REG - Castings PLC - Final Results
12/06/2024 07:00
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RNS Number : 0068S Castings PLC 12 June 2024
The information contained within this announcement is deemed by the Company to
constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018. Upon the publication of this
announcement via the Regulatory Information Service, this inside information
is now considered to be in the public domain.
Castings P.L.C.
Annual Financial Report
DTR 6.3.5 Disclosure
Year ended 31 March 2024
Chairman's Statement
The turnover of the group increased to £224 million (£201 million last year)
with a rise in profit before tax to £21.3 million compared to £16.7 million
last year.
Overview
Turnover increased by 12% compared with the previous year and operating profit
increased by 21%. The despatch weight fell by 5% compared to the prior year
which was at the highest level since 2014.
Demand from our customers was very strong during the year, particularly during
the first half. Our heavy truck customers (approximately 80% of revenue)
increased their build rates to satisfy an unprecedented level of demand, which
was caused in part by the backlogs associated with the Covid period and the
subsequent supply constraint issues that were well documented. In order to
satisfy the elevated schedules, the group outsourced the production of some
castings for a period of time to supplement our own internal production.
As we entered the second half of the year it became apparent that the OEMs had
satisfied the backlog demand and we started to see schedules at a lower level.
This was especially evident in the final quarter of the financial year and
these reduced levels have continued into the new financial year. We are
currently operating at a level approximately 20% below the highest point in
2023/24.
We have seen a year of relatively stable input prices following very
significant increases in raw materials and energy in the previous financial
year. The most significant increase related to electricity following the end
of our fixed price contract on 30 September 2022. This additional cost of
power has continued to be surcharged to our customers thus not adversely
affecting group profit. It does however impact reported margins and
comparisons with the prior year as the first six months of 2022/23 included
the lower electricity prices in the fixed price contract.
Foundry businesses
Demand was particularly high in the first six months and then reduced during
Q3 and again in Q4. The reduction in the second half of the year negatively
impacted production efficiencies in these businesses. The most significant
impact on the margin percentage has been the pass-through of cost rises for a
full year, particularly in respect of electricity which affects the foundries
to a much greater extent than the machining business.
In November 2023, the board approved the installation of an additional foundry
production line at our William Lee site. Whilst we are still in the early
stages of the project, it is expected that the new line will be commissioned,
on time and in line with budget, in June 2025 and at a cost of approximately
£17 million; it will add up to 12,000 tonnes of additional gross foundry
capacity which represents a 15% increase on the group's current capacity. The
additional facility will enable us to take advantage of new and growing market
areas such as wind energy, agriculture and further opportunities in the US as
well as satisfying additional demand from our existing customer base.
CNC Speedwell
It is pleasing to report a very good performance in the machining business
following the strong finish to the previous financial year. This demonstrates
the impact of high volumes in the period and also reflects the benefits of the
engineering productivity and prices of new parts introduced last year.
Investment has been focussed on replacement capacity and sustainability
initiatives such as solar panels and the second phase of the more energy
efficient cooling plant. The solar panels are expected to generate up to a
maximum of 10% of the monthly power demand for the machining business and this
is an area that we are seeking to expand in other businesses within the group.
Outlook
Our heavy truck customers are suggesting that the current lower levels of
demand are likely to continue in the short-term with the potential for a
slight increase in the autumn. We will continue to develop opportunities with
existing customers in areas such as the electrification of lighter trucks and
build relationships in other markets such as wind energy, agriculture and in
the US.
Dividend
The directors are recommending the payment of a final dividend of 14.19 pence
per share to be paid on 23 August 2024 to shareholders on the register on 19
July 2024. This, together with the interim dividend, gives a total dividend
for the year of 18.32 pence per share which, in line with our progressive
dividend policy, represents an increase of 5.6% on the prior year.
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 7.00 pence per share to be paid on 24 July 2024 to
shareholders on the register on 21 June 2024. This dividend, being
discretionary and non-recurring, does not compromise our commitment to invest
in market leading technologies to maintain our competitive advantage.
Directors
As previously announced, after nearly sixty three years with the company, of
which forty have been as chairman, Brian Cooke retired from the board on 15
August 2023. I reiterate my thanks to him for his outstanding contribution to
the group.
I also wish to thank the directors, senior management and all of our employees
for their hard work and commitment during the year.
