REG - Carclo plc - Half-year Report
30/11/2022 07:00
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RNS Number : 0000I Carclo plc 30 November 2022
Carclo plc
(“Carclo“ or the “Group“)
Interim Report and Accounts
Half-year results for the six months ended 30 September 2022
Carclo, the global provider of value-adding engineered solutions for the life
sciences, precision components, and specialised optics and aerospace
industries, announces its results for the first six months of its financial
year ending 31 March 2023 ("H1 23").
Highlights
Market environment
á High growth in our chosen markets, led by Life Science
innovations and a revival in Aerospace after the lifting of Covid related air
travel bans.
á Higher energy prices, labour and material costs have continued
to fuel our cost inflation. Where possible, the Group has implemented price
increases to mitigate the impact of these cost increases.
H1 Results
á Revenue grew strongly to £72.2m, up 23% compared to H1 2022,
driven by growth with new and existing life sciences customers, forex
tailwinds and price increases.
á Margins in our manufacturing operations fell as a result of
cost inflation and a delay in the launch of two new product lines.
á Underlying operating profit at £3.6m was slightly below H1
2022 as higher revenue and forex tailwinds largely offset the impact of lower
margins. On a constant currency basis, the underlying operating profit was
down by £0.3m.
á Net debt including IFRS16 lease liabilities increased to
£36.8m (31 March 2022: £32.4m) driven by increased working capital,
additional growth capital investment, and the impact of movement in exchange
rates on the translation of non-sterling denominated debt.
Strategy Ð Carclo 2025
á Our focus is on improving the Group's cash generation through
improved asset utilisation and driving operational excellence throughout our
manufacturing operations.
á Through this improved asset utilisation and operational
improvement, we aim to deliver a sustainable 15% ROCE through the cycle.
á We are building a "One Carclo" culture of entrepreneurialism
and collaboration across the group to establish Carclo as a destination for
talent and career development.
Financing
á As previously announced on 5(th) September, we have agreed to a
revised and extended funding arrangement with the Group's lending bank and the
Pension Scheme. This arrangement provides access to ongoing bank facilities
and visibility of pension deficit repair contributions to June 2025.
á Largely due to rising global interest rates, the Group
forecasts limited headroom on its interest cover covenant in the near term.
The Board is taking a number of actions to mitigate this.
Outlook
á Demand for the Group's products remains robust, but ongoing
cost inflation is expected to exert downward pressure on margins throughout
the second half and into the following year. As a result, the Board is
expecting a second half performance similar to that of the first half.
á Increasing global interest rates are already impacting the cost
of financing the Group and we expect this trend to continue, partly mitigated
by our focus on cash management.
á The Board is positive about the medium to long term prospects
for the Group, driven by structural growth drivers in our end-markets, our
strong customer relationships and the opportunity to drive improved financial
performance through a focus on operational excellence.
Frank Doorenbosch, Chief Executive Officer, said:
“I am proud of Carclo's strong growth as the result of our position as the
trusted partner of major blue-chip customers, operating in markets with robust
demand. Our focus is now to capitalise on this growth, through operational
excellence programmes and improved asset utilisation, to deliver an increased
ROCE. The margin pressure, mainly caused by tightness in the labour market and
inflation in both materials and energy costs is being offset by price
increases where possible and enhanced investment in continuous improvement.
Our near-term focus is on cash generation and improved asset utilisation as
we seek to reduce our cost of finance in an environment of increasing global
interest rates.
Looking ahead, we are targeting a sustainable 15% ROCE through the cycle, and
we believe our chosen market sectors will provide the opportunity to deliver
strong organic growth over the long term.“
The key financial performance measures for the period are as follows:
£000 H1 2023 H1 2022 Change
Revenue 72,151 58,672 13,479
Underlying operating profit 3,593 3,682 (89)
Exceptional items (332) - (332)
COVID-related US government grant income - 2,087 (2,087)
Operating profit 3,261 5,769 (2,508)
Profit on discontinued operations, net of tax - 693 (693)
Underlying earnings per share - basic 1.5p 2.5p -1.0p
Basic earnings per share - continuing operations 0.9p 6.5p -5.6p
Net debt excluding leases (23,773) (21,613) (2,160)
Net debt (36,830) (28,371) (8,459)
IAS 19 retirement benefit deficit (24,928) (33,407) 8,479
Underlying Operating Profit
Technical Plastics 4,009 4,784 (775)
Aerospace 673 227 446
Central (1,089) (1,329) 240
Total 3,593 3,682 (89)
Notes:
(1) underlying results are those calculated before discontinued
operations, separately disclosed items and exceptional items. A reconciliation
to statutory figures is set out below.
Enquiries
Carclo
Frank Doorenbosch Ð Chief Executive Officer 01924 268040
FTI Consulting Nick Hasell / Susanne Yule 020 3727 1340
Forward-looking statements
Certain statements made in these reports & accounts are forward-looking
statements. Such statements are based on current expectations and are subject
to several risks and uncertainties that could cause actual events to differ
materially from any expected future events or results referred to in these
forward-looking statements.
Alternative performance measures
The alternative performance measures are defined in the financial review of
the Annual Report and Accounts (ARA) for the year ended 31 March 2022, with a
reconciliation to statutory figures included in this Half Year Report to aid
the user of these accounts. The Directors believe that alternative performance
measures provide a more useful comparison of business trends and performance.
The term 'underlying' is not defined under IFRS and may not be comparable with
similarly titled measures used by other companies.
Overview of Results
Group revenue grew by 23.0% to £72.2m (H1 22: £58.7m), driven by a
combination of strong demand, the impact of price increases and foreign
exchange tailwinds. At constant exchange rates, revenue increased by 14.0%.
Technical Plastics ('CTP') revenues rose 22.2% to £69.1m (H1 22: £56.6m),
with growth of 12.9% at constant currency driven by strong demand in its key
markets.
The CTP business principally operates in three key market sectors: Life
Sciences, Precision Components and Optics. The Life Science segment exhibited
strong demand during the first half as we saw a growing adoption of life
science analytics in the healthcare market, particularly in North America
which continues to dominate the life science analytics market due to its
advanced and developing healthcare infrastructure. Revenue growth came from
both new and existing customers.
The Precision Components market continued to be held back by the supply of
microprocessors for our customers' products which constrained demand.
Demand in our traditional optics market of eyecare and aftermarket
car-lighting remains stable, and the business is now seeking to capture growth
by expanding its in-house range of highly efficient LED lighting solutions.
CTP Design and Engineering (previously described as tooling) activity in the
first half remained at a relatively high level, with revenue up 11.7% compared
to the prior year of £10.2m (H1 22: £9.1m). The high level of Design and
Engineering activity experienced over the last 18 months is now being
converted into increased manufacturing activity and this is anticipated to
continue with the launch of the two new major product lines expected in the
second half. CTP manufacturing solutions first half revenue increased by
24.2% to £59.0m (H1 22: £47.5m).
The aerospace market continued to recover as aircraft manufacturers responded
to increasing passenger numbers from the low levels during the height of the
covid pandemic. As a result, Aerospace first half revenues grew by 44.5% to
£3.0m (H1 22: £2.1m).
Revenue (£000) H1 2023 H1 2022 Change
CTP Design & Engineering 10,151 9,084 1,067
CTP Manufacturing Solutions 58,982 47,499 11,483
Aerospace 3,018 2,089 929
Total 72,151 58,672 13,479
Group underlying operating profit fell slightly to £3.6m (H1 22: £3.7m) as
increased revenues and the benefit of exchange rate tailwinds were offset by a
drop in margins. At constant exchange rates underlying operating profit fell
by 8.9%.
CTP's underlying operating profit margin reduced from 8.5% to 5.8% largely
driven by significant inflation across its major cost categories including
energy, materials, labour and transport. Prices have been increased where
possible to mitigate the effect of these cost increases, but there is often a
lag before the benefit of improved pricing feeds through to margins. CTP also
incurred significant costs in the first half in developing the production
lines for two new products, the launch of which has been delayed and is now
expected in the second half. These reduced margins only partly offset
increased revenues and the benefit of foreign exchange movement, resulting in
CTP underlying operating profit being lower than the prior year at £4.0m (H1
22: £4.8m).
Aerospace operating margins strengthened further to 22.3% (H1 22: 10.9%) as
the business continued to focus on its niche products. As a result the
increased activity levels translated into strong growth in underlying
operating profit, up 196.5% at £0.7m (H1 22: £0.2m).
