Interim Results

RNS Number : 7960I

Carclo plc

25 November 2008

 



Carclo plc

Interim Results for the six months ended 30 September 2008

Key Points

• Profit before tax up 10.1% at £2.6 million and underlying operating profits, before exceptional charges, up 25.2% at £3.3 million.

• Technical Plastics delivered improved profits on higher medical sales

• Precision Products increased sales by 40.0% to £14.2 million due to design and development revenues generated from contract wins in specialist lighting.

• LED optics business growing rapidly, up 50% on the equivalent period last year

• Conductive Inkjet Technology commissioned the MetalJet 6000 at its Cambridge facility

• Acquired Jacottet Industrie SA, a French aerospace business

• Interim dividend increased by 8.3% to 0.65 pence 

Commenting on the results, Christopher Ross, chairman, said -

'Profit progression in the first half was good and was in line with our expectations. Many of the markets we serve are proving resilient and, for the most part, have not been impacted by the current economic downturn. In November we have seen a reduction in demand in automotive and electronics markets, but the continued strength of the specialist medical and optical businesses and design and development revenues will help to mitigate the impact on the group. Whilst global demand remains uncertain, we will maintain our focus on cost control and margin improvement.

Our financing is secure, our strategy is sound and our businesses continue to trade well in a difficult and volatile environment.'

-ends-

For further information please contact:

Carclo plc
Ian Williamson, chief executive	On 25 November 2008: 020 7067 0700
Robert Brooksbank, finance director	Thereafter: 01924 268040
Weber Shandwick Financial
Terry Garrett	020 7067 0700
James White

A presentation for analysts will be held at 9.30 am, on 25 November 2008, at the offices of Weber Shandwick Financial, Fox Court, 14 Gray's Inn Road, London WC1X 8WS

Notes to editors

• Carclo plc is a global supplier of technical plastic components. It is a public company whose shares are quoted on the London Stock Exchange.

• 70% of sales are derived from the supply of fine tolerance, injection moulded plastic components, which are used in medical, automotive, 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 are derived from the supply of manufactured systems 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 delivered good profit progression in the six months to 30 September 2008, despite a background of increasingly severe economic turbulence. 

Underlying operating profit before exceptional costs increased by 25.2% to £3.3 million (2007 - £2.6 million) and profit before tax was £2.6 million for the half year, an increase of 10.1% compared to the same period last year. Technical Plastics delivered improved profits on similar turnover to the prior half year period, reflecting the improvement in margins from continued growth in the group's medical business. Precision Products generated profits well ahead of the half year to 30 September 2007 due to a strong inflow of new contracts in its specialist lighting business.

The board has declared an interim dividend of 0.65 pence per ordinary share, an increase of 8.3% on last year (2007 - 0.6 pence). The dividend will be paid on 6 April 2009 to shareholders on the register on 6 March 2009. The shares will be traded excluding the right to the dividend from 4 March 2009.  

Financial position

Net debt at 30 September 2008 was £15.9 million representing gearing on assets (excluding the net pension deficit) of 30.3% (2007 - 29.4%). In the six months under review, net debt increased by £2.2 million. This increase in indebtedness was primarily due to the acquisition of Jacottet Industrie SA ('Jacottet') for a net cash cost of £1.6 million as well as a £0.7 million impact from the re-translation of predominantly US dollar denominated net borrowings.

The group sold a surplus property in the period for £0.8 million which resulted in a profit of £0.3 million. The group has three other surplus properties held for sale with a net book value of £1.6 million and which are being actively marketed. However, in the current economic environment, it is difficult to predict when these properties will be sold.

The group re-financed with £20.0 million of new term loan facilities in 2007. These facilities, which are competitively priced, are in place until June 2012. The facility agreements contain a limited number of covenants relative to which the group has a very comfortable level of headroom.

Group strategy

The group's strategy continues to deliver good progress. Medical diagnostics, as expected, saw a sales performance ahead of the prior year and LED optic sales grew by over 50% compared to the first half of last year. Our decision to exit lower margin automotive moulding work in the period was well timed. Expansion of our production in low cost regions continues with the commissioning of an assembly facility in India to service our global customer base.

Investment in new technologies also continues. Conductive Inkjet Technology is set to see a step up in revenues as the manufacture of RFID antennas and printed electronics commences for a range of applications. Platform Diagnostics, in which Carclo now has a 17.5% stake, has made good progress in the research and development of a low cost disposable blood testing device.

