A n n u a l R e p o r t 2 0 0 9 16321CASTINGSCVR.indd 2 16321CASTINGSCVR.indd 2 16321 25/06/2009 Proof 6 25/06/2009 12:06 25/06/2009 12:06 16321CASTINGSCVR.indd 3 16321CASTINGSCVR.indd 3 16321 25/06/2009 Proof 6 25/06/2009 12:06 25/06/2009 12:06 C o n t e n t s 2 Directors 3 Chairman’s Statement 4 Business and Financial Review 5 Directors’ Report 8 Review of Principal Risks and Uncertainties 10 Corporate Social Responsibility 12 Corporate Governance 15 Remuneration Report 17 Statement of Directors’ Responsibilities 18 Independent Auditors’ Report 19 Consolidated Income Statement 20 Consolidated Balance Sheet 21 Consolidated Cash Flow Statement 22 Consolidated Statement of Recognised Income and Expense and Supplementary Statement 23 Notes to the Accounts 41 Five Year Financial History 42 Parent Company Accounts — Company Balance Sheet 43 Notes to the Parent Company Accounts 49 Notice of Meeting 51 Directors, Officers and Advisers 52 Shareholder Information A n n u a l R e p o r t 2 0 0 9 1 16321 25/06/2009 Proof 6 D i r e c t o r s Executive Directors Non-Executive Directors Brian Cooke Chairman Gerard Wainwright Non-executive Director Aged 69, he joined the company in 1960 Aged 59, he was appointed a director after attending foundry college and in 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 company wide range of manufacturing companies and was appointed a director in 1966, for over twenty-five years together with becoming joint managing director in 1968 international experience. He is chairman and managing director in 1970. He ceased of the remuneration committee and a to be chief executive in 2007. He has been member of the audit and nomination Chairman since 1983. David Gawthorpe Chief Executive Officer committees. Paul King Non-executive Director Aged 47, he joined the company in 1984 and became local technical director at Aged 72, he was appointed a director in 1998 and is an independent director. He Brownhills in 1994. He was appointed retired from practice as a partner with a director in 2003 and became chief Coopers & Lybrand and is a member of executive in April 2007 and is the director the Boards of Claverley Group Limited with environmental and human resource and Thomas Walker plc. He is chairman responsibility. Chris Roby Finance Director of the audit committee and is regarded as the financial expert of that committee and is also a member of the remuneration and nomination committees. Aged 61, he joined the company in 1988 as company secretary and was appointed Tony Smith finance director later in that year. Prior to that date he had been working in a Non-executive Director Aged 62, he joined the company in 1962 professional accounting firm specialising and became a director in 1985, ultimately in manufacturing and international being managing director at Brownhills. In 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 committees. companies. Mark Lewis Managing Director — CNC Speedwell Ltd Aged 45, 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. Graham Cooper Managing Director — William Lee Ltd Aged 55, he joined William Lee in 1977 becoming operations director there in 2003 and their managing director in 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 9 16321 25/06/2009 Proof 6 C h a i r m a n ’ s S t a t e m e n t It was indicated in the interim management of £2.2 million. This cost has been taken co-operation in this difficult time. Although statement in February 2009 that customer as normal cost of production, but cannot we have seen levels of demand stabilise, schedules had considerably reduced and be recovered from our customers and has the timing and strength of any recovery we were operating at 40% of our previous therefore had a significant effect on our still remains uncertain, and we remain production level. This situation has results. cautious with regard to prospects for the 2009/10 financial year. B. J. COOKE Chairman 24th June 2009 continued. However, at the time of writing, it has not worsened and schedules have stabilised at this low level. Our management at all companies have taken timely action to reduce overheads and employment costs, and It is with much regret that we have had future capital expenditure is on hold. to make approximately 350 employees redundant throughout all parts of the group. It is particularly sad that many long serving employees have had to leave the company; all our employees have worked hard over the past years and, through no fault of their own, some now find themselves out of work. It would surely have been cheaper for the government to fund temporary short time working rather than increasing unemployment. The unavoidable cost of the redundancies has been £2.2 million; money that could have been spent more wisely on future investment. Apart from the redundancy costs, we have provided £3.845 million as possible losses on deposits with Icelandic banks. It has been indicated by the administrators of Heritable Bank and Kaupthing Singer and Friedlander that we will recover some money and this is why the provision has been reduced from the £5.7 million we stated at the interim stage. We have been confronted by high operational costs, mainly in respect of electricity, due to the unexpectedly rapid decline in demand. We contracted to buy electricity in July 2008 for an estimated year’s requirements from October 2008 to September 2009. This was at a high price as at the time energy costs were rising rapidly due to high world oil and gas prices and forecasts were made of a shortage of energy and power cuts. Our customers were also forecasting high demands throughout the year. It was never predicted that the world recession would be so dramatic. We had to sell excess electricity back into the market at a loss The new foundry at William Lee which has cost some £16 million is now ready for production; melting and moulding trials are nearly complete and in general very satisfactory with the quality of castings made during trials being excellent. We are well placed to bring this plant into production as soon as customer demand starts to improve. We have purchased land next to the Brownhills site which will enable us to develop for future expansion of the business. Our machine shop, CNC Speedwell, has seen schedules reduce even more than the foundry companies because of customer de-stocking and also controlling our own stocks. We have had to continue to invest in machinery because of long term commitments, hence we still have a large depreciation charge, with little revenue. Dividends An interim dividend of 2.71 pence per share was paid in January 2009. Your board have confidence in the underlying strength and future potential of the group and accordingly are pleased to recommend a maintained final dividend of 7.29 pence per share making a total dividend of 10 pence per share for the year. Outlook This has been a most difficult year going from unusually high demand up to October 2008 to a very low level by December. It has been difficult for all our employees to come to terms with the situation and I thank them for their understanding and p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 3 16321 25/06/2009 Proof 6 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 Since November 2008 customer demands It was disappointing to report that As a result of the continuing unknown have been at a very low level and we are our deposits in four Icelandic banks are drain on resources by the Staff and now operating below 40% of our previous under threat. The deposits were made Shopfloor pension schemes, these production levels. We believe with our earlier in 2008 when our advisers rated schemes were closed to future accruals careful cash management and limited them satisfactorily. However, as a matter from 6th April 2009 with the contributing capital expenditure, we will be able to of prudence, we have made provision members joining the money purchase sustain operations at these reduced levels. against these deposits of £3,845,000. scheme. Revenue decreased by 13% to £85 million, of which 62% was exported. The dispatch weight of castings to third party customers was 43,900 tonnes which was a decrease of 12,500 tonnes from the previous year. The group produced 45,100 tonnes of castings compared to Notwithstanding these at risk deposits, we have further substantial funds available. The board is therefore satisfied that any loss which may be incurred on these deposits will not have any impact on the ability of the group to continue to finance its trading operations. The income statement shows a profit before tax of £3.6 million. However, this includes an income statement charge of £193,000 for defined benefit pension schemes (see note 6) in accordance with IAS 19. The directors view the cash contribution of £489,000 to be a relevant 58,700 tonnes last year. CNC Speedwell’s Despite ending the year with less charge which would have given rise to a profit before taxation of £2.9 million. The directors are recommending a final dividend that will be paid in August which, with the interim dividend paid in January, will result in the return of £4.4 million to shareholders. turnover decreased by 19.4%. Significant cost increases, including unrecovered electricity costs, contributed to the profit from operations decreasing by £13.3 million (including exceptional costs of £6 million) and decreased the operating margin (excluding exceptional costs) to 9.4% from 15.6%. Up to November 2008, our policy of continual improvement and investment once again reduced the number of hours it takes to produce one tonne of castings, but since then the large reduction in volumes has resulted in short-term inefficiencies decreasing the margin. Unfortunately these reductions resulted in redundancies of some 350 employees across the group costing £2.2 million. cash, the higher interest rates earlier in the year helped increase finance income by £270,000 to £1,684,000, an increase of 19%. Cash outflow included £19.9 million (2008: £9.4 million) on capital equipment. This included the construction of the new foundry at William Lee (£15.5 million) new machines at CNC Speedwell (£3.4 million) and land next to the Brownhills site (£1.04 million) which is to be used for future development of the business. However, due to the current economic downturn the new foundry is yet to come on stream. The pension valuation under IAS 19 showed a surplus of £1.01 million but this has not been shown as an asset due to the restriction of recognition of assets. 4 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 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 2009. Trading activities under section 146 of the Companies Act 2006 are required to direct all communications to the registered holder of their shares rather than to the company’s registrar, Capita Registrars, or to the company directly. Subject to legislation and to any 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 Castings P.L.C. supplies spheroidal think fit. graphite iron castings to a variety of manufacturing industries from its highly mechanised foundries at Brownhills. William Lee Limited supplies spheroidal graphite iron castings from Dronfield, Sheffield and CNC Speedwell Limited is a machining 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 8 and 9. Dividends An interim dividend of 2.71 pence per share was paid on 9th January 2009. The directors now recommend a final dividend of 7.29 pence per share payable on 21st August 2009, making a total distribution of 10.0 pence for the year. Share capital The company’s capital consists of 43,632,068 (2008 – 43,632,068) ordinary shares of 10 pence each with voting rights. There are no restrictions on voting rights. The company is authorised to purchase its own shares which may be selected by the board in any manner whatever. Directors The present directors of the company are listed on page 2 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 G. B. Wainwright D. J. Gawthorpe G. Cooper M. A. Lewis C. P. King Beneficial Holdings 2009 2008 1,950,986 1,950,986 128,190 103,079 30,000 28,296 8,000 3,025 — 128,190 103,079 — 28,296 — 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: J. C. Roby A. J. Smith D. J. Gawthorpe } by rotation The unexpired period of the contracts of service for B. J. Cooke, J. C. Roby, D. J. Gawthorpe, M. A. Lewis and G. Cooper is one year. Mr A. J. Smith, G. B. Wainwright and C. P. King do not have contracts 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 There are no restrictions on the for compensation for loss of office or employment that occurs because of a takeover bid. 