Interim Results

Carclo plc 02 December 2002 Carclo plc Interim Results for the Six Months ended 30 September 2002 Key Points - Sales from continuing operations up 1.8% to £63m (2001 - £62m). - Return to profitability - profit before tax of £0.3m (2001 - loss of £10.9m). - Operating profits increased by 40% in the Specialist Wire Division. - Carclo Technical Plastics turnover increased but costs associated with overseas start-ups and product development in the UK resulted in operating profits down by 6.4% to £2.8m (2001 - £3.0m). - Disposal of two surplus properties generated £1.0m cash. - Successful disposal of Francis W Birkett & Sons for £2.4m post the half year. - No interim dividend - focus on debt reduction continues. Commenting on the results, George Kennedy, Chairman, said: 'In Technical Plastics new business enquiries are at much higher levels than at this time last year. New projects in our automotive and medical operations will underpin performance in the second half. In electronics, we have experienced a muted start to the second half, although new opportunities continue to present themselves. Specialist Wire is seeing stable market conditions and continues to benefit from market share gains. Although economic uncertainties persist in the short term, we are confident that the flow of new business will be maintained and allow us to deliver positive momentum in 2003 and beyond.' For further information please contact: Carclo plc Ian Williamson, Chief Executive On 2 December: 020 7950 2800 Chris Mawe, Finance Director Thereafter: 01924 330500 Weber Shandwick/Square Mile Richard Hews 020 7950 2800 Susanne Walker An analyst meeting will be held at 10:00 this morning at the offices of Weber Shandwick Square Mile, Aldermary House, 15 Queen Street, London EC4N 1TX Chairman's statement Overview We are pleased to report that the group returned to profitability in the first half of the year. Underlying earnings of 4.0 pence per share reflect the benefits of the extensive rationalisation of our UK manufacturing operations. After exceptional charges, goodwill amortisation and interest, profit before tax amounted to £0.3 million (2001 - a loss of £10.9 million) and the profit per ordinary share was 0.7p compared to a loss per share of 21.4p last year. The group is now focused on two main business streams with excellent market positions and good growth potential. Technical Plastics has a global presence and serves attractive markets with medical, automotive and electronics applications. Specialist Wire provides card clothing products and services to the world-wide textile industry. Sales from continuing operations increased by 1.8% to £63.3 million compared to the equivalent period last year. Divisional operating profits on the same basis were ahead by 5.4% at £4.2 million. The group, however, operates two large defined benefits pension schemes for its UK employees and recent stock market falls have resulted in an increased pension charge of £0.8 million. As a consequence underlying operating profits from continuing activities fell by 18.8% to £2.8 million. Exceptional charges of £1.2 million in the period mainly reflect the further costs relating to the closure of those UK manufacturing operations announced last year. Financial position Net debt at 30 September 2002 was £43.7 million representing gearing of 88%. Cash generation within the businesses has been good with rationalisation costs more than covered by internal cash generation. As a result, debt reduced by £0.5 million compared to 31 March 2002 and by £6.3 million compared to 30 September 2001. The group continues to be focused on debt reduction with the goal of achieving interest cover above five times. We, however, continue to seek out and invest in growth opportunities. The significant reduction in our UK manufacturing capacity has released surplus plant which is being redeployed in the Czech Republic and China. As a result, capital expenditure in the period has been low at £1.4 million and amounted to 45% of depreciation. We are actively engaged in realising our substantial portfolio of surplus property which has a net book value of £8.5 million. During the six months to 30 September 2002 we disposed of two properties for £1.0 million. These disposals resulted in a book profit of £0.2 million. After the period end we sold Francis W. Birkett & Sons Limited, our non ferrous foundry, for a cash consideration of £2.4 million. This business was non core to Carclo and the proceeds have been used to reduce group indebtedness. The business was sold at a £0.1 million discount to its net assets and will result in the reinstatement of £0.6 million of goodwill which was previously written off to reserves. Operating review Technical Plastics Last year was one of the most demanding ever faced in this sector. The dramatic decline in the demand for telecommunication components severely affected the UK market which continues to be over supplied. Our manufacturing operations have been integrated to enable better balancing