Final Results
Carclo plc
13 June 2005
13 June 2005
Carclo plc
Preliminary results for the year ended 31 March 2005
Key points
• Profit before tax was £1.7 million (2004 - a loss of £6.7 million) with
earnings per share of 3.9 pence compared to a loss of 8.4 pence per share
last year.
• Underlying operating profits from continuing operations, before goodwill
and exceptional charges, doubled to £4.6 million despite sales down 6.9%.
• Profits have improved following the significant rationalisation
programmes undertaken in recent years and a good performance in CTP
Automotive as a number of specialist lighting contracts came into full
production.
• A binding offer has been received from NV Bekaert SA to acquire the card
clothing business for up to £8.6 million in cash subject to shareholder
approval which is being sought on 13 June 2005.
• Carclo's strategy is to grow rapidly in low cost manufacturing regions
and to develop new technologies and products to underpin future growth.
• A new facility in the Czech Republic was commissioned in the year ended
31 March 2005. An automotive facility is under construction in India, in
conjunction with our 50:50 joint venture partner.
• Conductive Inkjet Technology has won the Plastic Industry award for the
best technology achievement in 2005.
• Carclo's focus on debt reduction has been successful with net debt
reducing by £2.2 million to £25.9 million and will further reduce upon
completion of the card clothing disposal.
• The board has recommended a total dividend of 1.2 pence per share for
the year (2004 - 1.2 pence).
Commenting on the results, George Kennedy, chairman said:
'We have entered the new financial year with good momentum and the expected
disposal of the card clothing operations will allow management to focus fully on
exploiting the range of opportunities which the Technical Plastics businesses
bring. Overall, demand across our markets has stabilised. The medical components
market continues to present good opportunities although we have some concerns over
the strength of demand for automotive components in the USA.
Our Technical Plastics operation in China entered the new financial year in
profit and is seeing encouraging growth opportunities. The CTP Automotive joint
venture in India is on track to becoming fully operational during the coming
year and our developments in new technologies continue to progress well. We
expect the award winning Conductive Inkjet Technology joint venture to commence
generating revenues in the new financial year.
Overall, therefore, with good growth prospects in specialist plastics together
with interesting new products and technologies in development, we feel that the
group is well placed to deliver positive momentum.'
- Ends -
For further information, please contact:
Carclo plc On 13 June: 020 7067 0700
Ian Williamson, chief executive Thereafter: 01924 268040
Robert Brooksbank, finance director
Weber Shandwick Square Mile 020 7067 0700
Richard Hews / Susanne Walker
A presentation for analysts will be held at 9.15am at the offices of Weber
Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London WC1X 8WS.
Notes to editors
• Carclo plc is a global supplier of technical plastic products. It is a
public company whose shares are quoted on the London Stock Exchange.
• 70% of sales, on a pro forma basis (assuming the ECC Card Clothing
disposal completes), are derived from the supply of fine tolerance,
injection moulded plastic components, which are used in medical, telecom and
electronics products. This business, Carclo Technical Plastics, operates
internationally in a fast growing and dynamic market underpinned by rapid
technological development.
• 30% of sales, on a pro forma basis, are derived from the supply of
products to the automotive and aerospace industries.
• Carclo's strategy is to grow rapidly in low cost manufacturing regions
and to develop new technologies and products to underpin future growth.
Chairman's statement
Overview
Carclo has continued its strategy of developing its specialist technical
plastics operations, expanding in low cost regions and investing in new
technologies.
In the year ended 31 March 2005 Carclo returned to profit, with underlying
operating profits from continuing operations, before exceptional items and
goodwill, doubling to £4.6 million on turnover reducing from £115.7 million to
£107.7 million. The improvement in profitability reflects the benefits from the
restructuring programmes undertaken in both the prior year and in the year just
ended together with the benefit of new specialist lighting contracts in CTP
Automotive.
After net exceptional charges of £0.3 million (2004 - £6.3 million), goodwill
amortisation and interest, the profit before tax amounted to £1.7 million (2004
- a loss of £6.7 million). The profit per ordinary share was 3.9 pence (2004 - a
loss per ordinary share of 8.4 pence).
Since the year end we have received an offer from NV Bekaert SA to acquire the
card clothing business for a total cash consideration of up to £8.6 million, of
which £6.5 million will become payable once the disposal becomes unconditional.
Due to the size of the transaction shareholder approval is being sought at an
extraordinary general meeting to be held on 13 June 2005.
Dividend
The board is recommending a final dividend for the full year of 0.8 pence per
share, giving a total dividend for the year of 1.2 pence (2004 - 1.2 pence).
Subject to shareholder approval, dividend payments will be posted on 8 September
2005 to shareholders on the register at close of business on 5 August 2005. The
shares will be traded excluding the right to the dividend from 3 August 2005.
