REG - Carclo plc - Full Year Trading Update

CarcloAnnouncement

29/04/2022 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:20220429:nRSc7769Ja&default-theme=true

RNS Number : 7769J  Carclo plc  29 April 2022

29 April 2022

 

Carclo plc

 

("Carclo" or the "Group")

 

Full Year Trading Update

 

Carclo, a global manufacturer, principally of fine tolerance injection moulded
plastic parts and aerospace components, today provides an update on trading
for the financial year ended 31 March 2022 ("FY 2022").

 

The Board is pleased to report that the business expects to report a strong
performance for the year, with revenue growth ahead of, and underlying profits
in line with, its expectations despite the challenging macroeconomic
backdrop. In addition, the Group balance sheet has strengthened considerably
throughout the course of the year, in part driven by a reduction in the IAS 19
pension deficit.  We have continued to invest in capital equipment to support
long-term growth, largely financed by an increase in net debt.

 

The impact of the pandemic continued to be felt throughout the year albeit
less through the direct impacts of lockdowns and plant closures, and more
through the secondary effects of labour shortages and significant cost
inflation.  During the second half, whilst demand has remained robust, the
business faced more challenging conditions in terms of recruiting labour in
the US as well as cost escalations across raw materials, energy, packaging,
freight and other overheads.  Whilst the impact of raw material cost
increases can largely be passed on to customers (albeit with some time lag)
the overall impact of these increases reduced margins in the second half
particularly in the US operations.  Price increases are being negotiated with
customers and this will continue into FY 2023 to offset the impact of the
non-material cost increases.  Latterly the war in Ukraine has added to these
inflationary pressures.

 

The safety and wellbeing of the Carclo team has continued to be foremost in
the minds of the Board and in addition to the measures introduced at the start
of the pandemic a range of further actions have been taken to support
colleagues through these challenging times.  The Board is grateful for the
positivity, resilience and dedication shown by colleagues again this year.

 

In the first full trading year with a refreshed Board, the new leadership team
has focused on refining the Group's medium-term strategy. Having received the
final proceeds from the exit from the LED technology business, the
organisational structure has been simplified to focus purely on CTP and
Aerospace growth. Going forward the business will continue to execute on the
growth strategies developed for each of these divisions, with further
significant investment in capability and capacity planned for FY 2023.

 

In addition, the Board has continued to build positive relationships with
pension trustees and banks.  As well as additional employer contributions
made towards reducing the pension deficit, a range of other scheme initiatives
have been introduced aimed at enhancing members' benefits whilst reducing the
deficit, and these are expected to continue to contribute positively in the
coming years.

 

Carclo Technical Plastics (CTP)

 

The CTP division performed well with demand continuing to grow for medical and
diagnostic products.  The first half of the year was strong, followed by a
second half year performance impacted by cost inflation noted above.

 

The new large customer contract reported in previous trading updates has now
entered production in the UK after an extended period of prove out; the US
production line is still in the prove out stage but is expected to commence
production in the early part of FY 2023.

 

Despite the challenging backdrop, the division has been awarded significant
new tooling contracts by an existing large customer and consequently it is
anticipated that new production lines will be installed in CTP businesses
around the globe in line with our long-term strategy. This will in turn lead
to continuing long term revenue growth.  As a result, it is anticipated that
capital investment in the division will remain significant in FY 2023.

 

In addition to this large tooling order the division continued to deliver on
its longer-term growth strategy, introducing 17 additional new product lines
across four of our global sites.  We have also secured five new significant
accounts in target sectors including pharmaceutical accounts in the Czech
Republic and US, a medical account in India, and China accounts added in the
diabetes and diagnostics sectors.

 

To date the war in Ukraine has not directly impacted any operations other than
through the impact of oil and energy price increases feeding through into
inflation.  COVID-19 continues to have the potential to impact the division
through restrictions on labour movement, currently these impacts are notably
affecting our India and China Operations.

 

The division also benefited from a US Government Loan related to COVID-19
disruption being forgiven in the year; the resulting profit was disclosed
separately in the Interim Accounts income statement.

 

Aerospace

 

The Aerospace division has continued to show good resilience, remaining both
profitable and cash generative in the year.  Order intake remained somewhat
subdued in the first half but has improved significantly in the second half
and in particular in the last quarter of the year.  Additional business
development resources have been recruited with the objective of accelerating
growth as the industry recovers from the impact of the pandemic.  The order
growth has come both from existing customers placing larger orders as well as
new customers.  Margins have been maintained despite significant cost
increases in the second half.

 

As with CTP, the war in Ukraine has the potential to cause disruption to
customer supply chains but to date this has not had a material impact on the
division.

 

The division starts the new financial year with a healthy order book and
expects to see good revenue and profit growth in FY 2023.

 

 

 

Governance

 

The Group has operated with a refreshed Board over the last 12-month period,
bringing strong and relevant experience to the streamlined and re-focused
Group.  This complemented the new Tripartite Agreement established with the
Group's bank and pension trustees to form a stable basis on which to continue
to drive renewed growth for the business.

 

Outlook

 

Demand in the Group's key markets remains strong coming into the new financial
year and this underpins continued confidence in strong underlying revenue
growth.  However, the Group is seeing significant headwinds largely due to
the continued impact of COVID-19, in particular in our China and India
operations.  In addition, we remain mindful of the general market uncertainty
related to the impact of the war in Ukraine.  The margin pressures that have
been experienced in the CTP division in the second half of FY 2022 are
expected to continue into the new financial year and it is anticipated that
trading in the early months of FY 2023 will remain challenging.  A number of
initiatives are underway to mitigate these impacts with the benefits of these
making an increasing contribution to margins over the course of FY 2023.  For
the Aerospace division, the strong order intake in Q4 and the increased focus
on business development positions the division well for FY2023, with further
growth expected in the current year and beyond.

 

About Carclo plc

Carclo plc is a public company whose shares are quoted on the Main Market of
the London Stock Exchange. The Group is a global provider of value-adding
engineered solutions for the medical, optical and aerospace industries.

 

 

LEI: 21380078MEM399JPI956

 

Enquiries:

Carclo plc                             01924
268040

Nick Sanders - Executive Chair

 

FTI Consulting                    020 3727 1340

Nick Hasell / Susanne Yule

 

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  TSTFLFSRSDITFIF