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 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 board considers that the performance of those directors proposed for re-election continues to be effective, that they remain independent in judgement and that they p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 5 16321 25/06/2009 Proof 6 D i r e c t o r s ’ R e p o r t demonstrate a strong commitment to their role. 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 directors’ 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 2009 and 24th June 2009: Aberforth Partners’ Clients Hunter Hall Value Growth Trust Aviva plc & subsidiaries B. J. Cooke Hamstall Investments Inc. Legal & General Group plc Rathbone Investment Management Ltd Business review Number 7,297,723 4,698,478 2,577,144 1,950,986 1,800,000 1,737,639 1,600,000 % 16.7 10.8 5.9 4.5 4.1 4.0 3.7 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 purchases expires at the forthcoming 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 2009. 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, The Chairman’s Statement on page The present authority was granted on expect it to result in an increase in future 3, the Business and Financial Review 19th August 2008 and under Section 80 earnings per share, and if it is in the best on page 4, the Corporate Governance of the Companies Act must be renewed interests of shareholders generally. Statement on page 12, and the Notes to at least every five years. Authority will also the Accounts on pages 23 to 40 provide be sought from shareholders to allow the Fixed assets detailed information relating to the group, directors to issue new shares for cash to The market value of the group’s interests the operation and development of the persons other than to existing members in land cannot be accurately established business and the results and financial up to a maximum nominal amount of without obtaining a revaluation of all the position for the year ended 31st March £218,160, being approximately 5% of the land and buildings owned by the group. 2009. current issued share capital. The directors consider that although a 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. 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 17th August 2014 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 2008, the board was given authority to purchase and cancel up to 4,358,844 of its own shares 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 Employees are informed weekly of production levels and the relative production performance. Similarly, they are kept informed of any factor affecting the group and the industry generally. 6 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 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. Further details of employee involvement are given under the Corporate Social Responsibility section on pages 10 and 11. 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 group 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 number of days’ purchases outstanding for payment by the group at the year end was 28 (2008 – 43). Details of the use of financial instruments by the group are contained in note 20 to the accounts, and in note 4(b) in the Notes to 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. Auditors The auditors, BDO Stoy Hayward LLP, have indicated their willingness to continue in office. A resolution proposing their reappointment as auditors of the company and authorising the directors to determine their remuneration will be submitted at the Annual General Meeting. Each of the persons who are directors at the date when this report was approved confirms that so far as each of the directors is aware, there is no relevant audit information of which the group’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 auditors are aware of that information. the principal risks and uncertainties and corporate social responsibility incorporated into it by reference (together, the directors’ report), has been prepared solely to provide additional information to shareholders to assess the company’s strategies and the potential for those strategies to succeed. The directors’ report should not be relied upon by any other party or for any other purpose. The directors’ report (as defined) contains certain forward looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward Significant agreements looking information. There are no significant agreements to which the company is party that take effect, alter or terminate upon a change Each of the persons who is a director at the date of approval of this report confirms that to the best of his knowledge: of control of the company following a (a) each of the group and parent takeover bid. Principal risks and uncertainties financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU and UK Accounting Standards Principal risks and uncertainties are set respectively, gives a true and fair view of out on page 8 and in note 4(b) in the Notes the assets, liabilities, financial position to the Accounts. Corporate Governance Details of the group’s corporate governance policies are dealt with on Cautionary statement Under the Companies Act, a company’s directors’ report is required, among other matters, to contain a fair review by the directors of the group’s business through a balanced and comprehensive analysis of the development and performance of the and profit or loss of the issuer and the undertakings included in the consolidation taken as a whole; and (b) the Chairman’s Statement, Business and Financial Review and Directors’ Report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. business of the group and the position of By order of the board the group at the year end, consistent with the size and complexity of the business. The directors’ report set out above, including the chairman’s statement, B. J. COOKE Chairman 24th June 2009 Financial instruments page 12. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 7 16321 25/06/2009 Proof 6 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 Market competition In common with all trading business, the Automotive and commercial vehicle Commodity and energy pricing group is exposed to a variety of risks in the markets are, by their nature, highly The principal metal raw materials used conduct of its normal business operations. competitive, which has historically led to by the group’s businesses are steel scrap 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. Whilst it 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 material impact on future performance, 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 results in an actual cash flow, is not 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 technological factors (e.g. emission legislations) and economic growth. Passenger vehicle sales are influenced, inter alia, by consumer preferences, incentives and the availability of consumer credit. deflationary pressure on selling prices. and various alloys. The most important This pressure is most pronounced in alloy raw material inputs are premium cycles of lower demand. A number of graphite, magnesium ferrosilicon, nickel the group’s customers are also adopting and molybdenum. Wherever possible, global sourcing models with the aim to prices and quantities (except steel) are reduce bought out costs. Whilst there can secured through long-term agreements be no guarantee that business will not be with suppliers. In general, the risk of lost on price, we are confident that we can price inflation of these materials resides remain competitive. Customer concentration, programme dependencies and relationships with the group’s customers through price adjustment clauses. The group is exposed to price level changes in copper and molybdenum, which have seen dramatic increases in recent years. Where The loss of, or deterioration in any single possible, the group seeks to mitigate the customer relationship could have a financial impact through the application material impact on the group’s results. of surcharges, although the success Equipment of this approach varies by customer. Energy contracts are locked in for at least The group operates a number of specialist twelve months, although renegotiation pieces of equipment, including foundry risks remain at contract maturity dates furnaces, moulding lines and CNC milling but again this is mitigated through the machines which, due to manufacturing application of surcharges. However, lead times, would be difficult to replace energy contracts relate to specified usage sufficiently quickly to prevent major interruption and possible loss of business in the event of unforeseen failure. Whilst this risk cannot be entirely mitigated and if not obtained can result in penalties. Information technology and systems reliability without uneconomic duplication of all key The group is dependent on its information equipment, all key equipment is maintained technology (“IT”) systems to operate to the highest possible standards and its business efficiently, without failure inventories of strategic equipment spares or interruption. Whilst data within key maintained. The facilities at Brownhills systems is regularly backed up and and Dronfield have similar equipment and work can be transferred from one location to another very quickly. Suppliers 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. Although the group takes care to ensure Short-term deposits alternative sources of supply remain available Advice is taken as to where to deposit for materials or services on which the group’s funds, usually banks and building businesses are critically dependant, this is societies. Only highly rated institutions not always possible to guarantee without risk are used. However, institutions can be of short-term business disruption, additional costs and potential, damage to relationships with key customers. downgraded before maturity therefore possibly placing these deposits at risk. 8 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 Product quality and liability Pension scheme funding The fair value of the assets and liabilities The group’s businesses expose it to certain of the group’s defined benefit pension product liability risks which, in the event of schemes is substantial. As at 31st March failure, could give rise to material financial 2009 the schemes were in surplus on an liabilities. Whilst it is a policy of the group IAS 19 basis. Further details are set out in to limit its financial liability by contract in note 6 to the accounts. The potential risks all long-term agreements (“LTAs”), it is not and uncertainties are mitigated by careful always possible to secure such limitations management and continual monitoring of in the absence of LTAs. The group’s the schemes and by appropriate and timely customers do require the maintenance of action to ensure as far as possible that the demanding quality systems to safeguard defined benefit pension liabilities do not against quality-related risks and the group increase disproportionately. The company maintains appropriate external quality works closely with the scheme trustees accreditations. The group maintains and specialist advisers in managing the insurance for public liability-related claims inherent risks of such schemes. The schemes were closed to future accruals from 6th April 2009 which will only leave past service liabilities to be funded. but does not insure against the risk of product warranty or recall. 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 relevant laws and to establish a standard above the minimum level required. Whilst the group’s manufacturing processes are 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. