castings PLc
annuaL rePort
for the year ended 31st March 2012
21488.04 20.06.12 Proof 8 21488.04 20.06.12 Proof 8 C o n t e n t s
2
3
4
5
9
11
13
16
18
19
20
21
22
23
24
44
45
46
52
54
55
Directors
Chairman’s Statement
Business and Financial Review
Directors’ Report
Review of Principal Risks and Uncertainties
Corporate Social Responsibility
Corporate Governance
Remuneration Report
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Accounts
Five Year Financial History
Parent Company Balance Sheet
Notes to the Parent Company Accounts
Notice of Meeting
Directors, Officers and Advisers
Shareholder Information
1
Annual Report 2012 D i r e c t o r s
Executive Directors
Non-Executive Directors
Brian Cooke
Chairman
Mark Lewis
Gerard Wainwright
Managing Director — CNC Speedwell Ltd
Non-executive Director
Aged 72, he joined the company in 1960
Aged 48, he joined CNC Speedwell in
Aged 62, he was appointed a director
after attending
foundry college and
1990 becoming their managing director
in 1998 and is the senior independent
serving an engineering apprenticeship. He
in 1996. He has overseen the machining
director. He has been chief executive of a
worked in all departments of the company
requirements for the group and was
wide range of manufacturing companies
and was appointed a director in 1966,
appointed a director in 2003.
for over twenty-five years together with
becoming joint managing director in 1968
and managing director in 1970. He ceased
to be chief executive in 2007. He has been
Chairman since 1983.
David Gawthorpe
Chief Executive Officer
Aged 50, he joined the company in 1984
and became local technical director at
Brownhills in 1994. He was appointed
a director in 2003 and became chief
executive in April 2007 and is the director
with environmental and human resource
responsibility.
Steve Mant
Finance Director
Aged 36, he joined the company in
June 2010 and was appointed company
secretary and
finance director on
1 November 2010. Prior to joining the
company he had been working for BDO
LLP
specialising
in manufacturing,
international and listed companies.
Graham Cooper
Managing Director — William Lee Ltd
Aged 58, he joined William Lee in 1977
becoming operations director there in
international experience. He is chairman
of the remuneration committee and a
member of the audit and nomination
committees.
2003 and their managing director in 2005,
Paul King
when he was appointed to the main board.
Non-executive Director
Adam Vicary
Managing Director — Brownhills
Aged 44, he joined the company in
September 2010 as
joint managing
director and was appointed to the main
board in April 2012.
Aged 75, he was appointed a director
in 1998 and is an independent director.
He retired from practice as a partner
with Coopers & Lybrand and has been
a member of the boards of a number
of companies. He is chairman of the
audit committee and is regarded as the
financial expert of that committee and is
also a member of the remuneration and
nomination committees.
Alec Jones
Non-executive Director
Aged 60, he was appointed a director in
April 2012 and is an independent director. He
was a partner in PricewaterhouseCoopers
for 27 years until his retirement in 2010. He
is a member of the audit, remuneration and
nomination committees.
2
Annual Report 2012 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
It is pleasing to report that turnover
increased from £105.4 million to a record
£126.3 million. Profits increased from
£15.5m to £23.1 million.
It must be noted that the profits include
£1.0m credit following settlement of a
historic creditor, £0.7 million credit for
Icelandic bank receipts and £0.3 million
credit in respect of the defined benefit
pension schemes.
The profits are a record for the company
and are as a result of our continued
investment
in up-to-date plant and
machining equipment.
Foundry Production
The new warehouse at Brownhills opened
in January and it is proving beneficial in
improving our logistics and stock control.
The total cost of the warehouse project
was £5.5 million which included extra car
parking and an improved site entrance.
The building can in future be extended for
machining capacity. The foundries are all
now well equipped.
Foundry
production
at
Castings
Brownhills and William Lee has been
satisfactory throughout the year. We still
have some 20% spare capacity and we
are maintaining efforts to fill this with more
work from new and existing customers. In
this respect it is hoped that the European
truck industry will return to pre 2008 levels.
CNC Speedwell
CNC once again has enjoyed an improved
year and a further £5.4 million has been
invested in new machines for existing and
new projects.
It is pleasing to report we have obtained
several contracts
to machine and
assemble products for the automobile
industry. These contracts will hopefully
come into production during June and
July this year and will add to the turnover
and profits of the company.
The logistics to supply castings to CNC
have been improved which has released
space at CNC to be used for more future
Adam Vicary, who joined the company in
September 2010 was appointed to the
board on 3 April 2012. His experience in
lean manufacturing and production will
add strength to the board.
Dividend
I am pleased to report the directors
recommend an
increase
in
the
final
dividend to 8.84 pence per share. This,
together with an
increased
interim
dividend, gives a total for the year of 11.75
pence per share.
Outlook
It is difficult to forecast the future because
production. It is expected, as orders
of the well reported economic problems
increase,
further
investment will be
in Europe. The company continues to be
required at CNC, but as yet the figures are
in a strong position to take advantage of
unknown.
Directors
Tony Smith retired as a non-executive
any upturn and has the ability to manage
a downturn in demand. The financial
strength of the company is important to be
able to make quick investment decisions
director from 30 March 2012. I wish to
and at the same time secure dividend
thank him for his many years service at
payments for our shareholders.
Castings plc. He joined the company
in 1962 as a trainee and progressed to
Joint Managing Director before retiring in
2004. He then became a non-executive
director where his foundry knowledge and
industrial relations experience was a great
benefit to the company. We wish him and
his wife Margaret a happy retirement.
Alec Jones was appointed to the Board on
In conclusion, I would again like to thank
all our employees for their contribution
to the success of the company and it is
hoped any economic problems will not
affect us as they did in 2008/9.
B. J. COOKE
Chairman
3 April 2012 as a non-executive director.
20 June 2012
Alec is a chartered accountant and was
a partner
in PricewaterhouseCoopers
for 27 years until his retirement in 2010.
During that time he was a lead partner on
many major clients and a member of the
global management team responsible for
clients and markets from 2003 to 2008.
He was the leader of the emerging market
practices from 2008 to 2010.
3
Annual Report 2012 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
Revenue has increased by 20% to £126.3
The level of finance income again reflects
Overall
the group
returned a profit
million of which 66% was exported.
the prevailing low interest rates during the
before
taxation of £23.1 million
for
The despatch weight of castings to third
year.
party customers was 57,200 tonnes, being
Operationally the group generated £21.5
an increase of 6,600 tonnes from the
million
in cash
(after
tax payments)
which, after investment of £12.6 million in
property, plant and equipment and £4.8
million in dividend payments, resulted in
an increase in cash of £4.1 million to £17.8
the year. This includes a £0.3 million
credit in respect of the defined benefit
pension schemes (as set out in note 6)
in accordance with IAS 19; £0.7 million
credit for Icelandic bank receipts and
£1 million credit following the settlement
of an historic creditor position.
million at the balance sheet date,
The directors are recommending a final
The pension valuation showed a slight
improvement in the surplus, on an IAS 19
basis, to £6.8 million. This continues not
to be recognised on the balance sheet due
to the restriction of recognition of assets.
dividend that will be paid in August
which, with the interim dividend paid
in January, will result in the return of
£5.1 million to shareholders.
previous year.
Revenue from the machinist operation,
CNC Speedwell, increased by 3% during
the year.
During the year we have received £0.69
million from the administrators of the
UK subsidiaries of the Icelandic banks.
This brings the total sums received to-
date to £2.75 million which is £0.89
million in excess of the original 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.
4
Annual Report 2012 D i r e c t o r s ’ R e p o r t
Annual Report and the
Audited Accounts for the
year ended 31 March 2012.
Trading activities
Castings P.L.C.
supplies
spheroidal
graphite iron castings to a variety of
manufacturing industries from its highly
mechanised
foundries at Brownhills.
William Lee Limited supplies spheroidal
graphite
iron castings from Dronfield,
Sheffield and CNC Speedwell Limited
is a machining operation. There were
no significant changes in the principal
activities of
these companies during
the year.
The progress of these companies during
the year is recorded in the accounts, the
Chairman’s Statement on page 3 and
the Business and Financial Review on
page 4. A Review of Principal Risks and
Uncertainties is given on pages 9 and 10.
Dividends
An interim dividend of 2.91 pence per
share was paid in January 2012. The
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 A. J. Smith was a
non-executive until 31 March 2012.
