REG - Carclo plc - Final Results
18/07/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240718:nRSR8430Wa&default-theme=true
RNS Number : 8430W Carclo plc 18 July 2024
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE
INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO.
596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL)
ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION
IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN
Carclo plc
("Carclo" or the "Group")
Full Year Results for the year ended 31 March 2024 (unaudited)
Carclo plc, the leading global provider of high-precision components, offering
comprehensive services from mould design, automation and production to
assembly and printing, serving the life sciences, aerospace, optics and tech
sectors, announces its unaudited results for the financial year ended 31 March
2024 ("FY24").
The key financial performance measures for the year are as follows:
Year ended Year ended
31 March 31 March
2024 2023
£000 £000
Continuing operations
Revenue 132,672 143,445
Underlying operating profit 6,647 5,939
Exceptional items (4,857) (4,710)
Operating profit 1,790 1,229
Underlying earnings per share - basic - continuing operations 1.1p 0.4p
Basic loss per share - continuing operations (4.5)p (5.4)p
Net debt excluding lease liabilities 18,290 22,490
Net debt 29,457 34,360
IAS 19 retirement benefit liability 37,186 34,493
Continuing operations
Revenue
CTP Design & Engineering 21,570 20,077
CTP Manufacturing Solutions 103,473 116,737
Aerospace 7,629 6,631
Total 132,672 143,445
Underlying operating profit
CTP 9,417 7,321
Aerospace 1,699 1,520
Segmental total 11,116 8,841
Central (4,469) (2,902)
Total 6,647 5,939
Segmental underlying return on sales 8.4% 6.2%
Financial performance:
We have prioritised the control of capital investment, working capital
management and tight control over costs in order to increase cash generation
and to increase return on capital.
· Revenue from continuing operations decreased by 7.5% (4.5% at
constant currency) to £132.7m (FY23: £143.4m).
· Underlying operating profit from continuing operations was £6.6m
(FY23: £5.9m).
· Cash generated from operations was £15.6m (FY23: £7.8m).
· Statutory operating profit from continuing operations was £1.8m
(FY23: £1.2m).
· Net exceptional costs in the year were largely driven by
rationalisation costs incurred in CTP and totalled £4.9m (FY23: £4.7m), of
which the cash cost was £0.6m (FY23: £2.2m).
· Net debt of £29.5m (FY23: £34.4m). Net debt has reduced by
£4.9m from prior year, reflecting strong working capital management and the
increase in operating performance, placing Carclo on a sound footing for the
future. On 5 July 2024, the Group successfully extended the facilities with
the Company's lender for the multicurrency term and revolving facilities
agreement to 31 December 2025.
Strategic highlights:
· Fortifying our financial position for long-term success -
Delivered reduction of our net debt to uEBITDA ratio, through streamlining our
asset base for better returns, optimised our working capital position and
focused capital expenditures.
· Factory specialisation and standardisation - Completed the
reconfiguration of our APAC and EMEA facilities for specific product lines and
standardising production processes, which has led to substantial gains in
efficiency and product quality, supported by the integration of advanced
manufacturing technologies and targeted workforce training. The
reconfiguration in the US in ongoing.
· Organic growth through strategic partnerships - Expanded and
deepened our strategic alliances to deliver process optimisation, new back-end
automation and enhanced material utilisation.
· Embracing sustainability for a greener future - The "Zelda"
project delivered strong results, which reduced external waste through
material utilisation improvements. Our energy focus led to a reduction in
tonnes of CO2e per million £ of revenue. 98% of electricity used in the
United Kingdom now comes from renewable resources.
· Empowering unity, driving breakthroughs - Through "One Carclo" we
launched employee engagement initiatives, promoting diversity and inclusion,
and encouraged cross-functional teamwork between all sites, all of which
drives our performance.
Sustainability highlights:
· Leading the way in sustainability - Carclo is advancing "Project
Zelda," our ground-breaking initiative to reduce waste and enhance energy
efficiency. Initiating our shift to renewable energy in the UK exemplifies our
commitment to sustainability.
· Strengthening supply chain sustainability - In partnership with
EcoVadis, we've elevated our sustainability practices throughout our supply
chain, placing us in the top 35% of companies globally-a significant rise from
last year's top 50%.
· Engaging communities, creating lasting social value - We actively
promote and encourage our employees to engage in community support through
initiatives like volunteering for charity events, such as the Royal Marsden
Hospital walk, and partnering with educational institutions for skills
development and training. Additionally, we prioritise safety and
sustainability, celebrating milestones like accident-free days across our
sites and investing in energy-efficient technologies and green community
projects.
Commenting on the results, Frank Doorenbosch, Chief Executive Officer said:
"Carclo has undergone a lot of change and adaptation in the last year. We have
faced difficulties, but we have also prioritised health and safety, enhanced
our financial position, and fortified our position for lasting and stable
growth.
Looking to the future, our strategy will centre on reigniting our innovation
engine. We will focus on enhancing product development, refining processes,
and investing in our talented team. The strategic closure of our short-run
operations in Derry and the consolidation of assets and talent in Pennsylvania
will streamline our operations and drive innovation.
With a clear vision, a robust strategy, and our commitment to our customers
and employees, we are confident in our ability to navigate the challenges
ahead and appear as a stronger, more resilient organisation. The future holds
great promise for Carclo, and we are excited to embrace the opportunities that
lie ahead."
Further Information
Please contact:
Frank Doorenbosch, Chief Executive Officer, Carclo plc +44 (0) 20 8685 0500
Eric Hutchinson, Chief Financial Officer, Carclo plc +44 (0) 20 8685 0500
Forward-looking statements
Certain statements made in this annual report and 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 outcomes to differ
materially from those expected.
Alternative performance measures
A reconciliation to statutory numbers is included within the Finance Review.
The term "underlying" is not defined under IFRS and may not be comparable with
similarly titled measures used by other companies.
Chief Executive Officer's Review
As we wrap up the year, Carclo's journey through a dynamic and challenging
business environment has strengthened our foundation, pivotal in reshaping
Carclo as a premier strategic partner for multicomponent solutions in the life
sciences, precision technology, optics and aerospace markets. Carclo enhances
functionality and performance with our comprehensive offerings, including
design and engineering for moulds, injection moulding, assembly, decorating,
and supply chain solutions. Our sophisticated medical devices, essential
industrial components, and aerospace parts meet stringent safety standards.
Carclo plc is a trusted, one-stop shop dedicated to addressing the complex
needs of our global customers.
Despite significant changes in our organisation, we successfully reduced lost
time incidents. By mandating the reporting of all incidents, near misses and
hazards, we gained more precise insights into health and safety risks. Our
relentless drive for Health & Safety has led to a positive trend in lost
time incidents per 100,000 hours worked (the incident frequency rate). Our
second Carclo Safety Week was highly successful, driving motivation
participation and positively impacting our business.
Carclo faced a number of external challenges during the year, including
continued high inflation and interest rates, supply chain disruptions and
fluctuating raw material costs. We overcame these obstacles through strong
teamwork as One Carclo, leveraging our collective expertise and resilience to
adapt and thrive in a rapidly changing environment. During the year we
continued the implementation of our EMEA restructuring plan, announced the
closures of the Derry and Tucson sites and reallocated the assets initially
installed for the manufacturing contract that did not materialise. Our
strategic focus, rigorous cost management, optimised operational efficiencies
and strong supplier relationships have allowed us to navigate these challenges
effectively. Our investment in advanced manufacturing strategy and
technologies has bolstered our production capabilities, ensuring we remain
agile and competitive in a volatile market.
These efforts have addressed immediate challenges and laid a solid foundation
for sustainable growth and profitability. Our commitment to continuous
improvement and innovation ensures that we can capitalise on future
opportunities and deliver long-term value to our stakeholders.
For FY24, we set out four key priorities to improve performance to achieve our
strategic goals: strengthening balance sheet, maximising asset utilisation,
improving margins over top-line growth, and maximising the value from our
global footprint. Our exceptional team has risen to the occasion and delivered
progress on all fronts.
Strengthening balance sheet: We have fortified our financial foundation
through strict cash management, selective capital investment, improved working
capital positions, and enhanced business performance. These measures have
prepared us to weather economic uncertainties and seize growth
opportunities. As a result, our net debt to uEBITDA leverage in FY24 is now
2x (FY23: 2.5x) and working capital as a percentage of revenue has been driven
close to our target range of 5.0% and 7.0%
Maximising asset utilisation: Our team has effectively realigned our EMEA
operations and made significant strides in the US. The strategic closure of
our short-run facility in Derry and the consolidation of resources and talent
in Pennsylvania, which includes the forthcoming closure of our Tucson site,
have optimised our operations, enhancing our asset utilisation as evidenced by
increased revenue per pound invested in net fixed assets.
Improving margins over top-line growth: In our CTP Division, we have
implemented a range of initiatives to enhance operational efficiencies and
optimise our product mix. We have increased profitability by implementing
factory specialisation, with different facilities focusing on medium and
long-run products. Leveraging advanced manufacturing technologies and
fostering strong customer relationships has improved our margin, enhancing the
value of projects.
Maximising the value of our global footprint: We have leveraged our
international presence to both deliver local service and support our global
customers as well as to drive efficiency and innovation through a number of
strategic actions in FY24. We have implemented factory specialisation for
medium and long runs in the EMEA region, which has streamlined our operations
and improved productivity. In the US we ceased our short-series production,
closing our Derry, NH facility. We are optimising our operations by focusing
production and talent in Pennsylvania, leading to the recently announced
closure of our Tucson facility. We are equipping our facility in Greensburg,
PA, to become an assembly-focused site, resulting in more efficient
specialized operations in the different PA sites, mirroring our successful
EMEA model. The improved Greensburg facility is also our Design &
Engineering (D&E) centre in PA enhancing customer support and serving as a
training hub for our technical talent. We have bolstered our global production
capabilities by reallocating assets strategically and investing in advanced
sustainable manufacturing technologies. These actions ensure we remain
competitive, optimise operational efficiencies and deliver superior value to
our customers. Our global strategy enhances our market position and reinforces
our commitment to continuous improvement and long-term profitability.
Financial overview
In a year of unpredicted challenges and significant victories, we made
significant progress in improving both our financial health and the robustness
of our operations, reflecting the effectiveness of our strategic decisions.
Our Return on Capital Employed ("ROCE") increased from 9.7% in FY23 to 13.1%
in FY24. We delivered an improved contribution margin over last year of 36.0%
on a revenue of £132.7m. Our FY24 underlying EBIT reached £6.6m, marking an
increase of 21.8% from FY23 at a constant exchange rate. Cash generated from
operations grew to £15.6m, up 100.8% against the prior year. We maintained
streamlined operational cash management, resulting in working capital as a
percentage of revenue at 7.9% in FY24 (FY23: 11.0%). Additionally, we reduced
our net debt / uEBITDA from 2.5x to 2.0x in FY24, highlighting the
effectiveness of our debt management strategy.
Strategic achievements and operational highlights
Despite challenging market conditions, Carclo has demonstrated remarkable
resilience and made notable progress across our business units over the past
year. Our core divisions have delivered improved performance, achieved
significant milestones, and driven our success through their dedication,
capability, and innovative approaches.
Divisional Performance: CTP
Design & Engineering ("D&E")
Our Design & Engineering business has thrived, driven by our dedication to
precision and excellence in every customer project. Activity has focused on
"Asset Revitalisation", a distinctive program to support operational
excellence by upgrading existing manufacturing systems, which will continue in
the coming years.
In the US we have invested in our first technology centre and developed
in-house training programmes for process operators, ensuring continuous
education for our team and enhancing our processing knowledge. These
investments have streamlined our operational efficiency and increased client
satisfaction, positioning us for sustainable growth and unmatched value
delivery.
Strategically, we are introducing D&E as a standalone service,
strengthening our market position and unlocking new growth opportunities. The
expanded application of our D&E capabilities allows us to serve a broader
client base and cement our position as precision engineering leaders.
Manufacturing Solutions ("MS")
Our Manufacturing Solutions business has made significant progress in
operational excellence and strategic realignment, despite a 8.3% revenue
decline on a constant currency basis. Including the effect of currency
movements, CTP MS experienced a year-on-year revenue decrease from £116.7 m
to £103.5 m, influenced by several strategic and market factors. The
reduction in revenue was largely due to the cessation of PCR COVID-19 testing,
which impacted our customers' volumes. Additionally, we strategically
curtailed short-run and loss-making business segments, further refining our
focus on sustainable and profitable growth. Although these actions led to a
decrease in sales, they position us for a stronger and more stable financial
future.
The successful execution of our factory specialisation strategy in EMEA has
been pivotal to our improvement performance. By focusing on advanced process
optimisation, we have significantly increased throughput, product quality, and
competitiveness, achieving a structural increase in our Overall Equipment
Effectiveness (OEE) and maintaining a strong asset utilisation of 3.3x. OEE is
our comprehensive metric that evaluates how effectively our manufacturing
operation is utilised by measuring three key components: availability,
performance, and quality. These advancements in OEE have reduced operational
costs and delivery times, benefiting our clients through improved service
delivery and reliability.
Continuing our strategic realignment, we are centralising our North American
assets and talent in Pennsylvania which will further enhance our global
platform. This shift allows us to achieve more significant economies of scale
and foster a more agile production environment, enabling us to adapt swiftly
to market fluctuations and meet evolving customer demands.
CTP Profitability
Focusing on margins, we have achieved an increase in contribution margin
compared to prior year, resulting in a remarkable 28.6% increase in uEBIT for
our CTP business compared to FY23. Our margin improvement demonstrates the
effectiveness of our strategic initiatives and positions us to seize future
growth opportunities. By continuing to drive operational excellence and
strategic alignment, we are well-positioned to strengthen our manufacturing
capabilities and deliver unparalleled value to our customers.
Divisional Performance: Aerospace
Our Aerospace division has achieved record revenue of £7.6m (FY23: £6.6m)
and near-record profits, successfully navigating the post-COVID aerospace
recovery. Growth continues in our high-end engineering and machining product
lines, driven by our development in precision machining techniques. Our strong
performance in Southeast Asia, where we outpaced the high regional market
growth, now accounts for nearly 10% of our aerospace revenue, highlighting our
quality-driven approach.
A key driver of our success is the robust growth in our machined precision
solutions. We are expanding our precision machining capabilities and
infrastructure in both our UK and French site to support this success. These
investments solidify our position as a preferred partner in the aerospace
supply chain, enabling us to deliver large-scale, innovative solutions. By
collaborating closely with our customers, we develop tailored solutions that
provide a competitive edge and strengthen long-term partnerships.
Moving forward, our Aerospace division is poised to leverage its strengths,
adapt swiftly to market changes, and deliver exceptional value to customers
and stakeholders. With record sales, an improving supply chain and targeted
investments, we are well-positioned to maintain our growth momentum, solidify
our leadership in the aerospace niche and expand in the South Asian market.
By continuing to prioritise quality, reliability, and innovation, our
Aerospace division will capitalise on widening its offering in a growing
market and drive sustainable growth. We will further strengthen our industry
relationships, expand our capabilities and deliver cutting-edge solutions that
meet the evolving needs of our global aerospace customers.
