instalments due on asset finance loans
Invoice finance facility
Import loan facility
Current instalments due on finance leases
Group
Company
2018
£000
485
–
4,740
1,137
627
6,989
2017
£000
216
200
3,510
1,235
359
5,520
2018
£000
1,772
–
–
–
–
1,772
2017
£000
–
–
–
–
–
–
The overdraft is held with HSBC Bank plc as part of the Group net facility of £500,000, is secured on all assets of the business,
is repayable on demand and is renewable in March 2019. The net overdraft position as at 31 March 2018 was £485,000 (2017:
£216,000), this comprises cash balances of £1,735,000 (2017: £533,000) and bank overdrafts of £2,220,000 (2017: £749,000).
Interest is payable at 2.0% (2017: 2.0%) over base rate.
Asset finance loans were fully repaid in the year. Previously they were secured against various items of plant and machinery across
the Group.
The import loan facility is used to facilitate the purchase of equipment for the new machining centre. Once each asset is
commissioned the import loan facility is repaid in full, facilitated by a sale and lease back on finance lease. Interest is payable at
3.25% over base rate.
Other finance leases are secured against the specific item to which they relate. These leases are repayable by monthly
instalments for a period of five years to March 2022. Interest is payable at fixed amounts that range between 3.1% and 6.2%.
Invoice finance balances are secured against the trade receivables of the Group and are repayable on demand. Interest is payable
at 2.3% over base rate. The maximum facility as at 31 March 2018 was £7,000,000 (2017: £7,000,000). Management have
assessed the treatment of the financing arrangements and have determined it is appropriate to recognise trade receivables and
invoice finance liabilities separately.
Trade and other payables
Trade payables
Other taxation and social security
Other payables
Accruals
Fair value of derivative forward contracts
Group
Company
2018
£000
4,669
600
208
1,970
18
7,465
2017
£000
4,196
516
223
1,877
87
6,899
2018
£000
–
33
24
510
–
567
2017
£000
–
35
7
1,094
–
1,136
Trade payables are non-interest bearing and are normally on terms of 30 to 60 days.
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Financial Statements
18 NON CURRENT LIABILITIES
Financial liabilities
Instalments due on finance leases
Group
Company
2018
£000
1,889
1,889
2017
£000
1,308
1,308
2018
£000
–
–
2017
£000
–
–
Finance leases are secured against the specific item to which they relate. These leases are repayable by monthly instalments for a
period of five (2017: five) years to January 2023. £609,000 is repayable in 1-2 years (2017: £344,000), £1,280,000 within 2-5 years
(2017: £943,000) and £nil in greater than 5 years (2017: £21,000). Interest is payable at a fixed amount that ranges between
3.1% and 6.2%.
Provisions for liabilities
As at 31 March 2016 & 2017
Charge for the year
As at 31 March 2018
Dilapidations
£000
200
–
200
Dilapidations
The dilapidation provision relates to expected future lease dilapidations at the Petrel premises.
Group
Company
Deferred tax liabilities
Deferred taxation
Group liabilities
Temporary differences relating to share options
Capital gains rolled over
2018
£000
23
2017
£000
27
2018
£000
6
2018
£000
6
17
23
Total
£000
200
–
200
2017
£000
–
2017
£000
–
27
27
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SECTION 5
Other Supporting Notes CONTINUED
SECTION 3
OPERATING ASSETS AND LIABILITIES CONTINUED
18 NON CURRENT LIABILITIES continued
Deferred tax assets
Temporary differences relating to capital allowances
Temporary differences relating to pension scheme deficit
Temporary differences relating to share options
Temporary differences relating to tax losses
Temporary differences relating to cash flow hedges
Other temporary differences
Group
Company
2018
£000
239
864
–
–
3
30
1,136
2017
£000
473
886
1
103
–
35
1,498
2018
£000
13
864
–
–
–
23
900
2017
£000
13
886
1
–
–
6
906
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. The Group has assessed that it is probable that
future profits fully justify the recognition of the deferred tax asset relating to current tax losses.
Group tax losses carried forward for which a deferred tax asset has not been recognised total £579,000 (2017: £nil). The deferred
tax asset relating to the pension scheme deficit is deemed recoverable based upon the contributions into the pension scheme
which are designed to return the scheme to a fully funded position by April 2038, based on the April 2016 actuarial valuation, and
that there will be future taxable profits which the contributions can be utilised against.
Deferred income tax assets are recognised only to the extent that it is probable that taxable profits will be available against
which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. The Group has assessed
that it is probable that future profits will fully utilise current tax losses and other deductible temporary differences. Deferred tax
assets relating to the pension scheme deficit are expected to be recovered over the period that contributions are made into the
scheme, including the agreed contributions to April 2038. The deferred tax assets have been assessed as recoverable against
forecasts of future taxable profits.
All deferred tax assets are recoverable, and deferred tax liabilities will be settled, in greater than one year.
Of the total deferred tax charge of £380,000 (2017: credit of £122,000), a charge of £361,000 (2017: credit of £112,000) was
recognised within the consolidated income statement, a charge of £10,000 (2017: credit of £9,000) was recognised within
other comprehensive income and a charge of £6,000 (2017: credit of £1,000) recognised within the consolidated statement of
changes in equity.
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SECTION 4
CAPITAL STRUCTURE
19 SHARE CAPITAL
Allotted, called up and fully paid
7,958,126 (2017: 7,958,126) Ordinary shares of 25p
Financial Statements
2018
£000
1,990
2017
£000
1,990
During the year no shares (2017: none) were issued to directors to satisfy share options at nil (2017: nil) cost.
During the year 600,000 share options lapsed (2017: 830,255), none were granted (2017: 350,000) and none (2017: none)
were forfeited.
20 SHARE BASED PAYMENTS
Details of the equity settled scheme used to incentivise the directors of the Group are set out in the Remuneration Committee
Report on page 13 to 15.
Under all schemes, 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.
Relevant options outstanding during the year were as follows:
At 31 March 2017
Granted
Lapsed
At 31 March 2017
Lapsed
At 31 March 2018
Weighted average
Exercise
price
(p)
Remaining
contractual life
(years)
81.7
nil
70.2
61.7
97.7
nil
5.3
9.7
3.1
8.8
8.3
8.7
No. of options
1,430,255
350,000
(830,255)
950,000
(600,000)
350,000
Nil (2017: Nil) shares were exercisable at the end of the year.
