Castings P.L.C. annuaL rePort for the year ended 31 March 2013 22560.04 14 June 2013 4:32 PM Proof 9 Contents 01 Directors 02 Chairman’s Statement 03 Business and Financial Review 04 Directors’ Report 08 Review of Principal Risks and Uncertainties 10 Corporate Social Responsibility 12 Corporate Governance 15 Remuneration Report 17 Statement of Directors’ Responsibilities 18 Independent Auditors’ Report 19 Consolidated Statement of Comprehensive Income 20 Consolidated Balance Sheet 21 Consolidated Cash Flow Statement 22 Consolidated Statement of Changes in Equity 23 Notes to the Accounts 43 Five Year Financial History 44 Parent Company Balance Sheet 45 Notes to the Parent Company Accounts 50 Notice of Meeting 52 Directors, Officers and Advisers 53 Shareholder Information 22560.04 14 June 2013 4:32 PM Proof 9 Directors executive Directors non-executive Directors Brian Cooke Chairman Mark Lewis Managing Director — CNC Speedwell Ltd gerard Wainwright Non-executive Director Aged 73, he joined the company in 1960 Aged 49 he joined CNC Speedwell in Aged 63, 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 worked in all departments of the company requirements for the group and was of a wide range of manufacturing and was appointed a director in 1966, appointed a director in 2003. companies for over 25 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 graham Cooper Managing Director — William Lee Ltd international experience. He is chairman of the remuneration committee and a member of the audit and nomination chairman since 1983. Aged 59, he joined William Lee in 1977 committees. David gawthorpe Chief Executive Officer becoming operations director there in 2003 and their managing director in 2005, when he was appointed to the main board. Paul King Non-executive Director Aged 51, he joined the company in 1984 and became local technical director at Brownhills in 1994. He was appointed adam Vicary Managing Director — Brownhills Aged 76, he was appointed a director in 1998 and is an independent director. He retired from practice as a partner a director in 2003 and became chief Aged 45, he joined the company in with Coopers & Lybrand and has been executive in April 2007 and is the director September 2010 as joint managing a member of the boards of a number of with environmental and human resource director and was appointed to the main companies. He is chairman of the audit board in April 2012. responsibility. steve Mant Finance Director Aged 37, 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. committee and is also a member of the remuneration and nomination committees. alec Jones Non-executive Director Aged 61, 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. 22560.04 14 June 2013 4:32 PM Proof 9 01 Annual Report 2013 Chairman’s statement statement of full year results CnC speedwell CNC continued to grow by enhancing outlook At the present time business has improved contracts within the automotive sector. and it is expected to remain busy for the With the improvement in the heavy truck foreseeable future. It is very difficult, if not market since the year end, the company is impossible, to forecast long-term demand now enjoying increased activity across all because of the continuing European, areas of the business. and to a lesser extent world, economic Capital investments during the year were problems. £5.75 million, increasing capacity for Truck demand as reported by the industry new products and updating the quality is increasing, however there is general department with new equipment to market concern that this may be driven by improve our service to our expanding new European emission legislation being The turnover of the group reduced to £122.2 million from last year’s record of £126.3 million representing the second highest turnover of the group. Profits of £19.2 million, compared to £23.1 million last year, are considered satisfactory given the economic situation in Europe. Foundry Production The year was affected by significant reductions in customer schedules, but the situation improved considerably during the final months of the year, benefiting the profitability during that period. Limited capital investments of £1.1 million have been made at the foundries during the year to improve productivity and the working environment. customer base. Dividend I am pleased to report that the directors recommend an increase in the final dividend to 9.36 pence per share. This, We have some 20% spare capacity and together with an increased interim continue to maintain efforts to fill this dividend, gives a total for the year of with more work from new and existing 12.34 pence per share. customers. introduced at the end of 2013 and there may then be a short-term reduction in early 2014. The company is in a good financial state and continues to be able to make timely investment decisions. In conclusion, our thanks go to all our employees who contribute to the continued success of the company and also being understanding of the variable demands from our customers which require a considerable amount of flexibility in hours of work. B. J. CooKe Chairman 12 June 2013 02 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 Business and Financial review Revenue has decreased by 3% to The level of finance income again reflects Overall the group returned a profit £122.2 million of which 65% (2012 – 66%) the prevailing low interest rates during the before taxation of £19.2 million was exported. year, although the improved return has (2012 – £23.0 million) for the year. This been achieved by increasing the length of includes a £0.1 million credit in respect of The despatch weight of castings to third party customers was 52,700 tonnes, being term deposits. a fall of 4,500 tonnes from the previous Operationally the group generated the defined benefit pension schemes (as set out in note 6) in accordance with IAS 19 and £0.15 million credit for Icelandic bank receipts. £17.8 million in cash (after tax payments) which, after investment of £6.8 million year. Revenue from the machinist operation, CNC Speedwell, increased by 32% during the year. During the year we have received £0.15 million (2012 – £0.69 million) from the administrators of the UK subsidiaries of the Icelandic banks. This brings the total sums received to-date, of the original balance of £5.7 million, to £2.90 million which is £1.04 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. in property, plant and equipment and The directors are recommending a final £5.2 million in dividend payments, resulted dividend that will be paid in August which, in an increase in cash of £5.8 million in the with the interim dividend paid in January, year. This results in a total cash and deposits will result in the return of £5.4 million to position at the balance sheet date of shareholders. £23.6 million. The long-term deposit of £5 million is disclosed separately under current assets in the balance sheet. Therefore the cash and cash equivalents figure at the year end is £18.7 million, an increase of £0.9 million in the year. The pension valuation showed a slight reduction in the surplus, on an IAS 19 basis, to £6.7 million. This continues not to be recognised on the balance sheet due to the restriction of recognition of assets. 22560.04 14 June 2013 4:32 PM Proof 9 03 Annual Report 2013 Directors’ report annual report and the audited accounts for the year ended 31 March 2013. 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 2 and the Business and Financial Review on page 3. A Review of Principal Risks and Uncertainties is given on pages 8 and 9. Dividends An interim dividend of 2.98 pence per share was paid in January 2013. The directors now recommend a final dividend of 9.36 holder of their shares rather than to the company’s registrar, Capita Registrars, or to the company directly. Subject to legislation and to any resolution of the company in general meeting, all unissued shares are at the disposal of the board who may allot, grant options over or otherwise dispose of them to such persons, on such terms and at such times as it may think fit. The company is authorised to purchase its own shares. Directors The directors of the company are listed on page 1 and their interests in the ordinary share capital at the beginning and end of the year were: B. J. Cooke 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 2013 1,956,636 59,261 29,379 14,000 8,000 3,025 1,000 — — 2012 1,956,636 59,261 29,379 12,000 8,000 3,025 1,000 — — There have been no changes in the shareholdings of directors since the year end. The following directors retire under the provisions of the Articles of Association and, being eligible, offer themselves for re-election: B. J. Cooke – by rotation pence per share payable on 16 August M. A. Lewis – by rotation 2013 to shareholders on the register on 12 July 2013, making a total distribution of 12.34 pence for the year. share capital The company’s capital consists of 43,632,068 (2012 – 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 receive those shares holder of information rights under section 146 of to the Companies Act 2006 are required to direct all communications to the registered C. P. King – by rotation 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. The board considers that the performance of those directors proposed for re-election continues to be effective, that they remain independent in judgement and that they demonstrate a strong commitment to their role. 04 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 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, namely 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 31 March 2013. 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 12 June 2013: Delta Lloyd Asset Management NV Aberforth Partners’ Clients Ruffer LLP B. J. Cooke Hamstall Investments Inc. Rathbone Investment Management Ltd Number 5,549,018 5,129,289 4,923,921 1,956,636 1,949,900 1,600,000 % 12.7 11.8 11.3 4.5 4.5 3.7 During the period between 31 March 2013 and 12 June 2013, the directors have not been notified of any changes to the shareholdings set out above. Business review The Chairman’s Statement on page 2, the Business and Financial Review on page 3, the Corporate Governance Statement on page 12, and the Notes to the Accounts on pages 23 to 42 provide detailed information relating to the group, the operation and development of the business and the results and 14 August 2012 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. financial position for the year ended In any three year period no more than 31 March 2013. 