A n n u a l R e p o r t 2 0 1 0 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 Statement of Comprehensive Income 20 Consolidated Balance Sheet 21 Consolidated Cash Flow Statement 22 Consolidated Statement of Changes in Equity 23 Notes to the Accounts 43 Five Year Financial History 44 Parent Company Balance Sheet 45 Notes to the Parent Company Accounts 51 Notice of Meeting 53 Directors, Officers and Advisers 54 Shareholder Information A n n u a l R e p o r t 2 0 1 0 1 D i r e c t o r s Executive Directors Non-Executive Directors Brian Cooke Chairman Gerard Wainwright Non-executive Director Aged 70, he joined the company in 1960 Aged 60, 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 48, he joined the company in 1984 Aged 73, he was appointed a director and became local technical director at in 1998 and is an independent director. Brownhills in 1994. He was appointed He retired from practice as a partner a director in 2003 and became chief with Coopers & Lybrand and has been executive in April 2007 and is the director a member of the boards of a number with environmental and human resource of companies. He is chairman of the responsibility. Chris Roby Finance Director audit committee and is regarded as the financial expert of that committee and is also a member of the remuneration and nomination committees. Aged 62, he joined the company in 1988 as company secretary and was appointed Tony Smith finance director later in that year. Prior Non-executive Director to that date he had been working in a Aged 63, 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. companies. He will be retiring from the In 2004 he retired from executive duties. board later in the year. A successor has His continuing involvement is invaluable been appointed as financial director to the company with his experience in designate which will ensure a controlled 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. handover. Mark Lewis Managing Director — CNC Speedwell Ltd Aged 46, 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 56, 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 1 0 Outlook We are encouraged by the recent improvement in demand, but with world economic problems, it is impossible to predict the future. However, the company has also shown its capability in managing the business in difficult times and is well prepared for any further upturn in activity. B. J. COOKE Chairman 23rd June 2010 C h a i r m a n ’ s S t a t e m e n t The financial year under review was the new orders we have obtained come into most difficult trading year we have had to production. All foundries are fully invested manage for a considerable time. and little capital expenditure will be Our turnover reduced from record levels in year ended March 2008 of £97.4 million to £84.8 million last year and £60.6 million during the year ended March 2010. The problems revolved around the world economic situation and our main markets being involved in commercial vehicle production in Europe. Demand dropped rapidly in October 2008 and this continued for a long period of time, but we have seen a slow increase in demand from mid 2009 which hopefully will be sustained. Profit before tax as shown in the consolidated statement of comprehensive income is £9.8 million. However, this is after crediting a net £2.0 million in respect of one-off pension adjustments, and a net £0.2 million of other exceptional items. After excluding these items, the underlying profit before tax for the year was £7.6 million. Also, during the year the company paid £2.5 million into the final salary pension schemes. I am pleased to report we have started to re-employ some of the employees we had to make redundant. Growth back to our previous levels will take some time depending on many outside factors beyond our control. Foundry Production We are now operating at about 80% of our previous levels and also have extra production availability from the new foundry at William Lee. We are operating the new foundry for three days a week, and it is proving highly efficient. The company will benefit when demand increases and required in the immediate future. CNC Speedwell It has been a very difficult time for CNC Speedwell due to the high cost of capital expenditure and low demands from our major customers. However, I am pleased to report that with improved demand plus many orders from new customers now coming into production, the performance of the company is improving. We also expect to invest further in machining capacity as the market continues to improve. Dividend I am pleased to report that with careful cash management and the company’s policy of maintaining a healthy balance sheet we are recommending that the final dividend is maintained at 7.29 pence per share. An interim dividend of 2.71 pence per share was paid in January 2010. Directors and Employees Chris Roby will be retiring as Financial Director later in the year. We have appointed Steve Mant as our new Financial Director designate from BDO our auditors and it is intended that he will formally join the Board on Chris Roby’s departure. I wish to thank Chris for his many years’ service keeping the company’s finances in good order. I wish him a long and happy retirement. I again would like to thank all our employees for their continued support throughout these difficult times and it is hoped that the improvement continues. A n n u a l R e p o r t 2 0 1 0 3 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 We saw a small increase in demand up Throughout the year we have received The Consolidated Statement of to January 2010 but since then this has sums totalling £1.2 million from the Comprehensive Income shows a profit increased further and we have been able administrators of the UK subsidiaries of before tax of £9.8 million. However, this to add additional shifts to match the two of the Icelandic banks. The provision includes a credit of £2.0 million for defined orders. we made last year has been reviewed but benefit pension schemes (see note 6) in Revenue decreased by 28% to £61 not changed. accordance with IAS 19. million, of which 53% was exported. The Due to the significantly lower interest The directors are recommending a dispatch weight of castings to third party rates on offer from financial institutions final dividend that will be paid in August customers was 31,800 tonnes which was and having less cash to invest, finance which, with the interim dividend paid a decrease of 12,100 tonnes from the income reduced by £1.55 million (92%). in January, will result in the return of previous year. CNC Speedwell’s turnover Cash outflow included £2.5 million paid £4.4 million to shareholders. decreased by 25.7%. In the first part of the year the reduction in volumes resulted in short- term inefficiencies which decreased the margin. These have now been eliminated into the final salary pension schemes which were closed to future accruals from 6th April 2009 with the contributing members joining the money purchase scheme. but the margins are still below those prior The pension valuation under IAS 19 showed a surplus of £4.9 million but this has not been shown as an asset due to the restriction of recognition of assets. to the recession. The increased production has meant that we have been able to recruit additional employees across the group, many of whom were previously made redundant. As a result we have been able to release as an exceptional credit £404,000 relating to accruals for redundancy payments made as at 31st March 2009 that were not subsequently used. Also, the new foundry at William Lee has been brought into use but only at the expense of capacity elsewhere on site. 4 A n n u a l R e p o r t 2 0 1 0 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 2010. Trading activities Castings P.L.C. supplies spheroidal 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. 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 in January 2010. The directors now recommend a final dividend of 7.29 pence per share payable on 20th August 2010 to shareholders on the register on 23rd July 2010, making a total distribution of 10.0 pence for the year. Share capital The company’s capital consists of 43,632,068 (2009 – 43,632,068) ordinary shares of 10 pence each with voting rights. There are no restrictions on voting rights. 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 think fit. 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 2010 2009 1,953,986 1,950,986 128,190 103,079 40,000 28,296 8,000 3,025 — 128,190 103,079 30,000 28,296 8,000 3,025 — There have been no changes in the shareholdings of directors since the year end. The following directors retire under the provisions of the Articles of Association and, being eligible, offer themselves for re-election: B. J. Cooke C. P. King } M. A. Lewis 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 for compensation for loss of office or employment that occurs because of a There are no restrictions on the 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 under section 146 of the Companies 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 demonstrate a strong commitment to their role. A n n u a l R e p o r t 2 0 1 0 5 D i r e c t o r s ’ R e p o r t continued The business of the company is managed by the board who may exercise all such days immediately preceding the day of a powers of the company as are not by legislation or by the company’s Articles required to purchase. The minimum price which may be exercised in general meeting. The board may make such arrangements as it thinks fit for be paid for each share is 10 pence. 