15020CASTINGSCVR:Castings Cover AR06 12301 15/7/08 12:49 Page 2 AA nn nn uu aa ll RR ee pp oo rr tt 22 00 00 88 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 1 D i r e c t o r s a n d O f f i c e r s Directors B. J. Cooke, AdvDipNFC, MIBritF Chairman D. J. Gawthorpe, BSc (Hons), MIBritF Chief Executive J. C. Roby, FCA Finance Director M. A. Lewis Managing Director, CNC Speedwell Ltd G. Cooper Managing Director, William Lee Ltd A. J. Smith, MIBritF, IEng Non-executive C. P. King, FCA Non-executive G. B. Wainwright, MIMgt, MIEx, FRSA Non-executive Secretary and J. C. Roby, FCA Registered Office Lichfield Road, Brownhills, West Midlands, WS8 6JZ Tel: 01543 374341 Fax: 01543 377483 Web: www.castings.plc.uk Registrars Auditors Solicitors Bankers Stockbrokers Capita Registrars Northern House, Woodsome Park, Fenay Bridge, Huddersfield. West Yorkshire, HD8 0LA Tel: 0871 664 0300 (Calls cost 10p per minute plus network extras) Fax: 020 8658 3430 BDO Stoy Hayward LLP Chartered Accountants 125 Colmore Row, Birmingham, B3 3SD Enoch Evans (incorporating Kenneth Cooke & Co.) St Paul’s Chambers, 6/9 Hatherton Road, Walsall, West Midlands, WS1 1XS Pinsent Masons LLP 3 Colmore Circus, Birmingham, B4 6BH HSBC Bank plc High Street, Brownhills, West Midlands, WS8 6HJ Arden Partners plc Arden House, Highfield Road, Edgbaston, Birmingham, B15 3DU Registered No. 91580 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 1 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 2 D i r e c t o r s Executive Directors Non-Executive Directors Brian Cooke Gerard Wainwright Aged 68, he joined the company in 1960 Aged 58, he was appointed a director in after attending foundry college and 1998 and is the senior independent serving an engineering apprenticeship. He director. He has been chief executive of a worked in all departments of the wide range of manufacturing companies company and was appointed a director in for over twenty-five years together with 1966, becoming joint managing director continuous international experience. He is in 1968 and managing director in 1970. chairman of the remuneration committee He ceased to be chief executive in 2007. and a member of the audit and He has been Chairman since 1983. nomination committees. Chris Roby Paul King Aged 60, he joined the company in 1988 Aged 71, he was appointed a director in as company secretary and was appointed 1998. He retired from practice as a finance director later in that year. Prior to partner with Coopers & Lybrand and is a that date he had been working in a professional accounting firm specialising member of the Boards of Claverley Group Limited and Thomas Walker plc. He is in manufacturing and international chairman of the audit committee and companies. David Gawthorpe Aged 46, he joined the company in 1984 and became local technical director at is regarded as the financial expert of that committee and is also a member of the remuneration and nomination committees. Brownhills in 1994. He was appointed a Tony Smith director in 2003 and became chief Aged 61, he joined the company in 1962 executive in April 2007 and is the director and became a director in 1985, ultimately with environmental responsibility. being managing director at Brownhills. In Mark Lewis Aged 44, he joined CNC Speedwell in 1990 becoming their managing director in 1996. He has overseen the machining requirements for the group and was appointed a director in 2003. 2004 he retired from executive duties. His continuing involvement is invaluable to the company with his experience in foundry production and human relations. He adds to the existing strength of our non-executive directors. He is a member of the audit, remuneration and nomination Graham Cooper committees. Aged 54, he joined William Lee in 1977 becoming operations director there in 2003 and their managing director on 1st January 2005, when he was appointed to the main board. 2 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 3 C h a i r m a n ’ s S t a t e m e n t Turnover has increased from £86.2m to £97.4m and profits before income taxes are up from £13.06m to £16.66m compared to last year. An interim dividend of 2.71 pence per share was paid in January 2008. Your board recommends a final dividend of 7.29 pence per share compared with 6.94 pence per share last year. Foundry Companies Both Castings Brownhills and William Lee Ltd have enjoyed high demand for their castings during the year and despite pressure on costs due to continual increases in raw materials such as steel scrap, pig iron and alloy materials, the companies have managed to improve productivity and maintain margins. The new foundry development at our William Lee site is progressing at full speed and with good co-operation from the local planning departments it has enabled us to commence the building without any delay. It is planned to start production early in 2009. Continual investments are made at both Castings Brownhills and William Lee to update plant and improve productivity in order to maintain our competitiveness in the market and improve working conditions. CNC Speedwell Ltd The turnover has increased during the year by 21.4%, and the profits improved again. The company continues to win new orders from existing customers to such an extent that we have now re- opened our Fradley Park site. This has led to considerable refurbishment and moving costs being incurred during the year. We expect, with new contracts due to start production early in 2009, to be investing in new machines during this financial year and it is hoped benefits will Prospects It is extremely difficult to forecast the company’s prospects for the coming year. Many external factors, such as forecasts given by customers and general order intake, have to be taken into account. The outlook on demand at the present time is satisfactory, although we are now seeing adjustments in schedules from some customers, which are offset by increases from others. The rapid increases in steel scrap, pig iron and alloy prices since January 2008 are unprecedented in the market. These increases at such high levels have to be recovered and there is always a delay in recovery which will no doubt affect the first half results this year. We also expect further substantial energy cost increases in October 2008. It is impossible to say how future demand will be affected by these unprecedented rises in costs; this has never occurred previously so we are moving into the unknown. It could be described as a ‘crazy’ situation. Whatever the outcome of the current situation, however, the company is financially strong and is well placed to come through what may prove to be a difficult period. Employees Once again, on behalf of the board and the shareholders, I wish to thank all our employees for their support during this past year and it is hoped the current economic situation does not affect our employment levels and we can continue to grow and employ more people. come through during the second half of . 2009, providing the market conditions remain favourable. B. J. COOKE Chairman 25th June 2008 8 A n n u a l R e p o r t 2 0 0 8 3 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 4 B u s i n e s s a n d F i n a n c i a l R e v i e w Turnover increased by 12.9% to £97.4 Despite ending the year with more The income statement shows a profit million, of which 65.9% was exported. cash, the greater variation in interest rates before tax of £16.7 million. However, this The dispatch weight of castings to helped decrease finance income by includes an income statement charge outside customers was 56,400 tonnes £83,000 to £1,414,000, a decrease of of £27,000 for defined benefit pension which was an increase of 2,900 tonnes 5.5%. Cash outflow included £9.4 million schemes (see note 5) in accordance with from the previous year. The group (2007: £9.6 million) on capital equipment, IAS 19. The directors view the cash produced 58,700 tonnes of castings particularly for CNC Speedwell, and contribution of £537,000 to be a relevant compared to 56,000 tonnes last year. preparatory work for the new foundry at charge which would have given rise to a CNC Speedwell increased its turnover by William Lee. profit before taxation of £16.1 million. 21.4%. The pension valuation under IAS19 The directors are recommending an Despite significant cost increases, showed a surplus of £2.8 million but this increase of 5% in the final dividend that including unrecovered raw material and has not been shown as an asset due to will be paid in August which, with the electricity costs, profit from operations the restriction of recognition of assets interim dividend paid in January, will increased by £3.6 million, and increased under IAS 19. result in the return of £4.4 million to the operating margin to 15.6% from shareholders. 13.4%. Our policy of continual improvement and investment has again reduced the number of hours it takes to produce one tonne of castings, helping to increase the margin. 4 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 5 D i r e c t o r s ’ R e p o r t The directors submit their Annual Report and the Audited Accounts for the year ended 31st March 2008. Trading activities Castings P.L.C. spheroidal supplies graphite iron castings to a variety of manufacturing industries from its fully mechanised foundries at Brownhills. William Lee Limited supplies spheroidal graphite iron castings from Dronfield, Sheffield and CNC Speedwell Limited is a machinist operation. There were no significant changes in the principal activities of these companies during the year, which are considered to be one class of business only. The progress of these companies during the year is recorded in the accounts, the chairman’s statement on page 3 and the business and financial review on page 4. A review of principal risks and uncertainties is given on pages 7 and 8. Dividends An interim dividend of 2.71 pence per share was paid on 11th January 2008. The directors now recommend a final dividend of 7.29 pence per share payable on 22nd August 2008, making a total distribution of 10 pence for the year. Share capital consists of company’s The 43,632,068 (2007: 43,632,068) ordinary shares of 10 pence each with voting rights. There are no restrictions on voting rights. capital There are no restrictions on the transfer of shares in the company and in particular there are no limitations on the holding of shares and no requirements to obtain the approval of the company, or of other shareholders, for a transfer of shares. Beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights the section Companies Act 2006 are required to direct the registered holder of their shares rather than to the company’s registrar, Capita Registrars, or to the company directly. communications under 146 all to of to legislation and to any Subject resolution of the company in general meeting, all unissued shares are at the disposal of the board who may allot, grant options over or otherwise dispose of them to such persons, on such terms and at such times as it may think fit. The company is authorised to purchase its own shares which may be selected by the board in any manner whatever. The movements in the share capital of the company during the year are shown in note 16 on page 29. Directors The present directors of the company are listed on page 1 and their interests in the shares of the company are shown below. The interests of directors in the ordinary share capital at the beginning and end of the year were: B. J. Cooke J. C. Roby A. J. Smith D. J. Gawthorpe M. A. Lewis C. P. King G. B. Wainwright G. Cooper Beneficial Holdings 2008 1,950,986 128,190 103,079 28,296 3,025 — — — 2007 1,950,986 128,190 113,079 26,357 3,025 — — — There have been no changes in the shareholdings of directors since the year end. The following directors retire under the provisions of the Articles of Association and, being eligible, offer themselves for re-election: B. J. Cooke G. B. Wainwright G. Cooper } by rotation The unexpired period of the contracts of service for B. J. Cooke and G. Cooper is one year. Mr G. B. Wainwright does not have a contract of service. The company has made qualifying third-party indemnity provisions for the benefit of its directors which were made during the year and exist at the date of this report. There are no agreements between the company and its directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid. The number of directors is not subject to any maximum but shall not be less than two. The company may by ordinary resolution elect any person to be director and the board has the power to appoint any person to be director, but any director so appointed shall retire from office at the next Annual General Meeting. A director is not required to hold any share qualification. One third of the directors retire from office at every Annual General Meeting and are eligible for reappointment. The business of the company is managed by the board who may exercise all such powers of the company as are not by legislation or by the company’s Articles required to be exercised in general meeting. The board may make such arrangements as it thinks fit for the management and transaction of the company’s affairs and may for that purpose appoint local boards, managers and agents and delegate to them any of the powers of the board (other than the power to borrow and make calls on shares) with power to sub-delegate. Other than the director’s service contracts the directors have no interests in any other contract of the business. Substantial shareholdings The directors have been notified that the following investors, including directors, held interests in 3% or more of the company’s issued share capital at 31st March 2008 and 25th June 2008: Aberforth Partners’ Clients Hunter Hall Value Growth Trust Aviva plc & subsidiaries B. J. Cooke Hamstall Investments Inc. Rathbone Investment Management Ltd Legal & General Group plc Number 6,147,271 4,198,478 2,577,144 1,950,986 1,800,000 1,600,000 1,516,376 % 14.1 9.6 5.9 4.5 4.1 3.7 3.5 8 A n n u a l R e p o r t 2 0 0 8 5 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 6 D i r e c t o r s ’ R e p o r t Business review The Chairman’s Statement on page 3, the Business and Financial Review on page 4, the Corporate Governance Statement on page 11, and the Notes to the Accounts on pages 21 to 33 provide detailed information relating to the group, the operation and development of the business and the results and financial position for the year ended 31st March 2008. Future prospects Future prospects are dealt with in the Chairman’s Statement on page 3. Special business There will be three items of Special Business at the Annual General Meeting. Directors’ authority to allot shares Approval will be sought for a special resolution to renew the authority given to the directors to allot shares in the company. The present authority was granted on 14th August 2007 and under Section 80 of the Companies Act must be renewed at least every 5 years. 