Sustainability commitment
Sustainability is a cornerstone of our strategic vision. Over the past four
years, we have improved our CO2e efficiency year by year, reducing tonnes of
CO2e per £1m revenue from 155.3 to 142.6 which is particularly commendable
given the recent 7.5% reduction in revenues. Our commitment to sustainable
practices includes Project Zelda, which is already showing promising results
in improved process and material management-an essential second step in our
journey to operational excellence. Additionally, we have enhanced our Ecovadis
score, moving from the top 49% of companies to the top 35%, reflecting our
dedication to exceeding industry standards.
By investing in greener technologies and renewable energy, and fostering a
culture of sustainability, we drive long-term environmental and social
benefits. Our commitment to sustainability strengthens our market position and
positively impacts the planet, aligning with our goal of delivering superior
value to our customers and stakeholders.
Looking Ahead: strategic focus
As we look ahead, I am excited and optimistic about the opportunities that lie
before us. The team completed the initial steps of building the foundation and
specialising our factories in Asia and EMEA, and the US team is making good
progress on their journey. The improvements we can still make in material and
processing optimisation will be the next step on our long-term journey to
"Lights Out Manufacturing."
Our new procurement organisation is driving a shift towards strategic sourcing
and stronger supplier partnerships. By fostering these collaborative
relationships we anticipate enhanced business performance in the short term
and sustained improvements in the medium term, including increased efficiency,
cost savings and a more resilient supply chain.
In this rapidly evolving digital landscape, we must heighten our vigilance in
control and reporting. To build a system that ensures strategic alignment, we
need to streamline and standardise our business support processes, much like
we have done in our manufacturing operations. By implementing best practices
and driving operational efficiency, we can enhance our ability to respond
swiftly to market changes and deliver consistent, high-quality outcomes for
our stakeholders.
We understand that the rigorous validation processes surrounding our precision
solutions can lead to delays in scaling up new projects and products. However,
we are working on exciting new initiatives to diversify our customer base,
expand into new markets and broaden our product portfolio. While the path to
full-scale manufacturing takes time, we are committed to bringing innovative
solutions to our clients as efficiently as possible.
In the long term, we aim to develop and integrate proprietary technologies and
products to enhance our market offering. While we are excited about the
potential of our focused innovation incubator engine to drive this
development, we do recognise the importance of demonstrating immediate and
tangible growth. By prioritising our medium-term growth initiatives, we aim to
provide confidence to our stakeholders that we can achieve sustainable and
profitable growth while carefully advancing our long-term strategic goals.
This balanced approach reassures stakeholders that we are committed to walking
before we run, ensuring steady progress and minimising risks associated with
the incubator.
Our unwavering commitment to enhancing the customer experience is central to
this strategic vision. We will deliver high-quality products and services that
exceed expectations. Equipped with a great team, a clear strategic vision, and
a robust financial position, we can navigate the challenges ahead and emerge
as a more vital, resilient organisation. Our steadfast dedication to our
customers and employees will be crucial to our success.
With this multifaceted approach, I am confident that we will solidify our
position as an industry leader in the medium to long term and continue to
create value for all our stakeholders. I look forward to embarking on this
journey together and achieving great things.
Outlook
In the short term we remain focused on building the strong foundation for our
business. We expect that we will continue to deliver margin expansion in
FY25, as we see the benefits of our US manufacturing rationalisation and
improvement programme. This margin expansion is anticipated to continue into
FY26 as we see the full year benefits of our operational optimisation process,
continuing our journey toward our strategic goals of 10% return on sales and
25% return on capital employed. We will focus on disciplined cash management
and anticipate that we will again deliver strong operational cash conversion
in FY25.
In the medium to long term, as we move into the expansion phase of our
strategic plan, we anticipate delivering strong top line growth driven by both
exposure to structural growth markets and growing our share of wallet. As we
grow, we will maintain our capital and operational discipline to ensure this
is converted into strong earnings growth to deliver long-term value creation
for all of our stakeholders.
Closing remarks
In closing, I am deeply grateful for the unwavering dedication and hard work
of our Carclo team. Their commitment has been instrumental in driving our
achievements.
To our valued shareholders and customers, your continued trust and support are
the fuel that powers our relentless pursuit of excellence. Together, we look
forward to a future filled with boundless opportunities and groundbreaking
innovations. Thank you once again for your steadfast support. Your partnership
inspires us to reach new heights and create lasting impact.
Frank Doorenbosch
Chief Executive Officer
Finance Review
This year was one full of challenges which drove innovation in response to
them, creating the focus on internal self-help to put the business on a sound
footing for the future, as evidenced by the greatly improved performance in
the second half of the financial year.
The lower demand by key customers for PCR testing and lost business in FY23
impacting the base business for FY24, resulted in lower revenues of £132.7m
against last year's £143.4m. The impact of currency movement was marked,
being a £4.5m decrease on the prior year comparative.
Of the £132.7m achieved, £5.9m relates to work not transferred from sites
closed or being closed which, in effect, lowers the base level of revenue as
we start the new financial year.
The underlying operating profit came in at £6.6m, compared to £5.9m (or
£5.5m at constant currency) in the prior year. The prior year also benefited
from foreign exchange gains of £0.9m. Return on revenue was 5.0%, increasing
by 0.9 of a percentage point over 4.1% last year. The increase in
profitability was due to the actions implemented by our advanced process
optimisation programme increasing asset utilisation, improved pricing
processes, better purchasing and the drive to reduce waste, which increased
contribution margins, which were up by 4.0 percentage points to 35.9%.
Overheads were slightly up at £40.9m (FY23: £40.0m). The second half
underlying operating profit was £4.4m, representing a marked increase on the
first half of FY24 of £2.2m, resulting in £6.6m for the full year.
Exceptional net costs for the year amounted to £4.9m, compared to £4.7m in
FY23. The cash cost of these was £0.6m compared to £2.2m in the prior year.
Exceptional costs comprised £3.4m rationalisation costs incurred in CTP for
site closures and related asset impairments, as well as other, largely
employee related central costs, £1.0m past service cost in respect of
retirement benefits GMP equalisation, £0.4m net costs in respect of the work
commenced to re-finance the Group, £0.2m net costs arising from cancellation
of the OEM customer supply agreement in the prior year, £0.1m inventory
provision relating to a customer who has ceased trading, less £0.3m credit
for the release of a legacy health-related provision that is now settled.
Statutory operating profit is up £0.6m on prior year to £1.8m (FY23:
£1.2m).
Net finance costs increased by £1.8m to £5.6m (FY23: £3.7m), this includes
the imputed net interest on the defined benefit pension liability of £1.8m
(FY23: £0.7m). Finance expense has increased despite a reduction in average
net debt. Interest on bank loans and leases has increased as a result of sharp
increases in base rates, with the average UK base rate in FY24 being 5.0%
compared to 2.3% in FY23. Pension interest, although largely non-cash, has
surged year on year, as a reduction in discount rates adversely impacts
liabilities to a greater extent than assets are benefited.
Taxation credit for the year was £0.5m (FY23: £1.4m expense).
Statutory loss after tax was £3.3m (FY23: £4.0m) on continuing operations,
giving a statutory loss per share on all operations of 4.5 pence (FY23: 5.4
pence).
Underlying profit after tax was higher than prior year at £0.8m (FY23:
£0.3m), giving an underlying earnings per share of 1.1 pence (FY23: 0.4
pence).
As we deliver on our strategic priorities, we will continue to report those
KPIs which we consider best demonstrate the progress being made towards
achieving our strategic goals.
Financial Position
Net Debt
During the year, we redirected our investment in capital expenditure towards
those with a rapid payback, focusing on our continuous improvement strategy
aimed at supporting asset performance and utilisation. Tangible additions were
£7.5m (2023: £5.8m) mainly in support of major customer programmes. Of this
investment, £4.6m (FY23: £3.5m) was delivered via leasing.
Following the shift in strategic focus, improvements in our cash generation
have reduced net debt. Net debt, including IFRS16 lease liabilities, decreased
in the year by £4.9m to £29.5m (FY23: £34.4m). Net debt excluding leases
decreased £4.2m to £18.3m (FY23: £22.5m).
Cash
Cash generated from operations was £15.6m and 100.8% higher than the prior
year (FY23: £7.8m), reflecting the change in strategy from a focus on
top-line growth to cash generation via operational improvements and robust
working capital control. Efficient management of working capital was a key
contributor to cash performance and will continue to be our focus moving
forward.
The focus on cash management resulted in a working capital turnaround benefit
of £5.8m; with the current year working capital reducing by £4.6m against a
prior period increase of £1.2m. Net cash outflow from investing activities
during the year was £2.4m (FY23: outflow £0.8m) driven by £2.9m for capital
investment in adapting production lines and facilities to improve operating
performance in FY25 and beyond.
Net cash outflow from financing activities during the year was £12.1m (FY23:
£4.7m), comprising £3.7m repayment of lease liabilities (FY23: £4.1m) and
net repayment of other borrowings of £8.5m (FY23: £0.6m). There was an
overall £4.4m reduction in cash during the year (FY23: £2.0m).
Cash generated by the Group was principally utilised to make
capital investment and lease repayments, pension deficit repair
contributions, scheduled and unscheduled bank loan repayments and interest
payments.
Debt
Total debt decreased by £9.3m during the financial year to £35.4m. It was
reduced by £5.1m repayments of term loans (of which £3.7m were unscheduled),
£3.2m repayment of the revolving credit facility, £3.8m repayments of lease
liabilities and other loans, £1.3m lease remeasurement and £0.6m from
positive foreign exchange movements. It was increased by £4.6m from new lease
debt.
Bank facilities
On 5 July 2024, the Group successfully extended the facilities with the
Company's lender for the multicurrency term and revolving facilities agreement
to 31 December 2025.
The debt facilities available to the Group on 31 March 2024 comprise term
loans of £24.0m, denominated in sterling 9.2m, in US dollar 13.3m and in euro
4.9m. Of the sterling loan, £2.3m will be amortised by 31 March 2025 and
£3.8m will be amortised in the period between 31 May 2025 and 30 November
2025 before the balance becomes payable by the termination date, 31 December
2025. The facility also includes a £3.5m revolving credit facility,
denominated in sterling, maturing 31 December 2025. The revolving credit
facility was largely repaid in the period, leaving an amount drawn at 31 March
2024 of £0.3m (2023: £3.5m).
Moving forward, the Group remains committed to prioritising the strengthening
of its balance sheet and seeking alternative sources of financing. We will
continue to closely monitor market conditions and work proactively with our
bank to ensure our ongoing financial stability and success.
Segmental Overview
CTP division
CTP revenue of £125.0m was down 8.6% (5.5 % at constant currency) (FY23:
£136.8m) with underlying volumes lower due to lower demand for PCR testing
and lost business in FY23.
CTP divisional operating profit before exceptional items was £9.4m, £2.1m up
on the prior year (FY23: £7.3m), reflecting the benefits of the EMEA
restructuring and the start of restructuring in the US. Resulting underlying
operating profit return on revenue grew to 7.5% (FY23: 5.4%).
The CTP business principally operates in three key market sectors: Life
Sciences, Precision Components and Optics. The Life Science segment
experienced a marked fall in healthcare demand during the year, particularly
in North America which is exposed to the larger life science analytics market.
New product development activity remained high and is set to improve demand in
the medium to long term. Demand in our traditional optics market of eyecare
and aftermarket car-lighting significantly reduced, reflecting the constraints
that consumers have seen as the cost-of-living increases. However, the
products maintain a high contribution margin on the lowered activity level.
Cost reductions are being implemented which improved profitability in the
second half, with this improved performance expected to continue into the new
financial year and beyond. In the US, this included the strategic closure of
our facility at Derry and the start of the closure of our Tucson facility,
transferring production to our sites in Pennsylvania.
CTP Design and Engineering activity grew markedly with revenue at £21.6m, up
7.4% compared to the prior year (FY23: £20.1m). CTP Manufacturing Solutions
revenue was down 11.4% to £103.5m (FY23: £116.7m).
New control processes have been implemented to mitigate the impact of material
price inflation. Business is being transferred to the APAC region and local
marketing and sales activity has generated new business there. The EMEA region
has implemented new energy efficiency initiatives, and the current focus is on
improving the cost base and efficiency of the business' US operations. This
had a significant positive impact on the performance in the second half of
this financial year. Loss making operations, which have been closed or are in
the process of being closed, reported an operating loss in the year of £0.8m.
Aerospace division
In the Aerospace sector, we saw an impressive growth in revenue to a record
level of £7.6m, growth of 15.1%, compared to £6.6m in FY23. This reflects
increased demand as new airframes are being built, with build programmes
recommencing after the COVID-19 lockdown, and new business won in South Asia.
The business has a solid reputation for product quality. These factors drove
operating profitability of £1.7m for the year, up by 11.8% on the prior
year's £1.5m, overcoming the inflation challenges seen in all businesses. Our
strategy to strengthen and deepen relationships with existing customers with
exploration for new customers is achieving payback.
Central costs
Central costs increased by £1.6m to £4.5m, pre-exceptional costs, largely
due to the non-repeat of significant foreign exchange gains in the prior year
and investing in stronger leadership of the company. We will continue to seek
ways to streamline our central expenses without compromising the quality of
service we deliver to the business.
Defined benefit pension scheme actuarial valuation
The last triennial actuarial valuation of the Group pension scheme was carried
out as at 31 March 2021. This reported an actuarial technical provisions
deficit of £82.8m. The statutory accounting method of valuing the Group
pension scheme deficit under IAS 19 resulted in an increase in the net
liability to £37.2m as at 31 March 2024 (2023: £34.5m).
Over the year, the Group's contributions to the scheme were £3.5m (2023:
£4.1m).
The pension maintains a 60% liability hedge via Liability Driven Investments
("LDI") and bond holdings.
Disclosures under IAS19 may be volatile from year-to-year. This is because the
liabilities are measured by reference to corporate bond yields whereas the
majority of the Scheme's assets are invested across a variety of asset classes
that may not move in the same way.
Treasury
The Group faces currency exposure on its overseas subsidiaries and on its
foreign currency transactions. In addition, as set out in the principal risks
and uncertainties as presented in the annual report and accounts, the plc is
reliant on regular funding flows from the overseas subsidiaries to meet
banking, pension and administrative commitments. To manage this complexity, we
have enhanced the Group's management of cash, debt and exchange risks by
strengthening our treasury function.
The Group reports trading results of overseas subsidiaries based on average
rates of exchange compared with sterling over the year. This income statement
translation exposure is not hedged as this is an accounting rather than cash
exposure and as a result the income statement is exposed to movements in the
US dollar, euro, renminbi, Czech koruna and Indian rupee. In terms of
sensitivity, based on the FY24 results, a 10% increase in the value of
sterling against these currencies would have decreased reported profit before
tax by £0.8m.