No shares were exercised during the current or prior year.
Based on the following assumptions at 31 March 2018, the total fair value of options was £22,000 (2017: £22,000), of which
£7,000 was charged to the consolidated income statement (2017: charge of £2,000). The fair value of options granted in the year
was £nil (2017: £22,000).
The exercise price of options as at 31 March 2018 is nil (2017: nil p and 97.7p).
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SECTION 5
Other Supporting Notes CONTINUED
SECTION 4
CAPITAL STRUCTURE CONTINUED
20 SHARE BASED PAYMENTS continued
The key assumptions in relation to the valuation of the outstanding options were:
Grant date
Maturity date
Share price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
2018
14-Dec-16
14-Dec-19
70p
21.8%
7.0 years
1.4%
Nil
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 at 31 March 2018 was 63.5p (2017: 99.5p) and during the year ranged between 63.5p and
176.5p (2017: between 50.5p and 108.5p).
21 FIXED ASSET INVESTMENTS
Shares in subsidiary undertakings
Cost at 1 April 2017 and 1 April 2018
£000
8,159
Wholly owned operating subsidiaries
Principal activity
Chamberlin & Hill Castings Ltd
Manufacture and sale of engineering castings
Russell Ductile Castings Ltd
Manufacture and sale of engineering castings
Exidor Ltd
Petrel Ltd
Manufacture and sale of emergency exit equipment and door closers
Manufacture and sale of lighting, switchgear and electrical installation products
Chamberlin Foundry Ltd
Intermediary holding company
Wholly owned dormant subsidiaries
Chamberlin Group Ltd
Chamberlin & Hill Ltd
Ductile Castings Ltd
Fred Duncombe Ltd
Fitter & Poulton Ltd
Webb Lloyd Ltd
The Company owns 100% of the issued ordinary share capital of the above companies, all of whom are registered and operate
principally in England and Wales.
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Financial Statements
SECTION 5
OTHER SUPPORTING NOTES
22 PENSION ARRANGEMENTS
During the year, the Group operated funded defined benefit and defined contribution pension schemes for the majority of its
employees in the UK, these being established under trusts with the assets held separately from those of the Group. The pension
operating cost for the Group defined benefit scheme for 2018 was £218,000 (2017: £199,000) plus £126,000 of financing cost
(2017: £160,000).
The other schemes within the Group are defined contribution schemes and the pension cost represents contributions payable.
The total cost of defined contributions schemes was £369,000 (2017: £353,000). The notes below relate to the defined
benefit scheme.
The actuarial liabilities have been calculated using the Projected Unit method. The major assumptions used by the actuary were
(in nominal terms):
Rate of increase in salaries
Rate of increase of pensions in payment- post 1997 accrual only
Discount rate
Inflation assumption- RPI
Inflation assumption- CPI
At 31 March
2018
At 31 March
2017
At 31 March
2016
n/a
3.1%
2.5%
3.2%
2.2%
n/a
3.3%
2.5%
3.3%
2.3%
n/a
2.9%
3.5%
2.9%
2.1%
Demographic assumptions are all based on the S2PA (2017: S2PA) 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
female
male
female
2018
Years
21.1
23.0
22.1
24.1
2017
Years
21.1
22.9
22.1
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).
The contributions expected to be paid during the year to 31 March 2019 are £271,000. Apart from this amount there are no other
minimum funding requirements.
The triennial valuation as at 1 April 2017 was completed during the year and concluded that in return for maintaining the previous
contribution arrangements and extending the deficit reduction period to 2038, the Company has given security over the Group’s
land and buildings to the pension scheme. With effect from 1 April 2018 deficit reduction contributions will increase to £22,547
per month (previously £21,890 per month), with a 3% annual increase thereafter.
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SECTION 5
Other Supporting Notes CONTINUED
SECTION 5
OTHER SUPPORTING NOTES CONTINUED
22 PENSION ARRANGEMENTS continued
The scheme assets are stated at the market values at the respective balance sheet dates. The assets and liabilities of the
scheme were:
Equities/diversified growth fund
Bonds
Insured pensioner assets
Cash
Market value of assets
Actuarial value of liability
Scheme deficit
Related deferred tax asset
Net pension liability
2018
£000
11,802
1,280
28
97
2017
£000
12,325
1,143
30
50
13,207
13,548
(18,287)
(18,757)
(5,080)
864
(4,216)
(5,209)
886
(4,323)
Due to the nature of the investments held, the scheme is subject to normal market risks that effect the world’s stock markets,
and in particular the UK market.
Net benefit expense recognised in profit and loss
Net interest cost
Net benefit expense
Re-measurement losses/ (gains) in other comprehensive income
Actuarial losses/ (gains) arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Experience adjustments
Return on assets (excluding interest income)
Total re-measurement of the net defined liability shown in other comprehensive Income
Actual return on plan assets
Movement in deficit during the year
Deficit in scheme at beginning of year
Movement in year:
Employer contributions
Net interest expense
Actuarial loss
Deficit in scheme at end of year
Year to
31 March 2018
£000
Year to
31 March 2017
£000
(126)
(126)
(160)
(160)
Year to
31 March 2018
£000
Year to
31 March 2017
£000
(151)
(129)
291
(3)
8
2,703
(599)
(254)
(1,238)
612
Year to
31 March 2018
£000
Year to
31 March 2017
£000
334
1,673
Year to
31 March 2018
£000
Year to
31 March 2017
£000
(5,209)
(4,692)
263
(126)
(8)
255
(160)
(612)
(5,080)
(5,209)
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Financial Statements
Movement in scheme assets
Fair value at beginning of year
Interest income on scheme assets
Return on assets (excluding interest income)
Employer contributions
Benefits paid
Administrative costs
Fair value at end of year
Movement in scheme liabilities
Benefit obligation at start of year
Interest cost
Actuarial losses/ (gains) arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Experience adjustments
Benefits paid
Benefit obligation at end of year
The weighted average duration of the pension scheme liabilities is 13.5 years (2017: 14.0 years).