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 9 16321 25/06/2009 Proof 6 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 l Complying with all relevant legal information and training is given to all requirements, process, planning employees and contractors. General As a long-standing and principled company, we place great importance on our responsibilities to all our key stakeholders, whether shareholders, employees, customers, suppliers or the communities in which we operate. The group works hard to meet the legitimate and discharge authorisations, as appropriate to its operations. l Pursuing best practice techniques in the use of energy and raw materials. l Encouraging reuse, recycling and recovery of its waste the beneficial expectations of these stakeholder groups products. whilst at the same time seeking to fulfil our objective of creating outstanding and enduring value through commercial success based on superior performance. l Ensuring that environmental issues considered when making are decisions to invest in capital plant and in the planning and controlling of Both of our foundry sites are ISO 14001:2004 accredited and, CNC Speedwell is working towards the standard having obtained ISO 14001:1996. The group’s practices and procedures are subject to regular environmental audits by external consultants. The group has also in place an energy policy which requires each company to make continuing efforts to achieve the following objectives: The group has a network of policies manufacturing processes. l To monitor and record energy and l Promoting environmental awareness throughout the group and ensuring water consumption. l To reduce the consumption of that personnel whose activities have fossil fuels and utilise energy the potential to cause a significant from sustainable sources where impact on the environment receive practicable. 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 exceed, the standards demanded by applicable environmental legislation and operate a policy of effecting continual improvement in all of our processes that appropriate training. l Ensuring that suppliers and contractors adopt environmental practices on site that are compatible with our exacting environmental standards. l Establishing and maintaining adequate contingency procedures and plans to deal effectively with any accidental discharge or emission of pollutants. l Communicating our Environmental Policy Statement to any persons have the potential to impact the environment. working on our behalf and any Specifically, the company is interested parties. committed to: l Implementing and maintaining an Environmental Management System in accordance with the ISO 14001 standard. l Establishing procedures to review the impact of current or new activities or processes on the environment. l Reviewing audit results and initiating to address any corrective action deficiencies found within the group’s environmental management system, policy, objectives or targets. l Using techniques to avoid, reduce or control pollution. The group demands that all activities and services will comply with applicable laws and regulations and that all substances and materials will 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 compliance meets legislative requirements are used by our businesses. Noise from operations is kept to a level below legislative the minimum to ensure requirements of nuisance to the local environment. Appropriate and adequate environmental l To examine ways of reducing water consumption. l To promote energy awareness amongst employees and contractors. l To identify and implement energy saving measures and practice energy efficiency throughout all group premises, plant and equipment. l To incorporate environmentally sensitive designs into both new and refurbished buildings. l To target a reduction in energy consumption in line with the Government’s goal of cutting carbon dioxide emissions to counter the threat of climate change. Employees The group’s policy is to employ people who embody its core values of commitment and excellence. These values apply to all employees regardless of seniority or position, including directors. 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. 10 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 Employees are informed weekly of production levels and the relative l To make available all necessary safety devices and protective equipment and production performance. Similarly, they to supervise their use. are kept informed of any factor affecting the group and the industry generally. l To maintain a constant and continuing interest in health and safety matters Their involvement in the group’s applicable to the group’s activities, performance is encouraged by means consulting and involving employees of a production bonus and at the time of wherever possible. 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. 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 Recognising the demands of our manufacturing operations are carried out customers and our strategy, the group’s using independent agencies who make policy is to recruit the best available recommendations for improvements people and to invest in their training and development to enable a high level of to achieve best practice wherever appropriate. The group’s health and safety retention. In this regard, we are committed policy is regularly reviewed and modified to equality, judging applications for as circumstances and experiences dictate. employment neither by race, nationality, gender, age, disability, sexual orientation nor political bias. The group encourages the maintenance of consistent high standards and each site is required to develop a The group gives full consideration safety management system that includes: to employment applications by disabled persons where they can adequately fulfil the requirements of the position. If necessary, we endeavour to retrain any employee who becomes disabled during their period of employment with the group. Health and Safety l Health and safety planning and objective setting. l Carrying out risk assessments, both general and hazard specific. l Producing and issuing safe systems of work. l Induction training both job and hazard The board regards the promotion of specific and refresher training. 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: l To provide and maintain safe and healthy working conditions complying with all statutory conditions. l Maintenance, inspection and statutory inspection of work equipment. l Providing appropriate personal protective equipment and rules for its use. l Occupational health including health surveillance and exposure monitoring as required. l The control of visitors and contractors. l Incident reporting, recording and investigation. l Routine workplace inspections. l To provide training and instruction to enable employees to perform their l Performance evaluation. monitoring and work safely and efficiently. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 11 16321 25/06/2009 Proof 6 C o r p o r a t e G o v e r n a n c e General Castings P.L.C. 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 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. Environment The board recognises that our operations have an effect on the local, regional and global environment, and as a consequence of this, the board is committed to adopting policies, processes and procedures which will lead to the continual improvement in environmental performance and the prevention of pollution. Directors’ conflicts of interest From 1st October 2008, a director has had a statutory duty to avoid a situation in which he has, or can have, an interest that conflicts or possibly may conflict with the interests of the company. A director will to cover all controls including financial, For each business there are regular not breach that duty if the relevant matter operational and compliance controls and weekly and monthly reports, reviewed by has been authorised in accordance with risk management. boards and management, which contain the Articles of Association by the other 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 process for identifying, evaluating and managing the significant risks faced by the group which is both written reports and accounts. The directors. 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. The board has conducted a review of actual or possible conflicts of interest in respect of each director. At its meeting on 2nd October 2008, the board considered the process for identifying current conflicts, authorised conflicts that have regularly reviewed and has been in place Continual monitoring of the systems of been identified and stipulated conditions throughout the year under review and internal financial control is conducted by all in accordance with the guiding principles up to the date of approval of the annual management. The external auditors, who and agreed a process to identify and report and accounts. However, such a are engaged to express an opinion on the authorise future conflicts. In practice, system is designed to manage rather group accounts, also consider the systems directors are asked to consider and than eliminate the risk of failure to achieve of internal financial control to the extent disclose actual or potential conflicts at business objectives and can provide only necessary to express that opinion. The the beginning of each meeting and as and reasonable and not absolute assurance external auditors report the results of their when a matter arises. against material misstatement or loss. work to management, including members The review covers all controls including financial, operational, compliance and risk management. of the board and the audit committee. The board does not consider there is a need for an internal audit function due to The directors confirm that they have the size and complexity of the group. established procedures necessary to implement the guidance for directors on Auditors’ independence the Combined Code such that they fully The non-audit work undertaken in the year comply with it for the accounting period by the group auditors, BDO Stoy Hayward ended on 31st March 2009. Internal financial control LLP, was restricted to an involvement in the preparation of the tax computations and related tax advice of the group The directors are responsible for companies and a review of the interim maintaining the group’s systems of financial statements. Board of directors The board meets regularly to monitor the current state of business and to determine its future strategic direction. During the year the board comprised five executive directors and three non-executive directors. Two of the non-executive directors are independent of executive management and none of the non- executive directors participate in share option or other executive remuneration schemes nor do they qualify for pension benefits. 12 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 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 Attended Eligible to attend Attended Eligible to attend Attended 8 8 8 8 8 8 8 8 8 8 8 8 8 7 7 8 — — — — — 3 3 3 — — — — — 3 2 2 — — — — — 1 1 1 — — — — — 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 chairman also holds meetings with the non-executive directors without executives present. The remuneration committee reviews the performance of the directors, including the chairman. The non-executive directors appraise the chairman’s performance. Although the non-executive directors the review of annual and interim results, of funding available. Details of cash and have served for more than nine years their internal control procedures and accounting borrowing facilities are set out in note 20 knowledge, advice and controls are still practices. The audit committee meets with to the accounts. The group’s objectives, invaluable to the group. the auditors periodically and as necessary. policies and processes for managing its Directors receive regular updates Remuneration committee appropriate to the business throughout As detailed in the remuneration report the year. below. To assist with the conduct of their Nomination committee function, the non-executive directors This committee comprised the three are able to obtain professional advice non-executive directors and is chaired at the company’s expense if required in by G. B. Wainwright. The chairman may connection with their duties. In addition, attend meetings as appropriate to the all directors have access to the services of business in hand but is not a member of the company secretary. the committee. Board committees The principal committees established by Relations with shareholders 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 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 The directors have assessed the future funding requirements of the group and the company and compared them to the level capital, its financial risk management objectives, details of its financial instruments and hedging activities, and its exposure to credit risk and liquidity risk are also set out in note 20 to the accounts. The directors’ assessment included a review of the group’s financial forecasts, and financial instruments for the 15 months from the balance sheet date. The directors considered a range of potential scenarios within the key markets the group serves and how these may impact on cash flow. The group and company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman’s statement on page 3. The directors also considered what mitigating actions the group could take to limit any adverse consequences. After making these enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue operations p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 13 16321 25/06/2009 Proof 6 C o r p o r a t e G o v e r n a n c e continued for the foreseeable future. For this reason, they continue to adopt the going concern l The role of the financial director and company secretary are fulfilled by the basis in preparing the financial statements. same person as there is no one else Summary within the group qualified to do the job and it would not be a full-time position. The board takes its responsibilities The board monitors the effectiveness seriously even though there are a number of this arrangement annually. l 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. 