7.5% of the issued share capital will be Future prospects Future prospects are dealt with in the Chairman’s Statement on page 2. special business There will be two items of special business at the Annual General Meeting. Directors’ authority to allot shares Approval will be sought for a special resolution to renew the authority given to the directors to allot shares in the company. The present authority was granted on issued on a pre-emptive basis. Both authorities are to be for the period commencing on the date of passing of the resolution until 16 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 2012, the board was given authority to purchase and cancel up to 4,358,844 of its own shares representing 9.99% of the company’s existing shares, through market purchases on The London Stock 22560.04 14 June 2013 4:32 PM Proof 9 05 Annual Report 2013 Directors’ report continued Fixed assets The market value of the group’s interests supplier payment policy The group’s policy is to settle the terms in land cannot be accurately established of payment with suppliers when agreeing without obtaining a valuation of all the the terms of each transaction, ensure that land and buildings owned by the group. suppliers are made aware of the terms of The directors consider that although a payment and abide by them provided the revaluation would show the market value supplier complies with all relevant terms of the land and buildings to be in excess and conditions. The group does not follow of book value, this excess would not be any code or standard on payment practice. significant in the context of group trading Individual operating businesses within the and would not justify the expense of a group are responsible for establishing 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 10 and 11. Health and safety As required by legislation, the group’s policy for securing the health, safety and welfare at work of all employees has been brought to their notice. In addition, safety committees hold regular meetings. 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 48 (2012 – 51). Financial instruments Details of the use of financial instruments by the group are contained in note 19 and in note 4 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 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 8 and in note 4 in the Notes to the Accounts. Corporate governance the Details group’s of corporate governance policies are dealt with on page 12. 06 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 Cautionary statement Under the Companies Act, a company’s directors’ report is required, among other matters, to contain a fair review by the approval of Directors’ report and responsibility statement Each of the persons who is a director at directors of the group’s business through the date of approval of this report confirms a balanced and comprehensive analysis of that to the best of his knowledge: 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. (a) each of the group and parent financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU and UK The Directors’ Report set out above, Accounting Standards respectively, gives including the Chairman’s Statement, a true and fair view of the assets, liabilities, the Principal Risks and Uncertainties financial position and the profit or loss of and Corporate Social Responsibility the issuer and the undertakings included incorporated into it by reference (together, in the consolidation taken as a whole; and 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. (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 The Directors’ Report (as defined) contains with a description of the principal risks and certain forward looking statements. These uncertainties they face. 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 By order of the board B. J. CooKe Chairman both economic and business risk factors, 12 June 2013 underlying any such forward looking information. 22560.04 14 June 2013 4:32 PM Proof 9 07 Annual Report 2013 review of Principal risks and uncertainties risk In common with all trading business, the group is exposed to a variety of risks in the conduct of its normal business operations. Customer concentration, programme dependencies and relationships The loss of, or deterioration in, any major equipment The group operates a number of specialist pieces of equipment, including foundry furnaces, moulding lines and CNC milling customer relationship could have a machines which, due to manufacturing material impact on the group’s results. lead times, would be difficult to replace Product quality and liability The group’s businesses expose it to certain product liability risks which, in the event of failure, could give rise to material financial liabilities. Whilst it is a policy of the group to limit its financial liability by contract in all long-term agreements (“LTAs”), it is not always possible to secure such limitations in the absence of LTAs. The group’s customers do require the maintenance of demanding quality systems to safeguard against quality-related risks and the group maintains appropriate external quality accreditations. The group maintains insurance for public liability-related claims but does not insure against the risk of product warranty or recall. 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. sufficiently quickly to prevent major 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 equipment, all key equipment is maintained to the highest possible standards and inventories of strategic equipment spares maintained. The facilities at Brownhills and Dronfield have similar equipment and work can be transferred from one location to another very quickly. The machining business also operates from two separate locations enabling the transfer of some production if required. suppliers and trade credit Although the group takes care to ensure alternative sources of supply remain available for materials or services on which the group’s businesses are critically dependent, this is not always possible to guarantee without risk of short-term business disruption, additional costs and potential damage to relationships with key customers. 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. 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. 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. Market competition Automotive and commercial vehicle markets are, by their nature, highly competitive, which has historically led to deflationary pressure on selling prices. This pressure is most pronounced in cycles of lower demand. A number of the group’s customers are also adopting global sourcing models with the aim to reduce bought out costs. Whilst there can be no guarantee that business will not be lost on price, we are confident that we can remain competitive. 08 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 Commodity and energy pricing The principal metal raw materials used by short-term deposits A review of credit ratings is undertaken Pension scheme funding The fair value of the assets and liabilities prior to making new deposits and the of the group’s defined benefit pension the group’s businesses are steel scrap and maximum exposure to any one counter- schemes is substantial. As at 31 March various alloys. The most important alloy party is restricted. However, institutions 2013 the schemes were in surplus on an raw material inputs are premium graphite, can be downgraded before maturity IAS 19 basis. Further details are set out in magnesium ferro-silicon, copper, nickel therefore possibly placing these deposits note 6 to the accounts. The potential risks and molybdenum. Wherever possible, at risk. prices and quantities (except steel) are secured through long-term agreements with suppliers. In general, the risk of price inflation of these materials resides with the group’s customers through price adjustment clauses. Energy contracts are locked in for at least twelve months, although renegotiation risks remain at contract maturity dates but again this is mitigated through the application of price adjustment clauses. information technology and systems reliability The group is dependent on its information 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 technology (“IT”) systems to operate liability as well as significant harm to the its business efficiently, without failure reputation of our business. and uncertainties resulting from factors such as investment return, interest rates and mortality rates are mitigated by careful management and continual monitoring of the schemes and by appropriate and timely action to ensure as far as possible that the defined benefit pension liabilities do not increase disproportionately. The company works closely with the scheme trustees and specialist advisers in managing the inherent risks of such schemes. The schemes were closed to future accruals from 6 April 2009 which only leaves past service liabilities to be funded. or interruption. Whilst data within key systems is regularly backed up and systems subject to virus protection, any failure of back-up systems or other major IT interruption could have a disruptive effect on the group’s business. 22560.04 14 June 2013 4:32 PM Proof 9 09 Annual Report 2013 Corporate social responsibility general As a long-standing and principled company, we place great importance on our responsibilities to all our key ●● Complying with all relevant legal Appropriate and adequate environmental requirements, process, planning information and training is given to all and discharge authorisations, as employees and contractors. appropriate to its operations. Both of our foundry sites are ISO stakeholders, whether shareholders, ●● Pursuing best practice techniques in 14001:2004 accredited. The group’s employees, customers, suppliers or the the use of energy and raw materials. practices and procedures are subject to communities in which we operate. The group works hard to meet the legitimate expectations of these stakeholder groups whilst at the same time seeking to fulfil our objective of creating outstanding and enduring value through commercial success based on superior performance. The group has a network of policies and strategies through which we seek to ensure that our values form part of the culture of each of our operations. the environment We recognise our duty and responsibility towards protecting the environment ●● Encouraging the beneficial reuse, regular environmental audits by external recycling and recovery of its waste consultants. products. ●● Ensuring that environmental issues are considered when making 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 manufacturing processes. water consumption. ●● Promoting environmental awareness ●● To reduce the consumption of throughout the group and ensuring 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. wherever we conduct our business and ●● Ensuring that suppliers and strive to adopt the highest standards of contractors adopt environmental environmental practices with the aim of practices on site that are compatible minimising the impact of our commercial with our exacting environmental activities on the surrounding environment. standards. 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 have the potential to impact the environment. Specifically, the company is committed to: ●● 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 working on our behalf and any ●● Implementing and maintaining an interested parties. Environmental Management System in accordance with the ISO 14001 standard. The group demands that all activities and services will comply with applicable laws and regulations and that all substances ●● 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 ●● Establishing procedures to review the and materials will be continually reviewed embody its core values of commitment impact of current or new activities or to ensure that only those that have the and excellence. These values apply to processes on the environment. lowest impact on the environment will be all employees regardless of seniority or ●● Reviewing audit results and initiating corrective action to address any deficiencies found within the group’s environmental management system, policy, objectives or targets. ●● Using techniques to avoid, reduce or control pollution. used. In addition, where it is possible for us position, including directors. to assess, only waste disposal companies and facilities where the level of operational control and environmental compliance meets legislative requirements are used by our businesses. Noise from operations is kept to a level below legislative requirements to ensure the minimum of nuisance to the local environment. 