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 £218,160, being approximately 5% of the current issued share capital. In any three year period no more than 7.5% of the issued share capital will be issued on a pre-emptive basis. Both Authorities are to be for the period commencing on the date of passing of the Resolution until 18th August 2013 but will be put to annual shareholder approval. The proposed Resolutions are set out as items 8 and 9 in the Notice of Meeting. Authority to purchase own shares At the Annual General Meeting in 2007, the board was given authority to purchase and cancel up to 4,358,844 of its own shares representing 9.99% of the company’s existing shares, through market purchases on The London Stock Exchange. The maximum price to be paid on any exercise of the authority was restricted to 105% of the average of the middle market quotation for the shares for the five dealing days immediately preceding the day of a purchase. The minimum price which may be paid for each share is 10 pence. The current authority to make market the forthcoming purchases expires at Annual General Meeting. The directors are now seeking the approval of shareholders for the renewal of this authority upon the same terms, save that the authority is now sought to allow the company to purchase and cancel up to 4,358,844 of its own shares, representing 9.99% of its issued share capital at 31st March 2008. The authority is sought by way of a special resolution, details of which are also included in the notice of the meeting as item 10. 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 future earnings per share, and if it is in the best interests of shareholders generally. Fixed assets The market value of the group’s interests in land cannot be accurately established without obtaining a revaluation of all the land and buildings owned by the group. The directors consider that although a revaluation would show the market value of the land and buildings to be in excess of book value, this excess would not be significant in the context of group trading and would not justify the expense of a revaluation. Employee involvement informed weekly of Employees production relative the production performance. Similarly, they are kept informed of any factor affecting the group and the industry generally. are levels and Their involvement in the group’s performance is encouraged by means of a production bonus and at the time of annual wages and salaries review they are made aware of all economic factors affecting the previous year’s performance and the outlook for the ensuing year. details Further employee involvement are given under the Corporate Social Responsibility section on pages 9 and 10. of Health and safety As required by legislation, the group’s policy for securing the health, safety and welfare at work of all employees has been brought to their notice. In addition, safety committees hold regular meetings. Policy on payment of creditors The group’s policy is to settle the terms of payment with suppliers when agreeing the terms of each transaction, ensure that suppliers are made aware of the terms of payment and abide by them provided the supplier complies with all relevant terms and conditions. The company does not follow any code or standard on payment practice. Individual operating businesses within the group are responsible for establishing appropriate policies with regard to the payment of their suppliers. The purchases outstanding for payment by the company at the year end was 43 (2007 – 41). number days’ of Financial instruments Details of the use of financial instruments by the group are contained in note 19 of the accounts. Articles of Association Any amendments to the Articles of Association have to be adopted by the members by a special resolution in general meeting. The current articles were adopted in January 1989. indicated Auditors The auditors, BDO Stoy Hayward LLP, to have continue in office. A resolution proposing their the reappointment as auditors of company and authorising the directors to determine their remuneration will be submitted at the Annual General Meeting. their willingness In the case of each of the persons who are directors of the company at the date when this report was approved so far as each of the directors is aware, there is no relevant audit information of which the company’s auditors are unaware, and each of the directors has taken all steps that he ought to have taken as a director to make himself aware of any relevant audit information (as defined) and to establish that the company’s auditors are aware of that information. Significant agreements There are no significant agreements to which the company is party that take effect, alter or terminate upon a change of control of the company following a takeover bid. Principal risks and uncertainties Principal risks and uncertainties are set out on page 7. By order of the board B. J. COOKE Chairman 25th June 2008 6 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 7 R e v i e w o f P r i n c i p a l R i s k s a n d U n c e r t a i n t i e s Risk In common with all trading business, the group is exposed to a variety of risks in its normal business the conduct of operations. The group maintains a range of insurance policies against major identified insurable risks, including (but not limited to) those related to business interruption, damage to property and equipment, products and employment. it Whilst is not possible to either completely record or to quantify every material risk that the group faces, below is a summary of those risks that the directors believe are most significant to the group’s business and could have a impact on future performance, material causing it to differ materially from expected or historic achieved results. Foreign exchange risk Foreign exchange rate risk is sometimes partially hedged using forward foreign exchange contracts. Translational risk arises as a consequence of applying different exchange rates to net assets denominated in currencies other than sterling and, not being an exposure that is not results in an actual cash flow, hedged. Operational and commercial risks The group’s revenues are principally derived from commercial vehicle and automotive markets. Both markets, and therefore group revenues, can be subject to variations in patterns of demand. Commercial vehicle sales are linked to (e.g. emission technological factors legislations) growth. Passenger vehicle sales are influenced, inter alia, by consumer preferences, incentives of the and consumer credit. and economic availability Market competition Automotive and commercial vehicle markets are, by their nature, highly competitive, which has historically led to deflationary pressure on selling prices. This pressure is most pronounced in cycles of lower demand. A number of the group’s customers are also adopting global sourcing models with the aim to reduce bought out costs. Whilst there can be no guarantee that business will not be lost on price, we are confident that we can remain competitive. Customer concentration, programme dependencies and relationships The loss of, or deterioration in any single customer relationship could have a material impact on the group’s results. Equipment The group operates a number of specialist pieces of equipment, including foundry furnaces, moulding lines and CNC milling machines, which, due to manufacturing lead times would be difficult to replace sufficiently quickly to prevent major interruption and possible loss of business in the event of unforeseen failure. Whilst this risk cannot be entirely mitigated without uneconomic duplication of all key equipment, all key equipment is maintained to the highest possible standards and inventories of strategic equipment spares maintained. The facilities at Brownhills and Dronfield have similar equipment and work can be transferred from one location to another very quickly. Suppliers Although the group takes care to ensure alternative sources of supply remain available for materials or services on which the group’s businesses are critically dependant, this is not always possible to guarantee without term business disruption, additional costs and potentially, damage to relationships with key customers. risk of short Commodity and energy pricing The principal metal raw materials used by the group’s businesses are steel scrap and various alloys. The most important alloy raw material inputs are premium graphite, magnesium ferrosilicon, nickel and molybdenum. Wherever possible, prices and quantities (except steel) are secured through long term agreements The clauses. with suppliers. In general, the risk of price inflation of these materials resides with the group’s customers through price adjustment group is exposed to price level changes in copper and molybdenum, which have seen dramatic increases in recent years. Where possible, the group seeks to mitigate the financial impact through the application of surcharges, although the success of this approach varies by customer. Energy contracts are locked in for at least twelve months, although renegotiation risks remain at contract maturity dates but again this is mitigated through the application of surcharges. Information technology and systems reliability The group is dependant on its information technology (“IT”) systems to operate its business efficiently, without failure or interruption. Whilst data within key systems is regularly backed-up and systems subject to virus protection, any failure of back-up systems or other major IT interruption could have a disruptive effect on the group’s business. in all Product quality and liability to The group’s businesses expose it certain product liability risks, which, in the event of failure could give rise to material financial liabilities. Whilst it is a policy of the group to limit its financial liability by contract long term agreements (“LTAs”) it is not always possible to secure such limitations in the absence of LTAs. The group’s customers do require the quality maintenance systems to safeguard against quality- related risks and the group maintains appropriate quality accreditations. The group maintains insurance for public liability-related claims but does not insure against the risk of product warranty or recall. demanding external of 8 A n n u a l R e p o r t 2 0 0 8 7 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 8 R e v i e w o f P r i n c i p a l R i s k s a n d U n c e r t a i n t i e s relevant Environmental risk The group’s businesses are subject to compliance with many different laws and requirements in the UK, Europe, North America and elsewhere. Great care is made to act responsibly towards the environment to achieve compliance with all laws and to establish a standard above the minimum level group’s required. manufacturing not generally considered to provide a high risk of harm to the environment, a major control failure leading to environmental harm could give rise to a material financial liability as well as significant harm to the reputation of our business. the processes Whilst are Pension scheme funding The value of the assets and liabilities of the group’s defined benefit pension schemes is substantial. As at 31st March 2008 the schemes were in surplus on an IAS 19 basis. Further details are set out in note 5 to the financial statements. The potential risks and uncertainties are mitigated by careful management and continual monitoring of the schemes and by appropriate and timely action to ensure as far as possible that the defined benefit pension liabilities do not increase disproportionately. The company works closely with the scheme trustees and specialist advisors in managing the inherent risks of such schemes. 