Dividend
Under the terms of the extended bank facilities agreement, the Group is not
permitted to make a dividend payment to shareholders up to the period ending
31 December 2025.
Alternative performance measures
In the analysis of the Group's financial performance, position, operating
results and cash flows, alternative performance measures are presented to
provide readers with additional information. The principal measures presented
are underlying measures of earnings including underlying operating profit,
underlying profit before tax, underlying profit after tax, underlying EBITDA
and underlying earnings per share.
This results statement includes both statutory and adjusted non-GAAP financial
measures, the latter of which the Directors believe better reflect the
underlying performance of the business and provides a more meaningful
comparison of how the business is managed and measured on a day-to-day basis.
The Group's alternative performance measures and KPIs are aligned to the
Group's strategy and together are used to measure the performance of the
business and form the basis of the performance measures for remuneration.
Underlying results exclude certain items because, if included, these items
could distort the understanding of the performance for the year and the
comparability between the periods. A reconciliation of the Group's non-GAAP
financial measures can be found below.
We provide comparatives alongside all current year figures. The term
"underlying" is not defined under IFRS and may not be comparable with
similarly titled measures used by other companies.
All profit and earnings per share figures relate to underlying business
performance (as defined above) unless otherwise stated. A reconciliation of
underlying measures to statutory measures for FY24 is provided below:
£000 Statutory Exceptional items Underlying
Continuing operations:
CTP operating profit 6,158 (3,259) 9,417
Aerospace operating profit 1,649 (50) 1,699
Central costs (6,017) (1,548) (4,469)
Group operating profit from continuing operations 1,790 (4,857) 6,647
Net finance expense (5,587) - (5,587)
Group (loss) / profit before taxation from continuing operations (3,797) (4,857) 1,060
Taxation credit / (expense) 498 743 (245)
Group (loss) / profit for the period (3,299) (4,114) 815
Basic (loss) / profit per share (pence) (4.5)p (5.6)p 1.1p
The exceptional items comprise:
£000 Group(1)
Rationalisation costs (3,360)
Past service cost in respect to retirement benefits (1,020)
Refinancing costs (433)
Net costs arising from cancellation of future supply agreement (188)
Settlement / (costs) in respect to legacy claims 284
Doubtful debt and related inventory provision (140)
Total exceptional items (4,857)
1. There were no exceptional items in respect to discontinued operations
in the year to 31 March 2024.
Post balance sheet events and going concern
Post balance sheet events
On 5 July 2024 the Group's lending bank extended the committed facilities to
31 December 2025.
Notice was given to the landlord on 12 April 2024 that the company would
exercise the break option to exit the leased buildings at Tucson, Arizona, USA
on 1 October 2025 following the decision to close the facility at Tucson.
The reduction in the lease liability of £1.3m has been reflected in the
balance sheet at 31 March 2024 as the company was certain to exit on closure.
Going concern
The financial statements are prepared on the going concern basis.
On 5 July 2024 the Group's lending bank extended the committed facilities to
31 December 2025. Since the year end, the Company has commenced a process to
refinance the existing term loans and revolving credit facilities in order to
provide the strategic funding for the next phase of the business
development. Other than mentioned, since the year end there have been no
significant changes to the Group's liquidity position.
As part of the original bank financing in August 2020 the Group became subject
to four bank facility covenant tests. The quarterly covenants, and levels, to
be tested are:
· underlying interest cover (minimum 1.45 in March 2024, increasing
to 2.60 by December 2025);
· net debt to underlying EBITDA (2.75 maximum);
· core subsidiary underlying EBITA (50% minimum); and
· core subsidiary revenue (75% minimum).
Core subsidiaries are defined as Carclo Technical Plastics Ltd; Bruntons Aero
Products Ltd; Carclo Technical Plastics (Brno) s.r.o; CTP Carrera Inc and
Jacottet Industrie SAS, with CTP Taicang Co. Ltd and Carclo Technical Plastics
Pvt Co Ltd being treated as non-core for the purposes of these covenants.
A schedule of contributions is also in place with the pension trustees with an
agreed £3.5m to be paid annually until 31 October 2039. Additional
contributions also agreed are 26% of any FY25 surplus over underlying EBITDA
of £18m.
The Group is subject to a number of key risks and uncertainties, as will be
detailed in the principal risks and uncertainties section below. Mitigation
actions are also considered in this section. These risks and uncertainties
have been considered in the base case and severe downside sensitivities and
have been modelled accordingly.
The Directors have reviewed cash flow and covenant forecasts to cover the
period of at least twelve months from the date of signing these consolidated
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.
The base case forecast includes assumptions around revenue, margins, working
capital and interest rates. The sensitivity analysis has considered the risks
facing the Group and has modelled the impact of each in turn, as well as
considering the impact of aggregating certain risk types and shows that the
Group is able to operate within its available facilities and meet its agreed
covenants as they arise. Furthermore, 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 revenue of 3%
matched by a corresponding fall in cost of sales of the same amount, and
interest rate risk. Under these scenarios the Group would continue to meet
minimum covenant requirements, although with minimal headroom under these
scenarios in the next 12 months. The downside testing did not allow for the
benefit of any action that could be taken by management to mitigate the impact
of the scenarios. Using the base case forecast the minimal underlying
operating profit headroom, observed on the underlying interest cover covenant,
would be £0.8m. This suggests that a £16m drop in revenue or a 12% drop in
underlying operating profit would result in a breach of covenants.
The Group is not exposed to vulnerable sectors or vulnerable countries but is
dependent on certain key customers, which create risks and uncertainties.
These risks and uncertainties and the mitigating actions being taken will be
covered in detail in the principal risks and uncertainties section of our
annual report and accounts.
On the basis of this forecast and sensitivity testing, the Board has
determined that it is reasonable to assume that the Group will continue to
operate within the facilities available and will be able to adhere to the
covenant tests to which it is subject throughout at least the twelve-month
period from the date of signing the financial statements.
Accordingly, these financial statements are prepared on a going concern basis.
Eric Hutchinson
Chief Financial Officer
Principal risks and uncertainties
Carclo defines risk as uncertainty, whether positive or negative, that will
affect the outcome of an activity or intervention.
The Group operates a risk management framework to direct and control the
organisation with regard to risk.
Carclo's appetite for risk is categorised across the Strategic, Operational,
Financial and Compliance risk categories of the business and is set out below.
This operates as a guide to management as to appetite levels in approaching
risk to help set priorities and levels of focus.
Risk category Risk appetite Description
Strategic Moderate The Group is prepared to take moderate risks to realise its ambitions. In
doing so, we aim to strike a balance between our socio-economic role (low risk
acceptance) and our commercial targets (higher risk acceptance).
Operational Very Low The Group focuses on ensuring the efficiency and continuity of business
activities. We aim to reduce the risks that threaten this continuity as much
as possible. In the area of safety and security, we do all we can to avoid
risks that could put our customers, internal and external employees or
visitors in danger. Therefore, our risk acceptance in this regard is very low.
Financial Low We aim to maintain a solid financial position in order to provide stability
and value add to our stakeholders including shareholders, our bank, the
pension scheme trustees, our suppliers, and customers, who are all connected
to the Carclo chain. The Group is not prepared to take risks that could
jeopardise its credit ratings or harm its key financial relationships.
Compliance Zero The Group strives to comply with all applicable laws and regulations, with a
particular focus on safety and security, environmental, competition, tendering
and privacy/information security laws.
The Board is responsible for creating the framework for the Group's risk
management to operate effectively and for ensuring risk management activities
are embedded in Carclo processes. The Board is also responsible for ensuring
that appropriate and proportionate resources are allocated to risk management
activities. The Board undertakes risk management to improve its understanding
of the actual and potential risks to our business as well as its resilience,
performance, sustainability and success, to enable it to assess and respond to
new opportunities as they arise and to provide fair and balanced information
to shareholders and potential shareholders.
The Board has carried out an assessment of the principal risks facing Carclo
plc, including those that would threaten its business model, future
performance, and overall viability. This section on principal risks and
uncertainties details these risks and explains how they are being managed or
mitigated.
When assessing risk, the Board considers both external (arising from the
environment in which we operate) and internal factors (arising from the nature
of our business and its internal controls and processes).
Management is accountable to the Board for monitoring the system of internal
control and for providing assurance to the Board that it has done so.
An essential part of the risk management framework is for management to
monitor the framework's operation in order to provide assurance throughout the
management organisation and to those responsible for governance that it is
operating effectively.
Management is continually enhancing processes for ensuring that the risk
management stages such as event identification, risk assessment, selection of
responses and risk reporting are working.
This includes managers giving attention to ensuring that risk registers are
being updated for new or changing risks and that internal controls are being
adapted and developed where necessary.
Local management takes ownership of the specific risks relevant to their
sphere of operations with the likely causes and effects recorded within the
risk register held at site level, with corporate risks being identified within
the Group Executive Committee. The risks are scored based on likelihood and
severity to enable any significant risk to be readily identified and the
appropriateness of mitigations to be considered. The risk registers are
reviewed, challenged and debated to keep them up to date and relevant to our
strategy. Risks are escalated as appropriate.
During the year all the key risks identified by the sites were evaluated and
aggregated, with the highest risks reviewed in detail at the Group Executive
Committee meetings. This Committee then proposed the risks that it considered
key to the running of the business for evaluation at the Board meeting.
The Board carried out a review of effectiveness which concluded that the risk
management process that had been in place during the year was operating as
documented and continued to be appropriate.
A risk schedule is tabled at Audit & Risk Committee and / or Board
meetings at regular intervals, allowing the Directors to discuss the key risks
currently identified alongside their mitigations and status of actions. This
also includes emerging risks as identified at Group Executive Committee and
Board meetings and instances of incurred losses against identified risks to
enable assessment of the appropriateness of the mitigations.
The efficiency and effectiveness of existing internal controls will
continually be challenged to improve the risk management framework.
The responsibilities of the Audit & Risk Committee will be detailed in the
FY24 annual report and accounts. These responsibilities include the reviewing
of the Group's risk management systems. These are primarily designed to
mitigate risk down to an acceptable level, rather than completely eliminate
the risk, and the review can provide only reasonable and not absolute
assurance of effective operation, compliance with laws and regulations and
against material misstatement or loss.
The Group's management is responsible for the identification, assessment,
management and monitoring of risk and for developing, operating and monitoring
the system of internal control. The Audit and Risk Committee receives reports
from management on the effectiveness of those systems it has established.
Listed below are the most significant risks that may affect the Group,
although there are other risks that may occur and impact the Group's
performance.
Risks Mitigation
1. Treasury risk (funding, liquidity, foreign exchange ("FX"), and banking and
pension covenants)
Change: increased
On 5 July 2024, the Group successfully agreed with the Company's bank to Funding and liquidity planning and monitoring:
extend the Company's facilities to 31 December 2025.
Group management monitors liquidity across all regions through a rolling
13-week cash forecast and over the medium term through annual three-year
forecasting and regular in-year reforecasts.
At 31 March 2024, total UK bank facilities were £27.5m, of which £3.5m
related to a revolving credit facility (maturing on 31 December 2025) and
£24.0m in term loan facilities which expire on 31 December 2025.
Since the inception of the bank facility in August 2020 the Group has made
capital repayments of £10.4m up to the period ending 31 March 2024. The Group
intends to continue to make scheduled repayments when due and to further
There are covenants over interest cover, net leverage, core subsidiary revenue accelerate repayment of the bank debt through additional unscheduled capital
and core subsidiary EBITA in respect of the agreed £27.5m committed debt repayments, on an event‑driven basis.
facility. These are tested quarterly.
Group cash headroom at 31 March 2024 against bank facilities was £9.2m and
In terms of foreign exchange ("FX") risk, Carclo plc has sterling, dollar and net debt excluding lease liabilities was £18.3m.
euro denominated bank debt and sterling debt for the pension scheme. There is
a risk that insufficient income may be generated in foreign currencies, which
could impact the Group's ability to service the bank and pension liabilities.
Bank and pension covenant compliance monitoring:
The Group maintains a regular dialogue with both the bank and the pension
Strengthening of sterling against the subsidiaries' functional currencies scheme trustees. Covenant compliance is reported monthly to the bank and
creates a downside risk to P&L forecasts. pension scheme trustees in tripartite reports and is reviewed alongside Group
performance regularly in tripartite quarterly management meetings with the
Chief Executive Officer and Chief Financial Officer.
Potential interest rate increases could also increase debt servicing costs by
approximately £0.1m for each 0.25% interest rate increase.
Agreed bank and pension covenants have been met continuously since
establishing the initial £38m bank debt facilities in August 2020.
Volatility in performance has resulted in exposure to credit risk due to
uncertainty in supporting financial covenants combined with the full year
increasing cost of servicing debt. Management of FX exposures:
Divisional FX hedging accountability
The majority of the Group's earnings are now generated overseas, with the plc FX risk is managed at subsidiary level through natural hedges or forward
itself non-trading and therefore requiring regular funding as a cost centre contracts where the FX commitment timing and quantum is known and material.
entity with committed bank and pension debt repayments. If there was Subsidiary-level risk management has been effective to date with relatively
insufficient ability for overseas subsidiaries to repatriate cash to the plc minor exchange gains and losses recognised at subsidiary level.
then it could create a liquidity shortfall.
Group FX hedging policies are in place
These are set out in the Group finance manual to help mitigate FX exposure in
central treasury with reference to latest currency cash flow and financial
forecasts.
Individual material FX cash flow hedging is applied where significant FX
exposure may arise, such as from large capital or project spend or sale
contracts, or where significant cash repatriations are assessed against net FX
cash current and forecast positions to determine whether hedging is
appropriate.
Multi-currency bank debt hedging in place
USD 13.3m and EUR 4.9m of debt is held in currency, providing a hedge over
parts of the Group's net investment in foreign operations.
Interest rate management:
The Group uses forward yield curves to forecast interest as part of its
three-year planning process and runs sensitivities around increasing interest
rates.
Over the three-year plan period the Group is targeting significant additional
capital repayments on its debt facilities. Although finance costs are
anticipated to increase in the short term due to recent market interest rate
increases, the reduction in debt will bring future finance cost benefits.
Monitoring:
The Group generally aims to generate sufficient cash to cover holding company
funding requirements, although there may be timing shortfalls to forecast,
monitor and resolve with funding where needed.
The Group monitors liquidity Group-wide by country through a rolling 13-week
cash forecast and over the medium term through annual three-year forecasting.
Inter-company charge processes in place:
Cash is regularly remitted to the UK from subsidiaries via dividends,
royalties and management service recharges, such as IT, Group finance and
management, as well as from intra-group loans.
Subsidiaries regularly forecast their available cash to remit over the short
and medium time horizons, allowing UK liquidity to be planned and managed.
Support from professional tax and treasury advisors:
External advisors provide appropriate technical and legal guidance on
inter-company trading, management charges and managing the appropriate and
effective payments and receipts of inter-company cash.
Risks Mitigation
2. Operational execution risk and management bandwidth/dependence on key
individuals
Change: unchanged
CTP is currently going through a period of change as it focuses on the Regular risk reviews:
delivery of significant improvements in operational performance. This includes
a number of critical re-structuring projects which if not executed well will The Group has developed an enhanced focus on site-level risk management.
absorb management time, impact customer relationships and hinder forecast Frequent management reviews between risk owner and reporting managers are
earnings growth and cash generation. conducted.