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 production performance. Similarly, they 10 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 are kept informed of any factor affecting ●● To maintain a constant and continuing the group and the industry generally. interest in health and safety matters Their involvement in the group’s performance is encouraged by means of a production bonus and at the time of applicable to the group’s activities, consulting and involving employees wherever possible. annual wages and salaries review they The group has clearly defined health are made aware of all economic factors and safety policies and we operate affecting the previous year’s performance a system of strict reporting. Regular and the outlook for the ensuing year. audits of health and safety at the group’s 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 to equality, judging applications for manufacturing operations are carried out 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. employment neither by race, nationality, The group encourages the maintenance of gender, age, disability, sexual orientation consistent high standards and each site is nor political bias. required to develop a safety management The group gives full consideration to system that includes: employment applications by disabled ●● Health and safety planning and persons where they can adequately objective setting. fulfil the requirements of the position. If necessary, we endeavour to retrain any employee who becomes disabled during their period of employment with the group. Health and safety The board regards the promotion of health and safety measures as a mutual objective for management and employees at all levels. It is our policy to do all that is practicable to prevent personal injury and damage to property and to protect everyone from foreseeable hazards, including third parties in so far as they come into contact with the group’s activities. In particular, we aim to fulfil our responsibilities: ●● 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. ●● 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 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. 22560.04 14 June 2013 4:32 PM Proof 9 11 Annual Report 2013 Corporate governance 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, was Governance. The board has considered internal financial control. These controls restricted to an involvement in the review the principles and provisions of the 2010 are designed to both safeguard the and submission of the tax computations UK Corporate Governance Code and group’s assets and ensure the reliability and a review of the interim financial will continue to adhere to them where it of financial information used within the statements. The board is satisfied with is in the interests of the business, and of business and for publication. As with any the assessment that the auditors are shareholders, to do so. such systems, controls can only provide independent. The manner in which the board provides leadership of the company within a 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 the group’s system of internal controls, including internal financial control, and for monitoring its effectiveness. There is a continuous process for identifying, evaluating and managing the significant risks faced by the group which is regularly reviewed and has been in place throughout the year under review and up to the date of approval of the annual report and accounts. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. The review covers all controls including financial, operational, compliance and risk management. The directors confirm that they have established procedures necessary to implement the internal control guidance for directors such that they fully comply with the 2010 UK Corporate Governance Code for the accounting period ended on 31 March 2013. 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 authorities, and a practice throughout the group of regular management and board meetings to review all aspects of the group’s businesses including those aspects where there is a potential risk to the group. For each business there are regular weekly and monthly reports, reviewed by boards and management, which contain a situation in which he has, or can have, both written reports and accounts. The an interest that conflicts or possibly may accounts include profit and loss accounts conflict with the interests of the company. and balance sheets for the period under A director will not breach that duty if the review, year to date and previous year and relevant matter has been authorised in are compared with expected results. A accordance with the Articles of Association variety of operational and financial ratios by the other directors. are also produced. The board has conducted a review of Continual monitoring of the systems of actual or possible conflicts of interest in internal financial control is conducted by respect of each director. At its meeting on all management. The external auditors, 22 May 2013, the board considered the who are engaged to express an opinion process for identifying current conflicts, on the group accounts, also consider the authorised conflicts that have been systems of internal financial control to the identified and stipulated conditions in extent necessary to express that opinion. accordance with the guiding principles and The external auditors report the results agreed a process to identify and authorise of their work to management, including future conflicts. In practice, directors are members of the board and the audit asked to consider and disclose actual or 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. potential conflicts at the beginning of each meeting and as and when a matter arises. 12 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 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 A. Vicary C. P. King G. B. Wainwright A. N. Jones Board Audit Committee Remuneration Committee Eligible to attend 8 8 8 8 8 8 8 8 8 Attended 8 8 8 8 8 8 8 7 8 Eligible to attend — — — — — — 2 2 2 Attended — — — — — — 2 1 2 Eligible to attend — — — — — — 1 1 1 Attended — — — — — — 1 1 1 The chairman communicates frequently with the non-executive and executive directors. Directors are also encouraged to discuss any issues or concerns with the chairman at any time throughout the year. The chairman also holds meetings with the non-executive directors without executives present. The remuneration committee reviews the performance of the directors, including the chairman. The non-executive directors appraise the chairman’s performance. Board of directors The board meets regularly to monitor the Board committees The principal committees established by current state of business and to determine the directors are: its future strategic direction. During the year the board comprised six executive directors and three non-executive directors. The non-executive directors are independent of executive management and none of the non-executive directors participate in share option or other executive remuneration schemes nor do they qualify for pension benefits. Although two of the non-executive directors have served for more than ten years their knowledge, advice and controls are still invaluable to the group. audit committee This committee comprises 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. nomination committee This committee comprises the three non- executive directors and is chaired by G. B. Wainwright. The chairman may attend meetings as appropriate to the business in hand but is not a member of the committee. The committee did not meet during the year. relations with shareholders The company holds meetings from time The committee meets at least twice a year to time with institutional shareholders and examines any matters relating to the to discuss the company’s strategy and financial affairs of the group including financial performance. The Annual General the review of annual and interim results, Meeting is used to communicate with internal control procedures and accounting private and institutional investors. Directors receive regular updates practices. The audit committee meets with appropriate to the business throughout the auditors periodically and as necessary. the year. To assist with the conduct of their remuneration committee As detailed in the remuneration report on function, the non-executive directors page 15. are able to obtain professional advice at the company’s expense if required in connection with their duties. In addition, all directors have access to the services of the company secretary. 22560.04 14 June 2013 4:32 PM Proof 9 13 Annual Report 2013 Corporate governance continued going concern The directors have assessed the future summary The board takes its responsibilities funding requirements of the group and seriously even though there are a number the company and compared them to the of areas in which it does not comply fully level of funding available. Details of the with the 2010 UK Corporate Governance cash position are set out in note 19 to the Code. It does not feel that the size or accounts. The group’s objectives, policies complexity of the group and the way in and processes for managing its capital, which it governs would be enhanced ●● 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. its financial risk management objectives, or strengthened by further changing ●● There is no formal arrangement details of its financial instruments and the already existing high standards of 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. By order of the board s. J. Mant Company Secretary hedging activities, and its exposure to corporate governance practised. credit risk and liquidity risk are also set out in notes 17 and 19 to the accounts. For the year ended 31 March 2013 the company complied with the 2010 UK The directors’ assessment included a Corporate Governance Code other than review of the group’s financial forecasts, the following points: and financial instruments for the 15 months from the balance sheet date. The directors considered a range of potential scenarios within the key markets the group serves and how these may impact on cash flow. The group and company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Statement on page 2. The directors also considered what mitigating actions the group could take to limit any adverse consequences. After making these enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue operations for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. ●● There were three non-executive directors during the year. Although two of these directors have served for more than ten years the board recognises the value they bring and believes it is important too that shareholders have the reassurance of non-executives on the board whose independence is beyond question. ●● The non-executive directors do not have specified term contracts. 12 June 2013 ●● 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 through the managing directors of each location. The chairman concentrates on the effective working of the board and overall group strategies and remains a high level contact with our main customers. 