Interim Results
Carclo plc
06 December 2004
Embargoed for 7.00am 6 December 2004
Carclo plc
Interim Results for the Six Months ended 30 September 2004
Key Points
•Underlying profits, before goodwill and exceptional items, increased to
£1.6 million (2003 - £0.3 million) despite a 4.5% reduction in turnover.
•Profit before tax, after exceptional charges, goodwill amortisation and
interest, was £1.2 million (2003 - loss of £3.4 million).
•Earnings per share was 2.4p (2003 - loss per share of 4.2p).
•Net debt at 30 September 2004 was £28.1 million (2003 - £31.8 million)
representing gearing of 59% (2003 - 64%).
•The Board has declared an unchanged dividend of 0.4p per share.
•All business segments within Technical Plastics delivered profits ahead
of the previous half with CTP Automotive operating profits double those
earned in the previous half year.
•Conductive Inkjet Technology has, to date, developed seven patented
processes to deposit conductive metals directly onto injection moulded
components and films.
Commenting on the results, George Kennedy, Chairman, said:
'The first half recovery confirms the strategic direction undertaken by Carclo.
In line with our strategy of freeing up resources for further expansion of our
operations in low cost regions and in our specialist and new technology businesses,
we have stepped up the pace of rationalisation in both the UK and USA operations.
Although we have seen some slowing of demand in the past few weeks and raw material
price inflationary pressures persist, we remain confident of further progress in
the second half.'
For further information please contact:
Carclo plc
Ian Williamson, Chief Executive On 6 December: 020 7067 0700
Robert Brooksbank, Finance Director Thereafter: 01924 330500
Weber Shandwick/Square Mile
Richard Hews 020 7067 0700
Sarah Richardson
An analyst's presentation will be held at 9.30am at Weber Shandwick Square
Mile's offices Fox Court, 14 Gray's Inn Road, London WC1X 8WS
Notes to Editors
• Carclo plc is a global supplier of technical plastic components and
specialist wire products. It is a public company whose shares are quoted on
the London Stock Exchange.
• 80% 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.
• The Specialist Wire division manufactures card clothing, a specialised
engineered product used by the textile fibre processing industry world wide,
precision aerospace products and band saws.
• 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 entered the current financial year with the group's continuing business
segments in profit, having benefited from the restructuring and rationalisation
programmes undertaken last year. Trading has also benefited from greater
stability in customer demand. It is pleasing, therefore, to report that
underlying profits, before goodwill and exceptional items, increased from £0.3
million this time last year to £1.6 million, despite a 4.5% reduction in
turnover.
After exceptional charges, goodwill amortisation and interest, the profit before
tax amounted to £1.2 million (2003 - a loss of £3.4 million) and the profit per
ordinary share was 2.4 pence (2003 - loss per share of 4.2 pence). The board has
declared an unchanged interim dividend of 0.4 pence per ordinary share.
The strategy of the group is to grow our specialist businesses such as medical
plastics, to continue our expansion in low cost regions and to progress new
technological developments.
Financial position
Net debt at 30 September 2004 was £28.1 million representing gearing of 59%
(2003 - 64%). The debt profile of Carclo is such that debt is traditionally
higher in September than in March. Nevertheless, the focus on debt reduction has
resulted in debt at 30 September 2004 being at the same level as the year end
and £3.7 million below the debt at 30 September 2003.
Carclo continues to realise value from its surplus property. In the six months
to 30 September 2004 surplus land was sold for £1.2 million, net of costs, and
certain rights over a previously disposed property were waived in consideration
for £0.3 million. The net book value of the disposed property was nil and so the
net sales proceeds have been booked as exceptional profit.
The board is alert to the potential impact on distributable reserves of the
implementation of FRS 17, the new pension accounting standard, for the next
financial year. We are examining with our advisers ways of mitigating this
impact.
Operating review
Technical Plastics
The Technical Plastics operations benefited significantly from the
rationalisation programmes undertaken in the prior year. Divisional operating
profits increased from £0.1 million in the prior half year to £1.3 million in
the six months to 30 September 2004. This was also creditable in an environment
where raw material prices have increased sharply.
In the moulding operations within Technical Plastics, we are generally able to
pass polymer price increases directly on to our customers and therefore the
impact of rising polymer prices has been modest. Where we produce a finished
product, as in CTP Automotive, there is generally a delay between the material
price increase and the recovery of such increases in our own selling prices. We
are, however, pursuing a resolute policy of full cost recovery with all our
customers.
All business segments within Technical Plastics delivered profits ahead of the
previous half year. The European operations returned to profit helped by good
growth in medical plastics and a good profit contribution from our operation in
Czech Republic. The USA operation also delivered improved profits helped by
generally firm demand and growth in our medical business and has recently gained
a new customer for diagnostic components. The China facility made a small loss
in the first half but has entered the second half in profit as a result of
increasing levels of transfer work.
