REG - Carclo plc - Half-year Report
30/11/2023 07:15
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RNS Number : 1378V Carclo plc 30 November 2023
Carclo plc
("Carclo" or the "Group")
Interim Report and Accounts
Half-year results for the six months ended 30 September 2023
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 results for the first six months of its financial year
ending 31 March 2024 ("H1 2024").
Highlights:
· The Group faced challenging market conditions compared to the
prior year, in particular from the life sciences sector, as demand for
diagnostic equipment fell with key customers adjusting to post-COVID
requirements. Demand from the aerospace sector remained robust. As a
result, revenue from continuing operations decreased by 7.2% (4.8% at constant
currency) to £66.9 million (H1 2023: £72.2 million).
· Our focus on operational excellence and efficiency delivered
improved manufacturing contribution margins, in particular from our European
operations, which partially mitigated the effect of the reduced volumes. As
a result, segmental underlying return on sales increased to 7.0% from 6.5%.
· Underlying operating profit from continuing operations was
£2.2 million (H1 2023: £3.6 million) with the £0.7 million foreign currency
gain in H1 2023 not repeated in H1 2024 (£nil). On a constant currency
basis, underlying operating profit was down by £1.1 million.
· Net exceptional costs in the period were £2.1 million (H1
2023: £0.3 million) being primarily £1.0 million rationalisation costs of
which £0.4 million was cash. There is also a £1.0 million past service
pension cost which is non-cash.
· We made excellent progress on the key strategic goal of
improving the Group's cash generation with cash generated from operations of
£11.4 million (H1 2023: £0.5 million) largely driven by strict working
capital management.
· Net debt, including IFRS16 lease liabilities, decreased to
£29.5 million (31 March 2023: £34.4m) as a result of the focus on cash
management to allow increased debt repayment.
· The tough market conditions are expected to continue in the
near term, primarily in the US. A major restructuring plan for the US
business is being actioned to reduce expense and to drive operational
efficiency with the full year benefit expected to be realised in FY 2025.
Commenting on the results, Frank Doorenbosch, Chief Executive Officer said:
"The Carclo team has responded robustly to the fall in demand by our major
customers by adapting our business to achieve enhanced contribution margins
through increased efficiency. This has allowed the Group to maintain
profitability from its manufacturing operations and to achieve a significant
increase in cash generation in H1 2024 compared to H1 2023. This activity
will continue through H2 2024 to place the Group on a sound footing for FY
2025, so that we are well placed to satisfy the future recovery in demand and
retain our position as the trusted partner of major blue-chip customers, in
markets with medium to long term demand. Our strategy continues to focus on
operational excellence and improved asset utilisation, in order to deliver
outstanding service to our customers, and superior returns to our
shareholders."
The key financial performance measures for the period are as follows:
H1 2024 H1 2023
£000 £000
Continuing operations
Revenue 66,921 72,151
Underlying operating profit(1) 2,232 3,593
Exceptional items (2,095) (332)
Operating profit 137 3,261
Underlying (loss) / earnings per share - basic (0.5p) 1.5p
Basic (loss) / earnings per share (3.0p) 0.9p
£000 £000
Cash generated from operations 11,439 512
FY 2023
H1 2024
£000 £000
Net debt excluding lease liabilities 17,838 22,490
Net debt 29,500 34,360
IAS 19 retirement benefit liability 36,683 34,493
Continuing operations
Revenue H1 2023
H1 2024 £000
£000
63,072 69,133
CTP
Aerospace 3,849 3,018
Total 66,921 72,151
Underlying operating profit(1)
CTP 3,687 4,009
Aerospace 1,002 673
Segment total 4,689 4,682
Central (2,457) (1,089)
Total 2,232 3,593
Notes:
(1) Underlying results are those calculated before exceptional items. A
reconciliation to statutory figures is set out below.
Enquiries
Please contact:
Frank Doorenbosch - Chief Executive Officer, Carclo plc +44 (0)1924 268040
Eric Hutchinson - Chief Financial Officer, Carclo plc +44 (0)1924 268040
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 a number of risks and uncertainties that could cause outcomes to differ
materially from those expected.
