A n n u a l R e p o r t 2 0 1 1
C o n t e n t s
2
Directors
3
Chairman’s Statement
4
Business and Financial Review
5
Directors’ Report
9
Review of Principal Risks and Uncertainties
11
Corporate Social Responsibility
13
Corporate Governance
16
Remuneration Report
18
Statement of Directors’ Responsibilities
19
Independent Auditors’ Report
20
Consolidated Statement of Comprehensive Income
21
Consolidated Balance Sheet
22
Consolidated Cash Flow Statement
23
Consolidated Statement of Changes in Equity
24
Notes to the Accounts
44
Five Year Financial History
45
Parent Company Balance Sheet
46
Notes to the Parent Company Accounts
52
Notice of Meeting
54
Directors, Officers and Advisers
55
Shareholder Information
A n n u a l
R e p o r t 2 0 1 1
1
D i r e c t o r s
Executive Directors
Non-Executive Directors
Brian Cooke
Chairman
Gerard Wainwright
Non-executive Director
Aged 71, he joined the company in 1960
Aged 61, 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 49, he joined the company in 1984
Aged 74, 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.
Steve Mant
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 35, he joined the company in
June 2010 and was appointed company
Tony Smith
secretary and
finance director on 1
Non-executive Director
November. Prior to joining the company he
Aged 64, he joined the company in 1962
had been working for BDO LLP specialising
and became a director in 1985, ultimately
in manufacturing, international and listed
being managing director at Brownhills.
In 2004 he retired from executive duties.
His continuing involvement is invaluable
to the company with his experience in
foundry production and human relations.
He adds to the existing strength of our
non-executive directors. He is a member
of the audit, remuneration and nomination
committees.
companies.
Mark Lewis
Managing Director — CNC Speedwell Ltd
Aged 47, 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 57, 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 1
C h a i r m a n ’ s S t a t e m e n t
S t a t e m e n t o f f u l l y e a r r e s u l t s
The financial year under review was a
period of recovery from a low level of
activity rising to levels not seen since year
ending March 2008.
Our turnover increased from £60.6m to
a record level of £105.4m. The turnover
has been affected by the rapid rise in raw
material costs which accounts for some
£5.7m of turnover.
Foundry Production
We are now operating at the Castings
Icelandic Banks
As reported in the business and financial
Brownhills site at previous
levels of
review, during the year we have received
production and at William Lee we are
£0.86m from the administrators of the UK
producing at record levels with the new
subsidiaries of the Icelandic Banks. We
foundry operating at near capacity levels.
have now recovered a total of £2.06m
Overall we still have capacity available for
and it is hoped further payments will be
future growth. We had considerable costly
received.
It was reported at the half year that trading
the rapid changes in customer schedules.
was improving; this has continued and we
This caused excessive transport costs and
logistics problems during the year due to
Dividend
I am pleased to report the directors
are now operating at pre-recession levels
higher stock levels to satisfy customer’s
recommend an
increase
in
the
final
and in the machining business at levels
demands, however I am pleased to report
dividend to 8.04 pence per share after two
above those in 2008.
that we are now back to on-time delivery
years of no increases. It is gratifying that
During this period we are pleased to
report
that we have
re-employed a
considerable number of people we had
made redundant. We have also taken on
many new employees. I wish to thank all
our employees for their contribution to the
recovery and to welcome new employees.
It is sincerely hoped we can enjoy a
period of sustained growth in a somewhat
uncertain economic outlook. Our major
customers appear to be optimistic about
the future and forecast increased volumes.
and we are getting our stocks under
due to careful cash management and the
control.
CNC Speedwell –
Machining Business
I am pleased to report CNC had a record
year which is very satisfying thus justifying
the considerable
investment made
in
policy of maintaining a good cash position
we did not reduce dividends during the
recession. We hope the shareholders
support our view on cash management.
Outlook
Despite various adverse reports, our
the company. This has been achieved
customers are
forecasting stable or
by obtaining new customers, machining
increased demands and if these forecasts
third party castings and an improvement
are converted to sales we will enjoy
in traditional business. The company will
further growth in the company and our
continue to invest when opportunities
investments in both foundry production
arise. Again the management and staff
and machining capacity will
improve
have reacted well to the rapid changes in
returns.
customer demands.
Future Investments
We are at advanced stages of obtaining
planning permission to build a warehouse
and possible manufacturing area on land
we acquired three years ago. This will
improve our logistics, stock control and
also improve traffic congestion on the
main road at our Brownhills sites. The
estimated cost will be £5m and it is hoped
the project will be complete by the end of
the year.
In conclusion, I would again like to thank
all our employees for their continued
support and understanding through a
period of considerable change.
B. J. COOKE
Chairman
22 June 2011
A n n u a l
R e p o r t 2 0 1 1
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 have seen further increases in
During the year we have received
Overall the group returned a profit
demand during the financial year and we
£0.86 million
from the administrators
before
taxation of £15.5 million
for
have added further shifts to match the
of the UK subsidiaries of the Icelandic
the year, which includes a £0.4 million
increased order levels.
banks. This brings
the
total sums
credit in respect of the defined benefit
Revenue has increased by 74% to
£105 million of which 60% was exported.
The despatch weight of castings to third
party customers was 50,600 tonnes, being
an increase of 18,800 tonnes from the
previous year. Revenue from the machinist
operation, CNC Speedwell, increased by
151%.
The
speed at which
volumes
increased did result in some temporary
inefficiencies in production which, along
with raw material price increases, have
impacted on margins when compared to
pre-recession levels.
The use of the new foundry at William
Lee continues to increase as volumes rise.
received to-date to £2.06 million which
pension schemes (as set out in note 6) in
is £0.2 million in excess of the original
accordance with IAS 19.
The directors are recommending a
final dividend that will be paid August
which, with the interim dividend paid in
January, will result in the return of £4.7
million to shareholders.
estimate of recoverable amounts. Given
the uncertainty over the quantum and
timing of any possible further receipts,
no allowance has been made for future
recoverable amounts.
The level of finance income again
reflects the prevailing low interest rates
during the year. The overall cash position
at the balance sheet date has reduced by
£1 million as the group has invested £9
million in plant and equipment during the
year which has off-set the £13 million net
cash generated from operating activities
(excluding dividends paid of £4.4 million).
The pension valuation showed a further
improvement in the surplus, on an IAS 19
basis, to £6.7 million. This continues to not
be recognised on the balance sheet due
to the restriction of recognition of assets.
4
A n n u a l
R e p o r t 2 0 1 1
D i r e c t o r s ’ R e p o r t
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.
Directors
The directors of the company are listed on page 2 and in addition J. C. Roby was a director
until 31 October 2010.
The interests of directors in the ordinary share capital at the beginning and end of the
year were:
activities of these companies during the
B. J. Cooke
A. J. Smith
G. B. Wainwright
D. J. Gawthorpe
G. Cooper
M. A. Lewis
C. P. King
S. J. Mant
Beneficial Holdings
2011
2010
1,955,386
1,953,986
103,079
103,079
59,261
28,296
8,000
3,025
—
—
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:
G. B. Wainwright
G. Cooper }
by rotation
S. J. Mant – having been appointed since the last Annual General Meeting.
The unexpired period of the contracts of service for B. J. Cooke, S. J. Mant,
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 in force during the year and exist at the date of this report.
There are no agreements between the company and its directors or employees
providing for compensation for loss of office or employment that occurs because of a
takeover bid.
The number of directors is not subject to any maximum but shall not be less than two. The
company may by ordinary resolution elect any person to be director and the board has the
power to appoint any person to be director, but any director so appointed shall retire from office
at the next Annual General Meeting. A director is not required to hold any share qualification.
One-third of the directors retire from office at every Annual General Meeting and are
eligible for reappointment.
The 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.
The directors submit their
Annual Report and the
Audited Accounts for the
year ended 31 March 2011.
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
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 9 and 10.
Dividends
An interim dividend of 2.71 pence per
share was paid in January 2011. The
directors now recommend a final dividend
of 8.04 pence per share payable on
19th August 2011 to shareholders on the
register on 22nd July 2011, making a total
distribution of 10.75 pence for the year.
Share capital
The company’s capital consists of
43,632,068 (2010 – 43,632,068) ordinary
shares of 10 pence each with voting rights.
There are no restrictions on voting rights.
There are no restrictions on the
transfer of shares in the company and in
particular there are no limitations on the
holding of shares and no requirements
to obtain the approval of the company,
or of other shareholders, for a transfer of
shares.
Beneficial owners of shares who have
been nominated by the registered holder
of those shares to receive information
rights under section 146 of the Companies
A n n u a l
R e p o r t 2 0 1 1
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 22nd June 2011:
Aberforth Partners’ Clients
Delta Lloyd Asset Management NV*
Ruffer LLP
B. J. Cooke
Hamstall Investments Inc.
Rathbone Investment Management Ltd
Number
6,995,285
6,008,062
4,146,172
1,955,386
1,800,000
1,600,000
%
16.0
13.8
9.5
4.5
4.1
3.7
* The Delta Lloyd Asset Management NV holding was previously disclosed as Aviva plc &
subsidiaries.
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
on page 4, the Corporate Governance
persons other than to existing members
Statement on page 13, and the Notes to
up to a maximum nominal amount of
the Accounts on pages 24 to 43 provide
£218,160, being approximately 5% of the
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
2011.
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 2010 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 2010, 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
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
2011. 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.
Notice of meetings
Changes made
to
the Companies
Act 2006 by the Shareholders’ Rights
Regulations state that the notice period
required for general meetings of the
Company is 21 days unless shareholders
approve a shorter notice period, which
cannot however be less than 14 clear
days. (AGMs will continue to be held on at
least 21 clear days’ notice.)
The directors seek such approval
for meetings other than annual general
meetings as they believe it is in the best
interests of the Company to have the
ability to use the shorter notice period. It
is intended that this flexibility will only be
used for non routine business and where
merited in the interests of the shareholders
as a whole. The approval will be effective
until the Company’s next annual general
meeting, when it is intended that a similar
resolution will be proposed.