A. N. Jones
Chairman
12 June 2024
Business and Financial Review
General overview
The underlying demand from our commercial vehicle customers, which make up
nearly 80% of group revenue, was very strong, particularly in the first half
of the year. Following the COVID-19 period and the well-publicised supply
constraint issues, the OEMs experienced unprecedented demand for heavy trucks.
During the second half of the year, the backlog demand had been absorbed by
the OEMs with many reporting a normalisation of heavy truck demand. The impact
of this reduction was seen in the final quarter of the year and forward
schedules continue to reflect this lower level.
Input prices have remained relatively stable during the year. The most
significant increase in the last two years related to electricity following
the end of a fixed price contract on 30 September 2022.
The additional cost for power purchased during the prior year was
approximately £15 million reflecting elevated prices for the second half of
that year. This year has a full year of elevated cost resulting in a further
increase of approximately £13 million compared to the prior year. The total
impact in the year when compared to the previous fixed contract rate is in the
region of £28 million.
These electricity increases have continued to be surcharged to our customers
and result in an increased revenue in the year. This has not adversely
affected 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. An overview of the performance, position and future prospects
of each segment, and the relevant KPIs, are set out in the next column.
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 in the first half of the
year, with schedules reducing in he second half, particularly so in the final
quarter of the year.
The foundry businesses experienced a decrease in output of 5.0% to 50,450
tonnes and a rise in external sales revenue of £23.6 million (11.8%) to
£222.5 million. After taking into account the reduction in weight from
machining, this equates to approximately 56,200 tonnes of production.
Of the total output weight for the year, 63.3% related to machined castings
compared to 59.2% in the previous year. The change reflects the trend of an
increasing proportion of more complex, machined parts.
The segmental profit of £16.2 million was broadly flat compared to the
previous year, which represents a profit margin of 6.4% on total segmental
sales (2023 - 7.3%).
The pass-through of elevated input costs continues to be the most significant
impact on the margin percentage. This has been increased further by the
full-year impact of the electricity surcharge compared to six months in the
prior year. In addition, the significant and sharp fall in the demand
schedules in the final quarter of the year negatively impacted the margin in
the year.
Investment of £5.2 million has been made in the foundry businesses during the
year. The most significant element of this was £1.5 million of initial
payments for the production line at our William Lee site. This represents the
first foundry capacity increase for the group for over 15 years and the £17
million project remains on budget and on target for commissioning in June
2025.
Other investment during the year included a replacement programme on
production and processing equipment, along with AI in areas such as metal
melting and quality assurance.
Machining
The machining business generated total sales of £37.6 million in the year
compared to £27.7 million in the previous year. Of the total revenue, 5.0%
was generated from external customers compared to 7.3% in 2023.
The segmental result for the year was a profit of £3.7 million (2023 - £0.2
million).
With the higher demand in the year and increasing volumes on newly introduced
parts, the machining business has continued to build on the strong final
quarter of last year.
As demand from the foundry customers reduced in the second half of the year,
the machining business continued at a higher level for longer as the group
looked to replenish finished inventory levels that had been depleted since the
start of the year.
We have invested £5.3 million during the year, which included £1.8 million
on sustainability initiatives relating to a second more power efficient
cooling plant and solar panels and £3.2 million has been invested in
replacement, more efficient, machining capacity.
Business review and performance
Revenue
Group revenues increased by 11.7% to £224.4 million compared to £201.0
million reported in 2023, of which 85% was exported (2023 - 83%).
The revenue from the foundry operations to external customers increased by
11.8% to £222.5 million (2023 - £199.0 million) with the dispatch weight of
castings to third-party customers decreasing by 5.0% to 50,450 tonnes (2023 -
53,100 tonnes).
Revenue from the machining operation to external customers decreased by 7.2%
during the year to £1.9 million (2023 - £2.0 million).
Operating profit and segmental result
The group operating profit for the year was £19.8 million compared to £16.4
million reported in 2023, which represents a return on sales of 8.8% (2023 -
8.1%).
Finance income
The level of finance income increased to £1.53 million compared to £0.34
million in 2023, reflecting the higher interest rates available on deposits
during the financial year.
Profit before tax
Profit before tax has increased to £21.3 million from £16.7 million in the
prior year.