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. The current authority to make market purchases expires at the forthcoming Annual General Meeting. The directors are Other than the directors’ service contracts the directors have no interests in any other now seeking the approval of shareholders 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 23rd June 2010: Aviva plc & subsidiaries Aberforth Partners’ Clients Hunter Hall Value Growth Trust Ruffer LLP B. J. Cooke Hamstall Investments Inc. Rathbone Investment Management Ltd Number 6,008,062 5,678,679 4,081,637 2,380,558 1,953,986 1,800,000 1,600,000 % 13.8 13.0 9.3 5.4 4.5 4.1 3.7 Business review The Chairman’s Statement on page sought from shareholders to allow the 3, the Business and Financial Review directors to issue new shares for cash to 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 2010. The authority is sought by way of a special resolution, details of which are also included in the notice of the meeting as item 10. This authority will only be exercised if the directors, in the light of market conditions prevailing at the time, expect it to result in an increase in future earnings per share, and if it is in the best interests of shareholders generally. Fixed assets The market value of the group’s interests on page 4, the Corporate Governance persons other than to existing members in land cannot be accurately established Statement on page 12, and the Notes to up to a maximum nominal amount of without obtaining a revaluation of all the the Accounts on pages 23 to 42 provide £218,160, being approximately 5% of the land and buildings owned by the group. detailed information relating to the group, current issued share capital. the operation and development of the business and the results and financial position for the year ended 31st March 2010. Future prospects Future prospects are dealt with in the Chairman’s Statement on page 3. Special business There will be two items of Special Business at the Annual General Meeting. Directors’ authority to allot shares Approval will be sought for a special resolution to renew the authority given to the directors to allot shares in the company. The present authority was granted on 18th August 2009 and under the Companies Act must be renewed at least every five years. Authority will also be 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 16th August 2015 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 2009, the board was given authority to purchase and cancel up to 4,358,844 of its own shares representing 9.99% of the company’s existing shares, through market purchases on The London Stock Exchange. The maximum price to be paid on any exercise of the authority was restricted to 105% of the average of the middle market quotation for the shares for the five dealing The directors consider that although a revaluation would show the market value of the land and buildings to be in excess of book value, this excess would not be significant in the context of group trading and would not justify the expense of a revaluation. Employee involvement 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. 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. 6 A n n u a l R e p o r t 2 0 1 0 Further details of employee Each of the persons who are directors Report should not be relied upon by any involvement are given under the Corporate at the date when this report was approved other party or for any other purpose. Social Responsibility section on pages 10 confirms that so far as each of the directors and 11. Health and safety As required by legislation, the group’s 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 policy for securing the health, safety and as a director to make himself aware of any welfare at work of all employees has been relevant audit information (as defined) and brought to their notice. In addition, safety to establish that the auditors are aware of committees hold regular meetings. that information. Supplier payment policy The group’s policy is to settle the terms Significant agreements There are no significant agreements to of payment with suppliers when agreeing which the company is party that take the terms of each transaction, ensure that effect, alter or terminate upon a change suppliers are made aware of the terms of of control of the company following a payment and abide by them provided the takeover bid. supplier complies with all relevant terms and conditions. The group does not follow any code or standard on payment practice. Individual operating businesses within Principal risks and uncertainties Principal risks and uncertainties are set the group are responsible for establishing out on page 8 and in note 4(b) in the Notes appropriate policies with regard to the to the Accounts. payment of their suppliers. The number of days’ purchases outstanding for payment by the group at the year end was 58 Corporate Governance the Details group’s of corporate (2009 – 28). governance policies are dealt with on Financial instruments Details of the use of financial instruments by the group are contained in note 19 and page 12. Cautionary statement Under the Companies Act, a company’s in note 4(b) in the Notes to the Accounts. directors’ report is required, among other Articles of Association Any amendments to the Articles of matters, to contain a fair review by the directors of the group’s business through a balanced and comprehensive analysis of Association have to be adopted by the development and performance of the the members by a special resolution in business of the group and the position of general meeting. The current articles were the group at the year end, consistent with 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 looking information. Approval of Directors’ Report and Responsibility Statement Each of the persons who is a director at the date of approval of this report confirms that to the best of his knowledge: (a) each of the group and parent financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU and UK Accounting Standards respectively, gives a true and fair view of the assets, liabilities, financial position 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 adopted in January 1989. the size and complexity of the business. uncertainties that they face. Auditors The auditors, BDO 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. The Directors’ Report set out above, including the Chairman’s Statement, By order of the board 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’ B. J. COOKE Chairman 23rd June 2010 A n n u a l R e p o r t 2 0 1 0 7 R e v i e w o f P r i n c i p a l R i s k s a n d U n c e r t a i n t i e s Risk In common with all trading business, the Market competition Automotive and commercial vehicle group is exposed to a variety of risks in the markets are, by their nature, highly Commodity and energy pricing 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 The loss of, or deterioration in any single 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 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 The group operates a number of specialist of this approach varies by customer. Energy contracts are locked in for at least 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 and if not obtained can result in penalties. interruption and possible loss of business in the event of unforeseen failure. Whilst this risk cannot be entirely mitigated without uneconomic duplication of all key Information technology and systems reliability 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 systems subject to virus protection, any work can be transferred from one location failure of back-up systems or other major to another very quickly. IT interruption could have a disruptive Suppliers Although the group takes care to ensure alternative sources of supply remain available effect on the group’s business. Short-term deposits 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 dependent, 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 downgraded before maturity therefore costs and potential damage to relationships possibly placing these deposits at risk. with key customers. 8 A n n u a l R e p o r t 2 0 1 0 Product quality and liability The group’s businesses expose it to certain Pension scheme funding The fair value of the assets and liabilities 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 2010 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. 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. The schemes were closed to future accruals from 6th April 2009 which only leaves past service liabilities to be funded. Trade credit The ability of our suppliers to maintain credit insurance on the group and its principal operating businesses is an important issue. We have excellent relationships with our suppliers and we continue to work closely with them on a normal commercial basis. A reduction in the level of cover available to suppliers may impact on our trading relationship with them and may have a significant effect on cash flows. A n n u a l R e p o r t 2 0 1 0 9 C o r p o r a t e S o c i a l R e s p o n s i b i l i t y 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 l Complying with all relevant legal information and training is given to all requirements, process, planning employees and contractors. and discharge authorisations, as appropriate to its operations. l Pursuing best practice techniques in the use of energy and raw materials. Both of our foundry sites are ISO 14001:2004 accredited. The group’s practices and procedures are subject to regular environmental audits by external communities in which we operate. The l Encouraging the beneficial reuse, consultants. group works hard to meet the legitimate recycling and recovery of its waste The group has also in place an energy expectations of these stakeholder groups products. l Ensuring that environmental issues considered when making are policy which requires each company to make continuing efforts to achieve the following objectives: decisions to invest in capital plant l To monitor and record energy and and in the planning and controlling of manufacturing processes. water consumption. l To reduce the consumption of l Promoting environmental awareness throughout the group and ensuring fossil fuels and utilise energy from sustainable sources where that personnel whose activities have practicable. whilst at the same time seeking to fulfil our objective of creating outstanding and enduring value through commercial success based on superior performance. The group has a network of policies and strategies through which we seek to ensure that our values form part of the culture of each of our operations. The environment We recognise our duty and responsibility towards protecting the environment wherever we conduct our business and strive to adopt the highest standards of environmental practices with the aim of minimising the impact of our commercial activities on the surrounding environment. Thus, we aim to meet, and wherever possible exceed, the standards demanded by applicable environmental legislation and operate a policy of effecting continual improvement in all of our processes that the potential to cause a significant impact on the environment receive 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. 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 requirements to ensure the minimum l Using techniques to avoid, reduce or of nuisance to the local environment. control pollution. 