REG - Carclo plc - Half Year Results
19/11/2021 07:00
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RNS Number : 8902S Carclo plc 19 November 2021
Carclo plc
Interim Report and Accounts
Half Year Results for the six months ended 30 September 2021
Carclo plc, a global provider of value-adding engineered solutions for the
medical, diagnostics, optical, electronics and aerospace industries, announces
its results for the six months to 30 September 2021 ("H1 2022").
The key financial performance measures for H1 2022 are summarised below:
H1 2022 H1 2021
£000 £000
Revenue from continuing operations 58,672 49,950
Underlying((1)) operating profit from continuing operations 3,682 1,529
Underlying((1)) profit before tax from continuing operations 2,279 437
2.5p 0.0p
Underlying((1)) earnings per share from continuing operations
Statutory operating profit from continuing operations 5,769 227
Statutory profit/(loss) before tax from continuing operations 4,366 (865)
Statutory profit/(loss) for the period 5,487 (1,321)
Basic earnings/(loss) per share 7.5p (1.8p)
Net debt excluding lease liabilities 21,613 24,415
Net debt 28,371 29,358
Retirement benefit obligations 33,407 58,121
Revenue from continuing operations
Technical Plastics (CTP) 56,583 47,214
Aerospace 2,089 2,736
Total 58,672 49,950
Underlying operating profit from continuing operations((1))
Technical Plastics (CTP) 4,784 3,226
Aerospace 227 484
Central (1,329) (2,181)
Total 3,682 1,529
Underlying EBITDA from continuing operations((1)) 6,863 4,576
Highlights
· Strong trading momentum and operational execution throughout the
period delivered significant growth in both revenues and underlying operating
margins
· Total revenues of £58.7m, up 17.5% on the prior year (H1 2021:
£50.0m)
o Technical Plastics ("CTP") total revenues up 19.8% to £56.6m, tooling
income up 48.2% to £9.1m, product sales up 15.6%
o Higher tooling income reflects new business wins, further building the
pipeline for future product sales growth
o Aerospace revenue down £0.6m (23.6%) against a comparative period which
benefited from the fulfilment of a strong pre-Covid order pipeline
· Underlying Operating Profit more than doubled to £3.7m (H1 2021:
£1.5m) excluding the benefit of £2.1m of non-repeating US Covid grant income
· Statutory operating profit of £5.8m (H1 2021: £0.2m)
· Discontinued business income received of £0.7m from residual
claims on LED Technologies business disposal (H1 2021: £nil)
· Net debt excluding lease liabilities at 30 September 2021 was
£21.6m, a reduction of £2.8m compared to 30 September 2020.
· Net debt reduced by £1.0m to £28.4m (H1 2021: £29.4m), an
increase of £0.8m in the six months to 30 September 2021, including £3.5m
inventory increase mainly to protect materials availability against current
supply chain uncertainties
· IAS19 Retirement Benefit liability down to £33.4m, reduced by
£24.7m since September 2020 (and reduced by £3.9m since March 2021) from
improved asset returns, additional employer contributions, and initiatives
progressed with the Trustees
Notes:
(1) underlying results are those calculated before discontinued
operations, separately disclosed items and exceptional items. A reconciliation
to statutory figures is set out below.
Reconciliation of non-GAAP financial measures - H1 2022
£m Statutory Exceptional items Before exceptional COVID-related US grant Underlying
CTP operating profit 6,871 - 6,871 2,087 4,784
Aerospace operating profit 227 - 227 - 227
Central costs (1,329) - (1,329) - (1,329)
Group operating profit from continuing operations 5,769 - 5,769 2,087 3,682
Net finance expense (1,403) - (1,403) - (1,403)
Group profit before taxation 4,366 - 4,366 2,087 2,279
Taxation credit / (expense) 428 893 (465) - (465)
Group profit for the period from continuing operations 4,794 - 3,901 2,087 1,814
Profit on discontinued operations, net of tax 693 693 - - -
Group profit for the period 5,487 1,596 3,901 2,087 1,814
Basic earnings per share (pence) 7.5p 2.2p 5.3p 2.8p 2.5p
Commenting on the results, Nick Sanders, Executive Chairman, said:
"The Group continued to make good progress in the first half of the financial
year. In common with many companies, we experienced significant Covid-related
operational headwinds, but despite these delivered a strong set of financial
results. Our first half performance is ahead of our expectations even after
the impact of one-off benefits is removed.
Our primary focus has been to continue to ensure our employees and communities
remain safe, whilst increasing output in line with customer demand. This has
been achieved despite the continuing effect of mandatory lockdowns and
production restrictions in some countries.
Demand for CTP products in the medical and diagnostic sectors has continued to
increase from both existing and new customers and we expect this will continue
in the post-pandemic period. Labour shortages and increased labour costs,
particularly in the US, increased raw material costs and extended logistic
lead times have all presented significant challenges in the first half. We
have responded by implementing a range of measures and have been able to
mitigate some of the impact of cost pressures by increasing prices.
While maintaining our usual high level of delivery performance has been
difficult in recent months, and this situation will take some months yet to
fully recover, we nevertheless have been able to strengthen our customer and
supply chain relationships in working through these challenges together.
Encouragingly, our CTP businesses in Asia have performed strongly in line with
our strategy to grow more rapidly outside of our traditionally strong US and
European markets.
We have also benefited from strong demand for tooling with significant orders
received for both replacement and new projects. Tooling orders are generally a
precursor to production orders which provides us with optimism about future
demand.
Our Aerospace division is also showing the early signs of recovery with order
intake in the first half exceeding sales. A number of new contracts with
existing and some new customers have also been secured. It will however take
some time for these orders to feed through into sales and profit.
Central costs have been well managed, and our continued focus of cash
management has again delivered good cash headroom and reduced bank debt. The
Group has also worked closely with the Pension Trustees to develop
enhancements to the pension schemes which improve scheme benefits and reduce
the overall deficit.
Subject to there being no significant deterioration in trading conditions as a
result of supply chain or Covid-related disruption, the Board expects the
positive commercial momentum seen in the first half to continue, with further
product sales growth in H2. Trading margins for the second half are expected
to be slightly lower than H1, reflecting the current higher cost environment.
Nevertheless, the Board currently anticipates full year underlying trading
will be slightly ahead of expectations, with the one-off benefits of the
Covid-related grant income and contribution from discontinued operations
incremental to this.
Enquiries
Carclo plc
Nick Sanders - Executive Chairman 01924
268040
FTI Consulting Nick
Hasell / Susanne Yule 020 3727 1340
Forward looking statements
Certain statements made in these report & accounts 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.
Alternative performance measures
The alternative performance measures are defined in the financial review of
the Annual Report and Accounts (ARA) for the year ended 31 March 2021, with a
reconciliation to statutory figures included in this Half Year Report to aid
the user of these accounts. The Directors believe that alternative performance
measures provide a more useful comparison of business trends and performance.
The term 'underlying' is not defined under IFRS and may not be comparable with
similarly titled measures used by other companies. Operating profit before
exceptional items is not referred to in the ARA for the year ended 31 March
2021.
Overview of Results
The Group delivered a strong trading performance in H1 2022, ahead of the
Board's expectations, making progress over the prior year period on all the
listed key performance measures. This was achieved despite continuing
Covid-related headwinds on the Carclo supply chain, in common with many
international businesses.