Operating review

Technical Plastics

The Technical Plastics division achieved sales of £28.7 million, the same level as in the prior half year period. Increasing medical and LED optic sales offset fully the reduction in automotive moulding turnover. This shift in sales mix to higher quality revenues resulted in operating margins increasing from 5.1% to 6.8%. As a consequence, the division delivered operating profits, before exceptional charges, of £2.0 million compared to £1.5 million in the same period last year. Our UK medical business, in particular, performed well in the first half benefiting from growth in its diagnostic components and new medical device programmes.

 The closure of the group's small automotive mouldings facility in Llanelli, Wales was completed in the period resulting in a total exceptional charge of £0.5 million. In recent months cost pressures in the UK have been increasing. Whilst the Technical Plastics business has been successful in passing on the impact of polymer price increases, the significant increase in energy costs will impact the UK businesses in the second half. However, the increased profits from tooling contracts associated with the new medical programmes and the favourable impact from the re-translation of our US dollar denominated earnings is expected to compensate for these higher energy costs.

In October 2005, Delphi Corporation, a customer of our American moulding business, went into Chapter 11. At that time provision was made to cover 25% of the group's exposure. Given the failure of Delphi to complete its planned financial re-structuring, the board has increased the provision to 80% of the net amount outstanding. This has resulted in an exceptional bad debt charge of £0.2 million.

Precision Products

The Precision Products division delivered an excellent performance in the first half of the financial year. Design and development revenues generated by the contract wins in specialist automotive lighting helped sales to increase by 40.0% to £14.2 million (2007 - £10.2 million) and operating profits to increase from £1.7 million to £2.0 million. Product sales from these new lighting contracts will drive revenue growth from 2010 onwards.

The small precision engineering operation has continued to perform well. On 31 July 2008 the group acquired Jacottet, a small French aerospace business, in order to compliment our existing UK aerospace business. The company's share capital was purchased for £1.6 million, net of cash acquired with the business. Deferred consideration of up to £0.3 million is also expected to be paid in respect of the performance of Jacottet in the twelve months to 30 September 2008. Jacottet has traded well since acquisition.

Conductive Inkjet Technology ('CIT')

Conductive Inkjet Technology has also made good progress with the new MetalJet 6000 line being commissioned at its Cambridge facility. This innovative roll to roll production line for the volume manufacture of printed electronics, including RFID antennas, generated a significant amount of interest at Europe's largest RFID exhibition in October. During the next few weeks, production volume samples will be delivered to a number of leading players in the RFID sector.

We have seen very strong interest in CIT's photolithographic inks which permit very fine lines - invisible to human eye - to be produced. This technology is very effective for the production of touch screen interfaces. We have made significant technical advances which will facilitate high speed roll to roll production of touch screen components.

Technical progress on Photovoltaics has been good and we have two specialised inks which provide a conductivity and efficiency boost to polycrystalline silicon photovoltaics. We are now seeking partners to commercialise this technology.

Risks and uncertainties

In our annual report to shareholders in June 2008 we provided a detailed commentary on the risks faced by the group and the measures put in place to monitor and actively manage these risks. The current volatile and deteriorating economic environment clearly increases the risk profile for all businesses. 

As a manufacturing business, our operational gearing is high and, therefore, the biggest risk would be a substantial reduction in demand as global economic output reduces. Most of the markets served by Carclo, especially medical and aerospace, are uncoupled from general consumer activity and we have yet to see any significant adverse impact in these markets. Were such shifts in demand to take place, Carclo has a proven track record in reacting swiftly to rebalance manufacturing output to meet our customers' requirements.

Commodity prices have started to fall sharply in recent weeks. This will take time to filter through to the higher value engineering polymers used by Carclo but we would expect to see reductions in material costs in due course. Energy costs, which have been a major problem in the UK, are also likely to fall in the medium term.

Credit risk remains a major concern and our credit insurer is reducing or eliminating cover on a range of customers, especially in the automotive market. Where appropriate, we are re-negotiating payment terms to reduce our exposure to credit risk.

Since September US dollar exchange rates have strengthened against the euro and the pound. The strengthening US dollar will favourably impact on the translation of our US dollar earnings but will increase the sterling value of our dollar denominated debt.