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 2009 the company complied with the Combined Code other than the following points: l There are three non-executive directors but one does not conform to the definition of independent. Although these directors have served for more than nine years the board recognises the value they bring and believe it is important too that shareholders have the reassurance of non-executives on the board whose independence is beyond question. l The non-executive directors do not have specified term contracts. l The chairman is also regarded as an executive director but on reduced hours. However, the chief executive is responsible for the day to day running of the group with direct responsibility for the Brownhills site and through the managing directors of William Lee and CNC Speedwell. The chairman concentrates on the effective working of the board and overall group strategies and remains a high level contact with our main customers. 14 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 R e m u n e r a t i o n R e p o r t report has been prepared This 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 to approve the remuneration report for the financial year ended 31st March 2009. 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 18 and all other information is unaudited. Remuneration committee This committee comprised the three non- executive directors and is chaired by 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 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 consideration of their own remuneration. No advice has been provided by external advisers or consultants. Remuneration policy the The underlying policy 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. in setting 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 2009 The individual elements of remuneration of each director are set out in the table below. Annual bonus in a Executive directors participate performance-related bonus scheme. Bonuses are payable based on the group obtaining profits before tax and exceptional items above a predetermined threshold. This threshold has not been triggered, therefore no annual bonuses are annual payable in respect of 2009. Salaries £000 Fees £000 Benefits (note 1) £000 Performance related bonus £000 81 168 147 141 141 — — — 678 — — — — — 18 18 18 54 3 8 16 8 8 — — — 43 — — — — — — — — — 2009 Total £000 84 176 163 149 149 18 18 18 775 2008 Total £000 122 252 237 225 220 17 17 17 1,107 Note 1 — Benefits in kind comprise car or car benefit, fuel or cash allowance, private health care and life assurance. Pension arrangements Executive directors were contributing members of the Castings P.L.C. Staff Pension and Life Assurance Scheme, a defined benefit scheme, up to 5th April 2009. Their dependants are eligible for dependants’ pensions and the payment of a lump sum in the event of death in service. P.L.C. Money Purchase Pension Scheme, The scheme provides for a pension accrued a defined contribution pension scheme. at 1/60th per year of service to 2005 and Final pensionable remuneration is based 1/80th per year thereafter. From 6th April on capped basic salaries on retirement at 2009, they became deferred members. normal retirement age. Pension contributions From 6th April 2009, the executive directors were able to join the Castings are not paid on benefits or bonuses. Total contributions of the company total 7% to the Money Purchase Pension Scheme. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 15 16321 25/06/2009 Proof 6 R e m u n e r a t i o n R e p o r t continued Directors’ pension entitlements* Directors’ contributions in the year (note 1) £ Age at year end Increase Increase in accrued pension during Transfer Accumulated Accumulated total value of accrued increase net pension at of inflation year net and directors’ 31/03/2009 31/03/2008 total accrued pension at in accrued pension during the year of inflation contributions £ £ £ 60 47 45 55 10,756 10,418 9,415 8,025 2,978 3,171 2,233 2,254 1,183 1,132 1,320 1,125 9,138 796 2,066 6,838 Transfer value of accrued benefits Transfer Difference in transfer value of values accrued less benefits (note 2) 31/03/2009 31/03/2008 contributions £ £ £ £ 35,886 661,464 452,820 197,888 40,785 464,657 299,294 154,945 18,259 219,370 129,591 80,364 22,587 353,361 229,511 115,824 (note 2) £ 38,864 43,956 20,492 24,841 Name of director J. C. Roby D. J. Gawthorpe M. A. Lewis G. Cooper 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. 2. 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 Executive directors have contracts return, compared with the performance of the FTSE All Share Index — Engineering sub- of service terminable on one year’s sector, also measured by total shareholder return. This index has been selected for this notice. These contracts are considered comparison because this is the most relevant index in which the company’s shares are appropriate in the context of the overall quoted. 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 place for the executive directors is 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 24th June 2009 Source: Thomson Financial – Thomson One Banker 16 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 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 Group financial statements International Accounting Standard 1 Parent company financial statements requires that financial statements present Company law requires the directors to fairly for each financial year the group’s prepare financial statements for each financial position, financial performance financial year which give a true and fair and cash flows. This requires the faithful view of the state of affairs of the company presentation of the effects of transactions, and of the profit or loss of the company other events and conditions in accordance for that period. In preparing these financial with the definitions and recognition criteria statements, the directors are required to: The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the group, for safeguarding the assets of the company, for taking reasonable steps for the 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 prepare financial statements for the company in accordance with UK Generally for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘framework for the preparation and presentation of financial statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the directors to: l consistently select and apply appropriate policies; l present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and Accepted Accounting Practice. l provide additional disclosures when compliance with the 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. l select suitable accounting policies and then apply them consistently; l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business; l make judgements and estimates that are reasonable and prudent; and l state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. Financial statements are published on the group’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the group’s website is the responsibility of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 17 16321 25/06/2009 Proof 6 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 2009 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 the Directors’ Remuneration Report in 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 relevant in accordance with audited legal and regulatory requirements and International Standards on Auditing (UK and Ireland). 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 have been properly prepared in 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 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 the Governance Statement 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 the Corporate Responsibility 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. and 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 financial statements, and of of the the accounting policies are whether appropriate to the group’s and company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered 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: l l l l 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 2009 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; the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the parent company’s affairs as at 31st March 2009; parent company the part of financial the statements and the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985; and l the information given in the Directors’ Report is consistent with the financial statements. BDO Stoy Hayward LLP Chartered Accountants and Registered Auditors Birmingham 24th June 2009 18 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 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 2009 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Excluding exceptional expenses Exceptional Total administrative expenses Profit from operations Finance income Profit before income tax Income tax expense Notes 2 4 3 7 8 Profit for the year attributable to equity holders of the parent company 18 2009 £000 84,812 (66,921) 17,891 (1,208) (8,708) (6,043) (14,751) 1,932 1,684 3,616 (2,994) 622 2008 £000 97,372 (71,653) 25,719 (1,369) (9,100) — (9,100) 15,250 1,414 16,664 (4,668) 11,996 Earnings per share Basic and diluted 10 1.43p 27.49p Notes to the accounts are on pages 23 to 40. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 19 16321 25/06/2009 Proof 6 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 2009 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 11 12 13 14 15 6 16 17 18 18 18 2009 £000 53,408 429 53,837 7,401 13,854 15,804 37,059 90,896 12,608 310 12,918 — 4,301 4,301 17,219 73,677 4,363 874 13 68,427 73,677 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 The accounts on pages 19 to 40 were approved and authorised for issue by the board of directors on 24th June 2009, and were signed on its behalf by: B. J. Cooke J. C. Roby Chairman Finance Director Notes to the accounts are on pages 23 to 40. 20 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 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 2009 Notes 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 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 (decrease)/increase 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 20 20 This statement should be read in conjunction with the reconciliation on page 22. Notes to the accounts are on pages 23 to 40. 