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 practise 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. Employees are informed weekly of production levels and the relative 10 A n n u a l R e p o r t 2 0 1 0 production performance. Similarly, they are kept informed of any factor affecting l To maintain a constant and continuing interest in health and safety matters the group and the industry generally. applicable to the group’s activities, Their involvement in the group’s performance is encouraged by means consulting and involving employees wherever possible. of a production bonus and at the time of The group has clearly defined health annual wages and salaries review they and safety policies and we operate are made aware of all economic factors a system of strict reporting. Regular affecting the previous year’s performance audits of health and safety at the group’s and the outlook for the ensuing year. manufacturing operations are carried out Recognising the demands of our customers and our strategy, the group’s policy is to recruit the best available people and to invest in their training and development to enable a high level of retention. In this regard, we are committed using independent agencies who make recommendations for improvements to achieve best practice wherever appropriate. The group’s health and safety policy is regularly reviewed and modified as circumstances and experiences dictate. to equality, judging applications for The group encourages the employment neither by race, nationality, maintenance of consistent high standards gender, age, disability, sexual orientation and each site is required to develop a nor political bias. safety management system that includes: The group gives full consideration l Health and safety planning and to employment applications by disabled objective setting. 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 The board regards the promotion of health 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 specific and refresher training. l Maintenance, inspection and statutory and safety measures as a mutual objective inspection of work equipment. 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 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. with all statutory conditions. 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. l To make available all necessary safety devices and protective equipment and to supervise their use. A n n u a l R e p o r t 2 0 1 0 11 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 2008 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 A director has 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 not breach that duty if the to cover all controls including financial, For each business there are regular relevant matter has been authorised in operational and compliance controls and weekly and monthly reports, reviewed by accordance with the Articles of Association risk management. boards and management, which contain by the other directors. 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 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 been identified and stipulated conditions regularly reviewed and has been in place Continual monitoring of the systems of in accordance with the guiding principles throughout the year under review and internal financial control is conducted by all and agreed a process to identify and up to the date of approval of the annual management. The external auditors, who authorise future conflicts. In practice, report and accounts. However, such a are engaged to express an opinion on the directors are asked to consider and system is designed to manage rather group accounts, also consider the systems disclose actual or potential conflicts at than eliminate the risk of failure to achieve of internal financial control to the extent the beginning of each meeting and as and business objectives and can provide only necessary to express that opinion. The when a matter arises. reasonable and not absolute assurance external auditors report the results of their against material misstatement or loss. work to management, including members The review covers all controls including of the board and the audit committee. financial, operational, compliance and risk management. 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 non-complexity of the group. established procedures necessary to implement the guidance for directors on the Combined Code such that they fully Auditors’ independence The non-audit work undertaken in the comply with it for the accounting period year by the group auditors, BDO LLP, ended on 31st March 2010. Internal financial control are The directors responsible was restricted to an involvement in the preparation of the tax computations and related tax advice of the group companies for and a review of the interim financial maintaining the group’s systems of 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 1 0 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 7 8 8 8 7 — — — — — 2 2 2 — — — — — 2 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, company and compared them to the level have served for more than ten years their internal control procedures and accounting of funding available. Details of cash and knowledge, advice and controls are still practices. The audit committee meets with borrowing facilities are set out in note 19 invaluable to the group. the auditors periodically and as necessary. to the accounts. The group’s objectives, Directors receive regular updates appropriate to the business throughout Remuneration committee As detailed in the remuneration report on the year. page 15. To assist with the conduct of their function, the non-executive directors Nomination committee 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. The committee met once Board committees The principal committees established by the directors are: Audit committee This committee comprised the three non-executive directors and is chaired by C. P. King. The finance director and other executive directors may also attend meetings as appropriate to the business in hand but are not members of the committee. The committee meets at least twice a year and examines any matters relating to the financial affairs of the group including during the year. Relations with shareholders The company holds meetings from time to time with institutional shareholders to discuss the company’s strategy and financial performance. The Annual General Meeting is used to communicate with private and institutional investors. Going Concern The directors have assessed the future funding requirements of the group and the policies and processes for managing its 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 19 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 A n n u a l R e p o r t 2 0 1 0 13 C o r p o r a t e G o v e r n a n c e continued adequate resources to continue operations for the foreseeable future. For this reason, l The role of the financial director and company secretary are fulfilled by the they continue to adopt the going concern same person as there is no one else basis in preparing the financial statements. within the group qualified to do the job Summary The board takes its responsibilities of this arrangement annually. and it would not be a full-time position. The board monitors the effectiveness 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. seriously even though there are a number of the provisions of the Code with which it does not comply. It does not feel that the size or complexity of the group and the way in which it governs would be enhanced or strengthened by further changing the already existing high standards of corporate governance practised. For the year ended 31st March 2010 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 ten years the board recognises the value they bring and believes 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 1 0 R e m u n e r a t i o n R e p o r t under report has been prepared to in This the accordance with Schedule 8 Accounting Regulations the Companies Act 2006 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 2010. 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- 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 executive directors and is chaired by G. B. Wainwright. The chairman of the group is invited to attend meetings where appropriate but is not a member of the committee. None of the executive directors were present at meetings of the committee during consideration of their own remuneration. No advice has been provided by external advisers or consultants. Remuneration policy The underlying policy the remuneration of the executive directors is that it shall be designed to retain and motivate the directors and be reasonable and fair in relation to their responsibilities. in setting Executive emoluments directors’ comprise annual salary, an annual bonus, membership of a company pension scheme and other benefits. The committee ordinarily salaries reviews directors’ annually, effective from 1st April, taking into account market rates and the performance of the individual and of the company. Pay remuneration. Policies and employment conditions of the group are taken into account in determining directors’ 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 2010 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 and therefore no annual bonuses annual are payable in respect of 2010. Salary/ fees £000 Benefits (note 1) £000 Performance related bonus £000 80 166 146 139 139 18 18 18 724 3 9 16 8 9 — — — 45 — — — — — — — — — 2010 Total £000 83 175 162 147 148 18 18 18 769 2009 Total £000 84 176 163 149 149 18 18 18 775 Note 1 — Benefits in kind include car or car benefit, fuel or cash allowance, and private health care. 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 at 1/60th per year of service to 2005 and a defined contribution pension scheme. 