8 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 9 C o r p o r a t e S o c i a l R e s p o n s i b i l i t y to all our General As a long standing and principled company, we place great importance on our key responsibilities shareholders, stakeholders, whether employees, customers, suppliers or the communities in which we operate. The group works hard to meet the legitimate expectations of these stakeholder groups whilst at the same time seeking to fulfil our objective of creating outstanding and enduring value through commercial success based on superior performance. The group has a network of policies and strategies through which we seek to ensure that our values form part of the culture of each of our operations. The environment We recognise our duty and responsibility towards protecting the environment wherever we conduct our business and strive to adopt the highest standards of environmental practices with the aim of minimising the impact of our commercial activities on the surrounding environment. Thus, we aim to meet and, wherever possible standards demanded by applicable environmental legislation and operate a policy of effecting continual improvement in all of our processes that have the potential to impact the environment. exceed, the Specifically, the company is committed to: Implementing and maintaining an Environmental Management System in accordance with the ISO14001 standard. Establishing procedures to review the impact of current or new activities or processes on the environment. Reviewing audit results and initiating corrective action to address any deficiencies found within the group’s environmental management system, policy, objectives or targets. Using techniques to avoid, reduce or control pollution. relevant Complying with all legal requirements, process, planning and discharge as appropriate to its operations. authorisations, Pursuing best practice techniques in the use of energy and raw materials. Encouraging the beneficial re-use, recycling and recovery of its waste products. considered issues Ensuring that environmental are when making decisions to invest in capital plant and in the planning and controlling of manufacturing processes. Promoting environmental awareness throughout the group and ensuring that personnel whose activities have the potential to cause a significant impact on the environment receive appropriate training. that adopt suppliers and Ensuring contractors environmental practices on site that are compatible with our exacting environmental standards. maintaining and Establishing adequate contingency procedures and plans to deal effectively with any accidental discharge or emission of pollutants. Communicating our Environmental Policy Statement to any persons working on our behalf and any interested parties. and materials will The group demands that all activities and services will comply with applicable laws and regulations and that all substances be continually reviewed to ensure that only those that have the lowest impact on the environment will be used. In addition, where it is possible for us to assess, only waste disposal companies and facilities where the level of operational control and environmental meets legislative requirements are used by our businesses. Noise from operations is kept to a level below legislative requirements to ensure the minimum of nuisance to the local and environment. Appropriate adequate environmental information and training is given to all employees and contractors. compliance accredited Both of our foundry sites are ISO and, CNC 14001:2004 the Speedwell standard obtained having ISO14001:1996. The group’s practices is working towards and procedures are subject to regular environmental external audits consultants. by The group has also in place an energy policy which requires each company to make continuing efforts to achieve the following objectives: To monitor and record energy and water consumption. To reduce the consumption of fossil fuels from and where sustainable practicable. sources energy utilise To examine ways of reducing water consumption. promote awareness To amongst employees and contractors. energy To identify and implement energy saving measures and practice energy efficiency group throughout premises, plant and equipment. all incorporate To environmentally sensitive designs into both new and refurbished buildings. in To target a reduction in energy consumption the Government’s goal of cutting carbon dioxide emissions to counter the threat of climate change. line with embody Employees The group’s policy is to employ people who of commitment and excellence. These values apply to all employees regardless of including directors. position, seniority values core its or The group seeks to communicate with its employees in a structured open manner, including regular briefings and dissemination of relevant information on the group and business unit. levels Employees are informed weekly of production relative production performance. Similarly, they are kept informed of any factor affecting the group and the industry generally. and the Their involvement in the group’s performance is encouraged by means of a production bonus and at the time of annual wages and salaries review they are made aware of all economic factors 8 A n n u a l R e p o r t 2 0 0 8 9 15020 25/06/2008 Proof 6 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 10 C o r p o r a t e S o c i a l R e s p o n s i b i l i t y best practice achieve wherever appropriate. The group’s health and safety policy is regularly reviewed and modified and experiences dictate. circumstances as The group encourages the maintenance of consistent high standards and each site is required to develop a safety management system that includes: Health and safety planning and objective setting. Carrying out risk assessments; both general and hazard specific. Producing and issuing safe systems of work. Induction training both job and hazard specific and refresher training. Maintenance, statutory equipment. inspection of inspection and work Provide personal appropriate protective equipment and rules for its use. Occupational health including health surveillance and exposure monitoring as required. control The contractors. of visitors and Incident investigation. reporting, recording and Routine workplace inspections. Performance evaluation. monitoring and affecting the previous year’s performance and the outlook for the ensuing year. Recognising the demands of our customers and our strategy, the group’s policy is to recruit the best available people and to invest in their training and development to enable a high level of retention. are judging committed applications for employment neither by race, nationality, gender, age, disability, sexual orientation nor political bias. regard, we equality, this to In The group gives full consideration to employment applications by disabled persons where they can adequately fulfil the requirements of If necessary, we endeavour to retrain any employee who becomes disabled during their period of employment with the group. the position. Health & Safety The Board regards the promotion of health and safety measures as a mutual objective for management and employees at all levels. It is our policy to do all that is practicable to prevent personal injury and damage to property and to protect everyone from foreseeable hazards, including third parties in so far as they come into contact with the group’s activities. In particular, we aim to fulfil our responsibilities: To provide and maintain safe and healthy working conditions complying with all statutory conditions. To provide training and instruction to enable employees to perform their work safely and efficiently. To make available all necessary safety devices and protective equipment and to supervise their use. To maintain a constant and continuing interest in health and safety matters applicable to the group’s activities, consulting and involving employees wherever possible. The group has clearly defined health and safety policies and we operate a system of strict reporting. Regular audits of health and safety at the group’s manufacturing operations are carried out using independent agencies who make recommendations for improvements to 10 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 11 C o r p o r a t e G o v e r n a n c e General Castings PLC recognises the importance of high standards of Corporate Governance. The board has considered the principles and provisions of the Combined Code published in 2006 and will continue to adhere to them where it is in the interests of the business, and of shareholders, to do so. Internal control The Combined Code on Corporate Governance introduced a requirement that the directors review the effectiveness of the group’s systems of internal controls. This extended the existing requirement in respect of internal financial controls to cover all controls including financial, operational and compliance controls and risk management. for process The board is ultimately responsible for the group’s system of internal controls, including internal financial control, and for monitoring its effectiveness. There is a continuous identifying, evaluating and managing the significant risks faced by the group which is regularly reviewed and has been in place throughout the year under review and up to the date of approval of report and the annual accounts. However, such a system is designed to manage rather than eliminate failure to achieve business the risk of objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. The review covers all controls including financial, operational, risk compliance management. and necessary The directors confirm that they have to established procedures implement the guidance for directors on the Combined Code such that they fully comply with it for the accounting period ended on 31st March 2008. Internal financial control The directors are responsible for maintaining the group’s systems of internal financial control. These controls are designed to both safeguard the group’s assets and ensure the reliability of financial information used within the business and for publication. As with any such systems, controls can only provide reasonable and not absolute assurance against material misstatement or loss. Internal financial control is operated within a clearly defined organisational structure with clear control responsibilities and authorities, and a practice throughout the group of regular management and board meetings to review all aspects of the group’s businesses including those aspects where there is a potential risk to the group. For each business there are regular weekly and monthly reports, reviewed by boards and management, which contain both written reports and accounts. The accounts include profit and loss accounts and balance sheets for the period under review, year to date and previous year and are compared with expected results. A variety of operational and financial ratios are also produced. Continual monitoring of the systems of internal financial control is conducted by all management. The external auditors, who are engaged to express an opinion on the group accounts, also consider the systems of internal financial control to the extent necessary to express that opinion. The external auditors report the results of their work to management, including members of the board and the audit committee. The board does not consider there is a need for an internal audit function due to the size and complexity of the group. Auditors’ independence The non-audit work undertaken in the year by the group auditors, BDO Stoy Hayward LLP, was restricted to an involvement in the preparation of the tax computations of the group companies and a review of the interim financial statements. Environment as environment, this, adopting The board recognises that our operations have an effect on the local, regional and and global a the board is consequence of committed policies, processes and procedures which will lead to in environmental performance and the prevention of pollution. improvement continual the to Board of directors The board meets regularly to monitor the and to state of business current determine its future strategic direction. During the year the board comprised five executive directors and three non- the non- executive directors. Two of executive directors are independent of executive management and none of the non-executive directors participate in share executive remuneration schemes nor do they qualify for pension benefits. option other or 8 A n n u a l R e p o r t 2 0 0 8 11 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 12 C o r p o r a t e G o v e r n a n c e Directors receive regular updates appropriate to the business throughout the year. To assist with the conduct of their function, the non-executive directors are able to obtain professional advice at the company’s expense if required in connection with their duties. In addition, all directors have access to the services of the company secretary. Attendance at board and board committee meetings during the year is detailed in the table shown below: Director B. J. Cooke D. J. Gawthorpe J. C. Roby M. A. Lewis G. Cooper C. P. King G. B. Wainwright A. J. Smith Board Audit Committee Remuneration Committee Eligible to attend 9 9 9 9 9 9 9 9 Attended 9 9 8 8 9 9 9 8 Eligible to attend — — — — — 2 2 2 Attended — — — — — 2 1 1 Eligible to attend — — — — — 1 1 1 Attended — — — — — 1 1 1 The chairman communicates frequently with the non-executive and executive directors. Directors are also encouraged to discuss any issues or concerns with the chairman at any time throughout the year. The remuneration committee reviews the performance of the directors, including the chairman. Board committees The principal committees established by the directors are: Audit committee This committee comprised the three non- executive directors and is chaired by C. P. King. The finance director and other executive directors may also attend meetings as appropriate to the business in hand but are not members of the committee. The committee meets at least twice a year and examines any matters relating to the financial affairs of the group including the review of annual and interim results, and internal audit practices. accounting committee meets with the auditors periodically and as necessary. procedures control The Remuneration committee As detailed in the remuneration report below. Nomination committee This committee comprised the three non- executive directors and is chaired by G. B. Wainwright. The chairman may attend meetings as appropriate to the business in hand but is not a member of the committee. Relations with shareholders The company holds meetings from time to time with institutional shareholders to discuss the company’s strategy and financial performance. The Annual General Meeting is used to communicate with private and institutional investors. Going Concern After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue operations for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Summary The board takes its responsibilities seriously even though there are a number of the provisions of the Code with which it does not comply. It does not feel that the size or complexity of the group and the way in which it governs would be enhanced or strengthened by further changing the already existing high standards of corporate governance practised. For the year ended 31st March 2008 the company complied with the Combined Code other than the following points: there are three non-executive directors but one does not conform to the definition of independent; the non-executive directors do not have specified term contracts; the chairman is also an executive director but on reduced hours; the role of the financial director and company secretary are fulfilled by the same person as there is no one else within the group qualified to do the job and it would not be a full time position. The board monitors the effectiveness of this arrangement annually. there is no formal arrangement whereby staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. These are considered appropriate in relation to the size of the company and the way in which it operates. 