Annual Report for the year ended 31 March 2023
Stock Code: CGS
An Introduction
to Castings P.L.C.
Castings P.L.C. is a market leading iron
casting and machining group based in the
UK supplying both the domestic and export
markets.
Our continued strength is largely as a result
of our investment in the latest technologies
and manufacturing processes. Maintaining an
ungeared balance sheet provides investment
flexibility, enabling us to fully capitalise on
commercial opportunities to generate strong
returns for the benefit of shareholders,
customers and employees alike.
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Company Information
The production of this report supports the work of the Woodland Trust,
the UK’s leading woodland conservation charity. Each tree planted will
grow into a vital carbon store, helping to reduce environmental impact
as well as creating natural havens for wildlife and people.
Castings P.L.C.
Annual Report for the year ended 31 March 2023
Contents
Strategic Report
Financial Highlights
Chairman’s Statement
Group Overview and Strategy
Business Model
Business and Financial Review
Principal Risks and Uncertainties
Environmental, Social and Governance
Viability Statement
S172(1) Statement
Corporate Governance
Board of Directors
Directors’ Report
Corporate Governance
Audit and Risk Committee Report
Directors’ Remuneration Report
Annual Statement
Remuneration Policy
Annual Report on Directors’ Remuneration
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Five Year Financial History
Parent Company Balance Sheet
Parent Company Statement of Changes in Equity
Notes to the Parent Company Financial Statements
Company Information
Notice of Meeting
Directors, Officers and Advisers
Shareholder Information
02
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73
01
Castings P.L.C. Annual Report for the year ended 31 March 2023 Financial Highlights
Group revenue
(£m)
£201m
(2022: £149m)
Foundry sales volume
(tonnes)
53,100
(2022: 49,800)
Revenue Profile
Geographical revenue split
2023
2022
2021
2020
201
2023
2022
2021
2020
149
115
139
53,100
49,800
40,100
47,700
Profit before tax
(£m)
£16.7m
(2022: £12.1m)
EPS
(basic)
31.66p
(2022: 19.60p)
2023
2022
2021
2020
16.7
2023
2022
2021
2020
12.1
12.7
5.0
9.51
19.60
23.07
31.66
United Kingdom 17%
Export 83%
Customer sector profile
Cash generated from operating
activities (£m)
£22.4m
Capital expenditure
(£m)
£6.2m
(2022: £12.9m)
(2022: £4.4m)
2023
2022
2021
2020
12.9
13.0
22.4
2023
2022
2021
2020
27.2
6.2
4.4
5.2
8.2
Commercial vehicle 77%
Automotive 9%
Other 14%
Dividend per share (excluding
supplementary dividend) (pence)
17.35p
(2022: 16.23p)
2023
2022
2021
2020
02
17.35
16.23
15.26
14.88
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Chairman’s Statement
The turnover of the group
increased to £201 million (£149
million last year) with a rise in
profit before tax to £16.7 million
compared to £12.1 million last
year.
Overview
Turnover increased by 35% compared
with the previous year and operating profit
increased by 36%. The despatch weight was
at the highest level since 2014.
Demand from our customers has been
very strong, with the heavy truck OEMs
(approximately 75% of revenue) increasing
build rates throughout the year and this has
continued into the current financial year. In
order to satisfy the increasing schedules,
which has been skewed towards certain
production lines, it has been necessary to
rebalance production in the foundries which
resulted in some inefficiencies particularly in
the second half of the year, but these are now
behind us.
We have experienced very significant price
increases in raw materials and energy,
which have been largely recovered from our
customers through established escalators.
The most significant increase related to
electricity following the end of our fixed
price contract on 30 September 2022. This
additional cost of power was surcharged
to our customers and although it did not
adversely affect group profit, it did impact
reported margins.
Further price increases have been negotiated
in respect of other cost rises which have
taken effect from the start of the current
financial year.
Foundry businesses
Despite the impact of the production
rebalancing, foundry production increased
compared to the prior year. The recruitment
issues that have been experienced in the
last few years now seem to be largely
behind us. With increased demand, the
foundry profitability has improved compared
to the previous year, although the margin
percentage is impacted by the direct pass-
through of the cost increases.
We continue to invest both at Castings
Brownhills and William Lee to improve
productivity, reduce labour costs and improve
Supplementary dividend
In addition to the final dividend set out above,
the board has reviewed the cash position
of the group and considered the balance
between increasing returns to shareholders
whilst retaining flexibility for capital and other
investment opportunities. As a result, the
directors are declaring a supplementary
dividend of 15 pence per share to be paid
on 26 July 2023 to shareholders on the
register on 23 June 2023. This dividend,
being discretionary and non-recurring, does
not compromise our commitment to invest in
market leading technologies to maintain our
competitive advantage.
working conditions.
CNC Speedwell
It is pleasing to report on the return to
profitability in the machining business, with
a particularly strong final quarter of the
financial year. With higher output levels and
improved prices, the current performance of
CNC Speedwell is beginning to reflect the
level of investment that has been made in the
business.
Outlook
Our customers continue to increase
schedules with the demand for heavy
trucks in particular remaining very strong. In
addition, demand in other growth sectors
such as USA, wind energy, trailer braking and
coupling systems and innovative agricultural
products continues to grow.
Dividend
The directors are recommending the payment
of a final dividend of 13.51 pence per share to
be paid on 18 August 2023 to shareholders
on the register on 21 July 2023. This,
together with the interim dividend, gives a
total dividend for the year of 17.35 pence per
share.
Brian Cooke
As previously announced, after nearly sixty
three years with the company, of which forty
have been as Chairman, Brian Cooke is
standing down as a director and will not be
seeking re-election at the AGM in August.
Brian joined the company from foundry
college in 1960 and was appointed a director
six years later. Prior to becoming Chairman
in 1983, he served as managing director at
Brownhills and then as group chief executive.
Brian has led Castings from the front and
everything the group does reflects his energy
and wise business acumen. We would
all like to thank him for his outstanding
contribution over the last seven decades. I
am very pleased that he has agreed to remain
available to consult with the group after the
AGM.
I also wish to thank the directors, senior
management and all of our employees for
their help and commitment during the year.
A. N. Jones
Chairman
14 June 2023
03
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report Group Overview and Strategy
Group overview
Castings P.L.C. is a market leading iron casting and machining group based in the UK, supplying both the domestic and export markets.
The original foundry operation dates back to 1835 and today the group comprises of three trading businesses, employing approximately 1,200
people in the UK.
The group operates two iron foundries – Castings P.L.C. (Brownhills, West Midlands) and William Lee Limited (Dronfield, Derbyshire) – together
with the CNC Speedwell Limited machining operation which is also based in Brownhills.
The group produces Ductile iron, SG iron, Austempered ductile iron (ADI), SiMo and Ni-resist castings up to 45kg in weight. Our three Disamatic
moulding machines and three horizontal green sand moulding machines provide a foundry production capacity of 70,000 tonnes per annum
(equates to sales capacity of approximately 63,000 tonnes per annum after machining weight removed).
Our machining operation is invested to support the capacity requirements of the foundry customer base and also to expand general machining
in alternative materials.
Strategy
Our continued strength is largely as a result of our investment in the latest technologies and manufacturing processes. Utilising high volume
equipment in a medium batch environment, we are perfectly positioned to supply our commercial vehicle focussed customer base in Europe
and beyond.
The management team is committed to developing the business for the benefit of shareholders, employees and customers.
Our focus is to deliver long-term sustainable revenues and higher than average margins through the following strategic priorities:
Reinvestment for
innovation and
efficiency
We invest in the latest technologies to provide our customers with innovative design
and production offerings and to ensure we maximise production process efficiencies.
We seek to strike a balance in the allocation of strong cash flows between reinvestment
and providing attractive returns for shareholders.
Increase OEM
market share
By continuing to work collaboratively with customers to develop innovative, cost-
effective solutions, we strive to increase our market share within our existing core
commercial vehicle customer base.
With our investment in warehousing and logistics systems, we are well placed to take
advantage of opportunities to bring additional products to our current OEM customers.
Strength of
balance sheet
The group balance sheet is managed to ensure long-term financial stability and the
ability to make efficient investment decisions to support our strategic objectives.
Investment in
our people
With approximately 1,200 employees in the UK, our workforce is a critical element
to the continued success of the group. We are committed to developing our people
through targeted and balanced training across all levels, whilst maintaining an eye on
the future with apprenticeship programmes in all companies in the group.
04
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Business Model
INVESTMENT
D E S I G N C OLLABORATION
O U R PEOPLE
R
E
M
O
T
S
U
C
O
T
Y
R
E
V
I
L
E
D
F
O
U
N
D
R
Y
P
R
O
D
U
C
T
IO
N
MACHIN I N G
CAPABILI T I E S
INVESTMENT
VALUE FOR STAKEHOLDERS
Customers
Employees
Shareholders
Flexible, agile and
cost-effective
supply of high-
quality and diverse
product range.
Long-term security
of supply.
Training and
investment
allowing our
employees to
develop in a
challenging
and ambitious
environment.
Maintaining
competitive
position affords
us growth
opportunities to
increase returns to
our shareholders.
Strong cash
generation and
a progressive
dividend policy.
Communities
and
environment
We aim to
contribute
positively to the
communities and
environment in
which we operate.
A recycler of
steel scrap metal
produced in
the UK.
Design collaboration
Work closely with customers to
develop cost-effective solutions to
meet their needs.
Use of 3D design simulation and
rapid prototyping.
Our people
Committed, experienced workforce
with a high degree of technical
knowledge.
Foundry production
High-volume moulding equipment
used in a flexible manner (zero time
changeovers) to allow production of
small or large volume batches.
Ability to produce a diverse range of
parts.
Technical expertise, investment in
flexible automation and efficient
working practices ensure cost of
production is kept low, whilst quality
of output is very high.
Machining capability
Highly invested machine shop
focussed on the prismatic machining
of castings primarily for the group
customer base.
Robotic feeding of machines being
rolled out to aid efficiencies and
quality standards.
Vertical integration of assembly
processes available.
Delivery to customer
Investment in logistics systems
ensures a diverse product range is
managed effectively meeting strict
customer delivery deadlines.
Experience in managing logistics
both domestically and for the export
market.
05
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report
Business and Financial Review
After taking into account the reduction in
weight from machining, this equates to
approximately 59,000 tonnes of production.
Of the total output weight for the year, 59.2%
related to machined castings compared
to 54.0% in the previous year. The change
reflects a return to the increasing proportion
of more complex, machined parts after the
reduction last year as a result of disrupted
demand patterns.
The segmental profit has increased to
£16.3 million, from £13.1 million in the
previous year, which represents a profit
margin of 7.3% on total segmental sales
(2022 – 8.0%).
The most significant impact on the margin
percentage is due to the pass-through
impact of cost rises, along with the disruption
due to production rebalancing. Further
price increases have been negotiated with
customers to address the margin erosion
experienced during the year.
Investment of £4.8 million has been made in
the foundry businesses during the year. This
included £0.8 million completing the project
to partially automate the pouring on one of
the William Lee production lines and a further
£1.1 million on other automation projects.
Machining
The machining business generated total
sales of £27.7 million in the year compared to
£22.5 million in the previous year. Of the total
revenue, 7.3% was generated from external
customers compared to 13.3% in 2022.
The segmental result for the year was a profit
of £0.2 million (2022 – loss of £0.9 million).
With the higher volumes in the year, the
benefits of the engineering and productivity
improvements that have been made are now
being realised. With the pricing corrections
that have been made, the result in the final
quarter was particularly strong.
We have invested £1.4 million during the year,
which included £0.4 million in the roll-out of
automation which will continue during the
current year. A further £0.5 million investment
was made in a more power efficient cooling
plant in one area of the business, which will
help to reduce energy consumption.
Business review and
performance
Revenue
Group revenues increased by 35.3% to
£201.0 million compared to £148.6 million
reported in 2022, of which 83% was exported
(2022 – 79%).
The revenue from the foundry operations
to external customers increased by 36.7%
to £199.0 million (2022 – £145.6 million)
with the dispatch weight of castings to
third-party customers increasing by 6.6% to
53,100 tonnes (2022 – 49,800 tonnes).
Revenue from the machining operation to
external customers decreased by 32.3%
during the year to £2.0 million (2022 –
£3.0 million).
Operating profit and segmental result
The group operating profit for the year was
£16.4 million compared to £12.0 million
reported in 2022, which represents a return
on sales of 8.1% (2022 – 8.1%).
Finance income
The level of finance income increased to
£0.34 million compared to £0.05 million
in 2022, reflecting the rising interest rates
available on deposits during the financial year.
Profit before tax
Profit before tax has increased to
£16.7 million from £12.1 million in the prior
year.
Taxation
The current year tax charge of £2.92 million
(2022 – £3.52 million) is made up of a
current tax charge of £2.41 million (2022 –
£1.89 million) and a deferred tax charge of
£0.51 million (2022 – charge of £1.63 million).
The effective rate of tax of 17.5% (2022
– 29.2%) is lower than the main rate of
corporation tax of 19%. The primary reason
for this is a credit to the deferred tax estimate
relating to the prior year of £0.43 million,
offset by the deferred tax liability arising
from the super-deduction claimed on plant
investment during the year.
General overview
The year has seen increasing demand during
the period with our commercial vehicle
customers, which make up approximately
75% of group revenue, experiencing
extremely strong order books for heavy
trucks.
With demand being skewed towards
particular foundry lines, significant production
rebalancing has been necessary to try to
satisfy the dramatic schedule increases. This
has caused some production inefficiencies,
particularly in the second half of the year, but
these are now largely behind us.
Input price increases have been another key
element in the financial year. We have seen
significant changes in respect of raw materials
and energy which have been recovered
from our customers through established
escalators. The most significant increase
related to electricity following the end of a
fixed price contract on 30 September 2022;
the additional cost for power (approximately
£15 million) was surcharged to our customers
and resulted in increased revenue in the
second half of the year. This did not adversely
affect group profit as it is a pass-through of a
direct cost increase.
Overview of business
segment performance
The segmental revenue and results for the
current and previous years are set out in
note 2 on pages 46 and 47. An overview
of the performance, position and future
prospects of each segment, and the relevant
KPIs, are set out below.
Key Performance Indicators
The key performance indicators considered
by the group are:
• Segmental revenue
• Segmental profit
• EPS
• Net cash
• Dividends per share
Foundry operations
As set out previously, customer demand was
strong with schedules increasing during the
financial year.
The foundry businesses experienced an
increase in output of 6.6% to 53,100 tonnes
and a rise in external sales revenue of
£53.4 million (36.7%) to £199.0 million.
06
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Corporation tax payments during the year
totalled £2.9 million compared to £2.6 million
in 2022.
Capital expenditure during the year amounted
to £6.2 million (2022 – £4.4 million). This
included investment of £0.8 million as part of
a foundry moulding line automation project
as well as other automation and productivity
enhancements. The charge for depreciation
was £8.6 million (2022 – £8.6 million).
The company pays pensions on behalf
of the two final salary pension schemes
and then reclaims these advances from
the schemes (as set out in note 5). During
the year repayments of £2.1 million (2022
– £2.5 million) were received from the
schemes and advances were paid on behalf
of the schemes of £2.1 million (2022 – £2.1
million). These advances will be repaid to the
company during the current financial year.
Dividends paid to shareholders were
£13.7 million in the year (2022 – £6.7 million)
which includes £6.5 million in relation to a
supplementary dividend in respect of the year
ended 31 March 2022.
The company purchased 47,900 (2022 –
26,100) shares to be held in treasury at a total
cost of £0.15 million (2022 – £0.08 million).
The net cash and cash equivalents movement
for the year was a slight decrease of
£0.18 million (2022 – decrease of £0.35
million).
At 31 March 2023, the total cash and
deposits position was £35.6 million
(2022 – £35.8 million).
Pensions
The pension valuation showed an increase in
the surplus, on an IAS 19 (Revised) basis, to
£10.4 million compared to £9.9 million in the
previous year.
The majority of the liabilities of the schemes
are covered by an insurance asset that fully
matches, subject to final adjustment of the
bulk annuity pricing, the remaining pension
liabilities of the schemes. However, there
remains the uninsured element relating to
the GMP equalisation liability. This liability
has decreased during the year as a result of
the change in valuation assumptions (further
detail is set out in note 5).
The pension surplus continues not to be
shown on the balance sheet due to the
IAS 19 (Revised) restriction of recognition of
assets where the company does not have
an unconditional right to receive returns of
contributions or refunds.
Balance sheet
Net assets at 31 March 2023 were
£131.7 million (2022 – £131.5million). Other
than the total comprehensive income for the
year of £13.9 million (2022 – £8.7 million),
the only movements relate to the dividend
payment of £13.7 million (2022 – £6.7 million),
shares purchased in the year for £0.15 million
(2022 – £0.08 million) and share-based
payment charge of £0.1 million
(2022 – £0.08 million).
Non-current assets have decreased to
£60.7 million (20221 – £63.2 million) primarily
as a result of investment in property, plant
and equipment during the year being at a
level below the depreciation charge.
Current assets have increased to
£113.7 million (2022 – £102.0million) as a
result of the increase in trade receivables as
previously mentioned.
Total liabilities have increased to £42.8 million
(2022 – £33.7 million), largely as a result of an
increase in trade payables.
Earnings per share
Basic earnings per share increased 61.5% to
31.66 pence (2022 – 19.60 pence), reflecting
the 38.0% increase in profit before tax and a
significantly lower effective tax rate compared
to the previous year.
Options over 42,468 shares were granted
during the year (2022 – options over 32,149
shares), as set out in note 17. The company
purchased 47,900 shares during the year
(2022 – 26,100). As a result, the weighted
average number of shares has decreased to
43,671,502 resulting in a diluted earnings per
share of 31.58 pence per share (2022 –
19.57 pence per share).
Dividends
The directors are recommending a final
dividend of 13.51 pence per share (2022 –
12.57 pence per share) to be paid on 18
August 2023 to shareholders on the register
on 21 July 2023. This would give a total
ordinary distribution for the year of 17.35
pence per share (2022 – 16.23 pence per
share).
In addition, a supplementary dividend of
15.00 pence per share has been declared
which will be payable on 26 July 2023 to
shareholders on the register on 23 June
2023.
Cash flow
The group generated cash from operating
activities of £22.4 million compared to
£12.9 million in 2022. When compared
to 2022, the variance is mainly due to a
significant increase in operating profit of
£4.6 million and a working capital outflow
swing of £5.1 million.
In the year to 31 March 2023, the main
working capital movements centre around the
higher input prices from suppliers which are
then passed onto customers in the form of
higher selling prices. This has resulted in a
£10.0 million increase in trade receivables in
the year and a £6.5 million increase in trade
payables. The input price increase impact on
inventory has been offset by the lower level
held in stock at the year end compared to the
prior year.
07
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report Principal Risks and Uncertainties
In common with all trading businesses, the
group is exposed to a variety of risks in the
conduct of its normal business operations.
The directors regularly assess the principal
risks facing the entity. Whilst it is difficult
to completely 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.
Information is also provided as to how the
risks are, where possible, being managed or
mitigated.
The group does not operate a formal internal
audit function; however, risk management is
overseen by senior management and group
risk registers are maintained and regularly
reviewed, alongside factors which may
result in changes to risk assessments or
require additional mitigation measures to be
implemented.
External consultants are used to assess
design and effectiveness of controls relating
to IT security to provide specialist support to
management in this area.
Key risks arising or increasing in impact are
reviewed at both group and subsidiary board
meetings.
The impact of each risk set out below has
been described as increased, stable or
decreased dependent upon whether the
business environment and group activity has
resulted in a change to the potential impact
of that risk.
Several principal risks have been removed
which have been key themes in the last
few years. As the conditions of the United
Kingdom’s exit from the European Union
seems to be largely concluded and the
resulting changes embedded, it is no longer
considered a principal risk to the business as
a standalone issue. Similarly, with vaccination
programmes largely successful in major
markets, COVID-19 has also been removed
as a principal risk. Both issues remain subject
to review as part of the group’s internal risk
review process.