The interests of directors in the ordinary share capital at the beginning and end of the year
were:
B. J. Cooke
A. J. Smith (resigned 31 March 2012)
G. B. Wainwright59,261 59,261
D. J. Gawthorpe
A. Vicary
G. Cooper
M. A. Lewis
S. J. Mant
C. P. King
A. N. Jones
Beneficial Holdings
2012
2011
1,956,636
1,955,386
103,079
59,261
29,379
12,000
8,000
3,025
1,000
—
—
103,079
59,261
28,296
—
8,000
3,025
—
—
—
directors now recommend a final dividend
There have been no changes in the shareholdings of directors since the year end.
of 8.84 pence per share payable on
17 August 2012 to shareholders on the
register on 20 July 2012, making a total
distribution of 11.75 pence for the year.
Share capital
The company’s capital consists of
43,632,068 (2011 – 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
The following directors retire under the provisions of the Articles of Association and, being
eligible, offer themselves for re-election:
D. J. Gawthorpe – by rotation
A. Vicary – having been appointed since the last Annual General Meeting.
A. N. Jones – 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, G. Cooper and A. Vicary is one year. Mr A. N. Jones,
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.
Act 2006 are required
to direct all
The board considers that the performance of those directors proposed for re-election
communications to the registered holder
continues to be effective, that they remain independent in judgement and that they
demonstrate a strong commitment to their role.
5
Annual Report 2012
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 powers
Exchange. The maximum price to be
of the company as are not by legislation or by the company’s Articles required to be
paid on any exercise of the authority was
exercised in general meeting. The board may make such arrangements as it thinks fit for
restricted to 105% of the average of the
the management and transaction of the company’s affairs and may for that purpose appoint
middle market quotation for the shares
local boards, managers and agents and delegate to them any of the powers of the board
for the five dealing days immediately
(other than the power to borrow and make calls on shares) with power to sub-delegate.
preceding the day of a purchase. The
minimum price which may be paid for
each share is 10 pence.
The current authority to make market
purchases expires at the forthcoming
Annual General Meeting. The directors are
now seeking the approval of shareholders
for the renewal of this authority upon
the same terms, save that the authority
is now sought to allow the company to
purchase and cancel up to 4,358,844
of its own shares, representing 9.99%
of its issued share capital at 31st March
2012. 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.
Other than the directors’ service contracts the directors have no interests in any other
contract of the business.
Substantial shareholdings
The directors have been notified that the following investors, including directors, held
interests in 3% or more of the company’s issued share capital at 20 June 2012:
Aberforth Partners’ Clients
Delta Lloyd Asset Management NV
Ruffer LLP
B. J. Cooke
Hamstall Investments Inc.
Rathbone Investment Management Ltd
Number
6,736,285
5,549,018
4,300,667
1,956,636
1,949,900
1,600,000
%
15.4
12.7
9.9
4.5
4.5
3.7
During the period between 31 March 2012 and 20 June 2012, the directors have not been
notified of any changes to the shareholdings set out above.
Business review
The Chairman’s Statement on page
3, the Business and Financial Review
on page 4, the Corporate Governance
Statement on page 13, and the Notes to
the Accounts on pages 24 to 43 provide
detailed
information
relating
to
the
group, the operation and development
of the business and the results and
financial position for the year ended
31st March 2012.
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
16th August 2011 and under
the
Companies Act must be renewed at least
every five years. Authority will also be
sought from shareholders to allow the
directors to issue new shares for cash to
persons other than to existing members
up to a maximum nominal amount of
£218,160, being approximately 5% of the
current issued share capital.
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 2011,
Approval will be sought for a special
the board was given authority
to
resolution to renew the authority given to
purchase and cancel up to 4,358,844
the directors to allot shares in the company.
of its own shares representing 9.99% of
The present authority was granted on
the company’s existing shares, through
market purchases on The London Stock
6
Annual Report 2012
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.
Further details of employee involvement
are given under the Corporate Social
Responsibility section on pages 11 and 12.
Health and safety
As required by legislation, the group’s
policy for securing the health, safety and
welfare at work of all employees has been
brought to their notice. In addition, safety
committees hold regular meetings.
Supplier payment policy
The group’s policy is to settle the terms
of payment with suppliers when agreeing
the terms of each transaction, ensure that
suppliers are made aware of the terms of
payment and abide by them provided the
supplier complies with all relevant terms
and conditions. The group does not follow
any code or standard on payment practice.
Individual operating businesses within
the group are responsible for establishing
appropriate policies with regard to the
payment of their suppliers. The number of
days’ purchases outstanding for payment
by the group at the year end was 51
(2011 – 71).
Financial instruments
Details of the use of financial instruments
by the group are contained in note 19 and
in note 4(a) in the Notes to the Accounts.
Articles of Association
Any amendments
to
the Articles of
Association have
to be adopted by
the members by a special resolution in
general meeting. The current articles were
adopted in August 2011.
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.
Each of the persons who are directors at
the date when this report was approved
confirms that so far as each of the
directors is aware, there is no relevant audit
information of which the group’s auditors
are unaware, and each of the directors has
taken all steps that he ought to have taken
as a director to make himself aware of any
relevant audit information (as defined) and
to establish that the auditors are aware of
that information.
Significant agreements
There are no significant agreements to
which the company is party that take
effect, alter or terminate upon a change
of control of the company following a
takeover bid.
Principal risks and
uncertainties
Principal risks and uncertainties are set
out on page 9 and in note 4(a) in the Notes
to the Accounts.
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
a balanced and comprehensive analysis of
the development and performance of the
business of the group and the position of
the group at the year end, consistent with
the size and complexity of the business.
The Directors’ Report set out above,
including
the Chairman’s Statement,
the Principal Risks and Uncertainties
and Corporate Social Responsibility
incorporated into it by reference (together,
the Directors’ Report), has been prepared
solely to provide additional information
to shareholders to assess the company’s
strategies and the potential for those
strategies to succeed. The Directors’
Report should not be relied upon by any
other party or for any other purpose.
The Directors’ Report (as defined) contains
certain forward looking statements. These
statements are made by the directors
in good faith based on the information
available to them up to the time of
their approval of this report and such
statements should be treated with caution
due to the inherent uncertainties, including
both economic and business risk factors,
underlying any such
forward
looking
information.
7
Annual Report 2012 D i r e c t o r s ’ R e p o r t
continued
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
20 June 2012
8
Annual Report 2012 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
effect on the group’s business.
Short-term deposits
Advice is taken as to where to deposit
available for materials or services on
funds, usually banks and building
which the group’s businesses are critically
societies. Only highly rated institutions
dependent, this is not always possible
to guarantee without risk of short-term
are used. However, institutions can be
downgraded before maturity therefore
business disruption, additional costs
possibly placing these deposits at risk.
and potential damage to relationships
with key customers.
9
Annual Report 2012
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
2012 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
Annual Report 2012
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
●● Complying with all relevant
legal
adequate environmental information and
requirements,
process,
planning
training is given to all employees and
and discharge authorisations, as
contractors.
appropriate to its operations.
Both of our
foundry sites are
ISO
●● Pursuing best practice techniques in
the use of energy and raw materials.
14001:2004 accredited. The group’s
practices and procedures are subject to
communities in which we operate. The
●● Encouraging
the beneficial
reuse,
regular environmental audits by external
group works hard to meet the legitimate
recycling and recovery of its waste
consultants.
expectations of these stakeholder groups
products.
whilst at the same time seeking to fulfil
our objective of creating outstanding
and enduring value through commercial
success based on superior performance.
●● Ensuring that environmental issues
considered when making
are
decisions to invest in capital plant
The group has also in place an energy
policy which requires each company to
make continuing efforts to achieve the
following objectives:
and in the planning and controlling of
●● To monitor and record energy and
The group has a network of policies and
manufacturing processes.
water consumption.
●● Promoting environmental awareness
throughout the group and ensuring
●● To
reduce
the consumption of
fossil
fuels and utilise energy
that personnel whose activities have
from sustainable sources where
the potential to cause a significant
practicable.
impact on the environment receive
●● To examine ways of reducing water
appropriate training.
consumption.
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
●● Ensuring that suppliers and contractors
adopt environmental practices on site
that are compatible with our exacting
environmental standards.
●● Establishing and maintaining adequate
contingency procedures and plans to
deal effectively with any accidental
discharge or emission of pollutants.
●● 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 committed to:
●● Implementing and maintaining an
Environmental Management System
in accordance with the ISO 14001
standard.
●● Establishing procedures to review the
impact of current or new activities or
processes on the environment.
●● Reviewing audit results and initiating
to address any
corrective action
deficiencies found within the group’s
environmental management system,
policy, objectives or targets.
interested parties.
The group demands that all activities
and services will comply with applicable
laws and
regulations and
that all
substances and materials will be
continually reviewed to ensure that only
those that have the lowest impact on the
environment will be used. In addition,
where it is possible for us to assess, only
waste disposal companies and facilities
where the level of operational control
and environmental compliance meets
legislative requirements are used by our
businesses. Noise from operations is kept
●● Using techniques to avoid, reduce or
to a level below legislative requirements
control pollution.
to ensure the minimum of nuisance to
the local environment. Appropriate and
●● To
promote
energy
awareness
amongst employees and contractors.