6
A n n u a l
R e p o r t 2 0 1 1
New Articles of Association
Further details of employee involvement
Each of the persons who are directors
The directors seek approval to adopt new
are given under the Corporate Social
at the date when this report was approved
articles of association (the “New Articles”)
Responsibility section on pages 11 and 12.
confirms that so far as each of the directors
in order to update the Company’s current
articles of association
(the “Current
Articles”) primarily to take account of the
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
implementation of the Companies Act
policy for securing the health, safety and
taken all steps that he ought to have taken
2006.
The principal changes introduced in
the New Articles are summarised in an
Appendix document. Other changes,
which are of a minor, technical or clarifying
nature and also some more minor changes
which merely reflect changes made by
the Companies Act 2006 or conform the
language of the New Articles with that used
in the model articles for public companies,
have not been noted in an Appendix within
the Shareholder Information section on
page 55.
Fixed assets
The market value of the group’s interests
in land cannot be accurately established
without obtaining a revaluation of all the
land and buildings owned by the group.
The directors consider that although a
revaluation would show the market value
of the land and buildings to be in excess
of book value, this excess would not be
significant in the context of group trading
and would not justify the expense of a
revaluation.
Employee involvement
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.
welfare at work of all employees has been
as a director to make himself aware of any
brought to their notice. In addition, safety
relevant audit information (as defined) and
committees hold regular meetings.
to establish that the auditors are aware of
Supplier payment policy
The group’s policy is to settle the terms
of payment with suppliers when agreeing
that information.
Significant agreements
There are no significant agreements to
the terms of each transaction, ensure that
which the company is party that take
suppliers are made aware of the terms of
effect, alter or terminate upon a change
payment and abide by them provided the
of control of the company following a
supplier complies with all relevant terms
takeover bid.
and conditions. The group does not follow
any code or standard on payment practice.
Individual operating businesses within
the group are responsible for establishing
Principal risks and
uncertainties
Principal risks and uncertainties are set
appropriate policies with regard to the
out on page 9 and in note 4(b) in the Notes
payment of their suppliers. The number of
to the Accounts.
days’ purchases outstanding for payment
by the group at the year end was 71
(2010 – 58).
Financial instruments
Details of the use of financial instruments
by the group are contained in note 19 and
in note 4(b) in the Notes to the Accounts.
Articles of Association
Any amendments
to
the Articles of
Corporate Governance
the
Details
group’s
of
corporate
governance policies are dealt with on
page 13.
Cautionary statement
Under the Companies Act, a company’s
directors’ report is required, among other
matters, to contain a fair review by the
directors of the group’s business through
Association have
to be adopted by
a balanced and comprehensive analysis of
the members by a special resolution in
the development and performance of the
general meeting. The current articles were
business of the group and the position of
adopted in January 1989.
the group at the year end, consistent with
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 size and complexity of the business.
The Directors’ Report set out above,
including
the Chairman’s Statement,
the Principal Risks and Uncertainties
and Corporate Social Responsibility
incorporated into it by reference (together,
the Directors’ Report), has been prepared
solely to provide additional information
to shareholders to assess the company’s
strategies and the potential for those
strategies to succeed. The Directors’
Report should not be relied upon by any
other party or for any other purpose.
A n n u a l
R e p o r t 2 0 1 1
7
D i r e c t o r s ’ R e p o r t
continued
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
uncertainties that they face.
By order of the board
B. J. COOKE
Chairman
22nd June 2011
8
A n n u a l
R e p o r t 2 0 1 1
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
of short-term business disruption, additional
are used. However, institutions can be
downgraded before maturity therefore
costs and potential damage to relationships
possibly placing these deposits at risk.
with key customers.
A n n u a l
R e p o r t 2 0 1 1
9
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 continued
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
2011 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.
10
A n n u a l
R e p o r t 2 0 1 1
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.
The group has a network of policies
manufacturing processes.
l To
reduce
the consumption of
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
water consumption.
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.
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
legislative
is kept
level below
to a
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
A n n u a l
R e p o r t 2 0 1 1
11
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
continued
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.
12
A n n u a l
R e p o r t 2 0 1 1
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
Internal financial control
are
The directors
responsible
for
Auditors’ independence
The non-audit work undertaken in the
of
high
standards
of Corporate
maintaining
the group’s systems of
year by the group auditors, BDO LLP,
Governance. The board has considered
internal financial control. These controls
was restricted to an involvement in the
the principles and provisions of the
are designed to both safeguard the
preparation of the tax computations and
Combined Code published in 2008 and
group’s assets and ensure the reliability
related tax advice of the group companies
will continue to adhere to them where it
of financial information used within the
and a review of the interim financial
is in the interests of the business, and of
business and for publication. As with any
statements.
shareholders, to do so.
Internal control
The Combined Code on Corporate
Governance
introduced a requirement
that the directors review the effectiveness
of the group’s systems of internal controls.
This extended the existing requirement
in respect of internal financial controls
to cover all controls including financial,
operational and compliance controls and
risk management.
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
regularly reviewed and has been in place
throughout the year under review and
up to the date of approval of the annual
report and accounts. However, such a
system is designed to manage rather
than eliminate the risk of failure to achieve
business objectives and can provide only
reasonable and not absolute assurance
against material misstatement or loss.
The review covers all controls including
financial, operational, compliance and risk
management.
The directors confirm that they have
established procedures necessary
to
implement the guidance for directors on
the Combined Code such that they fully
comply with it for the accounting period
ended on 31st March 2011.
such systems, controls can only provide
reasonable and not absolute assurance
against material misstatement or loss.
Internal financial control is operated
within a clearly defined organisational
structure with clear control responsibilities
and authorities, and a practice throughout
the group of regular management and
board meetings to review all aspects of
the group’s businesses including those
aspects where there is a potential risk to
the group.
For each business there are regular
weekly and monthly reports, reviewed by
boards and management, which contain
both written reports and accounts. The
accounts include profit and loss accounts
and balance sheets for the period under
review, year to date and previous year and
are compared with expected results. A
variety of operational and financial ratios
are also produced.
Continual monitoring of the systems of
internal financial control is conducted by all
management. The external auditors, who
are engaged to express an opinion on the
group accounts, also consider the systems
of internal financial control to the extent
necessary to express that opinion. The
external auditors report the results of their
work to management, including members
of the board and the audit committee.
The board does not consider there is a
need for an internal audit function due to
the size and non-complexity of 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
relevant matter has been authorised in
accordance with the Articles of Association
by the other directors.
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
in accordance with the guiding principles
and agreed a process to identify and
authorise future conflicts. In practice,
directors are asked to consider and
disclose actual or potential conflicts at
the beginning of each meeting and as and
when a matter arises.
A n n u a l
R e p o r t 2 0 1 1
13
C o r p o r a t e G o v e r n a n c e
continued
Attendance at board and board committee meetings during the year is detailed in the table shown below:
Director
B. J. Cooke
D. J. Gawthorpe
S. J. Mant (appointed 1 November 2010)
J. C. Roby (retired on 31 October 2010)
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
3
5
8
8
8
8
8
7
8
3
5
8
8
7
8
8
—
—
—
—
—
—
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.
Board of directors
The board meets regularly to monitor the
Board committees
The principal committees established by
current state of business and to determine
the directors are:
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.
Although the non-executive directors
have served for more than ten years their
knowledge, advice and controls are still
invaluable to the group.
Audit committee
This committee comprised
the
three
non-executive directors and is chaired
by C. P. King. The finance director and
other executive directors may also attend
meetings as appropriate to the business in
hand but are not members of the committee.
The committee meets at least twice a
year and examines any matters relating to
the financial affairs of the group including
the review of annual and interim results,
internal control procedures and accounting
practices. The audit committee meets with
Directors
receive
regular updates
the auditors periodically and as necessary.
appropriate to the business throughout
the year.
Remuneration committee
As detailed in the remuneration report on
To assist with the conduct of their
page 15.
function,
the non-executive directors
are able to obtain professional advice
at the company’s expense if required in
connection with their duties. In addition,
all directors have access to the services of
the company secretary.
Nomination committee
This committee comprised the three non-
executive directors and is chaired by G.
B. Wainwright. The chairman may attend
meetings as appropriate to the business in
hand but is not a member of the committee.
The committee met once 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 company and compared them to the
level of funding available. Details of the
cash position are set out in note 19. to the
accounts. The group’s objectives, 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 notes 17 and 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
14
A n n u a l
R e p o r t 2 0 1 1
serves and how these may impact on cash
l The non-executive directors do not
flow. The group and company’s business
have specified term contracts.
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.
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
After making these enquiries, the
and CNC Speedwell. The chairman
directors have a reasonable expectation
concentrates on the effective working
that the company and the group have
of
the board and overall group
adequate resources to continue operations
strategies and remains a high level
for the foreseeable future. For this reason,
contact with our main customers.
they continue to adopt the going concern
basis in preparing the financial statements.
l The role of the financial director and
company secretary are fulfilled by the
same person as there is no one else
within the group qualified to do the job
and it would not be a full-time position.
The board monitors the effectiveness
of this arrangement annually.
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.
Summary
The board
takes
its
responsibilities
seriously even though there are a number
of the provisions of the Code with which it
does not comply. It does not feel that the
size or complexity of the group and the way
in which it governs would be enhanced
or strengthened by
further changing
the already existing high standards of
corporate governance practised.
For the year ended 31st March 2011
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.
A n n u a l
R e p o r t 2 0 1 1
15
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 2011.
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.
Directors’ Emoluments*
Remuneration committee
This committee comprised the three non-
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
The underlying policy
remuneration of the executive directors
is that it shall be designed to retain and
motivate the directors and be reasonable
and fair in relation to their responsibilities.
in setting
Executive
emoluments
directors’
comprise annual salary, an annual bonus,
membership of a company pension scheme
and other benefits. The committee ordinarily
reviews directors’ salaries annually, effective
from 1st April, taking into account market
rates and the performance of the individual
and of the company. Pay and employment
conditions of the group are taken into account
in determining directors’ remuneration, with
the committee approving similar rates of
salary increase across the group. Policies
for benefits (which include provision of a
car or car benefit, private health care and
life assurance) are reviewed regularly and
comparisons with other companies are
made. Reports and published data are also
taken into consideration in setting salary and
benefit packages.