Central costs decreased slightly by £0.2m to £1.1m mainly due to foreign
exchange gains.
Finance costs increased by 14.8% to £1.6m (H1 22: £1.4m) as a result of
increasing interest rates and higher net debt. Finance costs include net
interest on the defined benefit pension liability of £0.3m (H1 22: £0.4m).
The Group incurred net exceptional operating costs of £0.3m in the period (H1
22: £nil), comprising £1.1m rationalisation costs relating mainly to the
refinancing of the Group partly offset by a £0.8m gain on the sale and
leaseback of the property in Tucson, Arizona, USA.
Group profit before tax was £1.7m (H1 22: £4.4m including £2.1m
COVID-related US government grant income).
The income tax expense was £1.0m (H1 22: credit £0.4m benefitting from a
£0.9m one-off re-recognition of UK deferred tax assets), and the underlying
tax expense was £0.9m (H1 22: expense £0.5m). The effective tax rate was
59.5% (H1 22: credit 8.5%). The underlying effective tax rate was 43.8% (H1
22: expense 20.4%) due to a change in mix of the profits towards higher tax
jurisdictions.
Underlying earnings per share was 1.5 pence (H1 22: 2.5 pence). The statutory
earnings per share for the period was 0.9 pence (H1 22: 7.5 pence).
Carclo 2025 Strategy
The strategic focus for the business is now to drive improved returns and cash
flow. We are implementing our Carclo 2025 plan: 'Focus and Value', which
resets our operational model and is targeted to restore our margins, with the
medium-term goal of delivering a through-cycle ROCE of 15%. The key elements
of the Carclo 2025 plan are:
á A focus on operational excellence throughout the business to
increase efficiency and improve customer service.
á Increasing the utilisation of our asset base, in particular in
the CTP business, with near-term investment focused on continuous improvement,
delivering more predictable and higher returns.
á Targeting growth in less capital intensive areas of the business.
á Building a "One Carclo" culture of entrepreneurialism and
collaboration across the group to establish Carclo as a destination for talent
and career development.
Board changes
On 6 October 2022 the Board announced, with immediate effect, the appointment
of Frank Doorenbosch as Chief Executive Officer of Carclo. Frank had
previously been appointed as a consultant to the Group for a period of up to
twelve months from 6 June 2022 and accordingly since that date has been an
Executive Director of Carclo. On the same day Nick Sanders stood down as
Executive Chair and became Non-Executive Chair until 5 November 2022 when he
stepped down from the Board.
Joe Oatley was appointed as Non-Executive Chair with effect from 6 November
2022 and Eric Hutchinson, a Non-Executive Director and Chair of the Audit
Committee, was appointed as Senior Independent Director and Chair of the
Remuneration Committee with effect from 6 November 2022.
Phil White has given notice of his retirement and has stepped down from his
role as Chief Financial Officer and as a Director of the Company with effect
from 14 November 2022. Phil will remain with the Company until his
retirement in June 2023 in order to ensure a smooth transition to the new CFO.
The Board has announced the promotion of David Bedford to Chief Financial
Officer and appointment as a Director of the Company with effect from 14
November 2022. David joined Carclo in September 2022 as the Chief Financial
Officer of the CTP Division.
Financial Position
Net debt excluding lease liabilities increased by £2.2m during the first half
to £23.8m, and net debt increased by £4.4m to £36.8m which includes cash of
£10.7m (31 March 2022: £12.3m).
Cash
The following table analyses the net cash outflow before and after the cash
flows associated with debt and pension servicing.
Cash Flow Summary H1 2023 H1 2022
£000 £000
Underlying EBITDA 7,512 6,863
Exceptional operating cash flows (771) -
Working capital movements (4,718) (3,323)
Capex (owned assets) (1,035) (3,529)
Sale proceeds 2,351 718
Tax (652) (486)
Other non-operating cashflow 78 (18)
Cash flows before debt and pension servicing 2,765 225
Pension deficit repair contributions (1,589) (1,502)
Lease debt servicing (2,141) (1,031)
Non-lease debt servicing (1,782) (3,031)
Cash flows for debt and pension servicing (5,512) (5,564)
Net decrease in cash and cash equivalents (2,747) (5,339)
Net cash outflow from operating activities during the first half was £1.3m
(H1 22: net cash inflow £0.6m), comprising underlying EBITDA of £7.5m (H1
22: £6.9m), net working capital outflows of £4.7m (H1 22: outflow £3.3m),
net pension contributions of £1.6m (H1 22: £1.5m), interest costs of £1.2m
(H1 22: £1.0m), taxes of £0.7m (H1 22: £0.5m), exceptional rationalisation
costs of £0.8m (H1 22: £nil) and £0.2m of other inflows (H1 22: £nil).
Net cash inflow from investing activities during the first half was £0.2m (H1
22: net cash outflow £2.8m) comprising mainly £1.1m proceeds from the
disposal of part of the Tucson manufacturing site in a sale and leaseback
transaction (H1 22: LED Technologies disposal proceeds £0.7m), less £1.0m of
capital expenditure (H1 22: £3.5m).
Net cash outflow from financing activities during the first half was £1.5m
(H1 22: £3.1m), comprising £1.8m repayment of lease liabilities (H1 22:
£0.9m), net repayment of other borrowings £0.9m (H1 22: £2.2m) and £1.2m
proceeds related to the financing element of the sale and leaseback of Tucson
(H1 22: £nil).
A £1.1m foreign exchange gain on cash (H1 22: £0.2m), coupled with the
£2.7m net cash outflow (H1 22: net cash outflow £5.3m) resulted in an
overall £1.6m reduction in cash during the first half.
Debt
Debt increased by £2.8m during the first half of the financial year to
£47.6m. It was reduced by £1.1m repayments of term loans, £1.8m repayments
of lease liabilities and £0.4m net capitalisation of debt transaction costs.
It was increased by £1.2m of new lease liabilities arising from the sale and
leaseback of the Tucson manufacturing site, by £1.9m from other new leases
and by £2.8m from adverse foreign exchange movements.
On 2 September 2022 the Group successfully refinanced with the Company's bank.
The debt facilities available to the Group at 30 September 2022 comprise a
fully drawn £3.5m revolving credit facility and term loans of £31.2m,
denominated in sterling 14.9 million, in US Dollar 13.3 million and in Euro
4.9 million. Of the sterling loan £0.7m will be amortised by 31 March 2023, a
further £1.4 million by 31 March 2024, a further £2.2 million by 31 Mar 2025
and the balance becomes payable by 30 June 2025.
Pensions
On 2 September 2022, the Group agreed to the 31 March 2021 triennial pension
scheme valuation with an actuarial deficit of £82.8m and a revised schedule
of contributions under which the deficit repair contributions payable are
£3.9m in FY22, £3.8m in FY23 and £3.5m annually thereafter, plus additional
contributions of 25% of any surplus of FY24 underlying EBITDA over £18m
payable from 30 June 2024 to 31 May 2025, extending to 26% of any FY25 surplus
payable from 30 June 2025 to 31 May 2026.
At 30 September 2022 the Group's IAS 19 pension deficit reduced to £24.9m (31
March 2022: £26.0m) driven by Company contributions in excess of the interest
cost. Remeasurement gains during the first half of the financial year were
£49.6m, due mainly to a significant change in the discount rate from 2.70% to
5.30%. These were offset by £49.8m adverse asset return experience over the
period due to the Scheme's liability-driven investments being designed to
hedge the larger actuarial liabilities and therefore being over-hedged
relative to the IAS 19 liabilities and due to falls in the SchemeÕs growth
assets, offset partially by an increase in corporate bond spreads. The
estimated actuarial deficit at 30 September 2022 was £73.1m.
Dividend
Under the terms of its financing agreements the Company is not permitted to
make a dividend payment to shareholders before June 2025.
Outlook
Demand for the Group's products remains robust but ongoing cost inflation is expected to persist throughout the second half and into the following year. As a result, the Board is expecting a second half performance similar to that of the first half.
Increasing global interest rates are already impacting the cost of financing the Group and we expect this trend to continue, mitigated by our focus on cash management.
The Board is positive about the medium to long term prospects for the Group, driven by structural growth drivers in our end-markets, our strong customer relationships and the opportunity to drive improved financial performance through a focus on operational excellence.