Financial position
At the year end net debt was £25.9 million (2004 - £28.1 million) representing
gearing of 53.7% (2004 - 60.6%). On a pro forma basis, after allowing for
attributable transaction costs, debt will reduce to approximately £20 million as
and when the card clothing disposal completes. This will mean that Carclo will
have achieved its internal objective of reducing the group's net debt to the
targeted £20 million level. This is a creditable performance and means that debt
will have more than halved since 31 March 2002 when the group's net debt stood
at £44.3 million. At 31 March 2005 the group had cash and unutilised assured
medium term facilities of £17.0 million.
Employees
The past year has again been demanding with the further rationalisation of the
UK moulding facilities, the closure of one moulding operation in the USA and the
reorganisation of the UK card clothing business. As a result the number of
Carclo employees reduced by 14% to 1,719 at 31 March 2005.
The ongoing success of the group is ultimately dependent upon our employees and
I would like to thank them for their significant contribution.
The board
As stated in last year's annual report, Robert Brooksbank joined the board on 1
April 2004 as group finance director and Noel Hutton was appointed a non
executive director on 1 July 2004. Both Robert and Noel have made significant
contributions to the strategic development of Carclo.
I joined the board of Carclo in June 1993 and became chairman in January 1997.
Since then the group has undergone a significant transformation, investing in a
range of technical plastics businesses whilst divesting non core metal
processing businesses. The final stage of this strategic realignment will,
subject to shareholder approval and other conditions being satisfied, be reached
with the disposal of the card clothing business. Carclo will then be focused on
the development of its specialist moulding businesses and technological
innovations. With this transformation complete, I have elected to retire from
the board within the next twelve months. The search for a new chairman is being
co-ordinated by our senior independent director, Barbara Richmond.
I would like to take this opportunity to thank the members of the board and the
employees of Carclo, both past and present, who have provided continued support
in such challenging times.
Outlook
We have entered the new financial year with good momentum and the expected
disposal of the card clothing operations will allow management to focus fully on
exploiting the range of opportunities which the Technical Plastics businesses
bring. Overall, demand across our markets has stabilised. The medical components
market continues to present good opportunities although we have some concerns
over the strength of demand for automotive components in the USA.
Our Technical Plastics operation in China entered the new financial year in
profit and is seeing encouraging growth opportunities. The CTP Automotive joint
venture in India is on track to becoming fully operational during the coming
year and our developments in new technologies continue to progress well. We
expect the award winning Conductive Inkjet Technology joint venture to commence
generating revenues in the new financial year.
Overall, therefore, with good growth prospects in specialist plastics together
with interesting new products and technologies in development, we feel that the
group is well placed to deliver positive momentum.
George Kennedy
13 June 2005
Chief executive's review
Strategic overview
I wrote last year that I was more confident in the future of the group than at
any time since the telecom collapse hit us in 2001. That confidence was well
founded. We have experienced stable trading allowing underlying profits to
develop well and have been able to make excellent strategic progress in our core
technical plastics business. Since the year end we have announced the disposal
of ECC Card Clothing - Carclo's original business - completing the process of
restructuring which commenced in 1997.
The strategy of the group is:
• to grow our specialist businesses such as medical plastics and LED optics,
• to continue our expansion in low cost regions,
• to increase our investment in new technologies and proprietary know-how.
The economic environment we face remains harsh - our established customer base
in the UK and the USA continues to decline - and price pressures, especially in
automotive, remain as brutal as ever. In the UK the burden of excessive
regulation and poorly conceived legislation - most notably in pensions -
represents a substantial cost and constraint on the group. Our response has been
to increase our capacity in low cost regions and to concentrate our UK
activities in technical and quality control related areas. During the last year
we have commissioned a second moulding plant in the Czech Republic, initiated a
new factory in Bangalore, India, with our joint venture partner Suprajit
Engineering Ltd, and expanded capacity at our existing facility in Shanghai,
China. During the same period we have reduced manufacturing capacity in the UK
and the USA.
This strategic shift of capacity is now serving us well. We can offer UK or USA
based technical, quality and logistics support matched to a highly competitive
cost base with manufacturing located in the most appropriate location for the
customer. It is a very attractive offering and as a consequence we are seeing
strong enquiry levels and a good inflow of new contracts.
This year's results show that we have passed a turning point in terms of
profitability. Our focus now is on improving operating margins, targeting the
levels achieved historically in our businesses - we still have some way to go
with this task and it will require us to continue reducing costs as appropriate.
In the longer term we would hope to see another turning point where sales
revenues show growth on a like for like basis. It is difficult to forecast when
this turning point may come but our mix of specialist businesses and our global
manufacturing base positions us well for growth.
In the longer term we need to add more Carclo owned intellectual property to the
business mix. We have recognised this for some time and have been selectively
investing in new technologies. In this report we profile our work using digital
inkjet technology to apply optical coatings. In this application we have
established a world leading position. We also include an update on our
developments in optics for high power LEDs where again we have a world leading
position.