2009 £000 9,201 1,684 (2,525) 8,360 (19,888) 93 108 (19,687) (4,363) (4,363) (15,690) 31,494 15,804 £000 15,641 163 15,804 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 p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 21 16321 25/06/2009 Proof 6 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 2009 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 and expense for the year Notes 6 16 Year to 31st March Year to 31st March 2009 £000 622 (199) (296) 56 183 2008 £000 11,996 (87) (510) 32 11,431 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 Profit before income tax Depreciation (net of profit on sale of property, plant and equipment) 11 Interest received Excess of employer pension contributions over income statement charge Notes Increase in inventories Decrease in receivables Decrease in payables Net cash inflow from operating activities Notes to the accounts are on pages 23 to 40. Year to 31st March Year to 31st March 2009 £000 3,616 5,159 (1,684) (296) (347) 8,734 (5,981) 9,201 2008 £000 16,664 5,863 (1,414) (510) (736) (804) 2,377 21,440 22 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s 1 Accounting policies New standards effective in 2009 adopted by the group IFRIC 11: Group Treasury Share Transactions; which has had no impact on the group financial statements. IFRIC 14: IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirement and Their Interaction; which has had no impact on the group financial statements. Basis of accounting The group financial statements have been prepared in accordance with International Financial Reporting Standards, International and Accounting Standards (‘IAS’) Interpretations (collectively ‘IFRSs’), as endorsed for use in the EU. accounting policies is set out below. and curtailment gains are charged to Basis of consolidation operating profit for these plans, with the interest cost net of the expected return The consolidated income statement and on assets in the plans also being credited balance sheet include the accounts of to operating profit. Actuarial gains and the parent company and its subsidiaries losses are recognised directly in equity, made up to the end of the financial year. in the statement of recognised income These subsidiaries include William Lee and expense, and the balance sheet Limited and CNC Speedwell Limited, both reflects the schemes’ surplus or deficit at of which are 100% owned and are based the balance sheet date. A full valuation is in the UK. Business combinations and goodwill 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 tangible assets acquired are consolidated at a fair value to the group at the date of carried out tri-annually using the projected unit credit method. Payments to the defined contribution scheme are charged to the income statement as they become payable. If the group cannot benefit from a scheme surplus in the form of refunds from the plans or reductions in future contributions, any asset resulting from the above policy is restricted accordingly. The IFRSs applied in the group acquisition. All changes to these assets and financial statements are subject to ongoing liabilities, and the resulting gains and losses amendment by the IASB and subsequent that arise after the group has gained control endorsement by the European Commission of the subsidiary, are credited and charged and therefore subject to possible change to the post-acquisition income statement. in the future. Further standards and interpretations may be issued that will be applicable for financial years beginning on or after 1st April 2009 or later accounting periods but may be adopted early. 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 The preparation of financial statements followed. in accordance with IFRS requires the use of certain accounting estimates. It also Revenue recognition requires management to exercise its Revenue, which excludes value added judgement in the process of applying the tax and intra-group sales, represents the group’s accounting policies. The primary statements within the financial information contained in this document have been presented in 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 companies reporting under IFRS. A summary of the principal group IFRS invoiced value of goods and services sold to customers. Appropriate provisions for returns and other allowances are deducted from revenue as appropriate. The group has no barter transactions. The group’s revenue has been recognised when goods have been dispatched. Post-retirement benefits Two of the group’s pension plans are of a defined benefit type. Under IAS 19 ‘Employee Benefits’ the employer’s the current service costs portion of p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 23 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s continued Property, plant and equipment 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. Freehold buildings over 50 years. uses derivative financial instruments in asset. Such provisions are recorded in a economic hedges of currency rate risk, separate allowance account with the loss it does not hedge account for these being recognised within administrative transactions and the amounts are not expenses in the income statement. On material. The group has not classified any confirmation that the deposit or receivable of its financial assets as held to maturity. will not be collectable, the gross carrying Available-for-sale assets Non-derivative financial assets not included in the above category are value of the asset is written off against the associated provision. b) Financial liabilities classified as available-for-sale and The group classifies its financial liabilities comprise the group’s strategic investments into liabilities measured at amortised in entities not qualifying as subsidiaries. cost. Although the group uses derivative ii Leasehold land and buildings over They are carried at fair value with changes financial instruments in economic hedges 50 years or the period of the lease, in fair value recognised directly in a of currency risk, it does not hedge account whichever is less. separate component of equity. Fair value for these transactions, and the amounts iii Plant and equipment over a period of is determined with reference to published are not material. 3 to 14 years. The group annually reviews the assessment of residual values and useful lives in accordance with IAS 16. 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 short-term highly liquid investments with original maturities of three months or less. Foreign currencies quoted prices in an active market. Loans and receivables 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 that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. The effect of discounting on these financial instruments is not considered to be material. Unless otherwise indicated, 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 Assets and liabilities in foreign currencies Impairment provisions are recognised requirements. Share capital includes the are translated at the spot rates of when there is objective evidence (such as nominal value of the shares and any share exchange ruling at the balance sheet significant financial difficulties on the part premium attaching to the shares. date. Exchange differences are dealt with of the counterparty or default or significant through the income statement. delay in payment) that the group will be Current and deferred tax Financial Instruments a) Financial assets The group’s financial assets relate to loans and receivables and available-for-sale assets. Although the group occasionally unable to collect all of the amounts due Deferred tax is provided using the liability under the terms of the deposit or receivable. method. Deferred income tax assets are The amount of such a provision is the recognised to the extent that it is probable difference between the net carrying amount that future taxable profit will be available and the present value of the future expected against which the temporary differences cash flows associated with the impaired can be utilised. 24 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 Deferred tax is measured at the elimination of inconsistencies between average tax rates that are expected to Standards. 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 and legislation that have been enacted or substantially enacted by the balance sheet date. 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. Standards, interpretations and amendments to published standards that are not yet effective. The following have not been adopted in the financial statements. In each case the potential impact has been noted and management are considering the impact of the changes on future reporting. IAS 1: Presentation of financial statements (revised 2007, effective for accounting periods beginning on or after 1st January 2009) - disclosure impact only. Amendments to IFRS 7: Improving Disclosures about Financial Instruments (mandatory for accounts periods beginning on or after 1 January 2009 but is not as yet endorsed for use in the European Union) - disclosure impact only. In addition the following have been reviewed by the directors and are not considered to have an impact on the financial statements: Short-term deposits See note 4 for further details. Useful lives of property, plant and equipment Property, plant and equipment are l IFRS 3: Business Combinations depreciated over their useful lives based (revised 2008) and complementary on management’s estimates of the period amendments to IAS 27: Consolidated that the assets will generate revenue, which and Separate Financial Statements. are periodically reviewed for continued l IFRIC 16: Hedges of a Net Investment in a Foreign Operation. l Amendments to IAS 32: Financial (Puttable Instruments: Presentation instruments and obligations arising on a liquidation) and disclosure amendments to IAS 1. l Amendment Instruments: to IAS 39 Financial Recognition and Measurement: Eligible Hedged Items l Amendments to IAS 39 and IFRS Financial 7: Reclassification of Instruments. l Embedded derivatives: amendments to IFRIC 9 and IAS 39. There are a number of further standards, interpretations and amendments to published standards not set out above which the directors consider not to be relevant to the group. Critical accounting estimates and judgements The group makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectation of future appropriateness. Changes to estimates can result in significant 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 11. 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. See note 13 for further details. Pension assumptions The costs, assets and liabilities of the defined benefit pension schemes operated by the group are determined using methods relying on actuarial estimates and assumptions. Details of the key assumptions are set out in note 6. Exceptional items Exceptional items are those significant items which are separately disclosed by virtue of the size or incidence to enable a full understanding of the group’s financial performance. IFRS 8: Operating segments events that are believed to be reasonable (mandatory for accounts periods beginning under the circumstances. In the future, on or after 1st January 2009) - disclosure actual experience may differ from these impact only. Improvements to IFRSs (mandatory for accounts periods beginning on or after 1st January 2009) - this amendment takes various forms, including the clarification of the requirements of IFRSs and the 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. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 25 16321 25/06/2009 Proof 6 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 2009 £000 32,302 17,312 33,610 1,481 107 84,812 2008 £000 33,164 19,730 42,710 1,768 — 97,372 All revenue 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 5) Cost of inventories written off as an expense Depreciation of property, plant and equipment Fees payable to the company’s auditors for the audit of the company’s annual accounts Fees payable to the company’s auditors for other services: — The audit of the company’s subsidiaries — Tax services Profit on disposal of property, plant and equipment 4 Exceptional expenses Redundancy costs (see (a) below) Provision for losses on deposits with Icelandic banks (see (b) below) 2009 £000 27,876 537 5,233 24 25 13 (74) 2009 £000 2,198 3,845 6,043 2008 £000 33,126 (192) 5,913 22 24 11 (50) 2008 £000 — — — a) Redundancy costs relate to termination of employment payments due to reduction in production volumes. b) The company reported in October 2008 that it had £5.7 million on deposit with Icelandic banks Kaupthing Singer and Friedlander, Heritable Bank, Landsbanki and Glitnir Bank. All of these amounts were due for repayment by 31st December 2008. No repayment has been received and therefore these deposits are at risk. Statements have been issued by the administrators of Heritable Bank and Kaupthing Singer and Friedlander giving a range of possible outcomes. The lower end of these ranges has been used to calculate the recoverable amount (see note 14). 