Interim Results
Carclo plc
08 December 2003
For Immediate Release
8 December 2003 at 07.00
Carclo plc
Interim Results for the Six Months ended 30 September 2003
Key Points
• Sales for the six months ended 30 September 2003 were down 9.4% at £57.3
million (2002 - £63.3 million).
• Underlying operating profit for the period was £0.1 million (2002 - £2.9
million).
• Exceptional charges of £2.2 million incurred to rebalance capacity.
• Cash generation in the twelve months to 30 September 2003 was £12.0
million.
• Maiden profit contribution from the recently opened Czech Republic
facility, now running at full capacity.
• Interest in the Conductive Inkjet Technology venture has been high.
• The interim dividend has been resumed at 0.4 pence per share (2002 -
nil).
Commenting on the results, George Kennedy, Chairman, said:
'Whilst demand in the first half of the year was weak, we have seen a
significant improvement in October and November which, combined with our lower
cost base, should ensure a marked recovery in the second half.
The second half should also benefit from good growth in the Czech Republic and
China and from new business in our specialist areas of medical and optical
plastics and automotive lighting.
As we said in June, although economic uncertainties still persist, we remain
confident that our global strategy will deliver positive momentum.'
For further information please contact:
Carclo plc
Ian Williamson, Chief Executive On 8 December: 020 7067 0700
Chris Mawe, Finance Director Thereafter: 01924 330500
Weber Shandwick/Square Mile
Richard Hews 020 7067 0700
Susanne Walker
Chairman's statement
Overview
In the 2003 annual report we commented on the slow start to the current
financial year with a continued migration of our customer base to lower cost
regions. As expected, the six months ended 30 September 2003 has been
challenging. We have grown in low cost regions such as the Czech Republic and
China, but demand in the UK and USA was lower than planned, resulting in overall
volumes and profits being well down on the prior half year. Stability has
returned to our core UK and USA markets for technical plastic components and,
following rationalisation, we are now generating profits and growth again from a
slimmed down capacity base.
Sales from continuing operations for the six months to 30 September 2003 were
9.4% down at £57.3 million. Our businesses have a high operational gearing and
as a consequence underlying operating profit fell to £0.1 million (2002 - £2.9
million). After exceptional charges, goodwill amortisation and interest, the
loss before tax amounted to £3.4 million (2002 - a profit of £0.3 million). The
loss per ordinary share was 4.2p compared to a profit per share of 0.7p last
year.
Financial position
Our focus on debt reduction continues. Net debt at 30 September 2003 was £31.8
million representing gearing of 64%. Debt reduced by £3.1 million compared to 31
March 2003 and by £12.0 million compared to 30 September 2002.
Capital expenditure in the first half year was 49% of depreciation, benefiting
from our ability to redeploy assets freed up by the programme to rationalise our
UK manufacturing base.
In the six months to 30 September 2003 we disposed of two properties for £1.6
million and received the proceeds from the disposal of the Acre Mills property.
Since the half year we have disposed of the vacant facility at Hatfield for a
cash consideration of £0.9 million. We expect to sell the remaining surplus
property in excess of its net book value of £1.7 million.
Operating review
Technical Plastics
The technical plastics division reported turnover 11.9% down on the prior period
at £46.2 million with operating profit at breakeven compared to the £2.3 million
profit earned in the first half of last year.
The decline in demand for automotive and electronic components in the UK and the
USA affected the performance of the division. To rebalance capacity the
manufacturing facility at Hatfield has been closed. We have seen a marked upturn
in demand in October and November.
Our specialist medical and optical moulding business performed well and we have
continued to win significant new contracts which will underpin profit growth in
the second half.
We have concentrated business development efforts in the fast growing lower cost
regions. The new facility in the Czech Republic is at full production and
delivered a maiden profit in the half year. Further facilities are planned in
Eastern Europe although these will not be commissioned until the next financial
year. The China facility is fully operational and significant contract wins will
ensure the business ends the current financial year at near full capacity.