Finally, the Conductive Inkjet Technology development ('CIT') has had a very
successful year. We are well advanced with the development of innovative
applications of this technology with existing Carclo customers which should
contribute to revenues in the coming year. However, these applications are
dwarfed by the potential in RFID tags where the CIT technology looks likely to
provide a cost and performance breakthrough. The level of interest from major
players in the RFID field is high and we expect to be able to extend our joint
development programmes into commercial exploitation agreements during the coming
year.
Although for many of us at Carclo the disposal of the card clothing business is
a sad event, it leaves the group focused, with good, well invested facilities
and with plenty of exciting development opportunities ahead of us. My confidence
in the future of the group remains well founded.
Operating review
------------------------------------------------------------------------------------
| Carclo TechnicalPlastics Carclo Specialist Wire|
| |
| 2005 2004 2005 2004|
|----------------------------------------------------------------------------------|
|Turnover - continuing operations £86.8m £93.5m £20.8m £22.2m|
| |
|Underlying operating profit * £4.1m £1.7m £1.4m £1.9m|
| |
|Net assets £44.1m £39.8m £13.0m £12.0m|
| |
|Operating margin 4.7% 1.8% 6.6% 8.5%|
| |
|Return on capital employed 9.3% 4.2% 10.6% 15.8%|
| |
|Average number of employees 1,462 1,643 370 379|
| |
------------------------------------------------------------------------------------
* before goodwill amortisation and exceptional charges
Carclo Technical Plastics
Profits advanced strongly in all parts of Carclo Technical Plastics even though
sales continued to reduce. Divisional profits, before exceptional charges and
goodwill amortisation, increased by 144.8% to £4.1 million on sales down by 7.1%
at £86.8 million. The sales decline reflected the continuing rationalisation of
the UK and USA operations as we adjusted our capacity to the available business.
Despite the continued erosion of the UK and USA customer base, the UK and USA
moulding operations delivered much improved profits and benefited particularly
from continuing growth in medical business. The Carclo optics business had a
disappointing year as telecom related programmes declined and the recent growth
of LED optics did not fully compensate.
The low cost region operations in the Czech Republic and China continued to win
new programmes and are set to deliver good growth in 2006 and beyond.
The CTP Automotive operations had a very successful year. The new programmes in
specialist lighting for vehicles such as Bentley, Mercedes McLaren and Porsche
came up to full volumes. Demand for our vehicle antennas was also strong and we
are seeing continued growth from our multiband products which combine radio,
mobile telephone and satellite navigation antennas. In control cables we are now
well advanced with our resourcing of production to India and Hungary. We have
established a 50:50 joint venture with Suprajit Engineering Ltd, with whom we
have had a supply agreement for some years, and a new CTP Suprajit Ltd cable
factory will commence production in October 2005.
CTP Automotive was a supplier of control cables to MG Rover. Their credit
insurance was withdrawn in early 2004 and since that time we limited their
credit facility. As a consequence, our loss on the receivership of MG Rover was
limited to £0.1 million, mostly in regard to stocks which we would expect to
recover over the coming years through ongoing sales of replacement parts.
The last twelve months has seen very significant increases in the price of steel
and polymers. In addition there have been significant increases in the price of
gas and electricity. Generally we have recovered most of the increase in polymer
prices from our customers. In automotive we have been able to recover some, but
as yet not all, of the steel price increase. We continue to pursue a resolute
policy of full cost recovery with all of our customers.
Carclo Specialist Wire
As a division, Specialist Wire produced profits down by 27.3% at £1.4 million on
sales down by 6.1% at £20.8 million. All of the decline was in Card Clothing.
The two smaller Precision Engineering companies, which manufacture aerospace
control cables and sell band saws and consumables, performed well. Following the
disposal of the card clothing business, we intend to combine the two Precision
Engineering companies with CTP Automotive and report this new division
separately from Carclo Technical Plastics.
The world textile industry is undergoing a rapid shift as a consequence of the
ending of the MultiFibre Agreement. China and India are expected to be major
beneficiaries from the freeing up of world trade in textiles with almost all
other markets likely to suffer to some extent. For Card Clothing, last year was
difficult with demand starting slowly, improving in the summer but falling away
again sharply as customers faced the global uncertainty of the new tariff
regime. We continued to develop our operations in China and India and to reduce
costs and capacity in Europe. This process is set to continue over the coming
years as more and more of the world's textile capacity migrates to China.
On 26 May 2005 we announced that we had received a binding offer from NV Bekaert
SA for the card clothing business. Completion of this transaction is expected in
the coming weeks. Bekaert's offer essentially realises for cash the net book
value of the card clothing assets and leaves Carclo in possession of the
freehold UK and French properties which should, in due course, realise in excess
of the book value.
Bekaert is a world wide market and technological leader in selected applications
of its two core competence's - advanced metal transformation and advanced
materials and coatings. Bekaert has been active in the card clothing industry
for many years and wants to play a leading role as a supplier for textile
machine builders.