Remuneration in 2011
The individual elements of remuneration of
each director are set out in the table below.
Annual bonus
Executive directors participate
in a
performance-related annual bonus scheme.
Bonuses are payable based on the group
obtaining profits before tax and exceptional
items above a predetermined threshold.
Salary/
fees
£000
Benefits
(note 1)
£000
Performance
related bonus
£000
B. J. Cooke
D. J. Gawthorpe
S. J. Mant (appointed 1 November 2010) — Note 2
M. A. Lewis
G. Cooper
C. P. King
G. B. Wainwright
A. J. Smith
J. C. Roby (retired 31 October 2010)
80
200
46
145
145
20
20
20
94
770
4
9
4
9
10
—
—
—
10
46
2011
Total
£000
120
280
80
•225
•226
•20
•20
•20
145
36
71
30
71
71
—
—
—
41
320
•1,136
2010
Total
£000
83
175
—
147
148
18
18
18
162
769
Note 1 — Benefits in kind include car or
2009. Their dependants are eligible for
P.L.C. Money Purchase Pension Scheme,
car benefit, fuel or cash allowance, and
dependants’ pensions and the payment of
a defined contribution pension scheme.
private health care.
a lump sum in the event of death in service.
Pension contributions are not paid on
Note 2 — S. J. Mant was paid a salary of
£31,000 and bonus of £23,000 in respect
of the period prior to joining the Board.
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
The scheme provides for a pension accrued
benefits or bonuses. Total contributions
at 1/60th per year of service to 2005 and
of the company total 7% of pensionable
1/80th per year thereafter. From 6th April
earnings.
2009, they became deferred members.
Four directors are members of the Money
Final pensionable remuneration is based
Purchase Pension Scheme. In addition,
on capped basic salaries on retirement at
J. C. Roby received a pension allowance
normal retirement age.
equivalent to company contributions up to
From 6th April 2009, the executive
directors were able to join the Castings
the point of his retirement.
16
A n n u a l
R e p o r t 2 0 1 1
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’ 31/03/2011 31/03/2010
total
accrued
pension at
in accrued
pension
during
the year of inflation contributions
£
£
£
49
47
57
62
—
—
—
—
2,028
943
1,143
1,796
—
—
—
—
—
—
—
—
Transfer
value of
accrued
benefits
Transfer Difference
in transfer
value of
values
accrued
less
benefits
(note 2) 31/03/2011 31/03/2010 contributions
£
£
£
£
44,078
443,687
403,019
20,492
203,140
186,937
24,841
340,915
311,018
39,037
684,607
622,922
40,668
16,203
29,897
61,685
(note 2)
£
46,106
21,435
25,984
40,833
Name of director
D. J. Gawthorpe
M. A. Lewis
G. Cooper
J. C. Roby
The following directors are members of the Castings P.L.C. Money Purchase Pension and Life Assurance Scheme and the contributions paid
by Castings P.L.C. in respect of those directors over the year is set out below:
Contributions paid to 31/03/2011
D. J. Gawthorpe
S. J. Mant
M. A. Lewis
G. Cooper
10,030
3,754
9,264
9,264
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 (excluding S. J. Mant) 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
CCaassttiinnggss PPLCC — TToottaall RReettuurrnn oonn IInnvveessttmmeenntt
quoted.
300.00
250.00
200.00
150.00
100.00
50.00
0.00
01 April 2006
01 April 2007
31 March 2008
31 March 2009
31 March 2010
31 March 2011
Castings P.L.C.
FTSE 350 INDS ENG
Source: Thomson Financial – Thomson One Banker
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,
with the exception of S. J. Mant who has a
contract dated 1 November 2010.
Messrs King, Wainwright and Smith
do not have a contract of service and do
not participate in the company’s bonus
schemes and are not eligible to join a
company pension scheme.
On behalf of the board
G. B. WAINWRIGHT
Chairman of the remuneration committee
22 June 2011
A n n u a l
R e p o r t 2 0 1 1
17
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
financial statements, Article 4 of the IAS
Generally Accepted Accounting Practice
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;
18
A n n u a l
R e p o r t 2 0 1 1
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 2011 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 and express
an opinion on the financial statements
in accordance with applicable law and
International Standards on Auditing (UK
and Ireland). Those standards require us
to comply with the Auditing Practices
Board’s
(APB’s) Ethical Standards for
Auditors.
Scope of the audit of the
financial statements
A description of the scope of an audit of
financial statements is provided on the
APB’s website at http://www.frc.org.uk/
apb/scope/private.cfm.
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 2011 and of the group’s
profit for the year then ended;
the group financial statements have
been properly prepared in accordance
with
the
IFRSs as adopted by
European Union;
the parent company financial statements
have been properly prepared
in
accordance with United Kingdom
Accounting
Accepted
Generally
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 14 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.
l certain elements of
report
to shareholders by the board on
directors’ remuneration.
the
Stephen Ward (senior statutory auditor)
For and behalf of BDO LLP,
Statutory auditor
Birmingham
United Kingdom
22nd June 2011
BDO LLP is a limited liability partnership
registered in England and Wales (with
registered number OC305127).
A n n u a l
R e p o r t 2 0 1 1
19
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 2011
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
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
Net actuarial gain/(loss) and movement in unrecognised surplus on defined
benefit pension schemes
Tax effect of gains and losses recognised directly in equity
Total other comprehensive income for the year (net of tax)
Notes
2
4
3
7
8
2011
£000
105,368
(77,526)
27,842
(1,909)
(10,942)
352
(10,590)
15,343
158
15,501
(3,849)
11,652
—
(409)
—
(409)
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)
Total comprehensive income for the year attributable to the equity holders
of the parent company
11,243
3,921
Earnings per share attributable to the equity holders of the parent company
Basic and diluted
10
26.71p
17.51p
Notes to the accounts are on pages 24 to 43.
20
A n n u a l
R e p o r t 2 0 1 1
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 2011
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
2011
£000
55,889
467
56,356
11,402
30,956
13,707
56,065
112,421
25,113
1,546
26,659
5,647
32,306
80,115
4,363
874
13
74,865
80,115
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
The accounts on pages 20 to 43 were approved and authorised for issue by the board of
directors on 22nd June 2011, and were signed on its behalf by:
B. J. Cooke
S. J. Mant
Chairman
Finance Director
Notes to the accounts are on pages 24 to 43.
A n n u a l
R e p o r t 2 0 1 1
21
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 2011
Notes
Cash flows from operating activities
Profit before income tax
Adjustments for:
Depreciation
Profit on disposal of property, plant and equipment
Interest received
Excess of employer pension contributions over income statement charge
(Increase) in inventories
(Increase) in receivables
Increase 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 24 to 43.
2011
£000
15,501
5,606
(26)
(120)
(409)
(3,584)
(12,219)
10,442
15,191
(2,099)
120
13,212
(9,907)
15
32
(9,860)
(4,363)
(4,363)
(1,011)
14,718
13,707
13,280
427
13,707
2010
£000
9,804
4,533
(51)
(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
22
A n n u a l
R e p o r t 2 0 1 1
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 2011
Equity attributable to equity holders of the parent
Share
Share
Other
Retained
capitala)
premiumb)
reservec)
earningsd)
At 1st April 2010
Total comprehensive income for the period ended
31st March 2011
Dividends
£000
4,363
—
—
£000
874
—
—
At 31st March 2011
4,363
874
£000
13
—
—
13
£000
67,985
11,243
(4,363)
74,865
80,115
Equity attributable to equity holders of the parent
Share
Share
Other
Retained
capitala)
premiumb)
reservec)
earningsd)
At 1st April 2009
Total comprehensive income for the year ended
31st March 2010
Dividends
At 31st March 2010
£000
4,363
—
—
£000
874
—
—
4,363
874
£000
13
£000
68,427
3,921
(4,363)
—
—
13
67,985
73,235
Total
equity
£000
73,235
11,243
(4,363)
Total
equity
£000
73,677
3,921
(4,363)
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.
A n n u a l
R e p o r t 2 0 1 1
23
N o t e s t o t h e A c c o u n t s
1 Accounting policies
New standards effective in
2011 adopted by the group
accounting
following
new
The
standards have been adopted by the
group in these financial statements:
l Amendments to IFRS 7 ‘Improving
Financial
disclosures
about
Instruments’
l
Improvements to IFRSs
There has been no significant impact in
respect of adopting these new standards.
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.
The
IFRSs applied
in
the group
financial statements are subject
to
ongoing amendment by the IASB and
subsequent endorsement by the European
Commission and therefore subject to
possible change in the future. Further
standards and interpretations may be
issued that will be applicable for financial
years beginning on or after 1st April 2011
or later accounting periods but may be
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.
The primary statements within the
of the Companies Act 2006 applicable
to companies reporting under IFRS. A
summary of the principal group IFRS
accounting policies is set out below.
Basis of consolidation
statement
The
consolidated
of
comprehensive income and balance sheet
include the accounts of the parent company
and its subsidiaries made up to the end of
the financial year. These subsidiaries include
William Lee Limited and CNC Speedwell
Limited, both of which are 100% owned and
are based in the UK.
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
attributed to them, which is normally their
market value at the date of acquisition. Net
tangible assets acquired are consolidated
at a fair value to the group at the date of
acquisition. All changes to these assets and
liabilities, and the resulting gains and losses
that arise after the group has gained control
of the subsidiary, are credited and charged
to the post-acquisition income statement.
Under UK GAAP, goodwill arising on
acquisitions prior to 1998 was written off to
reserves. There have been no acquisitions
since 1998. Following the exemption in
IFRS 1 this treatment has continued to be
followed.
Revenue recognition
Revenue, which excludes value added
financial information contained in this
tax and intra-group sales, represents the
document have been presented
in
invoiced value of goods and services sold
accordance with IAS 1: Presentation of
to customers. Appropriate provisions for
Financial Statements.