1/80th per year thereafter. From 6th April Pension contributions are not paid on 2009, they became deferred members. benefits or bonuses. Total contributions Final pensionable remuneration is based of the company total 7% of pensionable on capped basic salaries on retirement at earnings. normal retirement age. dependants’ pensions and the payment of From 6th April 2009, the executive a lump sum in the event of death in service. directors were able to join the Castings The scheme provides for a pension accrued P.L.C. Money Purchase Pension Scheme, Three directors are members of the Money Purchase Pension Scheme. In addition, J. C. Roby received a pension allowance contributions. equivalent to company A n n u a l R e p o r t 2 0 1 0 15 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’ 31/03/2010 31/03/2009 total accrued pension at in accrued pension during the year of inflation contributions £ £ £ 61 48 46 56 — — — — 173 122 0 0 717 737 287 348 12,809 7,873 2,691 4,907 Transfer value of accrued benefits Transfer Difference in transfer value of values accrued less benefits (note 2) 31/03/2010 31/03/2009 contributions £ £ £ £ 38,864 622,922 661,464 (38,542) 43,956 403,019 464,657 (61,638) 20,492 186,937 219,370 (32,433) 24,841 311,018 353,361 (42,343) (note 2) £ 39,037 44,078 20,492 24,841 Name of director J. C. Roby D. J. Gawthorpe M. A. Lewis G. Cooper The following directors became members of the Castings P.L.C. Money Purchase Pension and Life Assurance Scheme from 6th April 2009 and the contributions paid by Castings P.L.C. in respect of those directors over the year is set out below: D. J. Gawthorpe M. A. Lewis G. Cooper Contributions paid to 31/03/2010 9,008 9,026 9,026 Notes to pension benefits: 1. The Castings P.L.C. Staff Pension and Life Assurance Scheme was closed to future accrual of benefits on 5th April 2009. The above directors were members of this scheme up until this date. 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. Performance graph The following graph shows the company’s performance, measured by total shareholder Directors’ contracts 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. 300.00 250.00 200.00 150.00 100.00 50.00 0.00 11 AApprriill 22000055 CCaassttiinnggss PPLCC — TToottaall RReettuurrnn oonn IInnvveessttmmeenntt 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 Castings P.L.C. FTSE 350 INDS ENG 31 March 2010 Chairman of the remuneration committee Source: Thomson Financial – Thomson One Banker 23rd June 2010 16 A n n u a l R e p o r t 2 0 1 0 S t a t e m e n t o f D i r e c t o r s ’ R e s p o n s i b i l i t i e s The directors are responsible for preparing l prepare a directors’ report and the annual report and the financial directors’ remuneration report which statements in accordance with applicable comply with the requirements of the law and regulations. Companies Act 2006. Company law requires the directors The directors are responsible for to prepare financial statements for keeping adequate accounting records each financial year. Under that law the that are sufficient to show and explain directors are required to prepare the the company’s transactions and disclose group financial statements in accordance with reasonable accuracy at any time the with International Financial Reporting financial position of the company and Standards (IFRSs) as adopted by the enable them to ensure that the financial European Union and have elected to statements comply with the Companies prepare the company financial statements Act 2006 and, as regards the group in accordance with United Kingdom Generally Accepted Accounting Practice financial statements, Article 4 of the IAS Regulation. They are also responsible for (United Kingdom Accounting Standards safeguarding the assets of the company and applicable law). Under company and hence for taking reasonable steps for law the directors must not approve the the prevention and detection of fraud and financial statements unless they are other irregularities. satisfied that they give a true and fair view of the state of affairs of the group and company and of the profit or loss for the Website publication The directors are responsible for Directors’ responsibilities pursuant to DTR 4 The directors confirm to the best of their knowledge: l The group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the group. l The annual report includes a fair review of the development and performance of the business and the financial position of the group and the parent company, together with a description or the principal risks and uncertainties that they face. group and company for that period. ensuring the annual report and the In preparing these financial statements, the directors are required to: l select suitable accounting policies and then apply them consistently; l make judgements and accounting estimates that are reasonable and prudent; financial statements are made available on a website. Financial statements are published on the company’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 l state whether they have been prepared in accordance with IFRSs as adopted integrity of the company’s website is the responsibility of the directors. The by the European Union, subject to any directors’ responsibility also extends material departures disclosed and to the ongoing integrity of the financial explained in the financial statements; statements contained therein. l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business; A n n u a l R e p o r t 2 0 1 0 17 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 members of Castings P.L.C. We have audited the financial statements of Castings P.L.C. for the year ended 31st March 2010 which comprise the consolidated statement of comprehensive income, consolidated and parent company balance sheets, consolidated cash flow statement, the consolidated statement of changes in equity and the related notes. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting in framework that has been applied preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards Ireland). Those on Auditing standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. (UK and Scope of the audit of the financial statements An audit about in involves obtaining evidence the amounts and disclosures financial statements sufficient the to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; of significant accounting estimates made by the directors; and the overall presentation of the financial statements. reasonableness the Opinion on financial statements In our opinion: l l l l the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs as at 31st March 2010 and of the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance the IFRSs as adopted by with European Union; the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accounting Accepted Practice; and in accordance with the financial statements have been prepared the requirements of the Companies Act 2006; and, as regards the group financial statements, Articles 4 of the IAS Regulation. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: l l the part of the directors’ remuneration report to be audited has been properly prepared the Companies Act 2006; and in accordance with the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with financial statements. the Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: l adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or l parent company financial the the statements and directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or the part of l certain disclosures of directors’ remuneration specified by law are not made; or l we have not received all the information and explanations we required for our audit. Under the Listing Rules we are required to review: l l the directors’ statements, set out on page 13 in relation to going concern; and the part of the corporate governance relating to the company’s compliance with the nine provisions of the June 2008 Combined Code specified for our review. Stephen Ward (senior statutory auditor) For and behalf of BDO LLP, Statutory auditor Birmingham United Kingdom 23rd June 2010 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 18 A n n u a l R e p o r t 2 0 1 0 C o n s o l i d a t e d S t a t e m e n t o f C o m p r e h e n s i v e I n c o m e for the year ended 31st March 2010 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Excluding exceptional 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 Other comprehensive income for the year: Change in fair value of available-for-sale financial assets Actuarial losses on defined pension schemes Tax effect of gains and losses recognised directly in equity Total other comprehensive income for the year (net of tax) Total comprehensive income for the year attributable to the equity holders of the parent company 2010 £000 60,649 (45,523) 15,126 (769) (4,896) 204 (4,692) 9,665 139 9,804 (2,166) 7,638 68 (4,466) 681 (3,717) 3,921 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 (199) (296) 56 (439) 183 Earnings per share attributable to the equity holders of the parent company Basic and diluted 10 17.51p 1.43p Notes to the accounts are on pages 23 to 42. A n n u a l R e p o r t 2 0 1 0 19 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 2010 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 Deferred tax liabilities Total liabilities Net assets Equity attributable to equity holders of the parent company Share capital Share premium account Other reserve Retained earnings Total equity Notes 11 12 13 14 15 16 17 2010 £000 51,596 480 52,076 7,818 19,149 14,718 41,685 93,761 14,671 568 15,239 5,287 20,526 73,235 4,363 874 13 67,985 73,235 2009 £000 53,408 429 53,837 7,401 13,854 15,804 37,059 90,896 12,608 310 12,918 4,301 17,219 73,677 4,363 874 13 68,427 73,677 The accounts on pages 19 to 42 were approved and authorised for issue by the board of directors on 23rd June 2010, 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 42. 20 A n n u a l R e p o r t 2 0 1 0 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 2010 Notes Cash flows from operating activities Profit before income tax Adjustments for: Depreciation (net of profit on sale of property, plant and equipment) Interest received Excess of employer pension contributions over income statement charge (|ncrease) in inventories (Increase)/decrease in receivables Increase/(decrease) in payables Cash generated from operating activities Tax paid Interest received 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 in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 19 Cash and cash equivalents: Short-term deposits Cash available on demand Notes to the accounts are on pages 23 to 42. 