●● To
identify and
implement energy
saving measures and practise energy
efficiency
throughout
all
group
premises, plant and equipment.
●● To
incorporate
environmentally
sensitive designs into both new and
refurbished buildings.
●● 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
11
Annual Report 2012 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
●● 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 maintenance of
employment neither by race, nationality,
consistent high standards and each site is
gender, age, disability, sexual orientation
required to develop a safety management
nor political bias.
system that includes:
The group gives full consideration to
●● Health and safety planning and
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
●● Carrying out risk assessments, both
general and hazard specific.
●● Producing and issuing safe systems
of work.
●● Induction training both job and hazard
specific and refresher training.
●● Maintenance, inspection and statutory
health and safety measures as a mutual
inspection of work equipment.
●● Providing
appropriate
personal
protective equipment and rules for
its use.
●● Occupational health including health
surveillance and exposure monitoring
as required.
●● The control of visitors and contractors.
●● Incident
reporting,
recording and
investigation.
●● Routine workplace inspections.
●● Performance monitoring and evaluation.
objective for management and employees
at all levels. It is our policy to do all that
is practicable to prevent personal injury
and damage to property and to protect
everyone
from
foreseeable hazards,
including third parties in so far as they
come
into contact with
the group’s
activities. In particular, we aim to fulfil our
responsibilities:
●● To provide and maintain safe and
healthy working conditions complying
with all statutory conditions.
●● To provide training and instruction to
enable employees to perform their
work safely and efficiently.
●● To make available all necessary safety
devices and protective equipment and
to supervise their use.
12
Annual Report 2012 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 2010
are designed to both safeguard the
preparation of the tax computations and
UK Corporate Governance Code 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.
The manner in which the board provides
leadership of
the company within a
such systems, controls can only provide
reasonable and not absolute assurance
against material misstatement or loss.
framework of prudent and effective
Internal financial control is operated within
controls is set out in this section and also
a clearly defined organisational structure
within the Remuneration report.
with clear control responsibilities and
Internal control
The board is ultimately responsible for
authorities, and a practice throughout
the group of regular management and
board meetings to review all aspects of
the group’s system of internal controls,
the group’s businesses including those
including internal financial control, and
aspects where there is a potential risk to
for monitoring its effectiveness. There
the group.
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
such that they fully comply with the 2010
UK Corporate Governance Code for the
accounting period ended on 31st March
2012.
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.
13
Annual Report 2012 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
M. A. Lewis
G. Cooper
C. P. King
G. B. Wainwright
A. J. Smith ( resigned on 31 March 2012)
Board
Audit
Committee
Remuneration
Committee
Eligible to
Eligible to
Eligible to
attend
Attended
attend
Attended
attend
Attended
8
8
8
8
8
8
8
8
8
8
8
7
8
7
7
7
—
—
—
—
—
2
2
2
—
—
—
—
—
2
1
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
current state of business and to determine
its future strategic direction. During the
year the board comprised five executive
directors
and
three
non-executive
directors. Two of
the non-executive
directors are independent of executive
management and none of
the non-
executive directors participate in share
option or other executive remuneration
schemes nor do they qualify for pension
benefits.
On 31 March 2012, A. J. Smith resigned
as non-executive director with A. N.
Jones being appointed on 2 April 2012. A.
Vicary was also appointed as an executive
director on 2 April 2012.
Although
two of
the non-executive
directors have served for more than ten
years their knowledge, advice and controls
are still invaluable to the group.
Directors
receive
regular
updates
appropriate to the business throughout
the year.
are able to obtain professional advice
at the company’s expense if required in
Nomination committee
This committee comprised the three non-
connection with their duties. In addition,
executive directors and is chaired by G.
all directors have access to the services of
B. Wainwright. The chairman may attend
the company secretary.
Board committees
The principal committees established by
the directors are:
Audit committee
This committee comprised
the
three
non-executive directors and is chaired
by C. P. King. The finance director and
other executive directors may also
attend meetings as appropriate to the
business in hand but are not members of
the committee.
The committee meets at least twice a year
and examines any matters relating to the
financial affairs of the group including
the review of annual and interim results,
internal control procedures and accounting
practices. The audit committee meets with
the auditors periodically and as necessary.
Remuneration committee
As detailed in the remuneration report on
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
To assist with the conduct of their
function,
the non-executive directors
page 15.
14
Annual Report 2012 credit risk and liquidity risk are also set out
board recognises the value they bring
in notes 17 and 19 to the accounts.
and believes it is important too that
The directors’ assessment included a
review of the group’s financial forecasts,
and
financial
instruments
for the 15
months from the balance sheet date. The
directors considered a range of potential
scenarios within the key markets the group
serves and how these may impact on cash
shareholders have the reassurance of
non-executives on the board whose
independence is beyond question.
Following the resignation of one non-
executive director at the year end, a
new independent non-executive was
appointed on 2 April 2012.
flow. The group and company’s business
●● The non-executive directors do not
activities, together with the factors likely to
have specified term contracts.
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.
●● 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
After making these enquiries, the directors
the managing directors of William Lee
have a reasonable expectation that the
and CNC Speedwell. The chairman
company and the group have adequate
concentrates on the effective working
resources to continue operations for the
of
the board and overall group
foreseeable future. For this reason, they
strategies and remains a high level
continue to adopt the going concern basis
contact with our main customers.
in preparing the financial statements.
Summary
The board
takes
its
responsibilities
seriously even though there are a number
of areas in which it does not comply fully
with the 2010 UK Corporate Governance
Code. 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 2012
the company complied with the 2010 UK
Corporate Governance Code other than
the following points:
●● There were
three non-executive
directors during the year, one of whom
did not conform to the definition of
independent. Although these directors
have served for more than ten years the
●● 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.
●● There
is no
formal arrangement
whereby staff may, in confidence, raise
concerns about possible improprieties
in matters of financial reporting or
other matters. The visibility of directors
within the business is considered
sufficient to enable any such issues to
be raised.
These are considered appropriate
in
relation to the size of the company and the
way in which it operates.
15
Annual Report 2012 R e m u n e r a t i o n R e p o r t
This
report has been prepared
in
accordance with Schedule 8
to
the
Accounting Regulations
under
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 2012.
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 directors’ emoluments 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 2012
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.
B. J. Cooke
D. J. Gawthorpe
S. J. Mant — Note 2
M. A. Lewis
G. Cooper
C. P. King
G. B. Wainwright
A. J. Smith
Salary/
Benefits
Performance
fees
£000
(note 1)
related bonus
£000
£000
84
208
125
152
152
22
25
22
790
5
11
10
10
10
—
—
—
46
71
142
142
142
142
—
—
—
639
2012
Total
£000
160
361
277
304
304
22
25
22
2011
Total
£000
120
280
80
225
226
20
20
20
1,475
1,136
Note 1 — Benefits in kind include car or
defined benefit scheme, up to 5th April
directors were able to join the Castings
car benefit, fuel or cash allowance, and
2009. Their dependants are eligible for
P.L.C. Money Purchase Pension Scheme,
private health care.
dependants’ pensions and the payment of
a defined contribution pension scheme.
Note 2 — In the prior year 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
a lump sum in the event of death in service.
Pension contributions are not paid on
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
2009, they became deferred members.
earnings.
Four directors are members of the Money
Final pensionable remuneration is based
Purchase Pension Scheme.
on capped basic salaries on retirement at
normal retirement age.
From 6th April 2009,
the executive
16
Annual Report 2012 Directors’ pension entitlements*
Directors’
contributions
in the
year
(note 1)
£
—
—
—
Increase
in accrued
pension
during
the year
£
2,305
1,072
1,299
Age at
year end
50
48
58
Increase
in accrued
pension
during
year net
of inflation
£
—
—
—
Transfer
value of
increase net
of inflation
and
directors’
contributions
£
—
—
—
Accumulated
total
accrued
pension at
31/03/2012
(note 2)
£
48,411
22,507
27,283
Accumulated
total
accrued
pension at
31/03/2011
(note 2)
£
46,106
21,435
25,984
Transfer
value of
accrued
benefits
31/03/2012
£
523,828
232,829
395,783
Transfer
value of
accrued
benefits
31/03/2011
£
443,687
203,140
340,915
Difference
in transfer
values
less
contributions
£
80,140
29,689
54,868
Name of director
D. J. Gawthorpe
M. A. Lewis
G. Cooper
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:
D. J. Gawthorpe
S. J. Mant
M. A. Lewis
G. Cooper
Contributions paid to 31/03/2012
9,211
9,118
9,202
9,202
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 of
return, compared with the performance of the FTSE All Share Index — Engineering sub-sector,
service terminable on one year’s notice.
also measured by total shareholder return. This index has been selected for this comparison
These contracts are considered appropriate
because this is the most relevant index in which the company’s shares are quoted
in the context of the overall remuneration
CCaassttiinnggss PPLCC — TToottaall RReettuurrnn oonn IInnvveessttmmeenntt
300.00
250.00
200.00
150.00
100.00
50.00
0.00
01 April 2007
01 April 2008
31 March 2009
31 March 2010
31 March 2011
31 March 2012
Castings P.L.C.
