Good morning, it's Paul here, with Monday's SCVR.

It's very quiet for relevant news in my area today, so hopefully I should be able to get this done by late morning.

Update at 12:51 - today's report is now finished.


Carclo (LON:CAR)

Share price: 10.0p (up 29% at 08:14)
No. shares: 73.4m
Market cap: £7.3m

Update on refinancing and current trading

The Group is a global provider of value-adding engineered solutions for the medical, optical and aerospace industries.

This share is very high risk, because the group is burdened with way too much debt, and a nasty pension deficit. I wouldn't touch it with a bargepole personally. But there's nothing much else to report on today, so it fills the time.

Today's share price rise looks like a "phew it hasn't gone bust" relief rally.

HSBC has extended surprisingly large bank facilities. It's not stated whether any of this is using Govt gurarantee schemes?

The Board announces that on 14 August 2020, the Group agreed revised funding arrangements with the Company's main secured creditors, HSBC and the Pension Scheme, which provide access to ongoing bank facilities as well as visibility over repayment schedules through to July 2023.

As part of this agreement, new facilities have been entered into with the Group's lending bank, HSBC, which comprise a Term Loan of £34.5m and a Revolving Credit Facility of £3.5m.

In parallel to this, the Group reached agreement with the Trustees of the Pension Scheme in respect of both the actuarial deficit and the resultant deficit repair contributions to be made over the next three years; £2.8m (2021), £3.9m (2022) and £3.8m (2023).

Those pension recovery payments look extremely onerous, as does the bank debt, for a company with a market cap of only £7.3m. When debt dwarfs the market cap, you have to wonder if the equity might ultimately be worth little, or nothing? On the other hand, when companies do manage to recover from this kind of situation, then the % upside for equity can be very good. High risk, potentially high reward.

Looking back at previous announcements;

  • The loss-making problem subsidiary, Wipac, was disposed of by putting it into administration late last year.
  • Interim results to 30 Sept 2019 show performance on a continuing basis, i.e. excluding Wipac, of £56.1m revenues, and an underlying PBT of £2.1m. So…

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