Finally, as detailed below, the mark to market valuation of the pension fund has become very volatile. This volatility has the potential to impact materially the figures reported under IAS 19 in the income statement and balance sheet. In Carclo's scheme the recurring cash income from the assets currently matches the scheme outgoings, minimising risk to the company.

Pensions

Under IAS 34 'Interim Financial Reporting' the group is required to review the carrying value of the pensions asset or liability at the half year. The recent reduction in equity markets has impacted the value of the pension scheme assets and the increase in corporate bond yields has reduced the scheme liabilities. As a consequence the board has provisionally reflected an IAS 19 deficit of £5.0 million on the balance sheet at 30 September 2008 and this compares to a £0.9 million pension asset as at 31 March 2008. The pension balances will be assessed in full at the year end, together with the regular cost and financing impact for the following financial year. Additional pension contributions of £0.9 million over and above the regular cash contributions were made by the group in October, in accordance with the scheme recovery plan.

Outlook

Profit progression in the first half was good and was in line with our expectations. Many of the markets we serve are proving resilient and, for the most part, have not been impacted by the current economic downturn. In November we have seen a reduction in demand in automotive and electronics markets, but the continued strength of the specialist medical and optical businesses and design and development revenues will help to mitigate the impact on the group. Whilst global demand remains uncertain, we will maintain our focus on cost control and margin improvement.

Our financing is secure, our strategy is sound and our businesses continue to trade well in a difficult and volatile environment.

Christopher Ross

25 November 2008

Consolidated income statement 

	Six months ended  30 September  2008 unaudited					Six months ended  30 September 2007  unaudited					Year ended 31 March 2008 audited
		Notes		£000					£000					£000
Revenue				42,694					38,755					81,274
Underlying operating profit
Operating profit before exceptional costs				3,301					2,636					5,713
- rationalisation costs		4		(542)					(388)					(1,244)
- exceptional bad debts		4		(170)					-					(93)
After exceptional costs				2,589					2,248					4,376
Operating profit before net financing		3		2,589					2,248					4,376
Finance income		5		5,437					5,351					10,668
Finance charge		5		(5,439)					(5,250)					(10,542)
Profit before tax				2,587					2,349					4,502
Income tax expense		6		(323)					(235)					-
Profit after tax but before profit / (loss) on discontinued operations				2,264					2,114					4,502
Profit / (loss) on discontinued operations, net of tax		7		176					-					(250)
Profit after tax				2,440					2,114					4,252
Attributable to:
Equity holders of the parent				2,440					2,155					4,293
Minority interest				-					(41)					(41)
Profit for the period				2,440					2,114					4,252
Earnings per ordinary share		8
Basic - continuing operations				4.0 p					3.9 p					8.1 p
Basic - discontinued operations				0.3 p					- p					(0.4) p
Basic - total				4.3 p					3.9 p					7.7 p
Diluted - continuing operations				4.0 p					3.8 p					8.0 p
Diluted - discontinued operations				0.3 p					- p					(0.4) p
Diluted - total				4.3 p					3.8 p					7.6 p
Dividend per ordinary share		9
Arising in respect of the period				0.65 p					0.6 p					1.9 p
Paid in the period				1.9 p					1.6 p					1.6 p

  Consolidated balance sheet

		30 September 2008 unaudited		30 September 2007 unaudited		31 March 2008 audited
	Notes	£000		£000		£000
Assets
Intangible assets		31,139		26,122		28,934
Property, plant and equipment		24,613		25,035		25,429
Investments		315		105		265
Deferred tax assets		4,440		4,639		2,273
Retirement benefit assets	10	-		-		857
Total non current assets		60,507		55,901		57,758
Inventories		10,841		8,981		9,661
Trade and other receivables		19,468		16,906		16,632
Cash and cash deposits		5,925		5,995		7,785
Assets classified as held for sale		1,579		842		1,271
Total current assets		37,813		32,724		35,349
Total assets		98,320		88,625		93,107
Liabilities
Interest bearing loans and borrowings		17,011		12,287		14,684
Deferred tax liabilities		4,128		3,628		3,785
Retirement benefit obligations	10	5,000		11,314		-
Other payables		450		750		1,000
Total non current liabilities		26,589		27,979		19,469
Trade and other payables		15,698		13,494		14,078
Current tax liabilities		2,149		1,873		1,919
Dividends payable		-		-		339
Interest bearing loans and liabilities		4,841		7,285		6,847
Total current liabilities		22,688		22,652		23,183
Total liabilities		49,277		50,631		42,652
Net assets		49,043		37,994		50,455
Equity
Ordinary share capital issued	14	2,859		2,815		2,859
Share premium	14	3,916		3,002		3,916
Other reserves	14	3,657		3,670		3,669
Translation reserve	14	4,077		1,145		3,351
Retained earnings	14	34,534		27,362		36,660
Total equity attributable to equity holders of the parent		49,043		37,994		50,455