FTSE 350 INDS ENG
Source: Thomson Financial – Thomson One Banker
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 2012.
The non-executive directors 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
20 June 2012
17
Annual Report 2012 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
●● 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 keeping
to prepare
financial statements
for
adequate
accounting
records
that
each financial year. Under that law the
are sufficient to show and explain the
directors are required to prepare 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:
●● The group financial statements have
in accordance with
been prepared
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.
●● 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:
●● select suitable accounting policies
and then apply them consistently;
●● 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
●● 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.
●● prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
company will continue in business;
18
Annual Report 2012 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 2012 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
framework that has been applied
in
preparation of
the parent company
financial statements is applicable law and
United Kingdom Accounting Standards
(United Kingdom Generally Accepted
Scope of the audit of the
financial statements
A description of the scope of an audit of
financial statements is provided on the
Matters on which we
are required to report by
exception
We have nothing to report in respect of the
APB’s website at http://www.frc.org.uk/
following matters where the Companies
apb/scope/private.cfm.
Act 2006 requires us to report to you if, in
Opinion on financial
statements
In our opinion:
●● 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 2012 and of the group’s
profit for the year then ended;
●● the group financial statements have
been properly prepared in accordance
with
IFRSs as adopted by
the
our opinion:
●● 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
●● the
parent
company
financial
statements and
the part of
the
directors’ remuneration report to be
audited are not in agreement with the
accounting records and returns; or
●● certain disclosures of directors’
remuneration specified by law are not
Accounting Practice).
European Union;
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.
●● the
parent
company
financial
made; or
statements have been properly
prepared in accordance with United
Kingdom
Generally
Accepted
Accounting Practice; and
●● the financial statements have been
the
in accordance with
prepared
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:
●● the part of the directors’ remuneration
report to be audited has been properly
prepared
in accordance with
the
Companies Act 2006; and
●● the information given in the directors’
report for the financial year for which
the financial statements are prepared
is consistent with
the
financial
statements.
●● we have not
received all
the
information and explanations we
required for our audit.
Under the Listing Rules we are required to
review:
●● the directors’ statements, set out on
pages 14 and 15 in relation to going
concern; and
●● the part of the corporate governance
relating to the company’s compliance
with the nine provisions of the 2010
UK Corporate Governance Code
specified for our review.
●● certain elements of
the
report
to shareholders by the board on
directors’ remuneration.
Stephen Ward (senior statutory auditor)
For and behalf of BDO LLP,
Statutory auditor
Birmingham
United Kingdom
20 June 2012
BDO LLP is a limited liability partnership
registered in England and Wales (with
registered number OC305127).
19
Annual Report 2012 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 2012
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)
Total comprehensive income for the year attributable to the equity
Notes
2
4
3
7
8
2012
£000
126,271
(92,658)
33,613
(1,665)
(9,704)
693
(9,011)
22,937
156
23,093
(5,502)
17,591
28
(345)
(7)
(324)
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)
holders of the parent company
17,267
11,243
Earnings per share attributable to the equity holders of the parent
company
Basic and diluted
10
40.32p
26.71p
Notes to the accounts are on pages 24 to 43.
20
Annual Report 2012
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 2012
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
2012
£000
62,226
495
62,721
9,310
30,191
17,805
57,306
2011
£000
55,889
467
56,356
11,402
30,956
13,707
56,065
120,027
112,421
18,863
2,983
21,846
5,577
27,423
92,604
4,363
874
13
87,354
92,604
25,113
1,546
26,659
5,647
32,306
80,115
4,363
874
13
74,865
80,115
The accounts on pages 20 to 43 were approved and authorised for issue by the board of directors on 20 June 2012, 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.
21
Annual Report 2012 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 2012
Cash flows from operating activities
Profit before income tax
Adjustments for:
Depreciation
Loss/(profit) on disposal of property, plant and equipment
Interest received
Excess of employer pension contributions over income statement charge
Decrease/(Increase) in inventories
Decrease/(Increase) in receivables
(Decrease)/Increase in payables
Cash generated from operating activities
Tax paid
Interest received
Notes
2012
£000
2011
£000
23,093
15,501
6,188
66
(137)
(345)
2,092
765
(6,250)
25,472
(4,142)
137
5,606
(26)
(120)
(409)
(3,584)
(12,219)
10,442
15,191
(2,099)
120
Net cash generated from operating activities
21,467
13,212
Cash flows from investing activities
Purchase of property, plant and equipment (net of adjustment – see note 11)
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 increase/(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.
(12,591)
—
—
(12,591)
(4,778)
(4,778)
4,098
13,707
17,805
17,189
616
17,805
(9,907)
15
32
(9,860)
(4,363)
(4,363)
(1,011)
14,718
13,707
13,280
427
13,707
22
Annual Report 2012 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 2012
Equity attributable to equity holders of the parent
Share
Share
Other
Retained
capitala)
premiumb)
reservec)
earningsd)
At 1st April 2011
Total comprehensive income for the period ended
31st March 2012
Dividends
At 31st March 2012
£000
4,363
—
—
4,363
£000
874
—
—
874
£000
13
—
—
13
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
At 31st March 2011
£000
4,363
—
—
4,363
£000
874
—
—
874
£000
13
—
—
13
a) Share capital — The nominal value of allotted and fully paid up ordinary share capital in issue.
b) Share premium — Amount subscribed for share capital in excess of nominal value.
c) Other reserve — Amounts transferred from share capital on redemption of issued shares.
d) Retained earnings — Cumulative net gains and losses recognised in the statement of comprehensive income.
87,354
92,604
Total
equity
£000
80,115
17,267
(4,778)
Total
equity
£000
73,235
11,243
(4,363)
£000
74,865
17,267
(4,778)
£000
67,985
11,243
(4,363)
74,865
80,115
23
Annual Report 2012
N o t e s t o t h e A c c o u n t s
1 Accounting policies
Accounting Standards and those parts
New standards effective in
2012 adopted by the group
The following new accounting standards
have been adopted by the group in these
financial statements:
●● IAS 24 “Related Party Disclosures
(Revised)” (effective date: 1 January
2011); and
●● Improvements to IFRS (1 January 2011)
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
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
International Financial Reporting Standards,
in full.
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
Business combinations
and goodwill
Shares issued as consideration for the
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
interpretations may be issued that will be
liabilities, and the resulting gains and losses
applicable for financial years beginning on
that arise after the group has gained control
or after 1st April 2012 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
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
group’s accounting policies.
followed.
The primary statements within the financial
information contained in this document
have been presented
in accordance
with IAS 1: Presentation of Financial
Statements.
Revenue recognition
Revenue, which excludes value added
tax and intra-group sales, represents the
invoiced value of goods and services sold
to customers. Appropriate provisions for
The accounts are prepared under the
returns and other allowances are deducted
historical cost convention, except where
adjusted
for
revaluations of certain
assets, and in accordance with applicable
from revenue as appropriate. The group
has no barter transactions.
The group’s revenue has been recognised
when goods have been dispatched.
24
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.
statement of comprehensive income as
they become payable.
Property, plant and
equipment
Property, plant and equipment assets
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
reviews
the
assessment of residual values and useful
lives in accordance with IAS 16.
acquisition of companies have a fair value
Payments to the defined contribution
attributed to them, which is normally their
scheme are charged to the consolidated
of the subsidiary, are credited and charged
are held at cost
less accumulated
to the post-acquisition income statement.
depreciation. Depreciation is provided on
Annual Report 2012 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.
societies, but may also incorporate other
Unless otherwise indicated, the carrying
Cash and cash equivalents
Cash and cash equivalents includes cash
in hand, deposits at call with banks and
other short-term highly liquid investments
with original maturities of three months or
less.
Foreign currencies
Assets and liabilities in foreign currencies
are translated at the spot rates of exchange
ruling at the balance sheet date. Exchange
types of contractual monetary asset.
They are initially recognised at fair value
plus transaction costs that are directly
attributable to the acquisition or issue and
subsequently carried at amortised cost
using the effective interest rate method,
less provision for impairment.