Comparing all results with H1 2021, Group revenues rose 17.5% to £58.7m (H1
2021: £50.0m).
Technical Plastics ("CTP") revenues rose 19.8% to £56.6m (H1 2021: £47.2m),
including a 15.6% increase in product sales to £47.5m (H1 2021: £41.1m) and
a 48.2% increase in tooling income to £9.1m (H1 2021: £6.1m).
The higher proportion of new and existing business converted into tooling
income in the period will also help drive on subsequent product sales.
CTP underlying operating profit rose by 48.3% to £4.8m (H1 2021: £3.2m) as a
result of improved tooling and product sales, with an additional £2.1m
recognised in respect of a Covid-related US government loan which was forgiven
and converted into grant income in H1 2022. All other Covid-related costs and
credits are also included in operating profit. Other non-US Covid-related
credits amounted to £0.1m in the period.
As anticipated, Aerospace revenue of £2.1m was down £0.6m on the previous
period which benefited from a high pre-Covid order pipeline. Whilst the
aerospace industry remains heavily impacted by the pandemic, the division
continued to be profitable with £0.2m delivered in the period, a reduction of
£0.3m. Encouragingly, the division is already seeing orders recover. These
have been tracking ahead of revenues for the Aerospace business over recent
months and will gradually benefit sales as the orders convert.
On a constant currency basis revenue from continuing operations increased by
23.3%, and underlying operating profit by 149.7%.
Central costs have been well managed, and our continued focus on cash
management has again delivered good cash headroom and helped reduce net bank
debt to £21.6m (H1 2021: £24.4m). Central costs including pension
administration costs reduced from £2.2m to £1.3m and finance costs increased
from £1.1m to £1.4m. Finance costs comprise net interest payable on bank
loans and leases of £1.0m (H1 2021: £0.7m) including bank commitment fees,
and net interest on the defined benefit pension liability of £0.4m (H1 2021:
£0.4m).
There were no exceptional costs recognised in the period (H1 2021: £1.3m).
The Board concluded that Covid-related costs and credits, given the
indeterminate nature of evaluating the additional costs, should all be
included within operating costs.
A further residual £0.7m was received following final distribution by
administrators of the discontinued LED business exited in December 2019, with
the income being shown separately from continuing operations.
The Group statutory profit before tax was £4.4m (H1 2021: loss (£0.9m)).
Taxation was a credit of £0.4m against a statutory profit before tax of
£4.4m, giving an effective tax credit rate of 8.5% (H1 2021: tax expense
£0.5m giving a 52.7% effective tax rate on a pre-tax loss of £0.9m). The
result includes a £0.9m credit from renewed deferred tax asset recognition
from UK combined businesses which have returned to forecasting taxable
profits, providing available tax losses to be set off against future profits.
The underlying effective tax rate, after excluding the deferred tax credit of
£0.9 million, amounts to 20.4% of underlying profit before tax (H1 2021:
104.3%).
Underlying earnings per share from continuing operations for H1 2022 was 2.5
pence (H1 2021: 0.0 pence). The statutory earnings per share for the period,
for all operations, was 7.5 pence (H1 2021: loss of 1.8 pence).
Board changes
As reported in our Full Year Results on 30 June 2021, Peter Slabbert and David
Toohey stepped down from the Board as Non-Executive Directors on 31 March 2021
and 30 April 2021 respectively.
Eric Hutchinson and Frank Doorenbosch were appointed to the Board as
Non-Executive Directors on 7 January 2021 and 1 February 2021 respectively.
Eric became Chair of the Audit Committee in March 2021, taking over from Peter
Slabbert. Frank took over as Chair of the Remuneration Committee in April 2021
following David Toohey's departure.
Financial Position
Cash generated from continuing operations during the first half was £2.0m (H1
2021: £0.6m), including increased cash payments (net of administration costs)
into the pension scheme of £1.8m (H1 2021: £1.0m) and a net working capital
increase of £3.3m (H1 2021: £2.3m), of which £3.5m related to inventory
increases mainly to protect operations amidst post-Covid supply chain
disruption.
Gross cash capital expenditure for the period was £3.5m (H1 2021: £0.8m).
As a result, net debt excluding lease liabilities reduced by £2.8m to £21.6m
(H1 2021: £24.4m), and net debt reduced by £1.0m to £28.4m compared to 30
September 2021.
At 30 September 2021, the Group's total UK bank facilities were £33.6m of
which £30.1m related to a term loan and £3.5m to a revolving credit
facility.
No additional government COVID-19 support was received in cash during the
period (H1 2021: £3.9m of which £2.6m was presented within interest bearing
loans and borrowings).
The Group's IAS 19 pension deficit reduced to £33.4m as at 30 September 2021
(30 September 2020: £58.1m and 31 March 2021: £37.3m) on additional
contributions made by the Group, backed by improved asset returns and
initiatives progressed with the Trustees. No change was made in the discount
rate assumption of 2.0% since March 2021 and no changes were made at this
stage in the mortality assessments. No initial data has yet been released on
the triennial actuarial valuation of March 2021. Relevant data here will be
taken into account to the extent that it is available for IAS19 valuation
purposes at the end of the financial year.
In accordance with the recovery plan agreed by the Pensions Regulator and
pension scheme trustees, total contributions paid by the Company (for deficit
recovery contributions and scheme administration costs) for the six-month
period were £2.1m (H1 2021: £1.1m). Total contributions for the six-month
period to 31 March 2022 are expected to be £1.8m.
Dividend
Under the terms of its financing agreements the Company is not permitted to
make a dividend payment to shareholders up to the period ending in July 2023.
Outlook
Subject to there being no significant deterioration in trading conditions as a
result of supply chain or Covid-related disruption, the Board expects the
positive commercial momentum seen in the first half to continue, with further
product sales growth in H2. Trading margins for the second half are expected
to be slightly lower than H1, reflecting the current higher cost environment.
Nevertheless, the Board currently anticipates full year underlying trading
will be slightly ahead of expectations, with the one-off benefits of the
Covid-related grant income and contribution from discontinued operations
incremental to this.
Principal Risks and Uncertainties
In the Annual Report for the year ended 31 March 2021 a detailed review of the
principal risks faced by the Group, and how these risks were being managed,
was provided. We continue to face, and proactively manage, the risks and
uncertainties in our business and, whilst the Board considers that these
principal risks and uncertainties have not materially changed since the
publication of the 2021 Annual Report, it is worth noting that:
· COVID-19 related uncertainty continues as to the impact on the
Group's markets and geographies evolving over time. It is possible that the
Group's operations, its supply chains and customer demand could continue to be
further impacted, particularly in the US, where labour and material shortage
experience has been most acute;
· the impact of Brexit has to some extent become intertwined with
post-Covid impact on labour and materials resource shortages in the supply
chain and as such is seen as a lesser but contributory factor in the COVID-19
risks identified above; and
· during the current period significant new tooling agreements have
been either entered into or progressed with new and existing customers.
These agreements and pending subsequent agreements for the supply of
manufactured product are subject to operational execution risk.