The accounts are prepared under
the historical cost convention, except
returns and other allowances are deducted
from revenue as appropriate. The group
has no barter transactions.
where adjusted for revaluations of certain
The group’s
revenue has been
assets, and in accordance with applicable
recognised when goods have been
Accounting Standards and those parts
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
are held at cost
less accumulated
depreciation. Depreciation is provided on
property, plant and equipment, other than
freehold land and assets in the course of
construction, on a straight-line basis. The
periods of write-off used are as follows:
i
Freehold buildings over 50 years.
ii Leasehold land and buildings over
50 years or the period of the lease,
whichever is less.
iii Plant and equipment over a period
of 3 to 15 years, straight line or
unit of production method if more
appropriate.
The group annually
the
assessment of residual values and useful
reviews
lives in accordance with IAS 16.
24
A n n u a l
R e p o r t 2 0 1 1
Inventories
The group’s inventories are valued at the
Loans and receivables
These assets are non-derivative financial
b) Financial liabilities
The group classifies its financial liabilities
lower of cost on a first in, first out basis
assets with
fixed or determinable
into
liabilities measured at amortised
and net realisable value. Cost includes a
payments that are not quoted in an active
cost. Although the group uses derivative
proportion of production overheads based
market. They arise principally through
financial instruments in economic hedges
on normal levels of activity. Provision is
the provision of goods and services to
of currency risk, it does not hedge account
made for obsolete and slow-moving items.
customers (e.g. trade receivables) and
for these transactions, and the amounts
deposits held at banks and building
are not material.
Cash and cash equivalents
Cash and cash equivalents includes cash in
societies, but may also incorporate other
types of contractual monetary asset.
hand, deposits at call with banks and other
They are initially recognised at fair value
short-term highly liquid investments with
plus transaction costs that are directly
original maturities of three months or less.
attributable to the acquisition or issue and
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
subsequently carried at amortised cost
using the effective interest rate method,
less provision for impairment.
The effect of discounting on these
financial instruments is not considered to
and other short-term monetary liabilities,
be material.
Impairment provisions are recognised
when there is objective evidence (such as
which are initially recognised at fair value
and subsequently carried at amortised
cost using the effective interest method.
significant financial difficulties on the part
Fair value is calculated by discounting
of the counterparty or default or significant
estimated future cash flows using a market
delay in payment) that the group will be
rate of interest.
unable to collect all of the amounts due
Foreign currencies
Assets and liabilities in foreign currencies
are translated at the spot rates of exchange
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
under the terms of the deposit or receivable.
assets. Although the group occasionally
The amount of such a provision is the
uses derivative financial instruments in
difference between the net carrying amount
economic hedges of currency rate risk,
and the present value of the future expected
it does not hedge account for these
cash flows associated with the impaired
transactions and the amounts are not
asset. Such provisions are recorded in a
material. The group has not classified any
separate allowance account with the loss
of its financial assets as held to maturity.
being
recognised within administrative
Available-for-sale assets
Available-for-sale
financial
assets
expenses in the consolidated statement of
comprehensive income. On confirmation
that the deposit or receivable will not be
comprise the group’s strategic investments
collectable, the gross carrying value of the
in entities not qualifying as subsidiaries.
asset is written off against the associated
They are carried at fair value with changes
provision.
in fair value recognised directly in the
consolidated statement of comprehensive
income. Fair value is determined with
reference to published quoted prices in an
active market.
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
enacted or substantially enacted by the
balance sheet date.
A n n u a l
R e p o r t 2 0 1 1
25
N o t e s t o t h e A c c o u n t s
continued
Critical accounting
estimates and
judgements
The group makes certain estimates and
Inventory
The company reviews the net realisable
value of, and demand for, its inventory on a
regular basis to provide assurance that the
judgements regarding the future. Estimates
recorded inventory is stated at the lower
and judgements are continually evaluated
of cost and net realisable value. Factors
based on historical experience and other
that could
impact estimated demand
factors, including expectation of future
and selling prices include customer order
events that are believed to be reasonable
scheduling, competitor actions, supplier
under the circumstances. In the future,
prices and economic trends. See note 13
actual experience may differ from these
for further details.
estimates and judgements. The estimates
and assumptions that have a significant
risk of causing a material adjustment
Pension assumptions
The costs, assets and
liabilities of
to the carrying amounts of assets and
the defined benefit pension schemes
liabilities within the next financial year are
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.
discussed below.
Short-term deposits
See note 19 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
carrying value and amounts charged to
the consolidated income statement in
specific periods. More details including
carrying values are included in note 11.
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.
Exceptional items
Exceptional items are those significant
items which are separately disclosed by
virtue of the size or incidence to enable a
full understanding of the group’s financial
performance.
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.
Improvements to IFRSs (2010) - the
amendments take various forms including
financial instrument and clarifying the
components of other comprehensive
income. The amendments are not
expected to have a significant impact.
There are a number of further standards,
interpretations
and
amendments
to
published standards not set out above
which the directors consider not to be
relevant to the group.
26
A n n u a l
R e p o r t 2 0 1 1
2 Business and geographical segments
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 Machining Operation.
The following shows the revenues, results and total assets by reportable segment in the year to 31st March 2011.
Revenue from external customers
Inter-segmental revenue
Segmental result
Unallocated costs:
Exceptional credit for recovery of Icelandic Bank deposits
previously written off
Release of 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
97,163
14,429
£000
8,205
11,701
£000
—
—
Total
£000
105,368
26,130
11,593
3,410
(421)
14,582
196
156
409
158
15,501
104,311
20,781
(12,671)
112,421
3,419
6,488
2,882
2,724
—
—
9,907
5,606
A n n u a l
R e p o r t 2 0 1 1
27
N o t e s t o t h e A c c o u n t s
continued
2 Business and geographical segments continued
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 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
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
Foundry
operations
Machining
Elimination
£000
58,077
939
£000
2,572
5,359
£000
—
—
Total
£000
60,649
6,298
5,438
(433)
—
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
—
—
2011
£000
42,617
21,189
38,147
2,436
979
105,368
2,721
4,533
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 £23,893,000 and £11,754,000 from two customers
(2010 – £9,189,000 and £6,188,000).
28
A n n u a l
R e p o r t 2 0 1 1
3 Profit from operations
This has been arrived at after charging/(crediting):
Staff costs (note 5)
Cost of inventories recognised 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 items
Redundancy costs (see (a) below)
Provision for losses on deposits with Icelandic banks (see (b) below)
Provision for Industrial Tribunal costs (see (c) below)
2011
£000
32,222
55,553
5,606
25
26
10
(8)
2011
£000
—
(196)
(156)
(352)
2010
£000
17,681
39,978
4,533
24
25
18
(51)
2010
(404)
—
200
(204)
a) The exceptional credit of £404,000 in the prior year 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 were released.
b) The company reported in the year end 31st March 2009 that £1.86 million was included in other receivables as recoverable from various
Icelandic banks. So far £2,056,000 has been received with the excess being shown as an exceptional credit.
c) The exceptional credit of £156,000 relates to a provision for Industrial Tribunal costs made as at 31st March 2010 that was released due
to the costs incurred being lower than the estimate made of £200,000.
5 Employee information
Average number of employees during the year was:
Production
Management and administration
2011
840
86
926
2010
594
78
672
A n n u a l
R e p o r t 2 0 1 1
29
N o t e s t o t h e A c c o u n t s
continued
5 Employee information continued
Staff costs (including directors) comprise:
Wages and salaries
Defined contribution pension costs
Defined benefit pension cost (note 6)
Employer’s national insurance contributions and similar taxes
2011
£000
27,754
658
(409)
2,790
30,793
2010
£000
17,148
430
(1,966)
1,731
17,343
In addition to the wages and salaries disclosed above, the group incurred costs of £1,429,000 (2010 — £147,000) in respect of agency workers.
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.
In July 2010 the UK Government announced that the statutory minimum level of revaluation would in the future be calculated using
the Consumer Price Index (“CPI”) rather than the Retail Price Index (“RPI”). The company, in conjunction with the Trustees of the Pension
Scheme, has undertaken to review the impact of this change and has therefore continued to link the deferred pensions to RPI for the purpose
of the current year Scheme revaluation. The assumption regarding future RPI rates is higher than for CPI rates and whilst it is estimated that
the impact of the change to CPI would be to increase the unrecognised surplus, this amount is not considered to be material to the financial
statements.
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 being performed with an effective date of 6 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 2011 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
2011
3.4%
5.5%
3.4%
2010
3.6%
5.6%
3.6%
30
A n n u a l
R e p o r t 2 0 1 1
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 (gain)/loss
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
2011
£000
41,369
—
—
2,271
—
(520)
(1,634)
41,486
46,250
2,680
873
—
—
1,634
48,169
6,683
(6,683)
—
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)
—
Year to
31st March
Year to
31st March
2011
£000
—
—
2,271
(2,680)
2010
£000
—
(2,158)
2,086
(1,894)
Total pension cost recognised within administrative expenses (note 5)
(1,966)
(409))
9(1,966)
Unrecognised pension surplus at beginning of year
Unrecognised pension surplus at end of year
Actuarial gain/(loss) for the year
Pension cost shown in Other Comprehensive Income
4,881
(6,683)
1,393
409
1,007
(4,881)
(592)
(4,466)
Cumulative amount of actuarial losses immediately recognised
10,712
13,105
A n n u a l
R e p o r t 2 0 1 1
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
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
2011
69%
28%
3%
100%
2010
69%
28%
3%
100%
To develop the expected long-term rate of return on assets assumption, the company considered the current level of expected returns on
risk-free investments (primarily government bonds), the historical level of risk premium associated with the other asset classes in which the
portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted
based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. This resulted in
the selection of the 5.9% (2010 – 5.6%) assumption.