A quantitative sensitivity analysis for significant assumptions as at 31 March 2018 is as shown below:
Present value of scheme liabilities when changing the following assumptions:
Discount rate increased by 1% p.a.
RPI and CPI increased by 1% p.a.
Mortality- members assumed to be their actual age as opposed to 1 year older
Year to
31 March 2018
£000
Year to
31 March 2017
£000
13,548
12,974
331
3
263
(938)
–
435
1,238
255
(1,354)
–
13,207
13,548
Year to
31 March 2018
£000
Year to
31 March 2017
£000
18,757
457
(151)
(129)
291
(938)
18,287
17,666
595
2,703
(599)
(254)
(1,354)
18,757
2018
£000
16,111
19,324
19,102
The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit
obligation as a result of reasonable changes in key assumptions occurring at the end of the year.
23 CONTINGENT LIABILITIES
Cross guarantees exist between the Company and its subsidiary undertakings in respect of the Group’s bank overdrafts, asset
finance loans and invoice finance facilities. The total borrowings of the subsidiaries at 31 March 2018 amounted to £7,106,000
(2017: £7,134,000).
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SECTION 5
Other Supporting Notes CONTINUED
SECTION 5
OTHER SUPPORTING NOTES CONTINUED
24 FINANCIAL COMMITMENTS
Capital expenditure
Contracted for but not provided in the accounts
Group
Company
2018
£000
173
2017
£000
137
2018
£000
–
2017
£000
–
Capital commitments relate to machinery purchases required for fulfilment of the Group’s contracts to supply fully machined
bearing houses from the Walsall foundry.
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
Company
2018
£000
297
562
374
2017
£000
535
694
401
1,233
1,630
2018
£000
67
91
–
158
2017
£000
63
52
–
115
Leases on land and buildings comprise the lease the premises of Petrel Limited (£91,000 per annum with an end date of
20 August 2019) and the lease for the Group’s new machined bearing housing facility £118,000 per annum for the first 5 years
and £88,000 per annum thereafter with an end date of November 2026.
No early termination is permitted on the lease on Petrel’s premises or the machining facility.
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.
The carrying amount of financial assets and financial liabilities are not materially different to their fair value.
The Company is only exposed to interest rate risk.
Currency risk
The Group’s functional currency is Sterling but approximately 50% 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 a proportion of forecast
exposures are hedged depending on the level of confidence and hedging is topped up following regular reviews. Hedging is built
up over 18 months up to an 80% hedge, on this basis up to 50% of the Group’s annual exposures are likely to be hedged at any
point in time and the Group’s net transactional exposure to different currencies varies from time to time. At the year end it had
net monetary assets denominated in Euros of £1,146,000 (2017: liabilities of £1,290,000). A proportion of the Group’s financial
liabilities are denominated in Euros, reducing the currency risk of the Group. Because up to 80% of the Euro debtors are hedged,
the impact on net monetary assets of a 5% exchange rate change in the Euro/Sterling would not be material to the profit and loss.
At 31 March 2018, 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 18 months.
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.
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Financial Statements
Forward currency contracts for the sale of Euros outstanding at the year end have been recorded at fair value with the movement
being recognised directly in other comprehensive income through the consolidated statement of comprehensive income. If
these contracts were not in place and the Euro/Sterling exchange rate moved by plus or minus 5% the corresponding gain/loss to
equity would be £738,000 (2017: £684,000).
A risk to the Group relates to ineffective hedges whereby highly probable sales do not occur and the Group is over hedged against
those particular sales. This situation has not occurred during the current or previous year.
At 31 March 2018
At 31 March 2017
Contracted
amount
(Euros ‘000)
17,547
16,781
Weighted
average
contract
rate
1.13
1.17
Contracted
amount
£’000
15,502
14,373
Contracted
amount at
year end rate
£’000
15,463
14,392
Unrealised
gain/ (loss)
£’000
39
(19)
Interest rate risk
The Group operates an overdraft facility with HSBC Bank plc along with asset finance loans and an invoice finance facility.
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 £26,000 reduction in profit before tax (2017: £19,000). An
equivalent decrease in rates would increase profit before tax by £26,000 (2017: £19,000).
An analysis of interest bearing financial assets and liabilities is given below.
Financial liabilities
Bank overdraft (Sterling denominated)
Bank overdraft (Euro denominated)
Invoice finance (Sterling denominated)
Invoice finance (Euro denominated)
Invoice finance (US Dollar denominated)
Asset finance loans (Sterling denominated)
Finance leases (Sterling denominated)
Import finance loan (Euro denominated)
Group
Company
2018
£000
(2,190)
1,705
(2,284)
(2,377)
(79)
–
(2,516)
(1,137)
(8,878)
2017
£000
1,944
(2,160)
(1,791)
(1,580)
(139)
(200)
(1,667)
(1,235)
(6,828)
2018
£000
(1,772)
–
–
–
–
–
–
–
(1,772)
2017
£000
–
–
–
–
–
–
–
–
–
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. There are no significant concentrations of credit risk within the Group.
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.
The bad debt charge for the year was £17,000 (2017: £9,000).
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SECTION 5
Other Supporting Notes CONTINUED
SECTION 5
OTHER SUPPORTING NOTES CONTINUED
25 DERIVATIVES AND FINANCIAL INSTRUMENTS continued
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. There are no material differences between the fair values and carrying values of the
financial assets and liabilities.
The Group’s funding strategy is to maintain flexibility in managing its day to day working capital needs through the use of an
invoice finance facility, subject to dividend and debtor turn covenants, along with an overdraft facility which is not subject to
financial covenants, and to fund acquisitions and significant capital projects through the use of longer term funding including
bank loans, hire purchase and equity. The Group’s £0.5m overdraft facility is renewable annually and is renewable in March
2019. The Group’s £7.0m invoice finance facility is renewable in March 2019, as discussed in the consolidated balance sheet
commentary on page 27.
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 which have a significant effect on the recorded fair value that are not based on observable
market data.
All derivative financial assets and liabilities are valued by level 2 techniques. The fair values of short term receivables, short term
payables, and the invoice finance facility and overdraft (both of which are repayable on demand) are not disclosed, as permitted by
IFRS 7, where the carrying amount is a reasonable approximation to fair value.