Alternative performance measures
Alternative performance measures are defined in the financial review of the
Annual Report and Accounts (ARA) for the year ended 31 March 2023, 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 fell by 7.2% to £66.9 million (H1 2023: £72.2 million),
primarily as a result of the decrease in demand by major life sciences in
vitro diagnostics companies restructuring their businesses as the demand for
PCR-based diagnostic testing significantly reduced. At constant exchange
rates, revenue decreased by 4.8%.
Revenue H1 2024 H1 2023
£000 £000
CTP Design & Engineering 11,322 10,151
CTP Manufacturing Solutions 51,750 58,982
CTP Total Revenue 63,072 69,133
Aerospace 3,849 3,018
Total 66,921 72,151
Underlying operating profit
CTP 3,687 4,009
Aerospace 1,002 673
Segment total 4,689 4,682
Central (2,457) (1,089)
Total 2,232 3,593
% %
Segmental underlying return on sales 7.0 6.5
Group underlying operating profit fell to £2.2 million (H1 2023: £3.6
million) largely due to a fall in demand for medical components. Exchange
gains of £0.7 million in H1 2023 did not repeat in H1 2024, accounting for a
major part of the fall in reported profit. At constant exchange rates
underlying operating profit fell by £1.1 million, this being the difference
between current period underlying operating profit and prior year underlying
operating profit translated at the current year's average exchange rate.
This impact is primarily in the CTP segment.
Net finance costs increased by £1.0 million to £2.6 million (H1 2023: £1.6
million) as a result of increasing market interest rates. Finance costs
include the imputed net interest on the defined benefit pension liability of
£0.8 million (H1 2023: £0.3 million).
The Group incurred net exceptional operating costs of £2.1 million in the
period (H1 2023: £0.3 million), comprising £1.0 million rationalisation
costs primarily in respect of the central division and CTP segment, £1.0
million past service cost in respect of retirement benefits GMP equalisation,
a further £0.4 million net costs in respect of the cancellation of the future
supply agreement announced earlier this year and a credit for the release of
£0.3 million provisions not required following settlement of legacy claims.
Group loss before tax was £2.5 million (H1 2023: £1.7 million profit).
The income tax credit was £0.3 million (H1 2023: £1.0 million expense) and
the underlying tax credit was £0.1 million (H1 2023: expense £0.9 million).
The effective tax rate was 13.2% credit (H1 2023: 59.5% expense). The
underlying effective tax rate was 17.7% credit (H1 2023: 43.8% expense)
primarily due to the fall in taxable profits in the US.
Underlying earnings per share was 0.5 pence loss (H1 2023: 1.5 pence
earnings). The statutory earnings per share for the period was 3.0 pence loss
(H1 2023: 0.9 pence earnings).
ROCE was 8.4% (H1 2023: 10.1%) reflecting the operating profit reduction in
the period.
CTP division
CTP revenues fell 8.8% to £63.1 million (H1 2023: £69.1m), reflecting the
decrease in demand by major customers due to the significant fall in PCR-based
diagnostic testing.
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 first half, down
12.3% to £51.8 million (H1 2023: £59.0m), 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 are expected to improve profitability in the second
half and beyond.
CTP Design and Engineering activity in the first half remained at a high
level, with revenue £11.3 million, up 11.5% compared to the prior year (H1
2023: £10.2 million). The high level of Design and Engineering activity
experienced over the last 18 months is expected to be converted into improved
manufacturing efficiency during the next financial year.
CTP return on sales ratio remained stable at 5.8% as the benefit of
significantly improved efficiency in the UK operations offset the impact of
reduced volumes in the US, China and India. The business continues to seek
opportunities to increase prices where possible to mitigate the effect of
input cost increases. The current focus is on improving the cost base and
efficiency of the business' US operations which is expected to have a
significant positive impact on the performance in the second half of this
financial year.
The decreased revenues resulted in CTP underlying operating profit being
marginally lower than the prior year at £3.7 million (H1 2023: £4.0 million)
whilst maintaining a stable return on sales of 5.8%. Compared to the second
half of last year CTP delivered an increase in underlying operating profit of
£0.4 million.
Aerospace division
The aerospace market continued to recover as aircraft manufacturers restarted
build programs responding to the continuing increase in passenger numbers from
the low levels during the height of the COVID pandemic. As a result,
Aerospace first half revenues grew by 27.5% to £3.8 million (H1 2023: £3.0
million).