14 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 remuneration report 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 Conduct 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 31 March 2013. 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 comprises 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 underlying policy in setting the remuneration of the executive directors is that it shall be designed to retain and motivate the directors and be reasonable and fair in relation to their responsibilities. 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 1 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 2013 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 M. A. Lewis G. Cooper A. Vicary G. B. Wainwright C. P. King A. N. Jones A. J. Smith Salary/ fees £000 86 230 160 173 173 160 33 30 30 — 1,075 Benefits (note 1) £000 5 10 10 10 11 10 — — — — 56 Performance related bonus £000 53 91 91 91 91 91 — — — — 508 2013 total £000 144 331 261 274 275 261 33 30 30 — 1,639 2012 Total £000 160 361 277 304 304 — 25 22 — 22 1,475 Note 1 — Benefits in kind include car or a lump sum in the event of death in service. Money Purchase Pension Scheme, a car benefit, fuel or cash allowance, and The scheme provides for a pension accrued defined contribution pension scheme. private health care. at 1/60th per year of service to 2005 and From 1 February 2013, contributions were Pension arrangements Executive directors were contributing members of the Castings P.L.C. Staff Pension and Life Assurance Scheme, a defined benefit scheme, up to 5 April 2009. Their dependants are eligible for dependants’ pensions and the payment of 1/80th per year thereafter. From 6 April paid to Castings P.L.C. Group Personal 2009, they became deferred members. Pension Plans. Pension contributions are Final pensionable remuneration is based on capped basic salaries on retirement at normal retirement age. From 6 April 2009, the executive directors were able to join the Castings P.L.C. not paid on benefits or bonuses. Total contributions of the company total 7% of pensionable earnings. Five directors receive contributions into defined contribution pension plans. 22560.04 14 June 2013 4:32 PM Proof 9 15 Annual Report 2013 remuneration report continued Directors’ pension entitlements* Directors’ contributions in the year (note 1) £ — — — Increase in accrued pension during the year £ 1,259 585 709 Age at year end 51 49 59 Increase in accrued pension during year net of inflation £ — — — Transfer value of increase net of inflation and directors’ contributions £ — — — Accumulated total accrued pension at 31/03/2013 (note 2) £ 49,670 23,091 27,992 Accumulated total accrued pension at 31/03/2012 (note 2) £ 48,411 22,507 27,283 Transfer value of accrued benefits 31/03/2013 £ 617,939 282,457 455,143 Transfer value of accrued benefits 31/03/2012 £ 523,828 232,829 395,783 Difference in transfer values less contributions £ 94,111 49,628 59,360 Name of director D. J. Gawthorpe M. A. Lewis G. Cooper The following directors received contributions into defined contribution pension plans paid by Castings P.L.C. as set out below: D. J. Gawthorpe S. J. Mant M. A. Lewis G. Cooper A. Vicary Contributions paid to 31/03/2013 9,518 9,518 9,518 9,518 9,518 notes to the pension benefits: 1 The Castings P.L.C. Staff Pension and Life Assurance Scheme was closed to future accrual of benefits on 5 April 2009. The above directors (excluding S. J. Mant and A. Vicary) were members of this scheme up until this date. 2 The pension entitlement shown is that which would be paid annually on retirement based on service to the end of the company financial year. Performance graph The following graph shows the company’s performance, measured by total shareholder Directors’ contracts Executive directors have contracts return, compared with the performance of the FTSE All Share Index — Engineering sub- of service terminable on one year’s sector, also measured by total shareholder return. This index has been selected for this notice. These contracts are considered comparison because this is the most relevant index in which the company’s shares are appropriate in the context of the overall CCaassttiinnggss PPLCC — TToottaall RReettuurrnn oonn IInnvveessttmmeenntt quoted. 400.00 350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00 01 April 2008 01 April 2009 01 April 2010 01 April 2011 01 April 2012 01 April 2013 Castings P.L.C. FTSE 350 INDS ENG remuneration policy as, in the opinion of the board, it encourages 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 1 April 2013. 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 12 June 2013 16 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 statement of Directors’ responsibilities 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 group and company for that period. In preparing these financial statements, the directors are required to: ●● select suitable accounting policies and then apply them consistently; Website publication The directors are responsible for ensuring the annual report and the 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 ●● make judgements and accounting dissemination of financial statements, estimates that are reasonable and which may vary from legislation in other jurisdictions. The maintenance and integrity of the company’s website is the responsibility of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. prudent; ●● state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; ●● prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business; 22560.04 14 June 2013 4:32 PM Proof 9 17 Annual Report 2013 independent auditors’ report to the members of Castings P.L.C. We have audited the financial statements of Castings P.L.C. for the year ended 31 March 2013 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 Accounting Practice). This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Matters on which we are required to report by exception We have nothing to report in respect of the Financial Reporting Council’s website at following: http://www.frc.org.uk/auditscopeukprivate 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 31 March 2013 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 European Union; ●● the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and ●● the financial statements have been prepared in accordance with the requirements of the Companies Act Under the Companies Act 2006 we are required to report to you if, in 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 made; or ●● we have not received all the information and explanations we required for our audit. Under the Listing Rules we are required to review: 2006; and, as regards the group ●● the directors’ statements, set out on financial statements, Articles 4 of the page 14 in relation to going concern; IAS Regulation. and 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 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; and ●● certain elements of the report to shareholders by the board on directors’ remuneration. ●● the information given in the directors’ tHoMas LaWton report for the financial year for which (senior statutory auditor) the financial statements are prepared is consistent with the financial statements. For and on behalf of BDO LLP, Statutory auditor Birmingham United Kingdom 12 June 2013 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 18 22560.04 14 June 2013 4:32 PM Proof 9 Annual Report 2013 Consolidated Statement of Comprehensive Income for the year ended 31 March 2013 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 loss and movement in unrecognised surplus on defined benefit pension schemes Tax effect of gains and losses recognised directly in equity Total other comprehensive losses for the year (net of tax) Total comprehensive income for the year attributable to the equity holders of the parent company Earnings per share attributable to the equity holders of the parent company Basic and diluted Notes to the accounts are on pages 23 to 42. Notes 2 4 3 7 8 6 2013 £000 122,215 (90,479) 31,736 (1,553) (11,481) 149 (11,332) 18,851 306 19,157 (4,371) 14,786 4 (138) (1) (135) 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) 14,651 17,267 10 33.89p 40.32p 22560.04 14 June 2013 3:31 PM Proof 9 19 Annual Report 2013 Consolidated Balance Sheet 31 March 2013 ASSETS Non-current assets Property, plant and equipment Financial assets Current assets Inventories Trade and other receivables Other current interest-bearing deposits 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 2013 £000 2012 £000 11 12 13 14 15 16 17 61,676 494 62,170 10,642 33,326 5,000 18,654 67,622 129,792 19,686 2,950 22,636 5,058 27,694 102,098 4,363 874 13 96,848 102,098 62,226 495 62,721 9,310 30,191 — 17,805 57,306 120,027 18,863 2,983 21,846 5,577 27,423 92,604 4,363 874 13 87,354 92,604 The accounts on pages 19 to 42 were approved and authorised for issue by the board of directors on 12 June 2013, and were signed on its behalf by: B. J. COOkE S. J. MANT Chairman Finance Director Notes to the accounts are on pages 23 to 42. 20 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 Consolidated Cash Flow Statement for the year ended 31 March 2013 Cash flows from operating activities Profit before income tax Adjustments for: Depreciation (Profit)/loss on disposal of property, plant and equipment Finance income Excess of employer pension contributions over income statement charge (Increase)/decrease in inventories (Increase)/decrease in receivables Increase/(decrease) in payables Cash generated from operating activities Tax paid Interest received Net cash generated from operating activities Cash flows from investing activities Dividends received from listed investments Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Transfer to other current interest-bearing deposits 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 in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash and cash equivalents: Short-term deposits Cash available on demand Notes to the accounts are on pages 23 to 42. Notes 2013 £000 2012 £000 19,157 23,093 7,416 (19) 6,188 66 (306) (156) (138) (1,332) (3,135) 823 22,466 (4,925) 285 17,826 (345) 2,092 765 (6,250) 25,453 (4,142) 137 21,448 21 19 (6,865) (12,591) 19 (5,000) 5 — — — (11,820) (12,572) (5,157) (5,157) 849 17,805 18,654 18,263 391 18,654 (4,778) (4,778) 4,098 13,707 17,805 17,189 616 17,805 19 22560.04 14 June 2013 3:31 PM Proof 9 21 Annual Report 2013 Consolidated Statement of Changes in Equity for the year ended 31 March 2013 At 1 April 2012 Total comprehensive income for the period ended 31 March 2013 Dividends At 31 March 2013 At 1 April 2011 Total comprehensive income for the period ended 31 March 2012 Dividends At 31 March 2012 Equity attributable to equity holders of the parent Share capitala) £000 4,363 — — 4,363 Share premiumb) £000 874 — — 874 Other reservec) £000 13 Retained earningsd) £000 87,354 — — 13 14,651 (5,157) 96,848 Equity attributable to equity holders of the parent Share capitala) £000 4,363 — — 4,363 Share premiumb) £000 Other reservec) £000 874 — — 874 13 — — 13 Retained earningsd) £000 74,865 17,267 (4,778) 87,354 Total equity £000 92,604 14,651 (5,157) 102,098 Total equity £000 80,115 17,267 (4,778) 92,604 a) Share capital — The nominal value of allotted and fully paid up ordinary share capital in issue. b) Share premium — Amount subscribed for share capital in excess of nominal value. c) Other reserve — Amounts transferred from share capital on redemption of issued shares. d) Retained earnings — Cumulative net gains and losses recognised in the statement of comprehensive income. 