  Consolidated statement of cash flows

	Six months ended 30 September  2008 unaudited				Six months ended 30 September  2007 unaudited		Year ended 31 March  2008 audited
	Notes		£000		£000		£000
Cash generated from operations	11		2,246		1,852		6,942
Interest paid			(537)		(613)		(1,344)
Tax paid			(92)		-		(131)
			-		-		-
Net cash from operating activities			1,617		1,239		5,467
Cash flows from investing activities
Proceeds from sale of property, plant and equipment			751		11		47
Interest received			71		121		264
Cash flows on discontinued operations			(46)		-		(100)
Receipt of deferred consideration, net of related costs			-		969		937
Proceeds from sale of investments			-		-		2
Acquisition of business undertaking, net of cash acquired		13	(1,582)		-		(1,406)
Acquisition of minority interest			-		-		(148)
Acquisition of property, plant and equipment			(1,118)		(2,052)		(3,571)
Acquisition of intangible assets - computer software			(7)		(129)		(89)
Acquisition of trade investment			(50)		(53)		(215)
Development expenditure			(455)		(359)		(1,244)
Net cash from investing activities			(2,436)		(1,492)		(5,523)
Cash flows from financing activities
Proceeds from the issue of share capital			-		-		6
Proceeds from sale of own shares			396		-		-
Drawings on term loan facilities			1,768		6,628		18,216
Repayment of borrowings			(217)		(7,565)		(17,288)
Payment of finance lease liabilities			-		(1)		(1)
Dividends paid			(1,074)		(890)		(890)
Net cash from financing activities			873		(1,828)		43
Net increase / (decrease) in cash and cash equivalents			54		(2,081)		(13)
Cash and cash equivalents at beginning of period			1,139		991		991
Effect of exchange rate fluctuations on cash held			108		(4)		161
Cash and cash equivalents at end of period		12	1,301		(1,094)		1,139

Consolidated statement of recognised income and expense 

	Six months ended 30 September 2008 unaudited	Six months ended 30 September 2007 unaudited			Year ended 31 March 2008 audited
	£000		£000		£000
Foreign exchange translation differences	726		287		2,493
Actuarial (losses) / gains on defined benefit schemes	(6,577)		-		10,339
Taxation on items taken directly to equity	1,841		(406)		(3,300)
Income and expense recognised directly in equity	(4,010)		(119)		9,532
Profit for the period	2,440		2,114		4,252
Total recognised income and expense for the period	(1,570)		1,995		13,784
Attributable to -
Equity holders of the parent	(1,570)		2,036		13,825
Minority interest	-		(41)		(41)
Total recognised income and expense for the period	(1,570)		1,995		13,784

Notes on the accounts

1.    Basis of preparation

The condensed half year report for the six months ended 30 September 2008 has been prepared on the basis of the accounting policies set out in the audited accounts for the year ended 31 March 2008 and in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority and the requirements of IAS 34: 'Interim Financial Reporting' as adopted by the EU. 

The financial information is unaudited, but has been reviewed by the auditors and their report to the company is set out on page 19.

The half year report does not constitute financial statements as defined in Section 240 of the Companies Act 1985 and does not include all of the information and disclosures required for full annual statements. It should be read in conjunction with the annual report and financial statements for the year ended 31 March 2008 which is available either on request from the company's registered office, Springstone House, PO Box 88, 27 Dewsbury Road, Ossett, WF5 9WS  or can be downloaded from the corporate website: www.carclo-plc.com.  

The comparative figures for the financial year ended 31 March 2008 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under Section 237 (2) or (3) of the Companies Act.

The half year report was approved by the board of directors on 25 November 2008 and is being sent to shareholders on 5 December 2008. Copies are available from the company's registered office and can also be downloaded from the corporate website. 

The group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRSs').  