The last annual report highlighted two innovative medical devices for which
Carclo has been selected to manufacture key components. These are the AfinionTM
point of care blood testing device, developed by Axis-Shield plc, and the
Aspirair(R) inhaler developed by Vectura plc. Axis-Shield launched Afinion TM on
25 November 2004 and we have already completed process validation in preparation
for volume production of the test cartridges. Vectura has also selected Carclo as
the development partner for its innovative Gyrohaler(R) device, adding to the
family of inhalers we are manufacturing for Vectura.
CTP Automotive performed well with operating profits double those earned in the
prior half year. We have commenced full production of specialist lighting for
prestige vehicle manufacturers such as Mercedes McLaren, Porsche Carrera GT and
Bentley. Additionally our antenna business is benefiting from an increased take
up of multiband antennas for in-car mobile phone and satellite navigation
systems. The control cable business did less well and was particularly exposed
to steel price increases which we expect to recover in the second half. We have
progressively outsourced production and assembly of control cables to lower cost
regions. This has proved highly successful and we have established a 50:50 joint
venture company in Bangalore, India in conjunction with Suprajit Engineering
Limited to manufacture and assemble control cables. We expect the new purpose
built factory to be in full production by September 2005.
Specialist Wire
Specialist Wire experienced a slow start to the year but demand increased
sharply over the summer months. Performance in the half was slightly down on the
same period last year. The new Chinese facility commenced production in the
period and enquiry levels are very encouraging. This facility will allow greater
penetration into the largest and fastest growing market for card clothing in the
world and provides a low cost manufacturing facility for our global sales.
The smaller precision engineering companies within this division continued to
perform well.
Innovation
Our collaboration with Xennia Technology Limited to develop an innovative
process to deposit conductive metals directly onto injection moulded components
and films continues to gather momentum. To date seven patented processes have
been developed by the joint venture vehicle, Conductive Inkjet Technology
Limited ('CIT'). These cover a wide range of applications from radio frequency
identification tags to printed batteries. The interest from potential customers
in this process has been exceptionally high and we have entered into several
joint development agreements. We are also developing a number of innovative
applications with existing Technical Plastics customers. At 30 September 2004
Carclo's funding of the research in CIT amounted to £0.8 million.
The board
As indicated in the annual report, Robert Brooksbank joined the board as group
finance director on 1 April 2004 and Noel Hutton was appointed as a non
executive director with effect from 1 July 2004. Both Robert and Noel have
already made significant contributions to the strategic development of Carclo.
Outlook
The first half recovery confirms the strategic direction undertaken by Carclo.
In line with our strategy of freeing up resources for further expansion of our
operations in low cost regions and in our specialist and new technology businesses,
we have stepped up the pace of rationalisation in both the UK and USA operations.
Although we have seen some slowing of demand in the past few weeks and raw material
price inflationary pressures persist, we remain confident of further progress in
the second half.
George Kennedy
Chairman
6 December 2004
Consolidated profit and loss account
--------------------------------------------------------------------------------
Half year ended Year ended
Half year ended 30 September 31 March
30 September 2003 2004
2004 (unaudited) (audited)
(unaudited) (as restated) (as restated)
£'000 £'000 £'000
--------------------------------------------------------------------------------
Turnover
Continuing operations 54,315 56,884 115,652
Discontinued operations - 433 623
------- ------- -------
54,315 57,317 116,275
------- ------- -------
Operating profit/(loss)
Continuing operations
- before rationalisation costs 1,647 252 2,309
- rationalisation costs (341) (284) (1,314)
------- ------- -------
- after rationalisation costs 1,306 (32) 995
Discontinued operations - (155) (226)
------- ------- -------
1,306 (187) 769
Goodwill amortisation (521) (521) (1,042)
------- ------- -------
Operating profit/(loss) 785 (708) (273)
Share of operating losses
in joint venture - (115) (115)
Loss on termination of operations (249) (1,871) (5,272)
Profit on sale of properties 1,457 40 337
------- ------- -------
Profit/(loss) before interest 1,993 (2,654) (5,323)
Net interest payable 745 700 1,331
------- ------- -------
Profit/(loss) on ordinary activities
before taxation 1,248 (3,354) (6,654)
Taxation charge/(credit) 40 (1,200) (2,390)
------- ------- -------
Profit/(loss) on ordinary activities
after taxation 1,208 (2,154) (4,264)
Ordinary dividends 204 204 613
------- ------- -------
Surplus/(deficit) for period 1,004 (2,358) (4,877)
------- ------- -------
Earnings per ordinary share
Basic 2.4p (4.2p) (8.2p)
Underlying 1.8p (1.4p) 0.9p
------- ------- -------
Dividend per ordinary share 0.4p 0.4p 1.2p
------- ------- -------
Consolidated statement of total recognised gains and losses
Profit/(loss) on ordinary activities
after taxation for the period 1,208 (2,154) (4,264)
Exchange gains/(losses) on the
translation of overseas assets 376 71 (539)
------- ------- -------
Total gains and losses relating
to the period 1,584 (2,083) (4,803)
Prior period adjustment (note 1) (324) (303) (303)
------- ------- -------
Total gains and losses recognised
since the last annual report 1,260 (2,386) (5,106)
------- ------- -------
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 2004, except for the accounting of own shares held under ESOP
trusts. The investment has been treated in accordance with the new requirements
of UITF 38 and has been deducted from equity. A prior period adjustment has been
made to reflect the adoption of this new guidance. This financial information
was approved by the directors on 6 December 2004.