Principal Risks and Uncertainties
In the Annual Report for the year ended 31 March 2022 a detailed review of the
principal risks faced by the Group and how these risks were being managed was
provided. We continue to face and proactively manage the risks and
uncertainties in our business and, whilst the Board considers that these
principal risks and uncertainties have not materially changed since the
publication of the 2022 Annual Report, it is worth noting that:
á Supply chain and political disruption continues with inflation
creating pressures on input costs, particularly energy and materials;
á Global interest rates have increased which has increased the
Group's cost of financing putting pressure on interest cover covenants; and
á Increased exchange rate volatility, particularly relative to
sterling, can impact the Group's reported profits earned in other currencies
and the reported value of debt.
Going Concern
These interim financial statements have been prepared on a going concern basis
as detailed in Note 1. Whilst the Board's base case forecasts show that the
Group is able to operate within its available facilities and to meet its
covenants as they fall due, the interest cover covenant headroom is limited,
principally due to increases in interest rates, and manifestation of the above
risks, individually or in combination, could lead to a breach of the Group's
banking covenants.
The Board is taking actions including operational restructuring, cost savings,
working capital management, debt reduction and interest reduction initiatives
and it considers that whilst the potential benefits from these give some
comfort that the downside risks can be mitigated there remains a material
uncertainty that the interest cover covenant will be breached under reasonable
downside risk scenarios.
The Group is engaging with the bank with a view to a temporary easement of the
interest cover covenant. Whilst the Board is hopeful that such an easement
will be granted, there is no guarantee and as such there is a material
uncertainty over going concern due to the lack of forecast headroom on the
interest cover covenant.
Responsibility Statement
We confirm to the best of our knowledge:
(a) the condensed consolidated set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting;
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related partiesÕ
transactions and changes therein).
By order of the Board,
Frank Doorenbosch David Bedford
Chief Executive Officer Chief Financial Officer
29 November 2022
Reconciliation of non-GAAP financial measures - H1 23
£000 Underlying Exceptional items Statutory
Technical Plastics operating profit 4,009 457 4,466
Aerospace operating profit 673 - 673
Central operating costs (1,089) (789) (1,878)
Operating profit 3,593 (332) 3,261
Net finance expense (1,610) - (1,610)
Profit before tax 1,983 (332) 1,651
Income tax expense (869) (114) (983)
Profit for the period 1,114 (446) 668
Basic earnings per share (pence) 1.5p (0.6p) 0.9p
Glossary of Terms
CONSTANT CURRENCY Retranslated at the prior half-yearÕs average exchange rate. Included to
explain the effect of changing exchange rates during volatile times to assist
the readerÕs understanding
GROUP CAPITAL EXPENDITURE Non-current asset additions
NET BANK INTEREST Interest receivable on cash at bank less interest payable on bank loans and
overdrafts. Reported in this manner due to the global nature of the Group and
its banking agreements
NET DEBT Cash and cash deposits less loans and borrowings. Used to report the overall
financial debt of the Group in a manner that is easy to understand
NET DEBT EXCLUDING LEASE LIABILITIES Net debt, as defined above, excluding lease liabilities. Used to report the
overall non-leasing debt of the Group in a manner that is easy to understand
EBITDA Profit before interest, tax, depreciation and amortisation
UNDERLYING Adjusted to exclude all exceptional and separately disclosed items
UNDERLYING EBITDA Profit before interest, tax, depreciation and amortisation adjusted to exclude
all exceptional and separately disclosed items
UNDERLYING EARNINGS PER SHARE Earnings per share adjusted to exclude all exceptional and separately
disclosed items
UNDERLYING OPERATING PROFIT Operating profit adjusted to exclude all exceptional and separately disclosed
items
UNDERLYING PROFIT BEFORE TAX Profit before tax adjusted to exclude all exceptional and separately disclosed
items
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS Operating profit adjusted to exclude all exceptional items
RETURN ON CAPITAL EMPLOYED (EXCLUDING PENSION LIABILITIES) (ÒROCEÓ) Return on capital employed measures the underlying operating profit for the
Group, including discontinued operations, as a percentage of average capital
employed, calculated as the average of the opening equity plus net debt and
pension liabilities, and closing equity plus net debt and pension liabilities.
Condensed consolidated income statement
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
unaudited unaudited audited
Notes £000 £000 £000
Continuing operations:
Revenue 4 72,151 58,672 128,576
Underlying operating profit 3,593 3,682 6,096
COVID related US government grant income 7 - 2,087 2,087
Exceptional items 6 (332) - 721
Operating profit 4 3,261 5,769 8,904
Finance revenue 8 60 34 77
Finance expense 8 (1,670) (1,437) (3,066)
Profit before tax 1,651 4,366 5,915
Income tax (expense) / credit 9 (983) 428 (809)
Profit after tax but before profit on discontinued operations 668 4,794 5,106
Discontinued operations:
Profit on discontinued operations, net of tax 6 - 693 693
Profit for the period 668 5,487 5,799
Attributable to:
Equity holders of the parent company 668 5,487 5,799
Non-controlling interests - - -
668 5,487 5,799
Earnings per ordinary share 10
Basic - continuing operations 0.9 p 6.5 p 7.0 p
Basic - discontinued operations - p 0.9 p 0.9 p
Basic 0.9 p 7.5 p 7.9 p
Diluted - continuing operations 0.9 p 6.5 p 6.9 p
Diluted - discontinued operations - p 0.9 p 0.9 p
Diluted 0.9 p 7.5 p 7.8p
Condensed consolidated statement of comprehensive income
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
unaudited unaudited audited
£000 £000 £000
Profit for the period 668 5,487 5,799
Other comprehensive (expense) / income:
Items that will not be reclassified to the income statement
Remeasurement (losses) / gains on defined benefit scheme (201) 2,730 8,480
Total items that will not be reclassified to the income statement (201) 2,730 8,480
Items that will or may in the future be classified to the income statement
Foreign exchange translation differences 6,911 913 1,840
Net investment hedge (1,971) (205) 440
Deferred tax arising (246) 236 (127)
Total items that are or may in future be classified to the income statement 4,694 944 2,153
Other comprehensive income, net of income tax 4,493 3,674 10,633
Total comprehensive income for the period 5,161 9,161 16,432
Attributable to:
Equity holders of the parent 5,161 9,161 16,432
Non-controlling interests - - -
Total comprehensive income for the period 5,161 9,161 16,432
Condensed consolidated statement of financial position
30 September 30 September 31 March
2022 2021 2022
unaudited unaudited audited
Notes £000 £000 £000
Non-current assets
Intangible assets 12 24,580 22,214 22,714
Property, plant and equipment 13 49,453 43,632 46,964
Deferred tax assets 1,469 1,500 1,403
Trade and other receivables 66 114 115
Total non-current assets 75,568 67,460 71,196
Current assets
Inventories 18,073 16,355 16,987
Contract assets 10,634 6,131 7,700
Trade and other receivables 22,648 23,172 19,702
Cash and cash deposits 17 10,724 10,394 12,347
Current tax assets - 538 -
NonÐcurrent assets classified as held for sale 14 - - 266
Total current assets 62,079 56,590 57,002
Total assets 137,647 124,050 128,198
Non-current liabilities
Loans and borrowings 18 43,583 36,014 41,804
Deferred tax liabilities 5,187 4,577 4,878
Contract liabilities 589 - 3,099
Trade and other payables 76 - -
Retirement benefit obligations 15 24,928 33,407 25,979
Total non-current liabilities 74,363 73,998 75,760
Current liabilities
Loans and borrowings 18 3,971 2,751 2,948
Trade payables 12,938 12,895 13,399
Other payables 7,946 8,127 7,663
Current tax liabilities 504 534 170
Contract liabilities 8,175 8,654 3,755
Provisions 95 - 87
Total current liabilities 33,629 32,961 28,022
Total liabilities 107,992 106,959 103,782
Net assets 29,655 17,091 24,416
Equity
Ordinary share capital issued 20 3,671 3,671 3,671
Share premium 7,359 7,359 7,359
Translation reserve 12,180 6,277 7,486
Retained earnings 6,471 (190) 5,926
Total equity attributable to equity holders of the Company 29,681 17,117 24,442
Non-controlling interests (26) (26) (26)
Total equity 29,655 17,091 24,416
Condensed consolidated statement of changes in equity
Attributable to equity holders of the Company
Share Share Translation Retained Non-controlling Total
capital premium reserve earnings Total interests equity
£000 £000 £000 £000 £000 £000 £000
Current half year period - unaudited
Balance at 1 April 2022 3,671 7,359 7,486 5,926 24,442 (26) 24,416
Profit for the period - - - 668 668 - 668
Other comprehensive income:
Foreign exchange translation differences - - 6,911 - 6,911 - 6,911
Net investment hedge - - (1,971) - (1,971) - (1,971)
Remeasurement gains on defined benefit scheme - - - (201) (201) - (201)
Taxation on items above - - (246) - (246) - (246)
Total comprehensive income for the period - - 4,694 467 5,161 - 5,161
Transactions with owners recorded directly in equity:
