Interim Results

Carclo PLC 3 December 2001 Carclo plc Interim Results for the Six Months ended 30 September 2001 Key Points * Sales from continuing operations maintained at £64m. * Underlying operating profits from continuing operations fell by 35% to £3.7m (2000: £5.6m) * Operating profits increased by 4.8% in the Specialist Wire Division * Carclo Technical Plastics suffered from decline in demand for telecom products * Exceptional charges include £4.9m costs of closing two UK operations and £6.3m for impairment of goodwill associated with acquisition of CTP Alan * Successful disposal of the Joseph Sykes Brothers wire business * Interim dividend passed and focus on debt reduction until benefits of reorganisation programme have been demonstrated Commenting on the results, George Kennedy, Chairman, said: 'The prompt and aggressive actions to eliminate loss making activities enable us to expect improved trading performance in the second half year. We are confident in our strategy of building a global technical plastics group and the development of manufacturing facilities in China and the Czech Republic will complement the technical resources of the redefined UK operations.' For further information please contact: Carclo plc Ian Williamson, Chief Executive On 3 December: 020 7324 8888 Chris Mawe, Finance Director Thereafter: 01924 330500 Golin/Harris Ludgate Richard Hews 020 7324 8888 Trish Featherston Chairman's statement Overview Sales in the six months to 30 September 2001 from continuing operations increased marginally to £64.4 million compared to the equivalent period last year, due to the inclusion of sales from CTP Alan offset by lower sales at CTP Carrera. Operating profits at the ongoing businesses reduced by 34.5% to £3.7 million mainly due to lower activity in the USA and operating losses at CTP Alan. The loss before tax of £10.9 million is stated after charges for exceptional items and goodwill together totalling £12.6 million. These include £4.9 million costs of closing two UK operations and a charge of £6.3 million for the impairment of goodwill associated with the acquisition of CTP Alan. The exceptional items also include a net profit of £0.4 million on the disposal of the Joseph Sykes Brothers wire business offset by a charge of £1.5 million for the reinstatement of goodwill and £0.9 million profit on the sale of the Halifax site formerly occupied by Lee Smith Wires. The loss per ordinary share was 21.4p compared to earnings per share of 5.4p last year, the reduction being mainly due to these exceptional charges. Financial position Net debt at 30 September 2001 was £50.0 million representing gearing of 88% and an increase of £6.4 million since 31 March 2001 due mainly to the payment of both interim and final dividends totalling £5.6 million in the period. Capital expenditure at £6.2 million was at a similar level to the equivalent period last year and included the acquisition of the freehold property occupied by CTP Wipac. The final earnout payment of £2.1 million was paid to the former owners of CTP Carrera and proceeds of £5.7 million were received for the sale of the wire manufacturing business of Joseph Sykes Brothers. We will be cash generative in the second half, with capital expenditure below depreciation, property disposals and further proceeds from the sale of the Joseph Sykes business. We expect to end the year with debt well below the half year peak. Operating review The results for the six months to 30 September 2001 reflect the most difficult trading conditions for many years. The group has suffered from a dramatic decline in the demand for telecommunication components which has necessitated aggressive action to reduce the UK manufacturing capacity. The closure of two UK plastics operations was announced in September and the results of these businesses have been treated as discontinuing. Those continuing businesses exposed to the telecommunications markets experienced reduced profits. Losses were incurred at CTP Alan and profits reduced at CTP Carrera due to lower operating efficiencies caused by the low demand for telecom products. Strong performance in the US medical market helped CTP Carrera to achieve a reasonable overall result and prospects for the second half will benefit from the continued increase in demand for its medical products. The automotive and medical operations demonstrated creditable resilience in the difficult market conditions. Product innovations, including the multiband antenna, have enabled the UK automotive businesses to maintain profitability despite continuing pressure on selling prices. The medical operations also have several new products in an advanced state of development which will provide growth opportunities