Risk description
Impact
Mitigation and control
Stable
The group continues to work with key
customers producing the next generation of
ICE commercial vehicles, whilst monitoring
opportunities for the future.
The strategic focus of the group is evaluated
regularly through group board meetings.
Consideration is given to what opportunities
might be available within alternative
light-weight metals (e.g aluminium), value
added opportunities and also replacement
technologies for heavy-duty trucks.
The group’s electricity contracts are fully
Renewable Energy Guarantees of Origin
(‘REGO’) backed and the gas contracts
will be from 1 October 2023. This provides
a platform for the group to support our
customers Green Iron aspirations.
Stable
The operational and commercial activity of
the business is driven by customer demand.
Demand has the potential to change rapidly
dependent upon the significant variable
factors in the macroeconomic environment
such as conflict in Ukraine, supply chain
issues or changing regulatory positions.
The group’s operations are set up in
such a way as to ensure that variation in
demand can be accommodated and rapidly
responded to.
Demand is closely reviewed by senior
management on a constant basis.
Technological change
Customers continue to invest in the
development of electric and hydrogen
powered vehicles to move away from
internal combustion engines (‘ICE’).
The initial phase of this is focussed on
passenger cars and smaller, short-range
trucks which are not key markets for the
group. However, the continued development
of new technology does present a medium-
term risk to the group as c. 30% of group
revenue arises from the supply of cast iron
powertrain components.
It is important to note that such a change
also presents an opportunity for the group
to evolve its product offering, as has always
been the case over the years.
Operational and commercial
The group’s revenues are principally derived
from the commercial vehicle markets which
can be subject to variations in patterns of
demand.
Commercial vehicle sales are linked to
technological factors (for example emissions
legislation) and economic growth.
08
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Risk description
Market competition
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.
Impact
Mitigation and control
Stable
Erosion of market share could result in loss
of revenue and profit.
Whilst there can be no guarantee that
business will not be lost on price, we are
confident that we can remain competitive.
The group continues to mitigate this risk
through investment in productivity, with a
strong focus on cost and customer value.
Customer concentration, programme dependencies and relationships
The group has relationships with key
customers in the commercial vehicle market
which form the majority of the customer
base.
Stable
The loss of, or deterioration in, any major
customer relationship could have a material
impact on the group’s results.
We build strong relationships with our
customers to develop products to meet
their specific needs.
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.
Stable
Fines or penalties could result in a loss
of revenue, additional costs and reduced
profits.
Foreign exchange
The group is exposed to foreign exchange
risk on both sales and purchases
denominated in currencies other than
sterling, being primarily euro and US dollar.
Stable
The group is exposed to gains or losses that
could be material to the group’s financial
results and can increase or decrease how
competitive the group’s pricing is to overseas
markets.
Whilst it is a policy of the group to
endeavour 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.
The group’s foreign exchange risk is well-
mitigated through commercial arrangements
with key customers.
Foreign exchange rate risk is sometimes
partially mitigated by using forward foreign
exchange contracts. Such contracts are
short term in nature, matched to contractual
cash flows and non-speculative.
Equipment
The group operates a number of specialist
pieces of equipment, including foundry
furnaces, moulding lines and CNC milling
machines which, due to manufacturing
lead times, would be difficult to replace
sufficiently quickly to prevent major
interruption and possible loss of business in
the event of unforeseen failure.
Stable
A large incident could disrupt business at
the site affected and result in significant
rectification costs or material asset
impairments.
Whilst this risk cannot be entirely mitigated
without uneconomic duplication of all key
equipment, all key equipment is maintained
to a high standard and inventories of
strategic equipment spares maintained.
The foundry facilities at Brownhills and
Dronfield have similar equipment and work
can be transferred from one location to
another very quickly.
09
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report Principal Risks and Uncertainties
continued
Impact
Mitigation and control
Stable
The risk of a supplier’s business interruption
remains very high due to the current global
business environment.
Risk description
Suppliers
The group holds long-standing relationships
with key suppliers and there is a risk that
a business which the group is critically
dependent upon could be subject to
significant disruption and that this could
materially impact the operations of the
group.
There are specifically high risks of semi-
conductor shortages in the supply chain,
COVID-19 outbreaks, disruption because of
the conflict in Ukraine or logistical delays.
Commodity and energy pricing
The group is exposed to the risk of price
inflation on raw materials and energy
contracts.
The principal metal raw materials used by
the group’s businesses are steel scrap and
various alloys. The most important alloy
raw material inputs are premium graphite,
magnesium ferro-silicon, copper, nickel and
molybdenum.
Stable
Changes to the pricing of the group’s
commodity and energy purchases could
materially impact the financial performance of
the group if no mitigating actions were taken.
Power and raw material markets have
become very volatile because of the current
conflict in Ukraine and other associated
supply issues.
Information technology and systems reliability
The group is dependent on its information
technology (‘IT’) systems to operate its
business efficiently, without failure or
interruption.
The group continues to invest in IT systems
to aid in the operational performance of the
group and its reporting capabilities.
There are increasing global threats faced by
these systems as a result of sophisticated
cyberattacks.
Stable
Significant failures to the IT systems of
the group as a result of external factors
could result in operational disruption and a
negative impact on customer delivery and
reporting capabilities.
10
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 group continues to maintain productive
dialogue with key suppliers, working
together to adjust to changes to the
business environment.
Wherever possible, 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.
Historically, energy contracts have been
locked in for at least 12 months. With the
volatile power market, following the end of
our fixed price contract on 30 September
2022, the group entered into a flexible
power agreement. When markets permit,
it would be the intention to revert back to
a fixed contract. Management has worked
with customers during the course of the
year to pass these costs through in a timely
manner.
Whilst data within key systems is regularly
backed up and systems subject to virus
protection, any failure of backup systems
or other major IT interruption could have a
disruptive effect on the group’s business.
IT projects are reviewed and approved at
board level and the group continues to
invest in IT security to improve our resilience
and response towards such threats.
The group engages with external specialists
to regularly assess the security of the IT
network and systems.
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Risk description
Impact
Mitigation and control
Regulatory and legislative compliance
The group must comply with a wide range
of legislative and regulatory requirements
including modern slavery, anti-bribery
and anti-competition legislation, taxation
legislation, employment law and import and
export controls.
Stable
Failure to comply with legislation could lead
to substantial financial penalties, business
disruption, diversion of management time,
personal and corporate liability and loss of
reputation.
The group maintains a comprehensive
range of policies, procedures and training
programmes in order to ensure that both
management and relevant employees are
informed of legislative changes and it is
clear how the group’s business is expected
to be carried out.
Whistleblowing procedures and an open-
door management style are in place
to enable concerns to be raised and
addressed.
Specialist advice is made available to
management when required to ensure that
the group is up to date with changes in
regulation and legislation.
The working group, formed last year,
continues to monitor and report on
developments with regards to climate risk.
As part of the renewal of energy contracts
the group reviews whether investment in
renewable energy sources would meet
the group’s investment criteria and such
proposals will continue to be considered on
their commercial merits.
The group will continue to engage with and
understand the needs of its stakeholders
with regard to climate risk.
Stable
It is expected that green taxes on energy and
the compliance cost of meeting developing
reporting obligations for our stakeholders
will result in increased energy prices and
administrative expenses.
Climate change
The group’s operations are energy-
intensive and whilst the group considers
that its businesses provide fundamental
components and services which will prove
resilient in a transition towards a net zero
economy, the board recognises the group
is likely to receive increased scrutiny in the
future in relation to emissions and climate
change.
People risk
The group’s operations depend upon the
availability of both skilled and unskilled
labour to operate manual equipment and
fulfil our strategic goals.
Inability to attract and retain talent could
result in either a shortage of staff or a
reduction in operating margins.
Stable
The labour market has been extremely
competitive during the year.
The group looks to provide safe, stable and
long-term employment at competitive rates
of pay.
We invest in people development and utilise
technology and productivity gains to ensure
that our products remain competitively
priced.
11
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report Environmental, Social and Governance
Our strategy
Our approach to ESG and sustainability activities continues to focus on providing safe, long-term employment for the local economy whilst
generating sustainable value for stakeholders (set out on page 5) in a manner which is consistent with our governance obligations.
The group presents its ESG Report for the year to 31 March 2023 taking note of relevant industrial data points suggested in the London Stock
Exchange guidance on ESG reporting. These metrics are used both in the context of wider ESG reporting and to support our Task Force on
Climate-related Financial Disclosures (‘TCFD’) metric reporting.
At a glance
Completed initiatives
On-going initiatives
• 100% renewable electricity powering the groups plant.
• 100% green gas from 1 October 2023.
•
•
Investment in plastic, cardboard and coolant recycling facilities.
Investment in compactors to allow recycling of swarf from
machining business to be remelted in the foundries.
•
Investment in energy efficient cooling plant in collaboration with
the BEIS Industrial Energy Transformation Fund.
• Upgrades to compressor systems to improve energy efficiency.
• Technical appraisal of sand reclamation equipment to enable
foundry sand to be re-used.
• Appointment of additional independent non-executive director.
• Application for a solar PV system at the Brownhills site, currently
rejected and under appeal.
Environmental
As an energy-intensive industry, we understand that we must evolve in order to meet the needs of our stakeholders. The group continues to
improve its environmental credentials in a commercially viable manner, with numerous success stories to date. We are taking proactive steps to
build on this further, working in collaboration with customers, suppliers, industry bodies and research organisations as set out in our report under
the TCFD framework on pages 16 and 17. The data set out in this section corroborates the strong environmental credentials of the group.
Carbon emissions
We have calculated our carbon footprint according to the World Resources Institute (‘WRI’) and World Business Council for Sustainable
Development (‘WBCSD’) GHG Protocol, which is the internationally recognised standard for corporate carbon reporting. The group’s total CO2
emission data is based on Scope 1 and Scope 2. Scope 1 emissions are direct emissions resulting from fuel usage and operation of facilities.
Scope 2 emissions are indirect energy emissions resulting from purchased electricity and other power for own use.
The group collects monthly consumption information from each facility and converts to tonnes of CO2e (‘tCO2e’) produced using the DEFRA
published national carbon conversion factors.
Energy consumption and intensity
A key priority of the company is to manage energy efficiently, thus reducing our carbon footprint and creating value for our stakeholders. It is
pleasing to report, in the table below, the high level trend of a reducing MWh of energy consumption as a proportion of revenue generated.
Scope 1
Scope 2
Total energy consumption (MWh)
Total energy intensity (MWh per £000 revenue)
2023
20,011
137,160
157,171
0.785
2022
16,235
132,548
148,783
1.001
2021
12,829
104,644
117,493
1.024
Greenhouse Gas (‘GHG’) emissions (tCO2e)
GHG emissions are set out below under both location and market-based methods. The location-based method reflects the average emissions
intensity of the grids on which energy consumption occurs (using mostly grid-average emission factor data), namely the UK grid for the group.
The market-based method reflects emissions from electricity that companies have specifically chosen. It derives emission factors from
contractual instruments, which include any type of contract between two parties for the sale and purchase of energy bundled with attributes
about the energy generation. Market-based emissions are therefore shown net of electricity supplied to the group under OFGEM certified
renewable contracts.
12
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C.
Location-based
Scope 1
Scope 2
Total location-based emissions
Market-based
Scope 1
Scope 2
Total market-based emissions
GHG intensity (location-based)
Revenue intensity (tCO2e per £000 revenue)
Foundry operations (gross revenue)
Machining operations (gross revenue)
Group total (net revenue)
Production intensity (tCO2e per production tonne)
Foundry operations
Group total
2023
3,602
26,524
30,126
2023
3,602
—
3,602
2022
2,974
28,144
31,118
2022
2,974
–
2,974
2021
2,359
24,401
26,760
2021
2,359
–
2,359
2023
2022
2021
0.126
0.067
0.151
0.496
0.528
0.199
0.088
0.209
0.512
0.547
0.222
0.102
0.233
0.564
0.606
For the foundry businesses, the most appropriate metric to measure the intensity of GHG emissions is by production tonne; this has decreased
to 0.496 (2022 – 0.512) tCO2e per production tonne. We actively seek to minimise energy use in the group, particularly in the foundry
businesses, so it is pleasing to see a reduction in emissions per tonne produced in each of the last three financial years. Energy efficiency is
maximised when the plants can operate uninterrupted which has been more achievable with the high demand levels in the year.
The machining operation does not have a production weight, therefore, the relevant intensity metric used is emissions per thousand pounds of
machining revenue; emissions have decreased to 0.067 (2022 – 0.088) tCO2e per £000.
Whilst many foundry competitors still utilise fossil fuels to power furnaces, generating direct emissions, the group’s operations utilise furnaces
and CNC machines which are powered by purchased electricity. This allows the plant and equipment to be fuelled by power purchased from
commercial energy providers supplying power from OFGEM certified renewable sources.
Waste, water and recycling
The group has made significant investments in scrap metal, plastic and cardboard recycling in recent years. The table below sets out the groups
waste classifications and water use:
Recycled waste (tonnes)
Non-recycled waste (tonnes)
Hazardous waste (tonnes)
Water use (m3)
Intensity
Recycled waste (tonnes per thousand tonnes produced)
Non-recycled waste (tonnes per thousand tonnes produced)
Hazardous waste (tonnes per thousand tonnes produced)
Water use (m3 per thousand tonnes produced)
2023
32
36,553
688
71,440
0.56
628.13
12.06
1.252
2022
48
35,070
586
65,689
0.84
615.93
10.30
1.154
2021
31
28,964
418
49,715
0.70
656.33
9.48
1.127
The group has compacted and sold waste bales of plastic and cardboard for several years and continues to seek ways of increasing the
recycling profile. Whilst efforts have been made to increase the recycling of core by-products from the production process, this has not been
reflected in the data reported above and so a greater focus is to be given to this area in the current year.
13
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report
Environmental, Social and Governance
continued
The vast majority of the non-recycled waste relates to sand. The group is in the process of appraising a sand-reclamation project which, if
successful, would enable sand to be reused in the foundry processes. In addition, the group is working with industry bodies that sponsor local
university research projects with an aim to identify a commercial use for this production by-product to further reduce landfill waste.
In recent years the group has been able to reduce the volume of hazardous waste it produces through investments in evaporation and recycling
equipment, reducing the disposal costs to the group. However, these investments were made prior to 2020 and therefore the improvements
are not evident in the data above. The group has an ongoing project to assess further ways of extracting hazardous waste from non-hazardous
elements, thus disposing of a smaller volume of hazardous waste in total.
The majority of the water consumed by the group is within the foundry production process, particularly within the sand mills. As a result, it is not
anticipated that the volume of water consumed will reduce significantly other than with variations in production volumes.
There have been no environmental fines in the past three years and NOx, SOx and VOC emissions are not material.
The group’s facilities are ISO 14001 accredited, and our practices and procedures are subject to regular environmental audits by external
consultants.
The group demands that all activities and services comply with applicable laws and regulations.
Social
The foundation of the group’s strength is its people. We strive to support our employees’ health and wellbeing whilst driving a performance
culture of business understanding and shared values. The group’s policy is to employ people who embody its core values of commitment and
excellence. These values apply to all employees regardless of seniority or position, including directors.
Proportion of new employees joining on temporary or short-term contracts
Number of apprentices recruited
Staff turnover*
2023
0.0%
6
18.5%
2022
0.0%
10
21.1%
2021
0.0%
9
17.1%
* Staff turnover is calculated by reference to the number of people who have left employment (having worked for at least a three month period)
as a proportion of the average number of employees for the year.
The group is a significant employer in each of the locations it operates and takes pride in operating its business based on permanent contracts, with
employees carrying full employee status and without the use of zero hours contracts. As a result, the group traditionally has high staff retention levels
and a dedicated, long-term focussed workforce.
Whilst staff turnover has decreased during the year, the group continues to look to improve employee wellbeing and return to pre-pandemic retention
levels.
In addition to the structured apprenticeship training, the group provides internal, external and continuous on-the-job training for all staff as
required. As a result of the nature of the training carried out, the group does not collate data concerning the number of hours of training
conducted each year.
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 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.
Equality, diversity and inclusion
Recognising the demands of our customers and our strategy, the group’s diversity and recruitment policy is to recruit the best available people
and to invest in their training and development to enable a high level of retention. We are committed to diversity and equality, judging applications
for employment neither by race, nationality, gender, age, disability, sexual orientation nor political bias. We have made a commitment to consider
applicants from a wide range of educational backgrounds and have an active apprenticeship programme.
The group gives full consideration to employment applications by disabled persons where they can adequately fulfil the requirements of the
position. If necessary, we endeavour to retrain any employee who becomes disabled during their period of employment with the group.
14
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. The gender of our staff at 31 March 2023 was as follows:
Non-executive directors
Executive directors
Senior managers
Other employees
Male
4
2
30
1,107
1,143
Female
—
—
3
105
108
Human rights
The group’s operations are all based in the United Kingdom. Each of the group’s businesses has a core of long-standing, local suppliers and
several key partners based in the European Union. The group has minimal activity with suppliers outside of these areas, therefore due to the
existing regulatory controls in our core areas of geographical activity, human rights is not considered to be a material issue.
Management have a high level of involvement in the day-to-day activities of the business and its suppliers and are trained to identify areas of
concern which may not align with the standards the group demands. The board receives regular updates on corporate responsibility issues
including the UK Modern Slavery Act.
We have a Code of Conduct that sets out our policy on compliance with legislation, child labour, anti-slavery and human trafficking and
conditions of employment.
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.
The group has clearly defined health and safety policies and we operate a system of strict reporting. Regular audits of health and safety at the
group’s 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. The group encourages the
maintenance of consistently high standards and each site is required to develop a safety management system. Health and safety training is a
continual process at each site and therefore is completed on a regular basis and covering all levels within the group.
Lost time incidents
Accidents
RIDDORs
Near misses (foundries only)
Intensity (per million hours worked)
Accidents
RIDDORs
Near misses (foundries only)
2023
219
8
66
89.9
3.3
39.3
2022
185
10
40
77.0
4.2
23.3
2021
144
6
41
78.2
3.3
32.2
We have unfortunately seen an increase to both the number of accidents and near misses (foundries only as it is currently reported differently
internally within the machining business) relative to the number of hours worked, however, there was a reduction in the number of RIDDORs (an
incident resulting in absence of at least seven consecutive shifts).
Management continues to strive to reduce these figures further and investments continue to be made in areas where the accident risks are the
greatest.
Governance
Strong and straightforward corporate governance underpins all our business activities. The group’s arrangements are set out in the Corporate
Governance section on pages 24 and 25.
There have been no political contributions made in the past three years.
15
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report
Environmental, Social and Governance
continued
Board diversity
All six members of the board are white British males and therefore the targets under LR 9.8.6 (9, 10) of 40% of the board being female and at
least one of the four senior positions on the board being occupied by a female and having one board member of minority ethnic origin have not
been met. This is an area that remains under review by the nomination committee.
Responsible business
We are committed to conducting business with the utmost integrity and in accordance with the Bribery Act 2010 and have a clear anti-bribery
and corruption policy in place, which is available on the company website. We communicate our expectations to all employees and have a zero
tolerance policy in respect of improper or criminal behaviours; all directors and employees are encouraged to report any suspicions of bribery.
Non-financial information statement
We comply with the non-financial reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006. Information
regarding our business model is set out on page 5; environmental matters on pages 12 to 14; employees, social matters and human rights on
pages 14 and 15; and anti-corruption and anti-bribery matters are set out above.
Task Force on Climate-related Financial Disclosures (‘TCFD’)
The company has prepared disclosures based on TCFD recommendations in accordance with Listing Rules 9.8.6R as set out below. As set out
in the table below, further work is underway on identifying targets and considering the resilience of company’s longer-term strategy. A progress
update will be provided in next year’s annual report.
Governance
Board oversight and
management role
Strategy
Climate-related risks
and opportunities
16
Climate risk is a principal risk included on the group risk register and executive management has formed a
working group, as set out in the process section on page 17, which has access to professional advice and
support, to continue to understand the group’s climate-related risks and opportunities and the associated
impacts upon the group, its stakeholders and markets.
Whilst no formal targets have been established as yet, the strategic focus of the group’s activities and capital
investment decisions include sustainability as a key consideration.
