Half Yearly Report

RNS Number : 3289T

Carclo plc

19 November 2013

 



19 November 2013

Carclo plc

("Carclo" or "the group")

Half year results for the six months ended 30 September 2013

Strong progress across breadth of group; first sales contribution from CIT

Carclo plc, the technology group, today announces a strong first half performance in line with the board's expectations.

Financial Highlights
		Six months ended 30 September  2013		Six months ended 30 September 2012	Increase/ (decrease)
		£000		£000	%
Revenue
Technical Plastics		28,026		24,199	15.8
LED Technologies		12,111		11,540	4.9
Precision Engineering		3,923		4,024	(2.5)
Conductive Inkjet Technology		1,374		267	414.6
Total		45,434		40,030	13.5
Operating profit before exceptional items			2,780	1,952	42.4
Operating profit		2,388		1,952	22.3
Profit before tax		1,756		1,069	64.3
Basic earnings per share		2.0p		1.3p	53.8
Interim dividend per share		0.85p		0.8p	6.3
Net debt		14,345		11,370	26.2
The comparatives have been restated in respect of the revisions to IAS 19 - "Employee Benefits (2011)"

Other Financial Highlights

·       Underlying operating profits from Technical Plastics increased to £1.7 million (2012 - £1.3 million)

·       LED Technologies benefitted from a strong performance from its LED optics business leading to underlying operating profits in line with the previous half year at £0.9 million (2012 - £0.9 million)

·       Precision Engineering had a strong first half generating underlying operating profits of £0.7 million (2012 - £0.7 million)

·       Net debt has risen to £14.3 million (2012 - £11.4 million) due to our continued investment in the group's manufacturing capacity and the unwinding of the $10.0 million prepayment from Atmel Corporation ("Atmel") as Conductive Inkjet Technology ("CIT") generated sales of coated film

Operational Highlights

·       Full scale manufacture of coated film to support Atmel's start-up of the XSense™ programme has commenced and CIT revenue in the first half of the financial year was £1.4 million

·       Within Technical Plastics our US business in particular has traded strongly and is set for further growth. Its capacity expansion project is on track for completion early next year. Our US and Czech businesses are both expected to benefit in future years from multiple new business wins

·       With design wins already awarded to Wipac, the LED Technologies division is expected to have a much stronger second half due to the phasing of design, development and tooling projects in its LED supercar lighting business. Further project wins are anticipated for the second half as manufacturers begin to adopt Wipac's new Hyperlite LED modules

·       At Carclo Diagnostic Solutions ("CDS") our external review of market opportunities has indicated good suitability to a wide range of medical device sectors. In parallel, our technical development has been focussed on performance robustness and test repeatability on both the Micropoc-pro and Micropoc-cat platforms with encouraging initial results. We have now entered into our first commercial collaboration with EKF Diagnostics Systems plc which will see our Micropoc-pro device used in a clinical samples programme with EKF for an Acute Kidney Injury test

Commenting on the results, Michael Derbyshire, Chairman said -

"The group's traditional businesses have produced solid results in the first half of the year and both Technical Plastics and LED Technologies are expected to enjoy a stronger second half with encouraging future growth prospects.  CIT is now generating growing revenues from the supply of coated film to Atmel and its turnover and profitability are set to expand rapidly as the XSense™ programme ramps up in the next calendar year and beyond. CDS's Micropoc platforms are well positioned to disrupt the Point-of-Care diagnostics market and resources will be increased in 2014 to support this significant long term opportunity.

The group's balance sheet remains strong and its financing is secure".

Enquiries

Carclo plc                                                                                            020 7067 0700 (today)

Chris Malley, chief executive                                                                  01924 268040 (thereafter)

Robert Brooksbank, finance director                                                      

Weber Shandwick Financial                                                                   020 7067 0700

Nick Oborne

Stephanie Badjonat

A presentation for analysts will be held at 9.30 a.m. on 19 November 2013 at the offices of Weber Shandwick Financial, 2 Waterhouse Square, 140 Holborn, London EC1N 2AE.

Notes to editors

About Carclo

Carclo plc is a technology group. It is a public company whose shares are quoted on the London Stock Exchange.

Carclo's strategy has been to develop new technologies and products to drive future growth. Its investment in CIT has led to the introduction of a new material for use in Capacitive Touch Screens. Further investment has been made in Carclo Diagnostic Solutions, where a novel Point-of-Care hardware platform has been developed.

Approximately three fifths of revenues are currently derived from the supply of fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products. This business, Carclo Technical Plastics, operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

Approximately two fifths of revenues are derived from the supply of specialised precision LED based systems to the premium automotive industry, as well as key control systems for the aerospace industry.

Forward looking statements

Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events to differ materially from any expected future events or results referred to in these forward looking statements.

 

 

 

Group Interim Results

Overview                                                                              

Carclo has continued to trade in line with the board's expectations in the first half of the current financial year and the group is expected to generate a much stronger second half result due to the impact of new business wins and the usual seasonality.

Following the commissioning of its new Cambridge facility Conductive Inkjet Technology has now commenced full scale manufacture of coated film to support Atmel Corporation's ("Atmel's") ramp up of production on its XSense™ programme and revenues of £1.4 million were generated in the first half of the financial year. We expect this production scale up to continue into the second half of the year and beyond. 