The projected pension cost for the year ending 31st March 2012 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
2011
£000
3,553
5.5%
5.6%
5.9%
n/a
2010
£000
12,081
5.6%
7.0%
5.6%
4.5%
32
A n n u a l
R e p o r t 2 0 1 1
6 Pension disclosures under IAS 19 continued
Weighted average life expectancy for mortality tables* used to
determine benefit obligations at:
2011
2010
Male
Staff/
Shopfloor
Female
Staff/
Shopfloor
Male
Staff/
Shopfloor
Female
Staff/
Shopfloor
21.8/20.1
25.0/23.2
21.6/19.9
24.8/23.0
Scheme member age 65
(current life expectancy)
Scheme member age 45
(life expectancy at age 65)
23.6/21.9
26.9/25.1
23.4/21.7
26.7/24.9
* 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 2011.
History of experience gains and losses
Financial year ended in:
Present value of defined obligation
Fair value of plan assets
2011
41,486
48,169
2010
41,369
46,250
2009
33,251
34,258
2008
39,043
41,829
2007
38,774
43,122
Surplus/(deficit)
6,683
4,881
1,007
2,786
4,348
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
873
2.0%
10,187
22.0%
(11,054)
(32.0%)
(4,781)
(11.0%)
(27)
0%
—
0%
—
0%
86
0%
(2,033)
5.0%
(1,875)
5.0%
1,393
3.0%
(592)
(1.0%)
(2,955)
(10.0%)
(2,748)
(7.0%)
1,848
5.0%
2011
£000
120
18
20
158
2010
£000
92
17
30
139
A n n u a l
R e p o r t 2 0 1 1
33
N o t e s t o t h e A c c o u n t s
continued
8
Income tax
Corporation tax based on a rate of 28% (2010 – 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
Change in rate of corporation tax
Taxation on profit on ordinary activities
Profit on ordinary activities before tax
Tax on profit on ordinary activities at the standard rate of corporation tax
in the UK of 28% (2010 – 28%)
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
Change in rate of future tax
Pension adjustments
Total tax charge for period
Effective rate of tax (%)
9 Dividends
Final paid of 7.29 per share for the year ended 31st March 2010 (2009 – 7.29p)
Interim paid of 2.71 per share (2010 – 2.71p)
2011
£000
3,924
(435)
3,489
412
384
(436)
3,849
15,501
4,340
110
(435)
384
(436)
(114)
3,849
24.8
2011
£000
3,181
1,182
4,363
2010
£000
1,541
(867)
674
688
804
—
2,166
9,804
2,745
34
(867)
804
—
(550)
2,166
22.1
2010
£000
3,181
1,182
4,363
The directors are proposing a final dividend of 8.04 pence (2010 – 7.29 pence) per share totalling £3,508,000 (2010 – £3,181,000).
This dividend has not been accrued at the balance sheet date.
34
A n n u a l
R e p o r t 2 0 1 1
10 Earnings per share
Earnings per share is calculated on the profit on ordinary activities after taxation of £11,652,000 (2010 – £7,638,000) and on the weighted
average number of shares in issue at the end of the year of 43,632,068 (2010 – 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 2010
Additions during year
Disposals
At 31st March 2011
Depreciation and amounts written off
At 1st April 2010
Charge for year
Disposals
Reclassification
At 31st March 2011
Net book values
At 31st March 2011
At 31st March 2010
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
22,320
1,016
—
23,336
2,822
481
—
22
3,325
20,011
19,498
21,849
471
—
22,320
2,541
281
—
2,822
19,498
19,308
84,385
8,891
(1,081)
92,195
52,287
5,125
(1,073)
(22)
56,317
35,878
32,098
83,459
2,250
(1,324)
84,385
49,359
4,252
(1,324)
52,287
32,098
34,100
Total
£000
106,705
9,907
(1,081)
115,531•
55,109
5,606
(1,073)
—
59,642
55,889
51,596
105,308
2,721
(1,324)
106,705
51,900
4,533
(1,324)
55,109
51,596
53,408
The net book value of group land and buildings includes £2,527,000 (2010 – £2,527,000) for land which is not depreciated. The cost of land
and buildings includes £359,000 for property held on long leases (2010 – £359,000).
A n n u a l
R e p o r t 2 0 1 1
35
N o t e s t o t h e A c c o u n t s
continued
12 Financial assets
Available-for-sale assets
At 1st April 2010
Disposals
Net gains/(losses) transferred to statement of comprehensive income
At 31st March 2011
2011
£000
467
2011
£000
480
(13)
—
467
2010
£000
480
2010
£000
429
(17)
68
480
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 £272,000 (2010 – £599,000).
14 Trade and other receivables
Due within one year:
Trade receivables
Other receivables
Prepayments
2011
£000
3,169
2,946
5,287
11,402
2011
£000
23,23,537
3,310
4,109
30,956
Other receivables in 2010 include deposits with Icelandic banks of £4,497,000 less impairment provision of £3,843,000 (see note 4).
15 Trade and other payables
Current trade and other payables:
Trade payables
Social security
Other payables
Accruals
2011
£000
15,893
2,118
422
6,680
25,113
2010
£000
2,347
2,226
3,245
7,818
2010
£000
15,130
2,315
1,704
19,149
2010
£000
7,945
1,193
507
5,026
14,671
Included within accruals in 2010 is a provision of £200,000 relating to Industrial Tribunal costs which was not included in a separate provision
as it is not material to the financial statements.
36
A n n u a l
R e p o r t 2 0 1 1
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 2010
Taken to equity
Charge
At 31st March 2011
The movement in deferred tax assets and liabilities during the year is shown below:
Deferred tax liabilities
At 1st April 2010
Charged to profit
At 31st March 2011
Accelerated
tax depreciation
Pension
Adjustment
£000
6,156
(102)
6,054
£000
(525)
357
(168)
The movement in the deferred tax assets and liabilities during the prior year is shown below:
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
2011
£000
5,287
—
360
5,647
Other
£000
(344)
105
(239)
Other
£000
(389)
26
19
(344)
2011
£000
—
—
—
2010
£000
4,301
(506)
1,492
5,287
Total
£000
5,287
360
5,647
Total
£000
4,301
1,492
(506)
5,287
2010
£000
(525)
19
(506)
The total tax on items taken directly to reserves is £nil (2010 — £681,000) which includes £nil (2010 — £175,000) of current tax on pension
adjustments taken directly to reserves.
A n n u a l
R e p o r t 2 0 1 1
37
N o t e s t o t h e A c c o u n t s
continued
17 Share capital
Authorised 50,000,000 10p ordinary shares
Allotted and fully paid 43,632,068 10p ordinary shares
2011
£000
5,000
4,363
2010
£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
2011
£000
1,609
2010
£000
909
38
A n n u a l
R e p o r t 2 0 1 1
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
2010
£000
15,130
1,904
14,718
31,752
2011
£000
23,537
3,310
13,707
40,554
A n n u a l
R e p o r t 2 0 1 1
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
Current financial liabilities
Trade payables
Other payables
Accruals
Total current financial liabilities
Credit risk
Financial liabilities measured
at amortised cost
2011
£000
15,893
422
6,680
22,995
2010
£000
7,945
507
5,026
13,478
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 2011, trade receivables of £23,216,000 (2010 – £14,696,000) 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 receivables is denominated in the following currencies:
Sterling
Euro
US$
2011
£000
17,822
5,634
81
23,537
2010
£000
11,184
3,946
—
15,130
40
A n n u a l
R e p o r t 2 0 1 1
19 Financial instrument risk exposure and management continued
At 31st March 2011 trade receivables of £321,000 (2010 – £45,000) 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
2011
£000
233
40
48
321
2010
£000
45
—
—
45
At 31st March 2011 trade receivables of £209,000 (2010 – £389,000) were past due and impaired. The amount of the provision at 31st March
2011 was £359,000 (2010 – £517,000). The ageing of these receivables is as follows:
30–60 days
60–90 days
90+ days
2011
£000
22
60
127
209
2010
£000
1
55
333
389
The group records impairment losses on its trade receivables separately from gross receivables. The movements on this allowance account
during the year are summarised below:
Opening balance
Decrease in provisions
Written off against provisions
Recovered amounts reversed
Closing balance
2011
£000
517
(155)
—
(3)
359
2010
£000
684
(132)
—
(35)
517
Impairment losses on trade receivables of £nil (2010 – £34,000) 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 £nil (2010 – £1,000,000) which are reviewed on an annual
basis. Based on 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).
A n n u a l
R e p o r t 2 0 1 1
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
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 instruments if liquidity risk
is not unduly compromised. Although the directors on investing in such instruments never intend to dispose of 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.
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 (2010 – £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 £1.7 million (2010 – £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 2011 (2010 – £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
2011
£000
17
122
286
425
assets
2011
£000
12,313
—
969
13,282
assets
2011
£000
17,822
81
5,634
23,537
Floating rate
Fixed rate
Interest-free
assets
2010
£000
23
36
258
317
assets
2010
£000
14,060
—
341
14,401
assets
2010
£000
11,185
—
3,945
15,130
Total
£000
30,152
203
6,889
37,244
Total
£000
25,268
36
4,544
29,848
42
A n n u a l
R e p o r t 2 0 1 1
19 Financial instrument risk exposure and management continued
Sterling
US$
Euro
Interest-free
liabilities
Interest-free
liabilities
2011
£000
14,903
—
990
15,893
2010
£000
7,210
2
733
7,945
Fixed rate assets attracted interest rates between 0.75% to 1.30% (2010 – 0.53% to 1.65%) 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 £60,000/(£70,000) (2010 – £85,000/(£26,000)).
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 (£268,000)/£297,000 (2010 – (£196,000)/£217,000 ).
Derivative Financial Instruments
In prior periods the group entered into contracts to purchase electricity. These contracts contained clauses which met the definition of a
derivative. At the point of initial recognition the derivative had no value and as the contracts ended during the year there was no derivative at
the balance sheet date. During the year the Statement of Comprehensive Income was credited with £1,053,000 (2010 – charged with £203,000)
under the heading Cost of Sales. This amount reflected the additional rebates/(costs) as a result of higher/(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.