Short term (0-2 years)
The group can provide casting, machining, assembly and ancillary services with a low level of transport (and
therefore GHG emissions emitted) between group sites and with manufacturing powered primarily by electricity
generated from renewable sources. Management believes this places the business in a strong position to support
its customers’ and stakeholders’ environmental aspirations, particularly when compared to coal-powered or
geographically disparate competitors.
Recycling, energy efficient plant solutions and waste management continue to be areas of focus with regard to
reducing the group’s carbon footprint and landfill waste. Through its participation in industry bodies the group
supports several research projects to find commercial uses for remaining waste materials, such as sand.
Medium term (2-5 years)
There is an opportunity for the group to utilise its considerable production experience, financial resource and
relationships as a supplier to the established commercial vehicle markets to enter new or additional product
categories as they develop at scale. In the nearer term, this means supplying parts to the most fuel efficient
combustion engines ever produced by OEMs for HGVs as well as expanding our supply of parts to offshore
power generation customers.
Further opportunities are expected to arise for supply into the smaller end of the truck sector which is naturally
more suited to the battery electric vehicle (‘BEV’) technology. This is not a market that the group has served to
any great degree previously.
Long term (5 years+)
As BEV and hydrogen fuel cell powertrain technologies evolve, there is a risk that the market for the group’s cast
iron internal combustion engine (‘ICE’) products could reduce, albeit the application of such technologies to the
group’s core heavy truck market is expected to be longer term. This would directly impact approximately
one-third of group revenue, but opportunities will exist for the group within the new product ranges.
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Impact on the group’s
strategy and financial
planning
The group’s plant is depreciated over a maximum life of 15 years and is not considered at risk of impairment
because of a reduction in cast iron business under currently reasonably foreseeable circumstances.
It is expected that this transition away from ICEs will be a medium to long-term, gradual strategic issue and
therefore investment will be appropriately managed to avoid redundant undepreciated plant that may become
subject to impairment. Structural parts to heavy goods vehicles will potentially continue to be made from cast iron
due to the material’s favourable characteristics.
Strategy
Resilience of
the company’s
strategy, taking
into consideration
different climate-
related scenarios
Process for
identifying and
managing risks
The group’s production sites are based in Brownhills, West Midlands and Dronfield, Derbyshire. The physical risks
of climate change are not expected to materially impact the production capability of either UK site.
Approximately one-third of the group’s turnover arises from the sale of parts which are used by our customers to
produce ICEs for heavy trucks. This revenue would be at risk in the event of a sudden technological or regulatory
development which rendered the ICE obsolete.
This scenario is considered unlikely to develop quickly given the reliance of the human population on a well-
functioning transport and logistics infrastructure to transport essential items such as food. In addition, any
technology break-through would need significant infrastructure changes to support the charging or re-fuelling
of an alternative powertrain for heavy trucks. At present the group is working with OEMs on a variety of project
opportunities, whilst research into the technical direction of the market (in response to climate-related scenarios)
continues, including:
• Supplying parts which make current large diesel engines significantly more efficient.
• Providing additional on-site ancillary services to reduce unnecessary transportation of parts.
• Making our own product using renewable energy .
• Collaborating to supply parts and potential capacity for the manufacture of electric trucks.
Whilst we are working with our key customers to facilitate movement away from ICEs and are active commercially
in this area, our key customers continue to invest significantly in new, more efficient diesel engine production
facilities and therefore we continue to see the phase out of diesel engines in the heavy truck market as a long
term issue in our scenario planning.
At present, we continue to focus on the short to medium term opportunities the transition to a zero-emission
market can provide, whilst utilising our engineering expertise and customer relationships to develop our long term
strategy alongside our customer base.
This initial consideration of resilience has been set out by the group and consideration is being given to more
detailed scenario analysis.
The working group formed to review climate-related risks and opportunities identifies and manages climate-
related risks.
The working group includes the group finance director, group financial controller, group health, safety and
environment director, the group CEO where appropriate and other members of the group’s senior management
team when relevant issues are due for discussion.
The working group has been supported by external advisers both with regard to market developments and ESG
reporting during the year and following this the working group has established an appropriate internal response to
developments.
Any significant issues will continue to be raised to the audit and risk committee through the review of the group
risk register and associated updates.
Metrics and targets
Metrics have been reported within the relevant sections of the group ESG Report on pages 12 to 14.
Consideration is being given as to the targets that might be used by the group to manage climate-related risks
and opportunities and performance against those targets.
17
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report Viability Statement
In conducting the review of the group’s long-term prospects, the directors considered economic and market conditions in conjunction with the
strategy and the principal risks facing the group (as set out in the Strategic Report on pages 2 to 19). This assessment considered the impact of
the principal risks on the business model and on future performance, liquidity and solvency and was mindful of the limited forward visibility that
the group has in respect of its major market of commercial vehicles.
In preparing this statement of viability, the directors have considered the prospects of the group over the three year period immediately following
the financial year ended 31 March 2023. This longer-term assessment process supports the board’s statements on both viability, as set out
below, and going concern (on page 25).
A three year period was determined as the most appropriate for the purpose of concluding on longer-term viability, given the limited forward
visibility of the group.
The directors’ viability assessment included a review of three year profit and cash flow estimates, alongside the group’s current position, and
a review of the sensitivity analysis performed on the three year estimate whereby the principal risks, particularly those related to markets and
customers, were applied to the plan. The assessment was based on current demand schedules from customers and assumed that these levels
remained consistent for the three year period. The sensitivity analysis was based on the assumption that demand levels were reduced by 50%
for the three year period, such a reduction representing a demand level just below the lowest level experienced in the last 15 years.
In making this viability statement, the directors considered the mitigating actions that would be taken by the group in the event that the principal
risks of the company become realised. The directors also took into consideration the group’s strong financial position at 31 March 2023, with
cash and deposits of £35.6 million, no debt and a history of strong cash generation.
The directors have assessed the viability of the group and, based on the procedures outlined above in addition to activities undertaken by the
board in its normal course of business, confirm that they have a reasonable expectation that the group will be able to continue in operation and
meet its liabilities as they fall due over the period to 31 March 2026.
18
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. S172(1) Statement
Principal decisions taken
during the year
Supplementary dividend
The board declared a supplementary dividend
of 15.00 pence per share as set out in note
8. During our engagement with investors, the
level of cash maintained by the company was
discussed and the board decided to exercise
their discretion and return an additional
£6.5 million to shareholders. In reaching this
decision the board considered the company’s
solvency at the time and the impact on
the creditors of the company. The board
concluded that the payment of the dividend
had no material effect on the company’s
ongoing business and also that the company
had sufficient distributable reserves to pay the
dividend.
The Strategic Report was approved by the
board and signed on its behalf by
A. Vicary
Chief Executive Officer
14 June 2023
The following disclosures describe how the
directors have had regard to the matters set
out in section 172(1)(a) to (f), relating to the
directors’ duty to promote the success of the
company, and forms the directors’ statement
required under section 414CZA(1) of the
Companies Act 2006.
Stakeholder engagement
Our success depends on the relationships
we have with the people, communities
and organisations that have an interest in
our business and may be impacted by the
decisions we take. The key stakeholders are
set out in the business model on page 5 and
the manner of our engagement with them is
described below.
Customers
Dedicated sales, technical and production
teams engage with customers to foster a
collaborative working relationship for the long
term. Investment in the latest production
technologies ensures we provide the quality,
efficiency and on-time delivery they require.
Employees
An important part of the culture of the group
is our open-door style of management. All
senior personnel are visible throughout the
business on a daily basis engaging with the
workforce across all levels; it is important
to both the company and our employees
that they have that chance to share their
opinions. In addition, regular function-specific
committee meetings take place as well as
regular information sharing to the whole
workforce.
Shareholders
We engage with our shareholders through a
number of channels which include the Annual
Report, AGM, investor site visits, one-to-
one meetings and telephone conversations.
They are interested in the strategy and its
execution, generating strong returns and
maintaining financial discipline. We report and
discuss these areas on a regular basis.
Communities and environment
As a significant employer for each area
where we are based, we support local
employment and apprenticeship schemes.
We seek to engage and collaborate with
local educational institutes where possible
and increase the overall visibility of the group.
The local communities are keen to ensure
we are supporting and investing in local
jobs, operating safely and ethically as well
as reducing our environmental impact. We
provide direct employment to over 1,200
people, invest in our facilities to provide a
safe workplace and consider opportunities to
ensure a more sustainable strategy.
Suppliers
We seek to improve our business
relationships with our key suppliers to protect
the operations of the company. We engage
with suppliers to ensure they comply with our
code of conduct to maintain high standards
of supply.
19
Castings P.L.C. Annual Report for the year ended 31 March 2023Strategic Report Board of Directors
Executive directors
Adam Vicary
Chief Executive Officer
Having obtained a degree in metallurgy and
a business masters, Adam has worked in
the foundry industry for all of his career and
joined the company in September 2010 as
joint managing director. He was appointed to
the main board in April 2012, becoming chief
executive on 31 March 2017.
Steve Mant
Finance Director
Steve is a fellow of the ICAEW and joined the
company in June 2010. He 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.
Non-executive directors
Alec Jones
Chairman
Alec was appointed a director in April 2012,
becoming chairman on 1 January 2023, and
is an independent director. He was a partner
in PricewaterhouseCoopers for 27 years until
his retirement in 2010.
Andrew Eastgate
Senior Independent Non-executive
Director
Andrew was appointed a director on
1 September 2018 and is an independent
director. He is a solicitor and was a partner in
Pinsents and is currently chairman of Epwin
Group plc. Until 31 May 2019 he was non-
executive director of Headlam Group plc and
was chairman of the remuneration committee.
Andrew is chairman of the remuneration and
nomination committees and is also a member
of the audit and risk committee.
Brian Cooke
Non-executive Director
Brian joined the company in 1960 after
attending foundry college and serving an
engineering apprenticeship. He worked in
all departments of the company and was
appointed a director in 1966, becoming joint
managing director in 1968 and managing
director in 1970. He ceased to be chief
executive in 2007. He was appointed
executive chairman in 1983, becoming non-
executive chairman in 2015 before standing
down on 1 January 2023. Brian will not be
seeking re-election at the AGM in August.
Mark Smith
Non-executive Director
Mark was appointed a director on
16 November 2022 and is an
independent director. He was a partner in
PricewaterhouseCoopers LLP for 24 years
until his retirement in 2021 and is currently
the chair of the audit, risk and assurance
committee of the West Midlands Combined
Authority and the chair of the risk, audit and
finance committee of the Royal Shakespeare
Company. Mark is chairman of the audit and
risk committee and is also a member of the
remuneration and nomination committees.
20
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Directors’ Report
The directors submit the Annual
Report and audited consolidated
financial statements of Castings
P.L.C. for the year ended
31 March 2023.
Strategic Report
The Strategic Report, which contains a review
of the group’s business, a description of the
principal risks and uncertainties facing the
group and commentary on the likely future
developments, is set out on pages 2 to 19.
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; 47,900 shares were purchased during
the year (2022 – 26,100) at a total cost of £151,941 (2022 – £78,661).
Directors
The directors of the company are listed on page 20 and their interests in the ordinary share
capital at the beginning and end of the year were:
Beneficial holdings
Financial results and
dividend
The profit for the year after taxation was
£13,790,000 (2022 – £8,552,000), full details
of which are set out in the consolidated
statement of comprehensive income on page
39.
A. N. Jones
A. Vicary
S. J. Mant
A. K. Eastgate
B. J. Cooke
M. L. Smith
2023
Total
—
35,000
12,350
1,000
2,001,936
—
2022
Total
—
35,000
9,250
1,000
1,993,936
—
An interim dividend of 3.84 pence per share
was paid in January 2023 in respect of the
year ended 31 March 2023.
The directors recommend a final dividend of
13.51 pence per share payable on
18 August 2023 to shareholders on the
register on 21 July 2023, making a total
ordinary distribution of 17.35 pence for the
year.
A supplementary dividend of 15.00 pence
per share has been declared which will be
payable on 26 July 2023 to shareholders on
the register on 23 June 2023.
Share capital
The company’s capital consists of
43,632,068 (2022 – 43,632,068) ordinary
shares of 10 pence each with voting rights.
There are no restrictions on voting rights.
There have been no changes in the shareholdings of directors since the year end.
In accordance with Provision 18 of the UK Corporate Governance Code all directors are
subject to annual re-election. B. J. Cooke is retiring from the board and not seeking re-election
at the AGM. The board considers that the performance of those directors proposed for re-
election continues to be effective, that they remain independent in judgement and that they
demonstrate a strong commitment to their role.
The unexpired period of the contracts of service for A. Vicary and S. J. Mant is one year. A. N.
Jones, A. K. Eastgate, B. J. Cooke and M. L. Smith 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 a director and the board
has the power to appoint any person to be a director, but any director so appointed will be
subject to election at the next Annual General Meeting.
There is no minimum shareholding requirement for directors.
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.
The business of the company is managed by the board, who may exercise all such powers of
the company as are not by legislation or by the company’s Articles required to be exercised in
general meeting. The board may make such arrangements as it thinks fit for the management
and transaction of the company’s affairs and may for that purpose appoint local boards,
managers and agents and delegate to them any of the powers of the board (other than the
power to borrow and make calls on shares) with power to sub-delegate.
Other than the directors’ service contracts, the directors have no interests in any contract of
the business.
Beneficial owners of shares who have been
nominated by the registered holder of those
shares to receive information rights under
Section 146 of the Companies Act 2006 are
required to direct all communications to the
registered holder of their shares rather than to
the company’s registrar, Link Asset Services,
21
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023
Further details of employee involvement
and the group’s policy on the employment
of disabled persons are given under the
Environmental, Social and Governance
section on pages 12 to 17 and the S172(1)
statement on page 19.
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. Further
details of health and safety are given under
the Environmental, Social and Governance
section on pages 12 to 17.
Financial instruments
Details of the use of financial instruments
by the group are contained in note 20 in
the notes to the consolidated financial
statements.
Research and development
Activities and likely future developments for
the business are described in the Strategic
Report on pages 2 to 19.
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.
Post balance sheet events
There were no reportable subsequent events
following the balance sheet date.
Directors’ Report
continued
Substantial shareholdings
As at 14 June 2023, the company had been notified, in accordance with DTR Rule 5, of the
following disclosable interests, including directors, in its voting rights:
Number
9,104,669
6,107,078
2,191,674
2,001,936
1,800,000
%
20.9
14.0
5.0
4.6
4.1
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 2023. The authority
is sought by way of a special resolution,
details of which are also included in the
Notice of Meeting as item 13.
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.
Stakeholder engagement
The key stakeholders are set out in the
Business Model on page 5. The engagement
and decisions taken during the year are
set out in the Section 172(1) statement on
page 19.
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.
Ruffer LLP
Aberforth Partners’ Clients
Threadneedle Asset Management Limited
B. J. Cooke
NR Holdings Limited
Special business
There will be the following items of special
business at the Annual General Meeting.
Directors’ authority to allot shares
Approval will be sought to renew the authority
given to the directors to allot shares in the
company in accordance with section 551
of the Companies Act 2006. The present
authority was granted on 16 August 2022
and under the Companies Act must be
renewed at least every five years. The
renewed authority would therefore expire on
14 August 2028, but will be put to annual
shareholder approval.
Authority will also be sought from
shareholders to allow the directors to allot
equity securities for cash as if section 561
of the Act (which gives shareholders certain
pre-emption rights on the issue of shares)
did not apply. Such allotments being up to
a maximum nominal amount of £218,160,
being approximately 5% of the current issued
share capital. The renewed authority would
expire on 14 August 2024.
In any three year period no more than 7.5%
of the issued share capital will be issued on a
pre-emptive basis.
The proposed resolutions are set out as items
11 and 12 in the Notice of Meeting.
Authority to purchase own shares
At the Annual General Meeting in 2022, the
board was given authority to purchase and
cancel up to 4,358,844 of its own shares,
representing 9.99% of the company’s existing
shares, through market purchases on The
London Stock Exchange. The maximum price
to be paid on any exercise of the authority
was restricted to 105% of the average of the
middle market quotation for the shares for the
five dealing days immediately preceding the
day of a purchase. The minimum price which
22
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Independent auditor
The auditor, Mazars LLP, have indicated their
willingness to continue in office. A resolution
proposing their reappointment as auditor 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 auditor is 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 auditor is 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.
Corporate governance
Details of the group’s corporate governance
policies are dealt with on pages 24 and 25.
Greenhouse gas emissions
Details of the group’s greenhouse gas
emissions are set out on pages 12 and 13.
Cautionary statement
Under the Companies Act, a company’s
Strategic Report and Directors’ Report
are required, among other matters, to
contain a fair review by the directors of the
group’s business through a balanced and
comprehensive analysis of the development
and performance of the business of the group
and the position of the group at the year end,
consistent with the size and complexity of the
business.
The Directors’ Report set out above, including
the Chairman’s Statement, the Principal
Risks and Uncertainties and Environmental,
Social and Governance section incorporated
into it by reference (together, the Directors’
Report), has been prepared solely to provide
additional information to shareholders to
assess the company’s strategies and the
potential for those strategies to succeed. The
Directors’ Report should not be relied upon
by any other party or for any other purpose.
The Directors’ Report (as defined) contains
certain forward-looking statements. These
statements are made by the directors in good
faith based on the information available to
them up to the time of their approval of this
report and such statements should be treated
with caution due to the inherent uncertainties,
including both economic and business
risk factors, underlying any such forward-
looking information.
Approval of Directors’
Report and Responsibility
Statement
Each of the persons who is a director at the
date of approval of this report confirms that to
the best of his knowledge:
a. each of the group and parent company
financial statements, prepared in
accordance with International Financial
Reporting Standards in accordance with
the Companies Act 2006 and UK Financial
Reporting Standards respectively, gives a
true and fair view of the assets, liabilities,
financial position and the profit or loss of
the issuer and the undertakings included
in the consolidation taken as a whole; and
b. the Chairman’s Statement, Strategic
Report and Directors’ Report include
a fair review of the development and
performance of the business and
the position of the company and the
undertakings included in the consolidation
taken as a whole, together with a
description of the principal risks and
uncertainties they face.
The directors consider that the Annual
Report and financial statements, taken as a
whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the company’s
and group’s performance, business model
and strategy.
On behalf of the board
A. N. Jones
Chairman
14 June 2023
23
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023 Corporate Governance
General
Castings P.L.C. recognises the importance
of high standards of corporate governance.
The board has considered the principles
and provisions of the 2018 UK Corporate
Governance Code and will continue to adhere
to them where it is in the interests of the
business, and of the shareholders, to do so.
The manner in which the board provides
leadership of the company within a
framework of prudent and effective controls is
set out in this section.
under the UK Corporate Governance Code.
However, the board consider his knowledge
of the industry and advice to continue to
be invaluable to the group and that this
outweighs concerns as to his independence
from the company.
The directors maintain their knowledge
through a combination of technical and
market bulletins and attendance at seminars.
The company secretary has responsibility for
bringing new regulatory developments to the
attention of the board.
Board of directors
The board meets regularly to monitor the
current state of business and to determine
its future strategic direction.
During the financial year, the board comprised
two executive directors and three non-
executive directors, increasing to four on
16 November 2022. 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.
A. N. Jones was appointed chairman on 1
January 2023 and has served on the board for
more than nine years, having been appointed
in April 2012. Notwithstanding the length of
service, the board considers that he remains
independent and that the skill and experience
he brings and his overall contribution to the
board remains of significant value to the group.
B. J. Cooke stood down as chairman on 1
January 2023 and will remain a non-executive
director until the AGM in August 2023. Having
joined the company in 1960 and previously
served as chief executive of the company,
he is not considered to be independent
Board committees
The principal committees established by the
directors are:
Audit and risk committee
Further details are contained within the Audit
and Risk Committee Report on page 26.
Remuneration committee
Further details are set out in the Directors’
Remuneration Report on page 27.