Aerospace return on sales ratio strengthened further to 26.0% (H1 2023: 22.3%)
as the business benefitted from the focus on its niche products. As a
result, the increased activity levels translated into robust growth in
underlying operating profit, up 48.9% at £1.0 million (H1 2023: £0.7
million).
Central costs
Central costs increased by £1.4 million to £2.5 million largely due to the
non-repeat of significant foreign exchange gains in the prior year and
investing in stronger leadership of the company.
Carclo 2025 Strategy
The strategic focus for the business continues to be to drive improved returns
and cash flow through 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:
· A focus on operational excellence throughout the business to
increase efficiency and improve customer service.
· 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.
· Targeting growth in less capital-intensive areas of the business.
· Building a "One Carclo" culture of entrepreneurialism and
collaboration across the group to re-establish Carclo as a destination for
talent and career development.
We have made excellent progress on improving the efficiency of our European
operations and our focus is now on replicating this turnaround across our US
business. Our focus on cash management has delivered a significant
improvement in cash generation and allowed us to reduce the Group's debt
burden over and above the required scheduled debt repayments.
Board changes
On 21 August 2023 the Board announced, with immediate effect, the resignation
of David Bedford as Chief Financial Officer, Company Secretary, and as a
Director of the Company. On the same day, Eric Hutchinson, formerly a
Non-Executive Director was appointed as Chief Financial Officer and Company
Secretary with immediate effect, thus becoming an Executive Director.
Also on 21 August 2023, Rachel Amey, a Non-Executive Director, was appointed
as Chair of the Audit & Risk Committee, Interim Chair of the Remuneration
Committee and Interim Senior Independent Director with immediate effect.
Rachel joined the Board as a Non-Executive Director on 1 March 2023. This
essential strengthening of the leadership team is necessary to ensure the
successful turnround of the Group and achieving the Carclo 2025 Plan.
Financial Position
Net debt excluding lease liabilities decreased by £4.7 million during the
first half to £17.8 million (31 March: 2023 £22.5 million). Total net debt
decreased by £4.9 million to £29.5 million (31 March 2023: £34.4 million).
Cash was £7.2 million (31 March 2023: £10.4 million).
Cash
Net cash inflow from operating activities during the first half was £8.5
million (H1 2023: net cash outflow £1.3 million), comprising underlying
EBITDA of £6.2 million (H1 2023: £7.5 million), net working capital inflows
of £7.0 million (H1 2023: outflow £4.7 million), net pension contributions
of £1.4 million (H1 2023: £1.6 million), interest costs of £2.2 million (H1
2023: £1.2 million), taxes of £0.7 million (H1 2023: £0.7 million),
exceptional rationalisation costs of £0.4 million (H1 2023: £0.7 million).
Focus on cash management resulted in a working capital turnaround benefit of
£11.7 million; with the current year working capital reducing by £7.0
million against a prior period increase of £4.7 million.
Net cash outflow from investing activities during the first half was £1.7
million (H1 2023: inflow £0.2 million) comprising mainly £2.1 million for
capital investment in adapting production lines for new products expected to
be manufactured in H2 2024.
Net cash outflow from financing activities during the first half was £10.0
million (H1 2023: £1.6 million), comprising £2.1 million repayment of lease
liabilities (H1 2023: £1.8 million) and net repayment of other borrowings
£7.9 million (H1 2023: £0.9 million).
A negligible foreign exchange gain on cash (H1 2023: £1.1 million), coupled
with the £3.2 million net cash outflow (H1 2023: net cash outflow £2.7
million) resulted in an overall £3.2 million reduction in cash during the
first half (H1 2023: £1.6 million).
Debt
Debt decreased by £8.0 million during the first half of the financial year to
£36.7 million. It was reduced by £4.4 million repayments of term loans (of
which £3.7 million were unscheduled), £3.5 million repayment of the
revolving credit facility and £2.1 million repayments of lease liabilities.
It was increased by £1.8 million from new lease debt and by £0.1 million
from negative foreign exchange movements.