to this profitable core business. The specialist wire division reported a modest increase in profits despite reduced sales in the UK card clothing business. Reduced order intake in card clothing reflects the current depressed global textile market and the manufacturing and selling cost base is being reviewed to retain the benefits from productivity improvements achieved in recent years. The remaining small engineering businesses performed well to improve profits despite the decline in their customer base of UK manufacturing companies. Dividend Whilst the trading environment remains uncertain the board of Carclo believes that shareholders will be best served by a determined focus on debt reduction to protect the overall value of the group. Accordingly, your board has decided to pass the interim dividend and will review the level of the final dividend in June next year when the benefits of the reorganisation programme will have been demonstrated and, hopefully, the direction of the global manufacturing economy is clearer. Outlook The prompt and aggressive actions to eliminate loss making activities enable us to expect improved trading performance in the second half year. We are confident in our strategy of building a global technical plastics group and the development of manufacturing facilities in China and the Czech Republic will complement the technical resources of the redefined UK operations. George Kennedy Chairman 3 December 2001 Consolidated profit and loss account (unaudited) Half year ended 30 Half year ended Year ended September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 ---------- ---------- ---------- Turnover Continuing operations ongoing 64,416 64,281 130,922 discontinuing 6,123 12,782 21,482 ---------- ---------- ---------- 70,539 77,063 152,404 Discontinued operations 9,229 11,605 18,736 ---------- ---------- ---------- 79,768 88,668 171,140 ---------- ---------- ---------- Operating(loss)/profit Continuing ongoing - before 3,688 5,632 11,511 operations rationalisation costs - rationalisation costs (594) (158) (336) - after rationalisation 3,094 5,474 11,175 costs discontinuing (985) 919 1,079 ---------- ---------- ---------- 2,109 6,393 12,254 Discontinued operations 597 611 1,196 ---------- ---------- ---------- 2,706 7,004 13,450 Goodwill amortisation (521) (472) (1,038) Goodwill impairment (6,299) - - ---------- ---------- ---------- Operating (loss)/profit (4,114) 6,532 12,412 Disposal of subsidiary undertaking (1,141) (46) (101) Loss on termination of operations (4,872) (852) (1,102) Profit on sale of properties 870 97 98 ---------- ---------- ---------- (Loss)/profit before interest (9,257) 5,731 11,307 Net interest payable 1,661 1,224 2,680 ---------- ---------- ---------- (Loss)/profit on ordinary activities (10,918) 4,507 8,627 before taxation Taxation - 1,578 2,938 ---------- ---------- ---------- (Loss)/profit on ordinary activities (10,918) 2,929 5,689 after taxation Ordinary dividends - 1,885 5,624 ---------- ---------- ---------- (Deficit)/retained profit for the (10,918) 1,044 65 period ---------- ---------- ---------- Earnings per ordinary share Basic (21.4p) 5.4p 10.5p Underlying 2.2p 7.1p 13.7p ---------- ---------- ---------- Dividend per ordinary share 0p 3.44p 11.00p ---------- ---------- ---------- Statement of total recognised gains and losses (Loss)/profit on ordinary activities (10,918) 2,929 5,689 after taxation for the period Exchange losses on the translation of (351) (216) (455) overseas assets ---------- ---------- ---------- Total gains and losses recognised (11,269) 2,713 5,234 relating to the period Prior year adjustment (1,250) - - ---------- ---------- ---------- Total gains and losses recognised (12,519) 2,713 5,234 since the last annual report ---------- ---------- ---------- Notes: 1. The financial information in this document has been prepared on the basis of the accounting policies set out in the audited accounts for the year ended 31 March 2001, with the exception of the adoption of FRS 19 on deferred taxation. This financial information was approved by the directors on 3 December 2001. 2. The taxation charge for the six months ended 30 September 2001 has been calculated in accordance with the provisions of FRS 19 on deferred taxation. No adjustment is required to the taxation charge for the six months ended 30 September 2000 and the year to 31 March 2001. A prior year adjustment of £1,250,000 has been made against revenue reserves at 1 April 2000 to incorporate a full provision for deferred taxation at that date in accordance with FRS 19. As a result the balance sheets at 30 September 2000 and 31 March 2001 have been restated. 3. The financial information is unaudited but has been reviewed by the auditors and their report to the company is set out on page 7. 