The effect of discounting on
these
financial instruments is not considered to
differences are dealt with through the
be material.
consolidated statement of comprehensive
Impairment provisions are
recognised
income.
Financial Instruments
a) Financial assets
The group’s financial assets relate to loans
when there is objective evidence (such as
significant financial difficulties on the part
of the counterparty or default or significant
delay in payment) that the group will be
unable to collect all of the amounts due
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
amounts of the group’s financial liabilities
are a reasonable approximation of their
fair values.
Financial liabilities
measured at amortised
cost
Financial liabilities include trade payables
and other short-term monetary liabilities,
which are initially recognised at fair value
and subsequently carried at amortised
cost using the effective interest method.
Fair value is calculated by discounting
estimated future cash flows using a market
rate of interest.
c) Share capital
The group’s ordinary shares are classified
as equity instruments. The group is not
uses derivative financial instruments in
economic hedges of currency rate risk,
it does not hedge account for these
transactions and the amounts are not
material. The group has not classified any
of its financial assets as held to maturity.
Available-for-sale assets
Available-for-sale
financial
assets
comprise the group’s strategic investments
in entities not qualifying as subsidiaries.
They are carried at fair value with changes
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.
difference between the net carrying amount
subject to any externally imposed capital
and the present value of the future expected
requirements. Share capital includes the
cash flows associated with the impaired
asset. Such provisions are recorded in a
separate allowance account with the loss
being
recognised within administrative
expenses in the consolidated statement of
comprehensive income. On confirmation
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 the deposit or receivable will not be
that future taxable profit will be available
collectable, the gross carrying value of the
against which the temporary differences
asset is written off against the associated
can be utilised.
provision.
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.
25
Annual Report 2012 N o t e s t o t h e A c c o u n t s
continued
Current
tax
is provided
for on
the
There are a number of further standards,
can result in significant variations in the
taxable profits of each company
in
interpretations
and
amendments
to
carrying value and amounts charged to
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 new standards, amendments
and
interpretations have been
issued
but are not yet effective and therefore
have not been adopted
in
these
financial statements. Management are
published standards not set out above
the consolidated income statement in
which the directors consider not to be
specific periods. More details including
relevant to the group.
carrying values are included in note 11.
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.
Pension assumptions
The costs, assets and
liabilities of
the defined benefit pension schemes
operated by the group are determined
using methods
relying on actuarial
estimates and assumptions. Details of the
key assumptions are set out in note 6.
estimates and judgements. The estimates
and assumptions that have a significant
risk of causing a material adjustment
to the carrying amounts of assets and
liabilities within the next financial year are
discussed below.
Short-term deposits
See note 19 for further details.
Useful lives of property,
plant and equipment
Property, plant and equipment are
depreciated over their useful lives based
considering the impact of the changes
on management’s estimates of the period
on future reporting.
●● Presentation of
Items of Other
are periodically reviewed for continued
that the assets will generate revenue, which
Comprehensive Income (Amendments
appropriateness. Changes to estimates
to IAS 1) (1 July 2012);
●● IFRS
9
“Financial
Instruments”
(1 January 2015);
●● IFRS 10
“Consolidated Financial
Statements” (1 January 2013);
●● IFRS 13 “Fair Value Measurement”
(1 January 2013);
●● Amendments to IAS 19 “Employee
Benefits” (1 January 2013); and
●● Amendments to IAS 27 “Separate
(1 January
Financial Statements”
2013);
26
Annual Report 2012 2 Operating 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 2012.
Revenue from external customers
Inter-segmental revenue
Foundry
operations
Machining
Elimination
£000
117,036
18,888
£000
9,235
11,283
£000
—
—
Total
£000
126,271
30,171
Segmental result
17,761
4,017
121
21,899
Unallocated costs:
Exceptional credit for recovery of Icelandic Bank deposits
previously written off
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.
693
345
156
23,093
110,377
22,755
(13,105)
120,027
7,508
5,356
3,046
3,142
—
—
12,864
6,188
27
Annual Report 2012 N o t e s t o t h e A c c o u n t s
continued
2 Operating segments continued
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
Foundry
operations
Machining
Elimination
£000
97,163
14,429
£000
8,205
11,701
£000
—
—
Total
£000
105,368
26,130
Segmental result
11,593
3,410
(421)
14,582
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
196
156
409
158
15,501
104,311
20,781
(12,671)
112,421
3,419
6,488
2,882
2,724
—
—
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
2012
£000
42,531
31,588
45,950
4,877
1,325
9,907
5,606
2011
£000
42,617
21,189
38,147
2,436
979
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 £28,168,000 and £18,452,000 from two customers
(2011 – £23,893,000 and £11,754,000).
126,271
105,368
28
Annual Report 2012 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
Loss/(profit) on disposal of property, plant and equipment
4 Exceptional items
Recovery of past provision for losses on deposits with Icelandic banks (see (a) below)
Provision for Industrial Tribunal costs (see (b) below)
2012
£000
34,021
55,097
6,188
25
26
10
66
2012
£000
(693)
—
(693)
2011
£000
30,793
55,553
5,606
25
26
10
(8)
2011
£000
(196)
(156)
(352)
a) 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 £2,749,000 has been received with the excess being shown as an exceptional credit.
b) The exceptional credit of £156,000 in 2011 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
2012
967
99
1,066
2011
840
86
926
29
Annual Report 2012 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
2012
£000
30,430
679
(345)
3,257
34,021
2011
£000
27,754
658
(409)
2,790
30,793
In addition to the wages and salaries disclosed above, the group incurred costs of £816,000 (2011 — £1,429,000) in respect of agency
workers.
The directors represent the key management personnel.
Details of their compensation are given in the Remuneration Report on page 16.
6 Pensions
The group operates two pension schemes providing benefits based on final pensionable pay, which are closed to new entrants and were
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”). Following an independent review during the year, it was agreed
that pension increases will be in line with the new statutory requirements. This change has been accounted for as an actuarial gain in these
financial statements.
The latest actuarial valuation was performed with an effective date of 6th April 2011 using the attained unit method. It assumed that the rate
of return on investments was 5.8% per annum for pre-retirement and 4.9% for post-retirement and price inflation was 3.5% under RPI and
3.1% under CPI. The demographic assumptions are based on S1NA tables with an age rating of -1 year being applied to the birth tables for
the Staff Scheme. The Staff Scheme has assumed long cohort projected improvements of 1% per annum on future life expectancy, with the
Shopfloor Scheme being based on CMI projections with a 1.5% per annum long-term rate of improvement.
The next actuarial valuation will be performed with an effective date of 6th April 2014.
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 2011 and updated to 31st March 2012 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 (RPI)
Inflation assumption (CPI)
2012
2.5%
4.9%
3.2%
2.5%
2011
3.4%
5.5%
3.4%
n/a
30
Annual Report 2012 6 Pension disclosures under IAS 19 continued
Change in benefit obligation
Benefit obligation at beginning of year
Current service cost
Past service cost
Interest cost
Plan participants’ contributions
Actuarial loss/(gain)
Benefits paid
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Expected return on plan assets
Actuarial (loss)/gain
Employer contribution
Member contributions
Benefits paid
Fair value of plan assets at end of year
Funded status
Unrecognised pension surplus
Net amount recognised in the balance sheet
Components of pension cost
Current service cost
Recognition of past service cost
Interest cost
Expected return on plan assets
Total pension cost recognised within administrative expenses (note 5)
Unrecognised pension surplus at beginning of year
Unrecognised pension surplus at end of year
Actuarial (loss)/gain for the year
Pension cost shown in Other Comprehensive Income
2012
£000
41,486
—
165
2,237
—
35
(1,628)
42,295
48,169
2,747
(225)
—
—
(1,628)
49,063
6,768
(6,768)
—
2011
£000
41,369
—
—
2,271
—
(520)
(1,634)
41,486
46,250
2,680
873
—
—
(1,634)
48,169
6,683
(6,683)
—
Year to
31st March
Year to
31st March
2012
£000
—
165
2,237
(2,747)
(345)
6,683
(6,768)
(260)
345
2011
£000
—
—
2,271
(2,680)
(409)
4,881
(6,683)
1,393
409
Cumulative amount of actuarial gains and losses immediately recognised
11,972
11,712
31
Annual Report 2012 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
2012
66%
31%
3%
100%
Plan
assets at
31st March
2011
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 5.8% (2011 – 5.9%) assumption.
The projected pension cost for the year ending 31st March 2013 is a credit of £150,000.