Share based payments - - - 78 78 - 78
Balance at 30 September 2022 3,671 7,359 12,180 6,471 29,681 (26) 29,655
Prior half year period unaudited
3,671 7,359 5,333 (8,426) 7,937 (26) 7,911
Balance at 1 April 2021
Profit for the period - - - 5,487 5,487 - 5,487
Other comprehensive income:
Foreign exchange translation differences - - 913 - 913 - 913
Net investment hedge - - (205) - (205) - (205)
Remeasurement losses on defined benefit scheme - - - 2,730 2,730 - 2,730
Taxation on items above - - 236 - 236 - 236
Total comprehensive income for the period - - 944 8,217 9,161 - 9,161
Transactions with owners recorded directly in equity:
Share based payments - - - 19 19 - 19
Balance at 30 September 2021 3,671 7,359 6,277 (190) 17,117 (26) 17,091
Attributable to equity holders of the Company
Share Share Translation Retained Non-controlling Total
capital premium reserve earnings Total interests equity
£000 £000 £000 £000 £000 £000 £000
Condensed consolidated statement of changes in equity continued
Prior year - audited
3,671 7,359 5,333 (8,426) 7,937 (26) 7,911
Balance at 1 April 2021
Profit for the period - - - 5,799 5,799 - 5,799
Other comprehensive income-
Foreign exchange translation differences - - 1,840 - 1,840 - 1,840
Net investment hedge - - 440 - 440 - 44
Remeasurement losses on defined benefit scheme - - - 8,480 8,480 - 8,480
Taxation on items above - - (127) - (127) - (127)
Total comprehensive income for the period - - 2,153 14,279 16,432 - 16,432
Transactions with owners recorded directly in equity: -
Share based payments - - - 73 73 - 73
Balance at 31 March 2022 3,671 7,359 7,486 5,926 24,442 (26) 24,416
Condensed consolidated statement of cash flows
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
unaudited unaudited audited
£000 £000 £000
Notes
Cash generated from operations 16 512 2,020 6,780
Interest paid (1,198) (983) (2,502)
Tax paid (652) (486) (1,309)
Net cash (used in) / from operating activities (1,338) 551 2,969
Cash flows from investing activities
Proceeds from sale of business, net of cash disposed - 693 693
Proceeds from sale of property, plant and equipment 13, 14 1,129 25 20
Interest received 60 34 77
Purchase of property, plant and equipment (976) (3,514) (4,804)
Purchase of intangible assets - computer software (59) (15) (135)
Net cash from / (used in) investing activities 154 (2,777) (4,149)
Cash flows from financing activities
Drawings on new facilities 198 - 1,575
Proceeds from sale and leaseback of property, plant and equipment 14 1,222 - 1,410
Repayment of borrowings excluding lease liabilities (1,145) (2,247) (2,282)
Repayment of lease liabilities (1,838) (866) (3,196)
Net cash used in financing activities (1,563) (3,113) (2,493)
Net decrease in cash and cash equivalents (2,747) (5,339) (3,673)
Cash and cash equivalents at beginning of period 12,347 15,485 15,485
Effect of exchange rate fluctuations on cash held 1,124 248 535
Cash and cash equivalents at end of period 17 10,724 10,394 12,347
Notes to the accounts
1. Basis of preparation
The condensed consolidated half year report for Carclo plc ("Carclo" or "the
Group") for the six months ended 30 September 2022 has been prepared on the
basis of the accounting policies set out in the audited accounts for the year
ended 31 March 2022 and in accordance with the Disclosure and Transparency
Rules of the UK Financial Conduct Authority and the requirements of UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'.
The financial information is unaudited.
The half year report does not constitute financial statements and does not
include all the information and disclosures required for full annual
statements. It should be read in conjunction with the annual report and
financial statements for the year ended 31 March 2022 which is available
either on request from the Company's registered office, Unit 5, Silkwood
Court, Ossett, WF5 9TP, or can be downloaded from the corporate website
www.carclo-plc.com
The comparative figures for the financial year ended 31 March 2022 are not the
Company's complete statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditors and delivered to the
Registrar of Companies. The report of the auditors was (i) unqualified, (ii)
did not include a reference to any matters which the auditors drew attention
by way of emphasis without qualifying their report and (iii) did not contain
statements under Section 498 (2) of the Companies Act 2006.
The half year report was approved by the Board of Directors on 29 November
2022. Copies are available from the corporate website.
The Group financial statements for the year ended 31 March 2022 have been
prepared and approved by the Directors in accordance with UK-adopted
International Accounting Standards.
Going concern
These interim financial statements have been prepared on the going concern
basis.
The Directors have reviewed cash flow and covenant forecasts to cover the
twelve-month period from the date of the approval of these condensed interim
financial statements considering the Group's available debt facilities and the
terms of the arrangements with the Group's bank and the Group pension scheme.
On 2 September 2022 the Group successfully refinanced with the Company's bank,
HSBC, concluding a first amendment and restatement agreement relating to the
multicurrency term and revolving facilities agreement dated 14 August 2020.
The debt facilities currently available to the Group comprise a term loan of
£31.2 million, of which £0.7 million will be amortised by 31 March 2023, a
further £1.4 million by 31 March 2024 and a further £2.2 million by 31 March
2025. The balance becomes payable by the termination date, 30 June 2025.
At 30 September 2022, the term loans are denominated as follows: sterling 14.9
million, US Dollar 13.3 million and Euro 4.9 million. The facility also
includes a £3.5m revolving credit facility, denominated in sterling, maturing
on 31 May 2025.
Net debt at 30 September 2022 was £36.8 million, rising from £32.4 million
at 31 March 2022 (30 September 2021: £28.4 million), £2.9 million of the
increase from March 2022 being the negative impact of foreign exchange on
borrowings during the period.
A schedule of contributions is in place with the pension trustees being £3.5
million to be paid annually until 31 October 2040. There are no additional
contributions payable until the year ending 31 March 2025 when a contingent
contribution mechanism becomes active.
The Group is subject to bank facility and pension scheme covenant tests, as
described in note 1 of the Annual Report and Accounts for the year to 31 March
2022, which remain unchanged following the first amendment and restatement
agreement.
Whilst the Board's base case forecast shows that the Group is able to operate
within its available facilities and to meet its covenants as they fall due,
the interest covenant headroom is limited.
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
and in the Annual Report and Accounts for the year to 31 March 2022.
Severe downside sensitivities modelled included a range of scenarios modelling
the financial effects of loss of business from: discrete sites, an overall
fall in gross margin of 1% across the Group, a fall in Group sales of 5%
matched by a corresponding fall in cost of sales of the same amount, margin
reduction on discrete customers, exchange risk and interest rate risk.
Because the interest cover covenant headroom is limited, principally due to
increases in interest rates, manifestation of the above risks, individually or
in combination, could lead to a breach of the Group's banking covenants.
The Board is taking actions including operational restructuring, cost savings,
working capital management, debt reduction and interest reduction initiatives
and it considers that whilst the potential benefits from these give some
comfort that the downside risks can be mitigated there remains a material
uncertainty that the interest cover covenant will be breached under reasonable
downside risk scenarios.
The Group is engaging with the bank with a view to a temporary easement of the
interest cover covenant. Whilst the Board is hopeful that such an easement
will be granted, there is no guarantee and as such there is a material
uncertainty over going concern due to the lack of forecast headroom on the
interest cover covenant.
2. Accounting policies
The accounting policies applied in these interim financial statements are the
same as those applied in the Group's consolidated financial statements as at,
and for the year ended 31 March 2022. Certain new standards, amendments and
interpretations to existing standards have been published that are mandatory
for the Group's accounting period beginning on 1 April 2022 but they are not
expected to have a material effect on the Group's financial statements.
3. Accounting estimates and judgements
The preparation of the interim financial statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. In preparing these half year financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key source of estimation uncertainty were the same as those
applied to the audited consolidated financial statements as at, and for the
year ended, 31 March 2022 except for the following -
Going concern
Key judgement
When considering going concern, management have applied judgement over
forecast profit, debt levels and interest rates, particularly base rates.
Impairment of assets
Key judgement
Management has exercised judgement to determine that there are no indicators
of impairment for intangible assets at 30 September 2022.