The Group’s finance team performs valuations of financial items for financial reporting purposes. Valuation techniques are
selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based
information. The finance team reports directly to the Group Finance Director and to and the audit committee. Valuation
processes fair value changes are discussed among the audit committee and the valuation team at least every year, in line with the
Group’s reporting dates. The following valuation techniques are used for instruments categorised in Levels 2 and 3:
Æ Foreign currency forward contracts (Level 2) – The Group’s foreign currency forward contracts are not traded in active
markets. These contracts have been fair valued using observable forward exchange rates and interest rates corresponding to
the maturity of the contract. The effects of non-observable inputs are not significant for foreign currency forward contracts.
The table below summarises the maturity profile of the Group’s financial assets and liabilities, which are all classified as level 2, at
31 March 2018 and 31 March 2017.
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Financial Statements
The carrying value of the Group’s financial assets and liabilities is considered to be the same as the fair value.
On demand
Less than
one year
1 to 2 years
2 to 5 years
Greater than 5
years
Total
At 31 March 2018
Financial assets
Trade receivables
Non-derivative financial liabilities
Bank overdraft
Invoice finance
Finance leases, including interest
Import loan, including interest
Trade payables
At 31 March 2017
Financial assets
Trade receivables
Non-derivative financial liabilities
Bank overdraft
Invoice finance
Asset loans, including interest
Finance leases, including interest
Import loan, including interest
Trade payables
6,773
485
4,740
–
–
–
5,225
6,857
216
3,510
–
–
–
–
3,726
–
–
691
1,182
4,669
6,542
–
–
211
428
1,284
4,196
6,119
–
–
–
–
672
1,417
–
–
–
–
672
1,417
–
–
–
–
–
–
413
1,044
–
–
–
–
413
1,044
6,773
485
4,740
2,780
1,182
4,669
13,856
6,857
216
3,510
211
1,906
1,284
4,196
11,323
–
–
–
–
–
–
–
–
–
21
–
–
21
The gross undiscounted future cash flows are analysed as follows:
Derivative financial liabilities
At 31 March 2018
Foreign Exchange forward contracts
On demand
Less than
one year
1 to 2 years
2 to 5 years
Total
–
–
11,989
11,989
3,474
3,474
–
–
15,463
15,463
The outflows above relate to the settlement of the derivative contracts which are a fair value asset at the year end as disclosed in
note 16.
At 31 March 2017
Foreign Exchange forward contracts
–
–
11,198
11,198
3,194
3,194
–
–
14,392
14,392
The Company’s financial liabilities comprise the bank overdraft of nil £1,772,000 (2017: £nil) and is payable on demand.
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25 DERIVATIVES AND FINANCIAL INSTRUMENTS continued
Capital management
The Group defines capital as the total equity of the Group, which at the year end is £3,156,000 (2017: £3,878,000). The Group
objective for managing capital is to deliver competitive, secure and sustainable returns to maximise long-term shareholder
value. The Group is subject to net worth covenants and debtor turn covenants on its invoice finance facility. There are no financial
covenant restrictions on the Group’s overdraft facility or asset loans.
Further details are discussed in the consolidated balance sheet commentary on page 27.
26 RELATED PARTY TRANSACTIONS
Group
All transactions between the parent company and subsidiary companies and between subsidiary 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 (including employer’s NI)
Termination costs (including employer’s NI)
Share based payments
Pension contributions
Group
Company
2018
£000
1,388
–
46
66
2017
£000
1,722
57
28
66
1,500
1,873
2018
£000
619
–
46
36
701
2017
£000
880
–
28
35
943
Key management, other than directors of the Company, comprise the Managing Directors and Finance Directors of the main
operating subsidiaries and are included in Group figures above.
Details of key management share options are disclosed in note 20.
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Financial Statements
27 NET DEBT
At 1 April 2016
Cashflow
Interest
At 31 March 2017
Cashflow
Interest
At 31 March 2018
Balances comprise:
Current liabilities
Non-current liabilities
Net
overdraft
£’000
126
64
26
216
238
31
485
485
–
485
Invoice
finance
£’000
2,582
851
77
3,510
1,083
147
4,740
4,740
–
4,740
Asset
loan
£’000
400
(206)
6
200
(206)
6
–
–
–
–
Finance
leases
£’000
84
1,581
2
1,667
792
57
2,516
627
1,889
2,516
Import
loan
£’000
–
1,186
49
1,235
(145)
47
1,137
1,137
–
1,137
Total
£’000
3,192
3,476
160
6,828
1,762
288
8,878
6,989
1,889
8,878
28 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.
Subsidiaries are entities which are controlled by the Group. Control is achieved when the Group has power over the investee, has
the right to variable returns from the investee and has the power to affects its returns. The Group obtains and exercises control
through voting rights and control is reassessed if there are indications that the status of any of the three elements have changed.
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 Strategic Report on pages 04 to 07. 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, comprising a £7.0m invoice discounting facility renewable in March
2019 (no indication that this won’t be renewed in March 2019), £0.5m overdraft renewable in March 2019 (the Group is not reliant
on this renewal), finance leases of £2.5m repayable over 5 years and an import loan of £1.1m. As a consequence, the Directors
believe that the Group is well placed to manage its business and financial risks successfully.
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.
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Presentation of the Consolidated Income Statement
The Consolidated Income Statement is allocated between Underlying items which relate to the trading activities of the business
and Non-underlying items which are either non-trading, non-recurring or are valued using market derived data which is outside
of management’s control. As per the non-underlying and exceptional items accounting policy note, the Directors believe that this
format sets out the performance of the Group more clearly.
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 IAS39 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as
equity, it is not re-measured 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.
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 goodwill is monitored for internal management purposes and will not be larger than an operating
segment before aggregation. Goodwill is tested for impairment when indicators of impairment are identified.
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.
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Financial Statements
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 consolidated 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. 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 – over the term of the lease
Plant and other equipment – 2 to 10 years
Motor vehicles – 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.
The recoverable amount of property, plant and equipment is the greater of net selling price (fair value less costs to sell) 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 consolidated income statement in the cost
of sales line item or in the other operating expenses line item depending on the asset concerned.
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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 consolidated 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 with the amortisation charge included within
other operating expenses. 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 between 3 years for normal software to 10 years for ERP systems.