12 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 13 R e m u n e r a t i o n R e p o r t This report has been prepared in accordance with Schedule 7A to the Companies Act 1985 and also meets the relevant requirements of the Listing Rules of the Financial Services Authority. The report describes how the board has applied the principles relating to directors’ remuneration. As required by the Act, a resolution will be proposed at the Annual General Meeting the remuneration report for the financial year ended 31st March 2008. approve to The Act requires the auditors to report to the company’s members on certain parts of the directors’ remuneration report and to state whether, in their opinion, those parts of the report have been properly prepared in accordance with the Act. Items marked * have been subject to audit and reported on in the auditors’ report on page 16 and all other information is unaudited. Remuneration committee This committee comprised the three non- Directors’ Emoluments* B. J. Cooke D. J. Gawthorpe J. C. Roby M. A. Lewis G. Cooper C. P. King G. B. Wainwright A. J. Smith Pension arrangements Executive directors are members of the Castings P.L.C. Staff Pension and Life Assurance Scheme, a defined benefit scheme. Their dependants are eligible for dependants’ pensions and the payment of a lump sum in the event of death in service. The scheme provides for a pension accrued at 1/60th per year of executive directors and is chaired by G. B. Wainwright. The chairman of the group is invited to attend meetings where appropriate but is not a member of the committee. None of the executive directors were present at meetings of the committee during own remuneration. consideration their of No advice has been provided by external advisers or consultants. Remuneration policy The underlying policy in setting the remuneration of the executive directors is that it shall be designed to retain and motivate the directors and be reasonable and fair in relation to their responsibilities. Executive emoluments directors’ comprise annual salary, an annual bonus, membership of a company pension scheme and other benefits. The committee ordinarily reviews directors’ salaries annually, effective from 1st April, taking into account market rates and the performance of the individual and of the company. Policies for benefits (which include provision of a car or car benefit, private health care and life assurance) are reviewed regularly and comparisons with other companies are made. Reports and published data are also taken into consideration in setting salary and benefit packages. Remuneration in 2008 The individual elements of remuneration of each director are set out in the table below. Annual bonus in Executive directors participate a performance-related annual bonus scheme. Bonuses are payable based on the group obtaining profits before tax and exceptional items above a predetermined threshold. Details of annual bonuses payable in respect of 2008 are set out in the table below. Salaries £000 78 162 142 135 130 — — — 647 Fees £000 — — — — — 17 17 17 51 Benefits £000 4 9 14 9 9 — — — Performance related bonus £000 40 81 81 81 81 — — — 2008 Total £000 122 252 237 225 220 17 17 17 2007 Total £000 210 193 201 189 184 17 17 17 45 364 1,107 1,028 of final service to 2005 and 1/80th per year pensionable thereafter remuneration based on capped basic salaries normal retirement retirement age. Pension contributions are not paid on benefits or bonuses. on at 8 A n n u a l R e p o r t 2 0 0 8 13 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 14 R e m u n e r a t i o n R e p o r t Directors’ pension entitlements* Directors’ contributions in the year (note 1) Age at year end Name of director Increase in accrued pension Increase during year excluding pension any increase during for inflation in accrued Transfer value of increase less directors’ (note 2) contributions the year Accumulated Accumulated total accrued pension at 31 March 2007 total accrued pension at 31 March 2008 (note 3) Difference in transfer values less (note 3) 31/03/2008 31/03/2007 contributions Transfer value of accrued benefits Transfer value of accrued benefits £ J. C. Roby 10,244 D. J. Gawthorpe 9,922 M. A. Lewis 8,967 G. Cooper 7,643 Notes to pension benefits: 1. These relate to the contributions paid or payable in the year by the directors under the terms of the Scheme. £ 33,231 38,080 16,193 20,491 £ 35,886 40,785 18,259 22,587 £ 1,359 1,220 1,434 1,297 £ 2,655 2,705 2,066 2,096 £ 8,356 164 1,484 6,461 £ 452,820 299,294 129,591 229,511 59 46 44 54 £ 390,081 241,864 97,151 187,885 £ 52,496 47,508 23,473 33,983 2. The increase in accrued pension during the year (and transfer value of the increase) excludes any increase for inflation. 3. The pension entitlement shown is that which would be paid annually on retirement based on service to the end of the company financial year. Members of the Scheme have the option to pay Additional Voluntary Contributions. Neither the contributions nor the resulting benefits are included in the above table. Performance graph Directors’ contracts The following graph shows the company’s performance, measured by total shareholder return, compared with the performance of the FTSE All Share Index — Engineering sub- sector, also measured by total shareholder return. This index has been selected for this comparison because this is the most relevant index in which the company’s shares are quoted. 400 350 300 250 200 150 100 50 0 April 2003 April 2004 April 2005 April 2006 April 2007 April 2008 Source: Thomson Financial – Thomson One Banker are contracts Executive directors have contracts of service terminable on one year’s notice. These considered appropriate in the context of the overall remuneration policy, as in the opinion of the board it is consistent for directors to take a long-term rather than a short-term view of their conduct and planning of the company’s affairs. None of the contracts contains any provision for predetermined compensation in the event of termination. The date of contracts currently in the executive directors is place for 1st April 2007. Messrs King, Wainwright and Smith do not have a contract of service and do not participate in the company’s bonus schemes and are not eligible to join a company pension scheme. On behalf of the board G. B. WAINWRIGHT Chairman of the remuneration committee 25th June 2008 14 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 15 S t a t e m e n t o f D i r e c t o r s ’ R e s p o n s i b i l i t i e s the group, The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of for safeguarding the assets of the company, for the taking reasonable steps for prevention and detection of fraud and other irregularities and for the preparation of a Directors’ Report and Directors’ Remuneration Report which comply with the requirements of the Companies Act 1985. The directors are responsible for preparing the annual report and the financial statements in accordance with the Companies Act 1985. The directors are also required to prepare financial statements for the group in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and Article 4 of the IAS Regulation. The directors have chosen to the prepare financial statements for company accordance with UK Generally Accepted Accounting Practice. in Group financial statements International Accounting Standard 1 requires that financial statements present fairly for each financial year the group’s financial position, financial performance and cash flows. This requires the faithful presentation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘framework for the preparation and In presentation of virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the directors to: financial statements’. consistently appropriate policies; select and apply present including information, accounting policies, in a manner that relevant, provides reliable, comparable understandable and information; and the with provide additional disclosures when compliance specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance. Parent company financial statements Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. financial statements, the directors are required to: In preparing these select suitable accounting policies and then apply them consistently; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business; make judgements and estimates that are reasonable and prudent; and have state whether applicable accounting standards followed, subject to any material departures disclosed and explained in the financial statements. been in preparation Financial statements are published on the group’s website in accordance with the United Kingdom legislation governing and the dissemination of financial statements, which may vary from legislation in other and jurisdictions. integrity of the group’s website is the responsibility of the directors. The directors’ responsibility also extends to the financial the ongoing integrity of statements contained therein. The maintenance 8 A n n u a l R e p o r t 2 0 0 8 15 15020 25/06/2008 Proof 6 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 16 I n d e p e n d e n t A u d i t o r s ’ R e p o r t To the shareholders of Castings P.L.C. We have audited the group and parent company financial statements of Castings P.L.C. for the year ended 31st March 2008 which comprise the consolidated income statement, the consolidated and parent company balance sheets, the consolidated cash flow statement, the consolidated statement of recognised income and expense and the related notes. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors’ Remuneration Report that is described as having been audited. Respective responsibilities of directors and auditors The directors’ responsibilities for preparing the Annual Report and the group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs), as adopted by the European Union, and for preparing the parent company financial statements and in the Directors’ Remuneration Report accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the financial statements and the part of the Directors’ Remuneration Report to be audited in accordance with relevant legal and and International Standards on Auditing (UK and Ireland). requirements regulatory We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and whether, in addition, the group financial statements in have properly accordance with Article 4 of the IAS Regulation. Additionally, we report to you whether the information given in the Directors’ Report is consistent with the financial statements. In addition, we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and prepared been explanations we require for our audit, or if information specified by law regarding directors’ other transactions is not disclosed. remuneration and reflects the Corporate We review whether Governance Statement the company’s compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. The other We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. information comprises only the Directors’ Report, the Review of Principal Risks and Uncertainties, the Chairman’s Statement, the Business and Financial Review, the unaudited part of the Directors’ Remuneration Report, Corporate Social Responsibility and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Our report has been prepared pursuant to the requirements of the Companies Act 1985 and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of the Companies Act 1985 or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’ Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group’s and company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so the information and as to obtain all considered explanations which we necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors’ Remuneration Report to be audited. Opinion In our opinion: the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group’s affairs as at 31st March 2008 and of its profit for the year then ended; the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; parent company the financial statements give a true and fair view, in accordance with United Kingdom Generally Accounting Accepted Practice, of the state of the parent company’s affairs as at 31st March 2008; parent company financial the statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985; and the information given in the Directors’ Report is consistent with the financial statements. BDO Stoy Hayward LLP Chartered Accountants and Registered Auditors Birmingham 25th June 2008 16 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) 15020CASTINGS:Castings AR06 12301 15/7/08 12:50 Page 17 C o n s o l i d a t e d I n c o m e S t a t e m e n t for the year ended 31st March 2008 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit from operations Finance income Profit before income tax Income tax expense Profit for the year attributable to equity holders of the parent company Earnings per share Basic and diluted Notes to the accounts are on pages 21 to 33. Notes 2 3 6 7 17 9 2008 £000 97,372 (71,653) 25,719 (1,369) (9,100) 15,250 1,414 16,664 (4,668) 11,996 2007 £000 86,230 (63,701) 22,529 (1,293) (9,676) 11,560 1,497 13,057 (3,647) 9,410 27.49p 21.57p 8 A n n u a l R e p o r t 2 0 0 8 17 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 18 C o n s o l i d a t e d B a l a n c e S h e e t 31st March 2008 ASSETS Non-current assets Property, plant and equipment Financial assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets LIABILITIES Current liabilities Trade and other payables Current tax liabilities Non-current liabilities Retirement benefit obligations Deferred tax liabilities Total liabilities Net assets Equity attributable to equity holders of the parent company Share capital Share premium account Other reserves Retained earnings Total equity Notes 10 11 12 13 14 5 15 16 17 17 17 2008 £000 38,772 736 39,508 7,054 22,588 31,494 61,136 100,644 18,589 1,816 20,405 — 2,382 2,382 22,787 77,857 4,363 874 13 72,607 77,857 2007 £000 35,495 823 36,318 6,318 21,784 25,452 53,554 89,872 16,212 883 17,095 — 2,141 2,141 19,236 70,636 4,363 874 13 65,386 70,636 The accounts on pages 17 to 33 were approved and authorised for issue by the board of directors on 25th June 2008, and were signed on its behalf by: B. J. Cooke J. C. Roby Chairman Finance Director Notes to the accounts are on pages 21 to 33. 