4. Segment reporting
The Group is organised into three, separately managed, business segments -
Technical Plastics, Aerospace and Central. These are the segments for which
summarised management information is presented to the Group's chief operating
decision maker (comprising the Main Board and Group Executive Committee).
The Technical Plastics segment supplies value-adding engineered solutions 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 supplies systems to the manufacturing and aerospace
industries.
The Central segment relates to central costs and non-trading companies.
The LED Technologies segment presented as a discontinued operation in the
prior period comparatives was a leader in the development of high power LED
lighting for the premium automotive industry and was disposed of in the year
to 31 March 2020 - see note 5.
Transfer pricing between business segments is set on an arm's length basis.
Segmental revenues and results shown below are after the elimination
of transfers between business segments. Those transfers are eliminated on
consolidation.
Technical
Plastics
(continuing)
£000
Aerospace Central Group
(continuing) (continuing) Total
£000 £000 £000
The segment results for the six months ended 30 September 2022 were as
follows:
Consolidated income statement
External revenue 69,133 3,018 - 72,151
Expenses (65,124) (2,345) (1,089) (68,558)
Underlying operating profit / (loss) 4,009 673 (1,089) 3,593
Exceptional operating items 457 - (789) (332)
Operating profit / (loss) 4,466 673 (1,878) 3,261
Net finance expense (1,610)
Income tax expense (983)
Profit for the period 668
Consolidated statement of financial position
Segment assets 128,967 5,355 3,325 137,647
Segment liabilities (44,637) (1,257) (62,098) (107,992)
Net assets 84,330 4,098 (58,773) 29,655
Other segmental information
Capital expenditure on property, plant and equipment 2,628 231 - 2,859
Capital expenditure on computer software 27 - 32 59
Depreciation 3,664 117 33 3,814
Amortisation of computer software 20 - 50 70
Amortisation of other intangibles 35 - - 35
Disaggregation of revenue
Major products/service lines
Manufacturing 58,982 3,018 - 62,000
Tooling 10,151 - - 10,151
69,133 3,018 - 72,151
Timing of revenue recognition
Products transferred at a point in time 58,982 3,018 - 62,000
Products and services transferred over time 10,151 - - 10,151
69,133 3,018 - 72,151
Technical Total
Plastics (continuing) Aerospace (continuing) Central (continuing) (continuing operations) Discontinued operations Group total
£000 £000 £000 £000 £000 £000
The segment results for the six months ended 30 September 2021 were as
follows:
Consolidated income statement
External revenue 56,583 2,089 - 58,672 - 58,672
Expenses (51,799) (1,862) (1,329) (54,990) - (54,990)
Underlying operating profit / (loss) 4,784 227 (1,329) 3,682 - 3,682
COVID related US government grant income 2,087 - - 2,087 - 2,087
Operating profit / (loss) before exceptional items 6,871 227 (1,329) 5,769 - 5,769
Exceptional operating items - - - - - -
Operating profit / (loss) 6,871 227 (1,329) 5,769 - 5,769
Net finance expense (1,403) - (1,403)
Income tax expense 428 - 428
Profit from operating activities after tax 4,794 - 4,794
Profit on disposal of discontinued operations, net of tax Ð see note 5 - 693 693
Profit for the period 4,794 693 5,487
Consolidated statement of financial position
Segment assets 117,433 6,107 510 124,050 - 124,050
Segment Liabilities (38,973) (751) (67,235) (106,959) - (106,959)
Net assets 78,460 5,356 (66,725) 17,091 -
17,091
Other segmental information
Capital expenditure on property, plant and equipment 2,893 29 30 2,952
Capital expenditure on computer software 15 - - 15 - 15
Depreciation 2,950 114 19 3,083 - 3,083
Amortisation of computer software 8 - 60 68 - 68
Amortisation of other intangibles 30 30 30
Disaggregation of revenue
Major products/service lines
Manufacturing 47,499 2,089 - 49,588 - 49,588
Tooling 9,084 - - 9,084 - 9,084
56,583 2,089 - 58,672 - 58,672
Timing of revenue recognition
Products transferred at a point in time 47,499 2,089 - 49,588 - 49,588
Products and services transferred over time 9,084 - - 9,084 - 9,084
56,583 2,089 - 58,672 - 58,672
Technical Total
Plastics Aerospace Central (continuing Discontinued Group
(continuing) (continuing) (continuing) operations) operations total
£000 £000 £000 £000 £000 £000
The segment results for the year ended 31 March 2022 were as follows:
Consolidated income statement
External revenue 123,869 4,707 - 128,576 - 128,576
Expenses (115,476) (4,030) (2,974) (122,480) - (122,480)
Underlying operating profit / (loss) 8,393 677 (2,974) 6,096 - 6,096
COVID related US government grant income 2,087 - - 2,087 - 2,087
Operating profit / (loss) before exceptional items 10,480 677 (2,974) 8,183 - 8,183
Exceptional operating items - - 721 721 - 721
Operating profit / (loss) 10,480 677 (2,253) 8,904 - 8,904
Net finance expense (2,989) - (2,989)
Income tax expense (809) - (809)
Profit from operating activities after tax 5,106 - 5,106
Profit on disposal of discontinued operations, net of tax - see note 5 - 693 693
Profit for the period 5,106 693 5,799
Consolidated statement of financial position
Segment assets 121,119 6,418 661 128,198 - 128,198
Segment liabilities (40,686) (998) (62,098) (103,782) - (103,782)
Net assets 80,433 5,420 (61,437) 24,416 - 24,416
Other segmental information
Capital expenditure on property, plant and equipment 9,529 36 143 9,708 - 9,708
Capital expenditure on computer software 62 - 73 135 - 135
Depreciation 6,533 234 58 6,825 - 6,825
Amortisation of computer software 16 - 120 136 - 136
Amortisation of other intangibles 67 - - 67 - 67
Disaggregation of revenue
Major products/service lines
Manufacturing 98,734 4,707 - 103,441 - 103,441
Tooling 25,135 - - 25,135 - 25,135
123,869 4,707 - 128,576 - 128,576
Timing of revenue recognition
Products transferred at a point in time 98,872 4,707 - 103,579 - 103,579
Products and services transferred over time 24,997 - - 24,997 - 24,997
123,869 4,707 - 128,576 - 128,576
5. Discontinued operations
There were no new discontinued operations in the six months to 30 September
2022 or in either of the comparative periods. Prior period proceeds were in
respect to amounts received from the administrators of Wipac Ltd which was
part of the former LED Technologies segment, classified as discontinued in the
year to 31 March 2020. Management does not expect to receive any further
proceeds from the administrators of Wipac Ltd.
6. Exceptional items
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Continuing operations
Rationalisation costs (1,101) - (133)
Credit arising on the disposal of surplus properties - see note 14 769 - -
Gain in respect of retirement benefits - - 854
Total recognised in operating profit (332) - 721
Deferred tax credit Ð see note 9 - 893 -
(332) 893 721
Discontinued operations
Profit on disposal of discontinued operations - see note 5 - 693 693
- 693 693
Exceptional items (332) 1,586 1,414
Rationalisation costs during the six months ended 30 September 2022 relate to
the restructuring and refinancing of the Group. These include £0.6 million
employee related costs in respect to restructuring of the Technical Plastics
division, £0.4 million legal and professional costs and £0.1m pension scheme
administration costs incurred to ensure successful refinancing with the
Group's principal bank and the Group pension scheme.
The credit arising on the disposal of surplus properties in the period is the
profit arising on the sale and leaseback arrangement of the Technical Plastics
manufacturing site at Tucson, Arizona, USA, see note 14.
There were no exceptional items recognised in operating profit from continuing
operations in the comparative six months ended 30 September 2021. A £0.9
million deferred tax credit upon re-recognition of UK deferred tax assets was
treated as exceptional in the six months ended 30 September 2021. In the
year ended 31 March 2022, £0.1 million rationalisation costs related to the
restructuring and refinancing of the Group and a £0.9 million gain in respect
to retirement benefits past service credit for the impact of introducing a
Pension Increase Exchange option to members were recognised as exceptional
items.
The profit on disposal of discontinued operations of £0.7 million presented
in the comparative periods comprises proceeds received in those periods from
the administrators of Wipac Ltd, see note 5.