Ian Williamson
13 June 2005
Technological innovations
Over the last few years Carclo has pursued an explicit strategy of developing
proprietary technologies which add value to our products and capabilities. A
particular area of expertise we have developed is the use of digital inkjet
technology to apply specialist coatings to injection moulded plastics. Our first
development in this area was using inkjet print heads to apply scratch resistant
coatings to our specialist optical products. The development commenced in 2002
and we are pleased to report that we have now received approval from a major
automotive customer to use this technology in high volume production of an
optical component. As far as we are aware this will be the first time that
digital inkjet technology has been used in a high quality volume manufacturing
application.
Our work in optical coatings led us to the conductive inkjet technology
development which has been discussed in previous annual reports. The Conductive
Inkjet Technology ('CIT') process is a unique patented chemistry which allows us
to use digital inkjet technology to print pure copper directly onto plastic and
non porous surfaces. We have made excellent progress with this technology in the
last year and have recently increased our investment in the joint venture
company which owns the technology. CIT won the 2005 Plastics Industry Award for
Best Technology Achievement.
Carclo Technical Plastics has two development projects with existing customers
which we anticipate will lead to production of components using this innovative
technology. With the world leading motorcycle helmet manufacturer, Schuberth
Head Protection Technology GmbH, we have used the CIT processes to apply very
fine heating elements to the inside of the helmet visor to provide an electrical
demisting function. This unique high value application of the technology
demonstrates our ability to print directly and without contact onto complex
three-dimensional components. The second project is in a security application
and remains confidential.
Of greater potential significance is CIT's collaboration with the USA based
Preco Industries Inc. to demonstrate a high speed web printing line producing
very low cost antennas for RFID tags. This line will be able to produce up to
100 million antennas per annum and our target cost for the antenna is around 1
cent - well below competing technologies. We have also patented and proven a
technology, PRINT2CHIP, which uses CIT technology to provide connections to the
very small integrated circuits used in RFID tags and many other electronic
applications. PRINT2CHIP dramatically reduces the cost of a complete RFID tag,
enabling tags to be produced in the 5 to 10 cent cost range. This is broadly in
line with WalMart's target for universal application of RFID technology. The
combination of CIT's print technology and PRINT2CHIP capability has created
enormous interest and we expect to extend our joint development programmes into
commercial exploitation agreements during the coming year. We remain very
excited about the potential of CIT in its own right, and as a means by which
Carclo Technical Plastics can increase the added value content of our products.
We have continued to make very good progress with our other technical
developments. Earlier this year Philips Lighting BV launched a new range of LED
lighting using Carclo optics. Our specialist range of optics for high power LEDs
is now generating good sales growth and we see great potential for this
proprietary product range which will be distributed by Future Electronics Inc.,
a leader in the field.
The development of water soluble capsules for drug delivery is ongoing with our
partner, Stanelco plc. We are concentrating on increasing the starch content of
the capsules to allow us both to reduce cost and, more importantly, to
facilitate the process of regulatory approval. We are in the process of
presenting the capsule technology to a number of drug development companies.
We continue to win new business as manufacturing partner for a number of
innovative and highly successful UK based medical technology companies. Our
projects with Vectura plc and Axis-Shield plc, which we described last year, are
progressing well. This year we are able to announce our involvement with Genosis
UK plc who have developed a highly innovative range of devices to measure male
and female fertility. The Genosis device is an impressive blend of precision
plastics, microfluidics and electronics and is ideally matched to our added
value manufacturing capability.
Finance director's review
2005 2004
£million £million
______________________________________________________________________________
Turnover - continuing 107.7 115.7
_____________________
Divisional operating profit 5.5 3.6
Central costs (0.9) (1.3)
_____________________
Underlying operating profit from continuing operations 4.6 2.3
Share of operating loss in joint venture - (0.1)
Operating loss from discontinued operations - (0.2)
Goodwill amortised (1.1) (1.1)
Non recurring items (0.3) (6.3)
Net interest (1.5) (1.3)
_____________________
Profit / (loss) before tax 1.7 (6.7)
Taxation credit 0.3 2.4
_____________________
Profit / (loss) attributable to ordinary shareholders 2.0 (4.3)
Ordinary dividend (0.6) (0.6)
_____________________
Surplus / (deficit) for the year 1.4 (4.9)
_____________________
Divisional operating margin from continuing operations 5.1% 3.1%
Basic earnings per share 3.9p (8.4)p
Underlying earnings per share 6.0p 0.9p
Financial summary
The group generated a profit before tax of £1.7 million last year after the
previous year's loss of £6.7 million. Turnover from continuing operations
decreased by 6.9% to £107.7 million. However, underlying operating profit from
continuing operations was £4.6 million, compared to operating profit of £2.3
million in the previous financial year. The increased profitability was due to
new specialist lighting contracts in CTP Automotive and the achievement of
further operating efficiencies in the group's moulding facilities in both the UK
and the USA. Savings generated by the ongoing rationalisation programme enabled
a much stronger second half performance despite continued pricing pressure and
raw material price increases.