Taxation
The tax charge of £4.57 million (2023 - £2.92 million) is made up of a
current tax charge of £4.25 million (2023 - £2.41 million) and a deferred
tax charge of £0.31 million (2023 - £0.51 million).
The effective rate of tax of 21.4% (2023 - 17.5%) is lower than the main rate
of corporation tax of 25% (2023 - 19%). The primary reason for this is a
credit to the deferred tax estimate relating to the prior year of £0.70
million.
Earnings per share
Basic earnings per share increased 21.4% to 38.45 pence (2023 - 31.66 pence),
reflecting the 27.4% increase in profit before tax which was partially offset
by a higher effective tax rate compared to the previous year.
Options over 37,620 shares were granted during the year (2023 - options over
42,468 shares). The company purchased 100,000 shares during the year (2023 -
47,900). As a result, the weighted average number of shares has decreased to
43,488,441 resulting in a diluted earnings per share of 38.32 pence per share
(2023 - 31.58 pence per share).
Dividends
The directors are recommending a final dividend of 14.19 pence per share (2023
- 13.51 pence per share) to be paid on 23 August 2024 to shareholders on the
register on 19 July 2024. This would give a total ordinary distribution for
the year of 18.32 pence per share (2023 - 17.35 pence per share).
In addition, a supplementary dividend of 7.00 pence per share has been
declared which will be payable on 24 July 2024 to shareholders on the register
on 21 June 2024.
Cash flow
The group generated cash from operating activities of £21.6 million compared
to £22.4 million in 2023. When compared to 2023, the variance is mainly due
to the significant increase in operating profit of £3.4 million offset by a
higher working capital outflow of £4.4 million when compared to the outflow
in 2023.
In the year to 31 March 2024, the most significant increase to working capital
relates to an increase in inventory levels of £7.0 million compared to the
start of the year. The weight of finished stock is now back to an appropriate
level having been depleted in the prior year. The decrease in receivables and
payables reflects the slowing of demand at the end of the year.
Corporation tax payments, net of overpayments from prior years, during the
year totalled £2.6 million compared to £2.9 million in 2023.
Capital expenditure during the year amounted to £9.6 million (2023 - £6.2
million), as set out previously, and the charge for depreciation was £8.9
million (2023 - £8.6 million).
Financial assets relating to listed investments were disposed of during the
year for £0.4 million.
The company pays pensions on behalf of the two final salary pension schemes
and then reclaims these advances from the schemes. During the year
repayments of £2.1 million (2023 - £2.1 million) were received from the
schemes and advances were paid on behalf of the schemes of £2.1 million (2023
- £2.1 million). These advances will be repaid to the company during the
current financial year.
Dividends paid to shareholders were £14.2 million in the year (2023 - £13.7
million) which includes £6.5 million in relation to a supplementary dividend
in respect of the year ended 31 March 2023.
The company purchased 100,000 (2023 - 47,900) shares to be held in treasury at
a total cost of £0.40 million (2023 - £0.15 million).
The net cash and cash equivalents movement for the year was a decrease of
£3.0 million (2023 - decrease of £0.18 million).
At 31 March 2024, the total cash and deposits position was £32.5 million
(2023 - £35.6 million).
Pensions
The pension valuation showed an increase in the surplus, on an IAS 19
(Revised) basis, to £10.9 million compared to £10.4 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.
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 2024 were £134.0 million (2023 - £131.7million).
Other than the total comprehensive income for the year of £16.8 million (2023
- £13.9 million), the only movements relate to the dividend payment of £14.2
million (2023 - £13.7 million), shares purchased in the year for £0.40
million (2023 - £0.15 million) and share-based payment charge of £0.1
million (2023 - £0.1 million).
Non-current assets have increased to £61.8 million (2023 - £60.7 million) as
a result of investment in property, plant and equipment during the year being
at a level greater than the depreciation charge.
Current assets have decreased to £112.3 million (2023 - £113.7 million) with
the inventory increase being offset by a reduction in receivables and cash
levels.