Continued scarcity of labour globally, but in particular in the US, may impact Succession planning:
the Group's ability to execute both projects and production.
The Group has commenced the roll-out of formal succession planning across all
management to identify and mitigate the highest risks for cover and succession
and implement plans to reduce the risk of significant business impact from key
There are some key members of management with significant experience of the dependent loss.
business and upon whom the Group particularly relies. There is a continuity
risk in the case that any of these individuals decide to leave the Group.
Operational excellence:
The Group is putting an increased focus on operational excellence to ensure
that the operational execution risk is minimised. This involves investment in
both people and systems to ensure that the business meets both the needs of
its customers and also maximises the efficient usage of its assets. Delivery
of key restructuring projects is regularly monitored, and the Board is kept
appraised on progress to ensure projects are delivered on time and on budget.
KPI reporting and regular local and Group management monitoring:
Performance execution is managed via enhanced focus on management of risks at
a local level, regular and frequent management reviews between risk owners and
reporting managers and the use of operational KPIs reporting and monitoring.
Risks Mitigation
3. Supply chain disruption and political uncertainty, leading to increasing
input costs and extended lead times
Change: unchanged
The disruption as a legacy of the pandemic on global industries with diverse Process:
supply chain dependencies such as Carclo continues, with increased supplier
costs, delays, shortage of labour and materials resource having a significant The Group Executive Committee and local management monitor and review relevant
impact on costs, profitability and customer service for the Group alongside supply chain risks and political and trade developments regularly, using input
many industries. from advisors as appropriate, and establish action plans and strategies
accordingly, while engaging with trade associations and government bodies.
Furthermore, political uncertainty such as the Russian invasion of Ukraine,
war in Gaza and heightened risk of wider conflict threatening supply chain Increasing risk level:
routes, and other overseas trade issues such as US and China trade tariffs can
naturally affect decisions by our customers to invest and therefore impact on Supply chain difficulties and increased costs continued throughout 2023,
our trading in those locations. particularly with regard to energy supply. Current uncertainties around the
supply of petroleum-based material means that Carclo continues to work
tactically and specifically with priority areas of the supply chain and
customer delivery to minimise supply disruption, net cost impact, and customer
shortfalls in delivery. Post-pandemic materials and labour shortages,
subsequent higher cost, and greater delays in order fulfilment exacerbated by
the war in Ukraine continue to challenge companies, including Carclo.
Offsetting opportunities:
Management is putting an increased focus on operational effectiveness and
efficiency to mitigate the effects of these challenges. Robust processes
have been put in place to respond to price inflation in a timely manner.
Risks Mitigation
4. IT security breach, systems failures
Change: increased
Hacking and ongoing data security risk is a concern for businesses everywhere. Security frameworks:
For listed companies like Carclo the risk increases. There has also been a
substantial rise in cyber-criminal activity such as ransomware and trojan Carclo uses a security password‑protected firewall to help minimise the risk
deployment and an increase in sophistication and frequency of attacks has been of fraudsters hacking into the system,and has a number of security solutions
seen. Stakeholders and insurers are increasing the thresholds required of to monitor and protect its users and maintains its systems with up-to-date
cyber security greatly, and increased turbulence in the global economy has versions of all its major applications.
further heightened the risk of unwanted systems breaches.
During the last twelve months the Group has implemented a comprehensive suite
Our IT systems process immense data volumes each day. These systems contain of cyber protection software firewalls. Cyber controls have been put in place
confidential information about our customers, employees and shareholders. A and are monitored closely and significant levels of cyber security training
breakdown or system failure may lead to major disruption for the businesses continue to be carried out across the Group. Multi-factor authentication has
within the Group, especially if network access is lost. been implemented across all Group sites.
Breaches of IT security may result in unauthorised access to or loss of Multi-level security and review:
confidential information, breaches of government data protection legislation,
loss or stoppage of the business, reputational damage, litigation and IT management undertakes regular risk reviews to keep data secure and
regulatory investigation or penalties. construct a layered environment that provides a countermeasure to the varying
forms of cyber-attacks. Multiple security applications, layers of back-up,
limiting access to core systems and restructuring IT in-house skill to
proactively respond to emerging cyber threats are some of the countermeasures
Systems failure impact can have significant operational and financial now activated.
ramifications if connection is unable to be restored quickly.
Accelerating cloud-based systems and security migration:
Limited cyber breaches have resulted in the exploitation of internal control
weakness through an intense social engineering fraud. The weakness exposed was As part of the Group's new IT strategy the Group is accelerating migration to
a lack of oversight regarding the change to bank account details for supplier cloud-based systems and security for underpinning protection of Group systems
payments. False information led to the transfer of legitimate payments to a as well as cost-efficiency and effectiveness.
fraudulent bank account, whilst some money was recovered through the banking
system and the crime insurer made a settlement for part of the loss the
company still suffered a financial loss.
Reducing Disaster Recovery lead times:
The business has a defined Disaster Recovery process. Previous targets for
full recovery in five days are now being superseded by new solution plans to
roll out 24-hour data recovery and return to operations, which is tested each
year.
Risks Mitigation
5. Reliance on major customers and credit risk
Change: unchanged
Management is putting an increased focus on operational excellence to ensure
that the Group retains its key customers through class-leading cost, quality
A substantial part of the Group's revenue is concentrated in a relatively and delivery. The Group has long-standing positive relationships with its key
small number of large customers. Details in relation to concentration risk customers and the high levels of investment the Group has made in both
have been disclosed in note 3 of the FY24 annual report and accounts: segment production equipment and process know-how help to ensure the longevity of
reporting. Any underperformance could lead to the loss of existing or future those relationships.
business with the customer. Further, other competitive factors or changes in
customer behaviour could lead to a significant loss of revenue. Pressures from
price increases required to offset the post-pandemic input cost inflation
impact across the business and international economies could trigger Diversification of business is being sought longer term where concentration
opposition from customers and destabilise the relationship. levels are most high, such as India. This will take time to develop.
The largest concentration of customer risk is at the India plant with Credit risk has been reduced significantly by gaining credit insurance cover
predominantly one large global customer. in the financial year for the whole Group, including notably India and China,
where previously credit insurance cover was absent or limited.
We have a major end customer of the Aerospace business, who along with the
rest of the sector experienced a downturn in the aerospace market due to the Our policy has been to focus on major customers who are blue-chip
pandemic. Orders are however now recovering strongly as air travel increases multi-nationals operating in the medical, electronics and aerospace markets,
and aircraft build rates are reverting to more normal levels. providing a degree of credit protection from strength, size and reputation.
Risks Mitigation
6.
Pensions
Change: unchanged
Carclo's UK defined benefit pension scheme, having long since closed to new Trustee liaison:
entrants, is mature and large compared with the size of Carclo.
The Group fully engages with the scheme via the Chair of the Trustees, who is
responsible for the development of a strategy to proactively manage assets,
liabilities and administrative costs of the scheme.
Whilst the interests of the Group and the pension fund trustees are aligned in
agreeing an affordable schedule of deficit repair contributions, there is
always some element of risk that this will not be
Trustee regular monitoring:
achieved. Therefore, there remains a risk that the Pensions Regulator may
impose conditions on the Group that the Directors deem to be unaffordable. Regular review of the pension scheme and Company position is conducted
currently in the form of tripartite meetings between the bank, the trustees
and the Company.
The Group expects it will be able to make the payments set out in the schedule
of contributions.
Deficit reduction initiatives:
The Group works with the trustees on deficit reduction initiatives. The Group
The PPF levy is a tax on the scheme's net liability driven by the Group's offers eligible pensioners the option to switch from a pension with
credit risk. Any change in this cost would be recognised in the Group income indexed‑linked pension increases to a higher fixed pension with no future
statement and whilst it would be settled out of scheme assets, thus protecting increases. The Company has also introduced a Bridging Pension Option
the Group's cash, it diminishes the deficit reduction effect of the Company's
contributions. which reduced the accounting (IAS 19) calculation of the scheme deficit and
may also reduce the scheme liabilities on the trustees' technical provisions
basis.
PPF levy management:
The Group continues to liaise with advisors and the scheme's Chair in respect
of PPF levy management and other opportunities which can help benefit members
and scheme liabilities.
Enterprise value growth:
Group management, with the support of the bank and scheme, is focused
primarily on growing Group enterprise value to reduce the deficit relative to
the size of the Group. The Group has presented its budget and long-term plans
to the scheme and the bank.
Investment strategy:
The Company has participated in Trustee Board changes made to the scheme's
investment management. The Trustee Board has adopted an investment strategy
with some risk to enable asset growth to help reduce the scheme's deficit.
The Trustees elected to reduce the level of the hedged technical provisions
liability to 60% to help avoid the risk of hedges becoming unsupportable
should gilt yields rise again. As a further stability measure, the scheme also
maintains "cash flow matching" bonds covering a large proportion of the
expected pension outflows for the next nine years.
Risks Mitigation
7.Climate-related risks
Change: unchanged
The current global warming that is occurring brings an increased number of Governance:
risks (and opportunities) to the Carclo Group, which, if not managed
correctly, could have a major impact on Carclo's operational and financial To ensure that Carclo complies with regulatory requirements and also uniformly
outcomes and could lead to significant reputational damage. addresses the significant risks and opportunities that climate change is
bringing, Carclo has set up a governance structure to provide central control
with appropriate delegation of authority to mitigate the risks posed.
Strategy:
Our strategy involves engaging with stakeholders to better understand how the
risks and opportunities are beginning to manifest themselves in the everyday
operations of our factories and how best we might deal with them. We have also
appointed an external climate consultancy to undertake a thorough risks and
opportunities assessment to ensure that we align with regulatory requirements
and can, at the same time, de-risk our business.
Risk management:
Each business has been asked to identify risks and opportunities associated
with climate change within their areas and these are then collated and
considered centrally to ensure a complete and uniform approach to risk and
opportunities management.
Metrics and targets:
Carclo is a relatively large user of energy, with its associated climate
connotations. We have appointed an external climate consultancy to define
appropriate metrics and targets for each area of the Group to help meet
climate obligations. The Board, through the governance structure that has been
set up, will review the consultancy's work and seek to implement their
recommendations to significantly improve our intensity ratios over a period of
time.
Risks Mitigation
8. Future global pandemics
Change: unchanged
The COVID-19 pandemic was an unexpected shock to the global economy and Whilst there is nothing specific that can be done to prevent a future global
economic activity pandemic at a Company level, Carclo has learned how to continue to work,
albeit at a reduced output, during the COVID-19 pandemic and is now far better
was suppressed globally. Differing approaches taken by different governments placed to deal with a future pandemic than was the case in early 2020.
in response to virus mutations, outbreaks and waves, including lockdowns and
shutting non-critical industry, created huge disruption to globalised supply
chains.
Home working, where possible, segregation of factory operatives, self-checking
for symptoms and a higher level of stock items have all been found to be
mitigants in reducing the overall impact of any outbreak, notwithstanding that
In the event of a further global pandemic or a resurgence of a more serious the health and safety of our workforce is paramount.
variant of COVID-19 there may be a risk to customer demand, supplier
continuity and our own capability to deliver, meaning the Group needs to adapt
to continually changing circumstances and be ready to respond at short notice.
Despite the potential for increased demand from our life science customers,
changing working practices and shutdowns would again have an impact on
operational efficiency which would likely adversely affect profitability.
During the pandemic the Group's Aerospace division witnessed a significant
reduction in customers' aircraft newbuild programmes and a similar impact
would be expected should a future global pandemic arise.
In the event of any future pandemic the welfare of our employees would
continue to be our top priority and we now feel better placed than previously
to swiftly adopt new secure working practices, including home‑based working,
if required by government protocols.
Consolidated income statement
for the year ended 31 March 2024
Notes 2024 2023
£000 £000
Continuing operations:
Revenue 4 132,672 143,445
Underlying operating profit 6,647 5,939
Exceptional items 5 (4,857) (4,710)
Operating profit 4 1,790 1,229
Finance revenue 6 424 218
Finance expense 6 (6,011) (3,967)
Loss before tax (3,797) (2,520)
Income tax credit / (expense) 7 498 (1,437)
Loss for the period (3,299) (3,957)
Attributable to:
Equity holders of the Company Non-controlling interests (3,299) (3,957)
(3,299) (3,957)
Loss per ordinary share 8
Basic (4.5)p (5.4)
Diluted (4.5)p (5.4)
Consolidated statement of comprehensive income
for the year ended 31 March 2024
2024 2023
£000 £000
Loss for the period (3,299) (3,957)
Other comprehensive (expense) / income
Items that will not be reclassified to the income statement
Remeasurement losses on defined benefit scheme (2,668) (10,577)
Total items that will not be reclassified to the income statement (2,668) (10,577)
Items that are or may in the future be classified to the income statement
Foreign exchange translation differences (2,387) 1,129
Net investment hedge 332 818
Deferred tax arising 33 (190)
Total items that are or may in the future be classified to the income (2,022) 1,757
statement
Other comprehensive expense net of tax (4,690) (8,820)
Total comprehensive expense for the year (7,989) (12,777)
Attributable to -
Equity holders of the Company (7,989) (12,777)
Non-controlling interests - -
Total comprehensive expense for the period (7,989) (12,777)
Consolidated statement of financial position
as at 31 March 2024
Notes 2024 2023
£000 £000
Non-current assets
Intangible assets 10 22,197 23,463
Property, plant and equipment 11 40,071 45,321
Deferred tax assets 864 1,185
Total non-current assets 63,132 69,969
Current assets
Inventories 11,289 15,203
Contract assets 1,663 5,763
Trade and other receivables 18,800 21,383
Cash and cash deposits 5,974 10,354
Current tax assets 82 -
Total current assets 37,808 52,703
Total assets 100,940 122,672
Current liabilities
Loans and borrowings 12 6,753 5,046
Trade payables 10,005 13,085
Other payables 7,485 8,323
Current tax liabilities 564 372
Contract Liabilities 2,998 4,689
Provisions 721 473
Current liabilities 28,526 31,988
Non-current liabilities
Loans and borrowings 12 28,678 39,668
Deferred tax liabilities 2,890 4,917
Retirement obligations 13 37,186 34,493
Total non-current liabilities 68,754 79,078
Total liabilities 97,280 111,066
Net assets 3,660 11,606
Equity
Ordinary share capital issued 14 3,671 3,671
Share premium 7,359 7,359
Translation reserve 7,221 9,243
Retained earnings (14,565) (8,641)
Total equity attributable to equity holders of the Company 3,686 11,632
Non-controlling interests (26) (26)
Total equity 3,660 11,606
Approved by the Board of Directors on 17 July 2024.