Despite weak automotive schedules, CTP Automotive increased volumes compared to
the first half of last year. We continue to increase our sourcing of assembly
operations from Eastern Europe and Asia and expect to benefit in the second half
as a number of prestige automotive lighting contracts come into production.
Specialist Wire
Specialist Wire performed well. The card clothing operations reported modest
growth. Our sales and service operation in China has proved highly successful
and a manufacturing facility will be commissioned in China in the second half of
the year to take advantage of the strong growth in local demand for textile
related products. This demonstrates the strength of card clothing's global
presence as we benefit from the shift away from the more established regions.
This shift has severely impacted demand in the USA causing our American facility
to move into losses. Actions have been taken in the second half to rationalise
this operation to reflect the over capacity in the USA market. Our French
facility, which also supplies product into the USA, has been rationalised to
reflect lower demand, the cost of which will impact the second half results.
Overall, sales increased by 2.4% to £11.1 million but operating profits fell
slightly to £0.9 million.
Innovation
Last year we announced our collaboration with Xennia Technology Limited to
develop an innovative process to deposit conductive metals directly onto
injection moulded components and films. Carclo's share of the costs incurred in
the current half year amounted to £0.1 million. The interest from customers in
this process has been high and we will continue to invest in this research
project.
Dividend
At 31 March 2003 we recommenced the payment of a dividend. Although the trading
performance in the first half has been disappointing, the actions
already taken will benefit the second half. Your board remains committed to a
progressive dividend policy and accordingly has declared an interim dividend of
0.4 pence per ordinary share (2002 - nil). Dividends will be posted on 6 April
2004 to shareholders on the register on 5 March 2004. The shares will be traded
excluding the right to the dividend from 3 March 2004.
The board
As indicated in the annual report, two of our non executive directors, Peter Lee
and Adam Broadbent, retired from the board at the annual general meeting which
was held on 4 September 2003. We wish them both a happy and long retirement.
Following the annual general meeting we announced the appointment of Christopher
Ross as a non executive director. Christopher is a chartered engineer and a
fellow of the Royal Academy of Engineering. He is currently deputy chairman of
Manganese Bronze Holdings plc and a non executive director of Lander Holdings
Limited.
Christopher Mawe, the group finance director, is leaving us to take up the
position as finance director at UK Coal plc. Christopher joined the company in
September 1999 and has made an excellent contribution to the development of
Carclo over the last four years and we wish him well in his future career. The
search for a replacement is well advanced and we expect to make an appointment
early in the new year.
Outlook
Whilst demand in the first half of the year was weak, we have seen a significant
improvement in October and November which, combined with our lower cost base,
should ensure a marked recovery in the second half.
The second half should also benefit from good growth in the Czech Republic and
China and from new business in our specialist areas of medical and optical
plastics and automotive lighting.
As we said in June, although economic uncertainties still persist, we remain
confident that our global strategy will deliver positive momentum.
George Kennedy
Chairman
8 December 2003
Consolidated profit and loss account
Half year ended Half year ended Year ended
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Turnover
Continuing operations 57,317 63,272 125,657
Discontinued operations - 2,271 2,286
------- ------- -------
57,317 65,543 127,943
------- ------- -------
Operating(loss)/profit
Continuing operations
- before rationalisation costs 97 2,888 4,496
- rationalisation costs (284) (152) (1,309)
------- ------- -------
- after rationalisation costs (187) 2,736 3,187
Discontinued operations - 182 183
------- ------- -------
(187) 2,918 3,370
Goodwill amortisation (521) (521) (1,042)
------- ------- -------
Operating (loss)/profit (708) 2,397 2,328
Share of operating losses in
joint venture (115) - -
Disposal of subsidiary undertaking - - (1,052)
Loss on termination of operations (1,871) (1,201) (2,342)
Profit on sale of properties 40 198 2,955
------- ------- -------
(Loss)/profit before interest (2,654) 1,394 1,889
Net interest payable 700 1,054 702
------- ------- -------
(Loss)/profit on ordinary activities
before taxation (3,354) 340 1,187
Taxation credit 1,200 - 1,725
------- ------- -------
(Loss)/profit on ordinary activities
after taxation (2,154) 340 2,912
Ordinary dividends 204 - 623
------- ------- -------
(Deficit)/surplus for period (2,358) 340 2,289
------- ------- -------
Earnings per ordinary share
Basic (4.2p) 0.7p 5.7p
Underlying (1.4p) 4.0p 8.2p
------- ------- -------
Dividend per ordinary share 0.4p 0.0p 1.2p
------- ------- -------
Statement of total recognised gains and losses
(Loss)/profit on ordinary activities
after taxation for the period (2,154) 340 2,912
Exchange gains/(losses) on the
translation of overseas assets 71 (300) (607)
------- ------- -------
Total gains and losses recognised
since the last annual report (2,083) 40 2,305
------- ------- -------
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 2003. This financial information was approved by the directors
on 8 December 2003.