Our Technical Plastics business has traded ahead of the comparative period last year and is set for a strong second half performance. Significant progress has been made on the US facility expansion which will support revenue growth from the start of the next financial year.

Carclo Diagnostic Solutions' collaboration with EKF Diagnostic Holdings plc has progressed very well and in early 2014 our Micropoc-pro device will be included in a clinical samples trial programme with EKF for an Acute Kidney Injury assay.

In the LED Technologies division the phasing of design, development and tooling programmes in Wipac's supercar lighting business means that the performance of this business is heavily weighted to the second half of the financial year.  This business will benefit from a number of new programme wins and is expected to show good growth for the year as a whole. The LED Optics business has enjoyed a strong first half. In Precision Engineering our aerospace businesses continue to perform well.

Underlying group operating profits of £2.8 million were well ahead of the prior year (2012 - £2.0 million) with a particularly strong performance by Technical Plastics and with LED Technologies and Precision Engineering in line with their prior year numbers.

These results take account of the changes made following the revisions to IAS 19 - "Employee Benefits (2011)" and these changes have also been applied to the comparatives. The amendments to the accounting standard result in pension scheme administration costs being charged directly to the income statement whilst the pension financing credit/charge is determined directly by applying the discount rate to the net defined benefit asset or liability. The impact on the results for the six months ended 30 September 2013 is to reduce operating profit by £0.3 million (2012 - £0.2 million) and increase net finance expense by £0.3 million (2012 - £0.6 million).

The group generated a profit before tax in the six months to 30 September 2013 of £1.8 million (2012 - £1.1 million), consequently, basic earnings per ordinary share increased by 53.8% to 2.0 pence. 

Financial position

As expected, net debt has risen since the year-end to £14.3 million (2012 - £11.4 million) due to our continued investment in the group's manufacturing capacity and the unwinding of the $10.0 million prepayment from Atmel as CIT generates sales of coated film. This represents gearing on assets (excluding the net pension deficit) of 19.3% (2012 - 15.2%). The group generated cash from operations of £2.5 million (2012 - £1.6 million) with working capital increasing by £2.0 million (2012 - increase of £2.2 million). Capital expenditure in the six months to 30 September 2013 was £3.7 million (2012 - £3.8 million) reflecting the completion of the development of the new Cambridge facility for CIT and the ongoing major facility expansion at our Technical Plastics facility in Latrobe, Pennsylvania. Investment in new technologies continued with £2.2 million (2012 - £1.7 million) invested in development costs at CIT and CDS.

As at 30 September 2013 the total drawings on the group's £20.0 million medium term loan facilities were £17.9 million (2012 - £17.5 million). These are committed facilities that run until November 2015. The facilities remain competitively priced in the current market, and the group has significant levels of headroom on its main banking covenants. The group also has available overdraft facilities totalling £9.8 million.

The board has declared an increased interim dividend of 0.85 pence per ordinary share. The dividend will be paid on 8 April 2014 to shareholders on the register on 28 February 2014. The shares will trade ex-dividend from 26 February 2014.

Operating review

Technical Plastics

Technical Plastics reported revenues of £28.0 million (2012 - £24.2 million), an increase of 15.8% on the same period last year. Operating profits, before rationalisation costs, increased by £0.4 million to £1.7 million (2012 - £1.3 million). This is primarily due to good growth in our US and Indian operations and the phasing of new customer funded tooling and development projects. Our Chinese business has had a more difficult year with reduced schedules from its biggest customer.

New business awards, both from existing and new customers, should underpin a stronger second half performance and future growth in this division over the medium term.

As reported in our June 2013 Preliminary results announcement, we have committed to a significant increase in manufacturing capacity at our facility in Latrobe, Pennsylvania. This expansion is well under way and is expected to be completed by the end of the group's financial year.  This additional capacity will support the new medical programmes that are due to enter production at the start of the next financial year.

LED Technologies

The group's LED Technologies division consists of the LED Optics business which was previously reported within Technical Plastics and the Wipac LED based supercar lighting business which was previously reported within the former Precision Products division.

The LED Technologies division generated sales of £12.1 million (2012 - £11.5 million) and operating profits of £0.9 million (2012 - £0.9 million) The performance of this division is significantly skewed to the second half due to the phasing of design, development and tooling programmes in Wipac's supercar lighting business.  This business has won two new programmes during the first half of the year which, together with further expected contract wins, should provide the momentum for significant growth in this division over the next few years. Our LED Optics business has enjoyed a strong first half benefitting from new business wins particularly in the area of custom optics.

Precision Engineering

The aerospace business continued to produce strong results with sales of £3.9 million (2012 - £4.0 million) and operating profits of £0.7 million (2012 - £0.7 million). This business produces good margins and cash generation and we have invested in new machinery this year which will improve efficiency and profitability going forwardand allow us to better serve our customers with rapid turnaround supplies.