22 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 Notes to the Accounts 1 Accounting policies Basis of preparation The group financial statements have which are 100% owned and are based in deficit at the balance sheet date. A full the UK. Intercompany transactions and valuation is carried out tri-annually using balances between group companies are the projected unit credit method. been prepared in accordance with eliminated in full. International Financial Reporting Standards, International Accounting Standards (‘IAS’) and Interpretations (collectively ‘IFRS’), as endorsed for use in the EU. The IFRSs applied in the group financial statements are subject to ongoing amendment by the IASB and subsequent endorsement by the European Commission and therefore subject to possible change in the future. Further standards and interpretations may be issued that will be applicable for financial years beginning on or after 1 April 2013 or later accounting periods but may be adopted early. The preparation of financial statements in accordance with IFRS requires the also requires management to exercise its judgement in the process of applying the group’s accounting policies. If the group cannot benefit from a scheme Business combinations and goodwill Shares issued as consideration for the surplus in the form of refunds from the plans or reductions in future contributions, acquisition of companies have a fair value any asset resulting from the above policy attributed to them, which is normally their is restricted accordingly. market value at the date of acquisition. Net tangible assets acquired are consolidated at a fair value to the group at the date of acquisition. All changes to these assets and liabilities, and the resulting gains and losses that arise after the group has gained control of the subsidiary, are credited and charged to the post-acquisition income statement. Payments to the defined contribution scheme are charged to the consolidated statement of comprehensive income as they become payable. Property, plant and equipment Property, plant and equipment assets are held at cost less accumulated Under UK GAAP, goodwill arising on depreciation. Depreciation is provided on acquisitions prior to 1998 was written off to property, plant and equipment, other than reserves. There have been no acquisitions freehold land and assets in the course of since 1998. Following the exemption in construction, on a straight-line basis. The IFRS 1 this treatment has continued to be periods of write-off used are as follows: Revenue recognition Revenue, which excludes value added ii. Leasehold land and buildings over 50 years or the period of the lease, tax and intra-group sales, represents the whichever is less. i. Freehold buildings over 50 years. use of certain accounting estimates. It followed. The primary statements within the financial information contained in this document have been presented in accordance with IAS 1: Presentation of Financial Statements. invoiced value of goods and services sold to customers. Services relate to the machining of parts which is recognised as the work is performed. Appropriate provisions for returns and other allowances iii. Plant and equipment over a period of 3 to 15 years, straight-line or unit of production method if more appropriate. The accounts are prepared under the historical cost convention, except where adjusted for revaluations of certain assets, and in accordance with applicable Accounting Standards and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. A summary of the principal group IFRS accounting policies is set out below. Basis of consolidation The consolidated statement of income and balance comprehensive 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 are deducted from revenue as appropriate. The group annually reviews the The group has no barter transactions. assessment of residual values and useful lives in accordance with IAS 16. The group’s revenue has been recognised when goods have been dispatched. Post-retirement benefits Two of the group’s pension plans are of a defined benefit type. Under IAS 19: Employee Benefits the employer’s portion of the current service costs and curtailment gains are charged to operating profit for these plans, with the interest cost net of the expected return on assets in the plans also being credited to operating profit. Actuarial gains and losses are recognised directly in equity, in the statement of comprehensive income, and the balance sheet reflects the schemes’ surplus or Inventories The group’s inventories are valued at the lower of cost on a first in, first out basis and net realisable value. Cost includes a proportion of production overheads based on normal levels of activity. Provision is made for obsolete and slow-moving items. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits at call with banks and other short-term highly liquid investments with original maturities of three months or less from inception. 22560.04 14 June 2013 3:31 PM Proof 9 23 Annual Report 2013 Notes to the Accounts continued Foreign currencies Assets and liabilities in foreign currencies The effect of discounting on these financial instruments is not considered to c) Share capital The group’s ordinary shares are classified are translated at the spot rates of exchange be material. ruling at the balance sheet date. Exchange differences are dealt with through the consolidated statement of comprehensive income. Financial Instruments a) Financial assets The group’s financial assets relate to loans and receivables and available-for-sale assets. Although the group occasionally uses derivative financial instruments in economic hedges of currency rate risk, it does not hedge account for these transactions and the amounts are not material. The group has not classified any of its financial assets as held to maturity. 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. Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the terms of the deposit or receivable. The amount of such a provision is the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired as equity instruments. Share capital includes the nominal value of the shares and any share premium attaching to the shares. Current and deferred tax Deferred tax is provided using the liability method. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. asset. Such provisions are recorded in a Deferred tax is measured at the average separate allowance account with the loss tax rates that are expected to apply in the being recognised within administrative periods in which the temporary differences expenses in the consolidated statement of are expected to reverse, based on tax comprehensive income. On confirmation rates and laws that have been enacted that the deposit or receivable will not be or substantively enacted by the balance collectable, the gross carrying value of the sheet date. asset is written off against the associated provision. b) Financial liabilities The group classifies its financial liabilities into liabilities measured at amortised cost. Although the group uses derivative financial instruments in economic hedges of currency risk, it does not hedge account for these transactions, and the amounts are not material. Unless otherwise indicated, the carrying amounts of the group’s financial liabilities are a reasonable approximation of their Current tax is provided for on the taxable profits of each company in the group, using current tax rates and legislation that have been enacted or substantively enacted by the balance sheet date. Dividends Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are only recognised when approved by the shareholders at the Annual General Meeting. 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. the provision of goods and services to fair values. customers (e.g. trade receivables) and deposits held at banks and building societies, but may also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. 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. 24 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 Standards, interpretations and Critical accounting estimates and amendments to published standards that are not yet effective The following new standards, amendments judgements The group makes certain estimates and Pension assumptions The costs, assets and liabilities of the defined benefit pension schemes judgements regarding the future. Estimates operated by the group are determined and interpretations have been issued and judgements are continually evaluated using methods relying on actuarial but are not yet effective and therefore based on historical experience and other estimates and assumptions. Details of the have not been adopted in these factors, including expectation of future key assumptions are set out in note 6. financial statements. Management are events that are believed to be reasonable considering the impact of the changes under the circumstances. In the future, on future reporting. ● Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) (1 July 2012); actual experience may differ from these estimates and judgements. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and ● IFRS 9 “Financial Instruments” liabilities within the next financial year are (1 January 2015); discussed below. ● IFRS 10 “Consolidated Financial Statements” (1 January 2014); ● IFRS 13 “Fair Value Measurement” (1 January 2013); ● Amendments to IAS 19 “Employee Benefits” (1 January 2013); Useful lives of property, plant and equipment Property, plant and equipment are depreciated over their useful lives based on management’s estimates of the period that the assets will generate revenue, which ● Amendments to IAS 27 “Separate are periodically reviewed for continued Financial Statements” (1 January appropriateness. Changes to estimates 2014); and ● Improvements to IFRS (2011 – 2013) (1 January 2013). There are a number of further standards, interpretations and amendments to published standards not set out above which the directors consider not to be relevant to the group. can result in significant variations in the carrying value and amounts charged to the consolidated income statement in specific periods. More details, including carrying values, are included in note 11. 22560.04 14 June 2013 3:31 PM Proof 9 25 Annual Report 2013 Notes to the Accounts continued 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 P.L.C. 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 31 March 2013: Revenue from external customers Inter-segmental revenue Segmental result 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. Foundry operations £000 106,674 19,166 Machining £000 Elimination £000 15,541 11,615 — — Total £000 122,215 30,781 14,656 3,803 105 18,564 114,690 1,141 4,169 27,575 5,724 3,247 (12,473) — — 149 138 306 19,157 129,792 6,865 7,416 26 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 2 Operating segments continued The following shows the revenues, results and total assets by reportable segment in the year to 31 March 2012: Revenue from external customers Inter-segmental revenue Segmental result 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. Foundry operations £000 117,036 18,888 17,761 Machining £000 9,235 11,283 4,017 Elimination £000 — — 121 110,377 7,508 3,046 22,755 5,356 3,142 (13,105) — — The geographical analysis of revenues by destination for the year is as follows: United Kingdom Sweden Netherlands Rest of Europe North and South America Other 2013 £000 42,353 23,893 19,024 31,520 4,042 1,383 Total £000 126,271 30,171 21,899 693 345 156 23,093 120,027 12,864 6,188 2012 £000 42,531 31,588 21,371 24,579 4,877 1,325 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 £28,932,000, £16,638,000 and £12,667,000 from three customers (2012 – £28,168,000, £18,452,000 and £12,078,000). 