A n n u a l
R e p o r t 2 0 1 1
43
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
2011
£000
2010
£000
2009
£000
105,368
60,649
84,812
15,501
11,652
4,363
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
4,363
75,752
4,363
68,872
4,363
69,314
4,363
73,494
4,363
66,273
80,115
73,235
73,677
77,857
70,636
Property, plant and equipment
55,889
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
467
—
480
—
429
—
736
—
56,356
56,065
52,076
41,685
53,837
37,059
39,508
61,136
823
—
36,318
53,554
(32,306)
(20,526)
(17,219)
(22,787)
(19,236)
80,115
73,235
73,677
77,857
70,636
10.0
2.7
10.0
1.7
26.71p
17.51p
10.0
—
1.43p
10.0
2.8
9.52
2.3
27.49p
21.57p
44
A n n u a l
R e p o r t 2 0 1 1
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 18, 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 2011
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
2011
£000
11,809
5,749
17,558
7,536
25,328
10,516
217
43,597
14,793
28,804
46,362
(494)
45,868
4,363
874
13
40,618
45,868
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
The parent company accounts on pages 45 to 51 were approved and authorised for issue by the board of directors on 22 June 2011, and
were signed on its behalf by:
B. J. Cooke
S. J. Mant
Chairman
Finance Director
Notes to the accounts are on pages 46 to 51.
A n n u a l
R e p o r t 2 0 1 1
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 8 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:
l Buildings
2%
l
Plant and other
equipment
7% to 33%
Freehold land is not depreciated.
Pension costs
The cost of providing retirement pensions
and related benefits is charged to the
profit and loss account over the periods
benefiting from the employees’ services
in accordance with FRS 17. 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.
denominated in foreign currencies are
translated at the rate of exchange ruling
Available-for-sale assets
at the balance sheet date. Transactions
in foreign currencies are recorded at the
rate ruling at the date of the transaction,
all differences being taken to the profit and
loss account.
Deferred tax
Available-for-sale
financial
assets
comprise
the
company’s
strategic
investments in entities not qualifying as
subsidiaries. They are carried at fair value
with changes in fair value recognised
directly in the statement of comprehensive
income. Fair value is determined with
Deferred tax is recognised in respect of
reference to published quoted prices in an
all timing differences that have originated
active market.
but not reversed at the balance sheet date
where transactions or events that result in
Loans and receivables
an obligation to pay more tax in the future
or a right to pay less tax in the future have
occurred at the balance sheet date. Timing
differences are differences between the
company’s taxable profits and its results
as stated in the accounts.
Deferred tax is measured at the average
tax rates that are expected to apply in the
periods in which the timing differences
are expected to reverse, based on tax
rates and laws that have been enacted or
substantially enacted by the balance sheet
date. Deferred tax is measured on a non-
discounted basis.
Investments
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
amounts owed by subsidiary companies)
and deposits held at banks and building
societies, but may also incorporate other
types of contractual monetary asset.
They are initially recognised at fair value
plus transaction costs that are directly
attributable to the acquisition or issue and
subsequently carried at amortised cost
using the effective interest rate method,
less provision for impairment.
Listed investments are accounted for
The effect of discounting on these
at fair value in accordance with FRS 26
financial instruments is not considered to
‘Financial
Instruments: Measurement’.
be material.
Investments in subsidiaries are held at
cost and reviewed for impairment annually.
46
A n n u a l
R e p o r t 2 0 1 1
Impairment provisions are recognised
Financial liabilities measured at
Dividends
when there is objective evidence (such as
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 grounds
as equity instruments. The group is not
that 100% of the voting rights in the
subject to any externally imposed capital
company are controlled within that group.
requirements. Share capital includes the
nominal value of the shares and any share
premium attaching to the shares.
significant financial difficulties on the part
of the counterparty or default or significant
delay in payment) that the group will be
unable to collect all of the amounts due
under the terms receivable, the amount
of such a provision being the difference
between the net carrying amount and
the present value of the future expected
cash flows associated with the impaired
receivable. For trade receivables, such
provisions are recorded in a separate
allowance account with the 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.
A n n u a l
R e p o r t 2 0 1 1
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
The Directors’ Report is on pages 5 to 8 of the Annual Report and Accounts
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 £4,722,000 (2010 – £2,261,000).
The profit and loss account includes £25,000 (2010 – £24,000) for audit fees.
3 Dividends
Final paid of 7.29p per share for the year ended 31st March 2010 (2009 – 7.29p)
Interim paid of 2.71p per share (2010 – 2.71p)
2011
£000
3,181
1,182
4,363
2010
£000
3,181
1,182
4,363
The directors are proposing a final dividend of 8.04 pence (2010 – 7.29 pence) per share totalling £3,508,000 (2010 – £3,181,000). This
dividend has not been accrued at the balance sheet date.
4 Fixed assets
Cost
At 1st April 2010
Additions during year
Disposals
At 31st March 2011
Depreciation and amounts written off
At 1st April 2010
Charge for year
Disposals and adjustments
At 31st March 2011
Net book values
At 31st March 2011
At 31st March 2010
Land and
buildings
£000
Plant
and other
equipment
£000
10,282
246
—
10,528
1,980
163
—
2,143
8,385
8,302
23,446
682
(44)
24,104
19,811
906
(37)
20,680
3,424
3,655
Total
£000
33,748
928
(44)
34,632
21,791
1,069
(37)
22,823
11,809
11,957
The net book value of land and buildings includes £2,127,000 (2010 – £2,127,000) for land which is not depreciated. The cost of land and
buildings includes £359,000 for property held on long leases (2010 – £359,000).
48
A n n u a l
R e p o r t 2 0 1 1
5
Investments
Subsidiary companies
At cost
Listed investments at market value
2011
£000
5,281
468
5,749
2010
£000
5,281
480
5,761
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 £12,000 (2010 – £17,000) and the change in fair value taken to equity is £nil
(2010 – £68,000).
6 Stocks
Raw materials
Work in progress
Finished goods
7 Debtors
Due within one year:
Trade debtors
Amounts owed by subsidiary companies
Other debtors
Prepayments 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
2011
£000
1,019
2,462
4,055
7,536
2011
£000
14,797
4,286
3,309
2,936
25,328
2011
£000
7,021
2,498
926
885
101
3,362
14,793
2010
£000
721
1,896
2,139
4,756
2010
£000
8,887
6,670
1,902
907
18,366
2010
£000
3,445
796
567
452
121
2,697
8,078
A n n u a l
R e p o r t 2 0 1 1
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
9 Provisions for liabilities
Deferred taxation
At 1st April 2010
Taxation deferred this year
At 31st March 2011
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 2010
Profit retained
Changes in fair value of investments
At 31st March 2011
2011
£000
181
313
494
668
(174)
494
2011
£000
5,000
4,363
2010
£000
571
(390)
181
776
(595)
181
2010
£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
40,259
359
—
Total
equity
£000
45,509
359
—
40,618
45,868
50
A n n u a l
R e p o r t 2 0 1 1
12 Reconciliation of movements in shareholders’ funds
Profit for the year
Changes in fair value of investments
Dividends
Net increase/(reduction) to shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
2011
£000
4,722
—
(4,363)
359
45,509
45,868
2010
£000
2,261
68
(4,363)
(2,034)
47,543
45,509
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 £nil (2010 – £2,500,000). 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
2011
£000
14
2010
£000
17
A n n u a l
R e p o r t 2 0 1 1
51
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 Castings
agreement which would or might
having, in the case of relevant
P.L.C. (the ‘Company’) will be held at Holiday
require relevant securities to be
shares, an aggregate nominal
Inn, Birmingham M6, Junc. 7, Chapel Lane,
allotted after the expiry of such
amount, or, in the case of other
Great Barr, Birmingham, West Midlands, B43
period and the directors may allot
equity securities, giving the right to
7BG, on Tuesday 16th August at 3.30 pm for
relevant securities
in pursuance
subscribe for or convert into relevant
the following purposes:
As ordinary business
1 To receive and adopt the directors’
report and audited accounts for the year
ended 31st March 2011.
2 To declare a final dividend.
3 To re-elect Mr G. B. Wainwright as a
director.
of any such offer or agreement as
shares having an aggregate nominal
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
the date of this resolution save that the
hereby revoked;
4 To re-elect Mr G. Cooper as a director.
(d) this authority will be put to annual
5 To re-elect Mr S. J. Mant as a director.
shareholder approval.
6 To approve the directors’ remuneration
As special business
report for the year ended 31st March
2011.
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
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 2011;
(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
52
A n n u a l
R e p o r t 2 0 1 1
Stock Exchange Limited for the
The record date for payment of the final
Act, that they may have a right under an
five business days immediately
dividend is 22nd July 2011. Assuming
agreement with the registered member
preceding the day of purchase;
the final dividend is approved by the
by whom they were nominated to be
members, the dividend will be paid on
appointed, or to have someone else
(d) unless previously
revoked or
varied,
the authority hereby
19th August 2011.
conferred shall expire at
the
Information about the meeting can be
conclusion of the next Annual
found on the Company’s website (www.
General Meeting of the Company
castings.plc.uk). The right to vote at the
following
the date of
this
meeting is determined by reference to
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
resolution, unless such authority is
the register of members as it stands on
rights.
renewed on or prior to such date;
12th August 2011. Shareholders have the
Nominated persons
should contact
right to ask questions at the meeting.
the registered member by whom they
(e) the Company may, before the
expiry of this authority, conclude
a contract to purchase ordinary
shares under this authority which
By order of the board
will or may be executed wholly
S. J. Mant
or partly after such expiry and
Company Secretary
may make a purchase of ordinary
shares pursuant
to any such
contract, as if such authority had
not expired.
Registered Office:
Lichfield Road,
Brownhills,
West Midlands, WS8 6JZ.
11 THAT a general meeting other than an
22nd June 2011
were nominated
in respect of these
arrangements.
In Accordance with Regulation 41 of the
Uncertified Securities Regulations 2001,
only those members entered on the
Company’s register of members at 6.00
pm on the day which is two days before
the day of the meeting or, if the meeting
is adjourned, shareholders entered on the
Company’s register of members at 6.00
pm on the day two days before the date
of any adjournment shall be entitled to
attend and vote at the meeting.