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
2012
£000
2,522
4.9%
5.5%
5.8%
n/a
2011
£000
3,553
5.5%
5.6%
5.9%
n/a
32
Annual Report 2012 6 Pension disclosures under IAS 19 continued
Weighted average life expectancy for mortality tables* used to determine benefit obligations at:
2012
2011
Male
Staff/
Shopfloor
`
Female
Staff/
Shopfloor
Male
Staff/
Shopfloor
Female
Staff/
Shopfloor
23.5/22.7
26.4/25.6
21.8/20.1
25.0/23.2
25.6/24.7
28.4/27.5
23.6/21.9
26.9/25.1
Scheme member age 65
(current life expectancy)
Scheme member age 45
(life expectancy at age 65)
* Mortality tables are S1NA (YOB) -1 for the Staff Scheme and S1NA (YOB) for the Shopfloor Scheme. A 1% p.a. floor in future improvements
was included as at 31st March 2012 for the Staff Scheme and 1.5% for the Shopfloor Scheme.
History of experience gains and losses
Financial year ended in:
Present value of defined obligation
Fair value of plan assets
2012
42,295
49,063
2011
41,486
48,169
2010
41,369
46,250
2009
33,251
34,258
2008
39,043
41,829
Surplus
6,768
6,683
4,881
1,007
2,786
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
(225)
0%
873
2.0%
10,187
(11,054)
22.0%
(32.0%)
(4,781)
(11.0%)
1,954
5.0%
—
0%
—
0%
86
0%
(2,033)
5.0%
(260)
(1.0%)
1,393
3.0%
(592)
(1.0%)
(2,955)
(10.0%)
(2,748)
(7.0%)
2012
£000
137
19
—
156
2011
£000
120
18
20
158
33
Annual Report 2012
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 26% (2011 – 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 26% (2011 – 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
2011
Final paid of 8.04p per share for the year ended 31st March 2011 (2011 – 7.29p)
Interim paid of 2.91p per share (2011 – 2.71p)
2012
£000
5,725
(146)
5,579
326
37
(440)
5,502
23,093
2011
£000
3,924
(435)
3,489
412
384
(436)
3,849
15,501
6,004
4,340
137
(146)
37
(440)
(90)
5,502
23.8
2012
£000
3,508
1,270
4,778
110
(435)
384
(436)
(114)
3,849
24.8
2011
£000
3,181
1,182
4,363
The directors are proposing a final dividend of 8.84 pence (2011 – 8.04 pence) per share totalling £3,858,820 (2011 – £3,508,000).
This dividend has not been accrued at the balance sheet date.
10 Earnings per share
Earnings per share is calculated on the profit on ordinary activities after taxation of £17,591,000 (2011 – £11,652,000) and on the weighted
average number of shares in issue at the end of the year of 43,632,068 (2011 – 43,632,068). There are no share options, hence the diluted
earnings per share is the same as above.
34
Annual Report 2012 11 Property, plant and equipment
Cost
At 1st April 2011
Additions during year
Disposals
Adjustment to opening position
At 31st March 2012
Depreciation and amounts written off
At 1st April 201
Charge for year
Disposals
At 31st March 2012
Net book values
At 31st March 2012
At 31st March 2011
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
Land and
buildings
£000
Plant and other
equipment
£000
23,336
6,001
—
—
29,337
3,325
663
—
3,988
25,349
20,011
22,320
1,016
—
23,336
2,822
481
—
22
3,325
20,011
19,498
92,195
6,863
(1,303)
(273)
97,482
56,317
5,525
(1,237)
60,605
36,877
35,878
84,385
8,891
(1,081)
92,195
52,287
5,125
(1,073)
(22)
56,317
35,878
32,098
Total
£000
115,531
12,864
(1,303)
(273)
126,819
59,642
6,188
(1,237)
64,593
62,226
55,889
106,705
9,907
(1,081)
115,531
55,109
5,606
(1,073)
—
59,642
55,889
51,596
The adjustment to the plant and other equipment opening position of £273,000 relates to an amendment to the cost of an asset acquired
in a previous period. The figure for purchases of property plant and equipment in the cash flow statement of £12,591,000 is shown net of
this adjustment.
The net book value of group land and buildings includes £2,527,000 (2011 – £2,527,000) for land which is not depreciated. The cost of land
and buildings includes £359,000 for property held on long leases (2011 – £359,000).
35
Annual Report 2012 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 2011
Disposals
Net gains/(losses) transferred to statement of comprehensive income
At 31st March 2012
2012
£000
495
2012
£000
467
—
28
495
2011
£000
467
2011
£000
480
(13)
—
467
Available-for-sale financial assets are UK quoted equity securities and are 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 £742,000 (2011 – £272,000).
14 Trade and other receivables
Due within one year:
Trade receivables
Other receivables
Prepayments
15 Trade and other payables
Current trade and other payables:
Trade payables
Social security
Other payables
Accruals
36
2012
£000
3,107
2,424
3,779
9,310
2012
£000
23,297
1,225
5,669
30,191
2012
£000
11,900
1,939
255
4,769
18,863
2011
£000
3,169
2,946
5,287
11,402
2011
£000
23,537
3,310
4,109
30,956
2011
£000
15,893
2,118
422
6,680
25,113
Annual Report 2012 16 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using the large company tax rate applicable in 2013 of 24%
(2011– 26%). The movement on the deferred tax account is shown below:
Deferred tax — net
At 1st April 2011
Taken to equity
(Credit)/charge to income statement
At 31st March 2012
The movement in deferred tax assets and liabilities during the year is shown below:
Deferred tax liabilities
At 1st April 2011
Charged to profit
Charged to other
comprehensive income
At 31st March 2012
Accelerated
tax depreciation
Pension
Adjustment
£000
6,054
(323)
—
5,731
£000
(168)
168
—
—
The movement in the deferred tax assets and liabilities during the prior year is shown below:
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 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
2012
£000
5,647
7
(77)
5,577
Other
£000
(239)
78
7
(154)
Other
£000
(344)
105
(239)
2012
£000
—
7
7
2011
£000
5,287
—
360
5,647
Total
£000
5,647
(77)
7
5,577
Total
£000
5,287
360
5,647
2011
£000
—
—
—
The total tax on items taken directly to reserves is £7,000 (2011 — £nil) which includes £nil (2011 — £nil) of current tax on pension adjustments
taken directly to reserves.
37
Annual Report 2012 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
2012
£000
5,000
4,363
2011
£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
2012
£000
348
2011
£000
1,609
38
Annual Report 2012 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:
●● trade receivables
●● other receivables
●● cash at bank
●● 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
Loans and receivables
Current financial assets
Trade receivables
Other receivables
Cash and cash equivalents
Total current financial assets
The maximum exposure to credit risks is detailed in the above table.
2012
£000
23,297
1,225
17,805
42,327
2011
£000
23,537
3,310
13,707
40,554
39
Annual Report 2012 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
2012
£000
11.900
255
4,769
16,924
2011
£000
15,893
422
6,680
22,995
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 2012, trade receivables of £23,240,000 (2011 – £23,216,000) were not past due. Against these balances no impairment
provisions were made.
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$
40
2012
£000
17,765
5,426
106
23,297
2011
£000
17,822
5,634
81
23,537
Annual Report 2012 19 Financial instrument risk exposure and management continued
At 31st March 2012 trade receivables of £57,000 (2011 – £321,000) 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
2012
£000
—
8
49
57
2011
£000
233
40
48
321
At 31st March 2012 trade receivables of £25,000 (2011 – £209,000) were past due and impaired. The amount of the provision at 31st March
2012 was £385,000 (2011 – £359,000). The ageing of these receivables is as follows:
30–60 days
60–90 days
90+ days
2012
£000
5
3
17
25
2011
£000
22
60
127
209
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
Increase/(decrease) in provisions
Written off against provisions
Recovered amounts reversed
Closing balance
2012
£000
359
26
(2)
2
385
2011
£000
517
(155)
—
(3)
359
Impairment losses on trade receivables of £26,000 (2011 – credit of £158,000) 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.
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).
41
Annual Report 2012 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 (2011 – £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 the group
had forward contracts in place to sell £2,700,000 (2011 – £nil). The fair value adjustment associated with these contracts is not considered
material and has therefore not been recognised in these financial statements. At the balance sheet date foreign exchange facilities of £1.7
million (2011 – £1.7 million) were unused and available to the group to enable them to enter into forward exchange contracts.
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
assets
2012
£000
13
145
464
622
Floating rate
assets
2011
£000
17
122
286
assets
2012
£000
15,835
—
1,348
17,183
Fixed rate
assets
2011
£000
12,313
—
969
assets
2012
£000
17,766
106
5,426
23,298
Interest-free
assets
2011
£000
17,822
81
5,634
425
13,282
23,537
Total
£000
33,614
251
7,238
41,103
Total
£000
30,152
203
6,889
37,244
Sterling
US$
Euro
Sterling
US$
Euro
42
Annual Report 2012
19 Financial instrument risk exposure and management continued
Sterling
US$
Euro
Interest-
free
liabilities
2012
£000
10,857
—
1,043
11,900
Interest-
free
liabilities
2011
£000
14,903
—
990
15,893
Fixed rate assets attracted interest rates between 0.75% to 1.65% (2011 – 0.75% to 1.30%) 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 £97,000/(£80,000) (2011 – £60,000/(£70,000)).