Conductive Inkjet Technology ("CIT")

CIT has commenced volume sales of coated film to our partner Atmel for machine commissioning and to support sales of its XSense™ product. CIT sales during the first half of the financial year totalled £1.4 million and, as announced at the end of October, we now expect full year sales to be towards the lower end of our previous guidance for revenues in the range of £4 - 7 million. Predicting revenues for a start-up product in the electronics industry is notoriously difficult as schedules are always subject to change in this consumer led industry. Notwithstanding this we take comfort from our partner's recent statement in its Q3 Analysts Earnings call that the XSense™ product is "shipping, ramping and accelerating". Our partner's announcement follows qualification of its Colorado manufacturing facility and confirmation that at least $100m of capacity will be available by the end of this calendar year. Atmel's recent confirmation that, as part of a customer system, XSense™ achieved Windows® 8 certification further confirms how XSense™ will address the fast growing market for PC's, Ultrabooks, Tablets and Smartphones. CIT has continued to create further product enhancements which will address customer needs moving forward. These developments include new protective coatings and increase our compatibility to a wider range of substrates that will be required as the industry diversifies into different capacitive touch assembly formats.

The new production facility in Cambridge was completed on schedule and the new high speed coating line commissioned on time. This coating line, which is performing well, is capable of supporting the production of 3.0 million square metres per annum of coated film. Our new plating line has also now been successfully commissioned and is running well.

Our original CIT facility is being prepared for our Printed Electronics investment and we anticipate that our first new equipment lines, which will include a new printing and conversion facility, will begin installation early next year. An example of how CIT's revolutionary printed electronics offering can create new products was showcased by the recent collaboration with CSR plc and Atmel in producing a reference design for the world's thinnest wireless touch interface.

CIT has incurred legal costs of £0.4 million in the period in respect of its litigation against Uni-Pixel Displays Inc ("Uni-Pixel"). On 7^th October 2013 the English High Court determined that CIT may pursue claims against Uni-Pixel in the English courts for breach of confidence and patent entitlement.

Carclo Diagnostic Solutions ("CDS")

At Carclo Diagnostic Solutions the first phase of our external review of market opportunities has indicated good suitability to a wide range of medical device sectors. The second phase of this review, which is underway and will complete by the end of 2013, will assist us in identifying detailed target applications and customer opportunities. In parallel, our technical development has been focussed on performance robustness and test repeatability on both the Micropoc-pro and Micropoc-cat platforms with encouraging initial results. Our collaboration with EKF Diagnostic Holdings plc ("EKF") has progressed very well and an assay based on our Micropoc-pro platform will be entering a clinical samples trial with EKF of an Acute Kidney Injury marker (pi-GST). Micropoc-pro is a unique single use, quantitative Point-of-Care test which can be adapted to a wide range of ELISA assays. The trials, which will start early in 2014 and be complete by mid-year, will provide an initial clinical validation of the Micropoc platform supporting further potential commercial collaboration with our partner, EKF, and providing a strong reference for broader external commercial engagements.

Risks and uncertainties

In the annual report to shareholders in June 2013 we provided a detailed review of the risks faced by the group and how these risks are managed. We continue to face, and proactively manage, the risks and uncertainties in our business and there has been no significant change in the risks faced by the group.

Outlook

The group's traditional businesses have produced solid results in the first half of the year and both Technical Plastics and LED Technologies are expected to enjoy a stronger second half with encouraging future growth prospects.  CIT is now generating growing revenues from the supply of coated film to Atmel and its turnover and profitability are set to expand rapidly as the XSense™ programme ramps up in the next calendar year and beyond. CDS's Micropoc platforms are well positioned to disrupt the Point-of-Care diagnostics market and resources will be increased in 2014 to support this significant long term opportunity.

The group's balance sheet remains strong and its financing is secure.

Condensed consolidated income statement 

	Six months ended 30 September  2013 unaudited				Six months ended 30 September 2012  unaudited			Year ended    31 March 2013 audited
						restated*		restated*
			Notes	£000		£000		£000
Revenue			4	45,434		40,030		86,514
Underlying operating profit
Operating profit before exceptional items				2,780		1,952		5,585
- rationalisation costs			5	-		-		(161)
- litigation costs			5	(392)		-		(414)
- exit of Ford volume automotive communication business			5	-		-		(95)
After exceptional items				2,388		1,952		4,915
Operating profit			4	2,388		1,952		4,915
Finance revenue			6	18		11		12
Finance expense			6	(650)		(894)		(1,710)
Profit before tax				1,756		1,069		3,217
Income tax expense			7	(439)		(235)		(408)
Profit after tax but before loss on discontinued operations				1,317		834		2,809
Loss on discontinued operations, net of tax		8		(37)		(14)		(70)
Profit after tax				1,280		820		2,739
Attributable to -
Equity holders of the parent				1,300		821		2,767
Non-controlling interests				(20)		(1)		(28)
				1,280		820		2,739
Earnings per ordinary share		9
Basic - continuing operations				2.0 p		1.3 p		4.4 p
Basic - discontinued operations				0.0 p		0.0 p		(0.1) p
Basic - total				2.0 p		1.3 p		4.3 p
Diluted - continuing operations				2.0 p		1.3 p		4.4 p
Diluted - discontinued operations				0.0 p		0.0 p		(0.1) p
Diluted - total				2.0 p		1.3 p		4.3 p
* The comparatives have been restated in respect of the revisions to IAS 19 - "Employee Benefits (2011)". More detail is set out in note 2 to this condensed consolidated half year report.