Nomination committee
The nomination committee is chaired by
A. K. Eastgate with A. N. Jones being a
member until 1 January 2023 and
M. L. Smith became a member on
appointment as a director. The committee
met once during the year. The committee
takes an active role in considering, with
the wider board, the overall culture of the
company. It is also involved in ensuring the
company considers equality, inclusion and
diversity in senior management positions.
The terms of reference for the three
committees are available on the company’s
website www.castings.plc.uk.
Effectiveness
The board undertakes an annual assessment
of its own performance, its committees and
the directors. The executive directors are
appraised annually by the chairman and
the non-executive directors. The chairman
is appraised annually by the non-executive
directors. The chairman considers the
effectiveness of each non-executive director
annually.
The results of these appraisals are
considered by the remuneration committee
for the determination of their remuneration
recommendations.
Directors’ conflicts
of interest
A director has a statutory duty to avoid a
situation in which he has, or can have, an
interest that conflicts or possibly may conflict
with the interests of the company. A director
will not breach that duty if the relevant matter
has been authorised in accordance with the
Articles of Association by the other directors.
The board has conducted a review of actual
or possible conflicts of interest in respect
of each director. The board has an agreed
process for identifying current conflicts,
authorised conflicts that have been identified
and stipulated conditions in accordance with
the guiding principles and agreed a process
to identify and authorise future conflicts. In
practice, directors are asked to consider and
disclose actual or potential conflicts as and
when a matter arises. There have been no
conflicts identified during the year.
Attendance at board and board committee
meetings during the year is detailed in the
table shown below:
Board
Audit and risk
committee
Remuneration
committee
Required to
attend
9
9
9
9
9
3
Attended
9
9
9
9
9
4
Required to
attend
3
—
—
4
—
1
Attended
4
4
4
4
4
2
Required to
attend
2
—
—
3
—
1
Attended
3
—
—
3
2
1
Director
A. N. Jones
A. Vicary
S. J. Mant
A. K. Eastgate
B. J. Cooke
M. L. Smith
24
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Relations with
shareholders
The company holds meetings from time
to time with institutional shareholders
to discuss the company’s strategy and
financial performance. The board regularly
receives copies of analysts’ and brokers’
briefings. The chairman is available to
meet major shareholders on request to
discuss governance and strategy. The
senior independent director and other
non-executive directors are also available to
meet shareholders if requested. The Annual
General Meeting is used to communicate with
private and institutional investors.
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
financial statements. 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 they have established
procedures necessary to implement the
internal control guidance for directors such
that they comply with the 2018 UK Corporate
Governance Code for the accounting year
ended on 31 March 2023.
Internal financial control
The directors are responsible for maintaining
the group’s systems of internal financial
control. These controls are designed to both
safeguard the group’s assets and ensure the
reliability of financial information used within
the business and for publication. As with
any such systems, controls can only provide
reasonable and not absolute assurance
against material misstatement or loss.
Internal financial control is operated within a
clearly defined organisational structure with
clear control responsibilities and authorities,
and a practice throughout the group of
regular management and board meetings to
review all aspects of the group’s businesses
including those aspects where there is a
potential risk to the group.
For each business there are regular weekly
and monthly reports, reviewed by boards
and management, which contain both written
reports and management accounts. The
accounts include income statements and
balance sheets for the year under review, year
to date and previous year and are compared
with expected results. A variety of operational
and financial ratios are also produced.
Continual monitoring of the systems of
internal financial control is conducted by all
management. The external auditor, who is
engaged to express an opinion on the group
financial statements, also considers the
systems of internal financial control to the
extent necessary to express that opinion. The
external auditor reports the results of their
work to management, including members of
the board and the audit and risk 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.
Going concern
The directors have assessed the future
funding requirements of the group and the
company and compared them to the level
of funding available. Details of the cash
position are set out in note 19 to the financial
statements. The group’s objectives, policies
and processes for managing its capital, its
financial risk management objectives, details
of its financial instruments and hedging
activities, and its exposure to credit risk and
liquidity risk are also set out in notes 18 and
20 to the financial statements.
The directors’ assessment of going concern,
and the viability statement on page 18,
included a review of the group’s financial
forecasts and financial instruments for a three
year period. The directors considered a range
of potential scenarios on future demand
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 Strategic Report.
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.
Summary
The board takes its responsibilities seriously
albeit there are a number of areas in which
it does not comply fully with the 2018 UK
Corporate Governance Code. It does not
feel that the size or complexity of the group
and the way in which it governs would
be enhanced or strengthened by further
changing the already existing high standards
of corporate governance practised.
For the year ended 31 March 2023 the
company complied with the 2018 UK
Corporate Governance Code other than the
following points:
• Whilst there were four non-executive
directors during the year, two have served
for more than nine years as at
31 March 2023 and one of whom was not
independent on appointment. However,
the board recognises the value they bring
to the group.
• The non-executive directors do not have
specified term contracts.
• The finance director also performs the
role of company secretary as there is no
one else within the business qualified to
fulfil the position. The role of company
secretary is not full time.
These are considered acceptable given the
size of the company and the way in which it
operates.
By order of the board
S. J. Mant
Company Secretary
14 June 2023
25
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023 Audit and Risk Committee Report
Responsibilities
The main responsibilities of the audit and risk
committee are:
to monitor the integrity of the financial
statements of the company and any
formal announcements relating to the
company’s financial performance,
reviewing significant financial reporting
judgements contained in them;
to provide advice on whether the
company’s Annual Report is fair, balanced
and understandable;
to review the company’s internal financial
controls and internal control and risk
management systems;
to review the need for an internal audit
function;
to make recommendations to the board,
for it to put to the shareholders for their
approval in general meeting, in relation
to the appointment, reappointment and
removal of the external auditor and to
approve the remuneration and terms of
engagement of the external auditor;
•
•
•
•
•
•
to review and monitor the external auditor
independence and objectivity and the
effectiveness of the audit process, taking
into consideration relevant UK professional
and regulatory requirements;
•
•
•
to develop and implement policy on the
engagement of the external auditor to
supply non-audit services; and
•
to report to the board on how it has
discharged its responsibilities.
Committee composition
and meetings
The audit and risk committee was chaired
by A. N. Jones until 1 January 2023, on his
appointment as company chairman, and by
M. L. Smith after that date. A. K. Eastgate
was a member of the committee. The
chairman, finance director and other directors
may also attend meetings as appropriate to
the business in hand but are not members of
the committee.
The board considers that M. L. Smith has the
most recent and relevant financial experience
as required by the code.
26
The committee meets at least four times
a year. Meetings are also attended by
representatives of the group’s external
auditor. At meetings attended by the external
auditor time is allowed for the committee
to discuss issues with the external auditor
without the executive directors being present.
External auditor
The committee oversees the relationship with
the external auditor and monitors all services
provided by and fees payable to them, to
ensure that potential conflicts of interest
are considered and that an objective and
professional relationship is maintained.
The committee operates under formal
terms of reference and these are reviewed
annually. The committee considers that it has
discharged its responsibilities as set out in its
terms of reference to the extent appropriate
during the year. There were no changes to the
terms of reference in the year under review.
Financial reporting and
accounting judgements
During the year, the committee reviewed
the appropriateness of the group’s half-year
and full-year financial statements, taking into
account the reports of the group finance
director and external auditor.
The main areas of focus considered by the
committee during the year were as follows:
revenue recognition processes have been
reviewed to ensure revenue has been
recognised appropriately and consistency
of policy applied across the group; and
reviewed the viability statement and
agreed an appropriate assessment period
and the reasonableness of the profit and
loss and cash flow estimates, together
with an evaluation of the main risks
affecting the viability of the company over
that time frame.
Internal control
During the year, the committee reviewed
the effectiveness of the group’s system of
internal controls and risk management and
the disclosures of the results in this Annual
Report. The committee concluded the system
to be effective.
The committee again concurred with the
board’s view that there is no requirement for
an internal audit function due to the size and
non-complex nature of the group.
In particular, the committee reviews and
monitors the independence and objectivity
of the external auditor and the effectiveness
of the audit process. At the outset of the
audit process, the committee receives from
the auditor a detailed audit plan, identifying
their assessment of the key risks and their
intended areas of focus. This is agreed
with the committee to ensure coverage is
appropriately focussed.
Feedback on the audit process is requested
from management and for the 2023 financial
year, management was satisfied that there
had been appropriate focus and challenge on
the primary areas of audit risk and assessed
the quality of the audit process to be
satisfactory. The committee concurred with
the view of management.
The committee also keeps under review
the nature, extent, objectivity and cost of
non-audit services provided by the external
auditor; there have been no such services
provided during the year.
Mazars LLP (‘Mazars’) has been the group’s
external auditor since 2020. In June 2023
the committee reviewed the external audit
mandate and confirmed the continuing
appointment of Mazars. This was on the
basis the committee was satisfied with the
quality of the audit and that the Mazars audit
team remained objective and independent.
The committee has recommended to the
board that a resolution be put to shareholders
for the reappointment of the auditor at the
Annual General Meeting.
As part of its work, and in line with its terms
of reference, the committee also considers
the discharge of the board’s responsibilities in
the areas of corporate governance, financial
reporting and internal control, including the
internal management of risk, as identified in
the UK Corporate Governance Code.
M. L. Smith
Chairman of the Audit and Risk Committee
14 June 2023
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Castings P.L.C.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Directors’ Remuneration Report
Annual statement
On behalf of the board, I am pleased to present the Directors’ Remuneration Report for the year ended 31 March 2023 together with the revised
directors’ remuneration policy for which shareholders’ approval will be sought at the AGM.
During the year, the executive directors received salary increases at a rate broadly in line with that awarded to group employees generally.
Share awards (in the form of nil cost options) were granted to the value of 25% of salary and the annual bonus was paid in accordance with the
current directors’ remuneration policy, without the exercise of discretion. Full details of directors’ remuneration are set out below.
The remuneration committee has reviewed the existing directors’ remuneration policy which was approved at the AGM held in 2020 for a
period of three years and the application of that policy in the period since then. The overall objective of the remuneration policy is to produce an
outcome which is sufficiently competitive to retain, motivate and, where necessary, recruit executive directors and senior management whilst
supporting the business objectives of the group. The remuneration structure is straightforward and transparent, striking what we believe to be an
appropriate balance between fixed and performance-related remuneration.
At the AGM in 2020 shareholders approved the introduction of a share ownership plan (‘the plan’) under which nil cost share options could be
granted annually to executive directors, in order to provide a mechanism for the executive directors to build a shareholding in the company.
When formulating the plan the committee took external advice and looked at several alternatives, including schemes which provide for higher
awards providing performance incentives are achieved. The committee decided to adopt a scheme which awards share options at a level of
up to 25% of salary but without performance criteria. The committee takes the view that the balance between certainty and value enables
the plan to achieve the objective of providing a further incentive to the executive directors and aligning them more closely with the interests of
shareholders, whilst remaining straightforward and easily understood. No change is proposed to the plan. The committee will consider granting
options under the plan to certain members of the senior management team in due course.
The committee is, however, proposing a change to the structure of the annual bonus. For some years, an annual bonus has been payable to
executive directors at the rate of 1% of pre tax profit over £10 million, with the remuneration committee having discretion to vary the bonus
payable in certain circumstances. In our opinion, after taking external advice, the potential bonus realistically achievable under the current policy
is behind market levels and we are proposing a change which we consider will provide a greater incentive and is nearer to market practice. It
is proposed that the annual bonus is calculated as a percentage of salary on a sliding scale by reference to the achievement of specified profit
levels. The proposal would provide a maximum potential bonus of up to 125% of salary for achievement of pre tax profit of £27.5 million, pre-tax
profit of approximately £19.5 million would result in a bonus of 50% of salary.
Consultation has taken place with larger shareholders in the process; full details of the proposal are set out in the proposed remuneration policy
below. The committee believes that the package of annual bonus and long term incentive is appropriate.
Except for the proposed alteration to the annual bonus, the remuneration policy is unchanged and the committee is of the opinion that it remains
fit for purpose and in the best interests of the company and its stakeholders.
By order of the board
A. K. Eastgate
Chairman of the Remuneration Committee
14 June 2023
Remuneration committee
The remuneration committee is chaired by A. K. Eastgate with A. N. Jones being a member until 1 January 2023 and M. L. Smith joining
the committee on appointment to the board on 16 November 2022. The group chairman, whilst not a formal member of the committee,
is also invited to attend meetings. The remuneration committee is responsible within the authority delegated by the board for determining
the remuneration policy and for determining the specific remuneration packages for each of the executive directors and the chairman. The
committee also monitors the structure of remuneration of senior management. None of the executive directors were present at meetings of the
committee during consideration of their own remuneration.
The remuneration committee’s terms of reference are available on the company’s website www.castings.plc.uk.
Remuneration policy
The underlying policy in setting the remuneration of the executive directors is that it shall be designed to attract, retain and motivate the directors
and be reasonable and fair in relation to their responsibilities.
27
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023 Directors’ Remuneration Report
continued
Detailed policy
The table below sets out the directors’ remuneration policy that will be proposed at the company’s AGM and, if approved, will apply for three
years from the date of approval. When determining the policy, the committee considered clarity, simplicity, risk, predictability, proportionality and
alignment as set out in the Corporate Governance Code.
Maximum potential value
Whilst no absolute maximum is
prescribed, increases will take
account of other salary increases
across the group. However, in certain
circumstances, including changing
roles and responsibilities, market
levels and individual and group
performance, the committee will have
discretion to award larger increases.
Whilst the committee has not set an
absolute maximum on the level of
benefits, these are set at a level that
the committee considers appropriate
against the market.
The annual bonus cannot exceed
125% of base salary.
Remuneration
element
Purpose and link to
strategy
Operation
Base salary
To provide competitive
fixed remuneration in
order to attract and retain
high calibre directors to
deliver growth for the
business.
Reviewed with effect from 1 April each year taking into
account market rates, performance of the individual and
the company and the rates of salary increase across the
group.
Benefits
Annual bonus
To provide broadly
market competitive
benefits as part of the
total remuneration
package.
To reward contribution
to the performance of
the group, aligned to
shareholder interests.
Currently include the provision of car benefit, private
healthcare, life assurance and income protection. Benefits
are reviewed annually taking into account market practice.
The committee does have discretion to alter benefits.
Bonus is based on paying a proportion of salary subject to
the achievement of a certain level of profits before tax and
exceptional items (‘pbt’). 5% of salary would be payable
per £1 million of pbt between £10m and £18m, 7.5%
of salary per £1 million of pbt between £18m and £21m
and 10% of salary for every £1m of pbt above £21m. The
committee does have discretion to pay an annual bonus
(not to exceed 50% of base salary) if, in its opinion, the
bonus otherwise payable does not adequately recognise
the performance of the individual. It is anticipated that this
discretion would only be used in unusual circumstances.
The committee has discretion to make such changes as
it thinks fit to the pbt targets, particularly having regard to
any significant corporate events such as share issues.
The annual bonus will be subject to malus and clawback
provisions covering such matters as material misstatement
of financial results, material irregularity and misconduct.
Pension
Share plan
To provide competitive
retirement benefits
as part of the overall
remuneration package.
To provide a mechanism
to enable executive
directors to build a
shareholding in the
company with a view
to providing a further
incentive and alignment
with the interests of
shareholders.
Executive directors receive 7% of base salary as
contributions to personal pension plans or a cash
equivalent.
7% of base salary.
Awards will normally be granted to
a value of 25% of the base salary
at the date of granting, though the
committee has the discretion to
increase this to 50% of base salary in
exceptional circumstances.
Awards will be in the form of nil-cost options and will
normally vest three years after the date of grant, subject
to continued employment with the group. Awards are
not subject to performance measures as the committee
believes that the balance between certainty and a lower
value of award achieves the objective of providing a further
incentive to the executive directors and aligning them
more closely with the interests of shareholders, whilst
remaining straightforward and easily understood. Awards
will normally be subject to a two year holding period
after vesting and may be granted on the basis that the
participant shall be entitled to an additional benefit (in cash
or shares) in respect of dividends paid over the subsequent
holding period. Awards are subject to malus and clawback
provisions covering such matters as material misstatement
of financial results, material irregularity and misconduct.
28
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Non-executive director remuneration
The fees paid to non-executive directors are set by reference to current levels in the market. Non-executive directors do not receive benefits
(except for B. J. Cooke) or participate in the company’s bonus schemes, nor are they eligible to join a company pension scheme.
Statement of shareholding voting
The voting to approve last year’s Annual Report on the directors’ remuneration and the directors’ remuneration policy at the respective AGMs are
set out in the following table:
Annual report on remuneration – approved at AGM on 16 August 2022
Directors’ remuneration policy – approved at AGM on 13 August 2020
Implementation in 2023/24
Votes for
(including
discretionary)
Number
%
25,357,316
84.97%
25,638,352
76.78%
Votes
against
Number
%
4,486,611
15.03%
7,751,961
23.22%
Total
number of
votes cast
29,843,927
Number
of votes
withheld
1,640
33,390,313
—
The committee has considered market rates and increases awarded to all employees in determining the base salary increases for the executive
directors for 2023/24. The committee did not consult directly with the workforce or any external consultants. The chief executive officer and
finance director receive a base salary of £346,023 and £251,670 respectively for the year ending 31 March 2024. This represents an increase of
9%, which is below the average rate of increase for employees across the group.
Scenario charts
The following charts set out the potential total remuneration payments for the year ended 31 March 2024 under our remuneration policy based
on the following assumptions:
• Minimum – base salary, no bonus payment and no share option award.
• Prior year – base salary, bonus based on profit as for year ended 31 March 2023 and 25% of base salary as share option award.
• Maximum – base salary, bonus of 125% of base salary and 25% of base salary as share option award.
Chief executive officer
Finance director
Minimum
100%
Minimum
100%
FY23 result
65%
19%
16%
FY23 result
65%
19%
16%
Maximum
40%
50%
10%
Maximum
40%
50%
10%
0
50 100
150 200 250 300 350 400
450 500 550
600
650
700
750
800
850
900
0
50
100
150
200
250
300
350
400
450
500
550
600
650
Remuneration £000
Remuneration £000
Salary
Bonus
Share option award
Recruitment policy
In the event of the recruitment of a new executive director, the remuneration package would reflect the policy set out above so far as is possible.
The overall maximum level of variable remuneration which may be granted (excluding ‘buyout’ awards as referred to below) is 175% of salary.
The committee may make payments or awards in respect of hiring an employee to ‘buyout’ remuneration arrangements forfeited on leaving
a previous employer. In doing so, the committee will take account of relevant factors, including any performance conditions attached to the
forfeited arrangements and the time over which they would have vested. The committee will generally seek to structure ‘buyout’ awards or
payments on a comparable basis to the remuneration arrangement forfeited. Any such payments or awards are excluded from the maximum
level of variable remuneration referred to above. Fees payable on the appointment of a chairman or non-executive director would be in line with
the fee policy in place at the time of appointment.
29
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023 Directors’ Remuneration Report
continued
Directors’ shareholdings (subject to audit)
The directors’ interests in the ordinary share capital of the company (including the interest of connected persons) are set out in the Directors’
Report on page 21.
Directors’ contracts
The executive directors entered into new service contracts on 4 June 2020. The contracts are terminable on twelve months’ notice, which is
considered by the committee to be appropriate, and do not contain any provision for predetermined compensation in the event of termination.
Any payments for loss of office would be determined at the time taking into account all the circumstances. Non-executive directors do not have
a contract of service.
Professional advice
The committee has received advice from Deloitte LLP at a cost of £1,750. Deloitte LLP has no connection with the company or any of its
directors.
Annual Report on Directors’ Remuneration
Directors’ remuneration during the year (audited)
The directors’ remuneration for the year ended 31 March 2023 is set out in the table below.