Consolidated statement of changes in equity
for the year ended 31 March 2024
Attributable to equity holders of the Company
Share Share Translation Retained Total Non-controlling Total
capital premium reserve earnings £000 interests equity
£000 £000 £000 £000 £000 £000
Balance at 1 April 2022 3,671 7,359 7,486 5,926 24,442 (26) 24,416
Loss for the year - - - (3,957) (3,957) - (3,957)
Other comprehensive income / (expense):
Foreign exchange translation differences - - 1,129 - 1,129 - 1,129
Net investment hedge - - 818 - 818 - 818
Remeasurement losses on defined benefit scheme - - - (10,577) (10,577) - (10,577)
Taxation on items above - - (190) - (190) - (190)
Total comprehensive income / (expense) for the period - - 1,757 (14,534) (12,777) - (12,777)
Transactions with owners recorded directly in equity
Share-based payments - - - (33) (33) - (33)
Taxation on items recorded directly in equity - - - - - - -
Balance at 31 March 2023 3,671 7,359 9,243 (8,641) 11,632 (26) 11,606
Balance at 1 April 2023 3,671 7,359 9,243 (8,641) 11,632 (26) 11,606
Loss for the year - - - (3,299) (3,299) - (3,299)
Other comprehensive (expense) / income:
Foreign exchange translation differences - - (2,387) - (2,387) - (2,387)
Net investment hedge - - 332 - 332 - 332
Remeasurement losses on defined benefit scheme - - - (2,668) (2,668) - (2,668)
Taxation on items above - - 33 - 33 - 33
Total comprehensive expense for the period - - (2,022) (5,967) (7,989) - (7,989)
Transactions with owners recorded directly in equity:
Share-based payments - - - 43 43 - 43
Taxation on items recorded directly in equity - - - - - - -
Balance at 31 March 2024 3,671 7,359 7,221 (14,565) 3,686 (26) 3,660
Consolidated statement of cash flows
for the year ended 31 March 2024
Notes 2024 2023
£000 £000
Cash generated from operations 15 15,615 7,778
Interest paid (4,193) (2,955)
Tax paid (1,056) (1,051)
Net cash from operating activities 10,366 3,772
Cash flows from / (used in) investing activities
Proceeds from sale of intangible assets 212 -
Proceeds from sale of property, plant and equipment - 1,390
Interest received 424 218
Purchase of property, plant and equipment (2,937) (2,313)
Purchase of intangible assets (95) (104)
Net cash used in investing activities (2,396) (809)
Cash flows (used in) / from financing activities
Drawings on new and existing facilities - 359
Refinancing costs (100) (250)
Proceeds from sale and leaseback of property, plant and equipment - 1,222
Repayment of borrowings excluding lease liabilities (8,190) (1,800)
Repayment of other loan facilities (192) (102)
Repayment of lease liabilities (3,659) (4,104)
Net cash used in financing activities (12,141) (4,675)
Net decrease in cash and cash equivalents (4,171) (1,712)
Cash and cash equivalents at beginning of period 10,354 12,347
Effect of exchange rate fluctuations on cash held (209) (281)
Cash and cash equivalents at end of period 5,974 10,354
Cash and cash equivalents comprise:
Cash and cash deposits 5,974 10,354
5,974 10,354
Notes on the preliminary statement
1. Basis of preparation
The financial statements included in this preliminary announcement have been
prepared in accordance with the Disclosure and Transparency Rules of the UK
Financial Conduct Authority, and the principles of UK-adopted international
accounting standards, but do not comply with the full disclosure requirements
of these standards. The financial information for the year ended 31 March 2023
is derived from the statutory financial statements for that year which have
been delivered to the Registrar of Companies. The auditor reported on those
financial statements: their report was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement under s498(2)
or (3) of the Companies Act 2006. The financial information has been prepared
on a going concern basis under the historic cost convention basis except that
derivative financial instruments, share options and defined benefit pension
plan assets are stated at their fair value.
The unaudited financial information contained in this announcement does not
constitute the statutory financial statements of the Group as at, and for the
year ended 31 March 2024, but is derived from those financial statements,
which have been prepared in accordance with UK-adopted international
accounting standards. The financial statements themselves will be approved by
the Board of Directors and reported on by the auditor and then subsequently
delivered to the Registrar of Companies. The Group expects to publish full
consolidated statements before the end of July 2024. Accordingly, the
financial information for FY24 is presented as unaudited in this announcement.
The financial statements are prepared on the going concern basis.
On 5 July 2024 the Group's lending bank extended the committed facilities to
31 December 2025. Since the year end, the Company has commenced a process to
refinance the existing term loans and revolving credit facilities in order to
provide the strategic funding for the next phase of the business
development. Other than mentioned, since the year end there have been no
significant changes to the Group's liquidity position.
As part of the original bank financing in August 2020 the Group became subject
to four bank facility covenant tests. The quarterly covenants, and levels, to
be tested are:
· underlying interest cover (minimum 1.45 in March 2024, increasing
to 2.60 by December 2025);
· net debt to underlying EBITDA (2.75 maximum);
· core subsidiary underlying EBITA (50% minimum); and
· core subsidiary revenue (75% minimum).
Core subsidiaries are defined as Carclo Technical Plastics Ltd; Bruntons Aero
Products Ltd; Carclo Technical Plastics (Brno) s.r.o; CTP Carrera Inc and
Jacottet Industrie SAS, with CTP Taicang Co. Ltd and Carclo Technical Plastics
Pvt Co Ltd being treated as non-core for the purposes of these covenants.
A schedule of contributions is also in place with the pension trustees with an
agreed £3.5m to be paid annually until 31 October 2039. Additional
contributions also agreed are 26% of any FY25 over underlying EBITDA of
£18m.
The Group is subject to a number of key risks and uncertainties, as detailed
in the principal risks and uncertainties section above. Mitigation actions are
also considered in this section. These risks and uncertainties have been
considered in the base case and severe downside sensitivities and have been
modelled
accordingly.
The Directors have reviewed cash flow and covenant forecasts to cover the
period of at least twelve months from the date of signing these consolidated
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.
The base case forecast includes assumptions around revenue, margins, working
capital and interest rates. The sensitivity analysis has considered the risks
facing the Group and has modelled the impact of each in turn, as well as
considering the impact of aggregating certain risk types, and shows that the
Group is able to operate within its available facilities and meet its agreed
covenants as they arise. Furthermore, 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 above.
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 revenue of 3%
matched by a corresponding fall in cost of sales of the same amount, and
interest rate risk. Under these scenarios the Group would continue to meet
minimum covenant requirements, although with minimal headroom under these
scenarios in the next 12 months. The downside testing did not allow for the
benefit of any action that could be taken by management to mitigate the impact
of the scenarios. Using the base case forecast the minimal underlying
operating profit headroom, observed on the underlying interest cover covenant,
would be £0.8m. This suggests that a £16m drop in revenue or a 12% drop in
underlying operating profit would result in a breach of covenants.
The Group is not exposed to vulnerable sectors or vulnerable countries but is
dependent on certain key customers, which create risks and uncertainties.
These risks and uncertainties are documented, and the mitigating actions being
taken are covered in detail in the Principal risks and uncertainties section
above.
On the basis of this forecast and sensitivity testing, the Board has
determined that it is reasonable to assume that the Group will continue to
operate within the facilities available and will be able to adhere to the
covenant tests to which it is subject throughout at least the twelve-month
period from the date of signing the financial statements.
Accordingly, these financial statements are prepared on a going concern
basis.
Directors' liability
Neither the Company nor the Directors accept any liability to any person in
relation to this report except to the extent that such liability could arise
under English law. Accordingly, any liability to a person who has demonstrated
reliance on any untrue or mistaken statement or omission shall be determined
in accordance with section 90(A) of the Financial Services and Markets Act
2000.
Responsibility statement of the Directors in respect of the annual report
The Directors at the date of this statement confirm that to the best of their
knowledge:
the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
the strategic report includes a fair review of the development and performance
of the business and the position of the issuer and the undertakings included
in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
2. Accounting policies
The accounting policies set out in the last published financial statements for
the year to 31 March 2023 have been applied consistently to all periods
presented in this preliminary statement, unless otherwise stated.
Judgements made by the Directors, in the application of these accounting
policies that have significant effect on the financial statements and
estimates with a significant risk of material adjustment in the next year are
discussed in note 3.
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 2023. The following new standards and
amendments to standards are mandatory and have been adopted for the first time
for the financial year beginning 1 April 2023:
IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2
Making Material Judgements (Amendment): Disclosure of accounting policies
(effective date 1 January 2023);
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment): Definition of accounting estimates (effective date 1 January
2023); and
IAS 12 Income Taxes: Deferred tax related to assets and liabilities arising
from a single transaction (effective 1 January 2023).
These standards have not had a material impact on the consolidated financial
statements.
Certain new standards, amendments and interpretations to existing standards
have been published that are mandatory for the accounting period beginning on
or after 1 April 2024. The Group has elected not to early adopt these
standards which are described below.
IAS 1 Presentation of Financial Statements (Amendment): Classification of
liabilities as current or non-current (effective 1 January 2024).
IFRS 16 Leases (Amendment): Lease liability in a sale and leaseback; and
IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments (Disclosures)
(Amendments): Supplier Finance Arrangements (effective 1 January 2024).
The above are not expected to have a material impact on the Group's results or
net assets.
There are no other IFRS or IFRIC interpretations which are endorsed by the UK
Endorsement Board, that are not yet effective, that would be expected to
have a material impact on the Group.
3. Accounting estimates and judgements
The preparation of the financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses.
The estimates and assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances.
These estimates and assumptions form the basis for making judgements about the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of revision and future periods if the revision affects both current and future
periods.
The following are the critical judgements and key sources of estimation
uncertainty that the Directors have made in the process of applying the
Group's accounting policies and that have the most significant effect on the
amounts recognised in the financial statements. Management has discussed
these with the Audit and Risk Committee. These should be read in conjunction
with the significant accounting policies provided in the Annual Report and
Accounts.
Going concern
Note 1 contains information about the preparation of these financial
statements on a going concern basis.
Key judgements
Management has exercised judgement over the likelihood of the Group being able
to continue to operate within its available facilities and in accordance with
its covenants for at least twelve months from the date of signing these
financial statements. Judgement has been applied over forecast profit, debt
levels and interest rates, particularly base rates. This determines whether
the Group should operate the going concern basis of preparation for these
financial statements.
Impairment of assets
Note 10 contains information about management's estimates of the recoverable
amount of cash generating units and their risk factors.
Key judgements
Management has exercised judgement over the underlying assumptions within the
valuation models and has applied judgement to determine the Group's cash
generating units to which goodwill is allocated and against which impairment
testing is performed. These are key factors in their assessment of whether
there is any impairment in related goodwill or other assets. Goodwill at 31
March 2024 amounts to £22.0m (2023:
£23.0m)
Management has exercised judgement when considering if there have been
indicators of impairment. Where indicators exist, management have estimated
recoverable amount as detailed below.
Key sources of estimation uncertainty
The Group tests whether goodwill has suffered any impairment and considers
whether there is any indication of impairment either of this or other assets
on an annual basis. As set out in more detail in notes 10 and 11, the
recoverable amounts may be based on either value-in-use calculations or fair
value less costs of disposal considerations. The former requires the
estimation of future cash flows and the choice of a discount rate in order to
calculate the present value of the future cash flows, the latter method
requires the estimation of fair value.
Details of the sensitivity of assumptions is included in note 10.
Pension assumptions
Note 13 contains information about management's estimate of the net liability
for defined benefit obligations and their risk factors. The pension
liability at 31 March 2024 amounts to £37.2m (31 March 2023: £34.5m).
Key sources of estimation uncertainty
The value of the defined benefit pension plan obligation is determined by
long-term actuarial assumptions. These assumptions include discount rates,
inflation rates and mortality rates. Differences arising from actual
experience or future changes in assumptions will be reflected in the Group's
consolidated statement of comprehensive income. The Group exercises judgement
in determining the assumptions to be adopted after discussion with a qualified
actuary. Details of the key actuarial assumptions used and of the sensitivity
of these assumptions are included within note 13.
In the year to 31 March 2022 and the year to 31 March 2021, the Scheme
introduced a right for members to Pension Increase Exchange (PIE) and a
Bridging Pension Option respectively. Having taken actuarial advice,
management exercised judgement that, for each, 40% of members would take the
options at retirement. There is no change to either assumption in the
current year. Any change in estimate would be recognised as remeasurement
gains/(losses) through the consolidated statement of comprehensive income.
Lease
The Annual Report and Accounts contains information about imputed interest
rates and lease break options.
Key judgement
Lease liabilities are measured initially at the present value of the lease
payments discounted using the rate implicit in the lease, or where not readily
determinable as is generally the case, using the Group's incremental borrowing
rate. This requires management to apply judgement.
Management has applied judgement when determining the expected certainty that
a break option within a lease will be exercised.
Revenue recognition
As revenue from design and engineering contracts is recognised over time, the
amount of revenue recognised in a reporting period depends on the extent to
which the performance obligations have been satisfied.
Key judgements
The revenue recognised on certain contracts in the CTP segment required
management to use judgement to apportion contract revenue to the Design and
Engineering performance obligations.
Key sources of estimation uncertainty
Revenue recognised on certain contracts in the CTP segment required management
to estimate the remaining costs to complete the Design and Engineering
performance obligation in order to determine the percentage of completion and
revenue to recognise in respect of those performance obligations. Costs to
complete are determined through consultation with the contract engineers and
changes to this estimate will therefore impact the amount of revenue
recognised
Recognition of deferred tax assets
Information about the deferred tax assets recognised in the consolidated
statement of financial position is included in the Annual Report and Accounts.
Key judgement
Management has exercised judgement over the level of future taxable profits in
the UK against which to relieve the Group's deferred tax assets. On the basis
of this judgement, with the exception of a £0.3m deferred tax asset which is
available to offset against a deferred tax liability of £0.3m arising on
historic property revaluations (2023: £0.3m), no UK deferred tax assets have
been recognised at period end.
Classification of exceptional items
Note 5 contains information about items classified as exceptional.
Key judgements
Management has exercised judgement over whether items are exceptional as set
out in the Group's accounting policy.
Expected credit losses
The allowance for expected credit losses ("ECLs") is calculated on a
customer-by-customer basis, using a combination of internally and externally
sourced information, including expected future default levels and future
predicted cash collection levels.
Key sources of estimation uncertainty
Management has applied judgement when setting expectations, these are derived
from past defaults/trends and future projections.
Provisions
On 14 February 2024, the Group announced the strategic consolidation and
closure of its Tucson, Arizona, USA facility, due to be completed by September
2024.
Key judgements
Management has applied judgement when determining what provisions to recognise
at 31 March 2024 for costs directly arising from the planned closure, where an
obligation exists at that date. Management has also used judgement to assess
whether there is any impairment of assets at the facility as a result of the
intended closure (see impairment of assets above).
Key sources of estimation uncertainty
Provision for employee redundancy and dilapidation costs of the leased
properties at Tucson, totalling £0.7m have been estimated at 31 March 2024.
Provisions recognised are management's best estimate of the cost that will be
required to settle the Group's obligation at a future date. Advice has been
sought from a third party who has provided an estimate of the cost to
make-good the properties prior to exit, however until the final cost is agreed
with the lessor, this remains an estimate. Following closure, any unused
provision will be released back to exceptional items as a credit in FY25.