of capacity across our five UK manufacturing sites. We have won £4 million of net new work in the last six months and forward enquiry levels are good. We, therefore, are optimistic about the prospects for the remaining UK capacity and expect to return to normal plant utilisation levels in the next 18 months. Our US moulding business performed creditably against the uncertainties of the US economy and delivered profits in line with the prior year. We are concentrating business development efforts in the fast growing lower cost regions where demand is strong. The new facilities in the Czech Republic and China are fully operational and together will move into profit in the second half after a small loss in the first half. Capacity has been increased in both plants and we are looking to commission a second plant in Eastern Europe in the second half. Our medical plastics business performed well and has won significant new contracts. We have increased technical resources in recent months to support this growth resulting in a small reduction in margins but are confident of showing progress for the year. The automotive companies continued to exploit their technical skills in their chosen markets and were able to hold profits on generally reduced automotive schedules. Our technical capabilities and lower cost sourcing strategies have allowed us to maintain our margins whilst offering a competitive service. Overall the technical plastics division reported turnover 4.4% ahead of the prior period at £52.4 million with operating profits at £2.8 million, down £0.2 million as a consequence of costs associated with the overseas start-ups and product development in the UK. Specialist Wire Specialist Wire performed very well and is on a trend of improving returns and margins. We benefited particularly from last years rationalisation of European and US manufacturing operations. The improvements in operational efficiency, product design and quality continue to bring benefits. We have opened a sales and service operation in China with very encouraging initial results and continue to gain market share in Turkey and India. Overall profits were up by 40% on lower turnover and this business should continue to benefit from its strategic position in world markets. Innovation We have continued to invest in product development and innovation. During the period we announced a collaboration with Xennia Technology Limited to develop an innovative process to deposit conductive metals directly onto injection moulded components and films. This development has exciting potential across a range of applications. Further details are available on our web-site www.carclo-ctp.co.uk Pensions In common with most long established manufacturing companies, Carclo operates large defined benefit pension schemes. Up until 2000 these schemes were substantially in surplus and the group did not make any cash contributions in recent years to the schemes. The schemes are now in deficit and we will make cash contributions in the current year of £1.6 million. In 2003/04 we will make an additional £0.9 million contribution to reduce this deficit. As at 30 September 2002 35% of the scheme assets were invested in equities - the balance of the fund was in bonds, property and cash. Dividend Whilst the trading environment remains uncertain the board of Carclo believes that the interests of shareholders will be best served by the ongoing focus to reduce debt. Accordingly, your board has decided not to pay an interim dividend and will review the level of the final dividend in June of next year. Outlook In Technical Plastics new business enquiries are at much higher levels than at this time last year. New projects in our automotive and medical operations will underpin performance in the second half. In electronics, we have experienced a muted start to the second half, although new opportunities continue to present themselves. Specialist Wire is seeing stable market conditions and continues to benefit from market share gains. Although economic uncertainties persist in the short term, we are confident that the flow of new business will be maintained and allow us to deliver positive momentum in 2003 and beyond. George Kennedy Chairman 2 December 2002 Consolidated profit and loss account Half year ended Half year ended Year ended 30 September 30 September 31 March 2002 2001 2002 (unaudited) (Unaudited) (audited) £'000 £'000 £'000 ________________________________________________________________________________ Turnover Continuing operations 63,272 62,123 121,773 Discontinued operations 2,271 17,645 23,857 ________ ________ ________ 65,543 79,768 145,630 ________ ________ ________ Operating profit/(loss) Continuing operations - before rationalisation costs 2,835 3,493 6,273 - rationalisation costs (152) (594) (4,610) ________ ________ ________ - after rationalisation costs 2,683 2,899 1,663 Discontinued operations 235 (193) 249 ________ ________ ________ 2,918 2,706 1,912 Goodwill amortisation (521) (521) (1,042) Goodwill impairment - (6,299) (6,354) ________ ________ ________ Operating profit/(loss) 2,397 (4,114) (5,484) Disposal of subsidiary undertaking - (1,141) (1,795) Loss on termination of operations (1,201) (4,872) (8,825) Profit on sale of properties 198 870 619 ________ ________ ________ Profit/(loss) before interest 1,394 (9,257) (15,485) Net interest payable 1,054 1,661 2,992 ________ ________ ________ Profit/(loss) on ordinary activities before taxation 340 (10,918) (18,477) Taxation - - 204 ________ ________ ________ Retained profit/(deficit) for the period 340 (10,918) (18,273) ________ ________ ________ Earnings per ordinary share Basic 0.7p (21.4)p (35.9)p Underlying 4.0p 2.2p 4.7p ________ ________ ________ Dividend per ordinary share 0.0p 0.0p 0.0p ________ ________ ________ Statement of total recognised gains and losses Profit/(loss) on ordinary activities after taxation for the period 340 (10,918) (18,273) Exchange losses on the translation of overseas assets (300) (351) (289) Total gains and losses recognised since the________ ________ ________ last annual report 40 (11,269) (18,562) ________ ________ ________ 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 2002. This financial information was approved by the directors on 2 December 2002. 2.The financial information is unaudited but has been reviewed by the auditors and their report to the company is set out below. 3.The financial information contained in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The results for the year ended 31 March 2002 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. 4.The amount shown for estimated taxation for the half year ended 30 September 2002 represents 0% of the profit on ordinary activities before taxation (30 September 2001 - 0%). 5.Earnings per ordinary share at 30 September 2002 have been calculated by dividing the profit attributable to ordinary shareholders of £340,000 by the weighted average number of ordinary shares in issue of 50,922,248. 6.Copies of the Interim Report will be posted to shareholders on 6 December 2002 and are available from the company's registered office, Ploughland House, P.O. Box 14, 62 George Street, Wakefield, WF1 1ZF. Consolidated balance sheet 30 September 2002 30 September 2001 31 March 2002 (unaudited) (Unaudited) (audited) £'000 £'000 £'000 £'000 £'000 £'000 _______________________________________________________________________________________ Intangible assets 17,502 18,543 18,023 Tangible assets 50,400 55,187 53,642 Investments 795 1,343 826 __________ __________ __________ Current assets 68,697 75,073 72,491 Stocks 14,801 15,302 14,045 Debtors 30,072 36,723 31,256 Pensions prepayment due after more than one year 11,742 11,742 11,742 Cash at bank and in hand 11,999 17,239 17,224 __________ __________ __________ 68,614 81,006 74,267 __________ __________ __________ Creditors-amounts falling due within one year Bank loans and overdrafts 7,821 13,317 11,135 Trade and other creditors 23,563 24,314 27,791 Taxation 66 816 - __________ __________ __________ 31,450 38,447 38,926 __________ __________ __________ Net current assets 37,164 42,559 35,341 __________ __________ __________ Total assets less current liabilities 105,861 117,632 107,832 Creditors-amounts falling due after more than one year 47,627 53,184 49,773 Provisions for liabilities and charges 8,486 7,447 8,351 __________ __________ __________ Total net assets 49,748 57,001 49,708 __________ __________ __________ Capital and reserves Called up share capital 2,594 2,594 2,594 Share premium 41,772 41,772 41,772 Revaluation reserve 2,246 2,252 2,246 Other reserves 1,330 1,330 1,330 Profit and loss account 1,806 9,053 1,766 __________ __________ __________ Shareholders' funds 49,748 57,001 49,708 __________ __________ __________ Ordinary shareholders' funds per share 96p 110p 96p Reconciliation of movements in shareholders' funds Half year ended Half year ended Year ended 30 September 30 September 31 March 2002 2001 2002 (unaudited) (Unaudited) (audited) £'000 £'000 £'000 ________________________________________________________________________________ Profit/(loss) on ordinary activities after taxation for the period 340 (10,918) (18,273) Dividends - - - __________ __________ _________ 340 (10,918) (18,273) Other recognised losses relating to the period (net) (300) (351) (289) Goodwill reinstated - 1,500 1,500 __________ __________ _________ 40 (9,769) (17,062) Opening shareholders' funds 49,708 66,770 66,770 __________ __________ _________ Closing shareholders' funds 49,748 57,001 49,708 __________ __________ _________ Cash flow statement Half year ended Half year ended Year ended 30 September 30 September 31 March 2002 2001 2002 (unaudited) (Unaudited) (audited) £'000 £'000 £'000 ________________________________________________________________________________ Cash flow from operating activities 68 3,757 11,865 Returns on investments and servicing of finance (1,318) (1,661) (3,030) Taxation 960 (777) (1,290) Capital expenditure and financial investment (317) (6,178) (5,623) Acquisitions