New Articles of Association
A copy of the proposed new Articles of
Note:
Any member of the Company entitled
to attend and vote at this meeting may
appoint one or more proxies, who need
not also be a member, to attend and vote,
Association of the Company is available
on a poll, in his stead. The instrument
for inspection during normal business
appointing a proxy, including authority
hours at the offices of Pinsent Masons
LLP, 30 Crown Place, London EC2A 4ES
(public holidays excluded) from the date
of this notice until the conclusion of the
Annual General Meeting and will also be
available for inspection at the place of the
Annual General Meeting 15 minutes before
time of AGM until its conclusion.
under which it is signed (or a notarially
certified copy of such authority), must be
deposited at the offices of the Company’s
registrars: Capita Registrars, PXS,
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
annual general meeting may be called
on not less than 14 clear days’ notice.
12 THAT with effect from the passing of
this resolution:
a
the Articles of Association of the
Company be amended by deleting
all the provisions of the Company’s
Memorandum
of Association
which, by virtue of section 28 of
the Companies Act 2006, have
been treated as provisions of the
Company’s Articles of Association
since 1 October 2009; and
b
the Articles
of Association
produced to the meeting and
initialled by
the chairman of
the meeting for the purpose of
identification be adopted as the
Articles of Association of the
Company in substitution for, and
to the exclusion of, the existing
Articles of Association.
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53
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
S. J. Mant, 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
S. J. Mant, 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
The Registry,
34 Beckenham Road,
Beckenham,
Kent, BR3 4TU
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
54
A n n u a l
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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
out arrangements whereby the holders of
be contacted by completing an online
shares in uncertificated form may change
shares on 31st March 1982, adjusted for
form at:
such holdings into certificated form (and
bonus issues, was 4.92 pence.
w w w. f s a . g o v. u k / p a g e s / d o i n g /
vice versa).
regulated/law/alerts/overseas.shtml
Article 18 — Execution of share
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
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.
certificates
Share certificates are no longer required to
be sealed and this new article permits the
Board to take advantage of this relaxation.
Articles 37 — 43 - Transfer of shares
The New Articles contain references to
the fact that shares may be transferred
in uncertificated form, and also make
reference to the fact that shares may be
admitted to the Official List of the UKLA.
The discretion of the Directors to refuse to
register transfers of partly-paid shares is
limited within the New Articles to shares
held in certificated form.
Article 40 — Notice of refusal to
register a transfer of shares
The Companies Act 2006 has introduced a
new requirement for companies to provide
the novice investor that has been duped
Explanatory Notes of Principal Changes
in this way; many of the victims had been
to the Company’s Articles of Association
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.
Set out below is a summary of the
a transferee with reasons for the refusal
principal differences between the current
where the directors refuse to register a
articles of association of the Company (the
transfer of shares. A company is also now
“Current Articles”) and the new articles of
under an obligation to register a transfer
association (the “New Articles”) proposed
as soon as is practicable, rather than
If you receive any unsolicited investment
to be adopted at the forthcoming Annual
within two months as was the case under
advice:
General Meeting. The article numbers
previous legislation. These requirements
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
are the numbers under the New Articles.
are reflected in the New Articles.
Generally, the opportunity has been taken
to bring clearer language into the New
Articles, and other than as set out below,
the differences between
the Current
Articles and New Articles are of a minor or
technical nature.
Article 43 — Renunciation deemed to
be a transfer
This article gives the Board the same
powers to refuse to give effect to a
renunciation of a renounceable letter of
allotment as if it would have in the case of
Articles 12 to 16 — Uncertificated
a transfer of shares.
Shares
The Current Articles do not contain
provisions
regarding holding shares
in an uncertificated form. These new
articles set out detailed provisions giving
effect to the Uncertificated Securities
Regulation 2001, and expressly deal with
the holding of shares in uncertificated
form and their transfer by means of the
CREST system. These articles also set
Article 49 — Disclosure of interests
This article sets out procedures under
the Companies Act 2006, which enable
the Company to require the disclosure
by shareholders of interests in shares. In
addition, the article also reflects current
Listing Rule requirements on the sanctions
which can be imposed on any shareholder
failing to comply with a notice requiring
disclosure of interests in shares. In the
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55
S h a r e h o l d e r I n f o r m a t i o n
continued
event that any person refuses to disclose
2006. Also, to reflect the Companies Act
a minor or formal nature or to correct a
information relating to the interests held in
2006, this article has been amended to
manifest error or one which he considers
shares, the Board may restrict the transfer
allow a general meeting (other than an
fit for consideration. The New Articles also
of shares and the payment of dividends in
annual general meeting) to consider a
provide that if the chairman consents,
respect of shares, and may withdraw the
special resolution to be convened on 14
an amendment may be withdrawn by its
right of the person in question to attend
days’ notice whereas previously 21 days’
proposer before it is put to the vote.
or vote at any general meeting. The article
notice was required. In accordance with
also deals with the circumstances in which
the Companies
(Shareholder Rights)
restrictions on shares must be lifted and
Regulations 2009, the Company intends to
the provision of dividends and shares
apply annually for shareholder approval to
issued during any restricted period. Where
hold general meetings (other than annual
the relevant shares represent less than
general meetings) on 14 days notice.
0.25 per cent of the issued shares of the
same class, the only sanction which can
be imposed is the withdrawal of the right
to attend or vote at any general meeting.
Article 58 — Security arrangements at
general meetings
In line with current market practice, the New
Articles contain provisions which allow the
Article 50 — Alteration of Share Capital
to
Previously,
if a company wanted
Board to make any security arrangements
which it considers appropriate as regards
purchase its own shares, consolidate or
general meetings of the Company, and to
sub-divide its shares or reduce its share
also eject any attendees who cause the
capital or other undistributable reserves, in
proceedings to become disorderly.
Articles 70 to 75 — Votes of members
Under the Companies Act 2006 proxies
are entitled to vote on a show of hands
whereas under the Current Articles proxies
are only entitled to vote on a poll. The New
Articles reflect this new legal position.
Articles 76 to 80 — Appointment of
Proxies
The New Articles make it clear that
multiple proxies may be appointed in
respect of one member’s shareholding in
the Company, provided that each proxy is
appointed to exercise the rights attached
to a different share or shares held by that
member. In addition to the amendments
addition to shareholder authority, specific
provisions in its articles authorising it
to undertake the relevant action were
required. Under
the Companies Act
2006, a company only needs shareholder
authority to carry out any of these actions
and it will no longer be necessary for the
articles of a company to contain enabling
provisions. Accordingly,
the
relevant
enabling provisions are being removed
from the Current Articles.
The
remaining article
regarding
the
alteration of share capital has been
amended to make it clear that, where
fractional entitlements arise on a
consolidation of shares, the Directors
may sell the shares representing such
entitlements on the market or otherwise
to such person at such time and at such
price as they think fit. This is provided
that the net proceeds of the disposal are
distributed to the member in question,
unless such proceeds are £5 or less, in
which case they may be retained by the
Company.
Articles 51 to 55 — General meetings
This article has been updated to remove
references
to extraordinary general
meetings, which are now termed ‘general
meetings’ under
the Companies Act
Article 61 — Adjournment
This article gives the chairman of a general
made to allow proxies to vote on a show
of hands as well as a poll, the New Articles
meeting the power to adjourn the meeting
allow for the appointment of proxies in
without its consent if he considers it
electronic as well as hard copy form.
impracticable to hold or continue the
Article 81 — Determination of proxy’s
meeting.
Article 62 — Meetings held in more
authority
The New
Articles
provide
that
than one place
The New Articles allow for a general
determination of the authority of a proxy
or corporate representative is effective
meeting to be held in more than one
only if notice of determination is received
place, provided that each person present
by the Company at least two hours prior
is able to participate in the business of
to the time of the meeting (no time period
the meeting concerned and can hear and
is provided in the Current Articles). The
see all speakers present at the general
New Articles also extend the ability of a
shareholder to determine the authority
of an appointed proxy or corporate
representative up to two hours prior to the
time of any poll taken after the date of the
meeting at which it is demanded.
meeting in question.
Article 63 — Amendments to
resolutions
The New Articles reflect the common law
position that no amendments to special
resolutions (other than an amendment
to correct an obvious error) may be
considered or voted upon. The New
Articles further state that an amendment to
an ordinary resolution may be considered
at a meeting of the Company if notice of
the amendment has been received by
the Company at least 48 hours before
the meeting or if the chairman decides
to accept or propose an amendment of
56
A n n u a l
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Article 82 — Representatives of
corporations
The New Articles entitle the Company to
Article 93 — Alternate directors
This article has been extended so that,
with current market practice. These
amendments are proposed in light of the
in addition to the provisions within the
fact that the total cap on fees has not
appoint multiple corporate representatives,
Current Articles, the appointment of an
been increased since the Current Articles
in line with the Companies Act 2006.
alternate director will also be revoked
were adopted in 1989 and is therefore
Article 83 — Class meetings
The New Articles set out more detailed
procedures in relation to the holding of
resolution.
class meetings, and specifically allow a
Article 100 to 103 — Powers of
where the individual is not a director and
substantially out of date. This also reflects
the Board revokes its approval of him by
the increasing cost of attracting and
retaining suitable non-executive directors.
An increase of the applicable limit will
cater for the appointment of any additional
directors to the Board.
Directors
Currently, a company can only change
poll to be called at a class meeting.