4. Segment reporting
The Group is organised into two, separately managed, business segments - CTP
and Aerospace. 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 CTP segment supplies value-adding engineered solutions from mould design,
automation, and production to assembly and printing for the life science,
optical and precision component industries. This business operates
internationally in a fast-growing and dynamic market underpinned by rapid
technological development.
The Aerospace segment delivers precise and durable components for the safety
and performance of aircraft to manufacturing and aerospace industries.
The Central costs relate to the cost of running the Group, plc and non-trading
companies.
Transfer pricing between business segments is set on an arm's length basis.
Segmental revenues and results are after the elimination of transfers between
business segments. Those transfers are eliminated on consolidation.
Analysis by business segment
The segment results for the year ended 31 March 2024 were as follows:
CTP Aerospace Central Group total
(continuing) (continuing) (continuing) £000
£000 £000 £000
Consolidated income statement
Continuing operations
External revenue 125,044 7,628 - 132,672
External expenses (115,627) (5,929) (4,469) (126,025)
Underlying operating profit / (loss) 9,417 1,699 (4,469) 6,647
Exceptional operating items (3,259) (50) (1,548) (4,857)
Operating profit / (loss) 6,158 1,649 (6,017) 1,790
Net finance expense (5,587)
Income tax credit 498
Loss for the period (3,299)
Consolidated statement of financial position
Segment assets 93,160 6,095 1,685 100,940
Segment liabilities (31,728) (1,739) (63,813) (97,280)
Net assets 61,432 4,356 (62,128) 3,660
Other segmental information
Capital expenditure on property, plant and equipment 6,736 585 166 7,487
Capital expenditure on computer software - - 95 95
Depreciation 7,454 223 92 7,769
Impairment of property, plant and equipment 1,892 - - 1,892
Amortisation of computer software 31 - 70 101
Amortisation of other intangibles 62 - - 62
The segment results for the year ended 31 March 2023 were as follows:
CTP Aerospace Central Group total
(continuing) (continuing) (continuing) £000
£000 £000 £000
Consolidated income statement
External revenue 136,814 6,631 - 143,445
Expenses (129,493) (5,111) (2,902) (137,506)
Underlying operating profit / (loss) 7,321 1,520 (2,902) 5,939
Exceptional operating items (2,752) - (1,958) (4,710)
Operating profit / (loss) 4,569 1,520 (4,860) 1,229
Net finance expense (3,749)
Income tax expense (1,437)
Loss for the period (3,957)
Consolidated statement of financial position
Segment assets 114,231 5,886 2,555 122,672
Segment liabilities (40,000) (1,198) (69,868) (111,066)
Net assets 74,231 4,688 (67,313) 11,606
Other segmental information
Capital expenditure on property, plant and equipment 5,474 287 49 5,810
Capital expenditure on computer software 36 - - 36
Capital expenditure on other intangibles 68 - - 68
Depreciation 7,516 223 76 7,815
Impairment of property, plant and equipment 783 - - 783
Amortisation of computer software 43 - 101 144
Amortisation of other intangibles 67 - - 67
Impairment of intangible fixed assets 208 - - 208
Analysis by geographical segment
The business operates in three main geographical regions - the United Kingdom,
North America and in lower-cost regions including the Czech Republic, China
and India. The geographical analysis was as follows:
External revenue Net segment (liabilities)/ Expenditure on tangible and intangible fixed assets
assets
2024 2023 2024 2023 2024 2023
£000 £000 £000 £000 £000 £000
United Kingdom 10,084 14,157 (39,006) (40,329) 1,980 1,923
North America 68,474 70,955 21,846 27,909 4,867 3,204
Rest of world 54,114 58,333 20,820 24,026 735 787
132,672 143,445 3,660 11,606 7,582 5,914
The analysis of segment revenue represents revenue from external customers
based upon the location of the customer.
The analysis of segment assets and capital expenditure is based upon the
location of the assets.
The material components of the Central assets and liabilities are retirement
benefit obligation net liabilities of £37.2m (2023: £34.5m), and net
borrowings of £24.3m (2023: £31.3m).
One CTP customer accounted for 41.1% (2023: 28.4%) and another customer for
13.3% (2023:10.5%) of Group revenues from continuing operations and similar
proportions of trade receivables.
No other customer accounted for more than 10.0% of revenues from continuing
operations in the year.
Deferred tax assets by geographical location are as follows: United Kingdom
£nil (2023: £0.3m), North America £0.8m (2023: £0.8m), rest of world
£0.1m (2023: £0.1m).
Total non-current assets by geographical location are as follows: United
Kingdom £20.6m (2023: £22.6m), North America £26.3m (2023: £28.8m), rest
of world £16.2m (2023: £18.6m).
5. Exceptional items
2024 2023
£000 £000
Continuing operations
Rationalisation costs (3,360) (2,648)
Past service cost in respect to retirement benefits (1,020) -
Refinancing costs (433) (756)
Net costs arising from cancellation of future supply agreement (188) (877)
Settlement / (costs) in respect to legacy claims 284 (302)
Doubtful debt and related inventory provision (140) (896)
Credit arising on the disposal of surplus properties - 769
(4,857) (4,710)
Rationalisation costs from continuing operations during the period relate to
the restructuring and rationalisation of the Group. Costs are mostly relating
to the announced Tucson, Arizona, USA facility closure and the now closed
Derry, NH, USA manufacturing site as well as some other Central
employee-related costs. These include a combination of employee redundancy
costs, site closure provisions and asset impairment costs. Prior year costs
were similar in nature, being a mixture of employee rationalisation and asset
impairment costs arising from the decision that the Derry manufacturing site
would be closed in the year to 31 March 2024.
During the year, the trustees of the Carclo Group Pension Scheme identified
that a group of members required an adjustment to their benefits in respect of
the requirement to provide equal benefits to males and females following the
Barber judgment in 1990. In summary, the adjustment consisted of decreasing
the normal retirement age from 65 to 60 for some members' benefits for some
elements of service after 17 May 1990. This has resulted in additional
liabilities in the Scheme which have been accounted for as a £1.0m past
service cost in the income statement (approximately 0.8% of liabilities).
Refinancing costs of £0.4m are legal and professional costs incurred to
ensure compliance with the Group's principal bank refinancing arrangement
which resulted in the amendment deed signed 17 July 2023, as well as other
Group refinancing-related activities in respect to the Group's commitment to
seek alternative sources of bank
financing.
£0.2m net costs arising from cancellation of future supply agreement relate
to the OEM customer who gave notice in December 2022. This includes £0.9m
asset impairment (see note 10), £0.2m loss on disposal of other related
ancillary equipment, less £0.7m being a credit recognised in the current year
for final settlement received.
During the year to 31 March 2024, the Group received notice from its
third-party advisor that there would be no obligation on Carclo plc to make
payment to settle two of the health-related claims that had been provided for
in the prior year. As such, the provision held at that date, £0.3m, has
been released back to exceptional items.
In the prior year, a customer of the CTP division provided notice that it
would be ceasing to operate. Provision was made at the time for amounts not
expected to be recovered through credit insurance. A further £0.1m
provision for inventory has been charged in the current year, as it is not now
expected to be recovered.
The credit arising on the disposal of surplus properties in the prior year is
the profit arising on the sale and leaseback arrangement of the CTP
manufacturing site at Tucson, Arizona, USA.
6. Net Finance expense
2024 2023
£000 £000
The expense recognised in the consolidated income statement comprises:
Interest receivable on cash and cash deposits 424 218
Interest payable on bank loans and overdrafts (3,141) (2,569)
Lease interest (1,042) (674)
Other interest (2) (59)
Interest on the net defined benefit pension liability (1,826) (665)
Finance expense (5,587) (3,749)
7. Income tax credit / (expense)
The credit / (expense) recognised in the consolidated income statement
comprises:
2024 2023
£000 £000
United Kingdom corporation tax
Adjustments for prior years (22) (18)
Overseas taxation:
Current tax (942) (1,462)
Adjustments for prior years (211) 110
Total current tax net expense (1,175) (1,370)
Deferred tax credit / (expense)
Origination and reversal of temporary differences:
Deferred tax 1,419 (20)
Adjustments for prior years 193 17
Rate Change 61 (64)
Total deferred tax credit / (expense) 1,673 (67)
Total income tax credit / (expense) recognised in the consolidated income 498 (1,437)
statement
Reconciliation of tax (credit) / expense for the year
The Group has reported an effective tax rate for the period of 14.1% which is
below the standard rate of UK corporation tax of 25% (2023: 19%). The
differences are explained as follows:
£000 2024 £000 2023
% %
Loss before tax (3,797) (2,520)
Income tax using standard rate of UK corporation tax of 25% (FY22/23: 19%) (949) 25.0 (479) 19.0
Expenses not deductible for tax purposes 166 (4.4) 128 (5.1)
Income not taxable (114) 3.0 (125) 5.0
Adjustments in respect of overseas tax rates (157) 4.1 155 (6.2)
Derecognition / (recognition) of deferred tax asset previously recognised / - - 669 (26.5)
(unrecognised)
Unprovided deferred tax movement 732 (19.3) 982 (39.0)
Adjustment to current tax in respect of prior periods (UK and overseas) 232 (6.1) (92) 3.7
Adjustments to deferred tax in respect of prior periods (UK and overseas) (193) 5.1 (17) (0.7)
Foreign taxes expensed in the UK (54) 1.4 210 (8.3)
Rate change on deferred tax (61) 1.6 64 (2.5)
Foreign exchange currency loss (100) 2.6 (58) 2.3
Total income tax (credit) / expense (498) 13.1 1,437 (57.0)
Tax on items credited / (charged) outside of the consolidated income
statement:
2024 2023
£000 £000
Recognised in other comprehensive income:
Foreign exchange movements 33 (190)
Total income tax credited / (charged) to other comprehensive income 33 (190)
8. (Loss) / earnings per share
The calculation of basic earnings per share is based on the (loss) / profit
attributable to equity holders of the parent company divided by the weighted
average number of ordinary shares outstanding during the year.
The calculation of diluted earnings per share is based on the (loss) / profit
attributable to equity holders of the parent company divided by the weighted
average number of ordinary shares outstanding during the year (adjusted for
dilutive options).
The following details the result and average number of shares used in
calculating the basic and diluted earnings per share:
2024 2023
£000 £000
Loss after tax (3,299) (3,957)
Loss attributable to non-controlling interests - -
Loss after tax, attributable to equity holders of the parent (3,299) (3,957)
2024 2023
Shares Shares
Weighted average number of ordinary shares in the year 73,419,193 73,419,193
Effect of dilutive share options in issue(1) 15,974 15,974
Weighted average number of ordinary shares (diluted) in the year for loss per 73,435,167 73,435,167
share calculation
Effect of dilutive share options in issue 817,049 -
Weighted average number of ordinary shares (diluted) in the year for 74,252,216 73,435,167
underlying earnings per share calculation
(1)There are 15,974 vested share options outstanding that are yet to be
issued. 817,049 of the share options granted on 21 September 2023 have been
excluded from the calculation of weighted average number of dilutive earnings
per share in the current year as they are anti-dilutive. These options could
potentially dilute earnings per share in the
future.
In addition to the above, the Company also calculates an earnings per share
based on underlying profit as the Board believes 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 loss to underlying profit used in
the numerator in calculating underlying earnings per share:
2024 2023
£000 £000
Loss after tax, attributable to equity holders of the (3,299) (3,957)
parent
Continuing operations:
Exceptional - rationalisation and restructuring costs, net of tax 2,690 2,314
Exceptional - past service cost in respect to retirement benefits, net of tax 1,020 -
Exceptional - refinancing costs, net of tax 433 756
Exceptional - net costs arising from cancellation of future supply agreement, 146 752
net of tax
Exceptional - (settlement) / costs in respect to legacy claims, net of tax (284) 302
Exceptional - doubtful debt and related inventory provision, net of tax 109 673
Exceptional - credit arising on the disposal of surplus properties, net of tax - (578)
Profit after tax but before exceptional items, attributable to equity holders 815 262
of the parent
Underlying operating profit 6,647 5,939
Finance revenue 424 218
Finance expense (6,011) (3,967)
Income tax expense (245) (1,928)
Profit after tax but before exceptional items - continuing operations 815 262
The following table summarises the (loss) / earnings per share figures based
on the above data:
2024 2023
Pence Pence
Basic loss per share (4.5) (5.4)
Diluted loss per share (4.5) (5.4)
Underlying earnings per share - basic 1.1 0.4
Underlying earnings per share - diluted 1.1 0.4
9. Dividends paid and proposed
The Directors are not proposing a final dividend for the year ended 31 March
2024 (31 March 2023: £nil). Under the terms of the amended and restated
bank facilities agreement, the Group is not permitted to make a dividend
payment to shareholders up to the period ending 31 December 2025.
10. Intangible assets
Goodwill Patents and Customer- Computer Total
£'000 development related Software £000
costs intangibles £000
£'000 £000
Cost
Balance at 31 March 2022 23,094 16,734 553 1,899 42,280
Additions - 68 - 36 104
Disposals - - - (14) (14)
Effect of movements in foreign exchange 1,005 - 35 31 1,071
Balance at 31 March 2023 24,099 16,802 588 1,952 43,441
Additions - - - 95 95
Disposals - - - (356) (356)
Effect of movements in foreign exchange (968) - - (10) (978)
Balance at 31 March 2024 23,131 16,802 588 1,681 42,202
Amortisation
Balance at 31 March 2022 1,130 16,734 302 1,400 19,566
Amortisation for the year - 6 61 144 211
Impairment - - 208 - 208
Effect of movements in foreign exchange (41) - 17 17 (7)
Balance at 31 March 2023 1,089 16,740 588 1,561 19,978
Amortisation for the year - 62 - 101 163
Disposal - - - (144) (144)
Effect of movements in foreign exchange 15 - - (7) 8
Balance at 31 March 2024 1,104 16,802 588 1,511 20,005
Carrying amounts
At 1 April 2022 21,964 - 251 499 22,714
At 31 March 2023 23,010 62 - 391 23,463
At 31 March 2024 22,027 - - 170 22,197
The Group has incurred research and development costs of £0.2m (2023: £0.2m)
which have been included within operating expenses in the consolidated income
statement.
In the prior year, a customer-related intangible asset that had been
recognised on acquisition of the US Derry, NH, USA facility, was fully
impaired as the Group has minimal trading with the customers to which it
related. The cost of £0.2m was recognised as an exceptional item in that
year.
Impairment tests for cash generating units containing goodwill
Goodwill acquired in a business combination is allocated at acquisition to the
cash generating units ("CGUs") that are expected to benefit from that business
combination. The carrying amount of goodwill is allocated to the Group's
principal CGUs, being the operating segments described in the operating
segment descriptions in note 4.