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 2003 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
2003 represents 36% of the loss on ordinary activities before taxation (30
September 2002 - 0%).
5. Earnings per ordinary share at 30 September 2003 have been calculated by
dividing the loss attributable to ordinary shareholders of £2,154,000 by the
weighted average number of ordinary shares in issue of 50,943,409.
6. Copies of the Interim Report will be posted to shareholders on 12 December
2003 and are available from the company's registered office, Ploughland House,
P.O. Box 14, 62 George Street, Wakefield, WF1 1ZF, West Yorkshire.
Consolidated balance sheet
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000 £'000 £'000 £'000
Fixed assets
Intangible assets 16,460 17,502 16,981
Tangible assets 40,549 50,400 43,666
Investments 266 795 313
------- ------- -------
57,275 68,697 60,960
Current assets
Stocks 14,499 14,801 14,135
Debtors 26,120 30,072 32,723
Pensions prepayment
due after more than
one year 13,052 11,742 12,152
Cash at bank and
in hand 9,743 11,999 10,140
------- ------- -------
63,414 68,614 69,150
------- ------- -------
Creditors-amounts
falling due within
one year
Bank loans and
overdrafts 8,701 7,821 8,678
Trade and other
creditors 20,990 23,563 24,215
Taxation - 66 199
Dividends 204 - 623
------- ------- -------
29,895 31,450 33,715
------- ------- -------
Net current assets 33,519 37,164 35,435
-------- -------- --------
Total assets less
current liabilities 90,794 105,861 96,395
Creditors-amounts
falling due after
more than one year 32,721 47,627 36,202
Provision for joint
venture deficit 115 - -
Provisions for
liabilities and
charges 8,213 8,486 8,161
-------- -------- --------
Total net assets 49,745 49,748 52,032
-------- -------- --------
Capital and reserves
Called up share capital 2,594 2,594 2,594
Share premium 41,772 41,772 41,772
Revaluation reserve 946 2,246 950
Other reserves 1,330 1,330 1,330
Profit and loss account 3,103 1,806 5,386
-------- -------- --------
Shareholders' funds 49,745 49,748 52,032
-------- -------- --------
Ordinary shareholders' funds
per share 96p 96p 100p
Reconciliation of movements in shareholders' funds
Half year ended Half year ended Year ended
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
(Loss)/profit on ordinary
activities after taxation
for the period (2,154) 340 2,912
Dividends 204 - 623
-------- -------- --------
(2,358) 340 2,289
Other recognised gains/(losses)
relating to the period (net) 71 (300) (607)
Goodwill reinstated - - 642
-------- -------- --------
(2,287) 40 2,324
Opening shareholders'funds 52,032 49,708 49,708
-------- -------- --------
Closing shareholders'funds 49,745 49,748 52,032
-------- -------- --------
Cash flow statement
Half year ended Half year ended Year ended
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flow from operating
activities (2,720) 68 6,182
Returns on investments and
servicing of finance (707) (1,318) (1,033)
Taxation 510 960 2,155
Capital expenditure and
financial investment 5,980 (317) (651)
Acquisitions and disposals - - 1,483
Equity dividends paid (623) - -
-------- -------- --------
Cash inflow/(outflow) before use
of liquid resources and funding 2,440 (607) 8,136
Financing
Decrease in debt (2,832) (1,515) (11,924)
Capital element of finance
lease rentals (125) (318) (551)
-------- -------- --------
Decrease in cash in period (517) (2,440) (4,339)
======== ======== ========
Half year ended Half year ended Year ended
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Reconciliation of net cash flow to
movement in net debt
Decrease in cash in period (517) (2,440) (4,339)