7. Government support for COVID-19
In April 2020, the Group received a loan under the Paycheck Protection
Program, underwritten by the US government in support of COVID-19 for $2.9
million. On 5 May 2021, notice of forgiveness of the loan was received from
the Small Business Administration, resulting in its conversion from a loan to
a grant and therefore its release to the condensed consolidated income
statement. As such, the full amount was recognised in the comparative
periods within operating expenses in the income statement as a credit to
off-set labour and variable COVID-19 related costs incurred.
The credit recognised in respect to the COVID-19 related government grant was
presented separately in the prior year comparatives on the face of the
condensed consolidated income statement for clarity.
8. Net finance expense
Six months ended Six months ended 30 September Year ended
30 September 31
March
2022 2021 2021
£000 £000 £000
The expense recognised in the condensed consolidated income statement
comprises:
Interest receivable on cash and cash deposits 60 34 77
Interest payable on bank loans and overdrafts (1,030) (816) (1,794)
Lease interest (303) (165) (527)
Other interest - (92) (18)
Net interest on the net defined benefit liability (337) (364) (727)
Net finance expense (1,610) (1,403) (2,989)
9. Income tax expense
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
The (expense) / credit recognised in the condensed consolidated income
statement comprises:
Continuing operations
Current tax expense on ordinary activities (795) (465) (1,470)
Deferred tax (expense) / credit on ordinary activities (74) - 661
Current tax expense on exceptional items (114) - -
Exceptional deferred tax credit - recognition of deferred tax assets - 893 -
Total income tax (expense) / credit recognised in the condensed consolidated (983) 428 (809)
income statement
The half year tax expense represents 59.5% of statutory profit before tax (6
months to 30 September 2021: tax credit: -8.5%) based on the estimated average
effective tax rate on ordinary activities for the full year. The prior
period comparative included a deferred tax credit of £0.9 million which was
recognised in the six months ended 30 September 2021 upon the recognition of
£0.9 million deferred tax assets in respect of UK losses and capital
allowances.
The half year underlying effective tax rate amounts to 43.8% of underlying
profit before tax and exceptional items (6 months to 30 September 2021: 20.4%
after excluding the deferred tax credit of £0.9 million and before COVID
government grant income).
The Group's underlying effective tax rate is higher than the underlying UK tax
rate of 19.0% (6 months to 30 September 2021: 19.0%) because the Group is
earning a higher proportion of its profits in higher tax jurisdictions, due to
withholding tax on dividends from certain tax jurisdictions and because
additional deferred tax assets in respect to UK losses have not been
recognised in the period.
Deferred tax assets and liabilities at 30 September 2022 have been calculated
on the rates substantively enacted at the balance sheet date. A change to
the main UK corporation tax rate, set out in the Finance Bill 2021 was
substantively enacted on 24 May 2021 with the main rate of corporation tax to
become 25% from 1 April 2023.
10. Earnings per share
The calculation of basic earnings per share is based on the profit
attributable to equity holders of the parent company divided by the weighted
average number of ordinary shares outstanding during the period.
The calculation of diluted earnings per share is based on profit attributable
to equity holders of the parent company divided by the weighted average number
of ordinary shares outstanding during the period (adjusted for dilutive
options).
The following details the result and average number of shares used in
calculating the basic and diluted earnings per share:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Profit after tax but before profit on discontinued operations 668 4,794 5,106
Profit attributable to non-controlling interests - - -
Profit attributable to ordinary shareholders from continuing operations 668 4,794 5,106
Profit on discontinued operations, net of tax - 693 693
Profit after tax, attributable to equity holders of the parent 668 5,487 5,799
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
Shares Shares Shares
Weighted average number of ordinary shares in the period 73,419,193 73,419,193 73,419,193
Effect of share options in issue 376,151 15,974 324,977
Weighted average number of ordinary shares (diluted) in the period 73,795,344 73,435,167 73,744,170
In addition to the above, the Company also calculates an earnings per share
based on underlying profit as the Board believe this provides a more useful
comparison of business trends and performance. Underlying profit is defined
as profit before impairments, rationalisation costs, one-off retirement
benefit effects, exceptional bad debts, business closure costs, litigation
costs, other one-off costs and the impact of property and business disposals,
net of attributable taxes.
The following table reconciles the Group's profit to underlying profit used in
the numerator in calculating underlying earnings per share:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Profit after tax, attributable to equity holders of the parent 668 5,487 5,799
Continuing operations:
Exceptional - rationalisation and restructuring costs, net of tax 1,023 - 133
Exceptional credit arising on the disposal of surplus properties, net of tax (577) - -
Exceptional - gain in respect of retirement benefits, net of tax - - (854)
Exceptional - recognition of UK deferred tax assets - (893) -
COVID-related US government grant income, net of tax - (2,087) (2,087)
Discontinued operations:
- (693) (693)
Exceptional - gain on disposal of discontinued operations, net of tax
Underlying profit attributable to equity holders of the parent 1,114 1,814 2,298
COVID related US government grant income, net of tax - 2,087 2,087
Profit after tax but before exceptional items, attributable to equity holders 1,114 3,901 4,385
of the parent
Underlying operating profit - continuing operations 3,593 3,682 6,096
Finance revenue - continuing operations 60 34 77
Finance expense - continuing operations (1,670) (1,437) (3,066)
Income tax (expense) / credit - continuing operations (869) 428 (809)
Less: recognition of UK deferred tax assets - continuing operations - (893) -
Underlying profit attributable to equity holders of the parent - continuing 1,114 1,814 2,298
operations
COVID related US government grant income, net of tax - 2,087 2,087
Profit after tax but before exceptional items - continuing operations 1,114 3,901 4,385
The following table summarises the earnings per share figures based on the
above data:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
Pence Pence Pence
Basic earnings per share - continuing operations 0.9 6.5 7.0
Basic earnings per share - discontinued operations - 0.9 0.9
Basic earnings per share 0.9 7.5 7.9
Diluted earnings per share - continuing operations 0.9 6.5 6.9
Diluted earnings per share - discontinued operations - 0.9 0.9
Diluted earnings per share 0.9 7.5 7.9
Underlying earnings per share - basic - continuing operations 1.5 2.5 3.1
Underlying earnings per share - basic - discontinued operations - - -
Underlying earnings per share - basic 1.5 2.5 3.1
Underlying earnings per share - diluted - continuing operations 1.5 2.5 3.1
Underlying earnings per share - diluted - discontinued operations - - -
Underlying earnings per share - diluted 1.5 2.5 3.1
Earnings per share before exceptional items - basic - continuing operations 1.5 5.3 6.0
Earnings per share before exceptional items - basic - discontinued operations - - -
Earnings per share before exceptional items - basic 1.5 5.3 6.0
Earnings per share before exceptional items - diluted - continuing operations 1.5 5.3 6.0
Earnings per share before exceptional items - diluted - discontinued - - -
operations
Earnings per share before exceptional items - diluted 1.5 5.3 6.0
11. Dividends paid and proposed
No dividends were paid in the period or the comparative periods.
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 June 2025.
12. Intangible assets
The movements in the carrying value of intangible assets are summarised as
follows:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Net book value at the start of the period 22,714 21,848 21,848
Additions 59 15 135
Amortisation (105) (98) (203)
Effect of movements in foreign exchange 1,912 449 934
Net book value at the end of the period 24,580 22,214 22,714
Included within intangible assets is goodwill of £23.8 million (31 March 2022
- £22.0 million). The carrying value of goodwill is subject to annual
impairment tests by reviewing detailed projections of the recoverable amounts
from the underlying cash generating units. At 31 March 2022, the carrying
value of goodwill was supported by value-in-use calculations. There has been
no indication of subsequent impairment in the current financial period.
Intangible assets also include customer-related intangibles of £0.3 million
(31 March 2022: £0.3 million) and computer software of £0.5 million (31
March 2022: £0.5 million).
13. Property, plant and equipment
The movements in the carrying value of property plant and equipment are
summarised as follows:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Net book value at the start of the period 46,964 43,218 43,218
Additions 2,859 2,952 9,708
Depreciation (3,814) (3,083) (6,825)
Disposals (207) - (20)
Reclassification of assets held for sale (65) - (266)
Effect of movements in foreign exchange 3,716 545 1,149
Net book value at the end of the period 49,453 43,632 46,964
Of the net book value at 30 September 2022, £27.0 million is land and
buildings and £22.4 million is plant and equipment (31 March 2022:
£26.5 million and £20.5 million respectively). Additions to 30 September
2022 were £1.3 million to land and buildings and £1.6 million to plant and
equipment with disposals of £0.0 million and £0.2 million respectively.