Going Concern
These interim financial statements have been prepared on a going concern basis
as detailed in Note 1 to these interim accounts. While headroom against
banking covenants has increased significantly over the last 6 months, it
should continue to be noted that any material manifestation of the above
risks, individually or in combination, could lead to a breach of the Group's
banking covenants. Management has considered the impact of potential
mitigations including improved trading, cost saving and working capital
management initiatives, as well as compensation from customers in respect of
delays and it considers that the potential benefits from these give sufficient
comfort that the downside risks can be mitigated. If it were not possible to
mitigate a potential breach the bank would be approached to request that it
considers issuing a waiver for any covenant that may be breached.
Responsibility Statement
We confirm to the best of our knowledge:
(a) the condensed consolidated set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting;
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board,
Nick Sanders Phil
White
Executive Chairman Chief Financial Officer
18 November 2021
Glossary of Terms
CONSTANT CURRENCY Retranslated at the prior half-year's average exchange rate. Included to
explain the effect of changing exchange rates during volatile times to assist
the reader's understanding
GROUP CAPITAL EXPENDITURE Non-current asset additions
NET BANK INTEREST Interest receivable on cash at bank less interest payable on bank loans and
overdrafts. Reported in this manner due to the global nature of the Group and
its banking agreements
NET DEBT Cash and cash deposits less loans and borrowings. Used to report the overall
financial debt of the Group in a manner that is easy to understand
NET DEBT EXCLUDING LEASE LIABILITIES Net debt, as defined above, excluding lease liabilities. Used to report the
overall non-leasing debt of the Group in a manner that is easy to understand
EBITDA Profit before interest, tax, depreciation and amortisation adjusted to exclude
all exceptional and separately disclosed items
UNDERLYING Adjusted to exclude all exceptional and separately disclosed items
UNDERLYING EBITDA Profit before interest, tax, depreciation and amortisation adjusted to exclude
all exceptional and separately disclosed items
UNDERLYING EARNINGS PER SHARE Earnings per share adjusted to exclude all exceptional and separately
disclosed items
UNDERLYING OPERATING PROFIT Operating profit adjusted to exclude all exceptional and separately disclosed
items
UNDERLYING PROFIT BEFORE TAX Profit before tax adjusted to exclude all exceptional and separately disclosed
items
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS Statutory operating profit adjusted to exclude all exceptional items
Condensed consolidated income statement
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
unaudited unaudited audited
Notes £000 £000 £000
Continuing operations:
Revenue 4 58,672 49,950 107,564
Underlying operating profit 3,682 1,529 4,840
COVID related US government grant income 7 2,087 - -
Operating profit before exceptional items 5,769 1,529 4,840
Exceptional items 6 - (1,302) 4,490
Operating profit 4 5,769 227 9,330
Finance revenue 8 34 57 42
Finance expense 8 (1,437) (1,149) (2,701)
Profit / (loss) before tax 4,366 (865) 6,671
Income tax credit / (expense) 9 428 (456) (457)
Profit / (loss) after tax but before profit on discontinued operations 4,794 (1,321) 6,214
Discontinued operations:
Profit on discontinued operations, net of tax 6 693 - 1,198
Profit / (loss) for the period 5,487 (1,321) 7,412
Attributable to:
Equity holders of the parent company 5,487 (1,321) 7,412
Non-controlling interests - - -
5,487 (1,321) 7,412
Earnings / (loss) per ordinary share 10
Basic - continuing operations 6.5 p (1.8) p 8.5 p
Basic - discontinued operations 0.9 p - p 1.6 p
Basic 7.5 p (1.8) p 10.1 p
Diluted - continuing operations 6.5 p (1.8) p 8.5 p
Diluted - discontinued operations 0.9 p - p 1.6 p
Diluted 7.5 p (1.8) p 10.1 p
Condensed consolidated statement of comprehensive income
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
unaudited unaudited audited
£000 £000 £000
Profit / (loss) for the period 5,487 (1,321) 7,412
Other comprehensive income / (expense):
Items that will not be reclassified to the income statement
Remeasurement gains / (losses) on defined benefit scheme 2,730 (20,714) (6,540)
Total items that will not be reclassified to the income statement 2,730 (20,714) (6,540)
Items that will or may in the future be classified to the income statement
Foreign exchange translation differences 913 (79) (2,939)
Net investment hedge (205) (18) 1,084
Deferred tax arising 236 57 137
Total items that will or may in future be classified to the income statement 944 (40) (1,718)
Other comprehensive income / (expense), net of income tax 3,674 (20,754) (8,258)
Total comprehensive income / (expense) for the period 9,161 (22,075) (846)
Attributable to:
Equity holders of the Company 9,161 (22,075) (846)
Non-controlling interests - - -
Total comprehensive income / (expense) for the period 9,161 (22,075) (846)
Condensed consolidated statement of financial position
30 September 30 September 31 March
2021 2020 2021
unaudited unaudited audited
Notes £000 £000 £000
Non-current assets
Intangible assets 12 22,214 22,863 21,848
Property, plant and equipment 13 43,632 40,127 43,218
Deferred tax assets 1,500 338 384
Trade and other receivables 114 116 112
Total non-current assets 67,460 63,444 65,562
Current assets
Inventories 16,355 13,968 12,821
Contract assets 6,131 3,519 2,898
Trade and other receivables 23,172 19,665 19,254
Cash and cash deposits 16 10,394 23,379 15,485
Current tax assets 538 - -
Total current assets 56,590 60,531 50,458
Total assets 124,050 123,975 116,020
Non-current liabilities
Loans and borrowings 17 36,014 38,738 37,997
Deferred tax liabilities 4,577 4,315 4,393
Contract liabilities - 426 866
Retirement benefit obligations 14 33,407 58,121 37,275
Total non-current liabilities 73,998 101,600 80,531
Current liabilities
Loans and borrowings 17 2,751 13,999 5,084
Trade and other payables 21,022 17,174 17,016
Current tax liabilities 534 558 17
Contract liabilities 8,654 3,877 5,461
Provisions - 18 -
Total current liabilities 32,961 35,626 27,578
Total liabilities 106,959 137,226 108,109
Net assets / (liabilities) 17,091 (13,251) 7,911
Equity
Ordinary share capital issued 19 3,671 3,671 3,671
Share premium 7,359 7,359 7,359
Translation reserve 6,277 7,011 5,333
Retained earnings (190) (31,266) (8,426)
Total equity attributable to equity holders of the Company 17,117 (13,225) 7,937
Non-controlling interests (26) (26) (26)
Total equity 17,091 (13,251) 7,911
Condensed consolidated statement of changes in equity
Attributable to equity holders of the Company
Share Share Translation Retained Non-controlling Total
capital premium reserve earnings Total interests equity
£000 £000 £000 £000 £000 £000 £000
Current half year period unaudited
Balance at 1 April 2021 3,671 7,359 5,333 (8,426) 7,937 (26) 7,911
Profit for the period - - - 5,487 5,487 - 5,487
Other comprehensive income:
Foreign exchange translation differences - - 913 - 913 - 913
Net investment hedge - - (205) - (205) - (205)
Remeasurement gains on defined benefit scheme - - - 2,730 2,730 - 2,730
Taxation on items above - - 236 - 236 - 236
Total comprehensive income for the period - - 944 8,217 9,161 - 9,161
Transactions with owners recorded directly in equity:
Share based payments - - - 19 19 - 19
Balance at 30 September 2021 3,671 7,359 6,277 (190) 17,117 (26) 17,091
Prior half year period unaudited
3,671 7,359 7,051 (9,324) 8,757 (26) 8,731
Balance at 1 April 2020
Loss for the period - - - (1,321) (1,321) - (1,321)
Other comprehensive income:
Foreign exchange translation differences - - (79) - (79) - (79)
Net investment hedge - - (18) - (18) - (18)
Remeasurement losses on defined benefit scheme - - - (20,714) (20,714) - (20,714)
Taxation on items above - - 57 - 57 - 57