2010 £000 9,804 4,482 (139) (4,466) (417) (4,884) 2,063 6,443 (652) 139 5,930 (2,721) 51 17 (2,653) (4,363) (4,363) (1,086) 15,804 14,718 14,401 317 14,718 2009 £000 3,616 5,159 (1,684) (296) (347) 8,734 (5,981) 9,201 (2,525) 1,684 8,360 (19,888) 93 108 (19,687) (4,363) (4,363) (15,690) 31,494 15,804 15,641 163 15,804 A n n u a l R e p o r t 2 0 1 0 21 C o n s o l i d a t e d S t a t e m e n t o f C h a n g e s i n E q u i t y for the year ended 31st March 2010 Equity attributable to equity holders of the parent Share Share Other Retained capitala) premiumb) reservec) earningsd) £000 13 £000 68,427 At 1st April 2009 Total comprehensive income for the period ended 31st March 2010 Dividends £000 4,363 — — £000 874 — — At 31st March 2010 4,363 874 Equity attributable to equity holders of the parent Share Share Other Retained capitala) premiumb) reservec) earningsd) £000 13 £000 72,607 At 1st April 2008 Total comprehensive income for the year ended 31st March 2009 Dividends £000 4,363 — — £000 874 — — At 31st March 2009 4,363 874 Total equity £000 73,677 3,921 (4,363) Total equity £000 77,857 183 (4,363) 3,921 (4,363) 67,985 73,235 183 (4,363) 68,427 73,677 — — 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) Other reserve — Amounts transferred from share capital on redemption of issued shares. d) Retained earnings — Cumulative net gains and losses recognised in the statement of comprehensive income. 22 A n n u a l R e p o r t 2 0 1 0 N o t e s t o t h e A c c o u n t s or later accounting periods but may be Under UK GAAP, goodwill arising on 1 Accounting policies New standards effective in 2010 adopted by the group IAS 1: Presentation of Financial Statements (Revised) includes the requirement to present a Statement of Changes in Equity as a primary statement and introduces the possibility of either a single Statement of adopted early. The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. Comprehensive Income (combining the The primary statements within the Income Statement and a Statement of financial information contained in this Comprehensive Income) or to retain the document have been presented in Income Statement with a supplementary accordance with IAS 1: Presentation of Statement of Comprehensive Income. Financial Statements. The first option has been adopted by the company. As this standard is concerned with presentation only it does not have any impact on the results or net assets of the group. 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 IFRS 8: Operating Segments requires of the Companies Act 2006 applicable operating segments to be identified on the to companies reporting under IFRS. A basis of internal reports about components summary of the principal group IFRS of the group that are regularly reviewed accounting policies is set out below. by the Chief Operating Decision Maker (‘CODM’). By contrast IAS 14: Segmental Reporting’ required business and Basis of consolidation statement The consolidated of geographical segments to be identified on a comprehensive income and balance sheet risks and rewards approach. The business include the accounts of the parent company segmental reporting bases used by the and its subsidiaries made up to the end of company in previous years are those which the financial year. These subsidiaries include are reported to the CODM, so the changes William Lee Limited and CNC Speedwell to the segmental reporting for 2010 are in Limited, both of which are 100% owned and respect of the additional disclosure only. are based in the UK. Basis of accounting The group financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards (‘IAS’) and Interpretations (collectively ‘IFRS’), as endorsed for use in the EU. Intercompany transactions and balances between group companies are eliminated in full. Business combinations and goodwill Shares issued as consideration for the acquisition of companies have a fair value The IFRSs applied in the group attributed to them, which is normally their financial statements are subject to market value at the date of acquisition. Net ongoing amendment by the IASB and tangible assets acquired are consolidated subsequent endorsement by the European at a fair value to the group at the date of Commission and therefore subject to acquisition. All changes to these assets and possible change in the future. Further liabilities, and the resulting gains and losses standards and interpretations may be that arise after the group has gained control issued that will be applicable for financial of the subsidiary, are credited and charged years beginning on or after 1st April 2010 to the post-acquisition income statement. acquisitions prior to 1998 was written off to reserves. There have been no acquisitions since 1998. Following the exemption in IFRS 1 this treatment has continued to be followed. Revenue recognition Revenue, which excludes value added tax and intra-group sales, represents the invoiced value of goods and services sold to customers. Appropriate provisions for returns 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 portion of the current service costs and curtailment gains are charged to operating profit for these plans, with the interest cost net of the expected return on assets in the plans also being credited to operating profit. Actuarial gains and losses are recognised directly in equity, in the statement of comprehensive income, and the balance sheet reflects the schemes’ surplus or deficit at the balance sheet date. A full valuation is carried out tri-annually using the projected unit credit method. 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. Payments to the defined contribution scheme are charged to the consolidated statement of comprehensive income as they become payable. Property, plant and equipment Property, plant and equipment assets less accumulated are held at cost A n n u a l R e p o r t 2 0 1 0 23 N o t e s t o t h e A c c o u n t s continued depreciation. Depreciation is provided on property, plant and equipment, other than freehold land and assets in the course of construction, on a straight-line basis. The periods of write-off used are as follows: i Freehold buildings over 50 years. Available-for-sale assets Non-derivative financial assets not included in the above category are classified as available-for-sale and comprise the group’s strategic investments in entities not qualifying as subsidiaries. ii Leasehold land and buildings over They are carried at fair value with changes 50 years or the period of the lease, in fair value recognised directly in the whichever is less. iii Plant and equipment over a period of 3 to 15 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 Assets and liabilities in foreign currencies consolidated statement of comprehensive income. Fair value is determined with reference to published 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 less provision for impairment. The effect of discounting on these financial instruments is not considered to are translated at the spot rates of exchange be material. ruling at the balance sheet date. Exchange differences are dealt with through the consolidated statement of comprehensive income. Financial Instruments a) Financial assets The group’s financial assets relate to loans and receivables and available-for-sale assets. Although the group occasionally uses derivative financial instruments in economic hedges of currency rate risk, it does not hedge account for these transactions and the amounts are not material. The group has not classified any of its financial assets as held to maturity. 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 of the deposit or receivable. The amount of such a provision is the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired asset. Such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the deposit or 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. 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. c) Share capital The group’s ordinary shares are classified as equity instruments. The group is not subject to any externally imposed capital requirements. Share capital includes the nominal value of the shares and any share premium attaching to the shares. Current and deferred tax Deferred tax is provided using the liability method. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the temporary differences are expected to reverse, based on tax rates and laws that have been attributable to the acquisition or issue and Fair value is calculated by discounting subsequently carried at amortised cost estimated future cash flows using a market using the effective interest rate method, rate of interest. 24 A n n u a l R e p o r t 2 0 1 0 enacted or substantially enacted by the balance sheet date. l Amendments to IAS 32: Financial (Puttable Instruments: Presentation carrying value and amounts charged to the consolidated income statement in 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. Amendments to IFRS 7: Improving Disclosures about Financial Instruments (mandatory for accounts periods beginning on or after 1st January 2009 but is not as yet endorsed for use in the European Union) — no material impact. 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 elimination of inconsistencies between Standards. No material impact. In addition, the following have been reviewed by the directors and are not considered to have an impact on the financial statements: l IFRS 3: Business Combinations (revised 2008) and complementary amendments to IAS 27: Consolidated and Separate Financial Statements. l IFRIC 16: Hedges of a Net Investment in a Foreign Operation. instruments and obligations arising specific periods. More details including on a liquidation) and disclosure carrying values are included in note 11. 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, 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 interpretations and amendments to for further details. 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 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 factors, including expectation of future items which are separately disclosed by events that are believed to be reasonable virtue of the size or incidence to enable a under the circumstances. In the future, full understanding of the group’s financial actual experience may differ from these performance. 