122,215 126,271 22560.04 14 June 2013 3:31 PM Proof 9 27 Annual Report 2013 Notes to the Accounts continued 3 Profit from operations This has been arrived at after charging/(crediting): Staff costs (note 5) Cost of inventories recognised as an expense Depreciation of property, plant and equipment Fees payable to the company’s auditors for the audit of the company’s annual accounts Fees payable to the company’s auditors for other services: — The audit of the company’s subsidiaries — Tax services (Profit)/loss on disposal of property, plant and equipment 4 Exceptional items Recovery of past provision for losses on deposits with Icelandic banks 2013 £000 35,875 57,765 7,416 25 26 10 (19) 2013 £000 (149) (149) 2012 £000 34,021 55,097 6,188 25 26 10 66 2012 £000 (693) (693) The company reported in the year ended 31 March 2009 that £1.86 million was included in other receivables as the net recoverable after provision from various Icelandic banks. So far £2.90 million has been received of the original balance of £5.7 million with the excess over the £1.86 million being shown as an exceptional credit. 5 Employee information Average number of employees during the year was: Production Management and administration 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 2013 950 102 1,052 2013 £000 31,841 760 (138) 3,368 35,831 2012 967 99 1,066 2012 £000 30,430 679 (345) 3,257 34,021 In addition to the wages and salaries disclosed above, the group incurred costs of £296,000 (2012 – £816,000) in respect of agency workers. The directors represent the key management personnel. Details of their compensation are given in the Remuneration Report on page 15. 28 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 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 6 April 2009. The assets are independent of the finances of the group and are administered by Trustees. The latest actuarial valuation was performed with an effective date of 6 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 6 April 2014. In addition, the group operated a money purchase pension scheme whereby contributions are invested through individual accounts under an insurance policy administered by Trustees. On 1 February 2013 the group commenced contributions to individual members’ Group Personal Pension Plans in place of the money purchase scheme. 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 6 April 2011 and updated to 31 March 2013 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) 2013 2.6% 4.2% 3.3% 2.6% 2012 2.5% 4.9% 3.2% 2.5% 22560.04 14 June 2013 3:31 PM Proof 9 29 Annual Report 2013 Notes to the Accounts continued 6 Pensions continued Change in benefit obligation Benefit obligation at beginning of year Current service cost Past service cost Interest cost Plan participants’ contributions Actuarial loss Benefits paid Benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Expected return on plan assets Actuarial gain/(loss) Employer contribution Member contributions Benefits paid Fair value of plan assets at end of year Funded status Unrecognised pension surplus Net amount recognised in the balance sheet 2013 £000 42,295 — — 2,040 — 5,753 (1,340) 48,748 49,063 2,178 5,502 — — (1,340) 55,403 6,655 (6,655) — 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) — The pension surplus has not been recognised as the group does not have an unconditional right to receive returns of contributions or refunds under the scheme rules. 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 Cumulative amount of actuarial gains and losses immediately recognised Year to 31 March 2013 £000 Year to 31 March 2012 £000 — — 2,040 (2,178) (138) 6,768 (6,655) (251) 138 12,223 — 165 2,237 (2,747) (345) 6,683 (6,768) (260) 345 11,972 30 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 6 Pensions continued Plan assets The weighted average assets allocations at the year end were as follows: Assets category Equities Bonds Real estate Plan assets at 31 March 2013 £000 67% 30% 3% 100% Plan assets at 31 March 2012 £000 66% 31% 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 4.5% (2012 – 5.8%) assumption. The projected pension cost for the year ending 31 March 2014 is £nil. Actual 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 2013 £000 7,680 2012 £000 2,522 4.2% 4.9% 4.9% 4.5% n/a 5.5% 5.8% n/a 22560.04 14 June 2013 3:31 PM Proof 9 31 Annual Report 2013 Notes to the Accounts continued 6 Pensions continued Weighted average life expectancy for mortality tables* used to determine benefit obligations at: Scheme member age 65 (current life expectancy) Scheme member age 45 (life expectancy at age 65) 2013 2012 Male Staff/ Shopfloor Female Staff/ Shopfloor Male Staff/ Shopfloor Female Staff/ Shopfloor 23.6/22.8 26.5/25.7 23.5/22.7 26.4/25.6 25.7/24.8 28.5/27.6 25.6/24.7 28.4/27.5 * 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 31 March 2013 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 Surplus Difference between expected and actual return on scheme assets: amount (£000) percentage of scheme assets 2013 48,748 55,403 6,655 5,502 10% 2012 42,295 49,063 6,768 (225) 0% 2011 41,486 48,169 6,683 873 2.0% 2010 41,369 46,250 4,881 10,187 22.0% 2009 33,251 34,258 1,007 (11,054) (32.0%) 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 — 0% 1,954 5.0% — 0% — 0% 86 0% (251) (1.0%) (260) (1.0%) 1,393 3.0% (592) (1.0%) (2,955) (10.0%) 2013 £000 285 21 306 2012 £000 137 19 156 32 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 8 Income tax Corporation tax based on a rate of 24% (2012 – 26%) 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 24% (2012 – 26%) 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 (%) 2013 £000 5,075 (184) 4,890 (300) 12 (232) 4,371 2012 £000 5,725 (146) 5,579 326 37 (440) 5,502 19,157 23,093 4,598 6,004 211 (184) 12 (233) (33) 4,371 22.7 137 (146) 37 (440) (90) 5,502 23.8 A reduction in the UK corporation tax rate from 26% to 24% was substantively enacted in March 2012 and was effective from 1 April 2012. A further reduction from 24% to 23% was substantively enacted in July 2012 and will be effective from 1 April 2013. Accordingly, the substantively enacted rates have been applied in the measurement of the group’s deferred tax assets and liabilities at 31 March 2013. 9 Dividends Final paid of 8.84p per share for the year ended 31 March 2013 (2012 – 8.04p) Interim paid of 2.98p per share (2012 – 2.91p) 2013 £000 3,857 1,300 5,157 2012 £000 3,508 1,270 4,778 The directors are proposing a final dividend of 9.36 pence (2012 – 8.84 pence) per share totalling £4,083,962 (2012 – £3,858,820). 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 £14,786,000 (2012 – £17,591,000) and on the weighted average number of shares in issue at the end of the year of 43,632,068 (2012 – 43,632,068). There are no share options, hence the diluted earnings per share is the same as above. 22560.04 14 June 2013 3:31 PM Proof 9 33 Annual Report 2013 Notes to the Accounts continued 11 Property, plant and equipment Cost At 1 April 2012 Additions during year Disposals Adjustment to opening position At 31 March 2013 Depreciation and amounts written off At 1 April 2012 Charge for year Disposals At 31 March 2013 Net book values At 31 March 2013 At 31 March 2012 Cost At 1 April 2011 Additions during year Disposals Adjustment to opening position At 31 March 2012 Depreciation and amounts written off At 1 April 2011 Charge for year Disposals At 31 March 2012 Net book values At 31 March 2012 At 31 March 2011 Land and buildings £000 Plant and other equipment £000 29,337 746 — — 97,482 6,145 (502) (25) Total £000 126,819 6,891 (502) (25) 30,083 103,100 133,183 3,988 637 — 4,625 25,458 25,349 23,336 6,001 — — 29,337 3,325 663 — 3,988 25,349 20,011 60,605 6,779 (502) 66,882 36,218 36,877 92,195 6,863 (1,303) (273) 97,482 56,317 5,525 (1,237) 60,605 36,877 35,878 64,593 7,416 (502) 71,507 61,676 62,226 115,531 12,864 (1,303) (273) 126,819 59,642 6,188 (1,237) 64,593 62,226 55,889 The net book value of group land and buildings includes £2,527,000 (2012 – £2,527,000) for land which is not depreciated. The cost of land and buildings includes £359,000 for property held on long leases (2012 – £359,000). 34 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 12 Financial assets Available-for-sale assets At 1 April 2012 Disposals Net gains/(losses) transferred to statement of comprehensive income At 31 March 2013 2013 £000 494 2013 £000 495 (5) 4 494 2012 £000 495 2012 £000 467 — 28 495 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 £235,000 (2012 – £227,000). 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 2013 £000 2,730 2,920 4,992 10,642 2013 £000 24,895 945 7,486 33,326 2013 £000 11,687 1,731 614 5,654 19,686 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 22560.04 14 June 2013 3:31 PM Proof 9 35 Annual Report 2013 Notes to the Accounts continued 16 Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using the large company tax rate applicable in 2014 of 23% (2012 – 24%). The movement on the deferred tax account is shown below: Deferred tax – net At 1 April 2012 Taken to equity Credit to income statement At 31 March 2013 The movement in deferred tax assets and liabilities during the year is shown below: Deferred tax – liabilities At 1 April 2012 (Credited)/charged to profit Charged to other comprehensive income At 31 March 2013 The movement in the deferred tax assets and liabilities during the prior year is shown below: Accelerated tax depreciation £000 5,731 (571) — 5,160 Accelerated tax depreciation £000 6,054 (323) — 5,731 Pension adjustment £000 (168) 168 — — At 1 April 2011 Charged to profit Charged to other comprehensive income At 31 March 2012 The deferred tax charged to equity during the year is as follows: Tax on change in fair value of available-for-sale financial assets Tax on items taken directly to reserves 2013 £000 5,577 1 (520) 5,058 Other £000 (154) 51 1 (102) Other £000 (239) 78 7 (154) 2013 £000 1 1 2012 £000 5,647 7 (77) 5,577 Total £000 5,577 (520) 1 5,058 Total £000 5,647 (77) 7 5,577 2012 £000 7 7 36 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 17 Share capital Authorised 50,000,000 10p ordinary shares Allotted and fully paid 43,632,068 10p ordinary shares 2013 £000 5,000 4,363 2012 £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 2013 £000 2,571 2012 £000 348 22560.04 14 June 2013 3:31 PM Proof 9 37 Annual Report 2013 Notes to the Accounts continued 19 Financial instrument risk exposure and management In common with all other businesses, the group is exposed to risks that arise from its use of financial instruments. This note describes the group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. 