Total comprehensive loss for the period - - (40) (22,035) (22,075) - (22,075)
Transactions with owners recorded directly in equity:
Share based payments - - - 93 93 - 93
3,671 7,359 7,011 (31,266) (13,225) (26) (13,251)
Balance at 30 September 2020
Attributable to equity holders of the Company
Share Share Translation Retained Non-controlling Total
capital premium reserve earnings Total interests equity
£000 £000 £000 £000 £000 £000 £000
Prior year - audited
3,671 7,359 7,051 (9,324) 8,757 (26) 8,731
Balance at 1 April 2020
Profit for the year - - - 7,412 7,412 - 7,412
Other comprehensive (loss) / income:
Foreign exchange translation differences - - (2,939) - (2,939) - (2,939)
Net investment hedge - - 1,084 - 1,084 - 1,084
Remeasurement losses on defined benefit scheme - - - (6,540) (6,540) - (6,540)
Taxation on items above - - 137 - 137 - 137
Total comprehensive (loss) / income for the period - - (1,718) 872 (846) - (846)
Transactions with owners recorded directly in equity: -
Share based payments - - - 26 26 - 26
3,671 7,359 5,333 (8,426) 7,937 (26) 7,911
Balance at 31 March 2021
Condensed consolidated statement of cash flows
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
unaudited unaudited audited
Notes £000 £000 £000
Cash generated from operations 15 2,020 570 11,202
Interest paid (983) (725) (1,782)
Tax paid (486) (342) (1,023)
Net cash from / (used in) operating activities 551 (497) 8,397
Cash flows from investing activities
Proceeds from sale of business, net of cash disposed 693 - 1,250
Proceeds from sale of property, plant and equipment 25 - 21
Interest received 34 57 42
Purchase of property, plant and equipment (3,514) (730) (7,180)
Purchase of intangible assets - computer software (15) (80) (139)
Net cash used in investing activities (2,777) (753) (6,006)
Cash flows from financing activities
Drawings on new facilities - 32,221 36,454
Transaction costs associated with the issue of debt - - (380)
Repayment of borrowings excluding lease liabilities (2,247) (28,147) (31,666)
Receipt of government support loans 7 - 2,589 2,243
Repayment of lease liabilities (866) (905) (1,601)
Net cash (used in) / from financing activities (3,113) 5,758 5,050
Net (decrease) / increase in cash and cash equivalents (5,339) 4,508 7,441
Cash and cash equivalents at beginning of period 15,485 8,352 8,352
Effect of exchange rate fluctuations on cash held 248 (153) (308)
Cash and cash equivalents at end of period 16 10,394 12,707 15,485
Notes to the accounts
1. Basis of preparation
The condensed consolidated half year report for Carclo plc ("Carclo" or "the
Group") for the six months ended 30 September 2021 has been prepared on the
basis of the accounting policies set out in the audited accounts for the year
ended 31 March 2021 and in accordance with the Disclosure and Transparency
Rules of the UK Financial Conduct Authority and the requirements of UK adopted
International Accounting Standard 34, "Interim Financial Reporting".
The financial information is unaudited.
The half year report does not constitute financial statements and does not
include all 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 2021 which is available
either on request from the Company's registered office, Unit 5, Silkwood
Court, Ossett, WF5 9TP, or can be downloaded from the corporate website -
www.carclo-plc.com.
The comparative figures for the financial year ended 31 March 2021 are not the
Company's complete 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 18 November
2021. Copies are available from the corporate website.
The Group financial statements for the year ended 31 March 2021 were prepared
and approved by the Directors in accordance with International Financial
Reporting Standards as adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union ("Adopted IFRSs").
Going concern
The interim financial statements are prepared on the going concern basis.
The Directors have reviewed cash flow and covenant forecasts to cover the
twelve-month period from the date of the approval of these condensed interim
financial statements considering the Group's available debt facilities and the
terms of the arrangements with the Group's bank and the Group pension scheme
which were disclosed in Note 1, Basis of Preparation - Going Concern, to the
Group's consolidated financial statements for the year ended 31 March 2021.
Net debt at 30 September 2021 was £28.4 million, rising from £27.6 million
at 31 March 2021 (30 September 2020: £29.4 million) and is forecast to
increase over the twelve-month period driven by capital investment and net
working capital outflows to support business growth. The Group's financing
remains within banking covenants as at 30 September 2021 and the base case
forecasts demonstrate that the Group has more than sufficient liquidity and
covenant headroom throughout the forecast period.
COVID-19 related uncertainty and the resulting supply chain disruption and
cost increases continue to impact the Group's markets and geographies and the
situation is evolving over time. It is possible that the Group's operations,
its supply chains and customer demand could continue to be further impacted,
particularly in the US, where labour and material shortage experience has been
most acute. Any material manifestation of these or other uncertainties could
lead to a breach of the Group's banking covenants.
The Directors have reviewed sensitivity testing modelling a range of severe
downside scenarios. These sensitivities attempt to incorporate identified
risks set out in the Principal Risks and Uncertainties section of this report.
Severe downside sensitivities modelled included a range of scenarios modelling
the financial effects of loss of business from: discrete sites, an overall
fall in gross margin of 1% across the Group, a fall in Group sales of 5%
matched by a corresponding fall in cost of sales of the same amount, exchange
risk and interest rate risk. These sensitivities attempt to incorporate the
risks arising from national and regional impacts of the global pandemic from
local lockdowns, impacts on manufacturing and supply chain and other potential
increases to direct and indirect costs. The Group has the capacity to take
mitigating actions to ensure that the Group remains financially viable,
including further reducing operating expenditures as necessary.
On this basis, the Directors have determined that it is reasonable to assume
that the Group will continue to operate within the facilities available to it
and that it will adhere to the covenant tests to which it is subject
throughout the twelve-month period from the date of signing these condensed
interim financial statements. As such the Directors have adopted the Going
Concern assumption in preparing these interim financial statements.
2. Accounting policies
The accounting policies applied in these interim financial statements are the
same as those applied in the Group's consolidated financial statements as at,
and for the year ended 31 March 2021. Certain new standards, amendments and
interpretations to existing standards have been published that are mandatory
for the Group's accounting period beginning on 1 April 2021 but they are not
expected to have a material effect on the Group's financial statements.
3. Accounting estimates and judgements
The preparation of the interim 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 2021 except for the following -
Government grants
Key judgement
At 31 March 2021 management made a key judgement that there was insufficient
certainty as to whether conditions attached to the $2.9 million of government
loans in support of COVID-19 interruption had been met and therefore the
proceeds were presented as loans and borrowings in the consolidated statement
of financial position and no associated government grant income was recognised
during that period. On 5 May 2021 the Group received confirmation of
forgiveness of the loan by the US Small Business Administration, resulting in
its conversion from a loan to a grant.