Right-of-use assets
Right-of-use assets related to lease agreements are presented within property,
plant and equipment above. The movements are summarised as follows:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Net book value at the start of the period 11,713 6,988 6,988
Depreciation (1,321) (823) (2,282)
Additions 2,002 196 6,818
Asset transferred to right-of-use assets from owned property, plant and 372 - -
equipment
Derecognition of right-of-use assets (207) - -
Effect of movements in foreign exchange 1,020 90 189
Net book value at the end of the period 13,579 6,451 11,713
Of the net book value at 30 September 2022, £7.4 million is land and
buildings and £6.2 million is plant and equipment (31 March 2022:
£6.7 million and £5.0 million respectively). Additions to 30 September
2022 were £1.1 million to land and buildings and £0.9 million to plant
and equipment with disposals of £0.0 million and £0.2 million respectively.
£0.4 million has been reallocated from owned property, plant and equipment
into right of use assets at net book value. This relates to the Tucson
property that was subject to a sale and leaseback arrangement in the period,
see note 14.
14.Non-current assets classified as held for sale
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Land and buildings held for sale at the start of the period 266 - -
Additions 64 266
-
Effect of movements in foreign exchange 30 - -
Disposals (360) - -
Net assets held for sale at the end of the period - - 266
On 11 July 2022, the Group finalised a sale and leaseback arrangement of a
Technical Plastics manufacturing site at Tucson, Arizona, USA for agreed
consideration of $2.95 million less costs of $0.155 million (£2.351 million
net). A lease term of eight years and four months has been agreed and grants
the Group the right to cancel any time after 1 October 2025, provided twelve
months' notice is given. At 30 September 2022 there is no reasonable
certainty that the Group will exercise the break clause.
The total net book value of the property amounted to £0.7 million at the date
of disposal however only the proportion relating to the disposed useful
economic life was classified as held for sale prior to disposal (£0.36
million). The balance of £0.4 million that relates to the right of use
asset remained in owned property, plant and equipment until completion when it
was transferred into right of use assets. The profit on the portion relating
to the disposed useful economic life amounted to £0.8 million and has been
classified as exceptional income - credit on disposal of surplus property in
the condensed consolidated income statement.
15. Retirement benefit obligations
The Group operates a defined benefit UK pension scheme which provides pensions
based on service and final pay. Outside of the UK, retirement benefits are
determined according to local practice and funded accordingly.
The amounts recognised in the condensed consolidated statement of financial
position in respect of the defined benefit scheme were as follows:
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
(128,079) (203,198)
Present value of funded obligations (181,759)
Fair value of scheme assets 103,151 169,791 155,780
Recognised liability for defined benefit obligations (24,928) (33,407) (25,979)
Six months ended Six months ended Year ended
30 September 30 September 31 March
Movement in the net liability for defined benefit obligations recognised in 2022 2021 2022
the condensed consolidated statement of financial position:
£000 £000 £000
(25,979) (37,275) (37,275)
Net liability for defined benefit obligations at the start of the period
2,392 2,050 3,900
Contributions paid
Net expense recognised in the condensed consolidated income statement (1,140) (939) (1,084)
(201) 2,757 8,480
Remeasurement (losses) / gains recognised in other comprehensive income
(24,928) (33,407) (25,979)
Net liability for defined benefit obligations at the end of the period
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
Movements in the fair value of Scheme assets: £000 £000 £000
T5d
Fair value of Scheme assets at the start of the period 155,780 167,379 167,379
2,057 1,646 3,259
Interest income
(Loss) / return on Scheme assets excluding interest income (49,846) 4,667 (6,763)
2,392 2,050 3,900
Contributions by employer
(6,429) (5,376) (10,784)
Benefit payments
(803) (575) (1,211)
Expenses paid
103,151 169,791 155,780
Fair value of Scheme assets at the end of the period
Actual (loss) / return on Scheme assets (47,789) 6,313 (3,504)
Six months ended 30 September Six months ended 30 September Year ended 31 March
2022 2021 2022
Movements in the present value of defined benefit obligations: £000 £000 £000
Defined benefit obligation at the start of the period 181,759 204,654 204,654
Interest expense 2,394 2,010 3,986
Actuarial gains due to changes in demographic assumptions - - (1,767)
Actuarial (gains) / losses due to changes in financial assumptions (49,645) 1,910 (13,476)
Benefit payments (6,429) (5,376) (10,784)
Past service credit - - (854)
Defined benefit obligation at the end of the period 128,079 203,198 181,759
Six months ended 30 September 2022 Six months ended 30 September 2021 Year ended 31 March 2022
The principal actuarial assumptions at the balance sheet date (expressed as
weighted averages) were:
Discount rate at period end 5.30% 2.00% 2.70%
Inflation (RPI) (non-pensioner) 3.55% 3.45% 3.70%
Inflation (CPI) (non-pensioner) 3.05% 2.95% 3.20%
Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less 3.55% 3.45% 3.70%
Allowance for revaluation of deferred pensions of CPI or 5% p.a. if less 3.05% 2.95% 3.20%
Allowance for pension in payment increases of RPI or 5% p.a. if less 3.45% 3.35% 3.55%
Allowance for pension in payment increases of CPI or 3% p.a. if less 2.55% 2.40% 2.60%
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 3.75% 3.75% 3.85%
3% p.a.
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 4.25% 4.25% 4.30%
4% p.a.
Life expectancy years years years
Male (current age 45) 19.7 19.9 19.7
Male (current age 65) 18.8 19.0 18.8
Female (current age 45) 22.0 22.2 22.0
Female (current age 65) 20.9 21.0 20.9
16. Cash generated from operations
Six months ended Six months ended Year ended
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Profit for the period - continuing operations 668 4,794 5,106
Profit for the period - discontinued operations - 693 693
668 5,487 5,799
Adjustments for -
Pension scheme contributions net of administration costs settled by the (1,869) (1,787) (3,258)
Company
Pension scheme administration costs settled by the Scheme 280 285 569
Depreciation charge 3,814 3,083 6,825
Amortisation charge 105 98 203
Exceptional provision for staff costs 330 - -
Exceptional gain in respect of retirement benefits - - (854)
Conversion of COVID-19 government support loan to grant - (2,104) (2,087)
Profit on business disposal - (693) (693)
Exceptional profit on disposal of surplus property (769) - -
Profit on disposal of other plant and equipment - (25) -
Share based payment charge 78 24 73
Financial income (60) (34) (77)
Financial expense 1,670 1,437 3,066
Taxation expense / (credit) 983 (428) 809
Operating cash flow before changes in working capital 5,230 5,343 10,375
Changes in working capital
Decrease / (increase) in inventories 410 (3,534) (3,816)
Increase in contract assets (2,112) (3,233) (4,708)
(Increase) / decrease in trade and other receivables (1,601) (3,920) 42
(Decrease) / increase in trade and other payables (2,669) 5,037 4,549
Increase in contract liabilities 1,254 2,327 338
Cash generated from operations 512 2,020 6,780
17. Cash and cash deposits
As at As at As at
30 September 30 September 31 March
2022 2021 2022
£000 £000 £000
Cash and cash deposits 10,724 10,394 12,347
10,724 10,394 12,347
The Group has a net UK multi-currency overdraft facility with a £nil net
limit and a £12.5 million gross limit. At 30 September 2022, Carclo plc's
overdraft of £5.9 million (31 March 2022: £2.4 million) has been recognised
within cash and cash deposits when consolidated.
18. Net debt
Net debt comprises -
As at As at As at
30 September
2021
£000
30 September 31
Mar
ch
2022 2022
£000 £000
Cash and cash deposits 10,724 10,394 12,347
Term loan (30,722) (29,893) (30,260)
Revolving credit facility (3,500) (2,000) (3,500)
Lease liabilities (13,057) (6,758) (10,870)
Other loans (275) (114) (122)
Net debt (36,830) (28,371) (32,405)
On 2 September 2022 the Group successfully refinanced with the Company's bank,
HSBC, concluding a first amendment and restatement agreement relating to the
multicurrency term and revolving facilities agreement dated 14 August 2020.
The debt facilities currently available to the Group comprise a term loan of
£31.2 million (31 March 2022: £30.3 million), of which £0.7 million will be
amortised by 31 March 2023, a further £1.4 million by 31 March 2024 and a
further £2.2 million by 31 March 2025. The balance becomes payable by the
termination date, 30 June 2025.
An arrangement fee of £0.5 million became payable on 2 September 2022 upon
completion, has been deducted from the carrying value of the term loan and is
to be settled quarterly over the subsequent twelve month period.