Condensed consolidated statement of comprehensive income

	Six months ended 30 September 2013 unaudited		Six months ended 30 September 2012 unaudited			Year ended 31 March 2013 audited
				restated*		restated*
		£000		£000		£000
Profit for the period		1,280		820		2,739
Other comprehensive income -
Items that will not be reclassified to the income statement
Actuarial gains / (losses) on defined benefit scheme		7,727		(916)		7,225
Deferred tax arising		(2,668)		266		(2,237)
Total items that will not be reclassified to the income statement		5,059		(650)		4,988
Items that are or may in the future be classified to the income statement
Foreign exchange translation differences		(1,502)		(845)		607
Impact of the change in rate of deferred taxation		190		-		(185)
Total items that are or may in future be classified to the income statement		(1,312)		(845)		422
Other comprehensive income, net of income tax		3,747		(1,495)		5,410
Total comprehensive income for the period		5,027		(675)		8,149
Attributable to -
Equity holders of the parent		5,047		(674)		8,177
Non-controlling interests		(20)		(1)		(28)
		5,027		(675)		8,149
* The comparatives have been restated in respect of the revisions to IAS 19 - "Employee Benefits (2011)". More detail is set out in note 2 to this condensed consolidated half year report.

Condensed consolidated statement of financial position

	30 September 2013 unaudited							30 September 2012 unaudited		31 March 2013 audited
	Notes					£000		£000		£000
Assets
Intangible assets		11				46,092		41,853		44,516
Property, plant and equipment		12				34,166		29,929		33,449
Investments						7		6		6
Deferred tax assets						7,751		11,266		9,741
Total non current assets						88,016		83,054		87,712
Inventories						13,059		12,244		12,574
Trade and other receivables						18,240		17,110		19,444
Cash and cash deposits						11,397		10,610		16,098
Non current assets classified as held for sale				13		-		350		-
Total current assets						42,696		40,314		48,116
Total assets						130,712		123,368		135,828
Liabilities
Interest bearing loans and borrowings						17,887		17,539		18,308
Deferred tax liabilities						6,757		5,948		6,720
Retirement benefit obligations		14				8,087		24,055		15,476
Total non current liabilities						32,731		47,542		40,504
Trade and other payables						19,428		12,955		20,979
Current tax liabilities						2,762		2,138		2,255
Interest bearing loans and borrowings						7,855		4,441		6,968
Total current liabilities						30,045		19,534		30,202
Total liabilities						62,776		67,076		70,706
Net assets						67,936		56,292		65,122
Equity
Ordinary share capital issued					19	3,297		3,245		3,258
Share premium						21,199		20,807		20,901
Other reserves						3,584		3,584		3,584
Translation reserve						3,293		3,343		4,795
Retained earnings						35,503		24,206		31,504
Total equity attributable to equity holders of the parent						66,876		55,185		64,042
Non-controlling interests						1,060		1,107		1,080
Total equity						67,936		56,292		65,122

Condensed consolidated statement of changes in equity

Attributable to equity holders of the company

									Non-
	Share	Share	Translation			Other	Retained		controlling		Total
	capital	premium	reserve			reserves	earnings	Total	interests		equity
	£000	£000	£000			£000	£000	£000	£000		£000
Current half year period - unaudited
Balance at 1 April 2013	3,258	20,901	4,795		3,584		31,504	64,042		1,080	65,122
Profit for the period	-	-	-	-			1,300	1,300	(20)		1,280
Other comprehensive income -
Foreign exchange translation differences	-	-	(1,502)	-			-	(1,502)	-		(1,502)
Actuarial gains on defined benefit scheme	-	-	-	-			7,727	7,727	-		7,727
Taxation on items above	-	-	-	-			(2,478)	(2,478)	-		(2,478)
Transactions with owners recorded directly in equity -
Share based payments	-	-	-	-			38	38	-		38
Dividends to shareholders	-	-	-	-			(1,674)	(1,674)	-		(1,674)
Exercise of share options	3	30	-	-			-	33	-		33
Performance share plan awards	36	268	-	-			(914)	(610)	-		(610)
Balance at 30 September 2013	3,297	21,199	3,293	3,584			35,503	66,876	1,060		67,936
Prior half year period - unaudited
Balance at 1 April 2012	3,090	8,296	4,188	3,584			25,008	44,166	1,108		45,274
Profit for the period	-	-	-	-			821	821	(1)		820
Other comprehensive income -
Foreign exchange translation differences	-	-	(845)	-			-	(845)	-		(845)
Actuarial losses on defined benefit scheme	-	-	-	-			(916)	(916)	-		(916)
Taxation on items above	-	-	-	-			266	266	-		266
Transactions with owners recorded directly in equity -
Share based payments	-	-	-	-			91	91	-		91
Dividends to shareholders	-	-	-	-			(1,070)	(1,070)	-		(1,070)
Exercise of share options	1	19	-	-			-	20	-		20
Issue of shares, net of costs	154	12,492	-	-			-	12,646	-		12,646
Proceeds from sale of own shares	-	-	-	-			6	6	-		6
Balance at 30 September 2012	3,245	20,807	3,343	3,584			24,206	55,185	1,107		56,292
Prior year period - audited
Balance at 1 April 2012	3,090	8,296	4,188	3,584			25,008	44,166	1,108		45,274
											-
Profit for the period	-	-	-	-			2,767	2,767	(28)		2,739
Other comprehensive income -
Foreign exchange translation differences	-	-	607	-			-	607	-		607
Actuarial gains on defined benefit scheme	-	-	-	-			7,225	7,225	-		7,225
Taxation on items above	-	-	-	-			(2,422)	(2,422)	-		(2,422)
Transactions with owners recorded directly in equity -
Share based payments	-	-	-	-			189	189	-		189
Dividends to shareholders	-	-	-	-			(1,071)	(1,071)	-		(1,071)
Exercise of share options	1	23	-	-			-	24	-		24
Issue of shares, net of costs	154	12,492	-	-			-	12,646	-		12,646
Proceeds from sale of own shares	-	-	-	-			6	6	-		6
Performance share plan awards	13	90	-	-			(246)	(143)	-		(143)
Taxation on items recorded directly in equity	-	-	-	-			48	48	-		48
Balance at 31 March 2013	3,258	20,901	4,795	3,584			31,504	64,042	1,080		65,122