Confirmation of forgiveness provides certainty that all conditions attached to
the loan have been met. As such, the full £2.1 million ($2.9 million) was
recognised as income in May 2021.
Recognition of deferred tax assets
Key judgement
Management have exercised judgement over the level of future taxable profits
in the UK against which to relieve the Group's deferred tax assets. On this
basis management believe it is appropriate to recognise deferred tax assets
and at 30 September 2021 UK deferred tax assets of £0.9 million have been
recognised (31 March 2021: £nil).
Impairment of assets
Key judgement
Management have exercised judgement to determine that there are no indicators
of impairment for intangible assets at 30 September 2021.
4. Segment reporting
The Group is organised into three, separately managed, business segments -
Technical Plastics, Aerospace and Central. These are the segments for which
summarised management information is presented to the Group's chief operating
decision maker (being the Group Executive Committee).
The Technical Plastics segment supplies fine tolerance, injection moulded
plastic components, which are used in medical, diagnostics, optical and
electronic products. This business operates internationally in a fast growing
and dynamic market underpinned by rapid technological development.
The Aerospace segment supplies systems to the manufacturing and aerospace
industries.
The Central segment relates to central costs and non-trading companies.
The LED Technologies segment presented as a discontinued operation was a
leader in the development of high-power LED lighting for the premium
automotive industry and was disposed of in the year to 31 March 2020 - see
note 5.
Transfer pricing between business segments is set on an arm's length basis.
Segmental revenues and results shown below are after the elimination of
transfers between business segments.
Technical Total
Plastics Aerospace Central (continuing Discontinued Group
(continuing) (continuing) (continuing) operations) operations total
£000 £000 £000 £000 £000
£000
The segment results for the six months ended 30 September 2021 were as
follows:
Consolidated income statement
Total external revenue 56,583 2,089 - 58,672 - 58,672
Expenses (51,799) (1,862) (1,329) (54,990) - (54,990)
Underlying operating profit / (loss) 4,784 227 (1,329) 3,682 - 3,682
COVID related US government grant income 2,087 - - 2,087 - 2,087
Operating profit / (loss) before exceptional items 6,871 227 (1,329) 5,769 - 5,769
Exceptional operating items - - - - - -
Operating profit / (loss) 6,871 227 (1,329) 5,769 - 5,769
Net finance expense (1,403) - (1,403)
Income tax credit 428 - 428
Profit from operating activities after tax 4,794 - 4,794
Profit on disposal of discontinued operations, net of tax - see note 5 - 693 693
Profit for the period 4,794 693 5,487
Technical Total
Plastics Aerospace Central (continuing Discontinued Group
(continuing) (continuing) (continuing) operations) operations total
£000 £000 £000 £000 £000 £000
Consolidated statement of financial position
Segment assets 117,433 6,107 510 124,050 - 124,050
Segment liabilities (38,973) (751) (67,235) (106,959) - (106,959)
Net assets 78,460 5,356 (66,725) 17,091 - 17,091
Other segmental information
Depreciation 2950 114 19 3,083 - 3,083
Amortisation 38 - 60 98 - 98
Disaggregation of revenue
Major products/service lines
Manufacturing 47,499 2,089 - 49,588 - 49,588
9,084 - - 9,084 - 9,084
Tooling
56,583 2,089 - 58,672 - 58,672
Timing of revenue recognition
Products transferred at a point in time 47,499 2,089 - 49,588 - 49,588
Products and services transferred over time 9,084 - - 9,084 - 9,084
56,583 2,089 - 58,672 - 58,672
Technical Group
Plastics Aerospace Central total
£000 £000 £000 £000
The segment results for the six months ended 30 September 2020 were as
follows:
Consolidated income statement
Total external revenue 47,214 2,736 - 49,950
Expenses (43,988) (2,252) (2,181) (48,421)
Underlying operating profit / (loss) 3,226 484 (2,181) 1,529
Exceptional operating items (74) (13) (1,216) (1,302)
Operating profit / (loss) 3,152 471 (3,397) 227
Net finance expense (1,092)
Income tax expense (456)
Loss after tax (1,321)
Consolidated statement of financial position
Segment assets 104,160 6,492 13,323 123,975
Segment liabilities (30,191) (1,049) (105,986) (137,226)
Net assets 73,969 5,443 (92,663) (13,251)
Other segmental information
Depreciation 2,755 133 15 2,903
Amortisation 103 - 41 144
Disaggregation of revenue
Major products/service lines
Manufacturing 41,086 2,736 - 43,822
Tooling 6,128 - - 6,128
47,214 2,736 - 49,950
Timing of revenue recognition
Products transferred at a point in time 41,086 2,736 - 43,822
Products and services transferred over time 6,128 - - 6,128
47,214 2,736 - 49,950
Technical Total
Plastics Aerospace Central (continuing Discontinued Group
(continuing) (continuing) (continuing) operations) operations total
£000 £000 £000 £000 £000
£000
The segment results for the year ended 31 March 2021 were as follows:
Consolidated income statement
Total external revenue 102,473 5,091 - 107,564 - 107,564
Expenses (93,256) (4,541) (4,927) (102,724) - (102,724)
Underlying operating profit / (loss) 9,217 550 (4,927) 4,840 - 4,840
Exceptional operating Items - - 4,490 4,490 (52) 4,438
Operating profit / (loss) 9,217 550 (437) 9,330 (52) 9,278
Net finance expense (2,659) - (2,659)
Income tax expense (457) - (457)
Profit from operating activities after tax 6,214 (52) 6,162
Profit on disposal of discontinued operations, net of tax - see note 5 - 1,250 1,250
Profit for the period 6,214 1,198 7,412
Consolidated statement of financial position
Segment assets 109,217 6,073 730 116,020 - 116,020
Segment liabilities (33,951) (832) (73,326) (108,109) - (108,109)
Net assets 75,266 5,241 (72,596) 7,911 - 7,911
Other segmental information
Depreciation 5,492 250 32 5,774 - 5,774
Amortisation 110 - 96 206 - 206
Disaggregation of revenue
Major products/service lines
Manufacturing 88,210 5,091 - 93,301 - 93,301
Tooling 14,263 - - 14,263 - 14,263
102,473 5,091 - 107,564 - 107,564
Timing of revenue recognition
Products transferred at a point in time 88,210 5,091 - 93,301 - 93,301
Products and services transferred over time 14,263 - - 14,263 - 14,263
102,473 5,091 - 107,564 - 107,564
5. Discontinued operations
Whilst there were no new discontinued operations in the 6 months to 30
September 2021 or in the prior year comparative, on 5 May 2021 and 6 August
2021, proceeds of £0.2 million and £0.3 million respectively were received
from the administrators of Wipac Ltd which was part of the LED Technologies
segment that was classified as discontinued in the year to 31 March 2020 (year
to 31 March 2021: £1.3 million). The proceeds were received by the Group's
lending bank, HSBC and used to prepay the Group's term loan.