26 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 5 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 6) Employer’s national insurance contributions and similar taxes 2009 865 84 949 2009 £000 24,239 236 800 193 2,408 27,876 2008 938 88 1,026 2008 £000 28,970 323 946 27 2,860 33,126 The directors represent the key management personnel. Details of their compensation are given in the Remuneration Report on page 15. 6 Pensions The group operates two pension schemes providing benefits based on final pensionable pay. These schemes are closed to new entrants and closed to future accruals on 6th April 2009. 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 2008 using the attained age method. It assumed that the rate of return on investments was 5.9% per annum for pre-retirement and 4.9% per annum for post-retirement, and the rate of increase in wages and salaries was 4.4% per annum for the Staff Scheme and 3.9% per annum for the Shopfloor Scheme and price inflation was 3.4%. The demographic assumptions are based on the PA92 tables with medium cohort projected improvements and an underpin of 1.0% p.a. on future annual life expectancy improvements. An age rating of +1 year is then applied for the Staff Scheme and +3 years for the Shopfloor Scheme. The next actuarial valuation is due as at 6th April 2011. 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 schemes 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 2008 and updated to 31st March 2009 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 2009 N/A 3.5% 7.0% 3.5% 2008 4.6% 3.6% 5.9% 3.6% p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 27 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s continued 6 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 Unrecognised pension surplus (Effect of paragraph 58(b) limit) Net amount recognised in the balance sheet 2009 £000 39,043 467 2,305 436 (8,099) (901) 33,251 41,829 2,579 (11,054) 1,369 436 (901) 34,258 1,007 (1,007) — 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 Year to 31st March Components of pension cost Current service cost Interest cost Expected return on plan assets 2009 £000 467 2,305 (2,579) Total pension cost recognised within administrative expenses in the income statement (note 5) 193 Total pension cost recognised in the statement of recognised income and expense (2,955) Cumulative amount of actuarial losses immediately recognised 12,513 2008 £000 540 2,100 (2,613) 27 (2,748) 9,558 28 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 6 Pension disclosures under IAS 19 continued Plan assets The weighted average assets allocations at the year end were as follows: Assets category Equities Bonds Real estate Other Plan assets at 31st March Plan assets at 31st March 2009 62% 34% 4% — 100% 2008 69% 23% 4% 4% 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 6.1% (2008 – 6.0%) assumption. The projected pension cost for the year ending 31st March 2010 is £nil. 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 2009 £000 (8,475) 7.0% N/A 5.9% 6.1% 4.6% 2008 £000 (2,168) 5.9% 4.6% 5.4% 6.0% 4.2% p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 29 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s continued 6 Pension disclosures under IAS 19 continued Weighted average life expectancy for mortality tables* used to determine benefit obligations at: 2009 2008 Male Staff/ Shopfloor Female Staff/ Shopfloor Male Staff/ Shopfloor Female Staff/ Shopfloor 21.1/19.4 24.0/22.2 21.1/19.4 24.0/22.2 Scheme member age 65 (current life expectancy) Scheme member age 45 (life expectancy at age 65) 22.2/20.4 25.0/23.1 22.2/20.4 25.0/23.1 * Mortality tables are PA92 mc (YOB) +1 for the Staff Scheme and PA92 mc (YOB) +3 for the Shopfloor Scheme. History of experience gains and losses Financial year ended in: Present value of defined obligation Fair value of plan assets 2009 33,251 34,258 2008 39,043 41,829 2007 38,774 43,122 2006 38,872 36,959 2005 33,949 27,692 Surplus/(deficit) 1,007 2,786 4,348 (1,913) (6,257) Difference between expected and actual return on scheme assets: amount (£000) percentage of scheme assets Experience gains and losses on scheme liabilities: amount (£000) percentage of scheme assets Total gains and losses: amount (£000) percentage of scheme assets 7 Finance income Interest on short-term deposits Income from listed investments Other (11,054) (32.0%) (4,781) (11.0%) (27) 0% 4,661 13.0% 1,369 5.0% 86 0% (2,033) 5.0% (1,875) 5.0% 2,674 7.0% 1,266 4.0% (2,955) (10.0%) (2,748) (7.0%) 1,848 5.0% 1,987 5.0% 103 0% 2009 £000 1,553 67 64 •1,684 2008 £000 1,364 42 8 1,414 30 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 8 Income tax Corporation tax based on a rate of 28% (2008 – 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 2009 £000 1,024 (5) — 1,019 1,990 (15) 2,994 3,616 Profit on ordinary activities at the standard rate of corporation tax in the UK of 28% (2008 – 30%) 1,013 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 Adjustment relating to industrial buildings allowances Effect of changes in tax rate Pension adjustments taken to equity Total tax charge for period Effective rate of tax (%) 18 — (5) (15) 2,066 — (83) 2,994 82.80 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 The Finance Act 2008 incorporated the phasing out of industrial building allowances and as a result the deferred tax implication (ie difference between accounting and tax treatment) is shown above. The effective rate of tax, excluding this adjustment, would have been 25.66%. 9 Dividends Final paid of 7.29p per share for the year ended 31st March 2008 (2007 – 6.94p) Interim paid of 2.71p per share (2008 – 2.71p) 2009 £000 3,181 1,182 4,363 2008 £000 3,028 1,182 4,210 The directors are proposing a final dividend of 7.29 pence (2008 – 7.29 pence) per share totalling £3,181,000 (2008 – £3,181,000). This dividend has not been accrued at the balance sheet date. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 31 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s continued 10 Earnings per share Earnings per share is calculated on the profit on ordinary activities after taxation of £622,000 (2008 – £11,996,000) and on the weighted average number of shares in issue at the end of the year of 43,632,068 (2008 – 43,632,068). There are no share options, hence the diluted earnings per share is the same as above. 11 Property, plant and equipment Land and buildings £000 Plant and other equipment £000 Cost At 1st April 2008 Additions during year Disposals At 31st March 2009 Depreciation and amounts written off At 1st April 2008 Charge for year Disposals At 31st March 2009 Net book values At 31st March 2009 At 31st March 2008 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 At 31st March 2008 Net book values At 31st March 2008 At 31st March 2007 14,056 7,793 — 21,849 2,274 267 — 2,541 19,308 11,782 12,516 92 1,448 — 14,056 2,018 256 — 2,274 11,782 10,498 74,115 12,095 (2,751) 83,459 47,125 4,966 (2,732) 49,359 34,100 26,990 68,175 4,111 3,703 (1,874) 74,115 43,178 5,657 (1,710) 47,125 26,990 24,997 Total £000 88,171 19,888 (2,751) 105,308 49,399 5,233 (2,732) 51,900 53,408 38,772 80,691 4,203 5,151 (1,874) 88,171 45,196 5,913 (1,710) 49,399 38,772 35,495 The net book value of group land and buildings includes £2,525,000 (2008 – £1,625,000) for land which is not depreciated. Land and buildings include £359,000 for property held on long leases (2008 – £359,000). At 31st March 2009 the new foundry at William Lee (asset in course of construction) is included at cost of £8,067,000 (2008 – £1,448,000) in land and buildings and cost of £10,453,000 (2008 – £3,703,000) in plant and machinery. 32 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 12 Financial assets Available-for-sale assets At 1st April 2008 Disposals Net gains/(losses) transferred to equity At 31st March 2009 2009 £000 429 2009 £000 736 (108) (199) 429 2008 £000 736 2008 £000 823 — (87) 736 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. 13 Inventories Raw materials Work in progress Finished goods Inventories are net of impairment provisions of £1,035,000 (2008 – £498,000). 14 Trade and other receivables Due within one year: Trade receivables Other receivables Prepayments 2009 £000 2,239 2,278 2,884 7,401 2009 £000 10,173 2,216 1,465 13,854 Other receivables include deposits with Icelandic Banks of £5,701,000 less impairment provision of £3,845,000 (see note 4). 15 Trade and other payables Current trade and other payables: Trade payables Social security Other payables Accruals 2009 £000 6,799 610 490 4,709 12,608 2008 £000 1,861 2,727 2,466 7,054 2008 £000 18,648 2,273 1,667 22,588 2008 £000 10,607 1,415 349 6,218 18,589 Included within accruals is a provision of £622,000 (2008 – nil) relating to redundancy costs which has not been included in a separate provision as it is not material to the financial statements. p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 33 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s continued 16 Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 28% (2008 – 28%). The movement on the deferred tax account is shown below: Deferred tax — net At 1st April 2008 Taken to equity Charge At 31st March 2009 The movement in deferred tax assets and liabilities during the year are shown below: Deferred tax liabilities At 1st April 2008 Charged to income statement Charged to statement of recognised income and expense At 31st March 2009 The deferred tax charged to equity during the year is as follows: Accelerated tax depreciation £000 2,840 1,850 — 4,690 Tax on actuarial gains Tax on change in fair value of available for sale financial assets Tax on items taken directly to reserves 2009 £000 2,382 (56) 1,975 4,301 Other £000 (458) 125 (56) (389) 2008 £000 — (56) (56) 2008 £000 2,141 (32) 273 2,382 Total £000 2,382 1,975 (56) 4,301 2007 £000 — (32) (32) 34 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 17 Share capital Authorised 50,000,000 10p ordinary shares Allotted and fully paid 43,632,068 10p ordinary shares 2009 £000 5,000 4,363 2008 £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. 18 Statement of changes in shareholders’ equity Share Share redemption Retained capital (a) premium (b) reserve (c) earnings (d) Capital At 1st April 2008 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 2009 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 £000 4,363 £000 874 — — — — — 4,363 4,363 — — — — — — — — — — 874 874 — — — — — At 31st March 2008 4,363 874 £000 13 — — — — — 13 13 — — — — — 13 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. Total equity £000 77,857 622 (4,363) (199) (296) 56 £000 72,607 622 (4,363) (199) (296) 56 68,427 73,677 65,386 11,996 (4,210) (87) (510) 32 70,636 11,996 (4,210) (87) (510) 32 72,607 77,857 p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 35 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s continued 19 Commitments Capital commitments contracted for by the group but not provided for in the accounts 2009 £000 435 2008 £000 10,380 20 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. Other than risks associated with Icelandic bank deposits 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. The added credit risks associated with bank deposits has led the group to only use major UK banks and to hold amounts on deposit for shorter periods. Principal financial instruments The principal financial instruments used by the group, from which financial instrument risk arises, are as follows: l trade receivables l other receivables l cash at bank l 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 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 receivables Other receivables Cash and cash equivalents Total current financial assets The maximum exposure to credit risks is detailed in the above table. Loans and receivables 2008 £000 18,648 2,273 31,494 52,415 2009 £000 10,713 2,216 15,804 28,733 36 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 20 Financial instrument risk exposure and management continued Current financial liabilities Trade payables Other payables Accruals Total current financial liabilities Credit risk Financial liabilities measured at amortised cost 2009 £000 6,799 490 4,709 11,998 2008 £000 10,607 349 6,218 17,174 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. As at 31st March 2009, trade receivables of £8,942,000 (2008 – £16,379,000) were past due. Against these balances no impairment provisions were made. The Icelandic bank deposits signify a significant concentration of credit risk. See notes 4 and 14. 