2.    Accounting estimates

The preparation of the half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. In preparing these half year financial statements, the significant judgements made by management in applying the group's accounting policies and the key source of estimation uncertainty were the same as those applied to the audited consolidated financial statements as at, and for the year ended, 31 March 2008.

3.    Segment reporting

At 30 September 2008, the group is organised into two main business segments: Technical Plastics and Precision Products. 

The primary segment reporting format is determined to be business segments as the group's risks and returns are affected predominantly by differences in the products and services provided. Secondary information is reported geographically. The operating business segments are organised and managed separately. 

The Technical Plastics segment supply fine tolerance, injection moulded plastic components, which are used in medical, telecom and electronics products. This business operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

The Precision Products segment supply systems to the automotive and aerospace industries. 

Transfer pricing between business segments is set on an arm's length basis. Segmental revenues and results include transfers between business segments. Those transfers are eliminated on consolidation.

The group's geographical segments are based on the location of the group's assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

Analysis by business segment

The segment results for the six months ended 30 September 2008 were as follows - 

	Technical Plastics	Precision Products	Unallocated	Eliminations	Group total
	£000	£000	£000	£000	£000
Income Statement
Total revenue	28,686	14,207	94	(293)	42,694
Less inter-segment revenue	(289)	(4)	-	293	-
Total external revenue	28,397	14,203	94	-	42,694
Expenses	(26,441)	(12,242)	(710)	-	(39,393)
Underlying operating profit	1,956	1,961	(616)	-	3,301
Rationalisation costs	(508)	-	(34)	-	(542)
Exceptional bad debts	(170)	-	-	-	(170)
Operating profit before net finance charge	1,278	1,961	(650)	-	2,589
Net finance charge					(2)
Tax					(323)
Profit after tax					2,264

The segment results for the six months ended 30 September 2007 were as follows - 

	Technical Plastics	Precision Products	Unallocated	Eliminations	Group total
	£000	£000	£000	£000	£000
Income Statement
Total revenue	28,745	10,150	52	(192)	38,755
Less inter-segment revenue	(192)	-	-	192	-
Total external revenue	28,553	10,150	52	-	38,755
Expenses	(27,090)	(8,461)	(568)	-	(36,119)
Underlying operating profit	1,463	1,689	(516)	-	2,636
Rationalisation costs	(366)	-	(22)	-	(388)
Operating profit before net finance income	1,097	1,689	(538)	-	2,248
Net finance income					101
Tax					(235)
Profit after tax					2,114

The segment results for the year ended 31 March 2008 were as follows - 

	Technical Plastics  £000	Precision Products  £000	Unallocated £000	Eliminations  £000	Group total  £000
Income statement
Total revenue	59,460	22,255	67	(508)	81,274
Less inter-segment revenue	(508)	-	-	508	-
Total external revenue	58,952	22,255	67	-	81,274
Expenses	(55,237)	(18,907)	(1,417)	-	(75,561)
Underlying operating profit	3,715	3,348	(1,350)	-	5,713
Rationalisation costs	(1,078)	(6)	(160)	-	(1,244)
Exceptional bad debts	(45)	-	(48)	-	(93)
Operating profit before net finance income	2,592	3,342	(1,558)	-	4,376
Net finance income					126
Tax					-
Profit after tax					4,502

Analysis by geographical segment by destination

	Six months ended 30 September 2008		Six months ended 30 September 2007		Year ended 31 March 2008
		£000		£000		£000
The analysis of revenue by geographic destination was as follows -
United Kingdom		16,769		16,229		33,540
North America		9,655		8,564		17,891
Rest of World		16,270		13,962		29,843
Total external revenue		42,694		38,755		81,274

4.    Exceptional costs

	Six months ended 30 September 2008		Six months ended 30 September 2007		Year ended 31 March 2008
		£000		£000		£000
Rationalisation costs		(542)		(388)		(1,244)
Exceptional bad debts		(170)		-		(93)
Total exceptional costs		(712)		(388)		(1,337)

The rationalisation costs in the period under review related primarily to the closure of a Technical Plastics facility in Wales.

The exceptional bad debt charge in the period under review relates to an additional provision on the net receivable from Delphi Corporation, a US based customer which went into Chapter 11 in October 2005. The provision has been increased from 25% of the net receivable to 80% and reflects the current assessment of the likely settlement.