Total liabilities have decreased to £40.1 million (2023 - £42.8 million),
largely as a result of a decrease in trade payables.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2024
2024 2023
£000 £000
Revenue 224,414 200,990
Cost of sales (181,124) (162,077)
Gross profit 43,290 38,913
Distribution costs (4,694) (5,440)
Administrative expenses (18,837) (17,104)
Profit from operations 19,759 16,369
Finance income 1,527 344
Profit before income tax 21,286 16,713
Income tax expense (4,565) (2,923)
Profit for the year attributable to equity holders of the parent company 16,721 13,790
Profit for the year attributable to equity holders of the parent company 16,721 13,790
Other comprehensive income for the year:
Items that will not be reclassified to profit and loss:
Movement in unrecognised surplus on defined benefit pension schemes net of 112 117
actuarial gains and losses
112 117
Items that may be reclassified subsequently to profit and loss:
Change in fair value of financial assets - (40)
Tax effect of items that may be reclassified - 10
- (30)
Other comprehensive income for the year (net of tax) 112 87
Total comprehensive income for the year attributable to the equity holders 16,833 13,877
of the parent company
Earnings per share attributable to the equity holders of the parent company
Basic 38.45p 31.66p
Diluted 38.32p 31.58p
Consolidated Balance Sheet
as at 31 March 2024
2024 2023
£000 £000
ASSETS
Non-current assets
Property, plant and equipment 61,799 60,353
Financial assets - 356
61,799 60,709
Current assets
Inventories 33,136 26,095
Trade and other receivables 46,593 51,080
Current tax asset - 980
Cash and cash equivalents 32,527 35,566
112,256 113,721
Total assets 174,055 174,430
LIABILITIES
Current liabilities
Trade and other payables 33,329 37,051
Current tax liabilities 706 -
34,035 37,051
Non-current liabilities
Deferred tax liabilities 6,030 5,719
Total liabilities 40,065 42,770
Net assets 133,990 131,660
Equity attributable to equity holders of the parent company
Share capital 4,363 4,363
Share premium account 874 874
Treasury shares (627) (231)
Other reserve 13 13
Retained earnings 129,367 126,641
Total equity 133,990 131,660
Consolidated Cash Flow Statement
for the year ended 31 March 2024
2024 2023
£000
£000
Cash flows from operating activities
Profit before income tax 21,286 16,713
Adjustments for:
Depreciation 8,851 8,646
Loss on disposal of property, plant and equipment 25 -
Finance income (1,527) (344)
Equity-settled share-based payment expense 102 119
Pension administrative costs 112 117
Operating cash flow before changes in working capital 28,849 25,251
Increase in inventories (7,041) (206)
Decrease/(increase) in receivables 4,486 (11,200)
(Decrease)/increase in payables (4,651) 8,574
Cash generated from operating activities 21,643 22,419
Tax paid (2,568) (2,904)
Interest received 1,474 327
Net cash generated from operating activities 20,549 19,842
Cash flows from investing activities
Dividends received from listed investments 12 17
Purchase of property, plant and equipment (9,584) (6,198)
Proceeds from disposal of property, plant and equipment 191 -
Proceeds from sale of financial assets 397 -
Repayments from pension schemes 2,120 2,114
Advances on behalf of the pension schemes (2,119) (2,120)
Net cash used in investing activities (8,983) (6,187)
Cash flows from financing activities
Dividends paid to shareholders (14,209) (13,682)
Purchase of own shares (396) (152)
Net cash used in financing activities (14,605) (13,834)
Decrease in cash and cash equivalents (3,039) (179)
Cash and cash equivalents at beginning of year 35,566 35,745
Cash and cash equivalents at end of year 32,527 35,566
Cash and cash equivalents:
Short-term deposits 13,230 19,993
Cash available on demand 19,297 15,573
32,527 35,566
Consolidated Statement of Changes in Equity
for the year ended 31 March 2024
Equity attributable to equity holders of the parent
Share Share Treasury shares(c)) Other Retained Total
capital(a)) premium(b)) £000 reserve(d)) earnings(e)) equity
£000 £000 £000 £000 £000
At 1 April 2023 4,363 874 (231) 13 126,641 131,660
Profit for the year - - - - 16,721 16,721
Other comprehensive income/(losses):
Movement in unrecognised surplus on defined benefit pension schemes net of - - - - 112 112
actuarial gains and losses
Tax effect of items taken directly to reserves - - - - - -
Total comprehensive income for the year - - - - 16,833 16,833
Shares acquired in the year - - (396) - - (396)
Equity-settled share-based payments - - - - 102 102
Dividends (see note 4) - - - - (14,209) (14,209)
At 31 March 2024 4,363 874 (627) 13 129,367 133,990
Equity attributable to equity holders of the parent
Share Share Treasury shares(c)) Other Retained Total
capital(a)) premium(b)) £000 reserve(d)) earnings(e)) equity
£000 £000 £000 £000 £000
At 1 April 2022 4,363 874 (79) 13 126,327 131,498
Profit for the year - - - - 13,790 13,790
Other comprehensive income/(losses):
Movement in unrecognised surplus on defined benefit pension schemes net of - - - - 117 117
actuarial gains and losses
Change in fair value of financial assets - - - - (40) (40)
Tax effect of items taken directly to reserves - - - - 10 10
Total comprehensive income for the year - - - - 13,877 13,877
Shares acquired in the year - - (152) - - (152)
Equity-settled share-based payments - - - - 119 119
Dividends (see note 4) - - - - (13,682) (13,682)
At 31 March 2023 4,363 874 (231) 13 126,641 131,660
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.