The debt facilities available to the Group at 30 September 2023 comprise term
loans of £25.1 million, denominated in sterling 9.9 million, in US Dollar
13.3 million and in Euro 4.9 million. Of the sterling loan £0.7 million will
be amortised by 31 March 2024, a further £2.2 million by 31 March 2025 and a
final payment of £1.3 million in May 2025 before the balance becomes payable
by 30 June 2025. The facility also includes a £3.5 million revolving credit
facility, denominated in sterling, maturing 30 June 2025.
The revolving credit facility was fully repaid in the period to 30 September
2023, leaving an amount drawn at that date of £nil (31 March 2023: £3.5
million).
Pensions
The most recent triennial actuarial valuation of the Group pension scheme was
carried out as at 31 March 2021. This reported a significantly reduced
actuarial technical deficit of £82.8 million (previously £90.4 million based
upon the 31 March 2018 valuation).
The statutory accounting method of valuing the Group pension scheme deficit
under IAS 19 resulted in net liability of £36.7 million at 30 September 2023
(31 March 2023: £34.5 million). Remeasurement gains during the first half
of the financial year were £7.9m, due mainly to a change in the discount rate
from 4.90% to 5.55%. These were offset by £9.6m 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
Scheme's growth assets, offset partially by an increase in corporate bond
spreads. Further, a GMP equalisation past service cost of £1.0 million has
been recognised as an exceptional item in the period to 30 September 2023.
Over the period, the Group's contributions to the scheme were £1.8 million
(H1 2023: £2.4 million).
Dividend
Under the terms of its financing agreements the Company is not permitted to
make a dividend payment to shareholders before June 2025.
Outlook
The tough market conditions are expected to continue in the near term. In the
US demand for Manufacturing Solutions is anticipated to continue at the lower
levels experienced during H1 2024, with Design and Engineering activity
reducing as programmes are completed. A major restructuring plan for the US
business is being actioned to reduce expense and to drive operational
efficiency with the full year benefit expected to be realised in FY 2025.
Increased global interest rates are impacting the cost of financing the Group
and we expect these to persist. We continue to seek opportunities to reduce
the Group's debt burden wherever possible.
All of the above means that the severe downside risk scenarios considered by
the Board when assessing the Group's future prospects create a material
uncertainty that the interest cover covenant will not be met in March 2024.
The Board remains positive about the medium to long term prospects for the
Group, driven by structural growth drivers in our end-markets, our strong
customer relationships across our global footprint and the opportunity to
drive improved financial performance through our focus on operational
excellence.
Principal Risks and Uncertainties
In the Annual Report for the year ended 31 March 2023 Carclo provided a
detailed review of the principal risks faced by the Group and how these risks
were being managed. The Group continues 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 2023 Annual Report, it is worth noting that the following
risks remain particularly relevant for the remainder of the financial year:
· Supply chain and political disruption is expected to continue
with inflation creating further pressure on input costs.
· There has been a noticeable destocking of products by some of our
customers over the last six to nine months, which has led to a reduction in
orders, particularly in the USA and there is a risk that this may continue in
H2 2024.
· Global interest rates remain high which continues to put pressure
on interest cover covenants.
Mitigating actions being taken include:
· Strengthening procurement management to improve supply chain
logistics and lower input costs;
· Pursuing operating efficiencies to lower the cost of production;
· Increasing asset utilisation to create additional capacity for
customers who demand higher volumes of existing products; and
· Marketing to win new customers;
as we continue to focus on debt reduction to mitigate the interest burden that
faces the Group.
Going Concern
These interim financial statements have been prepared on a going concern basis
as detailed in Note 1. The Board's forecasts show that the Group can operate
within its available facilities and meet its covenants as they fall due,
however the interest cover covenant headroom is limited at 31 March 2024,
principally due to the continuation of high interest rates.
The Board continues to take 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 comfort that the downside risks can be mitigated, there remains a
material uncertainty that the interest cover covenant may be breached under
certain severe downside risk scenarios.
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 party transactions
and changes therein).