18 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 19 C o n s o l i d a t e d C a s h F l o w S t a t e m e n t for the year ended 31st March 2008 Cash flows from operating activities Cash generated from operations Interest received Tax paid Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of financial assets Proceeds from disposal of property, plant and equipment Proceeds from disposal of financial assets Net cash used in investing activities Cash flow from financing activities Dividends paid to shareholders Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year (see below) Cash and cash equivalents at end of year (see below) Cash and cash equivalents: Short-term deposits Cash available on demand Notes 19 19 This statement should be read in conjunction with the reconciliation on page 20. Notes to the accounts are on pages 21 to 33. 2008 £000 21,440 1,414 (3,462) 19,392 (9,354) — 214 — (9,140) (4,210) (4,210) 6,042 25,452 31,494 £000 30,999 495 31,494 2007 £000 12,582 1,497 (2,858) 11,221 (9,637) (47) 45 220 (9,419) (4,036) (4,036) (2,234) 27,686 25,452 £000 24,923 529 25,452 8 A n n u a l R e p o r t 2 0 0 8 19 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 20 C o n s o l i d a t e d S t a t e m e n t o f R e c o g n i s e d I n c o m e a n d E x p e n s e for the year ended 31st March 2008 Profit for the year Change in fair value of available for sale financial assets Actuarial losses on defined benefit pension schemes Tax effect of gains and losses recognised directly in equity Total recognised income for the year Notes 5 15 Year to Year to 31st March 20031st March 2008 £000 11,996 (87) (510) 32 11,431 2007 £000 9,410 (143) (2,500) 780 7,547 S u p p l e m e n t a r y S t a t e m e n t Reconciliation of profit before income tax to net cash inflow from operating activities 2005 Notes Profit before income tax Depreciation (net of profit on sale of property, plant and equipment) 10 Interest received Excess of employer pension contributions over income statement charge Increase in inventories Increase in receivables Increase in payables Net cash inflow from operating activities Notes to the accounts are on pages 21 to 33. Year to Year to 31st March 20031st March 2008 £000 16,664 5,863 (1,414) (510) (736) (804) 2,377 21,440 2007 £000 13,057 6,663 (1,497) (4,413) (1,042) (1,335) 1,149 12,582 20 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 21 N o t e s t o t h e A c c o u n t s New standards effective in 2008 adopted by the group 7, Financial instruments: IFRS disclosures and a complementary amendment to IAS 1, Presentation of Financial Statements — capital disclosures (effective for accounting periods beginning on after 1st January 2007). IFRS 7 introduces new requirements aimed at improving the disclosure of information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk. Where those risks are deemed to be material requires to the group it disclosures based on the information used by key management. It replaces the disclosure IAS 32 requirements of ‘Financial Instruments: disclosure and presentation’. It is applicable to all entities that report under IFRS. the about The amendment to IAS 1 introduces disclosures and management of an entity’s capital. The group has applied IFRS 7 and the amendment to IAS 1 to the accounts for the period beginning on 1st April 2007. level Basis of accounting all issued by The financial information presented in these accounts has been prepared on the basis of International Financial Reporting Standards (‘IFRS’), including International Accounting Standards (‘IAS’) the and interpretations International Accounting Standards Board (‘IASB’) and its committees, and as interpreted by any regulatory bodies applicable to the group published by 31st March 2008 and endorsed by the EU. These are subject to ongoing amendment by the IASB and subsequent endorsement European Commission and are therefore subject to possible change. Further standards and interpretations may also be issued that will be applicable for financial years beginning on or after 1st April 2008 or that are applicable to later accounting periods but may be adopted early. the by of The preparation financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The primary statements within the information contained in this financial have been presented in document accordance with IAS 1, ‘Presentation of Financial Statements’. The accounts are prepared under the historical cost convention, except where adjusted for revaluations of certain assets, and in accordance with applicable Accounting Standards and those parts of the Companies Act 1985 applicable to IFRS. A companies reporting under summary of the principal group IFRS accounting policies is set out below. Basis of consolidation The consolidated income statement and balance sheet include the accounts of the parent company and its subsidiaries made up to the end of the financial year. These subsidiaries include William Lee Limited and CNC Speedwell Limited, both of which are 100% owned and are based in the UK. Business combinations and goodwill tangible Shares issued as consideration for the acquisition of companies have a fair value attributed to them, which is normally their market value at the date of acquisition, Net are assets consolidated at a fair value to the group at the date of acquisition. All changes to these assets and liabilities, and the resulting gains and losses that arise after the group has gained control of the subsidiary, are credited and charged to the post-acquisition income statement. acquired Under UK GAAP, goodwill arising on acquisitions prior to 1998 was written off to reserves. There have been no acquisitions since 1998. Following the exemption in IFRS 1 this treatment has continued to be followed. Revenue recognition Revenue, which excludes value added tax and intra-group sales, represents the invoiced value of goods and services sold to customers. Appropriate provisions for returns are deducted from revenue as appropriate. The group has no barter transactions. allowances other and Under IAS 18 ‘Revenue’ the group’s revenue has been recognised when goods have been dispatched. Post-retirement benefits are the gains charged type. Under Two of the group’s pension plans are of a IAS 19 defined benefit ‘Employee Benefits’ employer’s portion of the current service costs and curtailment to operating profit for these plans, with the interest cost net of the expected return on assets in the plans also being credited to operating profit. Actuarial gains and losses are recognised directly in equity, in the statement of recognised income and expenditure, and the balance sheet reflects the schemes’ surplus or deficit at the balance sheet date. A full valuation is carried the tri-annually projected unit credit method. using out Payments to the defined contribution scheme are charged to the income statement as they become payable. Property, plant and equipment Under IAS 16 ‘Property, Plant and Equipment’ assets are held at cost less accumulated depreciation. Depreciation is provided on property, plant and equipment, other than freehold land and assets in the course of construction, at rates calculated to write off the cost of each asset on a straight-line basis over its expected useful life as follows: i. ii Freehold buildings over 50 years. Leasehold land and buildings over 50 the lease, the period of years or whichever is less. iii Plant and equipment over a period of 3 to 14 years. The group annually reviews the assessment of residual values and useful lives in accordance with IAS 16. 8 A n n u a l R e p o r t 2 0 0 8 21 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 22 N o t e s t o t h e A c c o u n t s continued Inventories Loans and receivables In accordance with IAS 2 ‘Inventories’ the group’s inventories are valued at the lower of cost on a first in, first out basis and net realisable value. Cost includes a proportion of production overheads based on normal levels of activity. Provision is made for obsolete and slow- moving items. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits at call with banks and other liquid investments. short-term highly Foreign currencies Assets and liabilities in foreign currencies the spot are translated at rates of the balance sheet exchange ruling at date. Exchange differences are dealt with through the income statement. Financial Instruments a) Financial assets The group’s financial assets relate to loans and receivables and available- for-sale assets. Although the group occasionally uses derivative financial instruments in economic hedges of currency rate risk, it does not hedge account for these transactions and the amounts are not material. The group has not classified any of its financial assets as held to maturity. Available-for-sale assets as assets financial available-for-sale Non-derivative not included in the above category are and classified comprise the group’s strategic investments in entities not qualifying as subsidiaries. They are carried at fair value with changes in fair value recognised directly in a separate component of equity. Fair value is determined with reference to published quoted prices in an active market. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables) and deposits held at banks and building societies, but may also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. that The effect of discounting on these financial instruments is not considered to be material. the that Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part counterparty or default or of significant delay in payment) the group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such provisions are recorded in a separate allowance account with the recognised within administrative expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. being loss b) Financial liabilities The group classifies its financial liabilities into liabilities measured at amortised cost. Although the group uses derivative financial instruments in economic hedges of currency risk, it does not hedge account for these transactions, and the amounts are not material. indicated, Unless otherwise the carrying amounts of the group’s financial liabilities are a reasonable approximation of their fair values. Financial liabilities measured at amortised cost Financial liabilities include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Fair value is calculated by discounting estimated future cash flows using a market rate of interest. c) Share capital The group’s ordinary shares are classified as equity instruments. The group is not subject to any externally imposed capital requirements. Share capital includes the nominal value of the shares and any share premium attaching to the shares. Current and deferred tax Deferred tax is provided using the liability method. Deferred income tax assets are recognised to the extent is probable that future taxable profit will be available against which the temporary differences can be utilised. that it In the holding company and its subsidiaries the liability is assessed with reference to the individual company. On consolidation, the liability is assessed with reference to the group as a whole. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the temporary differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Current tax is provided for on the taxable profits of each company in the group, using current tax rates. Dividends The final dividend is only recognised at the point it is declared and approved by the shareholders at the Annual General Meeting. Interim dividends are recognised on payment. 22 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 23 Standards, intepretations and amendments to published standards that are not yet effective. The following standards have not been adopted in the financial statements. In each case the potential impact has been noted. IFRS 8 Operating Segments (effective for periods beginning on 1st January 2009 not endorsed by the EU) — disclosure impact only. 12 concession Service IFRIC arrangements for periods (effective beginning on 1st January 2008) — no impact. IFRIC 14 Accounting for Pensions Surpluses. This gives guidance on when pension surpluses as calculated under IAS 19 should be capped (effective for periods beginning on or after 1st January 2008). The group intends to comply when it is applicable. Amendments to IAS 1 Presentation of financial Revised Presentation (not endorsed by EU) — disclosue impact only. statements: A Amendments to IAS 27 Consolidated and separate financial statements (not endorsed by EU) — disclosure impact only. The is considered applicable to the group: following standard not Useful lives of property, plant and equipment Property, plant and equipment are depreciated over their useful lives based on management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to significant result estimates variations in the carrying value and amounts charged to the consolidated income statement in specific periods. More details including carrying values are included in note 10. can in Inventory The company reviews the net realisable value of, and demand for, its inventory on a regular basis to provide assurance that the recorded inventory is stated at the lower of cost and net realisable value. Factors that could impact estimated demand and selling prices include customer order scheduling, competitor actions, supplier prices and economic trends. Pension assumptions benefit pension The costs, assets and liabilities of the schemes defined operated by the group are determined using methods relying on actuarial estimates and assumptions. Details of the key assumptions are set out in note 5. IFRIC 13 Customer Loyalty Programmes Revised IFRS 3 Business Combinations Critical accounting estimates and judgements the The group makes certain estimates and judgements future. regarding Estimates and judgements are continually evaluated based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and judgements. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 8 A n n u a l R e p o r t 2 0 0 8 23 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 24 N o t e s t o t h e A c c o u n t s continued 2 Segment information The geographical analysis of revenues by destination for the year is as follows: United Kingdom Sweden Rest of Europe North and South America Other 2008 £000 33,164 19,730 42,710 1,768 — 97,372 2007 £000 30,321 17,145 37,377 1,375 12 86,230 All turnover arises in the United Kingdom from the group’s continuing principal activity, which the directors believe to be the only class of business carried out by the group. As a result it is not practical to provide segmental information. 3 Profit from operations This has been arrived at after charging/(crediting): Staff costs (note 4) Depreciation of property, plant and equipment Operating lease expense — Plant and machinery Fees payable to the company’s auditor for the audit of the company’s annual accounts Fees payable to the company’s auditor for other services: — The audit of the company’s subsidiaries — Tax services Profit on disposal of fixed assets 4 Employee information Average number of employees during the year was: Production Management and administration Staff costs (including directors) comprise: Wages and salaries Short-term non-monetary benefits Defined contribution pension costs Defined benefit pension cost (note 5) Employer’s national insurance contributions and similar taxes 2008 £000 33,126 5,913 328 22 24 11 (50) 2008 938 88 1,026 2008 £000 28,970 323 946 27 2,860 33,126 2007 £000 31,381 6,663 216 20 21 8 (62) 2007 900 90 990 2007 £000 27,302 410 589 413 2,667 31,381 Disclosures on directors emoluments are given in the Remuneration Report on page 13. 5 Pensions The group operates two pension schemes providing benefits based on final pensionable pay. These schemes are closed to new entrants. The assets are independent of the finances of the group and are administered by Trustees. The latest actuarial valuation was made as at 6th April 2005 using the attained age method. It assumed that the rate of return on investments was 6.25% per annum for pre-retirement and 4.75% per annum for post-retirement, and the rate of increase in wages and salaries was 4.4% per annum and price inflation was 2.9%. The next actuarial valuation was due as at 6th April 2008. In addition, the group operates a money purchase pension scheme whereby contributions are invested through individual accounts under an insurance policy administered by Trustees. Composition of the scheme The group operates defined benefit schemes (in addition to a defined contribution scheme) in the UK. Full actuarial valuations of the defined benefit schemes were carried out at 6th April 2005 and updated to 31st March 2008 using the projected unit method by a qualified independent actuary. The service cost has been calculated using the projected unit method. The major assumptions used by the actuary were (in nominal terms): Rate of increase in salaries Rate of increase of pensions in payment Discount rate Inflation assumption 2005 3.9% 2.9% 5.4% 2.9% 2008 4.6% 3.6% 5.9% 3.6% 2007 4.2% 3.2% 5.4% 3.2% 24 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 25 5 Pension disclosures under IAS 19 Change in benefit obligation Benefit obligation at beginning of year Current service cost Interest cost Plan participants’ contributions Actuarial gain Benefits paid Benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Expected return on plan assets Actuarial loss Employer contribution Member contributions Benefits paid Fair value of plan assets at end of year Funded status Effect of paragraph 58(b) limit Net amount recognised in the balance sheet Components of pension cost Current service cost Interest cost Expected return on plan assets Total pension cost recognised in the income statement (note 4) Total pension cost recognised in the statement of recognised income and expense Plan assets The weighted average assets allocations at the year end were as follows: Assets category Equities Bonds Real estate Other 2008 £000 38,774 540 2,100 479 (2,033) (817) 39,043 43,122 2,613 (4,781) 1,213 479 (817) 41,829 2,786 (2,786) — Year to 31st March 2008 £000 540 2,100 (2,613) 27 (2,748) 2007 £000 38,872 539 1,939 387 (1,875) (1,088) 38,774 36,959 2,065 (27) 4,826 387 (1,088) 43,122 4,348 (4,348) — Year to 31st March 2007 £000 539 1,939 (2,065) 413 1,848 Plan assets at 31st March 2008 £000 Plan assets at 31st March 2007 £000 69% 23% 4% 4% 100% 71% 22% 4% 3% 100% To develop the expected long-term rate of return on assets assumption, the company considered the current level of expected returns on risk-free investments (primarily government bonds), the historical level of risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. This resulted in the selection of the 6.0% (2007 – 5.5%) assumption. The projected pension cost for the year ending 31st March 2009 is £290,000. 8 A n n u a l R e p o r t 2 0 0 8 25 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 26 N o t e s t o t h e A c c o u n t s continued 5 Pension disclosures under IAS 19 continued Actuarial return on plan assets Weighted average assumptions used to determine benefit obligations: Discount rate Rate of compensation increase Weighted average assumptions used to determine net pension cost: Discount rate Expected long-term return on plan assets Rate of compensation increase Weighted average life expectancy for mortality tables* used to determine benefit obligations at: Scheme member age 65 (current life expectancy) Scheme member age 45 (life expectancy at age 65) * Mortality tables are PA92 ,c (YOB) +1 for the Staff Scheme and PA92 (YOB) +1 for the Shopfloor Scheme. Male Staff/ Shopfloor 21.1/19.4 22.2/20.4 2008 £000 (2,168) 5.9% 4.6% 5.4% 6.0% 4.2% 2007 £000 2,038 5.4% 4.2% 5.0% 5.5% 3.9% 2008 2007 Female Staff/ Shopfloor 24.0/22.2 25.0/23.1 Male Staff/ Shopfloor 21.1/19.4 22.2/20.4 Female Staff/ Shopfloor 24.0/22.2 25.0/23.1 History of experience gains and losses Financial year ended in: Difference between expected and actual return on scheme assets: amount percentage of scheme assets Experience gains and losses on scheme liabilities: amount percentage of scheme assets Total gains and losses: amount percentage of scheme assets 6 Finance income Interest on short-term deposits Income from listed investments Other 7 Income tax Corporation tax based on a rate of 30% (2007 – 30%) UK Corporation tax Current tax on profits for the year Adjustments to tax charge in respect of prior periods Effect of changes in tax rate Deferred tax Current year origination and reversal of temporary differences Prior year deferred tax movement Taxation on profit on ordinary activities Profit on ordinary activities before tax 2008 £000 2007 £000 2006 £000 2005 £000 (4,781) 11.0% (27) 0% 4,661 13.0% 1,369 5.0% (2,033) 5.0% (1,875) (5.0%) 2,674 7.0% 1,266 4.0% (2,748) 7.0% 1,848 5.0% 1,987 5.0% 103 0% 2008 £000 1,364 42 8 1,414 2008 £000 4,621 (226) (164) 4,231 230 207 4,668 16,664 4,999 17 (12) (226) 207 (164) (153) 4,668 28.01 2007 £000 1,322 30 145 1,497 2007 £000 2,225 (292) — . 1,933 1,654 60 3,647 13,057 3,917 13 (51) (292) 60 — — 3,647 27.93 Profit on ordinary activities at the standard rate of corporation tax in the UK of 30% (2007 – 30%) Effect of: Expenses not deductible for tax purposes Franked investment income Adjustment to tax charge in respect of prior periods Adjustment to deferred tax charge in respect of prior periods Effect of changes in tax rate Pension adjustments taken to equity Total tax charge for period Effective rate of tax (%) 26 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 27 8 Dividends Final paid of 6.94p per share for the year ended 31st March 2007 (2006 – 6.67p) Interim paid of 2.71p per share (2007 – 2.58p) 2008 £000 3,028 1,182 4,210 2007 £000 2,910 1,126 4,036 The directors are proposing a final dividend of 7.29 pence (2007 – 6.94 pence) per share totalling £3,181,000 (2007 – £3,028,000). This dividend has not been accrued at the balance sheet date. 9 Earnings per share Earnings per share is calculated on the profit on ordinary activities after taxation of £11,996,000 (2007 – £9,410,000) and on the weighted average number of shares in issue at the end of the year of 43,632,068 (2007 – 43,632,068). There are no share options, hence the diluted earnings per share is the same as above. 10 Property, plant and equipment Cost At 1st April 2007 Additions during year Assets in course of construction Disposals At 31st March 2008 Depreciation and amounts written off At 1st April 2007 Charge for year Disposals and adjustments At 31st March 2008 Net book values At 31st March 2008 At 31st March 2007 Cost At 1st April 2006 Additions during year Disposals At 31st March 2007 Depreciation and amounts written off At 1st April 2006 Charge for year Disposals and adjustments At 31st March 2007 Net book values At 31st March 2007 At 31st March 2006 Land and buildings £000 Plant and other equipment £000 12,516 1,540 — — 14,056 2,018 256 — 2,274 11,782 10,498 10,955 1,561 — 12,516 1,712 306 — 2,018 10,498 9,243 68,175 4,111 3,703 (1,874) 74,115 43,178 5,657 (1,710) 47,125 26,990 24,997 61,237 8,076 (1,138) 68,175 37,914 6,357 (1,093) 43,178 24,997 23,323 Total £000 80,691 5,651 3,703 (1,874) 88,171 45,196 5,913 (1,710) 49,399 38,772 35,495 72,192 9,637 (1,138) 80,691 39,626 6,663 (1,093) 45,196 35,495 32,566 The net book value of group land and buildings includes £1,625,000 (2007 – £1,625,000) for land which is not depreciated. Land and buildings include £359,000 for property held on long leases (2007 – £359,000). 8 A n n u a l R e p o r t 2 0 0 8 27 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 28 N o t e s t o t h e A c c o u n t s continued 11 Financial assets Available for sale assets At 1st April 2007 Additions Disposals Net gains/(losses) transferred to equity 2008 £000 736 2008 £000 823 — — (87) 736 2007 £000 823 2007 £000 1,139 47 (220) (143) 823 Available-for-sale financial assets are UK quoted equity securities and denominated in sterling. The fair value of the securities is based on published market prices. 12 Inventories Raw materials Work in progress Finished goods 13 Trade and other receivables Due within one year: Trade receivables Other receivables Prepayments 14 Trade and other payables Current trade and other payables: Trade payables Social security Other payables Accruals and deferred income 1,418 2,140 5,45 1,418 2,140 5,45 50 9 50 2008 £000 1,861 2,727 2,466 7,054 2008 £000 18,648 2,273 1,667 9 22,588 2008 £000 10,607 1,415 349 6,218 1,418 50 2,140 5,45 9 18,589 2007 £000 1,458 2,672 2,188 6,318 2007 £000 18,368 1,778 1,638 21,784 2007 £000 8,004 1,682 326 6,200 16,212 28 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 29 15 Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 28% (2007 – 30%). The movement on the deferred tax account is shown below: Deferred tax — net At 1st April 2007 Taken to equity Charge At 31st March 2008 1,418 5,45 The movement in deferred tax assets and liabilities during the year are shown below: Deferred tax liabilities At 1st April 2007 Charged to income statement Charged to statement of recognised income and expense At 31st March 2008 The deferred tax charged to equity during the year is as follows: Accelerated tax depreciation £000 3,107 (267) — 2,840 Tax on actuarial gains Tax on change in fair value of available for sale financial assets Tax on items taken directly to reserves 16 Share capital Authorised 50,000,000 10p ordinary shares Allotted and fully paid 43,632,068 10p ordinary shares 1,418 2,140 5,45 1,418 2,140 50 9 50 9 50 2008 £000 2,141 (32) 273 2,382 Other £000 (966) 540 (32) (458) 2008 £000 — (32) (32) 2008 £000 5,000 4,363 2007 £000 1,207 (780) 1,714 2,141 Total £000 2,141 273 (32) 2,382 2007 £000 (737) (43) (780) 2007 £000 5,000 4,363 As described in the share capital accounting policy the group considers its capital to comprise its ordinary share capital, share premium and accumulated retained earnings. In managing its capital, the group’s primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders through a combination of capital growth and distributions. Each share entitles the holder to receive the amount of dividends per share declared by the company and a vote at any meetings of the company. In order to achieve this objective, the group monitors its gearing to balance risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy, new share issues, or the reduction of debt, the group considers not only its short-term position but also its long-term operational and strategic objectives. 8 A n n u a l R e p o r t 2 0 0 8 29 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 30 N o t e s t o t h e A c c o u n t s continued 17 Statement of changes in shareholders’ equity At 1st April 2007 Profit retained Dividends Changes in fair value of available for sale financial assets Actuarial gains/(losses) on pension schemes Tax on items taken to reserves At 31st March 2008 At 1st April 2006 Profit retained Dividends Changes in fair value of available for sale financial assets Actuarial gains on pension schemes Tax on items taken to reserves At 31st March 2007 Share capital (a) £000 4,363 — — Share Capital redemption reserve (c) £000 13 — — premium (b) £000 874 — — Retained earnings (d) £000 65,386 11,996 (4,210) — — — 4,363 4,363 — — — — — 4,363 — — — 874 874 — — — — — 874 — — — 13 13 — — — — — 13 (87) (510) 32 72,607 61,875 9,410 (4,036) (143) (2,500) 780 65,386 a) Share capital — The nominal value of allotted and fully paid up ordinary share capital in issue. b) Share premium — Amount subscribed for share capital in excess of nominal value. c) Capital redemption reserve — Amounts transferred from share capital on redemption of issued shares. d) Retained earnings — Cumulative net gains and losses recognised in the consolidated income statement. 