The group incurred net exceptional charges of £0.3 million (2004 - £6.3
million). Costs incurred in respect of rationalisation and redundancy were
offset in the main by exceptional profit generated from the sale of surplus
group properties.
Net debt at the year end was £25.9 million (2004 - £28.1 million). The receipt
of the proceeds from the disposal of the group's card clothing business will
result in a net debt of approximately £20 million which is the group's internal
debt target. Despite the average level of debt being lower during the year,
interest payable has risen to £1.5 million (2004 - £1.3 million) due to the
progressive increases in bank base rates experienced last year.
The total investment in the Conductive Inkjet Technology joint venture during
the year was £1.0 million and these costs have been capitalised as development
expenditure.
The group received net tax refunds of £0.5 million (2004 - £0.7 million) due to
the utilisation of losses in prior periods. There is a net tax credit for the
current year of £0.3 million (2004 - £2.4 million).
The profit attributable to ordinary shareholders was £2.0 million (2004 - a loss
of £4.3 million). The board has recommended an unchanged dividend for the year
of 1.2 pence per ordinary share which is covered 3.3 times by earnings. The cash
flow of the group continues to be impacted by the requirement to make deficit
correction payments to the group pension schemes in accordance with the Minimum
Funding Requirements ('MFR'). The future pensions funding regime remains
uncertain and until there is greater clarity in this area the board consider
that it is prudent to maintain the dividend at its current level.
Exceptional items
The net exceptional charge of £0.3 million (2004 - £6.3 million) is analysed as
follows:
2005 2004
£million £million
__________________________________________________________________________
Rationalisation of Technical Plastics operations 0.6 1.0
Rationalisation of Specialist Wire operations 0.4 0.3
___________________
Total operating exceptional charges 1.0 1.3
Loss on termination of operations 0.8 5.3
Profit on disposal of surplus properties (1.5) (0.3)
___________________
0.3 6.3
___________________
Operating exceptional costs in respect of continuing operations were £1.0
million (2004 - £1.3 million). These costs relate to the ongoing reorganisation
at the group's UK Technical Plastics operations with the UK specialist medical
and optical moulding operations moving towards an integrated management
structure. Costs were also incurred in respect of the rationalisation of the UK
Specialist Wire business where the UK business has been reorganised due to the
ongoing expansion of production at the Chinese facility.
The loss on termination of operations was £0.8 million (2004 - £5.3 million).
The group has closed one moulding operation in the USA during the year, due to
the withdrawal of business from one particular customer, and completed the
closure of one facility in the UK.
The group continues to generate funds from the sale of surplus properties. Net
proceeds of £1.5 million were generated from the sale of surplus land at one of
the group's Scottish facilities and the waiver of certain rights over a
previously disposed property near the same facility.
Net debt and gearing
2005 2004
£million £million
_____________________________________________________________________
Underlying cash flow 8.6 6.4
Interest and tax (0.9) (0.7)
Capital expenditure, other than for expansion (2.6) (3.4)
__________________
Free cash flow 5.1 2.3
Other non recurring - 4.2
Equity dividends (0.6) (0.6)
__________________
Cash flow available for corporate activities 4.5 5.9
Capital expenditure for expansion (1.5) (0.6)
Investment in joint venture (1.0) (0.4)
Exchange movement 0.2 1.9
__________________
Decrease in debt in year 2.2 6.8
__________________
Net borrowings reduced by £2.2 million in the year to £25.9 million (2004 -
£28.1 million). The group gearing level is now 53.7% (2004 - 60.6%). Underlying
cash flow from operations was £8.6 million (2004 - £6.4 million) reflecting the
better trading conditions and increased profitability resulting from operating
efficiencies. Free cash flow in the year was £5.1 million (2004 - £2.3million).
The improvement in free cash flow reflects the increase in operating cash flows
and a lower capital expenditure requirement. Group capital expenditure was £4.1
million (2004 - £4.0 million) representing 88% of depreciation. The free cash
flow is after the cash cost of pension contributions of £2.6 million (2004 -
£2.6 million). Other non recurring cash flow items netted to £nil (2004 - £4.2
million) with property and other fixed asset disposal proceeds of £2.2 million
funding reorganisation costs of £0.6 million and closure costs of £1.6 million.
The group's surplus property portfolio has increased to a net book value of £5.8
million due to the continuing rationalisation of group companies together with
the likely disposal of the card clothing business and we will continue to
realise proceeds from the disposal of these surplus properties.
Financing
The group has assured medium term facilities of £35.3 million (2004 - £36.8
million) with an average life of 2.6 years including a modest amount of
amortisation over the next two years. The facilities are secured by a fixed and
floating charge over the assets of six group companies. Continuing its debt
reduction strategy, the group cancelled £1.5 million of medium term facility
during the year following the receipt of proceeds from property disposals and a
further reduction is anticipated following the likely disposal of the card
clothing business.