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. Short-term deposits See note 4 for further details. Useful lives of property, plant and equipment Property, plant and equipment are depreciated over their useful lives based on management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the A n n u a l R e p o r t 2 0 1 0 25 N o t e s t o t h e A c c o u n t s continued 2 Business and geographical segments Adoption of IFRS 8: Operating Segments The group has adopted IFRS 8: Operating Segments with effect from 1st April 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. In contrast, the predecessor Standard (IAS 14: Segment Reporting) required the group to identify two sets of segments (business and geographical), using a risks and returns approach, with the group’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. As a result, following the adoption of IFRS 8, the idenitification of the group’s reportable segments has changed. For internal decision making purposes, the group is organised into three operating companies which are considered to be the operating segments of the group: Castings plc and William Lee are aggregated into Foundry Operations and CNC Speedwell is the Maching Operation. The following shows the revenues, results and total assets by reportable segment in the year to 31st March 2010. Revenue from external customers Inter-segmental revenue Segmental result Unallocated costs: Exceptional credit for over-accrual for redundancy payments Provision for Industrial Tribunal costs Excess of employer pension contributions over statement of comprehensive income charge Finance income Profit before income tax Total assets Non-current asset additions Depreciation All non-current assets are based in the United Kingdom. Foundry operations Machining Elimination £000 58,077 939 £000 2,572 5,359 5,438 (443) £000 — — — Total £000 60,649 6,298 4,995 404 (200) 4,466 139 9,804 91,381 17,363 (14,983) 93,761 1,050 1,671 2,248 2,285 — — 2,721 4,533 26 A n n u a l R e p o r t 2 0 1 0 2 Business and geographical segments continued The following shows the revenues, results and total assets by reportable segment in the year to 31st March 2009: Revenue from external customers Inter-segmental revenue Segmental result Unallocated costs: Exceptional write-down of Icelandic bank deposits Exceptional costs relating to redundancy payments Excess of employer pension contributions over statement of comprehensive income charge Finance income Profit before income tax Total assets Non-current asset additions Depreciation Foundry operations Machining Elimination £000 83,111 989 £000 1,701 8,972 6,746 933 £000 — — — Total £000 84,812 9,961 7,679 (3,845) (2,198) 296 1,684 3,616 91,262 15,453 (15,819) 90,896 16,672 3,216 2,582 2,651 — — 19,888 5,233 2009 £000 32,302 17,312 33,610 1,481 107 84,812 All non-current assets are based in the United Kingdom The geographical analysis of revenues by destination for the year is as follows: United Kingdom Sweden Rest of Europe North and South America Other 2010 £000 28,212 10,001 21,256 1,166 14 60,649 All revenue arises in the United Kingdom from the group’s continuing activities. Inter-company sales are priced on an arm’s length basis. Information about major customers Included in revenues arising from Foundry operations are revenues of approximately £9,189,000 and £6,188,000 from two customers (2009 – £15,610,000 and £11,052,000). A n n u a l R e p o r t 2 0 1 0 27 N o t e s t o t h e A c c o u n t s continued 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) Provision for Industrial Tribunal costs (see (c) below) 2010 £000 17,681 (436) 4,533 •2424 25 18 (51) 2010 £000 (404) — 200 (204) 2009 £000 27,876 537 5,233 24 25 13 (74) 2009 £000 2,198 3,845 — 6,043 a) The exceptional credit of £404,000 relates to accruals for redundancy payments made as at 31st March 2009 that were not used due to the subsequent increase in production volumes and have therefore been released. b) The company reported last year that £1.86 million was included in other receivables as recoverable from various Icelandic banks. So far £1,202,000 has been received and the remaining receivable is considered to be the recoverable amount at 31st March 2010. c) An employee who was made redundant from CNC Speedwell brought a claim for unfair dismissal. We were advised by the Engineering Employers Federation throughout this process and it was dismissed at the Tribunal Hearing but the judge in his summing up awarded a protective collective award as a result of a procedural irregularity with the redundancy process. The Tribunal Judgment is being taken to appeal and since the outcome remains uncertain at the date of approval of these financial statements, a best estimate of the financial effect has been taken and a provision of £200,000 has been made. 28 A n n u a l R e p o r t 2 0 1 0 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 2010 594 78 672 2010 £000 17,295 191 430 (1,966) 1,731 17,681 2009 865 84 949 2009 £000 24,239 236 800 193 2,408 27,876 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 2010 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 of pensions in payment Discount rate Inflation assumption 2010 3.6% 5.6% 3.6% 2009 3.5% 7.0% 3.5% A n n u a l R e p o r t 2 0 1 0 29 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 Change in benefit obligation Benefit obligation at beginning of year Current service cost Curtailment Interest cost Plan participants’ contributions Actuarial loss/(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 gain/(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 Components of pension cost Current service cost Curtailment Interest cost Expected return on plan assets 2010 £000 33,251 — (2,158) 2,086 — 10,779 (2,589) 41,369 34,258 1,894 10,187 2,500 — (2,589) 46,250 4,881 (4,881) — 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) — Year to 31st March Year to 31st March 2010 £000 — (2,158) 2,086 (1,894) 2009 £000 467 — 2,305 (2,579) 193 3,666 (1,007) (2,955) (296) Total pension cost recognised within administrative expenses (note 5) (1,966) 19(1,966) Unrecognised pension surplus at beginning of year Unrecognised pension surplus at end of year Actuarial loss for the year Pension cost shown in Other Comprehensive Income 1,007 (4,881) (592) (4,466) Cumulative amount of actuarial losses immediately recognised 13,105 12,513 30 A n n u a l R e p o r t 2 0 1 0 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 Plan assets at 31st March Plan assets at 31st March 2010 69% 28% 3% 100% 2009 62% 34% 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 5.6% (2009 – 6.1%) assumption. The projected pension cost for the year ending 31st March 2011 is £nil. Actuarial return on plan assets Weighted average assumptions used to determine benefit obligations: Discount rate Weighted average assumptions used to determine net pension cost: Discount rate Expected long-term return on plan assets Rate of compensation increase 2010 £000 12,081 5.6% 7.0% 5.6% 4.5% 2009 £000 (8,475) 7.0% 5.9% 6.1% 4.6% A n n u a l R e p o r t 2 0 1 0 31 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: 2010 2009 Male Staff/ Shopfloor Female Staff/ Shopfloor Male Staff/ Shopfloor Female Staff/ Shopfloor 21.6/19.9 24.8/23.0 21.1/19.4 24.0/22.2 Scheme member age 65 (current life expectancy) Scheme member age 45 (life expectancy at age 65) 23.4/21.7 26.7/24.9 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. A 1% p.a. floor in future improvements was included as at 31st March 2010. History of experience gains and losses Financial year ended in: Present value of defined obligation Fair value of plan assets 2010 41,369 46,250 2009 33,251 34,258 2008 39,043 41,829 2007 38,774 43,122 2006 38,872 36,959 Surplus/(deficit) 4,881 1,007 2,786 4,348 (1,913) 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 liabilities Total gains and (losses): amount (£000) percentage of scheme assets 7 Finance income Interest on short-term deposits Income from listed investments Other 10,187 22.0% (11,054) (32.0%) (4,781) (11.0%) (27) 0% 4,661 13.0% — 0% 86 0% (2,033) 5.0% (1,875) 5.0% 2,674 7.0% (592) (1.0%) (2,955) (10.0%) (2,748) (7.0%) 1,848 5.0% 1,987 5.0% 2010 £000 92 17 30 139 2009 £000 1,553 67 64 1,684 32 A n n u a l R e p o r t 2 0 1 0 8 Income tax Corporation tax based on a rate of 28% (2009 – 28%) UK Corporation tax Current tax on profits for the year Adjustments to tax charge in respect of prior periods 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 2010 £000 1,541 (867) 674 688 804 2,166 9,804 Profit on ordinary activities at the standard rate of corporation tax in the UK of 28% (2009 – 28%) 2,745 Effect of: Expenses not deductible for tax purposes 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 Pension adjustments Total tax charge for period Effective rate of tax (%) 34 (867) 804 — (550) 2,166 22.1 2009 £000 1,024 (5) 1,019 1,990 (15) 2,994 3,616 1,013 18 (5) (15) 2,066 (83) 2,994 82.80 In 2009 the phasing out of industrial building allowances resulted in the deferred tax implication (i.e. difference between accounting and tax treatment) 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 2009 (2008 – 7.29p) Interim paid of 2.71p per share (2009 – 2.71p) 2010 £000 3,181 1,182 4,363 2009 £000 3,181 1,182 4,363 The directors are proposing a final dividend of 7.29 pence (2009 – 7.29 pence) per share totalling £3,181,000 (2009 – £3,181,000). This dividend has not been accrued at the balance sheet date. A n n u a l R e p o r t 2 0 1 0 33 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 £7,638,000 (2009 – £622,000) and on the weighted average number of shares in issue at the end of the year of 43,632,068 (2009 – 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 2009 Additions during year Disposals At 31st March 2010 Depreciation and amounts written off At 1st April 2009 Charge for year Disposals At 31st March 2010 Net book values At 31st March 2010 At 31st March 2009 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 21,849 471 — 22,320 2,541 281 — 2,822 19,498 19,308 14,056 7,793 — 21,849 2,274 267 — 2,541 19,308 11,782 83,459 2,250 (1,324) 84,385 49,359 4,252 (1,324) 52,287 32,098 34,100 74,115 12,095 (2,751) 83,459 47,125 4,966 (2,732) 49,359 34,100 26,690 Total £000 105,308 2,721 (1,324) 106,705 51,900 4,533 (1,324) 55,109 51,596 53,408 88,171 19,888 (2,751) 105,308 49,399 5,233 (2,732) 51,900 53,408 38,772 The net book value of group land and buildings includes £2,527,000 (2009 – £2,525,000) for land which is not depreciated. The cost of land and buildings includes £359,000 for property held on long leases (2009 – £359,000). 34 A n n u a l R e p o r t 2 0 1 0 12 Financial assets Available-for-sale assets At 1st April 2009 Disposals Net gains/(losses) transferred to statement of comprehensive income At 31st March 2010 2010 £000 480 2010 £000 429 (17) 68 480 2009 £000 429 2009 £000 736 (108) (199) 429 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 £599,000 (2009 – £1,035,000). 14 Trade and other receivables Due within one year: Trade receivables Other receivables Prepayments 2010 £000 2,347 2,226 3,245 7,818 2010 £000 15,130 2,315 1,704 19,149 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 £4,497,000 less impairment provision of £3,845,000 (see note 4) (2009 – £5,701,000 less impairment provision of £3,845,000). 