18 Commitments Capital commitments contracted for by the group but not provided for in the accounts 2,140 2008 £000 10,380 Total equity £000 70,636 11,996 (4,210) (87) (510) 32 77,857 67,125 9,410 (4,036) (143) (2,500) 780 70,636 2007 £000 3,283 30 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 31 19 Financial instrument risk exposure and management In common with all other businesses, the group is exposed to risks that arise from its use of financial instruments. This note describes the group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. Principal financial instruments The principal financial instruments used by the group, from which financial instrument risk arises, are as follows: trade receivables cash at bank trade and other payables General objectives, policies and processes The board has overall responsibility for the determination of the group’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the group’s finance function. The board receives monthly reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the board is to set policies that seek to reduce risk as far as possible without unduly affecting the group’s competitiveness and flexibility. Further details regarding these policies are set out below: Categories of financial assets and financial liabilities Current financial assets Trade and other receivables Cash and cash equivalents Total current financial assets Current financial liabilities Trade and other payables Total current financial liabilities Loans and receivables 2007 £000 21,784 25,452 47,236 2008 £000 22,588 31,494 54,082 Financial liabilities measured at amortised cost 2008 £000 18,589 20,405 2007 £000 16,212 17,095 50 9 50 1,418 2,140 5,45 1,418 2,140 Credit risk Credit risk arises principally from the group’s trade receivables. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. Trade receivables Credit risk is managed locally by the management of each subsidiary. Prior to accepting new customers, credit checks are obtained from a reputable external source (for example Creditsafe and trade references). Based on this information, credit limits and payment terms are established, although for some large customers and contracts, credit risk is not considered to be high risk, and credit limits can sometimes be exceeded. These exceeded accounts are closely monitored and if there is a concern over recoverability accounts are put on stop and no further goods will be sold before receiving payment. Pro-forma invoicing is sometimes used for new customers, or customers with a poor payment history until creditworthiness can be proven or re- established. Management teams at each subsidiary receive regular ageing reports, and these are used to chase relevant customers for outstanding balances. No major renegotiation of terms has taken place during the year. There are no customers with restricted accounts. 8 A n n u a l R e p o r t 2 0 0 8 31 15020 25/06/2008 Proof 6 (cid:1) (cid:1) (cid:1) 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 32 N o t e s t o t h e A c c o u n t s continued 19 Financial instrument risk exposure and management continued The carrying value of the group’s trade and other receivables are denominated in the following currencies: Sterling Euro US$ 2008 £000 13,894 4,724 30 18,648 1,418 2,140 5,45 50 9 2007 £000 13,151 5,217 — 18,368 At 31st March 2008 trade receivables of £1,957,000 (2007 – £1,751,000) were past due but not impaired. They relate to customers with no default history. The ageing of these receivables is as follows: 30–60 days 60–90 days 90+ days 1,418 2,140 5,45 50 9 2008 £000 1,768 119 70 1,957 2007 £000 1,665 84 2 1,751 At 31st March 2008 trade receivables of £312,000 (2007 – £580,000) were past due and impaired. The amount of the provision at 31st March 2008 was £563,000 (2007 – £634,000). The ageing of these receivables is as follows: 30–60 days 60–90 days 90+ days 1,418 2,140 5,45 50 9 2008 £000 76 28 208 312 2007 £000 235 137 208 580 The group records impairment losses on its trade receivables separately from gross receivable. The movements on this allowance account during the year are summarised below: Opening balance (Decrease)/increase in provisions Written off against provisions Recovered amounts reversed Closing balance 1,418 2,140 2,140 5,45 50 9 2008 £000 634 (71) — — 563 2007 £000 331 446 (143) — 634 Impairment gains on trade receivables of £71,000 (2007 – losses £446,000) were recognised in administration expenses. Liquidity risk Liquidity risk arises from the group’s management of working capital. It is the risk that the group will encounter difficulty in meeting its financial obligations as they fall due. The group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of at least 90 days. The cash position is continuously monitored to ensure that there is sufficient cash and that the optimum interest rate is obtained. At the balance sheet date, the group has unused bank overdraft and foreign exchange facilities amounting to £10,000,000 (2007 – £10,000,000) which are reviewed on an annual basis. Based on these facilities, the group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances. Market risk Market risk arises from the group’s use of interest bearing and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk). As at 31st March 2008 trade receivables of £16,379,000 (2007 – £16,037,000) were not past due. Against these balances impairment provisions of £300,000 (2007 – £320,000) were made. 32 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 33 19 Financial instruments continued The group balance sheet is exposed to market risk in two main ways. Firstly, the group holds some strategic equity investments in other companies where these complement the group’s operations (see note 11). Furthermore, where the group has generated a significant amount of surplus cash it will invest in high quality commercial paper instruments if liquidity risk is not unduly compromised. Although the directors, on investing in such instruments never intend to dispose of commercial paper investments before maturity, they cannot guarantee this will never happen and therefore do not classify these instruments as “held to maturity” in the consolidated balance sheet. Although variations in market value are reflected in the group balance sheet, over the life of the instruments these variations have a neutral impact on the balance sheet. The directors believe that the exposure to market price risk from these activities is acceptable in the group’s circumstances. Interest rate and currency risk The group does not have any financial liabilities subject to interest rate risk at the balance sheet date (2007 – £nil). Foreign exchange risk arises when individual group operations enter into transactions denominated in a currency other than their functional currency. It is the group’s policy to convert all non-functional currency to sterling at the first opportunity after allowing for similar functional currency outlays. It does not consider the use of hedging facilities would significantly minimise this risk. The group had no outstanding foreign currency forward at 31st March 2008 (2007 – £nil). The currency and interest profile of the group’s financial assets and liabilities are as follows: Sterling $US Euro Sterling $US Euro Sterling Euro Floating rate assets 2008 £000 299 137 59 Fixed rate assets 2008 £000 30,728 — 271 495 Floating rate assets 2007 £000 430 1 98 529 30,999 Fixed rate assets 2007 £000 24,741 — 182 24,923 Interest free assets 2008 £000 13,894 30 4,724 18,648 Interest free assets 2007 £000 13,151 — 5,217 18,368 Interest free liabilities 2008 £000 10,170 437 10,607 Total £000 44,921 167 5,054 50,142 Total £000 38,322 1 5,497 43,820 Interest free liabilities 2007 £000 7,669 335 8,004 Fixed rate assets attracted interest rates between 5.48% to 6.89% (2007 – 5.0% to 5.56%) on sterling deposits and interest rates of between 6.00% to 6.50% (2007 – 3.39%) on euro deposits. Floating rate assets consisted of overnight cash at bank at nominal interest rates. Cash and cash equivalents Cash and cash equivalents generally comprise short-term deposits that have fixed interest rates and maturity periods within six months. The effect of a +50/(50) increasing/(decreasing) profit before tax by £147,000/(£167,000) (2007 – £129,000/(£126,000)). increase/(decrease) in basis points with all other variables held constant would have the effect of The group believes that possible movements on exchange rates of +/–5% could be possible, the effect of which is that profit before tax would increase/(decrease) by (£238,000)/£264,000 (2007 – (£251,000)/£238,000. Fair value Unless otherwise indicated, the carrying amounts of the group’s financial instruments are a reasonable approximation of their fair values. 8 A n n u a l R e p o r t 2 0 0 8 33 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 34 F i v e Y e a r R e v i e w — u n a u d i t e d For the years ended 31st March 2008 IFRS £000 2007 IFRS £000 2006 IFRS £000 2005 IFRS £000 2004 UK GAAP £000 Trading results Revenue Profit before tax Profit after tax Dividends Balance sheet summary Equity Share capital Reserves Total equity Assets 97,372 86,230 76,696 69,037 61,176 16,664 11,996 4,210 13,057 12,701 9,410 4,036 8,755 3,875 9,632 6,792 3,704 8,693 6,079 3,678 4,363 73,494 77,857 4,363 66,273 70,636 4,363 62,762 67,125 4,363 56,368 60,731 4,363 54,772 59,135 Property, plant and equipment 38,772 35,495 32,566 33,163 31,043 Financial assets Deferred tax asset Current assets Total liabilities 736 — 39,508 61,136 823 — 36,318 53,554 1,139 574 34,279 53,411 984 1,877 36,024 47,314 704 — 31,747 43,617 (22,787) (19,236) (20,565) (22,607) (16,229) 77,857 70,636 67,125 60,731 59,135 Dividends and earnings Pence per share paid and proposed Number of times covered 10.0 2.7 9.52 2.3 9.20 2.3 8.79 1.8 8.43 1.6 Earnings per share — basic and diluted 27.49p 21.57p 20.07p 15.57p 13.93p The main changes from UK GAAP to IFRS relate to pensions, financial assets and taxation. 34 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 35 P a r e n t C o m p a n y A c c o u n t s U n d e r U K G A A P As noted on page 15, the company has elected to prepare its financial statements under UK GAAP P a r e n t C o m p a n y B a l a n c e S h e e t 31st March 2008 Fixed assets Tangible assets Investments Current assets Stocks Debtors Short-term deposits Cash at bank and in hand Creditors — amounts falling due within one year Net current assets Total assets less current liabilities Provisions for liabilities Capital and reserves Called up share capital Share premium Capital redemption reserve Profit and loss account Shareholders’ funds 2005 Notes 4 5 6 7 8 9 10 11 11 11 2008 £000 12,848 6,017 4,530 20,218 20,588 413 45,749 14,446 31,303 50,168 (483) 49,685 4,363 874 13 44,435 49,685 2007 £000 13,370 6,104 3,780 19,589 15,892 428 39,689 12,524 27,165 46,639 (97) 46,542 4,363 874 13 41,292 46,542 The parent company accounts on pages 35 to 39 were approved and authorised for issue by the board of directors on 25th June 2008, and were signed on its behalf by: B. J. Cooke J. C. Roby Chairman Finance Director Notes to the accounts are on pages 36 to 39. 8 A n n u a l R e p o r t 2 0 0 8 35 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 36 N o t e s t o t h e P a r e n t C o m p a n y A c c o u n t s The Directors’ report is on pages 5 and 6 of the Annual Report and Accounts 1 Accounting policies Basis of accounting The accounts are prepared under the historical cost convention except for revaluation of certain financial instruments as required by FRS 26 and in accordance with applicable UK Accounting Standards and the Companies Act 1985. Depreciation Depreciation is calculated on the straight- line basis to write off the initial cost of the following rates fixed assets at per annum: Buildings Plant and other equipment 2% 7% to 33% Freehold land is not depreciated. Pension costs The cost of providing retirement pensions and related benefits is charged to the profit and loss account over the periods benefiting from the employees’ services in accordance with FRS 17. In the company, the defined benefit schemes are treated as multi-employee schemes. Turnover (less sales Turnover is the aggregate of the invoiced and values of returns external allowances) to charged customers of the company, excluding value added tax. Turnover is recognised when goods are dispatched. Stocks Stock and work in progress have been consistently valued at the lower of cost and net realisable value. The valuation of work in progress and finished stocks includes appropriate manufacturing and works overheads computed on the basis of normal activity. Foreign currencies Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction, all differences being taken to the profit and loss account. Deferred tax Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the company’s taxable profits and its results as stated in the accounts. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis. Investments Listed investments are accounted for at fair value in accordance with FRS 26 ‘Financial Instruments: Measurement’. Investments in subsidiaries are held at impairment cost annually. and reviewed for Financial Instruments a) Financial assets uses occasionally The company’s financial assets relate to loans and receivables. Although the group derivative financial instruments in economic hedges of currency rate risk, it does not hedge account for these transactions and the amounts are not material. The group has not classified any of its financial assets as held to maturity. indicated, Unless otherwise the carrying amounts of the groups financial assets are a reasonable approximation of their fair values. Loans and receivables These assets are non-derivative financial fixed or determinable assets with payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables) and deposits held at banks and building societies, but may also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus are directly transaction costs attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. that The effect of discounting on these financial instruments is not considered to be material. the that Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part counterparty or default or of the significant delay in payment) group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying the amount and the present value of future expected cash flows associated with the impaired receivable. For trade receivables, such provisions are recorded in a separate allowance account with the within loss administrative expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. recognised being b) Financial liabilities The group classifies its financial liabilities into liabilities measured at amortised cost. Although the group uses derivative financial instruments in economic hedges of currency risk, it does not hedge account for these transactions and the amounts are not material. indicated, Unless otherwise the carrying amounts of the group’s financial liabilities are a reasonable approximation of their fair values. Financial liabilities measured at amortised cost Financial liabilities include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Fair value is calculated discounting estimated future cash flows using a market rate of interest. c) Share capital The group’s ordinary shares are classified as equity instruments. The group is not subject to any externally imposed capital requirements. Share capital includes the nominal value of the shares and any share premium attaching to the shares. 