Notes to the Consolidated Financial Statements
1 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 2024 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").
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 2024:
Foundry Machining Elimination Total
operations operations £000 £000
£000 £000
Revenue from external customers 222,542 1,872 - 224,414
Inter-segmental revenue 28,433 35,774 (64,207) -
Segmental result 16,184 3,719 (32) 19,871
Unallocated costs:
Defined benefit pension cost (112)
Finance income 1,527
Profit before income tax 21,286
Total assets 156,605 30,822 (13,372) 174,055
Non-current asset additions 5,179 5,334 - 10,513
Depreciation 5,069 3,782 - 8,851
Total liabilities (40,424) (7,719) 8,078 (40,065)
All non-current assets are based in the United Kingdom.
The following shows the revenues, results and total assets by reportable
segment in the year to 31 March 2023:
Foundry Machining Elimination Total
operations operations £000 £000
£000 £000
Revenue from external customers 198,972 2,018 - 200,990
Inter-segmental revenue 24,739 25,640 (50,379) -
Segmental result 16,332 169 (15) 16,486
Unallocated costs:
Defined benefit pension cost (117)
Finance income 344
Profit before income tax 16,713
Total assets 162,671 26,687 (14,928) 174,430
Non-current asset additions 4,826 1,372 - 6,198
Depreciation 5,235 3,411 - 8,646
Total liabilities (45,668) (6,759) 9,657 (42,770)
All non-current assets are based in the United Kingdom.
2024 2023
£000
£000
The geographical analysis of revenues by destination for the year is as
follows:
United Kingdom 34,296 34,519
Sweden 63,814 55,107
Germany 36,926 32,292
Netherlands 35,400 31,763
Rest of Europe 35,889 31,810
North and South America 16,927 14,322
Other 1,162 1,177
224,414 200,990
All revenue arises in the United Kingdom from the group's continuing
activities.
2 Income tax expense
2024 2023
£000
£000
Corporation tax based on a rate of 25% (2023 - 19%)
UK corporation tax
Current tax on profits for the year 4,425 2,500
Adjustments to tax charge in respect of prior years (171) (87)
4,254 2,413
Deferred tax
Current year origination and reversal of temporary differences 1,011 935
Adjustment to deferred tax charge in respect of prior years (700) (425)
311 510
Taxation on profit 4,565 2,923
Profit before income tax 21,286 16,713
Tax on profit at the standard rate of corporation tax 5,322 3,175
in the UK of 25% (2023 - 19%)
Effect of:
Expenses not deductible for tax purposes 86 238
Adjustment to tax charge in respect of prior years (171) (87)
Adjustment to deferred tax charge in respect of prior years (700) (425)
Pension adjustments 28 22
Total tax charge for the year 4,565 2,923
Effective rate of tax (%) 21.4 17.5
The UK tax rate was increased from 19% to 25% from 1 April 2023 as per the
Finance Act 2021 and consequently, the deferred tax balances have been
measured using these revised rates.