Condensed consolidated statement of cash flows

	Six months ended 30 September 2013 unaudited		Six months ended 30 September 2012 unaudited		Year ended 31 March 2013 audited
	Notes	£000	£000		£000

Cash generated from operations	15	2,486		1,578		11,303
Interest paid		(333)		(430)		(624)
Tax paid		(378)		(460)		(852)
Net cash from operating activities		1,775		688		9,827
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		24		36		227
Interest received		17		11		12
Cash flows on discontinued operations		(37)		(14)		(70)
Acquisition of property, plant and equipment		(3,749)		(3,833)		(8,174)
Acquisition of intangible assets - computer software		(26)		(21)		(26)
Development expenditure		(2,237)		(1,671)		(3,765)
Net cash from investing activities		(6,008)		(5,492)		(11,796)
Cash flows from financing activities
Proceeds from issue of share capital net of costs		-		12,646		12,646
Proceeds from exercise of share options		336		20		128
Proceeds from sale of own shares		-		6		6
Drawings on term loan facilities		-		350		350
Repayment of borrowings		-		(1,600)		(1,600)
Cash outflow in respect of performance share plan awards		(913)		-		(246)
Dividends paid		(521)		(1,533)		(1,534)
Net cash from financing activities		(1,098)		9,889		9,750
Net (decrease) / increase in cash and cash equivalents		(5,331)		5,085		7,781
Cash and cash equivalents at beginning of period		9,130		1,159		1,159
Effect of exchange rate fluctuations on cash held		(257)		(75)		190
Cash and cash equivalents at end of period	16	3,542		6,169		9,130

Notes on the accounts

1.         Basis of preparation

Except as outlined below the condensed consolidated half year report for Carclo plc ("Carclo" or "the group") for the six months ended 30 September 2013 has been prepared on the basis of the accounting policies set out in the audited accounts for the year ended 31 March 2013 and in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct 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 23.

The half year report does not constitute financial statements 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 2013 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 2013 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 498 (2) of the Companies Act 2006.

The half year report was approved by the board of directors on 19 November 2013 and is being sent to shareholders on 29 November 2013.  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"). 

The group meets its day-to-day working capital requirements through its banking facilities. The group's business activities and financial position, the factors likely to affect its future development and performance, and its objectives and policies in managing financial risks to which it is exposed are disclosed in the group's 2013 Annual Report and Accounts. After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. The group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements.

2.         Accounting policies

The accounting policies, methods of computation and presentation applied by the group in this condensed consolidated half year report are the same as those applied by the group in its annual report and financial statements for the year ended 31 March 2013.

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the group's accounting period beginning on or after 1 April 2013.  The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 April 2013:

Amendments to IAS 19 - "Employee Benefits (2011)";

Amendments to IAS 1 - "Presentation of Items of Other Comprehensive Income";

Amendments to IFRS 13 - "Fair Value Measurement";

Amendments to IFRS 7 - "Financial Instruments: Disclosures - Offsetting Financial Assets and Liabilities";

Amendments to IAS 32 - "Financial Instruments: Disclosures - Offsetting Financial Assets and Liabilities"; and

Annual improvements to IFRSs - "2009-2011 Cycle."

The impact of IAS 19 -"Employee Benefits (2011)" is described below. The implementation of the other standards has only had a presentational impact.

IAS 19 - "Employee Benefits" was amended in June 2011 and is effective for accounting periods beginning 1 January 2013 and onwards with retrospective application required. The principal impact of the revised standard is that the concepts of expected return on the defined benefit obligation as separate components of the defined benefit cost have been replaced by a single concept such that interest is now calculated on the net defined benefit deficit. This calculation uses the discount rate previously used to measure defined benefit pension liabilities after allowance for any asset ceilings and additional liability under IFRIC 14 -  "The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction".  In addition, plan administration expenses, previously deducted from the expected return on scheme assets, are now included within operating profit.