5.    Net finance (charge) / income

	Six months ended 30 September 2008		Six months ended 30 September 2007		Year ended 31 March 2008
		£000		£000		£000
Finance revenue		69		158		246
Finance expense		(522)		(637)		(1,267)
Other finance revenue - retirement benefits		5,368		5,193		10,422
Other finance expense - retirement benefits		(4,917)		(4,613)		(9,275)
Total		(2)		101		126

6.      Income tax expense

The half year accounts include a tax charge of 12.5% of profit before tax (2007 - 10.0%) based on the estimated average effective income tax rate for the full year. The group's effective tax rate continues to run at a lower level than the underlying UK tax rate of 28.0% (2007 - 30.0%) as the group continues to benefit from prior period tax losses and tax planning initiatives.  

7.      Profit / (loss) on discontinued activities, net of tax

The profit / (loss) on discontinued activities, net of tax, comprises -

	Six months ended 30 September 2008		Six months ended 30 September 2007		Year ended 31 March 2008
		£000		£000		£000
Cash costs incurred in relation to surplus assets arising on the disposal of businesses		(46)		-		(100)
Write down of deferred consideration		-		-		(150)
Profit on disposal of surplus property		322		-		-
Impairment of surplus property		(100)		-		-
Total		176		-		(250)

In the period under review a surplus UK property was disposed for a cash consideration, net of attributable costs, of £0.8 million and gave rise to a profit of £0.3 million. This property was formerly occupied by the card clothing business which was disposed in June 2005.

The impairment of the surplus property relates to a vacant freehold French property, which also was occupied by the card clothing business which was disposed in June 2005. The property is being actively marketed and, in the current economic climate, is receiving offers below its carrying value. Accordingly, an impairment provision has been established to reduce the carrying value to current market expectations of its saleable value. 

8.    Earnings per share

The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders of the company divided by the weighted average number of ordinary shares outstanding during the period.

The calculation of diluted earnings per share is based on profit attributable to ordinary shareholders of the company divided by the weighted average number of ordinary shares outstanding during the period (adjusted for dilutive options).

The following details the profit and average number of shares used in calculating the basic and diluted earnings per share -

Six months ended		Six months ended			Year ended
	30 September		30 September		31 March
	2008		2007		2008
	£000		£000		£000
Profit from continuing operations	2,264		2,114		4,502
Minority interest	-		41		41
Profit attributable to ordinary shareholders from continuing operations	2,264		2,155		4,543
Profit / (loss) from discontinued operations	176		-		(250)
Profit attributable to ordinary shareholders	2,440		2,155		4,293
Six months ended		Six months ended			Year ended
	30 September		30 September		31 March
	2008		2007		2008
	Shares		Shares		Shares
Weighted average number of ordinary shares in issue in the period	56,838,958		55,624,060		56,061,842
Effect of share options in issue	423,831		617,316		563,170
Weighted average number of ordinary shares (diluted) in the period	57,262,789		56,241,376		56,625,012

The following table summarises the earnings per share figures based on the above data -

Six months ended		Six months ended			Year ended
	30 September		30 September		31 March
	2008		2007		2008
	pence		pence		pence
Basic - continuing operations	4.0		3.9		8.1
Basic - discontinued operations	0.3		-		(0.4)
Basic - total	4.3		3.9		7.7
Diluted - continuing operations	4.0		3.8		8.0
Diluted - discontinued operations	0.3		-		(0.4)
Diluted - total	4.3		3.8		7.6

9.    Dividends paid and proposed

Ordinary dividends per 5 pence share declared in the period comprised - 

Six months ended		Six months ended		Year ended
	30 September		30 September		31 March
	2008		2007		2008
	£000		£000		£000
Final dividend for 2006/07 (1.2 pence per share)	-		668		668
Interim dividend for 2007/08 (0.6 pence per share)	-		-		339
Final dividend for 2007/08 (1.3 pence per share)	735		-		-
	735		668		1,007

The directors are proposing an interim dividend of 0.65 pence per ordinary share for the half year ended 30 September 2008. The dividend payment totalling £0.370 million will be paid on 6 April 2009 to shareholders on the share register at close of business on 6 March 2009.