Salary/fees
Benefits
Pension contributions
Total fixed remuneration
Performance-related bonus
Total variable remuneration
Total remuneration
A. N. Jones1
A. Vicary
S. J. Mant
A. K. Eastgate
B. J. Cooke2
M. L. Smith3
2023
£000
51
—
—
51
—
—
51
2022
£000
39
—
—
39
—
—
39
2023
£000
317
14
13
344
70
70
414
2022
£000
298
13
12
323
53
53
376
2023
£000
231
14
13
258
70
70
328
2022
£000
217
13
12
242
53
53
295
2023
£000
38
—
—
38
—
—
38
2022
£000
37
—
—
37
—
—
37
2023
£000
73
8
—
81
—
—
81
2022
£000
85
9
—
94
—
—
94
2023
£000
14
—
—
14
—
—
14
2022
£000
—
—
—
—
—
—
—
1. A. N. Jones became chairman of the company on 1 January 2023.
2. B. J. Cooke stood down as chairman of the company on 1 January 2023.
3. M. L. Smith was appointed a director on 16 November 2022.
Share options
Share options granted under the Castings 2020 Restricted Share Plan are nil-cost options which vest three years after the grant date and are
subject to continued employment with the group. The options are also subject to a two year holding period during which the participant shall be
entitled to an additional benefit (in cash or shares) in respect of dividends paid in that period. The following nil-cost options were granted during
the year:
A. Vicary
S. J. Mant
Grant date
30 June 2022
30 June 2022
Number of
shares
24,586
17,882
Market price
at grant date1
£3.228
£3.228
Fair value at
grant date
£79,363
£57,723
1. The average closing share price of the five days preceding the grant date.
In the event that the share price on vesting is 50% higher than the market price at the date of grant, the value of the options granted to A. Vicary
and S. J. Mant would be higher by £39,682 and £28,862 respectively. The following nil-cost options are outstanding as at 31 March 2023:
A. Vicary
S. J. Mant
30
As at
1 April 2022
39,044
28,397
Options
granted
24,586
17,882
Options
exercised
—
—
As at 31
March 2023
63,630
46,279
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Relative importance of spend on pay
The following table shows actual expenditure of the group and change in spend between the current and previous financial years on
remuneration paid to all employees compared to distributions to shareholders.
Remuneration of all employees
Dividends declared to shareholders
2023
£000
50,870
7,557
2022
£000
44,018
7,072
Change
£000
6,852
485
Change
%
15.6%
6.9%
Chief executive officer remuneration
The total remuneration paid to the chief executive officer for the last ten years is as follows:
Performance-related bonus1
Total remuneration
2023
£000
70
414
2022
£000
53
376
2021
£000
–
319
2020
£000
30
345
2019
£000
57
357
2018
£000
54
341
2017
£000
61
340
2016
£000
100
372
2015
£000
82
347
2014
£000
123
380
1. The performance-related bonus represents 17.6% of the maximum (2022 – 14.2%); there was no maximum amount for years 2020 and
earlier.
Percentage change in remuneration
2022 to 2023
The following table sets out the annual percentage change in remuneration from 2022 to 2023 for each of the directors compared to that of an
average employee. A. N. Jones was appointed chairman on 1 January 2023, with B. J. Cooke standing down, which is reflected below.
Salary/fees
Taxable benefits
Performance related bonus
A. Vicary
6.4%
0.0%
32.1%
S. J. Mant
6.5%
0.0%
32.1%
B. J. Cooke
-14.1%
0.0%
n/a
A. N. Jones A. K. Eastgate
2.7%
n/a
n/a
30.8%
n/a
n/a
M. L. Smith
n/a
n/a
n/a
Average
employee
13.7%
n/a
-21.6%
The performance related bonus reduction for an average employee is a result of a proportion of the bonus being consolidated into guaranteed
pay.
2021 to 2022
The following table sets out the annual percentage change in remuneration from 2021 to 2022 for each of the directors compared to that of an
average employee.
Salary/fees
Taxable benefits
Performance related bonus
A. Vicary
1.4%
0.0%
n/a
S. J. Mant
1.4%
0.0%
n/a
B. J. Cooke
0.0%
0.0%
n/a
A. N. Jones A. K. Eastgate
0.0%
n/a
n/a
0.0%
n/a
n/a
Average
employee
6.4%
n/a
42.4%
2020 to 2021
The following table sets out the annual percentage change in remuneration from 2020 to 2021 for each of the directors compared to that of an
average employee.
Salary/fees
Taxable benefits
Performance related bonus
A. Vicary
1.4%
0.0%
-100%
S. J. Mant
1.4%
0.0%
-100%
B. J. Cooke
0.0%
0.0%
n/a
A. N. Jones A. K. Eastgate
0.0%
n/a
n/a
0.0%
n/a
n/a
Average
employee
2.1%
n/a
-30.6%
The performance related bonus reductions were due to the impact of the COVID-19 pandemic on the company during 2021.
31
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023 Directors’ Remuneration Report
continued
Chief executive officer pay ratio
The table below shows the chief executive officer’s pay ratio at 25th, median and 75th percentile of our employees for the year to
31 March 2023. The ratios have been determined using Option A of The Companies (Miscellaneous Reporting) Regulations 2018.
Year ended 31 March 2023
Year ended 31 March 2022
There has not been a significant change in the ratios from 2022 to 2023.
Total shareholder return performance graph
25th percentile
pay ratio
14.0
14.3
Median pay
ratio
11.4
11.1
75th percentile
pay ratio
9.2
9.1
The following graph shows the company’s performance, measured by total shareholder return, compared with the performance of the FTSE 350
– Industrial Engineering Index, also measured by total shareholder return. This index has been selected for this comparison because this is the
most relevant index in which the company’s shares are quoted.
Castings P.L.C. TSR performance vs FTSE 350 Industrial Engineering Index (rebased to 100)
200
Sep 18
Mar 19
Sep 19
Mar 20
Sep 20
Mar 21
Sep 21
Mar 22
Sep 22
Mar 23
Castings P.L.C.
FTSE 350 Industrial Engineering Index
150
100
50
0
Mar 18
32
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Statement of Directors’ Responsibilities
in Respect of the Financial Statements
In the case of each director in office at the
date the Directors’ Report is approved:
• so far as the director is aware, there is
no relevant audit information of which the
group and parent company’s auditor is
unaware; and
•
they have taken all the steps that they
ought to have taken as a director in order
to make themselves aware of any relevant
audit information and to establish that the
group and parent company’s auditor is
aware of that information.
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 dissemination of financial statements,
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.
The directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable law
and regulation.
Company law requires the directors to
prepare financial statements for each financial
year. Under that law the directors have
prepared the group financial statements in
accordance with UK-adopted international
accounting standards and parent company
financial statements in accordance with
United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS
101 ‘Reduced Disclosure Framework’, and
applicable law). Under company law the
directors must not approve the financial
statements unless they are satisfied that
they give a true and fair view of the state
of affairs of the group and parent company
and of the profit or loss of the group and
parent company for that period. In preparing
the financial statements, the directors are
required to:
• select suitable accounting policies and
then apply them consistently;
• state whether UK-adopted international
accounting standards have been followed
for the group financial statements and
United Kingdom Accounting Standards,
comprising FRS 101, have been
followed for the parent company financial
statements, subject to any material
departures disclosed and explained in the
financial statements;
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the group
and parent company will continue in
business.
The directors are also responsible for
safeguarding the assets of the group and
parent company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the group and
parent company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the group and parent
company and enable them to ensure that
the financial statements and the Directors’
Remuneration Report comply with the
Companies Act 2006.
The directors are responsible for the
maintenance and integrity of the parent
company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Directors’ confirmations
The directors consider that the Annual Report
and accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the group and parent company’s
position and performance, business model
and strategy.
Each of the directors, whose names and
functions are listed in Board of Directors on
page 20 confirm that, to the best of their
knowledge:
•
•
•
the parent company financial statements,
which have been prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS
101 ‘Reduced Disclosure Framework’,
and applicable law), give a true and fair
view of the assets, liabilities, financial
position and profit of the company;
the group financial statements, which
have been prepared in accordance with
UK-adopted international accounting
standards, give a true and fair view of the
assets, liabilities, financial position and
profit of the group; and
the Business and Financial Review
includes a fair review of the development
and performance of the business and the
position of the group and parent company,
together with a description of the principal
risks and uncertainties that it faces.
33
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023
Independent Auditor’s Report
to the Members of Castings P.L.C.
Opinion
We have audited the financial statements of Castings P.L.C. (the
‘parent company’) and its subsidiaries (the ‘group’) for the year ended
31 March 2023 which comprise the Consolidated Statement of
Comprehensive Income, Consolidated Balance Sheet, Consolidated
Cash Flow Statement, Consolidated Statement of Changes in Equity,
Parent Company Balance Sheet, Parent Company Statement of
Changes in Equity and notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and UK-adopted international accounting
standards. The parent company financial statements have been
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”), as applied in
accordance with the provisions of the Companies Act 2006.
In our opinion, the financial statements:
• give a true and fair view of the state of the group’s and of the
parent company’s affairs as at 31 March 2023 and of the group’s
profit for the year then ended;
• have been properly prepared in accordance with UK-adopted
international accounting standards.
• as regards the parent company statements have, been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”); and
• have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the “Auditor’s responsibilities
for the audit of the financial statements” section of our report. We are
independent of the group and the parent company in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities and public interest entities and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our audit procedures to evaluate the directors’ assessment of the
group’s and the parent company’s ability to continue to adopt the
going concern basis of accounting included but were not limited to:
• Undertaking an initial assessment at the planning stage of the
audit to identify events or conditions that may cast significant
doubt on the group’s and the parent company’s ability to continue
as a going concern;
34
• Making enquiries of the directors to understand the period
of assessment considered by them, the assumptions they
considered and the implication of those when assessing the
group’s and the parent company’s future financial performance;
• Challenging the appropriateness of the directors’ key assumptions
in their cash flow forecasts, by reviewing supporting and
contradictory evidence in relation to these key assumptions and
assessing the directors’ consideration of severe but plausible
scenarios. This included assessing the viability of mitigating
actions within the directors’ control;
• Testing the accuracy and functionality of the model used to
prepare the directors’ forecasts;
• Assessing and challenging key assumptions and mitigating
actions put in place in response to the issues most relevant to this
assessment which include rising energy costs, inflation, customer
demand and the supply of materials and labour;
• Considering the consistency of the directors’ forecasts with other
areas of the financial statements and our audit; and
• Evaluating the appropriateness of the directors’ disclosures in the
financial statements on going concern.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group’s and the
parent company’s ability to continue as a going concern for a period
of at least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of this
report.
In relation to Castings P.L.C.’s reporting on how it has applied the UK
Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the financial
statements about whether the director’s considered it appropriate to
adopt the going concern basis of accounting.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
we identified, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
We summarise below the key audit matters in forming our opinion
above, together with an overview of the principal audit procedures
performed to address each matter and our key observations arising
from those procedures.
These matters, together with our findings, were communicated to
those charged with governance through our Audit Completion Report.
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Key Audit Matter
How our scope addressed this matter
Revenue Recognition
The group’s and the parent company’s accounting policy for revenue
recognition is set out in the accounting policy notes on pages 43
and 63 respectively.
Revenue is material for the group and the parent company and
represents the largest figure in the Consolidated Statement of
Comprehensive Income. An error in this balance could significantly
affect a user’s interpretation of the financial statements.
As a result, we identified revenue recognition, and in particular
cut-off (where revenue may be manipulated close to the year end to
record revenue in the incorrect financial period) as a key audit matter.
Our audit procedures included, but were not limited to, the following:
• Reviewing key controls relating to revenue recognition and
performing a walkthrough to evaluate their design and
implementation;
• Reviewing the contract terms for a selection of customers to
assess whether revenue was recognised in line with the agreed
terms; and
• Selecting a sample of transactions close to the year-end and
verifying that they had been posted to the correct financial period.
Key observations
Based on the procedures performed, we did not identify any material
misstatements in relation to revenue recognition.
Our application of materiality and an overview of the scope of our audit
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial
statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group materiality
Overall materiality
Group
£2,001k
Parent Company
£1,413k
How we determined it
Materiality has been determined with reference to a benchmark of revenue, of which it represents 1%.
Rationale for benchmark applied
We used revenue to calculate our materiality as, in our review, this is the most relevant and stable
measure of the underlying financial performance of the group and parent company for this year end.
Performance materiality
Reporting threshold
Performance materiality is set to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements in the financial statements exceeds
materiality for the financial statements as a whole.
On the basis of our risk assessments, together
with our assessment of the group’s overall
control environment, our judgement was that
performance materiality should be set at 70% of
our financial statement materiality, representing a
value of £1,407k.
On the basis of our risk assessments, together
with our assessment of the group’s overall
control environment, our judgement was that
performance materiality should be set at 70% of
our financial statement materiality, representing a
value of £989k.
We agreed with the audit committee that we
would report to them misstatements identified
during our audit above £60k as well as
misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
We agreed with the audit committee that we
would report to them misstatements identified
during our audit above £42k as well as
misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud or error, and
then designed and performed audit procedures responsive to those risks. In particular, we looked at where the directors made subjective
judgements, such as assumptions on significant accounting estimates.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a
whole. We used the outputs of our risk assessment, our understanding of the group and the parent company, their environment, controls, and
critical business processes, to consider qualitative factors to ensure that we obtained sufficient coverage across all financial statement line items.
Our group audit scope included an audit of the group and the parent company financial statements. Based on our risk assessment, all entities
within the group, including the parent company, were subject to full scope audit performed by the group audit team.
35
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023 Independent Auditor’s Report
to the Members of Castings P.L.C.
continued
Audit work on subsidiary entities for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based
on individual statutory performance materiality which is lower than the consolidated materiality set out above. The performance materiality set for
each subsidiary is based on the relative scale and risk of the subsidiary to the group as a whole and our assessment of the risk of misstatement
at subsidiary level. The range of financial statement materiality across components, audited to the lower of local statutory audit materiality and
materiality capped for group audit purposes, was between £277k and £1,413k, being all below group financial statement materiality.
The group audit team also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no
significant risks of material misstatement of the aggregated financial information.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements and those reports have been prepared in accordance with applicable legal requirements;
the information about internal control and risk management systems in relation to financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and Transparency Rules sourcebook made by
the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements; and
•
information about the parent company’s corporate governance code and practices and about its administrative, management and
supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we
have not identified material misstatements in the:
•
•
strategic report or the directors’ report; or
information about internal control and risk management systems in relation to financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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 require for our audit; or
• a corporate governance statement has not been prepared by the parent company.
36
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Corporate governance statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to Castings P.L.C.’s compliance with the provisions of the UK Corporate Governance Statement specified for our
review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified, set out on page 25;
• Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why they period is appropriate,
set out on page 18;
• Directors’ statement on fair, balanced and understandable, set out on page 23;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks, set out on page 8;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems, set out on page
25; and;
• The section describing the work of the audit committee, set out on page 26.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 33, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud.
Based on our understanding of the group and the parent company and their industry, we considered that non-compliance with the following
laws and regulations might have a material effect on the financial statements: employment regulation and health and safety regulation.
To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material
misstatement in respect to non-compliance, our procedures included, but were not limited to:
• Gaining an understanding of the legal and regulatory framework applicable to the group and the parent company, the industry in which they
operate, and the structure of the group, and considering the risk of acts by the group and the parent company which were contrary to the
applicable laws and regulations, including fraud;
•
Inquiring of the directors, management and, where appropriate, those charged with governance, as to whether the group and the parent
company is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and
regulations;
•
Inspecting correspondence with relevant licensing or regulatory authorities;
• Reviewing minutes of directors’ meetings in the year; and
• Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any indications of non-compliance.
We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as tax legislation,
pension legislation and the Companies Act 2006.
37
Corporate GovernanceCastings P.L.C. Annual Report for the year ended 31 March 2023 Independent Auditor’s Report
to the Members of Castings P.L.C.
continued
In addition, we evaluated the directors’ and management’s incentives and opportunities for fraudulent manipulation of the financial statements,
including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to
manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, in particular in
relation to revenue recognition (cut-off), and significant one-off or unusual transactions.
Our procedures in relation to fraud included but were not limited to:
• Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or alleged fraud;
• Gaining an understanding of the internal controls established to mitigate risks related to fraud;
• Discussing amongst the engagement team the risks of fraud; and
• Addressing the risks of fraud through management override of controls by performing journal entry testing.
The primary responsibility for the prevention and detection of irregularities, including fraud, rests with both those charged with governance
and management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional
omissions, misrepresentations or the override of internal controls.
The risks of material misstatement that had the greatest effect on our audit are discussed in the “Key audit matters” section of this report.
A further description of our responsibilities is available on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by the Audit and Risk Committee on the 8 January 2020 to audit the
financial statements for the year ending 31 March 2020 and subsequent financial periods. The period of total uninterrupted engagement is 4
years, covering the years ending 31 March 2020 to date.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our audit.
Our audit opinion is consistent with our additional report to the audit committee.
Use of the audit report
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.
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements will form part of
the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the
ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance over whether the annual financial report will be
prepared using the single electronic format specified in the ESEF RTS.
Louis Burns (Senior Statutory Auditor)
for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
Two Chamberlain Square
Birmingham
B3 3AX
14 June 2023
38
Castings P.L.C.Castings P.L.C. Annual Report for the year ended 31 March 2023 Consolidated Statement of Comprehensive Income
for the year ended 31 March 2023
Revenue
Cost of sales
Gross profit
Distribution costs
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
Profit for the year attributable to equity holders of the parent company
Other comprehensive income/(losses) for the year:
Items that will not be reclassified to profit and loss:
Movement in unrecognised surplus on defined benefit pension schemes net of
actuarial gains and losses
Items that may be reclassified subsequently to profit and loss:
Change in fair value of financial assets
Tax effect of items that may be reclassified
Other comprehensive income 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
Diluted
Notes to the consolidated financial statements are on pages 43 to 59.
Notes
2
3
6
7
5
9
2023
£000
200,990
(162,077)
38,913
(5,440)
(17,104)
16,369
344
16,713
(2,923)
13,790
2022
£000
148,583
(118,105)
30,478
(3,411)
(15,040)
12,027
47
12,074
(3,522)
8,552
13,790
8,552
117
117
(40)
10
(30)
87
119
119
88
(22)
66
185
13,877
8,737
31.66p
31.58p
19.60p
19.57p
39
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements
Consolidated Balance Sheet
as at 31 March 2023
ASSETS
Non-current assets
Property, plant and equipment
Financial assets
Current assets
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the parent company
Share capital
Share premium account
Treasury shares
Other reserve
Retained earnings
Total equity
Notes
2023
£000
2022
£000
10
11
12
13
14
15
16
60,353
356
60,709
26,095
51,080
980
35,566
113,721
174,430
37,051
37,051
5,719
42,770
131,660
4,363
874
(231)
13
126,641
131,660
62,801
396
63,197
25,889
39,874
489
35,745
101,997
165,194
28,477
28,477
5,219
33,696
131,498
4,363
874
(79)
13
126,327
131,498
The consolidated financial statements on pages 39 to 59 were approved and authorised for issue by the board of directors on 14 June 2023,
and were signed on its behalf by:
A. N. Jones
Chairman
S. J. Mant
Finance Director
Notes to the consolidated financial statements are on pages 43 to 59.
Company registration number – 91580.
40
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Consolidated Cash Flow Statement
for the year ended 31 March 2023
Cash flows from operating activities
Profit before income tax
Adjustments for:
Depreciation
Loss on disposal of property, plant and equipment
Finance income
Equity-settled share-based payment expense
Pension administrative costs
Increase in inventories
Increase in receivables
Increase in payables
Cash generated from operating activities
Tax paid
Interest received
Net cash generated from operating activities
Cash flows from investing activities
Dividends received from listed investments
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Repayments from pension schemes
Advances on behalf of the pension schemes
Net cash used in investing activities
Cash flow from financing activities
Dividends paid to shareholders
Purchase of own shares
Net cash used in financing activities
Decrease 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 consolidated financial statements are on pages 43 to 59.