4 Dividends
2024 2023
£000
£000
Final paid of 13.51p per share for the year ended 31 March 2023 (2022 - 5,881 5,475
12.57p)
Interim paid of 4.13p per share (2023 - 3.84p) 1,794 1,673
Supplementary dividend of 15.00p per share for the year ended 31 March 2023 6,534 6,534
(2022 - 15.00p)
14,209 13,682
The directors are proposing a final dividend of 14.19 pence (2023 - 13.51
pence) per share totalling £6,166,700 (2023 - £5,884,695). In addition, the
directors have declared a supplementary dividend of 7.00 pence per share,
totalling £3,042,065. These dividends have not been accrued at the balance
sheet date.
5 Earnings per share and diluted earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2024 2023
Profit after taxation (£000) 16,721 13,790
Weighted average number of shares - basic calculation 43,488,441 43,561,593
Earnings per share - basic calculation (pence per share) 38.45p 31.66p
Number of dilutive share options in issue 147,529 109,909
Weighted average number of shares - diluted calculation 43,635,970 43,671,502
Earnings per share - diluted calculation (pence per share) 38.32p 31.58p
6 Property, plant and equipment
Freehold Plant and equipment Total
land and £000 £000
buildings
£000
Cost
At 1 April 2023 40,957 160,396 201,353
Additions during the year 544 9,969 10,513
Disposals - (4,334) (4,334)
At 31 March 2024 41,501 166,031 207,532
Accumulated depreciation
At 1 April 2023 13,720 127,280 141,000
Charge for year 969 7,882 8,851
Disposals - (4,118) (4,118)
At 31 March 2024 14,689 131,044 145,733
Net book values
At 31 March 2024 26,812 34,987 61,799
At 31 March 2023 27,237 33,116 60,353
Cost
At 1 April 2022 40,110 155,596 195,706
Additions during the year 437 5,761 6,198
Disposals - (961) (961)
Other 410 - 410
At 31 March 2023 40,957 160,396 201,353
Accumulated depreciation
At 1 April 2022 12,295 120,610 132,905
Charge for year 1,015 7,631 8,646
Disposals - (961) (961)
Other 410 - 410
At 31 March 2023 13,720 127,280 141,000
Net book values
At 31 March 2023 27,237 33,116 60,353
At 31 March 2022 27,815 34,986 62,801
The net book value of land and buildings includes £2,169,000 (2023 -
£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 £890,000 (2023 - £385,000) which are not
depreciated.
7 Commitments and contingencies
2024 2023
£000 £000
Capital commitments contracted for by the group but not provided for in the 16,151 1,799
financial statements
Capital commitments primarily relate to the investment in the new foundry
line.
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 2024, the directors do not consider any significant liability will arise
in respect of any such claims (2023 - £nil).
8 Pensions
The company operates two defined benefit pension schemes which were closed to
future accruals at 6 April 2009. The funded status of these schemes at 31
March 2024 was a surplus of £10,863,000 (2023 - £10,413,000). On 24 March
2020, the Trustees of the schemes completed a bulk annuity insurance buy-in
with Aviva Life & Pensions UK Limited 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. 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 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.
9 Preliminary statement
The financial information set out above does not constitute the company's
statutory financial statements for the years ended 31 March 2024 or 2023 but
is derived from those financial statements. Statutory financial statements for
2023 have been delivered to the Registrar of Companies and those for 2024 will
be delivered following the company's Annual General Meeting. The auditors have
reported on those financial statements; their reports were unqualified, did
not include references to any matters to which the auditors drew attention by
way of emphasis without qualifying their reports and did not contain
statements under Section 498 of the Companies Act 2006.
The annual report and financial statements will be posted to shareholders on
21 June 2024 and will be available on the company's website,
www.castings.plc.uk, from 24 June 2024.
Appendix 1 - 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.
Risk description Impact Mitigation and control
Markets and competition
The group's revenues are dominated by the commercial vehicle sector which is a Stable The group's operations are set up in such a way as to ensure that variation in
cyclical market exposed to macroeconomic trends.
The operational and commercial activity of the business is driven by customer demand can be accommodated and rapidly responded to.
demand. Demand has the potential to change rapidly dependent upon the
Ongoing global conflicts, high levels of inflation and elevated interest rates significant variable factors in the macroeconomic environment such as Demand is closely reviewed by senior management on a constant basis.
have all been prevalent during the year, impacting both the underlying demand inflation, interest rate changes or changing regulatory positions.
for heavy goods vehicles and the affordability of vehicles to fleet operators.