10.    Retirement benefit assets / (obligations)

At 31 March 2008, the group had a retirement benefit asset, as calculated under the provisions of IAS 19: 'Employee Benefits', of £0.9 million. Adjusting for contributions and service charges in the period, the net asset would have increased to £1.6 million at 30 September 2008. However, the recent collapse in equity markets has significantly impacted the carrying value of the pension scheme assets, whilst the increase in corporate bond yields has reduced the scheme liabilities. The board have assessed the IAS 19 retirement benefit liability at 30 September 2008 to be £5.0 million and therefore charged £6.6 million through the statement of recognised income and expense with a commensurate adjustment to the related deferred tax balance.

11.    Cash generated from operations

	Six months ended		Six months ended				Year ended
		30 September		30 September			31 March
		2008		2007			2008
		£000		£000			£000
Profit before financing costs		2,589		2,248			4,376
Adjustments for -
Pension fund contributions in excess of service costs		(269)		(167)			(1,432)
Depreciation charge		1,565		1,469			3,152
Amortisation of intangible assets		85		28			112
Exceptional bad debt provision		170		-			93
Profit on disposal of other plant and equipment		-		(7)			(4)
Write down of assets charged to rationalisation costs		152		-			150
Share based payment charge		97		45			128
Operating cash flow before changes in working capital		4,389		3,616			6,575
Changes in working capital (excluding the effects of acquisition and disposal of subsidiaries)
Increase in inventories		(575)		(753)			(436)
(Increase) / decrease in trade and other receivables		(1,254)		474			827
Decrease in trade and other payables		(314)		(1,485)			(24)
Cash generated from operations		2,246		1,852			6,942

12.    Cash and cash equivalents

		As at		As at		As at
		30 September		30 September		31 March
		2008		2007		2008
		£000		£000		£000
Cash at bank and in hand		5,925		5,995		7,785
Bank overdrafts		(4,624)		(7,089)		(6,646)
		1,301		(1,094)		1,139

13.      Acquisition of subsidiary

On 31 July 2008, agreement was reached to acquire all of the share capital of the French aerospace business of Jacottet Industrie SA., for a cash consideration of € 2.525 million with a further payment of up to € 0.4 million payable dependant upon the performance of the business in the year to 30 September 2008.

The acquisition had the following effect on the group's assets and liabilities -

		Acquiree's book value	Fair value adjustments	Acquisition amounts
		£000	£000	£000
Property, plant and equipment		132	-	132
Intangible assets		165	(87)	78
Inventories		478	(104)	374
Trade and other receivables		1,502	(31)	1,471
Trade and other payables		(1,164)	(94)	(1,258)
Net cash		487	-	487
Net identifiable assets and liabilities		1,600	(316)	1,284

Settled by -
Consideration paid				2,008
Deferred consideration				314
Acquisition costs				241
Goodwill				(1,279)
				1,284

The net cash flows in the period arising on the acquisition were -

Consideration paid				2,008
Acquisition costs				61
Net cash acquired with the business				(487)
Net cash outflow				1,582

The fair value adjustments to the assets acquired related to the alignment of accounting policies with Carclo plc and the fair value associated with Jacottet's European customer base.

Goodwill has arisen on the acquisition of Jacottet at a premium to net assets and paid to secure a leading position in the supply of aerospace components, primarily to European markets.

14.    Statement of changes in shareholder's equity

		Attributable to equity holders of the company
				Share
	Share			premium		Translation		Other	Retained		Minority	Total
	capital			account		reserve		reserves	earnings	Total	interest	equity
		£000		£000		£000		£000		£000	£000	£000	£000
Current half year period
Balance at 1 April 2008	2,859			3,916		3,351		3,669	36,660	50,455	-	50,455
Total recognised income and expense		-		-		726		-		(2,296)	(1,570)	-	(1,570)
Transfer in respect of depreciation	-			-		-		(12)	12	-	-	-
Share based payments	-			-		-		-	97	97	-	97
Dividends to shareholders	-			-		-		-	(735)	(735)	-	(735)
Adjustment to deferred consideration		-		-		-		-		400	400	-	400
Proceeds from sale of own shares		-		-		-		-		396	396	-	396
Balance at 30 September 2008		2,859		3,916		4,077		3,657		34,534	49,043	-	49,043
Prior half year period
Balance at 1 April 2007	2,815			3,002		858		3,670	26,900	37,245	1,196	38,441
Total recognised income and expense		-			-		287		-	1,749	2,036	(41)	1,995
Share based payments	-			-		-		-	45	45	-	45
Dividends to shareholders		-		-		-		-		(667)	(667)	-	(667)
Acquisition of minority interest		-		-		-		-		(665)	(665)	(1,155)	(1,820)
Balance at 30 September 2007		2,815		3,002		1,145		3,670		27,362	37,994	-	37,994
Prior year period
Balance at 1 April 2007	2,815	3,002				858		3,670	26,900	37,245	1,196	38,441
Total recognised income and expense		-		-		2,493		-		11,332	13,825	(41)	13,784
Transfer in respect of depreciation	-			-		-		(1)	1	-	-	-
Share based payments	-			-		-		-	128	128	-	128
Dividends to shareholders	-			-		-		-	(1,007)	(1,007)	-	(1,007)
Issue of share capital	44			914		-		-	-	958	-	958
Acquisition of minority interest		-		-		-		-		(694)	(694)	(1,155)	(1,849)
Balance at 31 March 2008		2,859		3,916		3,351		3,669		36,660	50,455	-	50,455