The carrying value of goodwill at 31 March 2024 and 31 March 2023 is allocated
wholly to the CTP cash generating unit as follows
2024 2023
£000 £000
CTP 22,027 23,010
At 31 March 2024, the recoverable amount of the CTP cash generating unit was
determined on a calculation of value in use, being the higher of that and fair
value less costs of disposal ("FVLCD"). The recoverable amount calculated
exceeds the carrying amount of the CTP CGU by £8.9m. The results of each
produced the same answer, that there is no impairment of goodwill.
The value in use calculations use cash flow projections based upon financial
budgets approved by management covering a three-year period. Cash flows
beyond the three-year period are extrapolated using estimated growth rates of
between 1.5% and 4.3% (2023: 2.0% and 4.1%) depending upon the market served.
The cash flows were discounted at a weighted average pre-tax discount rate of
16.9% (2023: 9.3% - 10.4%). The discount rate is calculated and reviewed
annually and is based on the Group's weighted average cost of capital. Changes
in income and expenditure are based on expectations of future changes in the
market. Sensitivity testing of the recoverable amount to reasonably possible
changes in key assumptions has been performed, including changes in the
discount rate and changes in forecast cash flows.
All other assumptions unchanged, a 1.6% (2023: 5.5%) increase in the discount
rate to 18.5% (2023: 14.8% - 15.9%), or an 8.1% (2023: 28.8%) decrease in
underlying EBIT would reduce the headroom on the CTP CGU to £nil. Should the
discount rate increase further than this or the profitability decrease
further, then an impairment of the goodwill would be likely.
11. Property, plant and equipment
Land and Plant and Total
buildings equipment £000
£000 £000
Cost
Balance at 31 March 2022 42,923 72,127 115,050
Additions 1,662 4,148 5,810
Disposals - (1,483) (1,483)
Reclassification to assets held for sale (153) - (153)
Effect of movements in foreign exchange 1,709 1,840 3,549
Balance at 31 March 2023 46,141 76,632 122,773
Additions 3,623 3,864 7,487
Disposals (2,047) (2,413) (4,460)
Effect of movements in foreign exchange (1,382) (1,528) (2,910)
Balance at 31 March 2024 46,335 76,555 122,890
Depreciation and impairment losses
Balance at 31 March 2022 16,463 51,623 68,086
Depreciation charge for the year 3,596 4,219 7,815
Disposals - (999) (999)
Reclassification to assets held for sale (89) - (89)
Impairment - 783 783
Effect of movements in foreign exchange 704 1,152 1,856
Balance at 31 March 2023 20,674 56,778 77,452
Depreciation charge for the year 3,892 3,877 7,769
Disposals (2,282) (1,472) (3,754)
Reassessment of lease term 1,310 - 1,310
Impairment 116 1,850 1,966
Reversal of impairment - (74) (74)
Effect of movements in foreign exchange (701) (1,149) (1,850)
Balance at 31 March 2024 23,009 59,810 82,819
Carrying amounts
At 1 April 2022 26,460 20,504 46,964
At 31 March 2023 25,467 19,854 45,321
At 31 March 2024 23,326 16,745 40,071
At 31 March 2024, properties with a carrying amount of £2.8m were subject to
a registered charge in favour of the Group pension scheme (2023: £2.6m)
capped at £5.1m.
Property, plant and equipment includes right-of-use assets.
On 14 February 2024, the Group announced the intended closure of its Tucson,
Arizona, USA facility. As a result of this decision, it was deemed by
management that at 31 March 2024 there was reasonable certainty that the exit
options within two of the property leases at that location, would be
exercised. As such, the lease liability was remeasured with a corresponding
adjustment recognised against the right-of-use assets of £1.3m. Further, an
impairment of £0.1m was recognised as an exceptional charge, classified as
rationalisation costs in note 5, to impair the properties to value in use to
expected closure
date.
The impairment to plant and equipment of £1.9m includes £0.9m in respect to
assets obtained for production on a leading global OEM customer who in
December 2022 gave notice that they would not be proceeding into the
production phase of their project. Whilst an impairment of £0.5m was
recognised in the prior year, it was decided by management at 30 September
2023 that as the assets remained on balance sheet with no intended use, they
should be impaired to recoverable amount, being fair value less costs to
dispose. A further impairment was recognised at interim reporting date of
£0.9m and there has been no change to this assessment of recoverable amount
at 31 March 2024. Also, following the announcement of the intended closure
of the Tucson, Arizona, USA facility, management undertook an exercise to
determine the recoverable amount of assets located at this site. The assets
are a combination of both owned and leased, and recoverable amount has been
determined through either fair value less costs of disposal or value in use.
As a result of this review, an impairment of £1.0m has been recognised within
exceptional items of which £0.6m is in respect to leased
assets.
In the prior year, the decision by the Directors of the Group to proceed with
a plan of rationalisation of the CTP USA manufacturing footprint led to an
impairment review of the Derry, NH, USA site assets and ultimately an
impairment charge of £0.3m recognised as an exceptional cost in the prior
year. Assets that had been impaired in the year to 31 March 2023 were sold
for £0.1m more than their impaired value and as such, £0.1m of the
impairment provision has been reversed in the current year and recognised as a
credit in exceptional items at 31 March 2024.
FVLCD valuation uses an estimate of the value which would be expected to be
received from a third party in a sale of the asset, net of estimated sale
costs. This valuation is a level 3 measurement which is based on inputs
which are normally unobservable to market participants, including offers
received and management's experience of selling similar assets. Refer to
note 10 for details of cash flows and assumptions used in value in use
calculations.
12. Loans and borrowings
Reconciliation of movements of liabilities to cash flows arising from
financing activities:
Term loan Revolving credit facility Lease liabilities Other loans Total
£000 £000 £000 £000 £000
Balance at 31 March 2022 30,260 3,500 10,870 122 44,752
Changes from financing cashflows
Drawings on new facilities - - - 359 359
Transaction costs associated with the issue of debt - - - (500)
(500)
Repayment of borrowings (1,800) - (4,328) (102) (6,230)
(2,300) - (4,328) 257 (6,371)
Effect of changes in foreign exchange rates 818 - 373 15 1,206
Liability-related other charges
Drawings on new facilities - - 4,955 - 4,955
Interest expense- presented within exceptional items 69 - - - 69
Interest expense - presented within finance expense 103 - - - 103
172 - 4,955 - 5,127
Equity-related other changes - - - - -
Balance at 31 March 2023 28,950 3,500 11,870 394 44,714
Changes from financing cashflows
Drawings on new facilities - - - 53 53
Transaction costs associated with the issue of debt (100) - - - (100)
Repayment of borrowings (5,050) (3,200) (3,659) (132) (12,041)
(5,150) (3,200) (3,659) (79) (12,088)
Effect of changes in foreign exchange rates (332) - (229) (33) (594)
Liability-related other changes
Drawings on new facilities - - 4,583 - 4,583
Reassessment of lease liability - - (1,349) - (1,349)
Termination of facilities - - (49) - (49)
Interest expense - presented within finance expense 214 - - - 214
214 - 3,185 - 3,399
Equity-related other changes - - - - -
Balance at 31 March 2024 23,682 300 11,167 282 35,431
13. 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.
In the UK, Carclo plc sponsors the Carclo Group Pension Scheme (the "Scheme"),
a funded defined benefit pension scheme which provides defined benefits for
some of its members. This is a legally separate, trustee-administered fund
holding the Scheme's assets to meet long-term pension liabilities for some
2,493 current and past employees as at 31 March
2024.
The trustees of the Scheme are required to act in the best interest of the
Scheme's beneficiaries. The appointment of the trustees is determined by the
Scheme's trust documentation. It is policy that one-third of all trustees
should be nominated by the members. The trustees currently comprise two
Company-nominated trustees (of which one is an independent professional
trustee, and one is the independent professional Chairperson) as well as two
member-nominated trustees. The trustees are also responsible for the
investment of the Scheme's assets.
The Scheme provides pensions and lump sums to members on retirement and to
their dependants on death. The level of retirement benefit is principally
based on final pensionable salary prior to leaving active service and is
linked to changes in inflation up to retirement. The defined benefit section
is closed to new entrants who instead have the option of entering into the
defined contribution section of the Scheme, and the Group has elected to cease
future accrual for existing members of the defined benefit section such that
members who have not yet retired are entitled to a deferred
pension.
The Company currently pays contributions to the Scheme as determined by
regular actuarial valuations. The trustees are required to use prudent
assumptions to value the liabilities and costs of the Scheme whereas the
accounting assumptions must be best
estimates.
The Scheme is subject to the funding legislation, which came into force on 30
December 2005, outlined in the Pensions Act 2004. This, together with
documents issued by the Pensions Regulator and Guidance Notes adopted by the
Financial Reporting Council, set out the framework for funding defined benefit
occupational pension plans in the
UK.
A full actuarial valuation was carried out as at 31 March 2021 in accordance
with the scheme funding requirements of the Pensions Act 2004. The funding of
the Scheme is agreed between the Group and the trustees in line with those
requirements. These, in particular, require the surplus or deficit to be
calculated using prudent, as opposed to best estimate, actuarial assumptions.
The 31 March 2021 actuarial valuation showed a deficit of £82.8m. Under the
recovery plan agreed with the trustees following the 2021 valuation, the Group
agreed that it would aim to eliminate the deficit, over a period of 18 years
and 7 months starting from the valuation date and continuing until 31 October
2039, by the payment of annual contributions combined with the assumed asset
returns in excess of gilt yields. Contributions paid in respect of the year to
31 March 2023 amounted to £3.9m, £3.5m in respect of the year to 31 March
2024 and are agreed as £3.5m annually thereafter, plus additional
contributions of 26% of any surplus of 2024/25 underlying EBITDA over £18.0m
payable from 30 June 2025 to 31 May 2026. These contributions include an
allowance in respect of the expenses of running the Scheme and the Pension
Protection Fund ("PPF") levy of £0.9m in years ending 31 March 2024 and 2025
and £0.6m in the year to 31 March 2026 and
beyond.
At each triennial valuation, the schedule of contributions is reviewed and
reconsidered between the employer and the trustees; the next review being no
later than by 31 July 2025 after the results of the 31 March 2024 triennial
valuation are
known.
On 14 August 2020, additional security was granted by certain Group companies
to the Scheme trustees such that at 31 March 2024 the gross value of the
assets secured, which includes applicable intra-group balances, goodwill and
investments in subsidiaries at net book value in the relevant component
companies' accounts, but which eliminate in the Group upon consolidation,
amounted to £207.8m (2023: £240.9m). Excluding the assets which eliminate in
the Group upon consolidation, the value of the security was £29.9m (2023:
£37.7m).
For the purposes of IAS 19, the results of the actuarial valuation as at 31
March 2021, which was carried out by a qualified independent actuary, have
been updated on an approximate basis to 31 March 2024. There have been no
changes in the valuation methodology adopted for this period's disclosures
compared to the previous period's
disclosures.
The Scheme exposes the Group to actuarial risks and the key risks are set out
in the table below. In each instance these risks would detrimentally impact
the Group's statement of financial position and may give rise to increased
interest costs in the Group income statement. The trustees could require
higher cash contributions or additional security from the Group.
The trustees manage governance and operational risks through a number of
internal controls policies, including a risk register and integrated risk
management.
Risk Description Mitigation
Investment risk Weaker than expected investment returns result in a worsening in the Scheme's The trustees continually monitor investment risk and performance and have
funding position. established an investment sub-committee which includes a Group representative,
meets regularly and is advised by professional investment advisors. A number
of the investment managers operate tactical investment management of the plan
assets.
The Scheme currently invests approximately 68% of its asset value in
liability-driven investments, 30% in a portfolio of diversified growth funds
and 2% in cash and liquidity funds. The objective of the growth portfolio is
that in combination, the matching credit, liability-driven investments and
cash components generate sufficient return to meet the overall portfolio
return
objective.
Interest rate risk A decrease in corporate bond yields increases the present value of the IAS 19 The trustees' investment strategy includes investing in liability-driven
defined benefit obligations. investments and bonds whose values increase with decreases in interest rates.
A decrease in gilt yields results in a worsening in the Scheme's funding Approximately 60% of the Scheme's funded liabilities are currently hedged
position. against interest rates using liability-driven investments.
It should be noted that the Scheme hedges interest rate risk on a statutory
and long-term funding basis (gilts) whereas AA corporate bonds are implicit in
the IAS 19 discount rate and so there is some mismatching risk to the Group
should yields on gilts and corporate bonds
diverge.
Inflation risk An increase in inflation results in higher benefit increases for members which The trustees' investment strategy includes investing in liability-driven
in turn increases the Scheme's liabilities. investments which will move with inflation expectations with approximately 60%
of the Scheme's inflation-linked liabilities being hedged on a funded basis.
The growth assets held are expected to provide protection over inflation in
the long term.
Mortality risk An increase in life expectancy leads to benefits being payable for a longer The trustees' actuary provides regular updates on mortality, based on scheme
period which results in an increase in the Scheme's liabilities. experience, and the assumption continues to be reviewed.
The amounts recognised in the statement of financial position in respect of
the defined benefit scheme were as follows:
2024 2023
£000 £000
Present value of funded obligations (130,420) (134,091)
Fair value of scheme assets 93,234 99,598
Recognised liability for defined benefit obligations (37,186) (34,493)
The present value of Scheme liabilities is measured by discounting the best
estimate of future cash flows to be paid out of the Scheme using the projected
unit credit method. The value calculated in this way is reflected in the net
liability in the statement of financial position as shown above.
The projected unit credit method is an accrued
benefits valuation method in which allowance is made for projected earnings
increases. The accumulated benefit obligation is an alternative actuarial
measure of the Scheme's liabilities whose calculation differs from that under
the projected unit credit method in that it includes no assumption for future
earnings increases. In this case, as the Scheme is closed to future accrual,
the accumulated benefit obligation is equal to the valuation using the
projected unit credit method.
All actuarial remeasurement gains and losses will be recognised in the year in
which they occur in other comprehensive income.
The cumulative remeasurement net loss reported in the statement of
comprehensive income since 1 April 2004 is
£54.101m.
IFRIC 14 has no effect on the figures disclosed because the Company has an
unconditional right to a refund under the resulting trust
principle.
Movements in the net liability for defined benefit obligations recognised in
the consolidated statement of financial position:
2024 2023
£000 £000
Net liability for defined benefit obligations at the start of the year (34,493) (25,979)
Contributions paid 3,500 4,142
Net expense recognised in the consolidated income statement (see below) (3,525) (2,079)
Remeasurement losses recognised in other comprehensive income (2,668) (10,577)
Net liability for defined benefit obligations at the end of the year (37,186) (34,493)
Movements in the present value of defined benefit obligations:
2024 2023
£000 £000
Defined benefit obligation at the start of the year 134,091 181,759
Interest expense 6,615 4,750
Actuarial loss due to scheme experience 1,308 4,897
Actuarial gains due to changes in demographic assumptions (2,187) (7,539)
Actuarial loss / (gains) due to changes in financial assumptions 585 (38,032)
Benefits paid (11,012) (11,744)
Past service cost (see note 5) 1,020 -
Defined benefit obligation at the end of the year 130,420 134,091
There have been no plan amendments, curtailments, or settlements during the
period.