Intangible assets in the course of development 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, less impairment, 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 or weighted average cost 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.
Previously the engineering division included inventory valued at selling price less the calculated margin on certain finished goods
in the absence of more detailed individual product costing information. During the year a change in estimate was made to value all
finished goods using the method described above to be consistent with the rest of the Group. Management have evaluated the
effect of this change in estimate and do not believe it to be material.
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.
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Financial Statements
Maintenance items are held in inventory and expensed on use unless they exceed a de minimis level where they are capitalised
under plant and equipment and depreciated over the remaining useful economic life of the item of plant or equipment to which
they relate.
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 consolidated 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 and its subsidiary undertakings 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 consolidated 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 contracts 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 in other 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 consolidated income statement within
sales when the forecast hedged transaction occurs.
At 31 March 2018 the Group held 18 months worth of foreign currency forward contracts designated as hedges of expected
future sales to customers in Europe for which the Group has highly probable forecasted transactions.
Hedges are valued by reference to an external marked to market valuation. Group management perform an assessment to
confirm the reasonableness of this valuation.
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.
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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 credit method. As the scheme is closed to
future accrual, no service cost of providing pension to employees is charged to the consolidated income statement. The cost of
making improvements to past pension and other post-retirement benefits is recognised in the consolidated income statement
immediately as an expense.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises
the following changes in the net defined benefit obligation under non-underlying operating costs in the consolidated
income statement:
Æ Defined benefit pension scheme administration costs
Re-measurements gains and losses may result from: changes in financial assumptions, changes in demographic assumptions,
experience adjustments and differences between the expected return and the actual return on plan assets. Re-measurements
are recognised in full in the period in which they occur, in other comprehensive income.
For defined contribution plans, contributions payable for the year are charged to the consolidated 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:
Æ 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;
Æ 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
Æ 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 within the foreseeable
future.
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 other comprehensive income or equity if it relates to items that are credited or
charged to other comprehensive income or to equity respectively. Otherwise income tax is recognised in the consolidated
income statement.
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Financial Statements
Revenue
Revenue is recognised when the significant risks and rewards of ownership of the goods, in line with the International Commercial
terms as defined by the International Chamber of Commerce, 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.
Revenue from the sale of goods is recognised when all of the following conditions are satisfied:
Æ the significant risks and rewards of ownership are transferred to the buyer;
Æ the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective
control over the goods sold;
Æ the amount of revenue can be measured reliably;
Æ it is probable that the Group will receive the consideration due under the transaction; and
Æ the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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.
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 consolidated 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 a Black Scholes model. Cash-
settled share-based payments are measured at fair value at the balance sheet date using a Black Scholes model. The fair value is
then charged to the consolidated income statement over the vesting period of the options. In valuing equity-settled payments,
no account is taken of any service and performance conditions (vesting conditions) other than performance conditions linked
to the price of the shares of the company (market conditions). Any other conditions which are required to be met in order for an
employee to become fully entitled to an award are considered to be non-vesting conditions. Like market performance conditions,
non-vesting conditions are taken into account in determining the grant date fair value.
No expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon a market
vesting condition or a non-vesting condition, which are treated as vesting irrespective of whether or not the market vesting
condition or non-vesting condition is satisfied, provided all non-market vesting conditions are satisfied.
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 management’s best estimate of the achievement or otherwise of non-market vesting conditions
and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition or
a non-vesting condition, be treated as vesting above. The movement since the previous balance sheet date is recognised in the
consolidated income statement, with a corresponding entry in equity.
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.
Management have assessed the impact of market conditions on the valuation and have determined them not be material.
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SECTION 5
OTHER SUPPORTING NOTES CONTINUED
28 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Non-underlying and exceptional items
The Group presents as non-underlying items on the face of the consolidated income statement, those items of income and
expenditure which, because they are either non-trading related, 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 in the current year include share-based payment costs, administration costs of the pension
scheme and net financing costs of pension obligations, reorganisation costs and associated tax impact on these items.
Non-underlying items in the previous year include share-based payment costs, administration costs of the pension scheme and
net financing costs of pension obligations, reorganisation costs, and associated tax impact on these items.
Financial Leases
Management applies judgement in considering the substance of a lease agreement and whether it transfers substantially all
the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term in
relation to the economic life of the asset, the present value of the minimum lease payments in relation to the asset’s fair value,
and whether the Group obtains ownership of the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair
values of the respective lease interests. Each component is then evaluated separately for possible treatment as a finance lease,
taking into consideration the fact that land normally has an indefinite economic life.
The interest element of lease payments is charged to profit or loss, as finance costs over the period of the lease.
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.
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Financial Statements
The key figures in the accounts that are most sensitive to such estimates and assumptions are:
Æ Impairment of development costs - the Group determines whether 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. No development costs have been deemed to be impaired during the year.
Æ Impairment of property, plant and equipment – the Group performs an impairment review when indications of impairment
exist. Impairment testing requires an estimate of future cash flows and the application of a suitable discount rate. Note 13
provides details of the impairment review undertaken during the period.
Æ Defined benefit scheme pension liabilities – the cost of the closed defined benefit pension plan is determined using actuarial
valuations. The actuarial valuation, which is undertaken by external experts, involves making assumptions about discount
rates, future salary increases, mortality rates and future pension increases. Note 22 provides details of the defined pension
scheme liabilities and valuation assumptions.
Æ Restructuring provisions – the Group makes provision for restructuring costs, based on management’s best estimate of the
costs of implementing such a restructuring, once a formal plan has been agreed. No restructuring provisions are included in
the current year figures.
Æ Recoverability of deferred tax assets - deferred income tax assets are recognised only to the extent that it is probable that
taxable profits will be available against which the deductible temporary differences, carried forward tax credits or tax losses
can be utilised. The Group has assessed that it is probable that future profits will fully utilise current tax losses and other
deductible temporary differences. Deferred tax assets relating to the pension scheme deficit are expected to be recovered
over the period that contributions are made into the scheme, including the agreed contributions to April 2028. The deferred
tax assets have been assessed as recoverable against forecasts of future taxable profits. Note 18 provides details of the
deferred tax assets.