4. The results for the year ended 31 March 2001 are an abridged version of the company's full accounts which have been filed with the Registrar of Companies, on which the company's auditors reported without qualification. Comparative figures for the year to 31 March 2001 have been extracted from these accounts with a prior year adjustment to the balance sheet to incorporate a full provision for deferred taxation in accordance with FRS 19. 5. The amount shown for estimated taxation for the half year ended 30 September 2001 represents 0% of the profit on ordinary activities before taxation (30 September 2000 - 35%). 6. Earnings per ordinary share at 30 September 2001 have been calculated by dividing the loss attributable to ordinary shareholders of £ 10,918,000 by the weighted average number of ordinary shares in issue of 50,920,740. 7. Copies of the Interim Report will be posted to shareholders on 7 December 2001 and are available from the company's registered office, Ploughland House, P.O. Box 14, 62 George Street, Wakefield, WF1 1ZF. Consolidated balance sheet (unaudited) 30 September 2001 30 September 2000 31 March 2001 as restated as restated £'000 £'000 £'000 £'000 £'000 £'000 -------- -------- ---------- ---------- ---------- ---------- Fixed assets Intangible 18,543 19,687 24,676 assets Tangible 55,187 58,030 61,508 assets Investments 1,343 1,383 1,369 ------ ---------- ---------- 75,073 79,100 87,553 Current assets Stocks 15,302 17,396 18,076 Debtors 36,723 37,159 38,030 Pensions 11,742 11,393 11,561 prepayment due after more than one year Cash at bank 17,239 10,669 10,797 and in hand ------- ---------- ---------- 81,006 76,617 78,464 ------- ---------- ---------- Creditors-amounts falling due within one year Bank loans and 13,317 9,649 10,046 overdrafts Trade and 24,314 26,510 31,054 other creditors Taxation 816 1,239 1,662 Dividends - 1,882 5,621 --------- ---------- ---------- 38,447 39,280 48,383 -------- ---------- ---------- Net current assets 42,559 37,337 30,081 ------ ------- ------- Total assets less current 117,632 116,437 117,634 liabilities Creditors- amounts falling due 53,184 36,589 43,488 after more than one year Provisions for liabilities 7,402 7,324 7,331 and charges ----- ------- ------ Total net assets 57,046 72,524 66,815 ------ ------- ------- Capital and reserves Called up share capital 2,594 2,790 2,594 Share premium 41,772 41,772 41,772 Revaluation reserve 2,252 2,063 2,268 Other reserves 1,330 1,134 1,330 Profit and loss account 9,098 24,765 18,851 ------ ------- ------- Shareholders' funds 57,046 72,524 66,815 ------ ------- ------- Ordinary shareholders' funds 110p 130p 129p per share Reconciliation of movements in shareholders' funds Half year ended Half year ended Year ended 30 September 2001 30 September 31 March 2000 2001 as restated as restated £'000 £'000 £'000 ---------- ---------- ---------- (Loss)/profit on ordinary activities (10,918) 2,929 5,689 after taxation for the period Dividends - 1,885 5,624 ---------- ---------- ---------- (10,918) 1,044 65 Other recognised losses relating to (351) (216) (455) the period (net) Goodwill reinstated 1,500 - - New share capital issued - 52 52 Share buy back - - (4,491) ---------- ---------- ---------- (9,769) 880 (4,829) Opening shareholders' funds 66,815 71,644 71,644 ---------- ---------- ---------- Closing shareholders' funds 57,046 72,524 66,815 ---------- ---------- ---------- Cash flow statement (unaudited) Half year ended Half year ended Year ended 30 September 2001 30 September 2000 31 March 2001 £'000 £'000 £'000 ---------- ---------- ---------- Cash flow from operating 3,757 7,705 20,656 activities Returns on investments and (1,661) (1,439) (2,811) servicing of finance Taxation (777) (1,117) (2,672) Capital expenditure and (6,178) (6,245) (9,402) financial investment Acquisitions and disposals 3,561 121 (6,752) Equity dividends paid (5,622) (6,020) (6,020) ---------- ---------- ---------- Cash outflow before use of (6,920) (6,995) (7,001) liquid resources and funding Financing Issue of shares - 52 52 Repurchase of own shares - - (4,491) Increase in debt 10,014 5,590 11,078 Capital element of finance (497) (361) (760) lease rentals ---------- ---------- ---------- Increase/(decrease) in cash in 2,597 (1,714) (1,122) period ===== ===== ===== Half year ended Half year ended Year ended 30 September 2001 30 September 2000 31 March 2001 £'000 £'000 £'000 ---------- ---------- ---------- Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash 2,597 (1,714) (1,122) in period Cash inflow from increase in (9,517) (5,229) (10,318) debt and lease financing ---------- ---------- ---------- Change in net debt resulting (6,920) (6,943) (11,440) from cash flows Exchange movement 550 (859) (1,878) Loans and finance leases - - (2,238) acquired with subsidiary undertaking ---------- ---------- ---------- Movement in net debt in period (6,370) (7,802) (15,556) Net debt at beginning of (43,671) (28,115) (28,115) period ---------- ---------- ---------- Net debt at end of period (50,041) (35,917) (43,671) ===== ===== ===== Half year ended Half year ended Year ended 30 September 2001 30 September 2000 31 March 2001 £'000 £'000 £'000 ---------- ---------- ---------- Reconciliation of operating profit to operating cash flows Operating (loss)/profit (4,114) 6,532 12,412 Goodwill amortisation 6,820 472 1,038 Depreciation charges 4,204 4,211 8,735 Amortisation of own shares 31 15 28 (Profit)/loss on sale of (92) 44 (87) tangible fixed assets Cash flow relating to (312) - (700) exceptional reorganisation (Increase)/decrease in stocks (44) 430 705 Decrease in debtors 1,988 1,445 2,174 Decrease in creditors (4,724) (5,444) (3,649) ---------- ---------- ---------- Net cash inflow from operating 3,757 7,705 20,656 activities ===== ===== ===== Group turnover and operating profit Half year ended Half year ended Year ended 30 September 2001 30 September 2000 31 March 2001 Operating Operating Operating profit profit profit Turnover Turnover Turnover £'000 £'000 £'000 £'000 £'000 £'000 ---------- ------- ---------- ------- -------- ------- By class of business Continuing operations Ongoing Technical 50,197 2,986 49,281 4,838 100,614 9,957 plastics division Specialist 14,219 1,198 15,000 1,143 30,308 2,390 wire division Discontinuing Technical plastics division 6,123 (985) 12,782 919 21,482 1,079 ---------- -------- ---------- ------- ------ ------- 70,539 3,199 77,063 6,900 152,404 13,426 Rationalisation costs (note 1) (594) (158) (336) ---------- -------- ---------- ------- ------- ------- 70,539 2,605 77,063 6,742 152,404 13,090 Discontinued operations 9,229 597 11,605 643 18,736 1,253 Rationalisation - (32) (57) costs --------- ------- --------- ------- ------- ------ 9,229 597 11,605 611 18,736 1,196 --------- --------- --------- 79,768 88,668 171,140 --------- ------ --------- ------- -------- ------- Divisional operating 3,202 7,353 14,286 profit Central administration (596) (499) (1,136) costs Pension cost: - regular (1,319) (1,269) (2,538) cost - credit 1,419 1,419 2,838 in respect of surplus Goodwill amortisation (521) (472) (1,038) (note 2) Goodwill (6,299) - - impairment ------- ------ ------- Group operating (loss)/ (4,114) 6,532 12,412 profit --------- ------- ------- By geographical area Continuing operations Ongoing United 46,393 3,184 44,375 3,948 91,240 8,340 Kingdom United 13,697 1,236 15,885 2,184 31,193 4,193 States of America Rest of 4,326 (236) 4,021 (151) 8,489 (186) World Discontinuing United 6,123 (985) 12,782 919 21,482 1,079 Kingdom --------- -------- ------- ------ -------- ------ 70,539 3,199 77,063 6,900 152,404 13,426 Rationalisation (594) (158) (336) costs (note 1) --------- --------- ------ ------- ------- ------ 70,539 2,605 77,063 6,742 152,404 13,090 Discontinued operations United 9,229 597 11,292 564 18,423 1,149 Kingdom Rest of - 313 47 313 47 World --------- ------- ------- ------- ------- ------ 9,229 597 11,605 611 18,736 1,196 --------- -------- -------- 79,768 88,668 171,140 --------- ------- -------- ------- ------- ------ Divisional operating 3,202 7,353 14,286 profit Central administration (596) (499) (1,136) costs Pension cost - regular (1,319) (1,269) (2,538) cost - credit in respect of surplus 1,419 1,419 2,838 Goodwill amortisation (521) (472) (1,038) (note 2) Goodwill impairment (6,299) - - --------- ------- ------- Group operating (loss)/ (4,114) 6,532 12,412 profit --------- ------- -------- Geographical segment - by destination United 38,366 48,034 89,040 Kingdom Rest of 17,805 13,047 28,520 Europe Rest of 23,597 27,587 53,580 World --------- --------- --------- 79,768 88,668 171,140 --------- --------- --------- Notes: 1. The rationalisation costs in the half year relate to both divisions. 2. Goodwill amortisation relates to the technical plastics division. Report of the auditors to Carclo plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 September 2001 which comprises a Consolidated Profit and Loss Account, a Consolidated Balance Sheet, a Consolidated Cash Flow Statement, a Consolidated Statement of Total Recognised Gains and Losses and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data, and based thereon, assessing whether the accounting policies and presentation have been consistently applied, unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2001. Ernst & Young LLP Leeds 3 December 2001

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