As a result of these amendments the comparative financial information in the income statement and statement of comprehensive income for the six months ended 30 September 2012 and the year ended 31 March 2013 has been restated. The impact on the results for the six months ended 30 September 2012 is to reduce operating profit by £0.249 million (31 March 2013 - £0.614 million), increase net finance expense by £0.585 million (31 March 2013 - £1.183 million) and reduce actuarial losses in the statement of comprehensive income by £0.834 million (31 March 2013 - £1.797 million). The pensions deficit has remained unchanged and so the balance sheet has not been restated.

IFRS 13 - "Fair Value Measurement" establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 - "Financial Instruments: Disclosures". Some of these disclosures are specifically required in interim financial statements for financial instruments; accordingly, the group has included additional disclosures in this regard (see note 18).

In accordance with the transitional provisions of IFRS 13, the group has applied the new fair value measurement guidance prospectively, and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the group's assets and liabilities.

3.         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 2013.

4.         Segment reporting

The group is organised into four, separately managed, business segments - Technical Plastics, LED Technologies, Precision Engineering and Conductive Inkjet Technology.  These are the segments for which summarised management information is presented to the group's chief operating decision maker (comprising the main board and group executive committee).

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

The LED Technologies segment develops innovative solutions in LED lighting, and is a leader in the development of high power LED lighting for supercars.

The Precision Engineering segment supplies systems to the manufacturing and aerospace industries

The Conductive Inkjet Technology segment undertakes applied research into the digital printing of conductive metals onto plastic substrates.

The Unallocated segment also includes the group's development companies, Platform Diagnostics Limited and Carclo Diagnostic Solutions, until these companies start to achieve income streams for the group.

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 segment results for the six months ended 30 September 2013 were as follows -

	Technical  Plastics	LED Technologies	Precision Engineering	Conductive Inkjet Technology	Unallocated	Eliminations	Group total
	£000	£000	£000	£000	£000	£000	£000
Consolidated income statement
Total revenue	28,992	12,117	3,923	1,374	-	(972)	45,434
Less inter-segment revenue	(966)	(6)	-	-	-	972	-
Total external revenue	28,026	12,111	3,923	1,374	-	-	45,434
Expenses	(26,292)	(11,188)	(3,232)	(1,368)	(574)	-	(42,654)
Underlying operating profit	1,734	923	691	6	(574)	-	2,780
Litigation costs	-	-	-	(392)	-	-	(392)
Operating profit	1,734	923	691	(386)	(574)	-	2,388
Net finance expense							(632)
Income tax expense							(439)
Loss on discontinued operations, net of tax							(37)
Profit after tax							1,280
Consolidated statement of financial position
Segment assets	63,852	17,137	7,030	30,164	12,529	-	130,712
Segment liabilities	(11,299)	(2,601)	(1,275)	(6,817)	(40,784)	-	(62,776)
Net assets	52,553	14,536	5,755	23,347	(28,255)	-	67,936

The segment results for the six months ended 30 September 2012 were as follows -

	Technical  Plastics	LED Technologies	Precision Engineering	Conductive Inkjet Technology	Unallocated	Eliminations	Group total
	restated	restated	restated	restated	restated	restated	restated
	£000	£000	£000	£000	£000	£000	£000
Consolidated income statement
Total revenue	26,430	11,540	4,024	267	-	(2,231)	40,030
Less inter-segment revenue	(2,231)	-	-	-	-	2,231	-
Total external revenue	24,199	11,540	4,024	267	-	-	40,030
Expenses	(22,852)	(10,673)	(3,345)	(281)	(927)	-	(38,078)
Underlying operating profit	1,347	867	679	(14)	(927)	-	1,952
Exceptional costs	-	-	-	-	-	-	-
Operating profit	1,347	867	679	(14)	(927)	-	1,952
Net finance expense							(883)
Income tax expense							(235)
Loss on discontinued operations, net of tax							(14)
Profit after tax							820
Consolidated statement of financial position
Segment assets	62,459	17,034	6,274	22,058	15,543	-	123,368
Segment liabilities	(13,122)	(3,550)	(1,410)	(837)	(48,157)	-	(67,076)
Net assets	49,337	13,484	4,864	21,221	(32,614)	-	56,292

The segment results for the year ended 31 March 2013  were as follows -

	Technical  Plastics	LED Technologies	Precision Engineering	Conductive Inkjet Technology	Unallocated	Eliminations	Group total
	restated	restated	restated	restated	restated	restated	restated
	£000	£000	£000	£000	£000	£000	£000
Consolidated income statement
Total revenue	57,103	23,115	7,505	661	-	(1,870)	86,514
Less inter-segment revenue	(1,768)	(102)	-	-	-	1,870	-
Total external revenue	55,335	23,013	7,505	661	-	-	86,514
Expenses	(51,379)	(20,823)	(6,000)	(653)	(2,074)	-	(80,929)
Underlying operating profit	3,956	2,190	1,505	8	(2,074)	-	5,585
Rationalisation costs	(48)	(32)	-	-	(81)	-	(161)
Exit of Ford volume automotive     communication business	-	(95)	-	-	-	-	(95)
Litigation costs	-	-	-	(414)	-	-	(414)
Operating profit	3,908	2,063	1,505	(406)	(2,155)	-	4,915
Net finance expense							(1,698)
Income tax expense							(408)
Loss on discontinued operations, net of tax							(70)
Profit after tax							2,739
Consolidated statement of financial position
Segment assets	65,485	17,041	6,600	32,668	14,034	-	135,828
Segment liabilities	(11,384)	(3,050)	(1,586)	(7,774)	(46,912)	-	(70,706)
Net assets	54,101	13,991	5,014	24,894	(32,878)	-	65,122

5.          Exceptional costs

	Six months ended 30 September 2013		Six months ended 30 September 2012		Year ended 31 March 2013
		£000		£000		£000
Redundancy costs		-		-		(80)
Litigation costs		(392)		-		(414)
Exit of Ford volume automotive communication business		-		-		(95)
Rationalisation costs		-		-		(81)
Total		(392)		-		(670)
All rationalisation costs relate to the group's UK operations Litigation costs relate to fees incurred as part of the group's proceedings against Uni-Pixel Inc.