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 other interest-bearing deposits trade and other payables General objectives, policies and processes The board has overall responsibility for the determination of the group’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the group’s finance function. The board receives reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the board is to set policies that seek to reduce risk as far as possible without unduly affecting the group’s competitiveness and flexibility. Further details regarding these policies are set out below: Categories of financial assets and financial liabilities Current financial assets Trade receivables Other receivables Cash and cash equivalents Other interest-bearing deposits Total current financial assets The maximum exposure to credit risks is detailed in the above table. Loans and receivables 2013 £000 24,895 944 18,654 5,000 49,493 2012 £000 23,297 1,225 17,805 — 42,327 38 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 19 Financial instrument risk exposure and management continued Current financial liabilities Trade payables Other payables Accruals Total current financial liabilities Financial liabilities measured at amortised cost 2013 £000 11,687 614 5,654 17,955 2012 £000 11,900 255 4,769 16,924 Credit risk Credit risk arises principally from the group’s trade receivables. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. As at 31 March 2013, trade receivables of £24,628,000 (2012 – £23,240,000) were not past due. 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. 22560.04 14 June 2013 3:31 PM Proof 9 39 Annual Report 2013 Notes to the Accounts continued 19 Financial instrument risk exposure and management continued At 31 March 2013 trade receivables of £267,000 (2012 – £57,000) 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 2013 £000 3 25 239 267 2012 £000 — 8 49 57 At 31 March 2013 trade receivables of £163,000 (2012 – £25,000) were past due and impaired. The ageing of these receivables is as follows: 30–60 days 60–90 days 90+ days 2013 £000 62 2 99 163 2012 £000 5 3 17 25 The group records impairment losses on its trade receivables (including an impairment provision for trade receivables not past due) 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 2013 £000 385 103 — — 489 2012 £000 359 26 (2) 2 385 Impairment losses on trade receivables of £103,000 (2012 – £26,000) 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. 40 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 19 Financial instrument risk exposure and management continued 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). Where the group has generated a significant amount of surplus cash it will invest in term deposits if liquidity risk is not unduly compromised. Whilst a review of credit ratings is performed for each counterparty, there will always remain an element of risk over the recoverability of the funds at the end of the term. 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 (2012 – £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 euro with a sterling value of £2,030,000 (2012 – £2,700,000). 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 £1.9 million (2012 – £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: Sterling US$ Euro Sterling US$ Euro Floating rate assets 2013 £000 106 40 2,152 2,298 Floating rate assets 2012 £000 13 145 464 622 Fixed rate assets 2013 £000 20,145 — 1,211 21,356 Interest-free assets 2013 £000 21,551 47 3,297 24,895 Fixed rate assets 2012 £000 15,835 — 1,348 17,183 Interest-free assets 2012 £000 17,765 106 5,426 23,297 Total 2013 £000 41,802 87 6,660 48,549 Total 2012 £000 33,613 251 7,238 41,102 22560.04 14 June 2013 3:31 PM Proof 9 41 Annual Report 2013 Notes to the Accounts continued 19 Financial instrument risk exposure and management continued Sterling US$ Euro Interest-free liabilities 2013 £000 9,471 — 2,216 11,687 Interest-free liabilities 2012 £000 10,857 — 1,043 11,900 Fixed rate assets attracted interest rates between 0.75% to 3.15% (2012 – 0.75% to 1.65%) on sterling deposits. Floating rate assets consisted of overnight cash at bank at nominal interest rates. Cash and cash equivalents Cash and cash equivalents generally comprise short-term deposits that have fixed interest rates and maturity periods within three months. The effect of a +50/(50) increase/(decrease) in basis points with all other variables held constant would have the effect of increasing/ (decreasing) profit before tax by £96,000/(£96,000) (2012 – £76,000/(£76,000)). 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 £157,000/(£174,000) (2012 – (£258,000)/£286,000). Fair value Unless otherwise indicated, the carrying amounts of the group’s financial instruments are a reasonable approximation of their fair values. 42 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 Five Year Financial History — unaudited For the years ended 31 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 2013 £000 122,215 19,157 14,786 5,157 4,363 97,735 102,098 61,676 494 — 62,170 67,622 (27,694) 102,098 2012 £000 126,271 23,093 17,591 4,778 4,363 88,241 92,604 62,226 495 — 62,721 57,306 (27,423) 92,604 2011 £000 105,368 15,501 11,652 4,363 4,363 75,752 80,115 55,889 467 — 56,356 56,065 (32,306) 80,115 2010 £000 60,649 9,804 7,638 4,363 4,363 68,872 73,235 51,596 480 — 52,076 41,685 (20,526) 73,235 2009 £000 84,812 3,616 622 4,363 4,363 69,314 73,677 53,408 429 — 53,837 37,059 (17,219) 73,677 12.34 2.9 33.89p 11.75 3.7 40.32p 10.75 2.7 26.71p 10.0 1.7 17.51p 10.0 — 1.43p 22560.04 14 June 2013 3:31 PM Proof 9 43 Annual Report 2013 Parent Company Accounts Under Uk GAAP As noted on page 18, the company has elected to prepare its financial statements under UK GAAP Parent Company Balance Sheet 31 March 2013 Fixed assets Tangible assets Investments Current assets Stocks Debtors 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 2013 £000 15,019 5,775 20,794 6,356 27,363 15,828 131 49,678 12,942 36,736 57,530 (309) 57,221 4,363 874 13 51,971 57,221 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 The parent company accounts on pages 44 to 49 were approved and authorised for issue by the board of directors on 12 June 2013, and were signed on its behalf by: B. J. COOkE Chairman S. J. MANT Finance Director Notes to the accounts are on pages 45 to 49. 44 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 Notes to the Parent Company Accounts The Directors’ Report is on pages 4 to 7 of the Annual Report and Accounts 1 Accounting policies Basis of preparation The accounts are prepared under the historical cost convention except for revaluation of certain financial instruments as required by FRS 26 and in accordance with applicable UK Accounting Standards and the Companies Act 2006. Depreciation Depreciation is calculated on the straight- line basis to write off the initial cost of fixed assets at the following rates per annum: ● Buildings 2% ● Plant and other equipment 7% to 33% Freehold land is not depreciated. Pension costs The cost of providing retirement pensions and related benefits is charged to the profit and loss account over the periods benefiting from the employees’ services in accordance with FRS 17. Where defined benefit pension schemes are multi-employer schemes and it is not possible to identify the company’s share of assets and liabilities of those schemes on a reasonable and consistent basis, the company contributions payable to those schemes during the year are charged to the profit and loss account. Turnover Turnover Stocks Stock and work in progress have been consistently valued at the lower of cost Financial Instruments a) Financial assets The company’s financial assets relate and net realisable value. The valuation to loans and receivables. Although the of work in progress and finished stocks company occasionally uses derivative includes appropriate manufacturing and financial instruments in economic hedges works overheads computed on the basis of currency rate risk, it does not hedge of normal activity. Foreign currencies Monetary assets account for these transactions and the amounts are not material. The company has not classified any of its financial and liabilities assets as held to maturity. denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Transactions Available-for-sale assets 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. with changes in fair value recognised directly in the statement of comprehensive Deferred tax Deferred tax is recognised in respect of income. Fair value is determined with 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 an obligation to pay more tax in the future Loans and receivables 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 plus transaction costs that are directly or substantively enacted by the balance attributable to the acquisition or issue and is the aggregate of the sheet date. Deferred tax is measured on a subsequently carried at amortised cost 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. non-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. 22560.04 14 June 2013 3:31 PM Proof 9 45 Annual Report 2013 Notes to the Parent Company Accounts continued The Directors’ Report is on pages 4 to 7 of the Annual Report and Accounts Impairment provisions are recognised Financial liabilities measured at when there is objective evidence (such as significant financial difficulties on the part amortised cost Financial liabilities include trade payables Dividends Equity dividends are recognised when 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 the present value of the future expected estimated future cash flows using a market cash flows associated with the impaired rate of interest. Related party transactions The company has taken advantage of the exemption conferred by Financial Reporting Standard 8 ‘Related party receivable. For trade receivables, such provisions are recorded in a separate allowance account with the loss being c) Share capital The company’s ordinary shares are disclosures’ not to disclose transactions with members of the group on the grounds recognised within administrative expenses classified as equity instruments. Share that 100% of the voting rights in the in the income statement. On confirmation capital includes the nominal value of the company are controlled within that group. that the trade receivable will not be shares and any share premium attaching collectable, the gross carrying value of the to the shares. asset is written off against the associated provision. b) Financial liabilities The company classifies its financial liabilities into liabilities measured at amortised cost. Although the company uses derivative financial instruments in economic hedges of currency risk, it does not hedge account for these transactions and the amounts are not material. 46 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 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 £11,038,000 (2012 – £10,218,000). The profit and loss account includes £25,000 (2012 – £25,000) for audit fees. 3 Dividends Final paid of 8.84p per share for the year ended 31 March 2013 (2012 – 8.04p) Interim paid of 2.98p per share (2012 – 2.91p) 2013 £000 3,857 1,300 5,157 2012 £000 3,508 1,270 4,778 The directors are proposing a final dividend of 9.36 pence (2012 – 8.84 pence) per share totalling £4,083,962 (2012 – £3,858,820). This dividend has not been accrued at the balance sheet date. 4 Tangible assets Cost At 1 April 2012 Additions during year Disposals At 31 March 2013 Depreciation and amounts written off At 1 April 2012 Charge for year On Disposals At 31 March 2013 Net book values At 31 March 2013 At 31 March 2012 Land and buildings £000 Plant and other equipment £000 15,568 249 — 15,907 2,413 201 — 2,614 13,293 13,245 24,356 452 (73) 24,735 21,259 1,823 (73) 23,009 1,726 3,097 Total £000 40,014 701 (73) 40,642 23,672 2,024 (73) 25,623 15,019 16,342 The net book value of land and buildings includes £2,127,000 (2012 – £2,127,000) for land which is not depreciated. The cost of land and buildings includes £359,000 for property held on long leases (2012 – £359,000). 