By order of the Board,
Frank Doorenbosch Eric Hutchinson
Chief Executive Officer Chief Financial Officer
29 November 2023
Reconciliation of non-GAAP financial measures - H1 2024
£000 Underlying Exceptional items Statutory
CTP operating profit 3,687 (841) 2,846
Aerospace operating profit 1,002 (50) 952
Central costs (2,457) (1,204) (3,661)
Operating profit / (loss) 2,232 (2,095) 137
Net finance expense (2,635) - (2,635)
Loss before tax (403) (2,095) (2,498)
Income tax credit 71 259 330
Loss for the period (332) (1,836) (2,168)
Basic loss per share (pence) (0.5)p (2.5)p (3.0)p
Glossary of Terms
CONSTANT CURRENCY Prior period translated at the current period's average exchange rate.
Included to explain the effect of changing exchange rates during volatile
times to assist the reader's understanding
CASH CONVERSION RATE Cash generated from operations add back pension contributions net of pension
administration costs and cash from exceptional items, less total capex divided
by underlying EBIT as defined below
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
EBIT Profit before interest and tax
EBITDA Profit before interest, tax, depreciation, and amortisation
UNDERLYING Adjusted to exclude all exceptional and separately disclosed items
UNDERLYING EBIT Profit before interest and tax 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
OPERATIONAL GEARING Ratio of fixed overheads to sales
RETURN ON SALES Underlying operating profit, as defined above, from continuing operations, as
a percentage of revenue from continuing operations
RETURN ON CAPITAL EMPLOYED ("ROCE") Return on capital employed measures the underlying operating profit for the
Group, including discontinued operations, as a percentage of assets employed,
defined as working capital plus tangible assets
Condensed consolidated income statement
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
unaudited unaudited audited
Notes £000 £000 £000
Continuing operations:
Revenue 4 66,921 72,151 143,445
Underlying operating profit 2,232 3,593 5,939
Exceptional items 5 (2,095) (332) (4,710)
Operating profit 4 137 3,261 1,229
Finance revenue 6 283 60 218
Finance expense 6 (2,918) (1,670) (3,967)
(Loss) / profit before tax (2,498) 1,651 (2,520)
Income tax credit / (expense) 7 330 (983) (1,437)
(Loss) / profit for the period (2,168) 668 (3,957)
Attributable to:
Equity holders of the parent company (2,168) 668 (3,957)
Non-controlling interests - - -
(2,168) 668 (3,957)
(Loss) / earnings per ordinary share 8
Basic (3.0) p 0.9 p (5.4) p
Diluted (3.0) p 0.9 p (5.4) p
Condensed consolidated statement of comprehensive income
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
unaudited unaudited audited
£000 £000 £000
Notes
(Loss) / profit for the period (2,168) 668 (3,957)
Other comprehensive (expense) / income:
Items that will not be reclassified to the income statement
Remeasurement losses on defined benefit scheme 12 (1,719) (201) (10,577)
Total items that will not be reclassified to the income statement (1,719) (201) (10,577)
Items that will or may in the future be classified to the income statement
Foreign exchange translation differences (696) 6,911 1,129
Net investment hedge (94) (1,971) 818
Deferred tax arising 1 (246) (190)
Total items that are or may in future be classified to the income statement (789) 4,694 1,757
Other comprehensive (expense) / income, net of income tax (2,508) 4,493 (8,820)
Total comprehensive (expense) / income for the period (4,676) 5,161 (12,777)
Attributable to:
Equity holders of the parent (4,676) 5,161 (12,777)
Non-controlling interests - - -
Total (expense) / comprehensive income for the period (4,676) 5,161 (12,777)
Condensed consolidated statement of financial position
30 September 30 September 31 March
2023 2022 2023
unaudited unaudited audited
Notes £000 £000 £000
Non-current assets
Intangible assets 10 23,136 24,580 23,463
Property, plant, and equipment 11 43,776 49,453 45,321
Deferred tax assets 1,732 1,469 1,185
Trade and other receivables - 66 -
Total non-current assets 68,644 75,568 69,969
Current assets
Inventories 12,510 18,073 15,203
Contract assets 3,503 10,634 5,763
Trade and other receivables 19,578 22,648 21,383
Cash and cash deposits 14 7,185 10,724 10,354
Total current assets 42,776 62,079 52,703
Total assets 111,420 137,647 122,672
Non-current liabilities
Loans and borrowings 15 30,583 43,583 39,668
Deferred tax liabilities 4,693 5,187 4,917
Contract liabilities 1,458 589 -
Trade and other payables 124 76 -