The English High Court ruling in Lloyds Banking Group Pension Trustees Limited
v Lloyds Bank plc and others was published on 26 October 2018, and held that
UK pension schemes with Guaranteed Minimum Pensions ("GMPs") accrued from 17
May 1990 must equalise for the different effects of these GMPs between men and
women. The case also gave some guidance on related matters, including the
methods for equalisation.
The trustees of the plan will need to obtain legal advice covering the impact
of the ruling on the plan, before deciding with the employer on the method to
adopt. The legal advice will need to consider (amongst other things) the
appropriate GMP equalisation solution, whether there should be a time limit on
the obligation to make back-payments to members (the "look-back" period) and
the treatment of former members (members who have died without a spouse and
members who have transferred out for example).
In the year to 31 March 2020 the trustees commissioned scheme-specific
calculations to determine the likely impact of the ruling on the Scheme. An
allowance for the impact of GMP equalisation was included within the
accounting figures for that year, increasing liabilities by 1.68%, thereby
resulting past service cost of £3.6m was recognised in the income statement
at that time. The Scheme has not yet implemented GMP equalisation and
therefore the allowance made in 2019 has been maintained for accounting
disclosures.
On 20 November 2020, the High Court issued a supplementary ruling in the
Lloyds Bank GMP equalisation case with respect to members that have
transferred out of their scheme prior to the ruling. The results mean that
trustees are obliged to make top-up payments that reflect equalisation
benefits and to make top-up payments where this was not the case in the
past. Also, a defined benefit scheme that received a transfer is
concurrently obliged to provide equalised benefits in respect to the transfer
payments and, finally, there were no exclusions on the grounds of discharge
forms, CETV legislation, forfeiture provisions or the Limitation Act 1980.
The impact of this ruling was estimated to cost £0.2m (approximately 0.1% of
liabilities). This additional service cost was recognised through the income
statement as a past service cost in the year ended 31 March 2021 and was
presented within exceptional items and therefore the impact of the ruling is
allowed for in the figures presented at 31 March
2023.
During the year to 31 March 2024, the trustees of the Scheme identified that a
group of members required an adjustment to their benefits in respect of the
requirement to provide equal benefits to males and females following the
Barber judgement in 1990. In summary, the adjustment consisted of decreasing
the normal retirement age from 65 to 60 for some members' benefits, for some
elements of service after 17 May 1990. This has resulted in additional
liabilities in the Scheme which have been accounted for as a £1.0m past
service cost in the income statement, recognised as an exceptional cost
(approximately 0.8% of
liabilities).
The Scheme's liabilities are split between active, deferred and pensioner
members at 31 March as follows:
2024 2023
% %
Active - -
Deferred 28 29
Pensioners 72 71
100 100
Movements in the fair value of Scheme assets:
2024 2023
£000 £000
Fair value of Scheme assets at the start of the year 99,598 155,780
Interest income 4,789 4,085
Loss on Scheme assets excluding interest income (2,962) (51,251)
Contributions by employer 3,500 4,142
Benefits paid (11,012) (11,744)
Expenses paid (679) (1,414)
Fair value of Scheme assets at the end of the year 93,234 99,598
Actual gain / (loss) on Scheme assets 1,827 (47,166)
The fair value of Scheme asset investments was as follows:
2024 2023
£000 £000
Diversified growth funds 27,484 28,463
Bonds and liability-driven investment funds 63,777 68,365
Cash and liquidity funds 1,973 2,770
Total assets 93,234 99,598
None of the fair values of the assets shown above include any of the Group's
own financial instruments or any property occupied, or other assets used by
the Group.
All of the Scheme assets have a quoted market price in an active market with
the exception of the trustees' bank account balance.
Diversified growth funds are pooled funds invested across a diversified range
of assets with the aim of giving long-term investment growth with lower
short-term volatility than equities.
It is the policy of the trustees and the Group to review the investment
strategy at the time of each funding valuation. The trustees' investment
objectives and the processes undertaken to measure and manage the risks
inherent in the Scheme are set out in the Statement of Investment Principles.
A proportion of the Scheme's assets is invested in the BMO LDI Nominal Dynamic
LDI Fund and in the BMO LDI Real Dynamic LDI Fund which provides a degree of
asset liability matching.
The net expense recognised in the consolidated income statement was as
follows:
2024 2023
£000 £000
Past service cost 1,020 -
Net interest on the net defined benefit liability 1,826 665
Scheme administration expenses 679 1,414
3,525 2,079
The net expense recognised in the following line items in the consolidated
income statement:
2024 2023
£000 £000
Charged to operating profit 662 1,242
Charged to exceptional items 1,037 172
Other finance revenue and expense - net interest on the net defined benefit 1,826 665
liability
3,525 2,079
The principal actuarial assumptions at the balance sheet date (expressed as
weighted averages) were
2024 2023
% %
Discount rate at 31 March 4.85 4.90
Future salary increases N/A N/A
Inflation (RPI) (non-pensioner) 3.30 3.25
Inflation (CPI) (non-pensioner) 2.80 2.75
Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less 3.30 3.25
Allowance for revaluation of deferred pensions of CPI or 5% p.a. if less 2.80 2.75
Allowance for pension in payment increases of RPI or 5% p.a. if less 3.05 2.90
Allowance for pension in payment increases of CPI or 3% p.a. if less 2.15 2.00
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 3.75 3.80
3% p.a.
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 4.30 4.35
4% p.a.
The mortality assumptions adopted at 31 March 2024 are 165% of each of the
standard tables S3PMA/S3PFA (2023: 165% of S3PMA/S3PFA respectively), year of
birth, no age rating for males and females, projected using CMI_2022 (2023:
CMI_2021) converging to 1.0% p.a. (2023: 1.0%) with a smoothing parameter 7.0%
(2023: 7.0%).
It is recognised that the Core CMI_2022 model is likely to represent an overly
cautious view of experience in the near term. As a result, management has
applied judgement and has adopted additional weightings of 10% above the core
parameters for 2020, 2021 and 2022 data (2023: 10% of 2020 and 2021 data) to
represent possible future trend as a best estimate. This will be kept under
review in the future. These assumptions imply the following life expectancies:
2024 2023
Life expectancy for a male (current pensioner) aged 65 17.4 years 17.8 years
Life expectancy for a female (current pensioner) aged 65 20.1 years 20.4 years
Life expectancy at 65 for a male aged 45 18.3 years 18.7 years
Life expectancy at 65 for a female aged 45 21.2 years 21.6 years
It is assumed that 75% of the post A-Day maximum for active and deferred
members will be commuted for cash (2023: 75%).
Pension Increase Exchange take-up was estimated to be 40% on implementation in
the year ended 31 March 2022; there has been no change made to this assumption
nor to the 2021 bridging pension option take-up of 40%.
The pension scheme liabilities are derived using actuarial assumptions for
inflation, future salary increases, discount rates, mortality rates and
commutation. Due to the relative size of the Scheme's liabilities, small
changes to these assumptions can give rise to a significant impact on the
pension scheme deficit reported in the Group statement of financial position.
The sensitivity to the principal actuarial assumptions of the present value of
the defined benefit obligation is shown in the following table:
2024 2024 2023 2023
% £000 % £000
Discount rate (1)
Increase of 0.25% per annum (2.45%) (3,194) (2.41%) (3,228)
Decrease of 0.25% per annum 2.56% 3,334 2.51% 3,365
Decrease of 1.0% per annum 10.93% 14,253 10.71% 14,363
Inflation (2)
Increase of 0.25% per annum 0.81% 1,057 0.64% 853
Increase of 1.0% per annum 3.09% 4,032 2.77% 3,711
Decrease of 1.0% per annum (2.86%) (3,730) (2.61%) (3,499)
Life expectancy
Increase of 1 year 4.25% 5,545 4.30% 5,765
Notes: (1) At 31 March 2024, the assumed discount rate is 4.85% (2023: 4.90%).
(2) At 31 March 2024, the assumed rate of RPI inflation is 3.30% and CPI inflation
2.80% (2023: RPI 3.25% and CPI 2.75%).
The sensitivities shown above are approximate. Each sensitivity considers one
change in isolation. The inflation sensitivity includes the impact of changes
to the assumptions for revaluation and pension increases.
The weighted average duration of the defined benefit obligation at 31 March
2024 is ten years (31 March 2023: twelve years).
The life expectancy assumption at 31 March 2024 is based upon increasing the
age rating assumption by one year (31 March 2023: one year).
Other than those specifically mentioned above, there were no changes in the
methods and assumptions used in preparing the sensitivity analysis from the
prior year.
The history of the Scheme's deficits and experience gains and losses is shown
in the following table:
2024 2023
£000 £000
Present value of funded obligation (130,420) (134,091)
Fair value of Scheme asset investments 93,234 99,598
Recognised liability for defined benefit obligations (37,186) (34,493)
Actual gain / (loss) on Scheme assets 1,827 (47,166)
Actuarial gain due to changes in demographic assumptions 2,187 7,539
Actuarial (loss) / gains due to changes in financial assumptions (585) 38,032
14. Ordinary share capital
Ordinary shares of 5 pence each:
Number £000
of shares
Issued and fully paid at 31 March 2023 73,419,193 3,671
Issued and fully paid at 31 March 2024 73,419,193 3,671
There are 15,974 vested shares outstanding in respect of a buyout award
granted to a former Director of the Company. These are yet to be issued.
There are 4,606,957 potential share options outstanding under the performance
share plan at 31 March 2024 (2023: 2,857,752). No options vested during the
year to 31 March 2024 (2023:
nil).
15. Cash generated from operations
2024 2023
£000 £000
Loss for the year (3,299) (3,957)
Adjustments for:
Pension scheme contributions net of costs settled by the Company (2,972) (3,287)
Pension scheme costs settled by the Scheme 151 559
Depreciation charge 7,769 7,815
Amortisation charge 163 211
Exceptional rationalisation costs 2,212 1,235
Exceptional past service cost in respect to retirement benefits 1,020 -
Exceptional refinancing costs 125 69
Exceptional costs arising from cancellation of future supply agreement 1,034 751
Exceptional costs in respect to legacy claims (283) 302
Exceptional doubtful debt and related inventory provision 140 896
Exceptional profit on disposal of surplus property - (769)
Profit on disposal of other plant and equipment (17) -
Loss on disposal of intangible non-current assets - 14
Share-based payment charge / (credit) 43 (33)
Cash flow relating to onerous lease (177) -
Financial income (424) (218)
Financial expense 6,011 3,967
Taxation expense (498) 1,437
Operating cash flow before changes in working capital 10,998 8,992
Changes in working capital
Decrease in inventories 3,427 1,539
Decrease in contract assets 3,985 2,388
Decease / (Increase) in trade and other receivables 2,128 (1,656)
Decrease in trade and other payables (3,294) (943)
Decrease in contract liabilities (1,629) (2,542)
Cash generated from operations 15,615 7,778
16. Post balance sheet events
Notice was given to the landlord on 12 April 2024 that the company would
exercise the break option to exit the leased buildings at Tucson, Arizona, USA
on 1 October 2025 following the decision to close the facility at Tucson.
The reduction in the lease liability of £1.3m has been reflected in the
balance sheet at 31 March 2024 as the company was certain to exit on closure,
see note 11.
On 5 July 2024 the Group's lending bank extended the committed facilities to
31 December 2025.
Information for shareholders
Reconciliation of non-GAAP financial measures
Notes 2024 2023
Continuing operations: £000 £000
Statutory loss after tax (3,299) (3,957)
(Less) / add back: Income tax (credit) / expense 7 (498) 1,437
Loss before tax (3,797) (2,520)
Add back: Net financing charge 6 5,587 3,749
Operating profit 1,790 1,229
Add back: Exceptional items 5 4,857 4,710
Underlying operating profit 6,647 5,939
Add back: Amortisation of intangible assets 10 163 211
Underlying earnings before interest, tax and amortisation ("EBITA") 6,810 6,150
Add back: Depreciation of property, plant and equipment 11 7,769 7,815
Underlying earnings before interest, tax, depreciation and amortisation 14,579 13,965
("EBITDA")
Loss before tax (3,797) (2,520)
Add back: Exceptional items 5 4,857 4,710
Underlying profit before tax 1,060 2,190
Income tax (credit) / expense 7 (498) 1,437
Add back: Exceptional tax credit 743 491
Group underlying tax expense 245 1,928
Group statutory effective tax rate 13.1% (57.0%)
Group underlying effective tax rate 23.1% 88.0%
Cash at bank and in hand 5,974 10,354
Loans and borrowings - current (6,753) (5,046)
Loans and borrowings - non-current (28,678) (39,668)
Net debt (29,457) (34,360)
Add back: Lease liabilities 11,167 11,870
Net debt excluding lease liabilities (18,290) (22,490)
A reconciliation between the Group's loss to underlying profit used in the
numerator in calculating underlying earnings per share can be found in note 8.
Glossary
CASH CONVERSION RATE Cash generated from operations divided by EBITDA as defined below
COMPOUND ANNUAL GROWTH RATE ("CAGR") The geometric progression ratio that provides a constant rate of return over a
time period
CONSTANT CURRENCY Prior year translated at the current year's average exchange rate. Included to
explain the effect of changing exchange rates during volatile times to assist
the reader's understanding
FIXED ASSET UTILISATION RATIO Revenue from continuing operations divided by tangible fixed assets
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 CASH FLOW Cash generated from operations, add back pension contributions net of pension
administration costs and cash from exceptional items, less total capex and net
interest paid
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
NET DEBT TO UNDERLYING EBITDA RATIO Ratio of net debt as defined above to underlying EBITDA as defined below
EBIT Profit before interest and tax
EBITDA Profit before interest, tax, depreciation and amortisation
UNDERLYING Adjusted to exclude all exceptional items
UNDERLYING EBIT Profit before interest and tax, adjusted to exclude all exceptional items
UNDERLYING EBITDA Profit before interest, tax, depreciation and amortisation adjusted to exclude
all exceptional items
UNDERLYING EARNINGS PER SHARE Earnings per share adjusted to exclude all exceptional items
UNDERLYING OPERATING PROFIT Operating profit adjusted to exclude all exceptional items
UNDERLYING PROFIT BEFORE TAX Profit before tax adjusted to exclude all exceptional items
OPERATIONAL GEARING Ratio of fixed overheads to revenue
RETURN ON REVENUE Underlying operating profit, as defined above, from continuing operations, as
a percentage of revenue from continuing operations
RETURN ON CAPITAL EMPLOYED ("ROCE") Underlying operating profit for the Group as a percentage of assets employed,
defined as working capital plus tangible assets
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SFWESWELSESWRecent news on Carclo
See all newsREG - Carclo plc - Holding(s) in Company
AnnouncementREG - Carclo plc - Trading Statement
AnnouncementREG - Carclo plc - Holding(s) in Company
AnnouncementREG - Carclo plc - Refinancing Arrangements, Pension Scheme Valuation
AnnouncementREG - Carclo plc - Holding(s) in Company
Announcement