Whilst there can be no guarantee that business will not be lost on price, we
Erosion of market share could result in loss of revenue and profit. are confident that we can remain competitive.
High level of competition could lead to deflation in prices. Global sourcing
models could also result in resourcing of work to low cost economies. The group continues to mitigate this risk through investment in productivity,
with a strong focus on cost and customer value.
Customer concentration and relationships
The group has relationships with key customers in the commercial vehicle Stable We build strong relationships with our customers to develop products to meet
market which form the majority of the customer base.
The loss of, or deterioration in, any major customer relationship could have a their specific needs.
material impact on the group's results.
Technological change
Sustainability and climate change mean that customers continue to invest in Stable The strategic focus of the group is a matter addressed through group board
the development of synthetic fuels, electric and hydrogen powered vehicles to
The group continues to work with key customers producing the next generation meetings.
reduce the emissions produced by the heavy-duty truck sector. of internal combustion engine ('ICE') commercial vehicles, whilst monitoring
opportunities for the future. Consideration is given to what opportunities might be available within
The initial phase of this is focussed on passenger cars and smaller, alternative light-weight metals such as aluminium, value added opportunities
short-range trucks which are not key markets for the group. However, the and also investigating the potential within hydrogen fuel cells (considered to
continued development of new technology does present a medium-term risk to the be the most likely replacement technology for heavy-duty trucks).
group as c. 30% of group revenue arises from the supply of cast iron
powertrain components. Customers continue to invest in Green Iron solutions, the conditions for which
the group already satisfies, and demonstrate a commitment to transition to a
It is important to note that such a change also presents an opportunity for Green Iron supply chain by 2030.
the group to evolve its product offering, as has always been the case over the
years. Electricity contracts have been fully REGO backed since October 2022 and from
October 2023 our gas is purchased alongside contractual carbon offsets. This
provides a platform to support customers Green Iron aspirations.
Product quality and liability
The group's businesses expose it to certain product liability risks which, in Stable Whilst it is a policy of the group to endeavour to limit its financial
the event of failure, could give rise to material financial liabilities.
Fines or penalties could result in a loss of revenue, additional costs and liability by contract in all long-term agreements ('LTAs'), it is not always
reduced profits. possible to secure such limitations.
The group's customers do require the maintenance of demanding quality systems
to safeguard against quality-related risks and the group maintains appropriate
external quality accreditations. The group maintains insurance for public
liability-related claims but does not insure against the risk of product
warranty or recall.
Foreign exchange
The group is exposed to foreign exchange risk on both sales and purchases Stable The group's foreign exchange risk is well-mitigated through commercial
denominated in currencies other than sterling, being primarily the euro and US
The group is exposed to gains or losses that could be material to the group's arrangements with key customers.
dollar. financial results and can increase or decrease how competitive the group's
pricing is to overseas markets. 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 Stable Whilst this risk cannot be entirely mitigated without the uneconomic
foundry furnaces, moulding lines and CNC milling machines which, due to
A large incident could disrupt business at the site affected and result in duplication of all key equipment, the plant is maintained to a high standard
manufacturing lead times, would be difficult to replace sufficiently quickly significant rectification costs or material asset impairments. and inventories of strategic equipment spares are maintained.
to prevent major interruption and possible loss of business in the event of
unforeseen failure. The foundry facilities at Brownhills and Dronfield have similar equipment and
work can be transferred from one location to another very quickly.
Additional flexibility and resilience will be provided through investments in
a new foundry based in Dronfield and the introduction of a gradual machine
replacement programme at CNC Speedwell.
Suppliers
The group holds long-standing relationships with key suppliers and there is a Stable Although the group takes care to ensure alternative sources of supply remain
risk that a business which the group is critically dependent upon could be
The risk of a supplier's business interruption remains very high due to the available for materials or services on which the group's businesses are
subject to significant disruption and that this could materially impact the current global business environment. critically dependent, this is not always possible to guarantee without risk of
operations of the group. short-term business disruption, additional costs and potential damage to
relationships with key customers.
There are specifically high risks of supply disruption as a result of current
geopolitical instability. The group continues to maintain productive dialogue with key suppliers,
working together to adjust to changes to the business environment.
Commodity and energy pricing
The group is exposed to the risk of price inflation on raw materials and Decreased Wherever possible, prices and quantities (except steel) are secured through
energy contracts.