6.         Net finance expense

	Six months ended 30 September 2013		Six months ended 30 September 2012 restated		Year ended 31 March 2013 restated
		£000		£000		£000
Finance revenue		18		11		12
Finance expense		(312)		(352)		(626)
Net interest on the net defined benefit liability		(338)		(542)		(1,084)
Total		(632)		(883)		(1,698)

7.         Income tax expense

The half year accounts include a tax charge of 25.0% of profit before tax (2012 - 22.0%) based on the estimated average effective income tax rate for the full year. The group's effective tax rate is at a higher level than the underlying UK tax rate of 23.0% (2012 - 24.0%) as the group is earning a higher proportion of its profits in higher tax jurisdictions.

The prior year tax charges have been restated in respect of the revisions to IAS 19 - "Employee Benefits (2011)".

Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and from 21% to 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. These will reduce the company's future tax charge accordingly and have been taken account when performing the relevant deferred tax calculations in this report.

8.         Loss on discontinued operations, net of tax

	Six months ended 30 September 2013		Six months ended 30 September 2012		Year ended 31 March 2013
		£000		£000		£000
Costs incurred in relation to previously leased properties		(7)		-		(57)
Loss on disposal of surplus property		(30)		(14)		(13)
Total		(37)		(14)		(70)

9.         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
	2013		2012		2013
	£000		£000		£000
Profit after tax from continuing operations	1,317		834		2,809
Loss attributable to non-controlling interests	20		1		28
Profit attributable to ordinary shareholders from continuing operations	1,337		835		2,837
Loss on discontinued operations net of tax	(37)		(14)		(70)
Profit after tax attributable to ordinary shareholders of the parent	1,300		821		2,767
Six months ended		Six months ended			Year ended
30 September		30 September			31 March
	2013		2012		2013
	Shares		Shares		Shares
Weighted average number of ordinary shares in issue in the period	65,578,303		63,199,731		64,125,734
Effect of share options in issue	275,697		343,839		344,080
Weighted average number of ordinary shares (diluted) in the period	65,854,000		63,543,570		64,469,814

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
	2013		2012		2013
	Pence		Pence		Pence
Basic - continuing operations	2.0		1.3		4.4
Basic - discontinued operations	0.0		0.0		(0.1)
Basic - total	2.0		1.3		4.3
Diluted - continuing operations	2.0		1.3		4.4
Diluted - discontinued operations	0.0		0.0		(0.1)
Diluted - total	2.0		1.3		4.3

10.       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
	2013		2012		2013
	£000		£000		£000
Final dividend for 2011/12 (1.65 pence per share)	-		1,071		1,071
Interim dividend for 2012/13 (0.80 pence per share)	-		-		521
Final dividend for 2012/13 (1.75 pence per share)	1,153		-		-
	1,153		1,071		1,592

The directors are proposing an interim dividend of 0.85 pence per ordinary share for the half year ended 30 September 2013. The dividend payment totalling £0.560 million will be paid on 8 April 2014 to shareholders on the share register at close of business on 28 February 2014.  The proposed dividend has not been provided in the half year accounts.

11.       Intangible assets

The movements in the carrying value of intangible assets are summarised as follows -

Six months ended		Six months ended		Year ended
30 September		30 September			31 March
	2013		2012		2013
	£000		£000		£000
Net book value at the start of the period	44,516		40,827		40,827
Additions	2,263		1,692		3,791
Amortisation	(291)		(181)		(361)
Effect of movements in foreign exchange	(396)		(485)		259
Net book value at the end of the period	46,092		41,853		44,516

Included within intangible assets is goodwill of £21.3 million (2012 - £20.9 million). The carrying value of goodwill is subject to annual impairment tests by reviewing detailed projections of the recoverable amounts from the underlying cash generating units. At 31 March 2013, the carrying value of goodwill was supported by such value in use calculations. There has been no indication of subsequent impairment in the current financial year.

12.       Property, plant and equipment

The movements in the carrying value of property, plant and equipment are summarised as follows -

Six months ended		Six months ended		Year ended
30 September		30 September			31 March
	2013		2012		2013
	£000		£000		£000
Net book value at the start of the period	33,449		27,983		27,983
Additions	3,212		3,951		8,692
Depreciation	(1,797)		(1,708)		(3,521)
Disposals	(3)		-		-
Effect of movements in foreign exchange	(695)		(297)		295
Net book value at the end of the period	34,166		29,929		33,449

13.      Non current assets classified as held for sale

As at		As at		As at
30 September		30 September			31 March
	2013		2012		2013
	£000		£000		£000
Plant and equipment held for sale	-		350		-
Net book value at the end of the period	-		350		-

During the year ended 31 March 2013, the surplus machinery with a net book value of £0.350 million was disposed of for £0.332 million.