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 2004 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
2004 represents 3.2% of the profit on ordinary activities before taxation (30
September 2003 - credit of 35.8% of the loss).
5. Earnings per ordinary share at 30 September 2004 have been calculated by
dividing the profit attributable to ordinary shareholders of £1,208,000 by the
weighted average number of ordinary shares in issue of 51,066,647.
6. Copies of the Interim Report will be posted to shareholders on 10
December 2004 and are available from the company's registered office, Ploughland
House, P.O. Box 14, 62 George Street, Wakefield, WF1 1ZF, West Yorkshire.
7. Dividend payments will be posted to shareholders on 6 April 2005 to
shareholders on the register on 4 March 2005. The shares will be traded
excluding the right to the dividend from 2 March 2005.
Consolidated balance sheet
30 September 2003 31 March 2004
30 September 2004 (unaudited) (audited)
(unaudited) (as restated) (as restated)
£'000 £'000 £'000 £'000 £'000 £'000
----------------------------------------------------------------------------------
Fixed assets
Intangible assets 15,418 16,460 15,939
Tangible assets 36,727 40,549 37,716
Investments 10 11 10
------- ------- -------
52,155 57,020 53,665
Current assets
Stocks 13,836 14,499 13,596
Debtors 22,741 26,120 24,546
Pensions prepayment due
after more than one year 14,306 13,052 13,052
Cash at bank and in hand 7,443 9,743 7,693
------- ------- -------
58,326 63,414 58,887
------- ------- -------
Creditors-amounts falling
due within one year
Bank loans and overdrafts 4,407 8,701 4,610
Trade and other creditors 19,550 20,990 22,836
Taxation 1,962 - 1,369
Dividends 204 204 613
------- ------- -------
26,123 29,895 29,428
------- ------- -------
Net current assets 32,203 33,519 29,459
-------- -------- --------
Total assets less current
liabilities 84,358 90,539 83,124
Creditors-amounts falling
due after more than one year 31,043 32,721 31,086
Provision for joint venture
deficit 128 115 120
Provisions for liabilities
and charges 5,382 8,213 5,522
-------- -------- --------
Total net assets 47,805 49,490 46,396
-------- -------- --------
Capital and reserves
Called up share capital 2,594 2,594 2,594
Share premium 41,772 41,772 41,772
Revaluation reserve 846 946 852
Other reserves 1,330 1,330 1,330
Profit and loss account 1,263 2,848 (152)
-------- -------- --------
Equity shareholders' funds 47,805 49,490 46,396
-------- -------- --------
Ordinary shareholders'
funds per share 92p 95p 89p
Reconciliation of movements in equity shareholders' funds
----------------------------------------------------------------------------------
Half year ended Year ended
Half year ended 30 September 31 March
30 September 2003 2004
2004 (unaudited) (audited)
(unaudited) (as restated) (as restated)
£'000 £'000 £'000
----------------------------------------------------------------------------------
Profit/(loss) on ordinary activities
after taxation for the period 1,208 (2,154) (4,264)
Dividends 204 204 613
-------- -------- --------
1,004 (2,358) (4,877)
Other recognised gains/(losses)
relating to the period (net) 376 71 (539)
Amortisation and disposal of own shares 29 48 83
-------- -------- --------
1,409 (2,239) (5,333)
Opening equity shareholders' funds
as restated 46,396 51,729 51,729
-------- -------- --------
Closing equity shareholders' funds
as restated 47,805 49,490 46,396
-------- -------- --------
Consolidated cash flow statement
----------------------------------------------------------------------------------
Half year ended Half year ended Year ended
30 September 2004 30 September 2003 31 March 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
----------------------------------------------------------------------------------
Cash flow from operating activities 1,538 (2,720) 1,654
Returns on investments and servicing
of finance (732) (707) (1,350)
Taxation 429 510 694
Capital expenditure and financial
investment (297) 5,980 4,560
Equity dividends paid (613) (623) (623)
------- --------- ---------
Cash inflow before use of liquid
resources and funding 325 2,440 4,935
Financing
Decrease in debt (293) (2,832) (2,938)
Capital element of finance lease
rentals (43) (125) (168)
------- --------- ---------
(Decrease)/increase in cash in
period (11) (517) 1,829