At 30 September 2022, the term loans are denominated as follows: sterling 14.9
million, US Dollar 13.3 million and Euro 4.9 million. The facility also
includes a £3.5m (31 March 2022: £3.5 million) revolving credit facility,
denominated in sterling, maturing on 31 May 2025.
Reconciliation of movements of liabilities to cash flows arising from
financing activities
Term loan £000 Government Revolving credit facility £000 Lease liabilities Other loans £000 Total £000
COVID-19 support loan £000
£000
Balance at 31 March 2021 31,812 2,104 2,000 7,055 110 43,081
Changes from financing cash flows
Drawings on new facilities - - - 569 24 593
Repayment of borrowings (2,218) - - (866) (20) (3,104)
(2,218) - - (297) 4 (2,511)
Effect of changes in foreign exchange rates 211 (17) - - - 194
Liability-related other changes
Conversion of loan to a grant - (2,087) - - - (2,087)
Interest expense 88 - - - - 88
88 (2,087) - - - (1,999)
Equity-related other changes - - - - - -
Balance at 30 September 2021 29,893 - 2,000 6,758 114 38,765
Changes from financing cash flows
Drawings on new facilities - - 1,500 - 51 1,551
Repayment of borrowings - - - (2,329) (44) (2,373)
- - 1,500 (2,329) 7 (822)
Term loan £000 Government Revolving credit facility £000 Lease liabilities Other loans £000 Total £000
COVID-19 support loan £000
£000
Effect of changes in foreign exchange rates 229 - - 192 1 422
Liability-related other charges
Drawings on new facilities - - - 6,249 - 6,249
Interest expense 138 - - - - 138
138 - - 6,249 - 6,387
Equity-related other charges - - - - - -
Balance at 31 March 2022 30,260 - 3,500 10,870 122 44,752
Changes from financing cash flows
Drawings on new facilities - - - 3,092 198 3,290
Transaction costs associated with the issue of debt (500) - - - - (500)
Repayment of borrowings (1,100) - - (1,838) (45) (2,983)
(1,600) - - 1,254 153 (193)
Effect of changes in foreign exchange rates 1,972 - - 933 - 2,905
Liability-related other changes
Interest expense - presented within exceptional items 69 - - - - 69
Interest expense - presented within finance expense 21 - - - - 21
90 - - - - 90
Equity-related other charges - - - - - -
Balance at 30 September 2022 30,722 - 3,500 13,057 275 47,554
19. Financial instruments
The fair value of financial assets and liabilities are not materially
different from their carrying value.
There are no material items as required to be disclosed under the fair value
hierarchy.
20. Ordinary share capital
Number
of shares £000
Ordinary shares of 5 pence each
Issued and fully paid at 30 September 2021, 31 March 2022 and 30 September 73,419,193 3,671
2022
21. Related parties
Identity of related parties
The Company has a related party relationship with its subsidiaries, its
directors and executive officers and the Group pension scheme. There are no
transactions that are required to be disclosed in relation to the Group's 60%
dormant subsidiary Platform Diagnostics Limited.
Transactions with key management personnel
On 6 October 2022 the Board announced, with immediate effect, the appointment
of Frank Doorenbosch as Chief Executive Officer to Carclo plc. Frank had
previously been appointed as a consultant to the Group for a period of up to
twelve months from 6 June 2022 and accordingly since that date has been an
Executive Director of Carclo plc. On the same day, Nick Sanders, stood down
as Executive chair and became Non-Executive Chair until 5 November 2022 when
the Board announced that Nick Sanders would be stepping down from his role as
Non-Executive Chair and as a Director of the Company.
The Board has appointed Joe Oatley as Non-Executive Chair with effect from 6
November 2022 and Eric Hutchinson, a Non-Executive Director and Chair of the
Audit Committee, was appointed as Senior Independent Director and Chair of the
Remuneration Committee with Effect from 6 November 2022.
Phil White has given notice of his retirement and has stepped down from his
role as Chief Financial Officer and as a Director of the Company with effect
from 14 November 2022. Phil will remain with the Company until his retirement
in June 2023 in order to ensure a smooth transition to the new CFO. The
Board has announced the promotion of David Bedford to Chief Financial Officer
and appointment as a Director of the Company with effect from 14 November
2022.
During the period to 30 September 2022, the Group was billed £0.5 million (31
March 2022: £0.2 million) by Thingtrax, a company that offers intelligent
manufacturing infrastructure as a service. Frank Doorenbosch, a Carclo plc
Executive Director since 6 June 2022, is also a Non-Executive Director of
Thingtrax and, as such, the company is identified as a related party. During
the period to 30 September 2022, £0.3 million (31 March 2022: £0.1 million)
has been recognised as a cost in the condensed consolidated income statement;
a balance of £0.3 million remains on balance sheet as prepaid at 30 September
2022 and will be recognised in the second half of the year to 31 March 2023.
Key management personnel are considered to be the Executive Directors of the
Group. Full details of directors' remuneration is disclosed in the Group's
annual report. In the six months ended 30 September 2022, remuneration to
current and former directors amounted to £0.434 million (six months ended 30
September 2021 - £0.219 million).
On 3 August 2022 P White, the Group's former Chief Financial Officer was
granted 386,778 share options under the terms of the Carclo plc 2017
Performance Share Plan ("PSP") (30 September 2021: 386,778). The options
will vest at the end of a three-year period depending on the achievement of
performance targets set out in the PSP rules and 204,992 are then subject to a
further two-year holding period. The awards take the form of nil cost options,
being an option under the PSP with a £nil exercise price. Share price at
date of award was 20.02 pence and fair value at date of award totalled £0.053
million (30 September 2021: 41.60 pence, £0.118 million
respectively).
Group pension scheme
A third party professional firm is engaged to administer the Group pension
scheme (the Carclo Group Pension Scheme). The associated investment costs are
borne by the scheme in full. It has been agreed with the trustees of the
pension scheme that, under the terms of the recovery plan, the scheme would
bear its own administration costs.
Core contributions of £0.292 million per month have been made during the six
months to 30 September 2022, incorporating both deficit recovery contributions
and scheme expenses including PPF levy. An additional payment of £0.35
million has also been made during the period under the schedule of
contributions.
Carclo incurred administration costs of £0.803 million during the period
which has been charged to the consolidated income statement, including £0.124
million presented as exceptional costs, (30 September 2021: £0.575 million,
of which £nil was presented as exceptional). Of the administration costs,
£0.524 million was paid directly by the scheme (30 September 2021: £0.285
million). The total deficit reduction contributions and administration costs
paid during the period was £2.4 million (30 September 2021: £2.1 million).
22. Post balance sheet events
With the exception of those disclosed within note 21 Related parties, there
are no events that have occurred since the period end that require disclosure
in the report.
23. Seasonality
There are no specific seasonal factors which impact on the demand for products
and services supplied by the Group, other than for the timing of holidays and
customer shutdowns. These tend to fall predominantly in the first half of
Carclo's financial year and, as a result, revenues and profits are usually
higher in the second half of the financial year compared to the first half.
INDEPENDENT REVIEW REPORT TO CARCLO PLC
Conclusion
We have been engaged by Carclo plc (“the company“) to review the condensed
set of financial statements in the half-yearly financial report for the six
months ended 30 September 2022 which comprises the condensed consolidated
income statement, the condensed consolidated statement of comprehensive
income, the condensed consolidated statement of financial position, the
condensed consolidated statement of changes in equity, the consolidated cash
flow statement and related notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2022 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 (Revised), ÒReview of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued for use in the
United Kingdom. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted IFRSs. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting'
Material Uncertainty relating to going concern
We draw attention to note 1 to the interim financial information which
indicates that the directors have considered the Group's ability to operate
within its available banking facilities and to meet the associated covenants
as they fall due. In the base case forecasts the interest cover covenant
headroom is limited, principally due to increases in interest rates, and a
manifestation of the risks facing the Group, individually or in combination,
could lead to a breach of the Group's banking covenants. These events and
conditions, indicate the existence of a material uncertainly in respect of the
Group's ability to continue as a going concern.
Our conclusion is not modified in this respect.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
AuditorÕs Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for the conclusions we have reached.
Signed:
Mazars LLP
Chartered Accountants
30 Old Bailey
London EC4M 7AU
Date: 29 November 2022
Notes:
(a) The maintenance and integrity of the Carclo plc web site is the
responsibility of the directors; the work carried out by us does not involve
consideration of these matters and, accordingly, we accept no responsibility
for any changes that may have occurred to the interim report since it was
initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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