and disposals - 3,561 3,120 Equity dividends paid - (5,622) (5,622) _________ __________ __________ Cash outflow before use of liquid resources and funding (607) (6,920) (580) Financing (Decrease)/increase in debt (1,515) 10,014 6,517 Capital element of finance lease rentals (318) (497) (907) _________ __________ __________ (Decrease)/increase in cash in period (2,440) 2,597 5,030 ========= ========== ========== Half year ended Half year ended Year ended 30 September 30 September 31 March 2002 2001 2002 (unaudited) (Unaudited) (audited) £'000 £'000 £'000 ________________________________________________________________________________ Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in period (2,440) 2,597 5,030 Cash inflow/(outflow) from increase in debt and lease financing 1,833 (9,517) (5,610) _________ __________ __________ Change in net debt resulting from cash flows (607) (6,920) (580) Exchange movement 1,127 550 (18) _________ __________ __________ Movement in net debt in period 520 (6,370) (598) Net debt at beginning of period (44,269) (43,671) (43,671) _________ __________ __________ Net debt at end of period (43,749) (50,041) (44,269) ========= ========== ========== Half year ended Half year ended Year ended 30 September 30 September 31 March 2002 2001 2002 (unaudited) (Unaudited) (audited) £'000 £'000 £'000 Reconciliation of operating profit to operating cash flows Operating profit/(loss) 2,397 (4,114) (5,484) Goodwill amortisation 521 521 1,042 Goodwill impairment - 6,299 6,354 Depreciation charges 3,045 4,204 7,344 Impairment of tangible fixed assets - - 571 Amortisation of own shares 31 31 62 Profit on sale of tangible fixed assets (74) (92) (132) Provision for diminution in value of own shares - - 486 Cash flow relating to non operating exceptional charges (1,961) (312) (2,299) (Increase)/decrease in stocks (985) (44) 172 Decrease in debtors 188 1,988 5,890 Decrease in creditors (3,094) (4,724) (2,141) _________ __________ __________ Net cash inflow from operating activities 68 3,757 11,865 ========= ========== ========== Group turnover and operating profit Half year ended Half year ended Year ended 30 September 30 September 31 March 2002 2001 2002 (unaudited) (Unaudited) (audited) operating operating operating Turnover Profit Turnover Profit Turnover Profit £'000 £'000 £'000 £'000 £'000 £'000 _________________________________________________________________________________________________ By class of business Continuing operations Ongoing Technical plastics division 52,422 2,795 50,197 2,986 98,433 5,787 Specialist wire division 10,850 1,409 11,926 1,003 23,340 1,737 _________________ ________________ ________________ 63,272 4,204 62,123 3,989 121,773 7,524 Rationalisation costs (note 1) (152) (594) (4,610) _________________ ________________ ________________ 63,272 4,052 62,123 3,395 121,773 2,914 Discontinued operations 2,271 235 17,645 (193) 23,857 249 ________ ________ ________ 65,543 79,768 145,630 _________________ ________________ ________________ Divisional operating profit 4,287 3,202 3,163 Central administration costs (569) (596) (1,242) Pension cost - regular cost (946) (1,319) (1,893) - credit in respect of surplus 146 1,419 1,884 Goodwill amortisation (note 2) (521) (521) (1,042) Goodwill impairment - (6,299) (6,354) ________ _________ _________ Group operating profit/(loss) 2,397 (4,114) (5,484) ________ _________ _________ By geographical area Continuing operations Ongoing United Kingdom 45,308 3,095 44,100 2,989 85,270 5,232 United States 13,688 1,364 13,697 1,236 27,523 2,625 Rest of World 4,276 (255) 4,326 (236) 8,980 (333) _________________ ________________ ________________ 63,272 4,204 62,123 3,989 121,773 7,524 Rationalisation costs (note 1) (152) (594) (4,610) _________________ ________________ ________________ 63,272 4,052 62,123 3,395 121,773 2,914 Discontinued operations United Kingdom 2,271 235 17,645 (193) 23,857 249 ________ ________ ________ 65,543 79,768 145,630 _________________ ________________ ________________ Divisional operating profit 4,287 3,202 3,163 Central administration costs (569) (596) (1,242) Pension cost - regular cost (946) (1,319) (1,893) - credit in respect of surplus 146 1,419 1,884 Goodwill amortisation (note 2) (521) (521) (1,042) Goodwill impairment - (6,299) (6,354) ________ ________ ________ Group operating profit/(loss) 2,397 (4,114) (5,484) ________ ________ ________ Geographical segment - by destination United Kingdom 29,422 38,366 68,695 Rest of Europe 14,246 17,805 31,668 Rest of World 21,875 23,597 45,267 _______ ________ _______ 65,543 79,768 145,630 _______ ________ _______ Notes: 1. The rationalisation costs in the current half year relate to the specialist wire division. 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 2002 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 2002. Ernst & Young LLP Leeds 2 December 2002 This information is provided by RNS The company news service from the London Stock Exchange LFBFFBZ

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