Pensions
The group has two defined benefit pension schemes which are closed to new
members. These accounts have been prepared under the provisions of SSAP 24 for
the final time. Under SSAP 24 the charge to the profit and loss was £1.5 million
(2004 - £1.4 million) and this represents the costs of accounting for benefits
for the existing workforce based on the last actuarial valuation of the larger
scheme as at 31 March 2004. The actual cash contributions into the schemes
amounted to £2.4 million, consisting of £1.1 million regular employer cash
contributions and an additional payment of £1.3 million in accordance with the
MFR provisions.
As required by the provisions of FRS17, the group has disclosed the impact of
applying this standard on the balance sheet and profit and loss account. A
pension deficit of £17.1 million, net of tax, would have been recorded in the
balance sheet (2004 - £13.8 million). The overall charge to the profit and loss
account compared with current SSAP 24 accounting is illustrated in the following
table:
2005 2005
SSAP 24 FRS 17
£million £million
__________________________________________________
Charge to operating profits 1.5 0.7
Financing - (0.5)
___________________
Net charge 1.5 0.2
___________________
As can be seen, the reported profits for the group would have increased by £1.3
million if FRS17 had applied in year under review. It is likely that under the
new International Accounting Standard, IAS19 'Employee Benefits', the profit and
loss pension charge in the new financial year will be higher than under FRS17.
However, the IAS19 charge will be significantly lower than both the current
charge under SSAP 24 and the ongoing cost of funding the pension schemes.
Under the provisions of the MFR the group expects to make ongoing annual
payments of approximately £1.5m in order to eradicate the MFR deficit on the
pension schemes.
Proposed capital reorganisation
In the 2004 interim report we commented upon the potential impact on
distributable reserves of the implementation of FRS17 in respect of the
financial year ending 31 March 2006. The board proposes to seek shareholder
approval at the annual general meeting for a reduction in capital of Carclo plc
(specifically £41.8 million of the share premium account) in order to resolve
this issue. We will then lodge the necessary petitions with the Court. We
are also seeking approval at the annual general meeting to modify the borrowing
covenant contained in the articles of association to reflect the impact of the
new International Accounting Standards on the company's accounts.
Disposal of ECC Card Clothing
On 26 May 2005 we announced the proposed disposal of our card clothing business
for a cash consideration of up to £8.6 million. The acceptance of the binding
offer and subsequent completion of this transaction is dependent upon
satisfactory completion of employee consultations, Carclo shareholder approval
and Turkish merger control clearance.
On completion the group will receive £6.5 million, with further payments of up
to £2.1 million dependent upon the achievement of certain performance criteria
in the two years to 31 May 2007. The transaction excludes the main freehold
properties of the UK and French businesses with a combined net book value of
£2.2 million. Two of these properties will generate a commercial rent and the
main UK property will be disposed of on a two year timescale. The transaction
also excludes the UK trade debts and UK bank balances. A pro forma unaudited
statement of net assets as at 31 March 2005 for the continuing group, which
illustrates the impact of the disposal, is set out below:
Net Assets of
Carclo
Carclo post disposal
as at Disposal of Net Transaction as at
31 March 2005 ECC consideration costs 31 March 2005
£'000 £'000 £'000 £'000 £'000
Fixed Assets
Intangible assets 14,897 - - - 14,897
Tangible assets 36,707 (3,391) - - 33,316
Investments 10 - - - 10
_________ _________ _________ _________ _________
51,614 (3,391) - - 48,223
_________ _________ _________ _________ _________
Current Assets
Stock 13,685 (4,354) - - 9,331
Debtors 22,193 (2,323) - - 19,870
Debtors due after more than
one year 14,013 - 1,700 - 15,713
Cash At Bank And In Hand 9,938 (829) 6,447 (500) 15,056
_________ _________ _________ _________ _________
59,829 (7,506) 8,147 (500) 59,970
Creditors: Amounts Falling Due
Within One Year (27,409) 2,837 - - (24,572)
_________ _________ _________ _________ _________
Net current assets 32,420 (4,669) 8,147 (500) 35,398
Creditors: Amounts Falling Due
After More Than One Year (30,350) 2 - - (30,348)
Provisions For Liabilities
And Charges (5,453) (89) - - (5,542)
_________ _________ _________ _________ _________
Net Assets 48,231 (8,147) 8,147 (500) 47,731
========= ========= ========= ========= =========
Net debt 25,880 782 (6,447) 500 20,715
The group intends to utilise an element of the proceeds from the disposal of the
card clothing business to make an additional payment of up to £2 million to the
pension schemes with the balance being used to reduce debt.
