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
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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
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