22560.04 14 June 2013 3:31 PM Proof 9 47 Annual Report 2013 Notes to the Parent Company Accounts continued The Directors’ Report is on pages 4 to 7 of the Annual Report and Accounts 5 Investments Subsidiary companies At cost Listed investments at market value 2013 £000 5,281 494 5,775 2012 £000 5,281 495 5,776 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 £5,000 (2012 – £nil) and the change in fair value taken to equity is £4,000 (2012 – £27,000). 6 Stocks Raw materials Work in progress Finished goods 7 Debtors Due within one year: Trade debtors Amounts owed by subsidiary companies Other debtors Prepayments and accrued income 8 Creditors: amounts falling due within one year Due within one year: Trade creditors Amounts owed to subsidiary companies Corporation tax Other taxation and social security Other creditors Accruals and deferred income 2013 £000 916 2,246 3,194 6,356 2013 £000 15,498 4,477 944 6,444 27,363 2013 £000 4,673 2,457 1,752 787 434 2,839 12,942 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 14,077 48 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 9 Provisions for liabilities Deferred taxation At 1 April 2012 Taxation deferred this year At 31 March 2013 Deferred tax is provided as follows: Accelerated capital allowances Other timing differences 10 Called up share capital Allotted and fully paid 43,632,068 10p ordinary shares 11 Reserves At 1 April 2012 Profit retained Changes in fair value of investments At 31 March 2013 2013 £000 594 (285) 309 326 (17) 309 2013 £000 4,363 Share capital £000 4,363 — — 4,363 Share premium £000 874 — — 874 Other reserves £000 13 — — 13 Retained earnings £000 46,086 5,881 4 51,971 12 Reconciliation of movements in shareholders’ funds Profit for the year Changes in fair value of investments Dividends Net increase in shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 2013 £000 11,038 4 (5,157) 5,885 51,336 57,221 2012 £000 494 100 594 612 (18) 594 2012 £000 4,363 Total equity £000 51,336 5,881 4 57,221 2012 £000 10,218 28 (4,778) 5,468 45,868 51,336 13 Pensions It is not possible to identify the company’s share of the underlying assets and liabilities in respect of the group defined benefit schemes on a consistent and reasonable basis. Contributions to the schemes by the company are based on professional and independent actuarial advice. During the year the contributions payable by the company to the funds amounted to £nil (2012 – £nil). The last valuation was performed with an effective date of 6 April 2011. Further details of the schemes are contained in note 6 to the consolidated accounts of Castings P.L.C. 14 Capital commitments Authorised, but not provided in the accounts 2013 £000 — 2012 £000 — 49 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 Notice of Meeting Notice is hereby given that the one such expiry make an offer or (b) hundred and sixth Annual General Meeting enter into an agreement which the allotment to than pursuant to subparagraph (otherwise of Castings P.L.C. (the ‘Company’) will would or might require relevant (a) of this resolution) of equity be held at Holiday Inn, Birmingham M6, securities to be allotted after securities having, in the case of Junc. 7, Chapel Lane, Great Barr, the expiry of such period and relevant shares, an aggregate Birmingham, West Midlands, B43 7BG, the directors may allot relevant nominal amount, or, in the on 13 August 2013 at 3.30 pm for the securities in pursuance of any case of other equity securities, following purposes: As ordinary business 1 To receive and adopt the directors’ report and audited accounts for the year ended 31 March 2013. To declare a final dividend. such offer or agreement as if giving the right to subscribe for the authority conferred had not or convert into relevant shares expired; (c) the foregoing authority shall be in substitution for the authorities given to the directors under the Companies Act 2006 on having an aggregate nominal amount not exceeding £218,160, which represents approximately 5% of the current issued share capital of the Company, To re-elect B. J. Cooke as a director. 14 August 2012, which and shall expire at the conclusion of the authorities are accordingly next Annual General Meeting following To re-elect M. A. Lewis as a director. To re-elect C. P. King as a director. approve To remuneration report the directors’ for the year hereby revoked; (d) this authority will be put to annual shareholder approval. ended 31 March 2013. To reappoint BDO LLP as auditors of the Company at a fee to be agreed with the directors. As special business As special resolutions 9 THAT the directors be and are hereby empowered pursuant to the To consider and, if thought fit, pass the Companies Act 2006 to allot equity following resolutions, of which resolution 8 securities (within the meaning of that will be proposed as an ordinary resolution Act) for cash pursuant to the general 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 2 3 4 5 6 7 and resolutions 9 and 10 will be proposed authority conferred by the ordinary pre-emptive basis. as special resolutions. The share capital consists of 43,632,068 ordinary shares with voting rights. resolution 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 As an ordinary resolution shall be limited: 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 the approximately 14.6% of current issued share capital of the Company; (b) foregoing authority shall the expire on 16 August 2015 save that the Company may before (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 or other arrangement as the directors may consider appropriate, necessary or expedient to deal with any fractional entitlements or with any legal or practical difficulties in respect of overseas holders or otherwise) to the respective numbers of ordinary shares then held by such shareholders; and 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 to shares hereby authorised be purchased is 4,358,844 representing 9.99% of the issued share capital at 31 March 2013; (b) the minimum price which may be paid for each ordinary share is 10p, exclusive of the expenses of purchase; (c) the maximum price (exclusive of expenses) which may be paid for each ordinary share is an amount equal to 105% of the average of the middle market quotations for the ordinary shares as derived 50 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 from the Daily Official List of the Note: London Stock Exchange Limited for the five business days immediately preceding the day of purchase; Any member of the Company entitled to attend and vote at this meeting may appoint one or more proxies, who need not also be a member, to attend and vote, (d) unless previously revoked or on a poll, in his stead. The instrument varied, the authority hereby appointing a proxy, including authority conferred shall expire at under which it is signed (or a notarially the conclusion of the next certified copy of such authority), must be Annual General Meeting of the deposited at the offices of the Company’s Company following the date registrars: Capita Registrars, PXS, In Accordance with Regulation 41 of the Uncertified Securities Regulations 2001, only those members entered on the Company’s register of members at 6.00 pm on the day which is two days before the day of the meeting or, if the meeting is adjourned, shareholders entered on the Company’s register of members at 6.00 pm on the day two days before the date of any adjournment shall be entitled to attend and vote at the of this resolution, unless such 34 Beckenham Road, Kent, BR3 4TU, meeting. authority is renewed on or prior not less than 48 hours before the time to such date; appointed for the meeting. (e) the Company may, before the expiry of this authority, conclude a contract to purchase ordinary shares under this authority which will or may be executed wholly or partly after such expiry and may make a purchase of Beneficial owners: In accordance with Section 325 of the Companies Act 2006, the right to appoint proxies does not apply to persons nominated to receive information rights under section 146 of the Act. ordinary shares pursuant to Persons nominated to receive information any such contract, as if such rights under section 146 of the Act who authority had not expired. have been sent a copy of this notice of meeting are hereby informed, in accordance with Section 149 (2) of the Act, that they may have a right under an agreement with the registered member by whom they were nominated to be appointed, or to have someone else appointed, as a proxy for this meeting. If they have no such right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the member as to the exercise of voting rights. Nominated persons should contact the registered member by whom they were nominated in respect of these arrangements. The record date for payment of the final dividend is 12 July 2013. Assuming the final dividend is approved by the members, the dividend will be paid on 16 August 2013. Information about the meeting can be found on the Company’s website (www. castings.plc.uk). The right to vote at the meeting is determined by reference to the register of members as it stands on 9 August 2013. Shareholders have the 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 12 June 2013 22560.04 14 June 2013 3:31 PM Proof 9 51 Annual Report 2013 Directors, Officers and Advisers Directors B. J. Cooke, AdvDipNFC, FICME Chairman D. J. Gawthorpe, BSc (Hons), MICME Chief Executive S. J. Mant, BSocSc (Hons) FCA Finance Director M. A. Lewis Managing Director, CNC Speedwell Limited G. Cooper, BSc, MSc, FICME Managing Director, William Lee Limited A. Vicary, BEng, MSc, FICME Managing Director, Brownhills G. B. Wainwright, MCMI, MIEx, FRSA Senior Independent Non-executive C. P. King, FCA Non-executive A. N. Jones, BA (Hons), FCA Non-executive Secretary and Registered Office S. J. Mant, FCA Lichfield Road, Brownhills, Registrars Auditors Solicitors Bankers Stockbrokers 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 Arden Partners plc Arden House, Highfield Road, Edgbaston, Birmingham, B15 3DU Registered No. 91580 52 22560.04 14 June 2013 3:31 PM Proof 9 Annual Report 2013 shareholder information Capital gains tax The official price of Castings P.L.C. ordinary payment under the Financial Services Compensation Scheme. shares on 31 March 1982, adjusted for ● If the calls persist, hang up. bonus issues, was 4.92 pence. Warning to shareholders The following guidance has been issued More detailed information on this or similar activity can be found on the FCA website www.fca.org.uk/consumers/scams by the Financial Conduct Authority: 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. 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 FCA before getting involved. You can check at http:// www.fca.org.uk/register/ ● The FCA 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 FCA 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 22560.04 14 June 2013 4:32 PM Proof 9 53 Annual Report 2013 Castings P.L.C. Lichfield Road Brownhills West Midlands WS8 6JZ 22560.04 14 June 2013 4:32 PM Proof 9
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