Notes
2023
£000
2022
£000
10
3
6
5
6
6
5
5
8
18
16,713
12,074
8,646
8,601
—
(344)
119
117
(206)
(11,200)
8,574
22,419
(2,904)
327
19,842
17
(6,198)
—
2,114
(2,120)
(6,187)
(13,682)
(152)
(13,384)
(179)
35,745
35,566
19,993
15,573
35,566
62
(47)
74
119
(7,170)
(4,898)
4,106
12,921
(2,568)
28
10,381
19
(4,379)
27
2,496
(2,114)
(3,951)
(6,698)
(79)
(6,777)
(347)
36,092
35,745
17,065
18,680
35,745
41
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Consolidated Statement of Changes in Equity
for the year ended 31 March 2023
Equity attributable to equity holders of the parent
At 1 April 2022
Profit for the year
Other comprehensive income/(losses):
Movement in unrecognised surplus on defined benefit
pension schemes net of actuarial gains and losses
Change in fair value of financial assets
Tax effect of items taken directly to reserves
Total comprehensive income for the year
Shares acquired in the year
Equity-settled share-based payments (see note 17)
Dividends (see note 8)
Share
capitala)
£000
4,363
Share
premiumb)
£000
874
Treasury
sharesc)
£000
(79)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(152)
—
—
At 31 March 2023
4,363
874
(231)
Other
reserved)
£000
13
—
Retained
earningse)
£000
126,327
13,790
—
—
—
—
—
—
—
13
117
(40)
10
13,877
—
119
(13,682)
126,641
Equity attributable to equity holders of the parent
At 1 April 2021
Profit for the year
Other comprehensive income/(losses):
Movement in unrecognised surplus on defined benefit
pension schemes net of actuarial gains and losses
Change in fair value of financial assets
Tax effect of items taken directly to reserves
Total comprehensive income for the year
Shares acquired in the year
Equity-settled share-based payments (see note 17)
Dividends (see note 8)
At 31 March 2022
Share
capitala)
£000
4,363
Share
premiumb)
£000
874
Treasury
sharesc)
£000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,363
874
—
—
—
—
—
(79)
—
—
(79)
Other
reserved)
£000
13
Retained
earningse)
£000
124,214
—
8,552
119
88
(22)
8,737
—
74
—
—
—
—
—
—
—
13
(6,698)
(6,698)
126,327
131,498
Total
equity
£000
131,498
13,790
117
(40)
10
13,877
(152)
119
(13,682)
131,660
Total
equity
£000
129,464
8,552
119
88
(22)
8,737
(79)
74
a) Share capital (note 16) – 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) Treasury shares – Value of shares acquired by the company.
d) Other reserve – Amounts transferred from share capital on redemption of issued shares.
e) Retained earnings – Cumulative net gains and losses recognised in the statement of comprehensive income.
42
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Notes to the Consolidated Financial Statements
1 Accounting policies
General information
Castings Public Limited Company (the ‘company’, ‘Castings P.L.C.’) is incorporated and domiciled in the United Kingdom and registered in
England as a public company limited by shares. The company’s registered office is at Lichfield Road, Brownhills, West Midlands, WS8 6JZ,
United Kingdom. The company’s ordinary shares are traded on the London Stock Exchange’s Regulated Market (Premium Listing). There has
been no change in this information since the Annual Report for the year ended 31 March 2022.
Basis of preparation
The group financial statements have been prepared in accordance with UK-adopted international accounting standard in conformity with the
requirements of the Companies Act 2006.
The IFRSs applied in the group financial statements are subject to ongoing amendment by the IASB 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 2023 or
later accounting periods but may be adopted early.
The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management
to exercise its judgement in the process of applying the group’s accounting policies.
The primary statements within the financial information contained in this document have been presented in accordance with IAS 1 Presentation
of Financial Statements.
The financial statements are prepared on a going concern basis and 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. The presentation currency used is sterling and
the amounts have been presented in round thousands (‘£000’).
New standards effective and adopted by the group in the year
There have been no new standards, or amendments to standards, applied in the year that had a material effect on the group.
Going concern
In determining the basis of preparation for the consolidated financial statements, the directors have considered the group’s business activities,
together with factors likely to affect its future development, performance and position. Further details are set out in the viability statement on
page 18 and the corporate governance statement on page 25.
Basis of consolidation
The consolidated statement of comprehensive income and balance sheet include the financial statements of the parent company and its
subsidiaries made up to the end of the financial year. These subsidiaries include William Lee Limited and CNC Speedwell Limited, both of which
are 100% owned, controlled by the company and are based in the UK. Control is achieved where the company has the power to govern the
financial and operating policies of an investee entity so as to obtain benefits from its activities. Intercompany transactions and balances between
group companies are eliminated in full.
Business combinations and goodwill
Shares issued as consideration for the acquisition of companies have a fair value attributed to them, which is normally their market value at the
date of acquisition. Net 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.
Revenue recognition
Revenue is measured at the fair value of consideration received or receivable and represents amounts receivable for goods and services
provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Revenue from the sale of goods relates to
the sale of castings. Revenue from the sale of services relates to machining and minor assembly work performed on a subcontract basis for
external customers. Revenue is recognised once the performance obligation has been met. This is deemed to be when the goods and services
have been collected by, or delivered to, the customer in accordance with the agreed delivery terms. Payment terms are based on usual market
practices and commercial terms agreed with the customer.
43
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Consolidated Financial Statements
continued
1 Accounting policies continued
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 net interest also being charged/credited to operating
profit subject to the asset ceiling. Actuarial gains and losses are recognised in other comprehensive income and the balance sheet reflects the
schemes’ surplus or deficit at the balance sheet date. A full valuation is carried out triennially using the projected unit credit method. Where the
group cannot benefit from a scheme surplus in the form of refunds from the plans or reductions in future contributions, any asset resulting from
the above policy is restricted accordingly.
Payments to the defined contribution scheme are charged to the consolidated statement of comprehensive income as they become payable.
Property, plant and equipment
Property, plant and equipment assets are held at cost less accumulated depreciation. Depreciation is provided on property, plant and equipment,
other than freehold land and assets in the course of construction, on a straight-line basis. The periods of write-off used are as follows:
i. Freehold buildings over 50 years.
ii. Plant and equipment over a period of 3 to 15 years.
The group annually reviews the assessment of residual values and useful lives in accordance with IAS 16.
Impairment of proprty, plant and equipment
At each balance sheet date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists or an asset is not in use and therefore requires an annual test, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate
cash inflows that are largely independent from other assets, the group estimates the recoverable amount of the cash generating unit to which
the asset belongs.
Recoverable amount is the higher of fair value less costs to dispose and value-in-use. In assessing value-in-use, the estimated future nominal
cash flows are discounted to their present value using a nominal discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset
(cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in the consolidated
income statement.
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.
Foreign currencies
Assets and liabilities in foreign currencies are translated at the spot rates of exchange ruling at the balance sheet date. Transactions in foreign
currencies are recorded at the rate ruling at the date of the transaction; all differences are dealt with through the consolidated statement of
comprehensive income.
Financial instruments
a) Financial assets
The group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired.
The group’s accounting policy for each category is as follows:
Fair value through other comprehensive income
Fair value through other comprehensive income 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 in other comprehensive income. The cumulative fair value gains
and losses are held within retained earnings and are not treated as distributable. Fair value is determined with reference to published quoted
prices in an active market. The dividend income from listed investments is presented within finance income.
44
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. 1 Accounting policies continued
Amortised cost
These assets are held in order to collect contractual cash flows, on specific dates, which are solely payments of the principal and interest on
the principal amount outstanding. They arise principally through the provision of goods and services to customers (e.g. trade receivables) and
deposits held at banks and building societies, but may also incorporate other types of contractual monetary asset. They are initially recognised
at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit
losses. During this process the probability of the non-payment of the trade receivables is assessed. Where specific receivables are known to
be ‘bad’ or it becomes apparent that payment is ‘doubtful’ then a credit loss allowance of 100% is applied. Such provisions are recorded in
a separate allowance account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive
income. On confirmation that the deposit or receivable will not be collectable, the gross carrying value of the asset is written off against the
associated provision.
b) Financial liabilities
The group classifies its financial liabilities into liabilities measured at amortised cost. Although the group uses derivative financial instruments in
economic hedges of currency risk, it does not hedge account for these transactions, and the amounts are not material. These derivative financial
instruments are accounted for at fair value through the consolidated statement of income where material to the financial statements.
Unless otherwise indicated, the carrying amounts of the group’s financial liabilities are a reasonable approximation of their fair values.
Financial liabilities measured at amortised cost
Financial liabilities include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
Fair value is calculated by discounting estimated future cash flows using a market rate of interest.
c) Share capital
The group’s ordinary shares are classified as equity instruments. Share capital includes the nominal value of the shares and any share premium
attaching to the shares.
Current and deferred tax
Deferred tax is provided using the liability method. Deferred income tax assets are recognised to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.
Deferred tax is measured at the actual tax rates that are expected to apply in the periods in which the temporary differences are expected to
reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Current tax is provided for on the taxable profits of each company in the group, using current tax rates and legislation that has been enacted or
substantively enacted by the balance sheet date.
Share-based payments
The cost of equity-settled transactions with employees of the company is measured by reference to the fair value at the date at which they are
granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled
to the award.
The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service conditions are met, such
that the amount ultimately recognised as an expense is based on the number of awards that meet the related service conditions at the vesting
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.
Finance income and expense
Finance income and expense is recognised in the consolidated statement of comprehensive income as it accrues.
45
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Consolidated Financial Statements
continued
1 Accounting policies continued
Standards, interpretations and amendments to published standards that are not yet effective
There are no significant IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group.
Critical accounting estimates and judgements
The group makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. In the
future, actual experience may differ from these estimates and judgements. The estimates and judgements that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below:
Estimates
Pension assumptions
The costs, assets and liabilities of the defined benefit pension schemes operated by the group are determined using methods relying on actuarial
estimates and assumptions. Whilst this is a source of estimation uncertainty for the group, the scheme surplus is not recognised on the balance
sheet (as set out below). Details of the key assumptions are set out in note 5.
Judgements
Pension surplus
In accordance with the winding-up provisions of the Trust Deed and Rules of the final salary pension schemes, management has concluded that
the company does not have an unconditional right to receive returns of contributions or refunds when the schemes are in surplus. Accordingly,
the surplus has not been recognised on the balance sheet as set out in note 5.
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 Limited are aggregated into Foundry operations, due to the similar nature of the
businesses, and CNC Speedwell Limited is the Machining operation.
Inter-segment transactions are entered into under the normal commercial terms and conditions that would be available to third parties.
The following shows the revenues, results and total assets by reportable segment in the year to 31 March 2023:
Revenue from external customers
Inter-segmental revenue
Segmental result
Unallocated costs:
Defined benefit pension cost
Finance income
Profit before income tax
Total assets
Non-current asset additions
Depreciation
Total liabilities
All non-current assets are based in the United Kingdom.
Foundry
operations
£000
198,972
24,739
Machining
operations
£000
2,018
25,640
Elimination
£000
—
—
Total
£000
200,990
50,379
16,332
169
(15)
16,486
162,671
4,826
5,235
(45,668)
26,687
1,372
3,411
(6,759)
(14,928)
—
—
9,657
(117)
344
16,713
174,430
6,198
8,646
(42,770)
46
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. The following shows the revenues, results and total assets by reportable segment in the year to 31 March 2022:
Revenue from external customers
Inter-segmental revenue
Segmental result
Unallocated costs:
Exceptional credit for recovery of Icelandic bank deposits
previously written off
Defined benefit pension cost
Finance income
Profit before income tax
Total assets
Non-current asset additions
Depreciation
Total liabilities
All non-current assets are based in the United Kingdom.
The geographical analysis of revenues by destination for the year is as follows:
United Kingdom
Sweden
Germany
Netherlands
Rest of Europe
North and South America
Other
Foundry
operations
£000
145,601
17,037
Machining
operations
£000
2,982
19,488
Elimination
£000
—
—
Total
£000
148,583
36,525
13,084
(894)
(50)
12,140
148,554
3,388
4,790
(31,561)
26,741
991
3,811
(6,977)
6
(119)
47
12,074
165,194
4,379
8,601
(33,696)
2022
£000
31,319
38,809
20,506
19,907
26,050
11,294
698
(10,101)
—
—
4,842
2023
£000
34,519
55,107
32,292
31,763
31,810
14,322
1,177
200,990
148,583
All revenue arises in the United Kingdom from the group’s continuing activities.
Information about major customers
Included in revenues arising from Foundry operations are revenues of approximately £49,835,000, £29,374,000 and £22,229,000 from three
ultimate customer groups (2022 – £34,435,000, £21,778,000 and £18,037,000 respectively).
3 Net operating costs
Raw materials and consumables
Changes in inventories of finished goods and work in progress
Staff costs (note 4)
Depreciation of property, plant and equipment
Light, heat and power
Outside processing
Carriage
Repairs and maintenance
Loss on disposal of property, plant and equipment
Other costs
Total cost of sales, distribution costs and administrative expenses
2023
£000
51,835
1,257
56,517
8,646
25,937
18,096
5,440
7,735
—
9,158
184,621
2022
£000
40,960
(5,279)
48,582
8,601
11,069
14,845
3,411
6,764
62
7,541
136,556
47
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Consolidated Financial Statements
continued
3 Net operating costs continued
During the year the group obtained the following services from the company’s auditor:
Fees payable to the company’s auditor for the audit of the parent company and group financial statements
Fees payable to the company’s auditor for other services – the audit of the company’s subsidiaries
4 Employee information
Average monthly number of employees during the year was:
Production
Management and administration
Staff costs (including directors) comprise:
Wages and salaries
Social security costs
Other pension costs – defined contribution plans
Other pension costs – defined benefit plans (note 5)
2023
£000
76
54
2023
1,074
128
1,202
2023
£000
49,277
5,530
1,593
117
56,517
2022
£000
67
48
2022
1,050
117
1,167
2022
£000
42,562
4,445
1,456
119
48,582
The directors represent the key management personnel. Details of their compensation are given in the Directors’ Remuneration Report on
page 30.
5 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 Trustee board
is appointed by both the company and the members of the schemes and acts in the interest of the schemes and all relevant stakeholders,
including the members and the company. The Trustees are responsible for the investment of the assets of the schemes.
The latest actuarial valuation was performed with an effective date of 6 April 2020 using the defined accrued benefit method. It assumed that the
rate of return on investments was 0.3% per annum for pre-retirement and 0.6% for post-retirement and price inflation was 2.8% under RPI and
2.0% under CPI. The demographic assumptions were based on S3PA (YoB) tables with an age rating of -1 year and -2 year being applied to the
tables for shop floor and staff schemes respectively. The future mortality improvements were based on CMI 2020 projections with a 1.75% per
annum long-term improvement rate. The next actuarial valuation due will be with an effective date of 6 April 2023.
In order to help optimise the return on assets held by the pension schemes, the pension payments and administration costs incurred by the
schemes are paid by the company. The net amount due from the schemes (being pension payments made plus administrative costs less
repayments received from the schemes) are subject to repayment to the company and recorded as amounts receivable from pension schemes
in the group and company financial statements (notes 13 and 9 respectively). The amounts are recorded as payables by the schemes and
shown as a reduction to asset values in the pension disclosures set out below.
The pension schemes are related parties of the company and during the year £2,120,000 (2022 – £2,114,000) was paid by the company on
behalf of the schemes in respect of pension payments and administration costs. There are no funding arrangements in place that would impact
on future contributions and no contributions are expected to be made in the next financial year. The pension schemes made repayments to
the company during the year of £2,114,000 (2022 – £2,496,000). At 31 March 2023 the outstanding balance due from the schemes to the
company was £2,120,000 (2022 – £2,114,000) as set out in note 13. In addition, the group made contributions to individual members’ Group
Personal Pension Plans during the year.
48
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Related risks
Through its defined benefit pension plans, the group was exposed to a number of risks that are inherent in such plans and arrangements. The
main risks are summarised below and there are no unusual, entity-specific or plan-specific risks and no significant concentration risks:
• asset value volatility, with the associated impact on the assets held in connection with the funding of pension obligations and the related
cash flows;
• changes in bond yields, with any reduction resulting in an increase in the present value of pension obligations, mitigated by an increase in
the value of some of the plan assets;
inflation, as pension obligations are linked to inflation; and
life expectancy, as pension benefits are generally provided for the life of beneficiaries and their dependants.
•
•
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 2020 and updated to 31 March 2023 using the projected unit method by a qualified independent
actuary. 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)
Change in benefit obligation
Benefit obligation at beginning of year
Past service cost
Interest cost on defined benefit obligation
Actuarial gains arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Other experience losses/(gains)
Benefits paid
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Interest income on plan assets
Return on plan assets less than discount rate
Administrative expenses
Benefits paid
Fair value of plan assets at end of year
Surplus
Unrecognised pension surplus (asset ceiling)
Net amount recognised in the balance sheet
2023
2.6%
4.9%
3.2%
2.8%
2023
£000
50,947
—
1,383
(13,645)
—
2,343
(3,104)
37,924
60,879
1,660
(10,981)
(117)
(3,104)
48,337
10,413
(10,413)
—
2022
3.1%
2.8%
3.7%
3.3%
2022
£000
61,962
—
1,265
(4,641)
(3,643)
(561)
(3,435)
50,947
71,942
1,474
(8,983)
(119)
(3,435)
60,879
9,932
(9,932)
—
49
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Consolidated Financial Statements
continued
5 Pensions continued
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
Past service cost
Interest cost on defined benefit obligation
Interest income on plan assets
Interest expense on effect of asset ceiling on unrecognised surplus
Administrative expenses
Total pension cost recognised within administrative expenses (note 4)
Gain arising from changes in financial assumptions
Gain arising from changes in demographic assumptions
Experience loss/(gain)
Return on plan assets less than discount rate
Changes in asset ceiling on unrecognised surplus
Pension gain shown in statement of comprehensive income
Total defined benefit cost recognised in the year
Defined benefit obligation by participant category
Participant category
Active participants
Deferred participants
Pensioners
Year to
31 March
2023
£000
Year to
31 March
2022
£000
—
—
1,383
(1,660)
277
117
117
(13,645)
—
2,343
10,981
204
(117)
—
—
—
1,265
(1,474)
209
119
119
(4,641)
(3,643)
(561)
8,983
(257)
(119)
—
31 March
2023
£000
31 March
2022
£000
—
16,842
21,082
37,924
—
24,714
26,233
50,947
Scheme assets
Investments of the defined benefit schemes are diversified, such that failure of any single investment would not have a material impact on the
overall level of assets. On 24 March 2020, the Trustees of the schemes completed a bulk annuity insurance buy-in with Aviva Life & Pensions
UK Limited (‘Aviva’) thus providing certainty and security for all members of the schemes. The buy-in secures an insurance asset from Aviva
that fully matches, subject to final price adjustment of the bulk annuity pricing, the remaining pension liabilities of the schemes (excluding those
relating to GMP equalisation). The buy-in covers the investment, longevity, interest rate and inflation risks in respect of the schemes and therefore
substantially reduces the pension risk to the company. The asset allocations at the year end were as follows:
Plan
assets at
31 March
2023
£000
Plan
assets at
31 March
2022
£000
13,457
37,000
50,457
(2,120)
48,337
13,285
49,708
62,993
(2,114)
60,879
Assets category
Cash and cash equivalents
Asset held by insurance company
Amounts repayable to the group
50
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. In determining the appropriate discount rate, the company considers the interest rates of corporate bonds with at least an ‘AA’ rating.
The projected pension cost for the year ending 31 March 2024 is £121,000.
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)
2023
2022
Male
Staff/
Shopfloor
Female
Staff/
Shopfloor
Male
Staff/
Shopfloor
Female
Staff/
Shopfloor
23.2/22.3
25.8/24.9
23.1/22.2
25.7/24.8
24.8/24.0
27.5/26.6
24.7/23.8
27.4/26.5
* Mortality tables 102% for Males and 99% for Females of S3PA CMI 2020 projections with a 1.5% long-term rate of improvement have been
used for both schemes, with a -1 age rating applied for the staff scheme.
Sensitivities
The calculations of the defined benefit obligations are sensitive to the assumptions set out on pages 48 to 51. The following table sets out
the estimated impact of a change in the assumptions on the defined benefit obligation at 31 March 2023, whilst holding all other assumptions
constant. The sensitivity analysis may not be representative of the actual change in defined benefit obligation as it is unlikely that the change in
assumptions would occur in isolation of another as some of the assumptions may be correlated.