36 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 37 2 Company profit and loss account Castings P.L.C. has taken advantage of section 230(3) of the Companies Act 1985 and has not included its own profit and loss account in these accounts. The company’s profit after tax and dividends was £3,230,000 (2007 – loss £228,000). The profit and loss account includes £22,000 (2007 – £20,000) for audit fees. 3 Dividends Final paid of 6.94p per share for the year ended 31st March 2007 (2006 – 6.67p) Interim paid of 2.71p per share (2007 – 2.58p) 2008 £000 3,028 1,182 4,210 2007 £000 2,910 1,126 4,036 The directors are proposing a final dividend of 7.29 pence (2007 – 6.94 pence) per share totalling £3,181,000 (2007 – £3,028,000). This dividend has not been accrued at the balance sheet date. 4 Fixed assets Cost At 1st April 2007 Additions during year Disposals At 31st March 2008 Depreciation and amounts written off At 1st April 2007 Charge for year Disposals and adjustments At 31st March 2008 Net book values At 31st March 2008 At 31st March 2007 Land and buildings £000 9,239 — — 9,239 1,494 160 — 1,654 7,585 7,745 Plant and other equipment £000 23,254 1,150 (1,120) 23,284 17,629 1,502 (1,110) 18,021 5,263 5,625 Total £000 32,493 1,150 (1,120) 32,523 19,123 1,662 (1,110) 19,675 12,848 13,370 The net book value of land and buildings includes £1,225,000 (2007 – £1,225,000) for land which is not depreciated. Land and buildings include £359,000 for property held on long leases (2007 – £359,000). 5 Investments Subsidiary companies At cost Listed investments at market value 2008 £000 5,281 736 6,017 2007 £000 5,281 823 6,104 The company owns 100% of the issued share capital of William Lee Limited, CNC Speedwell Limited and W.H. Booth & Co. Limited, companies which operate in the United Kingdom. William Lee Limited supplies spheroidal graphite iron castings from Dronfield, Sheffield and CNC Speedwell Limited is a machinist operation. W.H. Booth & Co. Limited does not trade and is dormant. 8 A n n u a l R e p o r t 2 0 0 8 37 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 38 N o t e s t o t h e P a r e n t C o m p a n y A c c o u n t s continued 6 Stocks Raw materials Work in progress Finished goods 7 Debtors Due within one year: Trade debtors Amounts owed by subsidiary companies Other debtors Prepayments 8 Creditors Due within one year: Trade creditors Amounts owed to subsidiary companies Corporation tax Other taxation and social security Other creditors Accruals 9 Provisions for liabilities Deferred taxation At 1st April 2007 Taxation deferred this year At 31st March 2008 Deferred tax is provided as follows: Accelerated capital allowances Other timing differences 10 Called up share capital Authorised 50,000,000 10p ordinary shares Allotted and fully paid 43,632,068 10p ordinary shares 1,418 2,140 5,45 1,418 1,418 2,140 5,45 50 9 50 50 9 1,418 50 2,140 2,140 2,140 5,45 2,140 5,45 2,140 5,45 1,418 2,140 2008 £000 710 2,317 1,503 4,530 2008 £000 14,451 2,530 2,266 971 20,218 2008 £000 5,281 3,414 949 721 205 3,876 9 14,446 2008 £000 97 386 483 885 (402) 483 2008 £000 5,000 4,363 9 9 50 2007 £000 406 1,886 1,488 3,780 2007 £000 13,596 3,348 1,769 876 19,589 2007 £000 4,277 2,782 361 758 182 4,164 12,524 2007 £000 (107) 204 97 1,006 (909) 97 2007 £000 5,000 4,363 38 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 39 11 Reserves At 1st April 2007 Profit retained Changes in fair value of investments At 31st March 2008 Share capital £000 4,363 — — 4,363 Share Capital redemption reserve £000 13 — — premium £000 874 — — Profit and loss account £000 41,292 3,230 (87) 874 13 44,435 12 Reconciliation of movements in shareholders’ funds Profit for the year Changes in fair value of investments Dividends Net addition to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 13 Employee information Average number of employees during the year was: Production Management and administration Staff costs (including directors) comprise: Wages and salaries Short-term non-monetary benefits Defined contribution pension cost Defined benefit pension cost Employer’s national insurance contributions and similar taxes 1,418 1,418 2,140 1,418 2,140 5,45 1,418 1,418 2,140 1,418 1,418 2,140 2,140 2,140 2,140 5,45 2008 £000 7,440 (87) (4,210) 3,143 46,542 49,685 2008 434 32 466 2008 £000 13,745 215 169 520 1,316 15,965 50 50 50 9 50 50 50 50 9 Total equity £000 46,542 3,230 (87) 49,685 2007 £000 3,808 (143) (4,036) (371) 46,913 46,542 2007 443 32 475 2007 £000 13,235 209 161 589 1,272 15,466 14 Pensions It is not possible to identify the company’s share of the underlying assets and liabilities in respect of the group defined benefit schemes on a consistent and reasonable basis. Contributions to the schemes by the company are based on professional and independent actuarial advice. During the year the contributions payable by the company to the funds amounted to £520,000 (2007 – £589,000). The last valuation was performed with an effective date of 6th April 2005. Further details of the schemes are contained in note 5 of the consolidated accounts of Castings P.L.C. 15 Capital commitments Authorised, but not provided in the accounts 5,45 9 2008 £000 134 2007 £000 203 8 A n n u a l R e p o r t 2 0 0 8 39 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 40 N o t i c e o f M e e t i n g Notice is hereby given that the one hundred and first Annual General Meeting of Castings P.L.C. (the “Company”) will be held at Holiday Inn, Birmingham M6, Junc. 7, Chapel Lane, Great Barr, Birmingham, West Midlands, B43 7BG, on Tuesday, 19th August 2008 at 3.30 pm for the following purposes: As ordinary business 1 To receive and adopt the directors’ report and audited accounts for the year ended 31st March 2008. 2 3 4 5 6 7 To declare a final dividend. To re-elect Mr B. J. Cooke as a director. To re-elect Mr G. B. Wainwright as a director. To re-elect Mr G. Cooper as a director. To approve the directors’ remuneration report for the year ended 31st March 2008. To reappoint BDO Stoy Hayward LLP as auditors of the Company at a fee to be agreed with the directors. To consider and, if thought fit, pass the following resolutions, of which resolution 8 will be proposed as an ordinary resolution and resolutions 9 and 10 will be proposed as special resolutions. The share capital consists of 43,632,068 ordinary shares with voting rights. As an ordinary resolution 8 THAT: (a) and the directors be and are hereby generally unconditionally authorised in accordance with Section 80 of the Companies Act 1985 to exercise all the powers of relevant the Company to allot securities (as defined in the said Section 80) provided that the aggregate nominal value of such securities exceed represents which £636,793, approximately 14.6% of the current issued the Company; capital share shall not of (b) the foregoing authority shall expire on 18th August 2013 save that the Company may before such expiry make an offer or enter into an agreement which would or might require relevant securities to be allotted after the expiry of such period and the directors may allot relevant securities in pursuance of any such offer or agreement as if the authority conferred had not expired; (c) the foregoing authority shall be in substitution for the authorities given to the directors under Section 80 of the Companies Act 1985 on 14th August 2007, which authorities are accordingly hereby revoked; (d) this authority will be put to annual shareholder approval. As special business As special resolutions 9 that Act) THAT the directors be and are hereby empowered pursuant to Section 95 of the Companies Act 1985 to allot equity (within the meaning of securities Section 94 of for cash pursuant to the general authority conferred by the ordinary resolution numbered 8 set out in the notice convening this meeting as if Section 89(1) of the said Act did not apply to any such allotment provided that this power shall be limited: (a) (b) of to allotments in connection with an offer of equity securities to the ordinary the shareholders Company where the securities respectively attributable to the interests of such holders are proportionate (as nearly as may be and subject to such exclusions or other arrangement as the directors may appropriate, necessary or expedient to deal with any fractional entitlements or with any legal or practical difficulties in respect of overseas holders or otherwise) respective numbers of ordinary shares then held by such shareholders; and consider the to to the allotment (otherwise than pursuant to subparagraph (a) of this resolution) of equity securities having, in the case of relevant shares (as defined in Section 94 of the Companies Act 1985), an aggregate nominal amount, or, in the case of other equity securities, giving the right to subscribe for or convert into relevant shares having an aggregate nominal amount not exceeding represents £218,160, which approximately 5% of the current issued share capital of the Company, and shall expire at the conclusion of the next Annual General Meeting following the date of this resolution save that the Company shall be entitled before such expiry to make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors shall be entitled to allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. In any three year period no more than 7.5% of the issued share capital will be issued on a pre-emptive basis. and 10 THAT the Company be and is hereby generally unconditionally authorised for the purposes of Section 166 of the Companies Act 1985 to make one or more market purchases (within the meaning of section 163 of the Companies Act 1985) of any of its ordinary shares of 10p each (the “ordinary shares”), provided that: (a) (b) (c) the maximum number of ordinary shares hereby authorised to be purchased 4,358,844 is representing 9.99% of the issued share capital at 31st March 2008; the minimum price which may be paid for each ordinary share is 10p, exclusive of the purchase; expenses of the maximum price (exclusive of expenses) which may be paid for each ordinary share is an amount equal to 105% of the average of the middle market quotations for the ordinary shares as derived from the Daily Official List of the London Stock Exchange Limited for the five business immediately days preceding the day of purchase; (d) unless previously revoked or varied, the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company following the date of this resolution, unless such authority is renewed on or prior to such date; (e) the Company may, before the expiry of this authority, conclude a to purchase ordinary contract shares under this authority which will or may be executed wholly or partly after such expiry and may make a purchase of ordinary shares pursuant to any such contract, as if such authority had not expired. 40 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 41 The record date for payment of the final dividend is 25th July 2008. Assuming the final dividend is approved by the members, the dividend will be paid on 22nd August 2008. By order of the board J. C. ROBY Company Secretary Registered Office: Lichfield Road, Brownhills, West Midlands, WS8 6JZ. 25th June 2008 Note: Any member of the company entitled to attend and vote at this meeting may appoint one or more proxies, who need not also be a member, to attend and vote, on a poll, in his stead. The instrument appointing a proxy, including authority under which it is signed (or a notarially certified copy of such authority), must be deposited at the offices registrars: Capita of Registrars, The Registry, 34 Beckenham Road, Kent, BR3 4TU, not less than 48 hours before the time appointed for the meeting. the Company’s Beneficial owners: In accordance with Section 325 of the Companies Act 2006, the right to appoint proxies does not apply to persons nominated to receive information rights under section 146 of the Act. are informed, Persons nominated to receive information rights under section 146 of the Act who have been sent a copy of this notice of in hereby meeting accordance with Section 149 (2) of the Act, that they may have a right under an agreement with the registered member by nominated to be whom they were to have someone else appointed, or appointed, as a proxy for this meeting. If they have no such right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the member as to the exercise of voting rights. Nominated persons should contact the registered member by whom they were these nominated arrangements. respect of in To have the right to attend and vote at the Annual General Meeting a person must be entered on the register of members on or before 6.00 pm on 15th August 2008 (being not more than 48 hours prior to the time fixed for the meeting). 8 A n n u a l R e p o r t 2 0 0 8 41 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 42 42 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 150 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 43 8 A n n u a l R e p o r t 2 0 0 8 43 15020 25/06/2008 Proof 6 15020CASTINGS:Castings AR06 12301 15/7/08 12:51 Page 44 44 A n n u a l R e p o r t 2 0 0 8 15020 25/06/2008 Proof 6 15020CASTINGSCVR:Castings Cover AR06 12301 15/7/08 12:49 Page 1 15020 25/06/2008 Proof 6 1502
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