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. Impairment provisions are made against trade receivables when considered appropriate based upon objective evidence. No major renegotiation of terms has taken place during the year. The carrying value of the group’s trade and other receivables is denominated in the following currencies: Sterling US$ Euro 2009 £000 7,582 — 2,591 10,173 2008 £000 13,894 30 4,724 18,648 p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 37 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s continued 20 Financial instrument risk exposure and management continued At 31st March 2009 trade receivables of £662,000 (2008 – £1,957,000) 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 2009 £000 662 — — 662 2008 £000 1,768 119 70 1,957 At 31st March 2009 trade receivables of £569,000 (2008 – £312,000) were past due and impaired. The amount of the provision at 31st March 2009 was £684,000 (2008 – £563,000). The ageing of these receivables is as follows: 30–60 days 60–90 days 90+ days 2009 £000 273 57 239 569 2008 £000 76 28 208 312 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 Increase/(decrease) in provisions Written off against provisions Recovered amounts reversed Closing balance 2009 £000 563 131 (10) — 684 2008 £000 634 (71) — — 563 Impairment losses on trade receivables of £131,000 (2008 – gains £71,000) 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 facilities of £1,000,000 (2008 – £1,000,000) 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). 38 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 20 Financial instrument risk exposure and management 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 12). 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 (2008 – £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. At the balance sheet date foreign exchange facilities of £2 million (2008 – £2 million) were available to the group to enable them to enter into forward exchange contracts. The group had no outstanding foreign currency forward at 31st March 2009 (2008 – £nil). The currency and interest profile of the group’s financial assets and liabilities are as follows: Floating rate Fixed rate Interest-free Sterling US$ Euro Sterling US$ Euro assets 2009 £000 101 7 55 163 assets 2009 £000 15,501 — 140 15,641 assets 2009 £000 7,582 — 2,591 10,173 Floating rate Fixed rate Interest-free assets 2008 £000 299 137 59 495 assets 2008 £000 30,728 — 271 30,999 assets 2008 £000 13,894 30 4,724 18,648 Total £000 23,184 7 2,786 25,977 Total £000 44,921 167 5,054 50,142 p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 39 16321 25/06/2009 Proof 6 N o t e s t o t h e A c c o u n t s continued 20 Financial instrument risk exposure and management continued Sterling US$ Euro Interest-free liabilities Interest-free liabilities 2009 £000 6,600 4 195 6,799 2008 £000 10,170 — 437 10,607 Fixed rate assets attracted interest rates between 5.38% to 6.41% (2008 – 5.48% to 6.89%) on sterling 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 three months. The effect of a +50/(50) increase/(decrease) in basis points with all other variables held constant would have the effect of increasing/ (decreasing) profit before tax by £80,000/(£63,000) (2008 – £147,000/(£167,000)). 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 (£134,000)/£149,000 (2008 – (£238,000)/£264,000). Derivative Financial Instruments The group enters into contracts to purchase electricity and in the year the contract contained clauses which met the definition of a derivative. At the point of initial recognition and at the balance sheet date the derivative had no value. During the year the Income Statement was charged with £2,278,000 under the heading cost of sales. This amount reflects the additional costs incurred as a result of lower than predicted usage. Fair value Unless otherwise indicated, the carrying amounts of the group’s financial instruments are a reasonable approximation of their fair values. 40 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 F i v e Y e a r F i n a n c i a l H i s t o r y — u n a u d i t e d For the years ended 31st March Trading results Revenue Profit before tax Profit after tax Dividends Balance sheet summary Equity Share capital Reserves Total equity Assets Property, plant and equipment Financial assets Deferred tax asset Current assets Total liabilities Dividends and earnings Pence per share paid and proposed Number of times covered Earnings per share — basic and diluted 2009 £000 84,812 3,616 622 4,363 2008 £000 97,372 16,664 11,996 4,210 2007 £000 86,230 13,057 9,410 4,036 2006 £000 76,696 12,701 8,755 3,875 2005 £000 69,037 9,632 6,792 3,704 4,363 69,314 4,363 73,494 4,363 66,273 4,363 62,762 4,363 56,368 73,677 77,857 70,636 67,125 60,731 53,408 38,772 35,495 429 — 736 — 823 — 53,837 37,059 39,508 61,136 36,318 53,554 32,566 1,139 574 34,279 53,411 33,163 984 1,877 36,024 47,314 (17,219) (22,787) (19,236) (20,565) (22,607) 73,677 77,857 70,636 67,125 60,731 10.0 — 1.43p 10.0 2.7 9.52 2.3 9.20 2.3 8.79 1.8 27.49p 21.57p 20.07p 15.57p p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 41 16321 25/06/2009 Proof 6 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 17, 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 2009 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 Notes 4 5 6 7 8 9 10 11 11 11 2009 £000 12,951 5,710 4,612 18,203 13,020 72 35,907 6,454 29,453 48,114 (571) 47,543 4,363 874 13 42,293 47,543 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 The parent company accounts on pages 42 to 48 were approved and authorised for issue by the board of directors on 24th June 2009, and were signed on its behalf by: B. J. Cooke J. C. Roby Chairman Finance Director Notes to the accounts are on pages 43 to 48. 42 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 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 to 7 of the Annual Report and Accounts 1 Accounting policies Stocks Financial Instruments Basis of accounting Stock and work in progress have been a) Financial assets 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. 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 The company’s financial assets relate to loans and receivables. 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 Depreciation Monetary assets and liabilities held to maturity. Depreciation is calculated on the straight- line basis to write off the initial cost of fixed assets at the following rates denominated in foreign currencies are translated at the rate of exchange ruling Unless otherwise indicated, the at the balance sheet date. Transactions carrying amounts of the group’s financial in foreign currencies are recorded at the assets are a reasonable approximation of per annum: Buildings Plant and other equipment 2% rate ruling at the date of the transaction, their fair values. all differences being taken to the profit and 7% to 33% loss account. Loans and receivables Freehold land is not depreciated. Deferred tax These assets are non-derivative financial assets with fixed or determinable 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. Where defined benefit pension schemes are multi-employer schemes and it is not possible to identify the company’s share of assets and liabilities of those schemes on a reasonable and consistent basis, the company contributions payable to those schemes during the year are charged to the profit and loss account. Turnover Turnover is the aggregate of the invoiced values of sales (less returns and allowances) charged to external customers of the company, excluding value added tax. Turnover is recognised when goods are dispatched. Deferred tax is recognised in respect of payments that are not quoted in an active all timing differences that have originated market. They arise principally through but not reversed at the balance sheet date the provision of goods and services to where transactions or events that result in customers (e.g. trade receivables) and an obligation to pay more tax in the future deposits held at banks and building or a right to pay less tax in the future have societies, but may also incorporate other occurred at the balance sheet date. Timing types of contractual monetary asset. differences are differences between the They are initially recognised at fair value company’s taxable profits and its results plus transaction costs that are directly as stated in the accounts. attributable to the acquisition or issue and subsequently carried at amortised cost Deferred tax is measured at the average using the effective interest rate method, tax rates that are expected to apply in the less provision for impairment. periods in which the timing differences are expected to reverse, based on tax The effect of discounting on these rates and laws that have been enacted or financial instruments is not considered to substantially enacted by the balance sheet be material. 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 cost and reviewed for impairment annually. Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the terms receivable, the amount p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 43 16321 25/06/2009 Proof 6 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 to 7 of the Annual Report and Accounts of such a provision being the difference Financial liabilities measured at Dividends between the net carrying amount and amortised cost Equity dividends are recognised when they Financial liabilities include trade payables become legally payable. Interim equity and other short-term monetary liabilities, dividends are recognised when paid. Final which are initially recognised at fair value equity dividends are recognised when and subsequently carried at amortised approved by the shareholders at an annual cost using the effective interest method. general meeting. Fair value is calculated discounting Related party transactions estimated future cash flows using a market rate of interest. c) Share capital The company has taken advantage of the exemption conferred by Financial Reporting Standard 8 ‘Related party disclosures’ not to disclose transactions The group’s ordinary shares are classified with members of the group on the grounds as equity instruments. The group is not that at least 90% of the voting rights in subject to any externally imposed capital the company are controlled within that requirements. Share capital includes the group and the company is included in nominal value of the shares and any share consolidated financial statements. premium attaching to the shares. 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 loss being 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. 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. Unless otherwise indicated, the carrying amounts of the group’s financial liabilities are a reasonable approximation of their fair values. 44 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 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 was £2,420,000 (2008 – £7,440,000). The profit and loss account includes £24,000 (2008 – £22,000) for audit fees. 3 Dividends Final paid of 7.29p per share for the year ended 31st March 2008 (2007 – 6.94p) Interim paid of 2.71p per share (2008 – 2.71p) 2009 £000 3,181 1,182 4,363 2008 £000 3,028 1,182 4,210 The directors are proposing a final dividend of 7.29 pence (2008 – 7.29 pence) per share totalling £3,181,000 (2008 – £3,181,000). This dividend has not been accrued at the balance sheet date. 4 Fixed assets Cost At 1st April 2008 Additions during year Disposals At 31st March 2009 Depreciation and amounts written off At 1st April 2008 Charge for year Disposals and adjustments At 31st March 2009 Net book values At 31st March 2009 At 31st March 2008 Land and buildings £000 Plant and other equipment £000 9,239 1,040 — 10,279 1,654 164 — 1,818 8,461 7,585 23,284 178 (14) 23,448 18,021 945 (8) 18,958 4,490 5,263 Total £000 32,523 1,218 (14) 33,727 19,675 1,109 (8) 20,776 12,951 12,848 The net book value of land and buildings includes £2,125,000 (2008 – £1,225,000) for land which is not depreciated. Land and buildings include £359,000 for property held on long leases (2008 – £359,000). p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 45 16321 25/06/2009 Proof 6 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 5 Investments Subsidiary companies At cost Listed investments at market value 2009 £000 5,281 429 5,710 2008 £000 5,281 736 6,017 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. During the year the company disposed of listed investments of £108,000 (2008 – NIL) and transferred net losses to equity of £199,000 (2008 – £87,000). 