14.       Retirement benefit obligations

At 31 March 2013, the group had a retirement benefit liability, as calculated under the provisions of IAS 19  "Employee Benefits", of £15.476 million. Since the start of the current financial year, equity markets have improved which has resulted in the scheme's assets increasing in value by £3.273 million to £173.745 million. Additionally, an increase in the discount rate used to evaluate the scheme's liabilities, from 4.4% at the start of the period to 4.5%, has resulted in the value of the liabilities decreasing by £4.116 million to £181.832 million. As a consequence the scheme deficit, on an IAS 19 basis, has decreased from £15.476 million at 31 March 2013 to £8.087 million at 30 September 2013.

15.       Cash generated from operations

	Six months ended		Six months ended				Year ended
	30 September		30 September				31 March
		2013		2012			2013
		£000		£000			£000
Operating profit		2,388		1,952			4,915
Adjustments for -
Pension fund contributions in excess of service costs		-		-			(980)
Depreciation charge		1,797		1,708			3,521
Amortisation of intangible assets		291		181			361
Provision for site closure		-		(130)			(130)
Profit on disposal of other plant and equipment		(21)		(36)			(42)
Share based payment charge		38		91			189
Operating cash flow before changes in working capital		4,493		3,766			7,834
Changes in working capital
Increase in inventories		(756)		(658)			(710)
Decrease / (increase) in trade and other receivables		738		(515)			(2,527)
(Decrease) / increase in trade and other payables		(1,989)		(1,015)			6,706
Cash generated from operations		2,486		1,578			11,303

16.       Cash and cash equivalents

		As at		As at			As at
	30 September		30 September				31 March
		2013			2012		2013
		£000			£000		£000
Cash and cash deposits		11,397			10,610		16,098
Bank overdrafts		(7,855)			(4,441)		(6,968)
		3,542			6,169		9,130

17.       Net debt

The net movement in cash and cash equivalents can be reconciled to the change in net debt in the period as follows -

		Six months ended		Six months ended			Year ended
	30 September			30 September			31 March
			2013		2012		2013
			£000		£000		£000
Net (decrease) / increase in cash and cash equivalents			(5,331)		5,085		7,780
Net repayments of term loan borrowings			-		1,250		1,250
			(5,331)		6,335		9,030
Effect of exchange rate fluctuations on net debt			164		271		(232)
			(5,167)		6,606		8,798
Net debt at start of period			(9,178)		(17,976)		(17,976)
Net debt at end of period			(14,345)		(11,370)		(9,178)

18.       Financial instruments

                The fair values of financial assets and liabilities are not materially different from their carrying value.

                There are no material items as required to be disclosed under the fair value hierarchy.

19.       Ordinary share capital

Ordinary shares of 5 pence each -

				Number of shares			£000
Authorised at 30 September 2012, 31 March 2013 and 30 September 2013					80,000,000		4,000
Issued and fully paid at 31 March 2012					61,796,702		3,090
Shares issued on placing of shares for cash					3,078,240		154
Shares issued on exercise of share options					23,500		1
Issued and fully paid at 30 September 2012					64,898,442		3,245
Shares issued on exercise of share options					271,200		13
Issued and fully paid at 31 March 2013					65,169,642		3,258
Shares issued on exercise of share options					761,500		39
Issued and fully paid at 30 September 2013					65,931,142		3,297

In the six months ended 30 September 2013, options over 761,500 ordinary shares were exercised at an average exercise price of 44.0 pence per share. The shares are fully paid.

20.       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

Full details of directors' remuneration are disclosed in the group's annual report.  In the six months ended 30 September 2012, the directors' remuneration amounted to £0.307 million (2011 - £0.323 million).

Group pension scheme

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 2013 amounted to £0.235 million (2012 - £0.198 million). From 1 April 2007, it has been agreed with the trustees of the pension scheme 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. Carclo incurred an administration cost of £0.325 million which has been charged against other operating expenses following the adoption of IAS 19 (Revised ) (2012 - £0.249 million originally charged against the IAS 19 pension scheme deficit but now restated as charged against other operating expenses).

21.      Post balance sheet events

In October 2013, the group injected £1.009 million in cash into the group pension scheme in accordance with the agreed funding plan.

22.      Seasonality

There are no specific seasonal factors which impact on the demand for products and services supplied by the group, other than for the timing of holidays and customer shutdowns. These tend to fall predominantly in the first half of Carclo's financial year and, as a result, revenues and profits are usually higher in the second half of the financial year compared to the first half.

23.       Responsibility statement

We confirm that to the best of our knowledge -

•        the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU;

•        the interim management report includes a fair review of the information required by -

(a)     DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)     DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

Chris Malley- chief executive

Robert Brooksbank- finance director

19 November 2013

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 2013 which condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated 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 Conduct Authority ("the UK FCA"). 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 FCA.

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 34Interim 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 2013 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Mike Barradell

Audit director

For and on behalf of KPMG LLP

Leeds

19 November 2013

 

END

 

 

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