Æ Impairment of business incentives – the Group classifies business incentive payments made upfront for the award of
contracts within prepayments. These business incentives are amortised to the P&L through sales over a 5 year period. The
Group undertakes an impairment review at each reporting period to ensure each contract relating to the business incentive
payment still has an economic benefit to the Group. Business incentive payments are included within other receivables
within note 16.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CHAMBERLIN PLC
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Chamberlin Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 31 March 2018, which comprise the consolidated income statement, consolidated and parent company balance
sheets, the consolidate statement of comprehensive income, the consolidated and parent company cash flow statements,
the consolidated and parent company statements of changes in equity and notes to the financial statements, including a
summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of
the group financial statements 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.
In our opinion:
Æ 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 2018 and of the group’s loss for the year then ended;
Æ the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
Æ 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
Æ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Who we are reporting to
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.
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Financial Statements
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
Æ the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
Æ the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
Overview of our audit approach
Æ Overall materiality: £565,000, which represents 1.5% of the group’s total revenues.
Æ Key audit matters were identified as revenue recognition, impairment of fixed assets and
valuation of defined benefit pension scheme for the group.
Æ We have performed full-scope audit procedures on the financial statements of Chamberlin Plc
and on the financial information of all subsidiaries of Chamberlin Plc.
Key audit matters
The graph below depicts the audit risks identified and their relative significance based on the extent of the financial statement
impact and the extent of management judgement.
Revenue recognition
Valuation of defined benefit pension scheme
Impairment of fixed assets
Debtors existence
Inventory valuation
Inventory existence
Deferred tax asset valuation
(Group)
Hedge accounting
High
Potential
financial
statement
impact
Low
Low
Extent of management judgement
High
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CHAMBERLIN PLC CONTINUED
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Revenue recognition
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.
Revenue is the key driver of the business
and used as an important benchmark by
analysts for assessing the health of the
company. Due to the presumed risk of
fraud that revenue may be misstated due
to improper revenue recognition, we have
identified revenue recognition (focussing on
occurrence) as a significant risk, which was
one of the most significant assessed risks of
material misstatement.
Our audit work included, but was not restricted to:
Æ evaluating the revenue recognition accounting policies for
appropriateness in accordance with the requirements of International
Accounting Standard (IAS) 8 ‘Revenue’ and executing audit procedures
to provide evidence that revenue was accounted for in accordance with
these policies.
Æ testing a sample of revenue transaction across each subsidiary by
agreeing amounts to contracted amounts, cash receipts and/or proof of
delivery where applicable.
Æ assessing revenue analytically by comparing revenue recognised during
the year to prior years and corroborating fluctuations by computing
ratios relevant to the group, verifying that the underlying data used in the
analytics is valid and comparing results to expectations.
Æ determining that a sale has occurred in the financial year for revenue
recorded through journal entries by sampling invoices raised during the
cut-off period and testing whether they relate to goods dispatches in the
correct period.
The group’s accounting policy on revenue recognition is shown in note 28 to
the financial statements and related disclosures are included in note 3.
Key observations
Based on our audit work, we did not identify any evidence of material
misstatement in the revenue recognised in the year to 31 March 2018.
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Financial Statements
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Impairment of fixed assets
The process for assessing whether an
impairment exists under International
Accounting Standard (IAS) 36 ‘Impairment of
Assets’ is complex. Directors’ assessment
of the value in use of the group’s Cash
Generating Units (CGUs) involves judgement
about the future performance of the CGU
and the discount rates applied to future cash
flow forecasts.
Therefore, we identified impairment of fixed
assets as a significant risk, which was one
of the most significant assessed risks of
material misstatement.
Our audit work included, but was not restricted to:
Æ testing the methodology applied in the value in use calculation complies
with the requirements of IAS 36, ‘Impairment of Assets’, including
assessing whether impairment indicators exist and if so, were they
evaluated in accordance with the accounting policy.
Æ testing the mathematical accuracy of management’s model.
Æ corroborating valuation of assets in question to third party valuation
reports, where applicable.
Æ testing the key underlying assumptions for the financial year 2019 budget
by making inquiries of management on its knowledge of future actions
that directly impact growth rate and profitability margins and challenging
them on the feasibility of such future actions.
Æ challenging management on its cash flow forecast and the implied
growth rates for the financial year 2019 and beyond, considering evidence
available to support these assumptions.
Æ assessing the discount rates used in the forecast by performing a
sensitivity analysis to test the reactivity of the estimate to possible
changes in assumptions.
Æ performing a sensitivity analysis in respect of the key assumptions such
as discount and growth rates to ensure there was sufficient headroom in
their calculation.
The group’s accounting policy on impairment is shown in note 28 to the
financial statements and related disclosures are included in note 13.
Key observations
Based on our audit work, we found that the assumptions made and estimates
used in management’s assessment of fixed asset impairment were
reasonable. Note 13 also appropriately discloses the assumptions used in
arriving at the estimate. We found no errors in the calculations.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CHAMBERLIN PLC CONTINUED
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Valuation of defined benefit
pension scheme
The group operates a defined benefit
pension scheme that provides benefits to a
number of current and former employees. At
31 March 2018, the defined benefit pension
schemes’ deficit was £5.1 million. The gross
value of pension scheme assets and liabilities,
which form the deficit amount to £9.5 million
and £15.6 million respectively.
The valuation of the pension liabilities and
assets in accordance with IAS 19 ‘Employee
Benefits’ involves significant judgement and
is subject to complex actuarial assumptions.
Small variations in those actuarial
assumptions can lead to a materially different
defined benefit pension scheme asset or
liability being recognised within the group
financial statements.
Therefore, we identified the valuation
of the defined benefit pension scheme
as a significant risk, which was one of
the most significant assessed risks of
material misstatement.
Our audit work included, but was not restricted to:
Æ testing the methodology applied in valuation of the pension arrangements
and assessing compliance with IAS 19 ‘Employee Benefits’, including
assessing whether the liabilities arising from the defined benefit scheme
including return on plan assets were being evaluated in accordance with
the accounting policy.
Æ using an actuarial specialist to review the assumptions used, including
discount rates, price inflation, pension rate increases, mortality rates
and the calculation methods employed in the calculation of the
pension liability.
