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