The company maintains an employee share ownership plan for the benefit of employees and which can be used in conjunction with any of the group's share option schemes. As at 30 September 2008 the plan held 183,077 shares (31 March 2008 - 683,077 shares). On 8 August 2008, 500,000 shares were sold for 80 pence per share giving rise to a net cash inflow of £396,000 after commission charges. 

On 30 September 2007, Carclo acquired the minority holding in Conductive Inkjet Technology. The cost of acquiring the minority holding included a deferred consideration element totalling £750,000, contingent upon the achievement of specific sales and profits in the period to 31 March 2010. Based upon the performance of the business in the period under review and current forecast for the business to 31 March 2010, the board have concluded that deferred consideration of up to £350,000 is likely to be paid. Therefore the balance of £400,000 on the deferred consideration provision has been released and credited to retained earnings, in line with how the acquisition of the minority interest was originally accounted.

15.    Ordinary share capital

Ordinary shares of 5 pence each:

					Number of shares	£000
Authorised at 30 September 2007, 31 March 2008 and 30 September 2008					80,000,000	4,000
Issued and fully paid at 30 September 2007					56,307,137	2,815
Share issued in consideration of the acquisition of shares in Conductive Inkjet Technology Limited					869,565	43
Shares issued on exercise of share options for cash					12,000	1
Issued and fully paid at 31 March 2008 and 30 September 2008					57,188,702	2,859

16.    Related parties

Identity of related parties

The group has a related party relationship with its subsidiaries, its directors and executive officers and the group pension schemes.

Transactions with key management personnel

Details of directors' remuneration are disclosed in the group's annual report.

Group pension schemes

Carclo manages a pensions department which administers the group pension scheme. The associated investment costs are recharged to the schemes in full. The costs in the six months ended 30 September 2008 amounted to £0.206 million (2007 - £0.139 million). From 1 April 2007, it has been agreed with the Trustees of the Pension Schemes that, under the terms of the recovery plan, Carclo would bear the scheme's administration costs whilst ever the scheme was in deficit, as calculated at the triennial valuation. As the scheme was in deficit under the latest actuarial valuation, Carclo incurred an administration cost of £0.269 million which has been charged against the IAS 19 pension scheme deficit (2007 - £0.167 million). 

17.    Post Balance sheet events

In October 2008, the group injected £0.9 million in cash into the group pension scheme in accordance with the agreed funding plan.

18.    Responsibility statement

We confirm that to the best of our knowledge -

a)            The condensed set of half year financial statements has been prepared in accordance with IAS 34: “Interim Financial Reporting” as adopted by the EU; and

 

b)            The half year report includes a fair review of the information required by the Disclosure and Transparency Rules (DTR) 4.2.7R (indication of important events during the first six months and their impact on the financial statements and description of principal risks and uncertainties for the remaining six months of the year); and

 

c)            The half year report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the board

Ian Williamson - chief executive

Robert Brooksbank - finance director

INDEPENDENT REVIEW REPORT TO CARCLO PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008 which comprises the unaudited consolidated income statement, the unaudited consolidated statement of recognised income and expense, the unaudited consolidated balance sheet, the unaudited statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

KPMG Audit Plc

Chartered Accountants  

1, The Embankment,

Neville Street

Leeds

LS1 4DW

25 November 2008

 

END

 

 

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