Article 86 — Appointment and
retirement of directors
Under the Current Articles, one third of the
directors are required to retire annually at
each annual general meeting, regardless
of the length of time served on the Board
by the director in question. The New
Articles provide that, in line with current
recommended best practice for listed
companies, each director shall retire and
its name by special resolution. The
Articles 115 to 133 — Directors’
Companies Act 2006 allows directors to
change a company’s name, providing
interests
The Companies Act 2006 sets out
they are so authorised by the company’s
directors’ general duties which largely
articles. The New Articles are being
codify the existing law but with some
amended
to give
the Company
the
changes. Under the Companies Act 2006,
flexibility to enable the Directors to pass
a director must avoid a situation where
a resolution to change the Company’s
he has, or can have, a direct or indirect
name.
be eligible for reappointment at the third
The Companies Act 2006 allows directors
annual general meeting after the general
of a company to make provisions for
meeting at which he was appointed or
payments
to employees or
former
last reappointed. The Current Articles
employees
in connection with
the
also provide that the managing director of
cessation or transfer of the business of the
the Company is exempt from retirement
company, its subsidiaries or undertakings.
by rotation. The Board believes that it
Although similar provisions have existed
is now appropriate for all directors to
under the Companies Act 1985, it has
submit themselves for periodic re-election
not been standard practice specifically to
and the New Articles do not exempt any
include such authority in the Articles. The
directors from retirement by rotation. This
Companies Act 2006 stipulates that these
is also in line with current best practice
powers may only be exercised by directors
recommendations.
Article 87 — Age of Directors
The New Articles provide that directors
shall not be required to retire from office
automatically upon reaching the age of 70
if they are so authorised by the company’s
articles or by the company in general
meeting. Therefore, the New Articles are
being amended so that the Directors may
continue to exercise this power.
or any other age and allows a director to
Article 111 — Remuneration of
be appointed as such even after attaining
the age of 70.
Article 91 — Power of removal of
directors by special resolution
This article provides for the removal of
any director by a special resolution of the
Company in general meeting. This is in
addition to the statutory procedure which
empowers the members to remove a
director by ordinary resolution which can
prove difficult to use in practice.
directors
The Current Articles provide that the fees
payable to directors for their services
(excluding any special or additional
services provided by
that director,
such as membership of any of the
Company’s committees) is determined
by the Board, but shall not exceed in
aggregate £100,000. It is proposed that
the opportunity
is taken to
increase
this aggregate limit to £200,000, in line
interest that conflicts, or possibly may
conflict, with the company’s interests.
The requirement is very broad and could
apply, for example, if a director becomes a
director of another company or a trustee of
another organisation. The Companies Act
2006 allows directors of public companies
to authorise conflicts and potential
conflicts, where appropriate, where the
articles of association contain a provision
to this effect. The Companies Act 2006
also allows the articles of association to
contain other provisions for dealing with
directors’ conflicts of interest to avoid
a breach of duty. The New Articles give
the directors authority to approve such
situations and include other provisions to
allow conflicts of interest to be dealt with
in a similar way to the current position.
There are safeguards which will apply
when directors decide whether
to
authorise a conflict or potential conflict.
Firstly, only directors who have no interest
in the matter being considered will be
able to give the relevant authorisation,
and secondly,
in taking the decision
as to whether to authorise a conflict of
interests, the directors must act in a way
they consider, in good faith, will be most
likely to promote the company’s success.
A n n u a l
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57
S h a r e h o l d e r I n f o r m a t i o n
continued
The directors will be able to impose limits
or conditions when giving authorisation if
Article 160 — Scrip Dividends
This article allows the Board to propose
to
include
the
relevant authorities
within the New Articles which would be
they think this is appropriate.
a
resolution
to be passed by
the
required to allow such communication,
It is also proposed that the New Articles
should contain provisions relating
to
confidential information, attendance at
shareholders which permits the Company
should the Board decide to use website
to offer shareholders the right to receive
communication in the future.
shares in place of cash dividends.
Board meetings and availability of Board
Article 163 — Delivery of annual
papers to protect a director being in
breach of duty if a conflict of interest or
accounts
The Companies Act 2006 enables
Article 171 — Untraced member not
entitled to notices
This article allows the Company to stop
sending notices to a shareholder if the
potential conflict of interest arises. These
companies to send to their shareholders
despatch of cheques or warrants to that
provisions will only apply where the
a summary of financial statements instead
shareholder has been suspended
in
position giving rise to the potential conflict
of the present full audited accounts.
accordance with the New Articles or if two
has previously been authorised by the
This article permits the Company to take
consecutive notices to the shareholder’s
directors. All provisions of the New Articles
advantage of these provisions but this will
registered address or address for service
which deal with conflicts of interests have
not affect the rights of shareholders to
have been returned undelivered. The
been updated to ensure that the current
receive the full audited accounts should
Company will resume sending notices if
legislative position is reflected.
they so wish.
Article 136 — Notice of Board meetings
the Current Articles, when a
Under
Articles 166 to 170 — Notices
The Companies Act 2006 enables
director is abroad he can request that
companies
to
communicate with
the shareholder supplies a new registered
address or address for service.
Article 172 — Proof of service
This article has been amended to contain
notice of directors’ meetings are sent
members by electronic and/or website
provisions relating to proof of service
to him at a specified address within the
communications. The New Articles
of electronic documents, which is to be
UK and if he does not do so he is not
allow communications to members in
determined in accordance with guidance
entitled to receive notice whilst he is
electronic form and, in addition, they also
issued by the
Institute of Chartered
away. This provision has been removed,
permit the Company to take advantage
Secretaries and Administrators.
as modern communications mean that
of the provisions relating to website
there may be no particular obstacle to
communications. Before the Company
giving notice to a director who is abroad.
can communicate with a member by
It has been replaced with a more general
means of website communication, under
provision that a director is treated as
the Companies Act 2006, the relevant
having waived his entitlement to notice,
member must be asked individually by the
unless he supplies the Company with
Company to agree that the Company can
the information necessary to ensure that
send or supply documents or information
he receives notice of a meeting before it
to him by means of a website. Further,
takes place. The New Articles also provide
the Company must either have received
that notice of directors’ meetings may also
a positive response or have received no
be served electronically.
Article 158 — Uncashed dividends
This article allows the Company to stop
sending cheques or warrants or give
instructions for bank transfers to be
made in the event that dividends remain
uncashed or payment attempts have failed
on one occasion and reasonable enquiries
have failed to establish another address or
account, as well as in the circumstances
set out in the Current Articles where
dividends remain uncashed or payment
attempts have failed on two consecutive
occasions.
response within the period of 28 days
beginning with the date on which the
request was sent. The Company will
notify the member (either in writing, or by
other permitted means) when a relevant
document or information is placed on the
website and a member can always request
a hard copy version of the document or
information. The Company has no current
intention of seeking individual shareholder
consent to allow communications with
shareholders by means of a website,
however the Board considers it prudent
Articles 178 — Directors’ indemnities
The Companies Act 2006 has in some
areas widened the scope of the powers of
a company to indemnify directors and to
fund expenditure incurred in connection
with certain actions against directors.
In particular, a company that is a trustee
of an occupational pension scheme can
now indemnify a director against liability
incurred in connection with the company’s
activities as trustee of the scheme. In
addition, the Company will be permitted to
provide money for the purpose of funding
a director’s defence in court proceedings,
to
include regulatory proceedings,
in
the event that the director concerned
is acquitted or receives judgment in his
favour, or in respect of proceedings which
are otherwise concluded without any
finding of fault on the part of the director
concerned. The indemnity will also apply
to associated companies.
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A n n u a l
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In addition to the above, the following
Article 60 of the Current Articles —
The Company’s Objects
Special Business
Previously, a Company was required
to set out the general nature of “special
business” to be transacted at a general
meeting. As a consequence of this, the
Current Articles set out that matters which
are deemed to be special business. The
Companies Act 2006 requires companies
to set out the general nature of all business
to be transacted, therefore references to
“special business” have been deleted in
the New Articles.
Article 68 — Chairman’s Casting Vote
The Companies (Shareholders’ Rights)
The provisions regulating the operations
of the Company are currently set out
in the Company’s Articles, and also
in
the Memorandum of Association
(‘Memorandum’).
The
Company’s
Memorandum contains
the objects
clause which sets out the scope of the
activities the Company is authorised to
undertake. This clause is drafted to give
a wide scope. Under the Companies Act
2006, the objects clause and all other
provisions which are currently contained
in a company’s Memorandum, for existing
companies at 1 October 2009, are deemed
Regulations 2009 state
that
traded
to be contained in a company’s Articles
companies can no longer permit the
but can be removed by special resolution.
Chairman to have a casting vote upon
an equality of votes at a shareholders’
meeting. This provision does not therefore
appear in the New Articles.
The Companies Act 2006 further states
that unless a company’s Articles provide
otherwise, a company’s objects are
unrestricted. This abolishes the need for
companies to have objects clauses. For
this reason the Company is proposing to
remove its objects clause, together with
all other provisions of its Memorandum
which, by virtue of the 2006 Act, are to be
treated as forming part of the Company’s
Articles Resolution 12.1 confirms the
removal of
these provisions
for
the
Company.
As the effect of this resolution will be
to
in
remove
the statement currently
the Company’s memorandum of
association regarding limited liability, the
New Articles also contain an express
statement regarding the limited liability of
shareholders at Article 3.
provisions of the Current Articles have no
equivalent in the New Articles:-
General — Extraordinary Resolutions
The Current Articles contain provisions
which refer to extraordinary resolutions.
These provisions have been amended or
removed as appropriate, as the concept
of extraordinary resolutions has not been
retained under the Companies Act 2006.
Article 3 of the Current Articles —
Authorised Share Capital
This provision of the Current Articles has
been removed in its entirety to reflect the
abolition under the Companies Act 2006
of the concept of authorised share capital
as from 1 October 2009. Directors will still
be limited as to the number of shares they
can at any time allot because allotment
authority continues to be required under
the Companies Act 2006.
Article 9 of the Current Articles —
Purchase of own shares
Previously,
if a company wanted
to
purchase its own shares, consolidate or
sub-divide its shares or reduce its share
capital or other undistributable reserves,
in addition to shareholder authority, it
required specific provisions in its Articles
authorising it to undertake the relevant
action. Under the Companies Act 2006 ,
a company will require only shareholder
authority to do any of these things and it will
no longer be necessary for the Articles to
contain enabling provisions. Accordingly,
the relevant enabling provisions are being
removed from the New Articles.
Articles 47 to 50 of the Current Articles
The provisions of the Current Articles
relating to the conversion of shares into
stock and vice versa do not appear in
the New Articles as the Board does not
foresee any circumstances in which such
a conversion would take place.
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S h a r e h o l d e r N o t e s
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