Defined benefit obligation as a result of:
Reduction in the discount rate of 0.25%
Increase in inflation of 0.25%
One year increase in life expectancy
Maturity profile of defined benefit obligation
Expected benefit payments during:
Year 1
Year 2
Year 3
Year 4
Year 5
Years 6–10
31 March
2023
£000
39,034
38,624
39,061
31 March
2023
£000
31 March
2022
£000
1,991
2,035
2,154
2,314
2,399
13,414
1,951
1,992
2,035
2,154
2,314
12,968
The maturity profile shown above is not the full maturity profile but that of the next ten years, based on an analysis of the present value of the
defined benefit obligation.
The weighted average duration of the defined benefit obligation of the schemes is 13 years.
51
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Consolidated Financial Statements
continued
6 Finance income
Interest on short-term deposits
Income from listed investments
7 Income tax expense
Corporation tax based on a rate of 19% (2022 – 19%)
UK corporation tax
Current tax on profits for the year
Adjustments to tax charge in respect of prior years
Deferred tax
Current year origination and reversal of temporary differences
Adjustment to deferred tax charge in respect of prior years
Adjustment to deferred tax charge in respect of change in tax rate
Taxation on profit
Profit before income tax
Tax on profit at the standard rate of corporation tax
in the UK of 19% (2022 – 19%)
Effect of:
Expenses not deductible for tax purposes
Adjustment to tax charge in respect of prior years
Adjustment to deferred tax charge in respect of prior years
Adjustment to deferred tax charge in respect of change in tax rate
Pension adjustments
Total tax charge for the year
Effective rate of tax (%)
2023
£000
327
17
344
2023
£000
2,500
(87)
2,413
935
(425)
—
510
2,923
2022
£000
28
19
47
2022
£000
2,050
(155)
1,895
624
(107)
1,100
1,627
3,522
16,713
12,074
3,175
2,294
238
(87)
(425)
—
22
2,923
17.5
357
(155)
(107)
1,110
23
3,522
29.2
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2021 on 24 May 2021, the applicable main rate
increasing from the current level of 19% to 25% from 1 April 2023. Deferred taxes at the balance sheet date have been measured using these
enacted tax rates and reflected in these financial statements.
8 Dividends
Final paid of 12.57p per share for the year ended 31 March 2022 (2021 – 11.69p)
Interim paid of 3.84p per share (2022 – 3.66p)
Supplementary dividend of 15.00p per share for the year ended 31 March 2022 (2021 – nil)
2023
£000
5,475
1,673
6,534
13,682
2022
£000
5,101
1,597
—
6,698
The directors are proposing a final dividend of 13.51 pence (2022 – 12.57 pence) per share totalling £5,884,695 (2022 – £5,475,249). In
addition, the directors have declared a supplementary dividend of 15.00 pence per share, totalling £6,533,710. These dividends have not been
accrued at the balance sheet date.
52
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. 9 Earnings per share and diluted earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Profit after taxation (£000)
Weighted average number of shares – basic calculation
Earnings per share – basic calculation (pence per share)
Number of dilutive share options in issue
Weighted average number of shares – diluted calculation
Earnings per share – diluted calculation (pence per share)
10
Property, plant and equipment
Cost
At 1 April 2022
Additions during the year
Disposals
Other
At 31 March 2023
Accumulated depreciation
At 1 April 2022
Charge for year
Disposals
Other
At 31 March 2023
Net book values
At 31 March 2023
At 31 March 2022
Cost
At 1 April 2021
Additions during the year
Disposals
At 31 March 2022
Accumulated depreciation
At 1 April 2021
Charge for year
Disposals
At 31 March 2022
Net book values
At 31 March 2022
At 31 March 2021
2023
13,790
43,561,593
31.66p
109,909
43,671,502
31.58p
2022
8,552
43,631,545
19.60p
67,441
43,698,986
19.57p
Freehold
land and
buildings
£000
Plant and
equipment
£000
Total
£000
40,110
155,596
195,706
437
—
410
40,957
5,761
(961)
—
160,396
6,198
(961)
410
201,353
12,295
120,610
132,905
1,015
—
410
7,631
(961)
—
8,646
(961)
410
13,720
127,280
141,000
27,237
27,815
33,116
34,986
60,353
62,801
40,357
163
(410)
40,110
11,632
1,073
(410)
12,295
27,815
28,725
151,831
4,216
(451)
192,188
4,379
(861)
155,596
195,706
113,444
125,076
7,528
(362)
8,601
(772)
120,610
132,905
34,986
38,387
62,801
67,112
The net book value of land and buildings includes £2,169,000 (2022 – £2,169,000) for land which is not depreciated.
Included within plant and equipment are assets in the course of construction with a net book value of £385,000 (2022 – £1,043,000) which are
not depreciated.
53
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Consolidated Financial Statements
continued
11 Financial assets
Financial assets at FVOCI
At 1 April 2022
Net (losses)/gains recognised in other comprehensive income
At 31 March 2023
2023
£000
356
2023
£000
396
(40)
356
2022
£000
396
2022
£000
308
88
396
Financial assets at fair value through other comprehensive income (FVOCI) are UK quoted equity securities and are denominated in sterling. The
fair value of the securities is based on published quoted prices in an active market.
The cumulative fair value gains and losses which are undistributable and held within retained earnings totalled £199,000 (2022 – £239,000).
12 Inventories
Raw materials
Work in progress
Finished goods
2023
£000
8,464
9,598
8,033
26,095
2022
£000
7,001
8,893
9,995
25,889
Inventories are net of impairment provisions of £855,073 (2022 – £759,000). The cost of inventories recognised as an expense is £51,835,000
(2022 – £40,960,000).
13 Trade and other receivables
Due within one year:
Trade receivables
Other receivables
Receivable from pension schemes (see note 5)
Prepayments
14 Trade and other payables
Current trade and other payables:
Trade payables
Social security
Other payables
Accruals
Included within accruals is a warranty provision that is not material to the financial statements.
2023
£000
40,810
3,587
2,120
4,563
51,080
2023
£000
24,680
2,535
959
8,877
37,051
2022
£000
30,779
2,090
2,114
4,891
39,874
2022
£000
18,186
1,958
959
7,374
28,477
54
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. 15 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using the large company tax rate applicable in future years of
25% (2022 – 25%). The movement on the deferred tax account is shown below:
Deferred tax – net
At 1 April 2022
(Credited)/charged to other comprehensive income
Charged to profit
At 31 March 2023
The movement in deferred tax assets and liabilities during the year is shown below:
Deferred tax – liabilities
At 1 April 2022
Charged/(credited) to profit
Credited to other comprehensive income
At 31 March 2023
2023
£000
5,219
(10)
510
5,719
Other
£000
(11)
(12)
(10)
(33)
2022
£000
3,570
22
1,627
5,219
Total
£000
5,219
510
(10)
5,719
Accelerated
tax
depreciation
£000
5,230
522
—
5,752
Of the deferred tax liabilities, £836,000 (2022 – £903,000) is expected to be recovered within 12 months with £4,883,000 (2022 – £4,316,000)
expected to be recovered after more than 12 months.
The movement in the deferred tax assets and liabilities during the prior year is shown below:
At 1 April 2021
Charged/(credited) to profit
Charged to other comprehensive income
At 31 March 2022
The deferred tax (credited)/charged to other comprehensive income during the year is as follows:
Accelerated
tax
depreciation
£000
3,590
1,640
—
5,230
Tax on change in fair value of financial assets
Tax on items taken directly to other comprehensive income
16 Share capital
Authorised 50,000,000 10p ordinary shares
Allotted and fully paid 43,632,068 10p ordinary shares
Other
£000
(20)
(13)
22
(11)
2023
£000
(10)
(10)
2023
£000
5,000
4,363
Total
£000
3,570
1,627
22
5,219
2022
£000
22
22
2022
£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 or new share issues, the group considers not only its short-term
position but also its long-term operational and strategic objectives.
55
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Consolidated Financial Statements
continued
17 Share-based payments
The company operates the Castings 2020 Restricted Share Plan under which nil-cost options have been granted to executive directors. The
options vest three years after the grant date and are subject to continued employment with the group. The options are also subject to a two year
holding period during which the participant shall be entitled to additional benefit (in cash or shares) in respect of dividends paid in that period.
At 1 April
Granted during the year
Exercised or expired during the year
At 31 March
Average fair value of share awards granted during the year at date of grant (pence)
Fair value of awards granted during the year (£)
2023
67,441
42,468
—
109,909
322.8
137,086
2022
35,292
32,149
—
67,441
400.4
128,719
The options were all granted on 30 June 2022 at a fair value of £3.228 per option, being the average of the closing market price of the shares
for the previous five business days.
The group recognised a total charge to the consolidated income statement of £119,000 (2022 – £74,000) in respect of equity-settled share-
based payment transactions.
18 Commitments and contingencies
Capital commitments contracted for by the group but not provided for in the financial statements
2023
£000
1,799
2022
£000
1,637
As set out on page 9, the group does not insure against the potential cost of product warranty or recall. Accordingly, there is always the
possibility of claims against the group for quality related issues on parts supplied to customers. As at 31 March 2023, the directors do not
consider any significant liability will arise in respect of any such claims (2022 – £nil).
19 Related party transactions
The group has a related party relationship with its directors; details of salaries and other benefits paid to directors are disclosed in the Directors’
Remuneration Report on pages 27 to 32.
Transactions with the group’s pension schemes and balances owed to the company by the schemes are disclosed in note 5.
Controlling party
The company’s shares are listed on the London Stock Exchange’s Regulated Market (Premium Listing) and are widely held. There is no one
controlling party or group of related parties who have control of the group.
20 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 years 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
56
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. 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
Financial assets measured at amortised cost
Trade receivables
Other receivables
Cash and cash equivalents
Total current financial assets
Non-current financial assets
Financial assets at fair value through other comprehensive income
Total non-current financial assets
Total financial assets
Financial assets
2023
£000
40,810
5,707
35,566
82,083
356
356
82,439
2022
£000
30,779
4,204
35,745
70,728
396
396
71,124
The maximum exposure to credit risks is detailed in the above table, being the total financial assets excluding those at fair value through other
comprehensive income.
Current financial liabilities
Trade payables
Other payables
Accruals
Total current financial liabilities
Financial liabilities measured
at amortised cost
2023
£000
24,680
959
8,877
34,516
2022
£000
18,186
959
7,374
26,519
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 2023, trade receivables of £39,513,000 (2022 – £28,539,000) were not past due.
Apart from the largest customers set out in note 2, the group does not have any significant credit risk exposure to any single counterparty or any
group of counterparties having similar characteristics, being related entities. Concentration of credit risk to the direct customers included in note
2 did not exceed 28% of trade receivables at any time during the year. Concentration of credit risk to any other counterparty did not exceed 8%
of trade receivables at any time during the year.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating
agencies.
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 (e.g. Creditsafe) and trade references are taken up.
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. Proforma invoicing is
sometimes used for new customers, or customers with a poor payment history, until creditworthiness can be proven or re-established.
57
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Consolidated Financial Statements
continued
20 Financial instrument risk exposure and management continued
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 there is no reasonable expectation of recovery based upon objective evidence.
Impairment provisions are also recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. To measure
the expected credit losses, trade receivables have been grouped based on shared credit risk and the days past due. The expected loss rates
are based on the payment profiles and historical credit losses experience over a three year period. The historical loss rates are adjusted to reflect
current and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
No major renegotiation of terms has taken place during the year.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or
to historical information about default rates. The credit quality of trade receivables that are neither past due nor impaired are all assessed to be
virtually fully recoverable (2022 – virtually fully recoverable).
At 31 March 2023 trade receivables of £1,297,000 (2022 – £2,240,000) 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
2023
£000
242
624
431
1,297
2022
£000
324
553
1,363
2,240
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
Closing balance
2023
£000
447
137
—
584
2022
£000
486
(35)
(4)
447
Impairment losses on trade receivables of £137,000 (2022 – credit of £39,000) 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 sufficient cash balances on instant access deposits. The cash position is continuously monitored to
ensure that there is sufficient cash and that the optimum interest rate is obtained.
Based on projected cash flows, the group expected to have sufficient liquid resources to meet its obligations under all reasonably
expected circumstances.
Market risk
Market risk arises from the group’s use of interest-bearing and foreign currency financial instruments. It is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or
other market factors (other price risk).
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 deposits. 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 (2022 – £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 did
not have any forward contracts in place to sell foreign currency (2022 – £nil).
58
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. At the balance sheet date foreign exchange facilities of £1.9 million (2022 – £1.9 million) were unused and available to the group to enable it to
enter into forward exchange contracts.
The currency and interest profile of the group’s financial assets and financial liabilities are as follows:
Sterling
US$
Euro
Sterling
US$
Euro
Sterling
US$
Euro
Floating rate
assets
2023
£000
—
404
665
1,069
Fixed rate
assets
2023
£000
34,497
—
—
34,497
Interest-free
assets
2023
£000
38,817
2,934
5,122
46,873
Floating rate
assets
2022
£000
0
73
928
1,001
Fixed rate
assets
2022
£000
34,743
—
—
34,743
Interest-free
assets
2022
£000
29,679
2,023
3,678
35,380
Total
2023
£000
73,314
3,338
5,787
82,439
Total
2022
£000
64,422
2,096
4,606
71,124
Interest-free
liabilities
2023
£000
33,620
77
819
34,516
Interest-free
liabilities
2022
£000
25,999
75
445
26,519
Fixed rate assets attracted interest rates of between 1.0% and 4.2% (2022 – 0.05% and 0.75%) on sterling deposits.
Floating rate assets consisted of overnight cash at bank at nominal interest rates.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits on call with banks and short-term deposits that have fixed interest rates and
original maturities of three months or less on inception.
The effect of a +25/(25) increase/(decrease) in basis points with all other variables held constant would have the effect of increasing/(decreasing)
profit before tax by £83,000/(£83,000) (2022 – £84,000/(£84,000)).
The group believes that movements on exchange rates of +/–5% could be possible, the effect of which is that profit before tax would (decrease)/
increase by (£244,000)/£270,000 (2022 – (£175,000)/£194,000).
Fair value
Unless otherwise indicated, the carrying amounts of the group’s financial instruments are a reasonable approximation of their fair values.
Assets measured at fair value through other comprehensive income are classified as level 1 financial instruments with fair value being based on
the quoted market price of the asset.
59
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Five Year Financial History – unaudited
For the years ended 31 March
Trading results
Revenue
Profit before tax
Profit after tax
Dividends paid
Balance sheet summary
Equity
Share capital
Reserves
Total equity
Assets
Property, plant and equipment
Financial assets
Current assets
Total liabilities
Net assets
Dividends and earnings
Pence per share declared (excluding special)
Number of times covered (dividend paid, excluding special)
Earnings per share – basic
Earnings per share – diluted
2023
£000
200,990
16,713
13,790
13,682
4,363
127,297
131,660
60,353
356
60,709
113,721
(42,770)
131,660
17.35
1.9
31.66p
31.58p
2022
£000
148,583
12,074
8,552
6,698
4,363
127,135
131,498
62,801
396
63,197
101,997
(33,696)
131,498
16.23
1.3
19.60p
19.57p
2021
£000
114,702
4,987
4,149
6,532
4,363
125,101
129,464
67,112
308
67,420
90,169
(28,125)
129,464
15.26
0.6
9.51p
9.50p
2020
£000
138,667
12,700
10,066
13,037
4,363
127,295
131,658
70,693
358
71,051
84,629
(24,022)
131,658
14.88
1.6
23.07p
23.07p
2019
£000
150,236
14,050
11,010
6,327
4,363
130,026
134,389
71,438
380
71,818
92,116
(29,545)
134,389
14.78
1.7
25.23p
25.23p
60
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Parent Company Balance Sheet
as at 31 March 2023
ASSETS
Non-current assets
Property, plant and equipment
Investments
Financial assets
Current assets
Inventories
Trade and other receivables
Current tax asset
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 the equity holders of the company
Share capital
Share premium account
Treasury shares
Other reserve
Retained earnings
Total shareholders’ funds
Notes
2023
£000
2022
£000
5
6
7
8
9
10
12
13
21,428
4,995
356
26,779
17,205
38,157
129
29,239
84,730
111,509
25,725
—
25,725
1,326
27,051
84,458
4,363
874
(231)
13
79,439
84,458
21,394
4,995
396
26,785
17,630
27,394
—
30,878
75,902
102,687
16,435
39
16,474
1,131
17,605
85,082
4,363
874
(79)
13
79,911
85,082
The company’s profit for the financial year was £13,121,000 (2022 – £11,949,000).
The parent company financial statements on pages 61 to 68 were approved and authorised for issue by the board of directors on 14 June 2023,
and were signed on its behalf by:
A. N. Jones
Chairman
S. J. Mant
Finance Director
Notes to the parent company financial statements are on pages 63 to 68.
Registered number – 91580.
61
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements
Parent Company Statement of Changes in Equity
for the year ended 31 March 2023
At 1 April 2022
Profit for the year
Other comprehensive income/(losses):
Change in fair value of financial assets
Tax effect of items taken directly to reserves
Total comprehensive income for the year
Shares acquired in the year
Equity-settled share-based payments
Dividends (see note 4)
At 31 March 2023
At 1 April 2021
Profit for the year
Other comprehensive income/(losses):
Change in fair value of financial assets
Tax effect of items taken directly to reserves
Total comprehensive income for the year
Shares acquired in the year
Equity-settled share-based payments
Dividends (see note 4)
At 31 March 2022
Equity attributable to equity holders of the parent
Share
capitala)
£000
4,363
Share
premiumb)
£000
874
Treasury
sharesc)
£000
(79)
Other
reserved)
£000
13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,363
874
—
—
—
—
(152)
—
—
(231)
—
—
—
—
—
—
—
13
Retained
earningse)
£000
79,911
13,121
(40)
10
13,091
—
119
(13,682)
79,439
Equity attributable to equity holders of the parent
Share
capitala)
£000
4,363
Share
premiumb)
£000
874
Treasury
sharesc)
£000
—
Other
reserved)
£000
13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,363
874
—
—
—
—
(79)
—
—
(79)
—
—
—
—
—
—
—
13
Retained
earningse)
£000
74,520
11,949
88
(22)
12,015
—
74
(6,698)
79,911
Total
equity
£000
85,082
13,121
(40)
10
13,091
(152)
119
(13,682)
84,458
Total
equity
£000
79,770
11,949
88
(22)
12,015
(79)
74
(6,698)
85,082
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) Treasury shares – Value of shares acquired by the company.
d) Other reserve – Amounts transferred from share capital on redemption of issued shares.
e) Retained earnings – Cumulative net gains and losses recognised in the statement of comprehensive income.
62
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Notes to the Parent Company Financial Statements
The Directors’ Report is on pages 21 to 23 of the Annual Report and Financial Statements
1 Accounting policies
General information
Castings Public Limited Company (the ‘company’, ‘Castings P.L.C.’) is incorporated and domiciled in the United Kingdom and registered in
England as a public company limited by shares. The company’s registered office is at Lichfield Road, Brownhills, West Midlands, WS8 6JZ,
United Kingdom. The company’s ordinary shares are traded on the London Stock Exchange’s Regulated Market (Premium Listing). There has
been no change in this information since the Annual Report for the year ended 31 March 2022.
Basis of preparation
The financial statements have been prepared in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) including Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’). The principal accounting policies
adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all years presented,
unless otherwise stated.
The financial statements have been prepared on a going concern basis and under the historical cost convention, except for the revaluation of
certain financial instruments, and in accordance with the Companies Act 2006. As permitted by FRS 101, the company has taken advantage of
certain disclosure exemptions available under that standard and, therefore, these financial statements do not include:
• certain comparative information otherwise required;
• certain disclosures regarding the company’s capital;
• a statement of cash flows;
•
•
the effect of future accounting standards not yet adopted;
the disclosure of the remuneration of key management personnel; and
• disclosure of related party transactions with other wholly owned members of the group headed by the company.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are included
in the group financial statements. Therefore, these financial statements do not include certain disclosures in respect of business combinations,
financial instruments (other than certain disclosures required as a result of recording instruments at fair value), impairment of assets and pension
schemes.