Æ corroborating the pension scheme assets with statements issued by
external asset managers.
The group’s accounting policy on defined benefit pension scheme is shown
in note 28 to the financial statements and related disclosures are included in
note 22.
Key observations
Based on our audit work, we found the valuation methodologies including
the inherent actuarial assumptions to be reasonable and consistent with
the expectation of our actuarial specialists. We consider that the group’s
disclosures on page 51 appropriately describe the significant degree of
inherent imprecision in the assumptions and estimates and the potential
impact on future periods of revisions to these estimates. We found no errors
in calculations.
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Financial Statements
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature,
timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure Group
Parent
Financial statements
as a whole
£565,000, which is 1.5% of the group’s total
revenues. This benchmark is considered
the most appropriate because this is a key
performance measure used by the Board of
Directors to report to investors on the financial
performance of the group.
Materiality for the current year is higher than
the level that we determined for the year
ended 31 March 2017 as a result of increases
in revenue.
£136,000, which is 1.5% of the company’s
total assets excluding the deferred tax asset,
income tax receivable and amount due from
subsidiary undertakings. This benchmark is
considered the most appropriate because
this is a key performance measure used by
the Board of Directors to report to investors
on the financial performance of the company
whose principal activity is that of an investment
holding company.
Materiality for the current year is lower than the
level that we determined for the year ended
31 March 2017 as a result of decreases in
total assets.
Performance
materiality used to
drive the extent of our
testing
Specific materiality
Based on our risk assessment, including
the group’s overall control environment, we
determined a performance materiality of 75%
of the financial statement materiality. This is
consistent with performance materiality in the
previous year.
Based on our risk assessment, including the
company’s overall control environment, we
determined a performance materiality of 75%
of the financial statement materiality. This is
consistent with performance materiality in the
previous year.
We determined a lower level of materiality for
certain areas such as directors’ remuneration
and related party transactions.
We determined a lower level of materiality for
certain areas such as directors’ remuneration
and related party transactions.
Communication of
misstatements to the
audit committee
£28,250 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
£9,700 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CHAMBERLIN PLC CONTINUED
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality - group
Overall materiality - parent
25%
25%
75%
75%
Tolerance for potential uncorrected misstatements
Performance materiality
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the group’s business, its environment
and risk profile including performing walkthroughs of management’s processes and assessing the design effectiveness of key
controls. The subsidiaries of the group were evaluated by the audit team based on a measure of materiality considering each as
a percentage of total group assets, liabilities, revenues and profit before taxes, to assess its significance in relation to the overall
group and to determine the planned audit response. In order to address the audit risks described above as identified during our
planning procedures, we performed a full-scope audit of the financial statements of the parent company, Chamberlin Plc and on
the financial information of the group’s subsidiaries. The operations that were subject to full-scope audit procedures made up
100 per cent of consolidated revenues and 100 per cent of total profit before tax.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
Æ the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
Æ the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
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Financial Statements
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
Æ 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
Æ the parent company financial statements are not in agreement with the accounting records and returns; or
Æ certain disclosures of directors’ remuneration specified by law are not made; or
Æ we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the statement of directors’ responsibilities, set out on page 18, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
DAVID WHITE
SENIOR STATUTORY AUDITOR
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
4 June 2018
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PARENT COMPANY BALANCE SHEET
AT 31 MARCH 2018
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax asset
Current assets
Financial assets
Trade and other receivables
Income taxes receivable
Amounts due from subsidiary undertakings
Total assets
Current liabilities
Financial liabilities
Trade and other payables
Non-current liabilities
Deferred tax
Defined benefit pension scheme deficit
Total liabilities
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Retained earnings
Total equity
Total equity and liabilities
31 March
2018
£000
31 March
2017
£000
Notes
13
14
21
18
16
16
16
17
17
22
19
768
3
8,159
900
9,830
–
98
107
156
361
800
4
8,159
906
9,869
306
97
101
153
657
10,191
10,526
1,772
567
2,339
6
5,080
5,086
7,425
1,990
1,269
109
(602)
2,766
10,191
–
1,136
1,136
–
5,209
5,209
6,345
1,990
1,269
109
813
4,181
10,526
The loss dealt with in the accounts of the parent company was £1,449,000 (2017: profit of £403,000).
KEVIN NOLAN
DAVID ROBERTS
DIRECTORS
The accounts were approved by the Board of Directors on 4 June 2018
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PARENT COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2018
Operating activities
(Loss)/ profit for the year before tax
Adjustments to reconcile (loss)/ profit for the year to net cash inflow/ (outflow)
from operating activities:
Net finance costs excluding pensions
Investment income
Depreciation of property, plant and equipment
Amortisation of software
Profit on disposal of property, plant and equipment
Share based payments
Difference between pension contributions paid and amounts recognised
in the Income Statement
Decrease in receivables
(Decrease)/ increase in payables
Net cash outflow from operating activities
Investing activities
Dividends received
Purchase of property, plant and equipment
Disposal of plant and equipment
Net cash (outflow)/ inflow from investing activities
Financing activities
Interest paid
Net cash outflow 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:
(Bank overdraft)/ cash in hand
Financial Statements
Year ended
31 March
2018
£000
Year ended
31 March
2017
£000
Note
(1,579)
308
13
14
20
13
81
–
36
1
–
46
(137)
128
(569)
87
(2,450)
38
1
(1)
28
(95)
123
515
(1,993)
(1,446)
–
(4)
–
(4)
(81)
(81)
(2,078)
306
(1,772)
(1,772)
(1,772)
2,450
–
8
2,458
(87)
(87)
925
(619)
306
306
306
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PARENT COMPANY
STATEMENT OF CHANGES IN EQUITY
Balance at 1 April 2016
Profit for the year
Other comprehensive expense for the year net of tax
Total comprehensive income
Share based payment
Deferred tax on employee share options
Total of transactions with shareholders
Share
capital
£000
1,990
Share
premium
account
£000
1,269
Capital
redemption
reserve
£000
Retained
earnings
£000
Attributable to
equity holders
of the Company
£000
109
923
4,291
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
403
(542)
(139)
28
1
29
813
403
(542)
(139)
28
1
29
4,181
Balance at 1 April 2017
1,990
1,269
109
Loss for the year
Other comprehensive expense for the year net of tax
Total comprehensive income
Share based payment
Deferred tax on employee share options
Total of transactions with shareholders
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,449)
(1,449)
(6)
(6)
(1,455)
(1,455)
46
(6)
40
46
(6)
40
Balance at 31 March 2018
1,990
1,269
109
(602)
2,766
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.