On 28 July 2021, an additional £0.2 million was received from the Wipac Ltd
administrators in payment of a first and final dividend for the Group's
unsecured creditor claim against the company. In accordance with the
facility agreement, the first £0.1 million was retained by the Group with the
balance of £0.1 million used to prepay the Group's term loan.
No asset was recognised in the results for the year to 31 March 2021 for
potential post balance sheet proceeds or dividends, and as such, the full
£0.7 million has been recognised as exceptional profit on disposal of
discontinued operations in the current period.
Management does not expect to receive any further proceeds from the
administrators of Wipac Ltd.
6. Exceptional items
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Continuing operations
Rationalisation costs - (1,302) (1,968)
Gain in respect of retirement benefits - - 6,458
Total recognised in operating profit - (1,302) 4,490
Deferred tax credit - see note 9 893 - -
893 (1,302) 4,940
Discontinued operations
Rationalisation costs - - (52)
Profit on disposal of discontinued operations - see note 5 693 - 1,250
693 - 1,198
Exceptional items 693 (1,302) 5,688
There have been no exceptional items recognised in operating profit in the
period to 30 September 2021.
The turnover and cost impacts of the COVID-19 pandemic are so pervasive and
difficult to identify that they cannot be readily separated and quantified
from the ongoing trading of the Group. As a result, consistent with the
results reported in the financial statements for the year ended 31 March 2021,
neither COVID-19 related costs nor credits arising from government assistance
have been presented as exceptional items in the condensed consolidated income
statement for the six months to 30 September 2021.
A £0.9 million deferred tax credit upon the re-recognition of UK deferred tax
assets has been treated as exceptional.
The profit on disposal of discontinued operations of £0.7 million comprises
proceeds received from the administrators of Wipac Ltd which was part of the
LED Technologies segment which was classified as discontinued in the year
ended 31 March 2021. The £1.3 million received in the year ended 31 March
2021 was all in respect to proceeds.
The 31 March 2021 gain in respect to retirement benefits is a past service
credit for the impact of introducing a Bridging Pension Option, partly offset
by a past service cost relating to GMP equalisation.
7. Government support for COVID-19
During the period the Group has utilised governmental support in its operating
locations to mitigate the impact of COVID-19. Support has been in the form
of grants, loans and deferral of tax payments.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
The governmental support utilised during the period was:
Grants - used to offset labour and variable costs, included within operating 2,153 615 747
profit
Loans - presented in loans and borrowings - 2,589 2,104
Payment deferrals - presented in trade and other payables - 705 68
In April 2020, the Group received a loan under the Payback Protection Program,
underwritten by the US government in support of COVID-19 for $2.9 million,
presented as loans and borrowings in the prior period and year end
comparatives. On 5 May 2021, notice of forgiveness of the loan was received
from the Small Business Administration, resulting in its conversion from a
loan to a grant and therefore its release to the condensed consolidated income
statement. In the 6 months to 30 September 2021 the full amount has been
recognised within operating profit in the income statement as a credit to
off-set labour and variable COVID-19 related costs incurred to date.
The credit recognised in respect to the COVID-19 related government grant has
been presented separately on the face of the condensed consolidated income
statement for the 6 months to 30 September 2021 for clarity.
8. Net finance expense
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
The expense recognised in the condensed consolidated income statement
comprises:
Interest receivable on cash and cash deposits 34 57 42
Interest payable on bank loans and overdrafts (816) (635) (1,559)
Lease interest (165) (89) (210)
Other interest (92) (1) (90)
Net interest on the net defined benefit liability (364) (424) (842)
Net finance expense (1,403) (1,092) (2,659)
9. Income tax expense
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
The credit / (expense) recognised in the condensed consolidated income
statement comprises:
Continuing operations
Current tax expense on ordinary activities (465) (563) (293)
Deferred tax credit / (expense) on ordinary activities - 107 (164)
Exceptional deferred tax credit - recognition of deferred tax assets 893 - -
Total income tax credit / (expense) recognised in the condensed consolidated 428 (456) (457)
income statement
The half year tax credit represents -8.5% of statutory profit before tax
(2021: -52.7%) based on the estimated average effective tax rate on ordinary
activities for the full year.
This rate includes a deferred tax credit of £0.9 million which has been
recognised in the six months ended 30 September 2021 upon the recognition of
£0.9 million deferred tax assets in respect of UK losses and capital
allowances.
The half year underlying effective tax rate, after excluding the deferred tax
credit of £0.9 million, amounts to 20.4% of underlying profit before tax,
exceptional items and COVID related US government grant income (2021: 104.3%).
The Group's underlying effective tax rate is higher than the underlying UK tax
rate of 19.0% (H1 2021: 19.0%) mainly because the Group is earning a higher
proportion of its profits in higher tax jurisdictions.
Deferred tax assets and liabilities at 30 September 2021 have been calculated
on the rates substantively enacted at the balance sheet date. A change to the
main UK corporation tax rate, set out in the Finance Bill 2021 was
substantively enacted on 24 May 2021 with the main rate of corporation tax to
become 25% from 1 April 2023.
10. Earnings per share
The calculation of basic earnings per share is based on the profit / (loss)
attributable to equity holders of the parent 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 / (loss)
attributable to equity holders of the parent company divided by the weighted
average number of ordinary shares outstanding during the period (adjusted for
dilutive options).
The following details the result 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
2021 2020 2021
£000 £000 £000
Profit / (loss) after tax but before profit on discontinued operations 4,794 (1,321) 6,214
Profit / (loss) attributable to non-controlling interests - - -
Profit / (loss) attributable to ordinary shareholders from continuing 4,794 (1,321) 6,214
operations
Profit on discontinued operations, net of tax 693 - 1,198
Profit / (loss) after tax, attributable to equity holders of the parent 5,487 (1,321) 7,412
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
Shares Shares Shares
Weighted average number of ordinary shares in the period 73,419,193 73,419,193 73,419,193
Effect of share options in issue 15,974 15,974 15,974
Weighted average number of ordinary shares (diluted) in the period 73,435,167 73,435,167 73,435,167
In addition to the above, the Company also calculates an earnings per share
based on underlying profit as the Board believe this provides a more useful
comparison of business trends and performance. Underlying profit is defined
as profit before impairments, rationalisation costs, one-off retirement
benefit effects, exceptional bad debts, business closure costs, litigation
costs, other separately disclosed one-off items and the impact of property and
business disposals, net of attributable taxes.