======= ========= =========
Half year ended Half year ended Year ended
30 September 2004 30 September 2003 31 March 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
----------------------------------------------------------------------------------
Reconciliation of net cash flow to
movement in net debt
(Decrease)/increase in cash in period (11) (517) 1,829
Cash outflow from debt and lease
financing 336 2,957 3,106
------- --------- --------
Change in net debt resulting
from cash flows 325 2,440 4,935
Exchange movement (295) 696 1,885
------- --------- --------
Movement in net debt in period 30 3,136 6,820
Net debt at beginning of period (28,112) (34,932) (34,932)
------- --------- --------
Net debt at end
of period (28,082) (31,796) (28,112)
======= ========= ========
Year ended
Half year ended Half year ended 31 March 2004
30 September 2004 30 September 2003 (audited)
(unaudited) (unaudited) (as restated)
£'000 £'000 £'000
----------------------------------------------------------------------------------
Reconciliation of operating profit to
operating cash flows
Operating profit/(loss) 785 (708) (273)
Goodwill amortisation 521 521 1,042
Depreciation charges 2,881 2,882 5,410
Amortisation of share options 29 28 55
(Profit)/loss on sale of tangible
fixed assets (36) 7 12
Cash flow relating to non operating
exceptional charges (1,352) (1,550) (3,208)
Decrease/(increase) in stocks 50 (894) (369)
Decrease/(increase) in debtors 849 (926) 295
Decrease in creditors (2,189) (2,080) (1,310)
------- ------- --------
Net cash inflow/(outflow) from
operating activities 1,538 (2,720) 1,654
======= ======= ========
Group turnover and operating profit/(loss)
Half year ended Year ended
Half year ended 30 September 31 March
30 September 2003 2004
2004 (unaudited) (audited)
(unaudited) (as restated) (as restated)
£'000 £'000 £'000
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 43,555 1,276 45,773 146 93,460 1,680
Specialist wire division 10,760 797 11,111 904 22,192 1,896
---------------------- ---------------------- ---------------------
54,315 2,073 56,884 1,050 115,652 3,576
Rationalisation costs
(note 1) (341) (284) (1,314)
---------------------- ---------------------- ---------------------
54,315 1,732 56,884 766 115,652 2,262
Discontinued operations - - 433 (155) 623 (226)
------- ------- -------
54,315 57,317 116,275
---------------------- ---------------------- ---------------------
Divisional operating profit 1,732 611 2,036
Central administration costs (426) (798) (1,267)
Goodwill amortisation (note 2) (521) (521) (1,042)
-------- -------- -------
Group operating profit/(loss) 785 (708) (273)
-------- -------- -------
By geographical area
Continuing operations
Ongoing
United Kingdom 38,595 1,595 42,221 1,201 85,386 3,228
United States of America 10,109 466 10,011 3 19,982 711
Rest of World 5,611 12 4,652 (154) 10,284 (363)
---------------------- ---------------------- ---------------------
54,315 2,073 56,884 1,050 115,652 3,576
Exceptional costs (note 1)
United Kingdom (341) (284) (1,022)
United States of America - - (172)
Rest of World - - (120)
---------------------- ---------------------- ---------------------
54,315 1,732 56,884 766 115,652 2,262
Discontinued operations
United Kingdom - - 433 (155) 623 (226)
------- ------- -------
54,315 57,317 116,275
---------------------- ---------------------- ---------------------
Divisional operating profit 1,732 611 2,036
Central administration costs (426) (798) (1,267)
Goodwill amortisation (note 2) (521) (521) (1,042)
-------- -------- -------
Group operating profit/(loss) 785 (708) (273)
-------- -------- -------
Geographical segment - by destination
United Kingdom 23,032 25,407 49,846
Rest of Europe 13,512 13,296 28,628
Rest of World 17,771 18,614 37,801
-------- ------- -------
54,315 57,317 116,275
-------- ------- -------
Notes:
1. The rationalisation costs in the current half year relate to the technical plastics division and
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 2004 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, reconciliation of
movements in equity shareholders' funds 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 discussed.
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 2004.
Ernst & Young LLP
Leeds
6 December 2004
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