Revenue recognition
Revenue is measured at the fair value of consideration received or receivable and represents amounts receivable for goods and services
provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Revenue from the sale of goods relates to the
sale of castings. Revenue from the sale of services relates to machining and minor assembly work performed on a subcontract basis for external
customers. Revenue is recognised once the performance obligation has been met. This is deemed to be when the goods and services have
been collected by, or delivered to, the customer in accordance with the agreed delivery terms.
Post-retirement benefits
Two of the company’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 net interest also being charged/credited to operating
profit subject to the asset ceiling. Actuarial gains and losses are recognised in other comprehensive income and the balance sheet reflects the
schemes’ surplus or deficit at the balance sheet date. A full valuation is carried out triennially using the projected unit credit method. Where the
company cannot benefit from a scheme surplus in the form of refunds from the plans or reductions in future contributions, any asset resulting
from the above policy is restricted accordingly. Payments to the defined contribution scheme are charged to the consolidated statement of
comprehensive income as they become payable.
Property, plant and equipment
Property, plant and equipment assets are held at cost less accumulated depreciation. Depreciation is provided on property, plant and equipment,
other than freehold land and assets in the course of construction, on a straight-line basis. The periods of write-off used are as follows:
i. Freehold buildings over 50 years.
ii. Plant and equipment over a period of 3 to 15 years.
The company annually reviews the assessment of residual values and useful lives in accordance with IAS 16.
Inventories
The company’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.
63
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Parent Company Financial Statements
continued
The Directors’ Report is on pages 21 to 23 of the Annual Report and Financial Statements
1 Accounting policies continued
Foreign currencies
Assets and liabilities in foreign currencies are translated at the spot rates of exchange ruling at the balance sheet date. Transactions in
foreign currencies are recorded at the rate ruling at the date of the transaction; all differences are dealt with through the statement of
comprehensive income.
Financial instruments
a) Financial assets
The company classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was
acquired. The company’s accounting policy for each category is as follows:
Fair value through other comprehensive income
Fair value through other comprehensive income 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 in other comprehensive income. The cumulative fair value gains
and losses are held within retained earnings and are not treated as distributable. Fair value is determined with reference to published quoted
prices in an active market.
Amortised cost
These assets are held in order to collect contractual cash flows, on specific dates, which are solely payments of the principal and interest on
the principal amount outstanding. They arise principally through the provision of goods and services to customers (e.g. trade receivables) and
deposits held at banks and building societies, but may also incorporate other types of contractual monetary asset. They are initially recognised
at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit
losses. During this process the probability of the non-payment of the trade receivables is assessed. Where specific receivables are known to
be ‘bad’ or it becomes apparent that payment is ‘doubtful’ then a credit loss allowance of 100% is applied. Such provisions are recorded in
a separate allowance account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive
income. On confirmation that the deposit or receivable will not be collectable, the gross carrying value of the asset is written off against the
associated provision.
b) Financial liabilities
The 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.
Financial liabilities measured at amortised cost
Financial liabilities include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
Fair value is calculated by discounting estimated future cash flows using a market rate of interest.
c) Share capital
The company’s ordinary shares are classified 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.
Deferred tax is measured at the actual tax rates that are expected to apply in the periods in which the temporary differences are expected to
reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Current tax is provided for on the taxable profits of each company in the group, using current tax rates and legislation that has 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 recognised when approved by the shareholders at an Annual General Meeting.
64
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Share-based payments
The cost of equity-settled transactions with employees of the company is measured by reference to the fair value at the date at which they are
granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled
to the award.
The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service conditions are met, such
that the amount ultimately recognised as an expense is based on the number of awards that meet the related service conditions at the vesting
date.
Investments
Investments in subsidiaries are held at cost and reviewed for impairment annually.
Critical accounting estimates and judgements
The company makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. In
the future, 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 liabilities within the next financial year are set out on page 46 of the group
financial statements.
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
financial statements. The company’s profit for the financial year was £13,121,000 (2022 – £11,949,000).
The profit and loss account includes £76,000 (2022 – £67,000) for audit fees.
The cost of inventories recognised as an expense during the year was £18,410,000 (2022 – £12,299,000).
3 Employee information
Average monthly number of employees during the year was:
Production
Management and administration
Staff costs (including directors) comprise:
Wages and salaries
Social security costs
Other pension costs
2023
2022
367
26
393
2023
£000
18,550
2,180
662
21,392
359
27
386
2022
£000
16,593
1,794
646
19,033
The directors represent the key management personnel. Details of their compensation are given in the Directors’ Remuneration Report on
page 30.
65
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Parent Company Financial Statements
continued
The Directors’ Report is on pages 21 to 23 of the Annual Report and Financial Statements
4 Dividends
Final paid of 12.57p per share for the year ended 31 March 2022 (2021 – 11.69p)
Interim paid of 3.84p per share (2022 – 3.66p)
Supplementary dividend of 15.00p per share for the year ended 31 March 2022 (2021 - nil)
2023
£000
5,475
1,673
6,534
13,682
2022
£000
5,101
1,597
—
6,698
The directors are proposing a final dividend of 13.51 pence (2022 – 12.57 pence) per share totalling £5,884,695 (2022 – £5,475,249). In
addition, the directors have declared a supplementary dividend of 15.00 pence per share, totalling £6,533,710. These dividends have not been
accrued at the balance sheet date.
5 Property, plant and equipment
Cost
At 1 April 2022
Additions during year
Disposals
At 31 March 2023
Accumulated depreciation
At 1 April 2022
Charge for year
Disposals
At 31 March 2023
Net book values
At 31 March 2023
At 31 March 2022
Freehold and
leasehold
land and
buildings
£000
Plant and
equipment
£000
21,347
395
—
21,742
5,233
395
—
5,628
16,114
16,114
35,470
1,510
(358)
36,622
30,190
1,476
(358)
31,308
5,314
5,281
Total
£000
56,817
1,905
(358)
58,364
35,423
1,871
(358)
36,936
21,428
21,394
The net book value of land and buildings includes £1,768,000 (2022 – £1,768,000) for land which is not depreciated. Included within plant and
other equipment are assets in the course of construction with a net book value of £nil (2022 – £136,000) which are not depreciated.
6 Investments
Subsidiary companies
At cost
At 1 April 2022
Impairment losses
At 31 March 2023
2023
£000
4,995
4,995
2023
£000
4,995
—
4,995
2022
£000
4,995
4,995
2022
£000
4,995
—
4,995
The company owns 100% of the issued share capital of William Lee Limited, CNC Speedwell Limited, W. H. Booth & Co. Limited and Castings
Property Limited, companies which operate in the United Kingdom. William Lee Limited supplies spheroidal graphite iron castings and CNC
Speedwell Limited is a machinist operation. W. H. Booth & Co. Limited and Castings Property Limited do not trade and are dormant. The
registered office of William Lee Limited is Callywhite Lane, Dronfield, Sheffield, S18 2XU. The registered office for all other subsidiaries is Lichfield
Road, Brownhills, West Midlands, WS8 6JZ.
66
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. 7 Financial assets
Financial assets at FVOCI
At 1 April 2022
Net (losses)/gains recognised in other comprehensive income
At 31 March 2023
2023
£000
356
2023
£000
396
(40)
356
2022
£000
396
2022
£000
308
88
396
Financial assets at fair value through other comprehensive income (FVOCI) are UK quoted equity securities and are denominated in sterling. The
fair value of the securities is based on published quoted prices in an active market.
The cumulative fair value gains and losses which are undistributable and held within retained earnings totalled £199,000 (2022 – £239,000).
8 Inventories
Raw materials
Work in progress
Finished goods
Inventories are net of impairment provisions of £378,000 (2022 – £241,000).
9 Trade and other receivables
Due within one year:
Trade receivables
Other receivables
Receivable from pension schemes (see note 5 of group financial statements)
Prepayments
Trade receivables are net of impairment provisions of £353,000 (2022 – £203,000).
10 Trade and other payables
Current trade and other payables
Trade payables
Amounts owed to subsidiary companies
Social security
Other payables
Accruals
Amounts owed to subsidiary companies are interest free and have no fixed repayment terms.
11 Share-based payments
The disclosures in respect of share-based payments are set out in note 17 of the group financial statements.
2023
£000
4,410
5,492
7,303
17,205
2023
£000
31,033
2,083
2,120
2,921
38,157
2023
£000
13,143
7,773
934
392
3,483
25,725
2022
£000
3,934
4,733
8,963
17,630
2022
£000
21,836
1,623
2,114
1,821
27,394
2022
£000
8,844
3,344
737
360
3,150
16,435
67
Castings P.L.C. Annual Report for the year ended 31 March 2023Financial Statements Notes to the Parent Company Financial Statements
continued
The Directors’ Report is on pages 21 to 23 of the Annual Report and Financial Statements
12 Deferred tax liabilities
Deferred tax is calculated in full on temporary differences under the liability method using the large company tax rate applicable in future years of
25% (2022 – 25%). The movement on the deferred tax account is shown below:
Deferred tax liabilities
At 1 April 2022
(Credited)/charged to other comprehensive income
Charged to profit
At 31 March 2023
The movement in deferred tax liabilities during the year is shown below:
Deferred tax liabilities
At 1 April 2022
Charged to profit
Credited to other comprehensive income
At 31 March 2023
The movement in the deferred tax liabilities during the prior year is shown below:
At 1 April 2021
Charged to profit
Charged to other comprehensive income
At 31 March 2022
Accelerated
tax
depreciation
£000
1,071
205
—
1,276
Accelerated
tax
depreciation
£000
656
415
—
1,071
The deferred tax charged/(credited) to other comprehensive income during the year is as follows:
Tax on change in fair value of financial assets
Tax on items taken directly to other comprehensive income
13 Share capital
Allotted and fully paid 43,632,068 (2022 – 43,632,068) 10p ordinary shares
2023
£000
1,131
(10)
205
1,326
Other
£000
60
—
(10)
50
Other
£000
28
10
22
60
2023
£000
(10)
(10)
2023
£000
4,363
2022
£000
684
22
425
1,131
Total
£000
1,131
205
(10)
1,326
Total
£000
684
425
22
1,131
2022
£000
22
22
2022
£000
4,363
14 Pensions
Castings P.L.C. has no contractual agreement or stated policy for charging its subsidiary entities for the net defined benefit cost on an IAS 19
Employee Benefits measurement basis. Legally, Castings P.L.C. is the sponsoring employer for the plan, so it recognises the full defined benefit cost
or asset (where recoverable) in its financial statements. The last valuation was performed with the effective date of 6 April 2020. Further details of the
schemes are contained in note 5 to the group financial statements.
15 Capital commitments and contingencies
Authorised, but not provided in the financial statements
2023
£000
—
2022
£000
318
The company does not insure against the potential cost of product warranty or recall. Accordingly, there is always the possibility of claims
against the company for quality-related issues on parts supplied to customers. As at 31 March 2023, the directors do not consider any
significant liability will arise in respect of any such claims (2022 – £nil).
68
Castings P.L.C.
Annual Report for the year ended 31 March 2023
Castings P.L.C. Notice of Meeting
Notice is hereby given that the one hundred and sixteenth Annual General Meeting of Castings P.L.C. (the ‘company’) will be held at Fairlawns Hotel
& Spa, Little Aston Road, Aldridge, West Midlands, WS9 0NU on 15 August 2023 at 3.30 pm for the purposes set out below.
As ordinary business
1 To receive and adopt the Directors’ Report and audited financial statements for the year ended 31 March 2023.
2 To declare a final dividend.
3 To re-elect A. N. Jones as a director.
4 To re-elect A. Vicary as a director.
5 To re-elect S. J. Mant as a director.
6 To re-elect A. K. Eastgate as a director.
7 To elect M. L. Smith as a director.
8 To approve the directors’ remuneration policy.
9 To approve the Directors’ Remuneration Report for the year ended 31 March 2023.
10 To reappoint Mazars LLP as auditors of the company at a fee to be agreed with the directors.
As special business
To consider and, if thought fit, pass the following resolutions, of which resolution 11 will be proposed as an ordinary resolution and resolutions 12
and 13 will be proposed as special resolutions.
The share capital consists of 43,632,068 ordinary shares with voting rights.
As ordinary resolutions
11 THAT:
(a) the directors be and are hereby generally and unconditionally authorised in accordance with the Companies Act 2006 to exercise all
the powers of the company to allot relevant securities provided that the aggregate nominal value of such securities shall not exceed
£636,793, which represents approximately 14.6% of the current issued share capital of the company;
(b) the foregoing authority shall expire on 14 August 2028 save that the company may before such expiry make an offer or enter into an
agreement which would or might require relevant securities to be allotted after the expiry of such period and the directors may allot
relevant securities in pursuance of any such offer or agreement as if the authority conferred had not expired;
(c) the foregoing authority shall be in substitution for the authorities given to the directors under the Companies Act 2006 on
16 August 2022, which authorities are accordingly hereby revoked; and
(d) this authority will be put to annual shareholder approval.
As special resolutions
12 THAT the directors be and are hereby empowered pursuant to the Companies Act 2006 to allot equity securities (within the meaning of that
Act) for cash pursuant to the general authority conferred by the ordinary resolution numbered 11 set out in the notice convening this meeting
as if the said Act did not apply to any such allotment provided that this power shall be limited:
(a) to allotments in connection with an offer of equity securities to the ordinary shareholders of the Company where the securities respectively
attributable to the interests of such holders are proportionate (as nearly as may be and subject to such exclusions or other arrangement
as the directors may consider appropriate, necessary or expedient to deal with any fractional entitlements or with any legal or practical
difficulties in respect of overseas holders or otherwise) to the respective numbers of ordinary shares then held by such shareholders; and
(b) to the allotment (otherwise than pursuant to subparagraph (a) of this resolution) of equity securities having, in the case of relevant
shares, an aggregate nominal amount, or, in the case of other equity securities, giving the right to subscribe for or convert into relevant
shares having an aggregate nominal amount not exceeding £218,160, which represents approximately 5% of the current issued share
capital of the company,
and shall expire at the conclusion of the next Annual General Meeting following the date of this resolution save that the company shall be
entitled before such expiry to make an offer or agreement which would or might require equity securities to be allotted after such expiry and
the directors shall be entitled to allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not
expired. In any three year period no more than 7.5% of the issued share capital will be issued on a pre-emptive basis.
69
Castings P.L.C. Annual Report for the year ended 31 March 2023Company Information Notice of Meeting
continued
13 THAT the company be and is hereby generally and unconditionally authorised for the purposes of the Companies Act 2006 to make one or
more market purchases of any of its ordinary shares of 10p each (the ‘ordinary shares’), provided that:
(a) the maximum number of ordinary shares hereby authorised to be purchased is 4,358,844, representing 9.99% of the issued share
capital at 31 March 2023;
(b) the minimum price which may be paid for each ordinary share is 10p, exclusive of the expenses of purchase;
(c) the maximum price (exclusive of expenses) which may be paid for each ordinary share is an amount equal to 105% of the average of the
middle market quotations for the ordinary shares as derived from the Daily Official List of the London Stock Exchange Limited for the five
business days immediately preceding the day of purchase;
(d) unless previously revoked or varied, the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of
the company following the date of this resolution, unless such authority is renewed on or prior to such date;
(e) the company may, before the expiry of this authority, conclude a contract to purchase ordinary shares under this authority which will or
may be executed wholly or partly after such expiry and may make a purchase of ordinary shares pursuant to any such contract, as if
such authority had not expired.
The record date for payment of the final dividend is 21 July 2023. Assuming the final dividend is approved by the members, the dividend will be
paid on 18 August 2023.
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 11 August 2023.
By order of the board
S. J. Mant
Company Secretary
Registered Office:
Lichfield Road, Brownhills,
West Midlands, WS8 6JZ
14 June 2023
Note 1 - Proxy voting:
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, on a poll, in their stead. The instrument appointing a proxy, including authority under which it is signed (or a notarially certified
copy of such authority), must be deposited at the offices of the company’s registrars: Link Group, PXS 1, Central Square, 29 Wellington Street,
Leeds, LS1 4DL, not less than 48 hours before the time appointed for the meeting.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Meeting (and
any adjournment of the Meeting) by using the procedures described in the CREST Manual (available from www.euroclear.com). CREST Personal
Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated in accordance with Euroclear UK & International Limited’s specifications and must contain the
information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the
issuer’s agent (ID RA10) by 3.30 pm on 11 August 2023. For this purpose, the time of receipt will be taken to mean the time (as determined by
the timestamp applied to the message by the CREST application host) from which the issuer’s agent is able to retrieve the message by enquiry
to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & International Limited
does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in
relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a
CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that their CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in
particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as
invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
70
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Note 2 - Beneficial owners:
In accordance with Section 325 of the Companies Act 2006, the right to appoint proxies does not apply to persons nominated to receive
information rights under Section 146 of the Act.
Persons nominated to receive information rights under Section 146 of the Act who have been sent a copy of this notice of meeting are hereby
informed, in accordance with Section 149 (2) of the Act, that they may have a right under an agreement with the registered member by whom they
were nominated to be appointed, or to have someone else appointed, as a proxy for this meeting. If they have no such right, or do not wish to
exercise it, they may have a right under such an agreement to give instructions to the member as to the exercise of voting rights.
Nominated persons should contact the registered member by whom they were nominated in respect of these arrangements.
In accordance with Regulation 41 of the Uncertified Securities Regulations 2001, only those members entered on the company’s register of
members at the close of business on the day which is two working days before the day of the meeting or, if the meeting is adjourned, shareholders
entered on the company’s register of members at the close of business on the day two days before the date of any adjournment shall be entitled to
attend and vote at the meeting.
71
Castings P.L.C. Annual Report for the year ended 31 March 2023Company Information Directors, Officers and Advisers
Directors
A. N. Jones, BA (Hons), FCA Non-executive Chairman
A. Vicary, BEng, MSc, FICME Chief Executive Officer
S. J. Mant, BCom (Hons) FCA Finance Director
A. K. Eastgate, BA (Hons) Senior Independent Non-executive
B. J. Cooke, AdvDipNFC, FICME Non-executive
M. L. Smith, BA Econ (Hons), FCA Non-executive
Secretary and
Registered Office
S. J. Mant, FCA
Lichfield Road,
Brownhills,
West Midlands, WS8 6JZ
Tel: 01543 374341
Fax: 01543 377483
Web: www.castings.plc.uk
Registrars
Auditors
Solicitors
Bankers
Stockbrokers
Link Group
10th Floor,
Central Square,
29 Wellington Street,
Leeds, LS1 4DL
Tel: 0371 664 0300 (Calls are charged at the standard
geographic rate and will vary by provider. Calls outside
the UK will be charged at the applicable international rate.
Lines are open 9.00 am to 5.30 pm Mon – Fri)
Email: shareholderenquiries@linkgroup.co.uk
Mazars LLP
Two Chamberlain Square,
Birmingham, B3 3AX
Enoch Evans LLP
St Paul’s Chambers,
6/9 Hatherton Road,
Walsall,
West Midlands, WS1 1XS
Pinsent Masons LLP
55 Colmore Row,
Birmingham, B3 2FG
HSBC Bank plc
49 Market Street,
Lichfield,
Staffordshire, WS13 6LB
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
Zeus Capital Limited
125 Old Broad Street
London
EC4N 1AR
Registered No.
91580
72
Castings P.L.C. Annual Report for the year ended 31 March 2023Castings P.L.C. Shareholder Information
Capital gains tax
The official price of Castings P.L.C. ordinary shares on 31 March 1982, adjusted for bonus issues, was 4.92 pence.
Warning to shareholders
The following guidance has been issued by the Financial Conduct Authority:
Over the last year many companies have become aware that their shareholders have received unsolicited phone calls or correspondence
concerning investment matters. These are typically from overseas-based ‘brokers’ who target UK shareholders offering to sell them what often
turn 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 then 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 payment under the Financial Services
Compensation Scheme.
•
If the calls persist, hang up.
More detailed information on this or similar activity can be found on the FCA website www.fca.org.uk/consumers/scams
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.
73
Castings P.L.C. Annual Report for the year ended 31 March 2023Company Information