Changes to the pricing of the group's commodity and energy purchases could long-term agreements with suppliers. In general, the risk of price inflation
materially impact the financial performance of the group if no mitigating of these materials resides with the group's customers through price adjustment
The principal metal raw materials used by the group's businesses are steel actions were taken. clauses.
scrap and various alloys. The most important alloy raw material inputs are
premium graphite, magnesium ferro-silicon, copper, nickel and molybdenum. Power and raw material markets have been volatile because of the current Historically, energy contracts have been locked in for at least 12 months.
conflict in Ukraine. The impact upon pricing has reduced during the year and With the volatile power market, following the end of our fixed price contract
The availability, and therefore price, of steel scrap has the potential to be whilst tensions remain in the Middle East, prices have become more stable than on 30 September 2022, the group entered into a flexible power agreement and as
a risk to the group as a result of steel producers transitioning from blast we have seen for the past two years. markets stabilise we continue to review the most appropriate arrangement
furnaces to electric arc furnaces. moving forwards.
Information technology and systems reliability
The group is dependent on its information technology ('IT') systems to operate Stable Whilst data within key systems is regularly backed up and systems subject to
its business efficiently, without failure or interruption.
Significant failures to the IT systems of the group as a result of external virus protection, any failure of backup systems or other major IT interruption
factors could result in operational disruption and a negative impact on could have a disruptive effect on the group's business.
The group continues to invest in IT systems to aid in the operational customer delivery and reporting capabilities.
performance of the group and its reporting capabilities. 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
There are increasing global threats faced by these systems as a result of threats.
sophisticated cyberattacks.
The group engages with external specialists to regularly assess the security
of the IT network and systems.
Regulatory and legislative compliance
The group must comply with a wide range of legislative and regulatory Stable The group maintains a comprehensive range of policies, procedures and training
requirements including modern slavery, anti-bribery and anti-competition
Failure to comply with legislation could lead to substantial financial programmes in order to ensure that both management and relevant employees are
legislation, taxation legislation, employment law and import and export penalties, business disruption, diversion of management time, personal and informed of legislative changes and it is clear how the group's business is
controls. corporate liability and loss of reputation. 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.
Climate change
The group's operations are energy intensive by their nature and therefore Stable The group continues to develop its ESG strategy, reporting and practices and
result in greenhouse gas emissions being produced, which either require
It is expected that green taxes on energy and the compliance cost of meeting has appointed a Head of Sustainability to support this.
reducing or offsetting. developing reporting obligations for our stakeholders will result in increased
energy prices and administrative expenses. The ESG working group continues to monitor ESG strategy, risks, opportunities
Whilst the group considers that its businesses provide fundamental components
and developments.
and services which will prove resilient in a transition towards a net zero Opportunities may present themselves as a result of the group's early adoption
economy, it also recognises policy targets have been set which may result in of green iron principles and strong sustainability credentials. The group is evolving its ESG reporting to communicate the positive story we
changes to the wider economy and societal attitudes towards industry. have to tell, including our early adherence to Green Iron standard which is
based on the fundamentals of electric furnaces, renewable energy and the use
A fall in investor demand in the industrial sector could negatively impact of scrap steel.
share values; it is important to ensure that the groups sustainability
strategy is communicated appropriately to ensure that stakeholders are aware The group is now powered by 100% renewable power and carbon offset gas, with a
of the group's progressive net zero position for scope 1 and 2 emissions, number of on-site renewables projects either under way or under application.
alongside the fact that the group is already well invested with plant which
can support our customers' green iron aspirations (such as electric induction The group operates in locations where the physical risks of climate change are
furnaces). relatively low but will continue to engage with and understand the needs of
its stakeholders in this area.
The risk of business disruption due to extreme weather events may also
increase if policy targets are not met. Insurance policies are maintained in relation to the group's property, plant
and equipment.
People risk
The group's operations depend upon the availability of both skilled and Stable The group looks to provide safe, stable and long-term employment at
unskilled labour to operate manual equipment and fulfil our strategic goals.
The labour market has been extremely competitive during the year. competitive rates of pay.
The inability to attract and retain talent could result in either a shortage We invest in people development and utilise technology and productivity gains
of staff or a reduction in operating margins. to ensure that our products remain competitively priced.
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