The following table reconciles the Group's profit to underlying profit used in
the numerator in calculating underlying earnings per share:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
5,487 (1,321) 7,412
Profit / (loss) after tax, attributable to equity holders of the parent
Continuing operations:
Exceptional - rationalisation and restructuring costs, net of tax - 1,302 1,968
- - (6,458)
Exceptional - gain in respect of retirement benefits, net of tax
(2,087) - -
COVID related US government grant income, net of tax
(893) - -
Exceptional - recognition of UK deferred tax assets
Discontinued operations:
Exceptional - rationalisation and restructuring costs, net of tax - - 52
(693) - (1,250)
Exceptional - gain on disposal of discontinued operations, net of tax
1,814 (19) 1,724
Underlying profit / (loss) attributable to equity holders of the parent
1,814 (19) 1,724
Underlying profit / (loss) attributable to equity holders of the parent
2,087 - -
COVID related US government grant income, net of tax
3,901 (19) 1,724
Profit / (loss) after tax but before exceptional items, attributable to equity
holders of the parent
3,682 1,529 4,840
Underlying operating profit - continuing operations
34 57 42
Finance revenue - continuing operations
(1,437) (1,149) (2,701)
Finance expense - continuing operations
Income tax credit / (expense) - continuing operations 428 (456) (457)
(893) - -
Exceptional recognition of UK deferred tax assets - continuing operations
1,814 (19) 1,724
Underlying profit / (loss) attributable to equity holders of the parent -
continuing operations
1,814 (19) 1,724
Underlying profit / (loss) attributable to equity holders of the parent -
continuing operations
2,087 - -
COVID related US government grant income, net of tax
3,901 (19) 1,724
Profit / (loss) after tax but before exceptional items - continuing operations
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
2021 2020 2021
Pence Pence Pence
Basic earnings / (loss) per share - continuing operations 6.5 (1.8) 8.5
Basic earnings / (loss) per share - discontinued operations 0.9 - 1.6
Basic earnings / (loss) per share 7.5 (1.8) 10.1
Diluted earnings / (loss) per share - continuing operations 6.5 (1.8) 8.5
Diluted earnings / (loss) per share - discontinued operations 0.9 - 1.6
Diluted earnings / (loss) per share 7.5 (1.8) 10.1
Underlying earnings / (loss) per share - basic - continuing operations 2.5 (0.0) 2.4
Underlying earnings / (loss) per share - basic - discontinued operations - - -
Underlying earnings / (loss) per share - basic 2.5 (0.0) 2.4
Underlying earnings / (loss) per share - diluted - continuing operations 2.5 (0.0) 2.4
Underlying earnings / (loss) per share - diluted - discontinued operations - - -
Underlying earnings / (loss) per share - diluted 2.5 (0.0) 2.4
Earnings / (loss) per share before exceptional items - basic - continuing 5.3 (0.0) 2.4
operations
Earnings / (loss) per share before exceptional items - basic - discontinued - - -
operations
Earnings / (loss) per share before exceptional items - basic 5.3 (0.0) 2.4
Earnings / (loss) per share before exceptional items - diluted - continuing 5.3 (0.0) 2.4
operations
Earnings / (loss) per share before exceptional items - diluted - discontinued - - -
operations
Earnings / (loss) per share before exceptional items - diluted 5.3 (0.0) 2.4
11. Dividends paid and proposed
No dividends were paid in the period or the comparative periods.
Under the terms of the restructuring agreement, the Group is not permitted to
make a dividend payment to shareholders up to the period ending July 2023.
12. 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
2021 2020 2021
£000 £000 £000
Net book value at the start of the period 21,848 22,880 22,880
Additions 15 80 139
Disposals - - (5)
Amortisation (98) (144) (206)
Effect of movements in foreign exchange 449 47 (960)
Net book value at the end of the period 22,214 22,863 21,848
Included within intangible assets is goodwill of £21.5 million (30 September
2020 - £22.0 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 2021, the carrying
value of goodwill was supported by value-in-use calculations. There has been
no indication of subsequent impairment in the current financial period.
Intangible assets also include customer-related intangibles of £0.3 million
(30 September 2020: £0.3 million) and computer software of £0.4 million (30
September 2020: £0.5 million).
13. 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
2021 2020 2021
£000 £000 £000
Net book value at the start of the period 43,218 40,395 40,395
Additions 2,952 2,701 10,374
Depreciation (3,083) (2,903) (5,774)
Disposals - - (193)
Impairment - - 13
Effect of movements in foreign exchange 545 (66) (1,597)
Net book value at the end of the period 43,632 40,127 43,218
Right-of-use assets
Right-of-use assets related to lease agreements are presented within property,
plant and equipment above. The movements are summarised as follows:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Net book value at the start of the period 6,988 5,119 5,119
Depreciation (823) (741) (1,582)
Additions 196 385 3,769
Derecognition of right-of-use assets - - (148)
Effect of movements in foreign exchange 90 (9) (170)
Net book value at the end of the period 6,451 4,754 6,988
14. Retirement benefit obligations
The Group operates a defined benefit UK pension scheme which provides pensions
based on service and final pay. Outside of the UK, retirement benefits are
determined according to local practice and funded accordingly.
The amounts recognised in the condensed consolidated statement of financial
position in respect of the defined benefit scheme were as follows:
Six months Six months Year
ended
ended
ended
30 September
30 September
31 March
2021
2020
2021
£000
£000
£000
(203,198) (237,839)
Present value of funded obligations (204,654)
Fair value of scheme assets 169,791 179,718 167,379
(33,407) (58,121) (37,275)
Recognised liability for defined benefit obligations
Six months ended Six months ended Year ended
30 September 30 September 31 March
Movement in the net liability for defined benefit obligations recognised in 2021 2020 2021
the condensed consolidated statement of financial position:
£000 £000 £000
(37,620) (37,620)
Net liability for defined benefit obligations at the start of the period (37,275)
1,067 2,834
Contributions paid 2,050
Net credit / (expense) recognised in the condensed consolidated income (939) (424) 4,052
statement
(21,144) (6,541)
Remeasurement (losses) / gains recognised in other comprehensive income 2,757
(33,407) (58,121) (37,275)
Net liability for defined benefit obligations at the end of the period
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
Movements in the fair value of Scheme assets: £000 £000 £000
Fair value of Scheme assets at the start of the period 167,379 172,766 172,766
1,646 1,957 3,888
Interest income
4,667 8,285 (988)
Return / (loss) on Scheme assets excluding interest income
2,050 1,879 2,834
Contributions by employer
(5,376) (4,357) (9,557)
Benefit payments
(575) (812) (1,564)
Expenses paid
169,791 179,718 167,379
Fair value of Scheme assets at the end of the year
Actual return on Scheme assets 6,313 10,242 2,900
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
Movements in the present value of defined benefit obligations: £000 £000 £000
Defined benefit obligation at the start of the period 204,654 210,386 210,386
Interest expense 2,010 2,381 4,730
Actuarial gains due to changes in demographic assumptions - - (6,727)
Actuarial losses due to changes in financial assumptions 1,910 29,429 12,280
Benefit payments (5,376) (4,357) (9,557)
Past service credit - - (6,458)
Defined benefit obligation at the end of the period 203,198 237,839 204,654
30 September 30 September 31 March
2021 2020 2021
The principal actuarial assumptions at the balance sheet date (expressed as
weighted averages) were:
Discount rate at period end 2.00% 1.50% 2.00%
Inflation (RPI) (non-pensioner) 3.45% 3.10% 3.25%
Inflation (CPI) (non-pensioner) 2.95% 2.60% 2.75%
Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less 3.45% 3.10% 3.25%
Allowance for revaluation of deferred pensions of CPI or 5% p.a. if less 2.95% 2.60% 2.75%
Allowance for pension in payment increases of RPI or 5% p.a. if less 3.35% 3.00% 3.15%
Allowance for pension in payment increases of CPI or 5% p.a. if less 2.40% 3.00% 2.30%
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 3.75% 3.10% 3.65%
3% p.a.