15 Trade and other payables Current trade and other payables: Trade payables Social security Other payables Accruals 2010 £000 7,945 1,193 507 5,026 2009 £000 6,799 610 490 4,709 14,671 12,608 Included within accruals is a provision of £200,000 relating to Industrial Tribunal costs (for 2009 – £622,000 relating to redundancy costs) which has not been included in a separate provision as it is not material to the financial statements. A n n u a l R e p o r t 2 0 1 0 35 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% (2009 – 28%). The movement on the deferred tax account is shown below: Deferred tax — net At 1st April 2009 Taken to equity Charge At 31st March 2010 The movement in deferred tax assets and liabilities during the year is shown below: Deferred tax liabilities At 1st April 2009 Charged to profit Charged to other comprehensive income At 31st March 2010 Accelerated tax depreciation Pension Adjustment £000 4,690 1,466 — 6,156 £000 — — (525) (525)(869) The deferred tax charged to equity during the year is as follows: Tax on pension adjustments Tax on change in fair value of available-for-sale financial assets Tax on items taken directly to reserves 2010 £000 4,301 (506) 1,492 5,287 Other £000 (389) 26 19 (344) 2010 £000 (525) 19 (506) 2009 £000 2,382 (56) 1,975 4,301 Total £000 4,301 1,492 (506) 5,287 2009 £000 — (56) (56) The total tax on items taken directly to reserves is £681,000 which includes £175,000 of current tax on pension adjustments taken directly to reserves. 36 A n n u a l R e p o r t 2 0 1 0 17 Share capital Authorised 50,000,000 10p ordinary shares Allotted and fully paid 43,632,068 10p ordinary shares 2010 £000 5,000 4,363 2009 £000 5,000 4,363 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 Commitments Capital commitments contracted for by the group but not provided for in the accounts 2010 £000 909 2009 £000 435 A n n u a l R e p o r t 2 0 1 0 37 N o t e s t o t h e A c c o u n t s continued 19 Financial instrument risk exposure and management In common with all other businesses, the group is exposed to risks that arise from its use of financial instruments. This note describes the group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. The added credit risks associated with bank deposits have 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 (excluding corporation tax recoverable) Cash and cash equivalents Total current financial assets The maximum exposure to credit risks is detailed in the above table. Loans and receivables 2009 £000 10,173 2,216 15,804 28,193 2010 £000 15,130 1,904 14,718 31,752 38 A n n u a l R e p o r t 2 0 1 0 19 Financial instrument risk exposure and management continued Current financial liabilities Trade payables Other payables Accruals Financial liabilities measured at amortised cost 2010 £000 7,945 507 5,026 2009 £000 6,799 490 4,709 Total current financial liabilities 13,478 11,998 Credit risk Credit risk arises principally from the group’s trade receivables. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. As at 31st March 2010, trade receivables of £14,696,000 (2009 – £8,942,000) were not 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 Euro 2010 £000 11,184 3,946 15,130 2009 £000 7,582 2,591 10,173 A n n u a l R e p o r t 2 0 1 0 39 N o t e s t o t h e A c c o u n t s continued 19 Financial instrument risk exposure and management continued At 31st March 2010 trade receivables of £45,000 (2009 – £662,000) 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 2010 £000 45 — — 45 2009 £000 662 — — 662 At 31st March 2010 trade receivables of £389,000 (2009 – £569,000) were past due and impaired. The amount of the provision at 31st March 2010 was £517,000 (2009 – £684,000). The ageing of these receivables is as follows: 30–60 days 60–90 days 90+ days 2010 £000 1 55 333 389 2009 £000 273 57 239 569 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 2010 £000 684 (132) — (35) 517 2009 £000 563 131 (10) — 684 Impairment losses on trade receivables of £34,000 (2009 – £11,000) were recognised in administrative 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 (2009 – £1,000,000) which are reviewed on an annual basis. Based on these facilities and projected cash flows, 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). 40 A n n u a l R e p o r t 2 0 1 0 19 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 (2009 – £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 (2009 – £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 2010 (2009 – £nil). The currency and interest profile of the group’s financial assets (less other receivables) and liabilities are as follows: Floating rate Fixed rate Interest-free Sterling US$ Euro Sterling US$ Euro assets 2010 £000 23 36 258 317 assets 2010 £000 14,060 — 341 14,401 assets 2010 £000 11,185 — 3,945 15,130 Floating rate Fixed rate Interest-free assets 2009 £000 101 7 55 163 assets 2009 £000 15,501 — 140 15,641 assets 2009 £000 7,582 — 2,591 10,173 Total £000 25,268 36 4,544 29,848 Total £000 23,184 7 2,786 25,977 A n n u a l R e p o r t 2 0 1 0 41 N o t e s t o t h e A c c o u n t s continued 19 Financial instrument risk exposure and management continued Sterling US$ Euro Interest-free liabilities Interest-free liabilities 2010 £000 7,210 2 733 7,945 2009 £000 6,600 4 195 6,799 Fixed rate assets attracted interest rates between 0.53% to 1.65% (2009 – 5.38% to 6.41%) 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 £85,000/(£26,000) (2009 – £80,000/(£63,000)). The group believes that movements on exchange rates of +/–5% could be possible, the effect of which is that profit before tax would increase/(decrease) by (£196,000)/£217,000 (2008 – (£134,000)/£149,000). 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 Statement of Comprehensive Income was charged with £203,000 (2009 – £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. 42 A n n u a l R e p o r t 2 0 1 0 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 2010 £000 2009 £000 60,649 84,812 9,804 7,638 4,363 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 4,363 68,872 4,363 69,314 4,363 73,494 4,363 66,273 4,363 62,762 73,235 73,677 77,857 70,636 67,125 Property, plant and equipment 51,596 53,408 38,772 35,495 Financial assets Deferred tax asset Current assets Total liabilities Dividends and earnings Pence per share paid Number of times covered Earnings per share — basic and diluted 480 — 429 — 736 — 823 — 52,076 41,685 53,837 37,059 39,508 61,136 36,318 53,554 32,566 1,139 574 34,279 53,411 (20,526) (17,219) (22,787) (19,236) (20,565) 73,235 73,677 77,857 70,636 67,125 10.0 1.7 17.51p 10.0 — 1.43p 10.0 2.8 9.52 2.3 9.20 2.3 27.49p 21.57p 20.07p A n n u a l R e p o r t 2 0 1 0 43 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 2010 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 Other reserve Retained earnings Shareholders’ funds Notes 4 5 6 7 8 9 10 11 11 11 2010 £000 11,957 5,761 17,718 4,756 18,366 12,840 88 36,050 8,078 27,972 45,690 (181) 45,509 4,363 874 13 40,259 45,509 2009 £000 12,951 5,710 18,661 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 The parent company accounts on pages 44 to 50 were approved and authorised for issue by the board of directors on 23rd June 2010, and were signed on its behalf by: B. J. Cooke J. C. Roby Chairman Finance Director Notes to the accounts are on pages 45 to 50. 44 A n n u a l R e p o r t 2 0 1 0 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 2006. 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 per annum: 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 Buildings Plant and other equipment 2% in foreign currencies are recorded at the assets are a reasonable approximation of rate ruling at the date of the transaction, their fair values. 7% to 33% all differences being taken to the profit and Freehold land is not depreciated. Pension costs The cost of providing retirement pensions and related benefits is charged to the profit and loss account over the periods benefiting from the employees’ services in accordance with FRS 17. 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. loss account. Deferred tax Loans and receivables These assets are non-derivative financial assets with fixed or determinable 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 amounts owed by subsidiary companies) or a right to pay less tax in the future have and deposits held at banks and building occurred at the balance sheet date. Timing societies, but may also incorporate other differences are differences between the types of contractual monetary asset. company’s taxable profits and its results They are initially recognised at fair value as stated in the accounts. plus transaction costs that are directly attributable to the acquisition or issue and Deferred tax is measured at the average subsequently carried at amortised cost tax rates that are expected to apply in the using the effective interest rate method, periods in which the timing differences less provision for impairment. are expected to reverse, based on tax rates and laws that have been enacted or The effect of discounting on these substantially enacted by the balance sheet financial instruments is not considered to date. Deferred tax is measured on a non- be material. 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 A n n u a l R e p o r t 2 0 1 0 45 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 under the terms receivable, the amount Financial liabilities measured at Dividends of such a provision being the difference amortised cost Equity dividends are recognised when Financial liabilities include trade payables they become legally payable. Interim and other short-term monetary liabilities, equity dividends are recognised when which are initially recognised at fair value paid. Final equity dividends are recognised and subsequently carried at amortised when approved by the shareholders at an cost using the effective interest method. Annual 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 as equity instruments. The group is not grounds that 100% of the voting rights subject to any externally imposed capital in 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. between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such provisions are recorded in a separate allowance account with the 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. 