Retirement benefit obligations 12 36,683 24,928 34,493
Total non-current liabilities 73,541 74,363 79,078
Current liabilities
Loans and borrowings 15 6,102 3,971 5,046
Trade payables 11,401 12,938 13,085
Other payables 8,878 7,946 8,323
Current tax liabilities 93 504 372
Contract liabilities 4,364 8,175 4,689
Provisions 96 95 473
Total current liabilities 30,934 33,629 31,988
Total liabilities 104,475 107,992 111,066
Net assets 6,945 29,655 11,606
Equity
Ordinary share capital issued 17 3,671 3,671 3,671
Share premium 7,359 7,359 7,359
Translation reserve 8,454 12,180 9,243
Retained earnings (12,513) 6,471 (8,641)
Total equity attributable to equity holders of the Company 6,971 29,681 11,632
Non-controlling interests (26) (26) (26)
Total equity 6,945 29,655 11,606
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 2023 3,671 7,359 9,243 (8,641) 11,632 (26) 11,606
Loss for the period - - - (2,168) (2,168) - (2,168)
Other comprehensive income:
Foreign exchange translation differences - - (696) - (696) - (696)
Net investment hedge - - (94) - (94) - (94)
Remeasurement losses on defined benefit scheme - - - (1,719) (1,719) - (1,719)
Taxation on items above - - 1 - 1 - 1
Total comprehensive expense for the period - - (789) (3,887) (4,676) - (4,676)
Transactions with owners recorded directly in equity:
Share based payments - - - 15 15 - 15
Balance at 30 September 2023 3,671 7,359 8,454 (12,513) 6,971 (26) 6,945
Prior half year period unaudited
3,671 7,359 7,486 5,926 24,442 (26) 24,416
Balance at 1 April 2022
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 losses 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
3,671 7,359 12,180 6,471 29,681 (26) 29,655
Balance at 30 September 2022
Condensed consolidated statement of changes in equity continued
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 7,486 5,926 24,442 (26) 24,416
Balance at 1 April 2022
Loss for the year - - - (3,957) (3,957) - (3,957)
Other comprehensive income-
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)
3,671 7,359 9,243 (8,641) 11,632 (26) 11,606
Balance at 31 March 2023
Condensed consolidated statement of cash flows
30 September 30 September 31 March
2023 2022 2023
Unaudited Unaudited Audited
Notes £000 £000 £000
Cash generated from operations 13 11,439 512 7,778
Interest paid (2,204) (1,198) (2,955)
Tax paid (719) (652) (1,051)
Net cash from / (used in) operating activities 8,516 (1,338) 3,772
Cash flows (used in) / from investing activities
Proceeds from sale of property, plant and equipment 225 1,129 1,390
Interest received 283 60 218
Purchase of property, plant and equipment (2,142) (976) (2,313)
Purchase of intangible assets (77) (59) (104)
Net cash (used in) / from investing activities (1,711) 154 (809)
Cash flows from / (used in) financing activities
Drawings on new facilities 74 198 359
Refinancing costs (50) - (250)
Proceeds from sale and leaseback of property, plant and equipment - 1,222 1,222
Repayment of borrowings excluding lease liabilities (7,868) (1,100) (1,800)
Repayment of other loan facilities (103) (45) (102)
Repayment of lease liabilities (2,060) (1,838) (4,104)
Net cash used in financing activities (10,007) (1,563) (4,675)
Net decrease in cash and cash equivalents (3,202) (2,747) (1,712)
Cash and cash equivalents at beginning of period 10,354 12,347 12,347
Effect of exchange rate fluctuations on cash held 33 1,124 (281)
Cash and cash equivalents at end of period 14 7,185 10,724 10,354
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 2023 has been prepared on the
basis of the accounting policies set out in the audited accounts for the year
ended 31 March 2023 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 2023 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 2023 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
2023. Copies are available from the corporate website.
The Group financial statements for the year ended 31 March 2023 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.
The debt facilities currently available to the Group comprise a term loan of
£25.1 million, of which £0.7 million will be amortised by 31 March 2024, a
further £2.2 million by 31 March 2025 and a final payment of £1.3 million in
May 2025, before the balance becomes payable by 30 June 2025. At 30
September 2023, the term loans are denominated as follows: sterling 9.9
million, US Dollar 13.3 million and Euro 4.9 million. The facility also
includes a £3.5 million revolving credit facility, denominated in sterling,
maturing on 30 June 2025.