6 Stocks Raw materials Work in progress Finished goods 7 Debtors Due within one year: Trade debtors Amounts owed by subsidiary companies Corporation tax recoverable Other debtors Prepayments and accrued income 8 Creditors Due within one year: Trade creditors Amounts owed to subsidiary companies Corporation tax Other taxation and social security Other creditors Accruals and deferred income 2009 £000 858 1,423 2,331 4,612 2009 £000 6,954 8,567 157 1,973 552 18,203 2009 £000 2,361 796 — 365 463 2,469 6,454 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 14,446 46 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 9 Provisions for liabilities Deferred taxation At 1st April 2008 Taxation deferred this year At 31st March 2009 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 11 Reserves At 1st April 2008 Profit retained Changes in fair value of investments At 31st March 2009 Share capital £000 4,363 — — 4,363 2009 £000 483 88 571 806 (235) 571 2009 £000 5,000 4,363 Capital Share redemption Profit and premium reserve loss account £000 874 — — 874 £000 13 — — 13 £000 44,435 (1,943) (199) 2008 £000 97 386 483 885 (402) 483 2008 £000 5,000 4,363 Total equity £000 49,685 (1,943) (199) 42,293 47,543 p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 47 16321 25/06/2009 Proof 6 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 12 Reconciliation of movements in shareholders’ funds Profit for the year Changes in fair value of investments Dividends Net (reduction)/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 Redundancy payments Short-term non-monetary benefits Defined contribution pension cost Defined benefit pension cost Employer’s national insurance contributions and similar taxes 2009 £000 2,420 (199) (4,363) (2,142) 49,685 47,543 2009 395 29 424 2009 £000 11,815 1,312 177 161 589 1,181 15,235 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 Directors’ remuneration is detailed in the Remuneration Report on pages 15 and 16. 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 £589,000 (2008 – £520,000). The last valuation was performed with an effective date of 6th April 2008. Further details of the schemes are contained in note 6 of the consolidated accounts of Castings P.L.C. 15 Capital commitments Authorised, but not provided in the accounts 2009 £000 35 2008 £000 134 48 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 N o t i c e o f M e e t i n g Notice is hereby given that the one hundred on 17th August 2014 save that the held by such shareholders; and and second Annual General Meeting of Company may before such expiry Castings P.L.C. (the “Company”) will be make an offer or enter into an held at Holiday Inn, Birmingham M6, Junc. agreement which would or might 7, Chapel Lane, Great Barr, Birmingham, require relevant securities to be West Midlands, B43 7BG, on Tuesday, allotted after the expiry of such 18th August 2009 at 3.30 pm for the period and the directors may allot relevant securities in pursuance of any such offer or agreement as if the authority conferred had not expired; (b) 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 (c) the foregoing authority shall be in an aggregate nominal amount substitution for the authorities given not exceeding £218,160, which to the directors under Section 80 of represents approximately 5% of the the Companies Act 1985 on 19th current issued share capital of the August 2008, which authorities are accordingly hereby revoked; Company, and shall expire at the conclusion of the following purposes: As ordinary business 1 To receive and adopt the directors’ report and audited accounts for the year ended 31st March 2009. 2 To declare a final dividend. 3 To re-elect Mr J. C. Roby as a director. 4 To re-elect Mr A. J. Smith as a director. 5 To re-elect Mr D. J. Gawthorpe as a director. (d) this authority will be put to annual next Annual General Meeting following 6 To approve the directors’ remuneration shareholder approval. report for the year ended 31st March As special business 2009. 7 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. As special resolutions 9 THAT the directors be and are hereby empowered pursuant to Section 95 of the Companies Act 1985 to allot equity securities (within the meaning of Section 94 of that Act) for cash pursuant to the general authority conferred by the ordinary resolution numbered 8 set out in the notice convening this meeting as The share capital consists of 43,632,068 if Section 89(1) of the said Act did not ordinary shares with voting rights. As an ordinary resolution 8 THAT: (a) the directors be and are hereby generally and unconditionally authorised in accordance with Section 80 of the Companies Act 1985 to exercise all the powers of the Company to allot relevant securities (as defined in the said Section 80) provided that the aggregate nominal value of such securities shall not exceed £636,793, which represents approximately 14.6% of the current issued share capital of the Company; (b) the foregoing authority shall expire apply to any such allotment provided that this power shall be limited: (a) to allotments in connection with an offer of equity securities to the ordinary shareholders of the the securities Company where the to respectively attributable interests of such holders are proportionate (as nearly as may be and subject to such exclusions or other arrangement as the directors may consider appropriate, necessary or expedient to deal with any fractional entitlements or with any legal or practical difficulties in respect of overseas holders or otherwise) to the respective numbers of ordinary shares then 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. 10 THAT the Company be and is hereby generally and 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) the maximum number of ordinary shares hereby authorised to be purchased is 4,358,844 representing 9.99% of the issued share capital at 31st March 2009; (b) the minimum price which may be paid for each ordinary share is 10p, exclusive of the expenses of purchase; p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 49 16321 25/06/2009 Proof 6 N o t i c e o f M e e t i n g continued (c) the maximum price (exclusive of Note: In Accordance with Regulation 41 of the expenses) which may be paid for Any member of the company entitled Uncertified Securities Regulations 2001, each ordinary share is an amount to attend and vote at this meeting may only those members entered on the equal to 105% of the average of appoint one or more proxies, who need company’s register of members at 6.00 the middle market quotations for not also be a member, to attend and vote, pm on the day which is two days before the ordinary shares as derived on a poll, in his stead. The instrument the day of the meeting or, if the meeting from the Daily Official List of appointing a proxy, including authority is adjourned, shareholders entered on the the London Stock Exchange under which it is signed (or a notarially company’s register of members at 6.00 Limited for the five business days certified copy of such authority), must be pm on the day two days before the date immediately preceding the day of deposited at the offices of the Company’s of any adjournment shall be entitled to purchase; registrars: Capita Registrars, The Registry, attend and vote at the meeting. (d) unless previously revoked or varied, the authority hereby conferred shall expire at the 34 Beckenham Road, Kent, BR3 4TU, not less than 48 hours before the time appointed for the meeting. conclusion of the next Annual Beneficial owners: General Meeting of the Company In accordance with Section 325 of the following the date of this Companies Act 2006, the right to appoint resolution, unless such authority is proxies does not apply to persons renewed on or prior to such date; nominated to receive information rights (e) the Company may, before the under section 146 of the Act. expiry of this authority, conclude Persons nominated to receive information a contract to purchase ordinary rights under section 146 of the Act who shares under this authority which have been sent a copy of this notice will or may be executed wholly of meeting are hereby informed, in or partly after such expiry and accordance with Section 149 (2) of the may make a purchase of ordinary Act, that they may have a right under an shares pursuant to any such agreement with the registered member contract, as if such authority had by whom they were nominated to be not expired. The record date for payment of the final dividend is 24th July 2009. Assuming the final dividend is approved by the members, the dividend will be paid on 21st August 2009. By order of the board J. C. ROBY Company Secretary Registered Office: Lichfield Road, Brownhills, West Midlands, WS8 6JZ. 24th June 2009 appointed, or to have someone else 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 nominated in respect of these arrangements. 50 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 D i r e c t o r s , O f f i c e r s a n d A d v i s 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 G. B. Wainwright, MIMgt, MIEx, FRSA Non-executive C. P. King, FCA Non-executive A. J. Smith, MIBritF, IEng Non-executive Secretary and J. C. Roby, FCA Registered Office Lichfield Road, Registrars Auditors Brownhills, West Midlands, WS8 6JZ Tel: 01543 374341 Fax: 01543 377483 Web: www.castings.plc.uk 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 Solicitors 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 Bankers Stockbrokers Arden Partners plc Arden House, Highfield Road, Edgbaston, Birmingham, B15 3DU Registered No. 91580 p o r t 2 0 0 9 A n n u a l R e p o r t 2 0 0 9 51 16321 25/06/2009 Proof 6 S h a r e h o l d e r I n f o r m a t i o n Capital gains tax If you receive any unsolicited investment The official price of Castings P.L.C. ordinary advice: shares on 31st March 1982, adjusted for bonus issues, was 4.92 pence. Warning to shareholders The following guidance has been issued by the Financial Services Authority: l Make sure you get the correct name of the person and organisation. l Check that they are properly authorised by the FSA before getting involved. You can check at www.fsa. Over the last year many companies have gov.uk/register. become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas-based ‘brokers’ who target UK shareholders offering to sell them what often turned out to be worthless or high risk shares in US or UK investments. They can be very persistent and extremely persuasive and a 2006 survey by the Financial Services Authority (FSA) has reported that the average amount lost by investors is around £20,000. It is not just the novice investor that has been duped in this way; many of the victims had been successfully investing for several years. Shareholders are advised to be very wary of any unsolicited advice, offers to l The FSA also maintains on its website a list of unauthorised overseas firms who are targeting, or have targeted, UK investors and any approach from such organisations should be reported to the FSA so that this list can be kept up to date and any other appropriate action can be considered. If you deal with an unauthorised firm, you would not be eligible to receive payment under the Financial Services Compensation Scheme. The FSA can be contacted by completing an online form at: w w w. f s a . g o v. u k / p a g e s / d o i n g / regulated/law/alerts/overseas.shtml l If the calls persist, hang up. buy shares at a discount or offers of free More detailed information on this or similar reports into the company. activity can be found on the FSA website www.fsa.gov.uk/consumer/ 52 A n n u a l R e p o r t 2 0 0 9 16321 25/06/2009 Proof 6 16321CASTINGSCVR.indd 4 16321CASTINGSCVR.indd 4 16321 25/06/2009 Proof 6 25/06/2009 12:06 25/06/2009 12:06 16321CASTINGSCVR.indd 1 16321CASTINGSCVR.indd 1 16321 25/06/2009 Proof 6 25/06/2009 12:06 25/06/2009 12:06
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