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 (£258,000)/£286,000 (2011 – (£268,000)/£297,000).
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 prior year the Statement of Comprehensive Income was credited with £1,053,000 under the heading Cost of
Sales. This amount reflected the additional rebates as a result of higher than predicted usage. There has been no contract of this nature relating
to the current year.
Fair value
Unless otherwise indicated, the carrying amounts of the group’s financial instruments are a reasonable approximation of their fair values.
43
Annual Report 2012 F i v e Y e a r F i n a n c i a l H i s t o r y — u n a u d i t e d
For the years ended 31st March
Trading results
Revenue
Profit before tax
Profit after tax
Dividends
Balance sheet summary
Equity
Share capital
Reserves
Total equity
Assets
Property, plant and equipment
Financial assets
Deferred tax asset
Current assets
Total liabilities
Dividends and earnings
Pence per share paid
Number of times covered
Earnings per share — basic and diluted
2012
£000
2011
£000
2010
£000
126,271
105,368
60,649
23,093
17,591
4,778
15,501
11,652
4,363
9,804
7,638
4,363
2009
£000
84,812
3,616
622
4,363
2008
£000
97,372
16,664
11,996
4,210
4,363
88,241
4,363
75,752
4,363
68,872
4,363
69,314
4,363
73,494
92,604
80,115
73,235
73,677
77,857
62,226
55,889
51,596
53,408
38,772
495
—
62,721
57,306
(27,423)
467
—
56,356
56,065
(32,306)
480
—
52,076
41,685
(20,526)
429
—
53,837
37,059
(17,219)
736
—
39,508
61,136
(22,787)
92,604
80,115
73,235
73,677
77,857
10.0
3.7
10.0
2.7
10.0
1.7
40.32p
26.71p
17.51p
10.0
—
1.43p
10.0
2.8
27.49p
44
Annual Report 2012 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 2012
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
2012
£000
16,342
5,776
22,118
5,319
25,475
12,878
217
43,889
14,077
29,812
51,930
(594)
51,336
4,363
874
13
46,086
51,336
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
The parent company accounts on pages 45 to 51 were approved and authorised for issue by the board of directors on 20 June 2012, and
were signed on its behalf by:
B. J. Cooke
Chairman
S. J. Mant
Finance Director
Notes to the accounts are on pages 46 to 51.
45
Annual Report 2012
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
Basis of accounting
Stocks
Financial Instruments
Stock and work in progress have been
a) Financial assets
The accounts are prepared under
consistently valued at the lower of cost
The company’s financial assets relate
the historical cost convention except
and net realisable value. The valuation
to
loans and
receivables. Although
for revaluation of certain financial
of work in progress and finished stocks
the group occasionally uses derivative
instruments as required by FRS 26
includes appropriate manufacturing and
financial instruments in economic hedges
and
in accordance with applicable
works overheads computed on the basis
of currency rate risk, it does not hedge
UK Accounting Standards and the
of normal activity.
Companies Act 2006.
Foreign currencies
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-
denominated in foreign currencies are
line basis to write off the initial cost of fixed
translated at the rate of exchange ruling
Available-for-sale assets
assets at the following rates per annum:
●● Buildings
●● Plant and other
equipment
7% to 33%
2%
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.
46
at the balance sheet date. Transactions
Available-for-sale
financial
assets
in foreign currencies are recorded at the
comprise
the
company’s
strategic
rate ruling at the date of the transaction,
investments in entities not qualifying as
all differences being taken to the profit and
subsidiaries. They are carried at fair value
loss account.
Deferred tax
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
These assets are non-derivative financial
or a right to pay less tax in the future have
assets with
fixed or determinable
occurred at the balance sheet date. Timing
payments that are not quoted in an active
differences are differences between the
market. They arise principally through
company’s taxable profits and its results
the provision of goods and services to
as stated in the accounts.
customers (e.g. trade receivables and
amounts owed by subsidiary companies)
Deferred tax is measured at the average
and deposits held at banks and building
tax rates that are expected to apply in the
societies, but may also incorporate other
periods in which the timing differences
types of contractual monetary asset.
are expected to reverse, based on tax
They are initially recognised at fair value
rates and laws that have been enacted or
plus transaction costs that are directly
substantially enacted by the balance sheet
attributable to the acquisition or issue and
date. Deferred tax is measured on a non-
subsequently carried at amortised cost
discounted basis.
using the effective interest rate method,
less provision for impairment.
Investments
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.
Annual Report 2012 Impairment provisions are
recognised
Financial liabilities measured at
Dividends
when there is objective evidence (such as
amortised cost
Equity dividends are recognised when
significant financial difficulties on the part
Financial liabilities include trade payables
they become
legally payable.
Interim
of the counterparty or default or significant
and other short-term monetary liabilities,
equity dividends are recognised when
delay in payment) that the group will be
which are initially recognised at fair value
paid. Final equity dividends are recognised
unable to collect all of the amounts due
and subsequently carried at amortised
when approved by the shareholders at an
under the terms receivable, the amount
cost using the effective interest method.
Annual General Meeting.
of such a provision being the difference
between the net carrying amount and
Fair value
is calculated discounting
Related party transactions
the present value of the future expected
estimated future cash flows using a market
The company has taken advantage of
cash flows associated with the impaired
rate of interest.
receivable. For trade receivables, such
provisions are recorded in a separate
c) Share capital
the exemption conferred by Financial
Reporting Standard 8
‘Related party
disclosures’ not to disclose transactions
allowance account with the loss being
The group’s ordinary shares are classified
with members of the group on the grounds
recognised within administrative expenses
as equity instruments. The group is not
that 100% of the voting rights in the
in the income statement. On confirmation
subject to any externally imposed capital
company are controlled within that group.
that the trade receivable will not be
requirements. Share capital includes the
collectable, the gross carrying value of the
nominal value of the shares and any share
asset is written off against the associated
premium attaching to the shares.
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.
47
Annual Report 2012 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 £10,218,000 (2011 – £4,722,000).
The profit and loss account includes £25,000 (2011– £25,000) for audit fees.
3 Dividends
Final paid of 8.04p per share for the year ended 31st March 2011 (2011 – 7.29p)
Interim paid of 2.91p per share (2011 – 2.71p)
2012
£000
3,508
1,270
4,778
2011
£000
3,181
1,182
4,363
The directors are proposing a final dividend of 8.84 pence (2011 – 8.04 pence) per share totalling £3,858,820 (2011 – £3,508,000). This
dividend has not been accrued at the balance sheet date.
4 Fixed assets
Cost
At 1st April 2011
Additions during year
At 31st March 2012
Depreciation and amounts written off
At 1st April 2011
Charge for year
At 31st March 2012
Net book values
At 31st March 2012
At 31st March 2011
Land and
buildings
£000
10,528
5,130
15,658
2,143
270
2,413
13,245
8,385
Plant
and other
equipment
£000
24,104
252
24,356
20,680
579
21,259
3,097
3,424
Total
£000
34,632
5,382
40,014
22,823
849
23,672
16,342
11,809
The net book value of land and buildings includes £2,127,000 (2011 – £2,127,000) for land which is not depreciated. The cost of land and
buildings includes £359,000 for property held on long leases (2011 – £359,000).
48
Annual Report 2012
5
Investments
Subsidiary companies
At cost
Listed investments at market value
2012
£000
5,281
495
5,776
2011
£000
5,281
468
5,749
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 £nil (2011 – £12,000) and the change in fair value taken to equity is £27,000
(2011 – £nil).