International Accounting Standards
Consolidated financial statements of all listed companies must be prepared
according to the International Accounting Standards ('IAS') for accounting
periods beginning on or after 1 January 2005. The group will, therefore, be
preparing its consolidated accounts for the financial year ending 31 March 2006
under the provisions of IAS. The first set of accounts to be published under IAS
will be the group's interim results for the six months ended 30 September 2005.
The transition balance sheet as at 31 March 2004 will form the opening position
for the comparative information contained in the 31 March 2006 accounts. A
detailed review of the impact of IAS on the transition balance sheet and on the
profit and loss account has now been ongoing for a number of months. As the
group has previously reported, a main impact on the balance sheet will result
from the adoption of IAS19 'Employee Benefits' which proposes a similar pension
accounting treatment to FRS17. Under IAS19, the group pension deficit will be
recorded in the balance sheet for the first time. Based on the FRS17 deficit, as
at 31 March 2005 this would have reduced group net assets by £26.9 million to
£21.3 million. The pension charge to the profit and loss account is likely to be
reduced under IAS19. The group is considering the options under IAS19 to
minimise volatility in the group's accounts going forward.
A more detailed assessment of the impact of IAS on the financial statements of
the group will be published in advance of the interim report published in
December 2005.
Robert Brooksbank
13 June 2005
Consolidated profit and loss account
year ended 31 March
2005 2004
£000 £000
(as restated)
______________________________________________________________________________
Turnover
Continuing operations 107,674 115,652
Discontinued operations - 623
_________________________
107,674 116,275
Operating profit/(loss)
Continuing operations - before exceptional costs
and goodwill 4,574 2,309
- exceptional costs (1,038) (1,314)
_________________________
- after exceptional costs but
before goodwill 3,536 995
Discontinued operations - (226)
_________________________
3,536 769
Goodwill amortisation (1,042) (1,042)
_________________________
Operating profit/(loss) 2,494 (273)
_________________________
Continuing operations 2,494 (47)
Discontinued operations - (226)
_________________________
Operating profit/(loss) 2,494 (273)
Share of operating loss in joint venture - (115)
Loss on termination of operations (763) (5,272)
Profit on sale of properties 1,462 337
_________________________
Profit/(loss) before interest 3,193 (5,323)
Net interest payable 1,512 1,331
_________________________
Profit/(loss) on ordinary activities before taxation 1,681 (6,654)
Taxation credit 319 2,390
_________________________
Profit/(loss) attributable to ordinary shareholders 2,000 (4,264)
Ordinary dividends 613 613
_________________________
Surplus/(deficit) for the year 1,387 (4,877)
_________________________
Earnings per ordinary share
Basic and diluted 3.9p (8.4p)
Underlying 6.0p 0.9p
_________________________
Dividend per ordinary share 1.2p 1.2p
_________________________
Consolidated statement of total recognised gains and losses
Year ended 31 March 2005 2004
£000 £000
(as restated)
______________________________________________________________________________
Profit/(loss) attributable to ordinary shareholders 2,000 (4,264)
Exchange gains/(losses) on the translation of
overseas net assets 410 (539)
_________________________
Total recognised gains and losses relating to the
year 2,410 (4,803)
_____________
Prior period adjustment (324)
_____________
Total gains and losses recognised since last annual
report 2,086
_____________
Note: The investment in own shares held under ESOP trusts have been treated in
accordance with the new requirements of UITF 38 and have been deducted from
equity. A prior period adjustment has been made to reflect the adoption of this
new guidance.
Consolidated balance sheet
as at 31 March
2005 2004
£000 £000 £000 £000
(as restated) (as restated)
___________________________________________________________________________________________
Fixed assets
Intangible assets 14,897 15,939
Tangible assets 36,707 37,716
Investments 10 10
_________ _________
51,614 53,665
Current assets
Stocks 13,685 13,596
Debtors 22,193 24,546
Pensions prepayment due after more than
one year 14,013 13,052
Cash at bank and in hand 9,938 7,693
_________ _________
59,829 58,887
_________ _________
Creditors - amounts falling due within
one year
Bank loans and overdrafts 5,442 4,610
Trade and other creditors 19,652 22,836
Taxation 1,702 1,369
Dividends 613 613
_________ _________
27,409 29,428
_________ _________
Net current assets 32,420 29,459
_________ _________
Total assets less current liabilities 84,034 83,124
Creditors - amounts falling due after
more than one year 30,350 31,086
Provision for deficit in joint venture
Share of gross assets 633 69
Share of gross liabilities (686) (189)
_________ _________
53 120
Provisions for liabilities and charges 5,400 5,522
_________ _________
Total net assets 48,231 46,396
========= =========
Capital and reserves
Called up share capital 2,594 2,594
Share premium 41,772 41,772
Revaluation reserve 840 852
Other reserves 1,330 1,330
ESOP reserve (905) (1,030)
Profit and loss account 2,600 878
_________ _________
Equity shareholders' funds 48,231 46,396
========= =========
Consolidated cash flow statement
year ended 31 March
2005 2004
£000 £000