46 A n n u a l R e p o r t 2 0 1 0 2 Company profit and loss account Castings P.L.C. has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and loss account in these accounts. The company’s profit after tax was £2,261,000 (2009 – £2,420,000). The profit and loss account includes £24,000 (2009 – £24,000) for audit fees. 3 Dividends Final paid of 7.29p per share for the year ended 31st March 2009 (2008 – 7.29p) Interim paid of 2.71p per share (2009 – 2.71p) 2010 £000 3,181 1,182 4,363 2009 £000 3,181 1,182 4,363 The directors are proposing a final dividend of 7.29 pence (2009 – 7.29 pence) per share totalling £3,181,000 (2009 – £3,181,000). This dividend has not been accrued at the balance sheet date. 4 Fixed assets Cost At 1st April 2009 Additions during year Disposals At 31st March 2010 Depreciation and amounts written off At 1st April 2009 Charge for year Disposals and adjustments At 31st March 2010 Net book values At 31st March 2010 At 31st March 2009 Land and buildings £000 Plant and other equipment £000 10,279 3 — 10,282 1,818 162 — 1,980 8,302 8,461 23,448 52 (34) 23,466 18,958 887 (34) 19,811 3,655 4,490 Total £000 33,727 55 (34) 33,748 20,776 1,049 (34) 21,791 11,957 12,951 The net book value of land and buildings includes £2,127,000 (2009 – £2,125,000) for land which is not depreciated. The cost of land and buildings includes £359,000 for property held on long leases (2009 – £359,000). A n n u a l R e p o r t 2 0 1 0 47 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 2010 £000 5,281 480 5,761 2009 £000 5,281 429 5,710 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 £17,000 (2009 – £108,000) and transferred net profits to equity of £68,000 (2009 – losses £199,000). 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 2010 £000 721 1,896 2,139 4,756 2010 £000 8,887 6,670 — 1,902 907 2009 £000 858 1,423 2,331 4,612 2009 £000 6,954 8,567 157 1,973 552 18,366 18,203 2010 £000 3,445 796 567 452 121 2,697 8,078 2009 £000 2,361 796 — 365 463 2,469 6,454 48 A n n u a l R e p o r t 2 0 1 0 9 Provisions for liabilities Deferred taxation At 1st April 2009 Taxation deferred this year At 31st March 2010 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 2009 Profit retained Changes in fair value of investments At 31st March 2010 2010 £000 571 (390) 181 776 (595) 181 2010 £000 5,000 4,363 2009 £000 483 88 571 806 (235) 571 2009 £000 5,000 4,363 Share capital £000 4,363 — — 4,363 Share premium £000 874 — — 874 Other reserve £000 13 — — 13 Retained earnings £000 42,293 (2,102) 68 Total equity £000 47,543 (2,102) 68 40,259 45,509 A n n u a l R e p o r t 2 0 1 0 49 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 to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 2010 £000 2,261 68 (4,363) (2,034) 47,543 45,509 2009 £000 2,420 (199) (4,363) (2,142) 49,685 47,543 13 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 £2,500,000 (2009 – £589,000). 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. 14 Capital commitments Authorised, but not provided in the accounts 2010 £000 17 2009 £000 35 50 A n n u a l R e p o r t 2 0 1 0 N o t i c e o f M e e t i n g Notice is hereby given that the one hundred make an offer or enter into an this resolution) of equity securities and third Annual General Meeting of agreement which would or might having, in the case of relevant Castings P.L.C. (the ‘Company’) will be require relevant securities to be shares, an aggregate nominal held at Holiday Inn, Birmingham M6, Junc. allotted after the expiry of such amount, or, in the case of other 7, Chapel Lane, Great Barr, Birmingham, period and the directors may allot equity securities, giving the right to West Midlands, B43 7BG, on Tuesday, relevant securities in pursuance subscribe for or convert into relevant 17th August 2010 at 3.30 pm for the of any such offer or agreement as shares having an aggregate nominal following purposes: As ordinary business 1 To receive and adopt the directors’ report and audited accounts for the year ended 31st March 2010. 2 To declare a final dividend. 3 To re-elect Mr B. J. Cooke as a director. if the authority conferred had not amount not exceeding £218,160, expired; (c) the foregoing authority shall be in substitution for the authorities given which represents approximately 5% of the current issued share capital of the Company, to the directors under the Companies and shall expire at the conclusion of the Act 2006 on 18th August 2009, next Annual General Meeting following which authorities are accordingly hereby revoked; 4 To re-elect Mr M. A. Lewis as a director. (d) this authority will be put to annual 5 To re-elect Mr C. P. King as a director. shareholder approval. 6 To approve the directors’ remuneration As special business report for the year ended 31st March 2010. 7 To reappoint BDO 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 the Companies Act 2006 to allot equity securities (within the meaning 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 if the said Act did not apply to any such allotment The share capital consists of 43,632,068 provided that this power shall be limited: ordinary shares with voting rights. (a) to allotments in connection with 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 the Companies Act 2006 to make one or more market purchases of any of its ordinary shares of 10p each (the ‘ordinary shares’), As an ordinary resolution 8 THAT: (a) the directors be and are hereby generally and unconditionally authorised in accordance with the Companies Act 2006 to exercise all the powers of the Company to allot relevant securities 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 on 16th August 2015 save that the Company may before such expiry an offer of equity securities to provided that: the ordinary shareholders of the Company where the securities respectively attributable to the interests of such holders are proportionate (as nearly as may be and subject to such exclusions or other arrangement as the directors may 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 held by such shareholders; and (b) to the allotment (otherwise than pursuant to subparagraph (a) of (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 2010; (b) the minimum price which may be paid for each ordinary share is 10p, exclusive of the expenses of purchase; (c) the maximum price (exclusive of expenses) which may be paid for each ordinary share is an amount equal to 105% of the average of the middle market quotations for the ordinary shares as derived from the Daily Official List of the London A n n u a l R e p o r t 2 0 1 0 51 N o t i c e o f M e e t i n g continued Stock Exchange Limited for the five business days immediately Note: Any member of the Company entitled In Accordance with Regulation 41 of the Uncertified Securities Regulations 2001, preceding the day of purchase; to attend and vote at this meeting may only those members entered on the (d) unless previously revoked or varied, the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company following the date of this resolution, unless such authority is renewed on or prior to such date; (e) the Company may, before the expiry of this authority, conclude a contract to purchase ordinary shares under this authority which will or may be executed wholly or partly after such expiry and may make a purchase of ordinary shares pursuant to any such contract, as if such authority had not expired. The record date for payment of the final dividend is 23rd July 2010. Assuming the final dividend is approved by the members, the dividend will be paid on 20th August 2010. Information about the meeting can be found on the Company’s website (www. castings.plc.uk). The right to vote at the meeting is determined by reference to the register of members as it stands on 13th August 2010. Shareholders have the right to ask questions at the meeting. By order of the board J. C. ROBY Company Secretary Registered Office: Lichfield Road, Brownhills, West Midlands, WS8 6JZ. 23rd June 2010 appoint one or more proxies, who need Company’s register of members at 6.00 not also be a member, to attend and vote, pm on the day which is two days before on a poll, in his stead. The instrument the day of the meeting or, if the meeting appointing a proxy, including authority is adjourned, shareholders entered on the under which it is signed (or a notarially Company’s register of members at 6.00 certified copy of such authority), must be pm on the day two days before the date deposited at the offices of the Company’s of any adjournment shall be entitled to registrars: Capita Registrars, PXS, attend and vote at the meeting. 34 Beckenham Road, Kent, BR3 4TU, not less than 48 hours before the time appointed for the meeting. Beneficial owners: In accordance with Section 325 of the Companies Act 2006, the right to appoint proxies does not apply to persons nominated to receive information rights under section 146 of the Act. Persons nominated to receive information rights under section 146 of the Act who have been sent a copy of this notice of meeting are hereby informed, in accordance with Section 149 (2) of the Act, that they may have a right under an agreement with the registered member by whom they were nominated to be 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. 52 A n n u a l R e p o r t 2 0 1 0 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, lines are open 8.30 am to 5.30 pm Mon–Fri) Fax: 020 8658 3430 BDO 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 A n n u a l R e p o r t 2 0 1 0 53 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 The official price of Castings P.L.C. ordinary Compensation Scheme. The FSA can be contacted by completing an online shares on 31st March 1982, adjusted for 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. More detailed information on this or similar activity can be found on the FSA website www.moneymadeclear.fsa.gov.uk Website Castings P.L.C.’s website www.castings. plc.uk gives additional information on the group. Notwithstanding the references we make in this Annual Report to Castings P.L.C.’s website, none of the information made available on the website constitutes part of this Annual Report or shall be deemed to be incorporated by reference herein. bonus issues, was 4.92 pence. Warning to shareholders The following guidance has been issued by the Financial Services Authority: Over the last year many companies have 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 buy shares at a discount or offers of free reports into the company. If you receive any unsolicited investment advice: 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. gov.uk/register. 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 54 A n n u a l R e p o r t 2 0 1 0
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