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
2012
£000
884
1,809
2,626
5,319
2012
£000
15,733
4,012
1,224
4,506
25,475
2012
£000
5,063
3,272
2,009
1,003
92
2,638
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
14,077
14,793
49
Annual Report 2012 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
2012
£000
494
100
594
612
(18)
594
2012
£000
5,000
4,363
Share
Other
Retained
premium
reserve
earnings
£000
874
—
—
874
£000
13
—
—
13
£000
40,618
5,440
28
2011
£000
181
313
494
668
(174)
494
2011
£000
5,000
4,363
Total
equity
£000
45,868
5,440
28
46,086
51,336
continued
9 Provisions for liabilities
Deferred taxation
At 1st April 2011
Taxation deferred this year
At 31st March 2012
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 2011
Profit retained
Changes in fair value of investments
At 31st March 2012
Share
capital
£000
4,363
—
—
4,363
50
Annual Report 2012 12 Reconciliation of movements in shareholders’ funds
Profit for the year
Changes in fair value of investments
Dividends
Net increase to shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
13 Pensions
2012
£000
10,218
28
(4,778)
5,468
45,868
51,336
2011
£000
4,722
–
(4,363)
359
45,509
45,868
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 (2011 – £nil). The last valuation was
performed with an effective date of 6th April 2011. 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
2012
£000
—
2011
£000
14
51
Annual Report 2012 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
P.L.C. (the ‘Company’) will be held at Holiday
Inn, Birmingham M6, Junc. 7, Chapel Lane,
Great Barr, Birmingham, West Midlands, B43
7BG, on Tuesday 14th August at 3.30 pm for
the following purposes:
As ordinary business
agreement which would or might
having, in the case of relevant
require relevant securities to be
shares, an aggregate nominal
allotted after the expiry of such
amount, or, in the case of other
period and the directors may allot
equity securities, giving the right to
relevant securities
in pursuance
subscribe for or convert into relevant
of any such offer or agreement as
shares having an aggregate nominal
if the authority conferred had not
amount not exceeding £218,160,
expired;
which represents approximately 5%
of the current issued share capital
of the Company,
given to the directors under the
and shall expire at the conclusion of the next
1 To receive and adopt the directors’
report and audited accounts for the year
(c) the foregoing authority shall be
in substitution for the authorities
ended 31st March 2012.
2 To declare a final dividend.
3 To re-elect Mr D. J. Gawthorpe as a
director.
4 To elect Mr A. Vicary as a director.
5 To elect Mr A.N. Jones as a director.
Companies Act 2006 on 16th
August 2011, which authorities are
accordingly hereby revoked;
(d) this authority will be put to annual
shareholder approval.
6 To approve the directors’ remuneration
As special business
report for the year ended 31st March
2012.
7 To reappoint BDO LLP as auditors of the
Company at a fee to be agreed with the
directors.
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
To consider and, if thought fit, pass the
cash pursuant to the general authority
following resolutions, of which resolution 8
conferred by the ordinary resolution
Annual General Meeting following the date
of this resolution save that the Company
shall be entitled before such expiry to
make an offer or agreement which would
or might require equity securities to be
allotted after such expiry and the directors
shall be entitled to allot equity securities
in pursuance of such offer or agreement
as if the power conferred hereby had not
expired. In any three year period no more
than 7.5% of the issued share capital will be
issued on a pre-emptive basis.
10 THAT the Company be and is hereby
generally and unconditionally authorised
for the purposes of the Companies
Act 2006 to make one or more market
purchases of any of its ordinary shares
of 10p each (the ‘ordinary shares’),
provided that:
(a) the maximum number of ordinary
shares hereby authorised to be
purchased is 4,358,844 representing
9.99% of the issued share capital at
31st March 2012;
numbered 8 set out in the notice
convening this meeting as if the said
Act did not apply to any such allotment
provided that this power shall be limited:
(a) to allotments in connection with
an offer of equity securities to
the ordinary shareholders of the
Company where
the securities
respectively attributable
to
the
interests of such holders are
proportionate (as nearly as may
be and subject to such exclusions
(b) the minimum price which may be
or other arrangement as
the
paid for each ordinary share is
directors may consider appropriate,
10p, exclusive of the expenses of
necessary or expedient to deal with
purchase;
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
(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
(b) to the allotment (otherwise than
the Daily Official List of the London
pursuant to subparagraph (a) of
will be proposed as an ordinary resolution
and resolutions 9 and 10 will be proposed
as special resolutions.
The share capital consists of 43,632,068
ordinary shares with voting rights.
As an ordinary resolution
8 THAT:
(a) the directors be and are hereby
generally
and
unconditionally
authorised in accordance with 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
52
Annual Report 2012 Stock Exchange Limited for the
Note:
In Accordance with Regulation 41 of the
five business days immediately
preceding the day of purchase;
Any member of the Company entitled
Uncertified Securities Regulations 2001,
to attend and vote at this meeting may
only those members entered on the
(d) unless previously
revoked or
appoint one or more proxies, who need
Company’s register of members at 6.00
varied,
the authority hereby
conferred shall expire at
the
conclusion of the next Annual
General Meeting of the Company
following
the date of
this
resolution, unless such authority is
renewed on or prior to such date;
(e) the Company may, before the
expiry of this authority, conclude
a contract to purchase ordinary
shares under this authority which
not also be a member, to attend and vote,
pm on the day which is two days before
on a poll, in his stead. The instrument
the day of the meeting or, if the meeting
appointing a proxy, including authority
is adjourned, shareholders entered on the
under which it is signed (or a notarially
Company’s register of members at 6.00
certified copy of such authority), must be
pm on the day two days before the date
deposited at the offices of the Company’s
of any adjournment shall be entitled to
registrars: Capita Registrars, PXS,
attend and vote at the meeting.
34 Beckenham Road, Kent, BR3 4TU,
not less than 48 hours before the time
appointed for the meeting.
will or may be executed wholly
Beneficial owners:
or partly after such expiry and
In accordance with Section 325 of the
may make a purchase of ordinary
shares pursuant
to any such
contract, as if such authority had
not expired.
Companies Act 2006, the right to appoint
proxies does not apply
to persons
nominated to receive information rights
under section 146 of the Act.
The record date for payment of the final
Persons nominated to receive information
dividend is 20th July 2012. Assuming
rights under section 146 of the Act who
the final dividend is approved by the
have been sent a copy of this notice
members, the dividend will be paid on
of meeting are hereby
informed,
in
17th August 2012.
accordance with Section 149 (2) of the
Information about the meeting can be
Act, that they may have a right under an
found on the Company’s website (www.
agreement with the registered member
castings.plc.uk). The right to vote at the
by whom they were nominated to be
meeting is determined by reference to
appointed, or to have someone else
the register of members as it stands on
appointed, as a proxy for this meeting. If
10th August 2012. Shareholders have the
they have no such right, or do not wish to
right to ask questions at the meeting.
By order of the board
S. J. Mant
Company Secretary
Registered Office:
Lichfield Road,
Brownhills,
West Midlands, WS8 6JZ.
20th June 2012
exercise it, they may have a right under
such an agreement to give instructions to
the member as to the exercise of voting
rights.
Nominated persons
should contact
the registered member by whom they
were nominated
in respect of these
arrangements.
53
Annual Report 2012 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, FICME Chairman
D. J. Gawthorpe, BSc (Hons), MICME Chief Executive
S. J. Mant, FCA Finance Director
M. A. Lewis Managing Director, CNC Speedwell Ltd
G. Cooper Managing Director, William Lee Ltd
A. Vicary, BEng MSc Managing Director, Brownhills
G. B. Wainwright, MCMI, MIEx, FRSA Non-executive
C. P. King, FCA Non-executive
A. N. Jones, FCA Non-executive
Secretary and
S. J. Mant, FCA
Registered Office Lichfield Road,
Registrars
Auditors
Solicitors
Bankers
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
Enoch Evans LLP
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
Stockbrokers
Arden Partners plc
Arden House,
Highfield Road,
Edgbaston,
Birmingham, B15 3DU
Registered No.
91580
54
Annual Report 2012
S h a r e h o l d e r I n f o r m a t i o n
Capital gains tax
The official price of Castings P.L.C. ordinary
Compensation Scheme. The FSA can
be contacted by completing an online
shares on 31st March 1982, adjusted for
form at:
bonus issues, was 4.92 pence.
www.fsa.gov.uk/pages/doing/regulated/
law/alerts/overseas.shtml
●● 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.
Warning to shareholders
The following guidance has been issued
by the Financial Services Authority:
Over the last year many companies have
become aware that their shareholders
have received unsolicited phone calls or
correspondence concerning investment
matters. These are
typically
from
overseas-based ‘brokers’ who target UK
shareholders offering to sell them what
often turned out to be worthless or high
risk shares in US or UK investments. They
can be very persistent and extremely
persuasive and a 2006 survey by the
Financial Services Authority (FSA) has
reported that the average amount lost by
investors is around £20,000. It is not just
the novice investor that has been duped
in this way; many of the victims had been
successfully investing for several years.
Shareholders are advised to be very
wary of any unsolicited advice, offers to
buy shares at a discount or offers of free
reports into the company.
If you receive any unsolicited investment
advice:
●● Make sure you get the correct name of
the person and organisation.
●● Check
that
they
are properly
authorised by the FSA before getting
involved. You can check at www.fsa.
gov.uk/register.
●● 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
55
Annual Report 2012 S h a r e h o l d e r N o t e s
56
Annual Report 2012 21488.04 20.06.12 Proof 8 castings PLc
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
21488.04 20.06.12 Proof 8