________________________________________________________________________________
Cash inflow from operating activities 6,303 1,654
Returns on investments and servicing of finance (1,410) (1,350)
Taxation 541 694
Capital expenditure and financial investment (2,721) 4,560
Acquisitions and disposals (95) -
Equity dividends paid (613) (623)
____________________
Cash inflow before use of liquid resources and financing 2,005 4,935
Financing
Decrease in debt (487) (2,938)
Capital element of finance lease rentals (96) (168)
____________________
Increase in cash in the year 1,422 1,829
====================
2005 2004
£000 £000
________________________________________________________________________________
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year 1,422 1,829
Cash outflow from decrease in debt and lease financing 583 3,106
____________________
Change in net debt resulting from cash flows 2,005 4,935
Exchange movement 227 1,885
____________________
Movement in net debt in the year 2,232 6,820
Net debt at beginning of the year (28,112) (34,932)
____________________
Net debt at end of the year (25,880) (28,112)
====================
Turnover, operating profit / (loss) and net assets employed
year ended 31 March
2005 2004
Turnover Operating Net Turnover Operating Net
£000 profit assets £000 profit assets
£000 £000 £000 £000
(as restated) (as restated)
____________________________________________________________________________________________________________________
By class of business
Continuing operations
Technical plastics division 86,833 4,114 44,145 93,460 1,680 39,752
Specialist wire division 20,841 1,378 12,982 22,192 1,896 11,976
______________________________________________________________________________
107,674 5,492 57,127 115,652 3,576 51,728
Exceptional costs (1,038) (1,314)
______________________________________________________________________________
107,674 4,454 57,127 115,652 2,262 51,728
Discontinued operations
Technical plastics division - - - 623 (226) -
___________ ___________
Operating assets 57,127 51,728
Unallocated net liabilities (note 1) (8,896) (5,332)
___________ ________________________ ___________
107,674 48,231 116,275 46,396
______________________________________________________________________________
Divisional operating profit 4,454 2,036
Central administration costs (918) (1,267)
Goodwill amortisation (note 2) (1,042) (1,042)
___________ ___________
Operating profit / (loss) 2,494 (273)
=========== ===========
By geographical area of origin
Continuing operations
United Kingdom 77,885 3,824 39,968 85,386 3,228 36,458
United States of America 19,402 1,476 7,686 19,982 711 8,627
Rest of World 10,387 192 9,473 10,284 (363) 6,643
______________________________________________________________________________
107,674 5,492 57,127 115,652 3,576 51,728
Exceptional costs
United Kingdom (932) (1,022)
United States of America. (16) (172)
Rest of World (90) (120)
______________________________________________________________________________
107,674 4,454 57,127 115,652 2,262 51,728
Discontinued operations
United Kingdom - - - 623 (226) -
___________ ___________
Operating assets 57,127 51,728
Unallocated net liabilities (note 1) (8,896) (5,332)
___________ ________________________ ___________
107,674 48,231 116,275 46,396
______________________________________________________________________________
Divisional operating profit 4,454 2,036
Central administration costs (918) (1,267)
Goodwill amortisation (note 2) (1,042) (1,042)
___________ ___________
Operating profit / (loss) 2,494 (273)
=========== ===========
Geographical segment - by destination
United Kingdom 47,077 49,846
Rest of Europe 26,133 28,628
Rest of World 34,464 37,801
___________ ___________
107,674 116,275
___________ ___________
Notes
1. Unallocated net liabilities include interest bearing assets
and liabilities, investments, taxation balances, capitalised goodwill and head
office net assets.
2. Goodwill amortisation relates to continuing businesses within the technical
plastics division.
3. The preliminary announcement is prepared on the same basis
as set out in the accounts for the year ended 31 March 2004, other than for the
accounting for own shares held under ESOP trusts. The investment has been
treated in accordance with the requirements of UITF 38 and has been deducted
from equity. A prior period adjustment has been made to reflect the adoption of
this guidance. The investment in Carclo plc shares held by the ESOP trust is
classified at original cost as a deduction from shareholders funds within other
reserves. This change in accounting policy has resulted in a prior period
adjustment for both the group and the company. For the group and company,
shareholders' funds at 1 April 2003 have been reduced by £0.303 million. Profit
for the current year has been reduced by £nil (2004 - £0.104 million) as a
result of the change in accounting policy.
4. The financial statements set out above does not constitute
the company's statutory accounts for the years ended 31 March 2005 and 31 March
2004, but is derived from those accounts. Statutory accounts for the year ended 31
March 2004 have been delivered to the Registrar of Companies and those for the
year ended 31 March 2005 will be delivered following the company's annual
general meeting.
5. The auditors have reported on those accounts; their reports
were unqualified and did not contain a statement under S 237 (2) or S 237 (3) of
the Companies Act 1985.
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