Cash outflow from debt and
lease financing 2,957 1,833 12,475
-------- -------- --------
Change in net debt resulting
from cash flows 2,440 (607) 8,136
Exchange movement 696 1,127 1,201
-------- -------- --------
Movement in net debt in period 3,136 520 9,337
Net debt at beginning of period (34,932) (44,269) (44,269)
-------- -------- --------
Net debt at end of period (31,796) (43,749) (34,932)
======== ======== ========
Half year ended Half year ended Year ended
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Reconciliation of operating profit to
operating cash flows
Operating (loss)/profit (708) 2,397 2,328
Goodwill amortisation 521 521 1,042
Depreciation charges 2,882 3,045 5,961
Amortisation of own shares 28 31 62
Loss/(profit) on sale of tangible
fixed assets 7 (74) (84)
Provision for diminution in
value of own shares - - 127
Cash flow relating to non
operating exceptional charges (1,550) (1,961) (3,075)
Increase in stocks (894) (985) (705)
(Increase)/decrease in debtors (926) 188 2,558
Decrease in creditors (2,080) (3,094) (2,032)
-------- -------- --------
Net cash (outflow)/inflow
from operating activities (2,720) 68 6,182
======== ======== ========
Group turnover and operating profit
Half year ended Half year ended Year ended
30 September 2003 30 September 2002 31 March 2003
(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 46,206 (9) 52,422 2,341 103,141 3,270
Specialist wire division 11,111 904 10,850 1,244 22,516 2,597
------------------------- ------------------------- -------------------------
57,317 895 63,272 3,585 125,657 5,867
Rationalisation costs
(note 1) (284) (152) (1,309)
------------------------- ------------------------- -------------------------
57,317 611 63,272 3,433 125,657 4,558
Discontinued operations - - 2,271 182 2,286 183
---------- ---------- ----------
57,317 65,543 127,943
------------------------- ------------------------- -------------------------
Divisional operating profit 611 3,615 4,741
Central administration costs (798) (697) (1,371)
Goodwill amortisation(note 2) (521) (521) (1,042)
---------- ---------- ----------
Group operating (loss)/profit (708) 2,397 2,328
---------- ---------- ----------
By geographical area
Continuing operations
Ongoing
United Kingdom 42,654 1,046 45,308 2,476 91,826 4,426
United States of America 10,011 3 13,688 1,364 25,223 1,939
Rest of World 4,652 (154) 4,276 (255) 8,608 (498)
------------------------- ------------------------- -------------------------
57,317 895 63,272 3,585 125,657 5,867
Rationalisation costs (note 1) (284) (152) (1,309)
------------------------- ------------------------- -------------------------
57,317 611 63,272 3,433 125,657 4,558
Discontinued operations
United Kingdom - - 2,271 182 2,286 183
---------- ---------- ----------
57,317 65,543 127,943
------------------------- ------------------------- -------------------------
Divisional operating profit 611 3,615 4,741
Central administration costs (798) (697) (1,371)
Goodwill amortisation (note 2) (521) (521) (1,042)
---------- ---------- ----------
Group operating(loss)/profit (708) 2,397 2,328
---------- ---------- ----------
Geographical segment - by destination
United Kingdom 25,407 29,422 55,530
Rest of Europe 13,296 14,246 30,049
Rest of World 18,614 21,875 42,364
---------- ---------- ----------
57,317 65,543 127,943
---------- ---------- ----------
Notes:
1. The rationalisation costs in the current half year relate to the technical plastics 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 2003 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 2003.
Ernst & Young LLP
Leeds
8 December 2003
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