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 4.25% 4.00% 4.20%
4% p.a.
Life expectancy years years years
Male (current age 45) 19.9 20.6 19.9
Male (current age 65) 19.0 19.6 19.0
Female (current age 45) 22.2 22,6 22.2
Female (current age 65) 21.0 21.3 21.0
15. Cash generated from operations
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Profit / (loss) for the period - continuing operations 4,794 (1,321) 6,214
Profit for the period - discontinued operations 693 - 1,198
5,487 (1,321) 7,412
Adjustments for -
Pension scheme contributions net of administration costs settled by the (1,787) (993) (2,179)
Company
Pension scheme administration costs settled by the Scheme 285 455 910
Depreciation charge 3,083 2,903 5,774
Amortisation of intangible assets 98 144 206
Exceptional gain in respect of retirement benefits - - (6,458)
COVID related US government grant income (2,104) - -
(Profit) on business disposal (693) - (1,250)
(Profit) / loss on disposal of other plant and equipment (25) - 10
Loss on disposal of intangible assets - - 5
Cash flow relating to provision for site closure costs - (5) (23)
Share based payment charge 24 93 1
Financial income (34) (57) (42)
Financial expense 1,437 1,149 2,701
Taxation (credit) / expense (428) 456 457
Operating cash flow before changes in working capital 5,343 2,824 7,524
Changes in working capital
(Increase) / decrease in inventories (3,534) 233 768
Increase in contract assets (3,233) (2,095) (1,492)
(Increase) / decrease in trade and other receivables (3,920) 107 (308)
Increase / (decrease) in trade and other payables 5,037 (3,195) 864
Increase in contract liabilities 2,327 2,696 3,846
Cash generated from operations 2,020 570 11,202
16. Cash and cash deposits
As at As at As at
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Cash and cash deposits 10,394 23,379 15,485
Bank overdrafts - (10,672) -
10,394 12,707 15,485
The Group has a net UK multi-currency overdraft facility with a £nil net
limit and a £12.5 million gross limit agreed as part of the refinancing
arrangement signed 14 August 2020. At 30 September 2021, Carclo plc's
overdraft of £3.9 million (31 March 2021: £4.6 million) has been recognised
within cash and cash deposits when consolidated.
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
2021 2020 2021
£000 £000 £000
Net (decrease) / increase in cash and cash equivalents (5,339) 4,508 7,441
Net repayment of / (drawings on) term loans and other loans 2,247 (4,074) (4,492)
Net forgiveness / (receipt) of government support loans 2,104 (2,589) (2,243)
Net repayment of / (drawing on) lease liabilities 670 905 (2,020)
(318) (1,250) (1,314)
Effect of exchange rate fluctuations on net debt (457) (751) 1,075
(775) (2,001) (239)
Net debt at start of period (27,596) (27,357) (27,357)
Net debt at end of period (28,371) (29,358) (27,596)
Net debt comprises -
As at As at As at
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Cash and cash deposits 10,394 23,379 15,485
Bank overdrafts - (10,672) -
Term loan (29,893) - (31,812)
Government COVID-19 support loans - (2,589) (2,104)
Revolving credit facility (2,000) (34,504) (2,000)
Lease liabilities (6,758) (4,943) (7,055)
Other loans (114) (29) (110)
Net debt (28,371) (29,358) (27,596)
On 14 August 2020 the Group concluded a restructuring with the Company's bank,
HSBC. The debt facilities currently available to the Group comprise a term
loan of £30.1 million (31 March 2021: £32.1 million), of which a further
£1.4 million (31 March 2021: £3.0 million) will be amortised by 30 September
2022 and a £3.5m revolving credit facility maturing on 31 July 2023.
18. Financial instruments
The fair value 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
Number
of shares £000
Ordinary shares of 5 pence each
Issued and fully paid at 30 September 2020, 31 March 2021 and 30 September 73,419,193 3,671
2021
20. Related parties
Identity of related parties
The Company has a related party relationship with its subsidiaries, its
Directors and executive officers and the Group pension scheme. There are no
transactions that are required to be disclosed in relation to the Group's 60%
dormant subsidiary Platform Diagnostics Limited.
There have been no changes in related parties in the period to 30th September
2021.
Transactions with key management personnel
Key management personnel are considered to be the executive directors of the
Group. Full details of directors' remuneration are disclosed in the Group's
annual report. In the six months ended 30 September 2021, remuneration to
current and former directors amounted to £0.219 million (six months ended 30
September 2020 - £0.350 million).
On 5 August 2021 P White, the Group's Chief Financial Officer was granted
386,778 share options under the terms of the Carclo plc 2017 Performance Share
Plan. The options will vest at the end of a three-year period depending on
the achievement of performance targets set out in the LTIP and are then
subject to a further two-year holding period. The awards take the form of nil
cost options, being an option under the LTIP with a nil exercise price.
Share price at date of award was 41.6 pence and fair value at date of award
totalled £0.118 million.
On 30 June 2021, N Sanders the Group's Chief Executive Officer and P White
purchased 95,656 and 19,136 shares respectively in Carclo plc at market price
of 51.8 pence per share.
Group pension scheme
A third-party professional firm is engaged to administer the Group pension
scheme (the Carclo Group Pension Scheme). The associated investment costs are
borne by the scheme in full. It has been agreed with the trustees of the
pension scheme that, under the terms of the recovery plan, the scheme would
bear its own administration costs.
Contributions of £0.292 million per month have been made during the six
months to 30 September 2021, incorporating both deficit recovery contributions
and scheme expenses including PPF levy. A further payment of £0.3 million
has also been made during the period being part of the £0.750 million agreed
as payable between 30 June 2021 and September 2022 under the schedule of
contributions.
Carclo incurred administration costs of £0.575 million during the period
which has been charged to the consolidated income statement, £nil have been
presented as exceptional, (six months to 30 September 2020: £0.8 million, of
which £0.3 million was presented as exceptional). Of the administration
costs, £0.285 million was paid directly by the scheme (six months to 30
September 2020: £0.455 million). The total deficit reduction contributions
and administration costs paid during the period was £2.1 million (six months
to 30 September 2020: £1.4 million).
21. Post balance sheet events
There are no events that have occurred since the period end that require
disclosure in the report.
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.
Independent review report
Introduction
We have been engaged by Carclo plc ("the Company") to review the financial
information for the six months ended 30 September 2021 which comprises the
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
consolidated cash flow statement and 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.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing
Practices Board and our Engagement Letter. Our work has been undertaken so
that we might state to the Company those matters we are required to state to
them in an independent review 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 formed.
Respective responsibilities of directors and auditor
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 UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express to the Company a conclusion on the
consolidated financial information in the interim 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 United Kingdom. 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 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 consolidated financial information in the interim report does
not give a true and fair view of the financial position of the Company as at
30 September 2021 and of its financial performance and its cash flows for the
six months then ended, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Signed:
Mazars LLP
Chartered Accountants
Tower Bridge House
St Katharine's Way
London
E1W 1DD
Date: 18 November 2021
Notes:
(a) The maintenance and integrity of the Carclo plc web site is
the responsibility of the directors; the work carried out by us does not
involve consideration of these matters and, accordingly, we accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial information may differ from legislation in
other jurisdictions.
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