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ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Financial Statements
FIVE YEAR
FINANCIAL SUMMARY
Financial Highlights
Revenue
Underlying profit before tax
Statutory profit before tax
Underlying diluted earnings per share
Dividend per share
31 March
2018
£000
31 March
2017
£000
31 March
2016
£000
31 March
2015
£000
37.7
(21)
(471)
(5.6)
0.0
32.1
579
54
7.1
0.0
35.0
652
(236)
5.5
0.0
40.8
803
76
7.2
0.0
31 March
2014
£000
38.6
(818)
(2,116)
(7.6)
0.0
Cash generated from operations
1,300
(106)
2,256
1,320
(1,497)
REVENUE (£m)
UNDERLYING PROFIT BEFORE TAX (£000)
2018
2017
2016
2015
2014
(21)
37.7
32.1
35.0
40.8
2018
2017
2016
2015
38.6
2014
(818)
579
652
803
STATUTORY PROFIT BEFORE TAX (£000)
UNDERLYING DILUTED EARNINGS PER SHARE (p)
2018
2017
2016
2015
(5.6)
(471)
(236)
2018
2017
2016
2015
54
76
5.5
7.1
7.2
2014
(2,116)
2014
(7.6)
DIVIDEND PER SHARE (p)
CASH GENERATED FROM OPERATIONS (£000)
2018
0.0
2017
0.0
2016
0.0
2015
0.0
2014 0.0
2018
2017
2016
2015
2014
1,300
(106)
2,256
1,320
(1,497)
www.chamberlin.co.uk
STOCK CODE: CMH
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NOTICE OF
ANNUAL GENERAL MEETING
Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members
registered on the Company’s register of members at:
Æ 10.30am on 20 July 2018; or,
Æ If this Meeting is adjourned, at 10.30am on the day two days prior to the adjourned meeting,
shall be entitled to attend and vote at the AGM.
Notice is hereby given that the Annual General Meeting of the Company will be held on Tuesday 24 July 2018 at the Registered
Office, Chuckery Road, Walsall, WS1 2DU at 10.30am for the following purposes:
To consider and, if thought fit, to pass the following resolutions as ordinary resolutions:
1. To receive and adopt the Report of the Directors, Annual Accounts and Report of the Auditors for the year ended 31 March
2018 (Resolution 1).
2. To re-elect as a Director Keith Butler-Wheelhouse (Resolution 2).
3. To re-elect as a Director Kevin Nolan (Resolution 3).
4. To re-elect as a Director David Roberts (Resolution 4).
5. To re-elect as a Director Keith Jackson (Resolution 5).
6. To re-elect as a Director David Flowerday who has been appointed by the board since the last annual general meeting as a
director of the Company (Resolution 6).
7. To approve the Directors’ Remuneration Report for the year ended 31 March 2018 (Resolution 7).
8. To reappoint Grant Thornton UK LLP as Auditors of the Company and to authorise the Directors to fix the remuneration of
the Auditors (Resolution 8).
9. 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 £663,177 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 24 October 2019, 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 9).
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ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Financial Statements
To consider and, if thought fit, to pass the following resolutions as special resolutions:
10. That, subject to the passing of resolution 9 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 9 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)
(ii)
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
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 10(a) of this resolution, up to an aggregate nominal amount of £198,953,
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 24 October 2019, 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 10).
11. 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 on
such terms and in such manner as the Directors may from time to time determine provided that:
(a)
(b)
(c)
the maximum aggregate number of Ordinary Shares which may be purchased is 795,812;
the minimum price (exclusive of expenses) which may be paid for each Ordinary Share is 25 pence;
the maximum price which may be paid for each Ordinary Share is an amount equivalent to 105 per cent 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 24 October 2018, 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 (Resolution 11).
By order of the Board
DAVID ROBERTS
COMPANY SECRETARY
4 June 2018
Chuckery Road
Walsall
WS1 2DU
www.chamberlin.co.uk
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NOTICE OF
ANNUAL GENERAL MEETING CONTINUED
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, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA,
not later than 10.30am on 20 July 2018 (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.
A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each
such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an
individual shareholder, provided that (where there is more than one representative and the vote is otherwise than on a show of
hands) they do not do so in relation to the same shares.
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 9 of the
enclosed annual report and accounts.
An explanation of Resolutions 9, 10 and 11 is set out in the Report of the Directors on page 16‑19.
Members should notify the Registrars without delay of any change of address.
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ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2018
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Financial Statements
SHAREHOLDER
INFORMATION
DIRECTORS
Keith Butler-Wheelhouse (Non-Executive Chairman)
Kevin Nolan (Chief Executive)
David Roberts (Finance Director)
Keith Jackson (Non-Executive)
David Flowerday (Non-Executive)
COMPANY
SECRETARY
David Roberts
REGISTERED
OFFICE
Chuckery Road
Walsall
WS1 2DU
Registered in England No. 76928
AUDITOR
Grant Thornton UK LLP
Birmingham
SOLICITORS
DLA Piper
Birmingham
STOCKBROKERS Smith & Williamson
London
BANKERS
HSBC Bank plc
Birmingham
REGISTRARS
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
www.chamberlin.co.uk
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SHAREHOLDER NOTES
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Financial Statements
Chamberlin & Hill Castings Ltd
Chuckery Road
Walsall, WS1 2DU
Tel: 01922 721411
Fax: 01922 614610
www.chcastings.co.uk
Exidor Ltd
Progress Drive
Cannock, WS11 0JE
Tel: 01543 570050
Fax: 01543 573534
www.exidor.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
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.
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.
www.chamberlin.co.uk
STOCK CODE: CMH
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Visit us online
For more information on
Chamberlin Group operations
please visit our website at:
www.chamberlin.co.uk
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Chuckery Road, Walsall, West Midlands, WS1 2DU
T: 01922 707100 F: 01922 638370
E: plc@chamberlin.co.uk
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