Net debt at 30 September 2023 was £29.5 million, a significant decrease from
£34.4 million at 31 March 2023 (30 September 2022: £36.8 million), £3.7
million of the decrease is unscheduled repayments made since March 2023 to
reduce the cost of debt.
A schedule of contributions is in place with the pension trustees being £3.5
million to be paid annually until 31 October 2039. Additional contributions
also agreed are 25% of any surplus of 2023 / 24 underlying EBITDA over £18
million payable from 30 June 2024 to May 2025, extending to 26% of any 2024/25
surplus payable from 30 June 2025 to 31 May 2026.
The Group is subject to bank facility covenant tests, as described in note 1
of the Annual Report and Accounts for the year to 31 March 2023. On 22 June
2023, the bank agreed to the Group's request to amend the interest cover
covenant to June 2025 and the net leverage covenant to December 2023 with the
amendment deed signed 17 July 2023. The pension scheme had the benefit of a
fifth covenant to be tested annually up to and including 2023. This test was
completed earlier this year and the requirements have now been met.
The Board's forecasts show that the Group can operate within its available
facilities and meet its covenants as they fall due, however the interest cover
covenant headroom is limited at 31 March 2024, principally due to the
continuation of high interest rates.
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 2023.
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 3%
matched by a corresponding fall in cost of sales of the same amount, general
underperformance against forecast of certain sites and interest rate risk.
Because the interest cover covenant headroom is limited, principally due to
the continuation of high interest rates, manifestation of the above risks,
individually or in combination, could lead to a breach of the Group's banking
covenants.
The Board continues to take 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 comfort that the downside risks can be mitigated, there remains a
material uncertainty that the interest cover covenant may be breached under
certain severe downside risk scenarios.
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 2023. 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 2023 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 2023.
Notes to the accounts continued
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 supplies systems to the manufacturing and aerospace
industries.
The Central costs relate to the running of the Group, plc and non-trading
companies.
Transfer pricing between business segments is set on an arm's length basis.
Segmental revenues and results presented are after the elimination
of transfers between business segments. Those transfers are eliminated on
consolidation.
CTP
£000
Aerospace Central Grou
p
£000 £000
Tota
l
£000
The segment results for the six months ended 30 September 2023 were as
follows:
Consolidated income statement
Continuing operations:
External revenue 63,072 3,849 - 66,921
Expenses (59,385) (2,847) (2,457) (64,689)
Underlying operating profit / (loss) 3,687 1,002 (2,457) 2,232
Exceptional operating items (841) (50) (1,204) (2,095)
Operating profit / (loss) 2,846 952 (3,661) 137
Net finance expense (2,635)
Income tax credit 330
Loss for the period (2,168)
Consolidated statement of financial position
Segment assets 102,539 6,420 2,461 111,420
Segment liabilities (38,639) (1,523) (64,313) (104,475)
Net assets 63,900 4,897 (61,852) 6,945
Other segmental information
Capital expenditure on property, plant and equipment 3,155 577 154 3,886
Capital expenditure on computer software - - 77 77
Depreciation 3,719 116 41 3,876
Impairment of property, plant and equipment 1,006 - - 1,006
Amortisation of computer software 15 - 35 50
Amortisation of other intangible assets 35 - - 35
Disaggregation of revenue
Major products/service lines
Manufacturing 51,750 3,849 - 55,599
Tooling - Design & Engineering 11,322 - - 11,322
63,072 3,849 - 66,921
Timing of revenue recognition
Products transferred at a point in time 51,750 3,849 - 55,599
Products and services transferred over time 11,322 - - 11,322
63,072 3,849 - 66,921
Notes to the accounts continued
4. Segment reporting continued
CTP Aerospace Central Group Total
£000 £000 £000 £000
The segment results for the six months ended 30 September 2022 were as
follows:
Consolidated income statement
Continuing operations:
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 / (liabilities) 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 intangible assets 35 - - 35
Disaggregation of revenue
Major products/service lines
Manufacturing 58,982 3,018 - 62,000
Tooling - Design & Engineering 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
Notes to the accounts continued
4. Segment reporting continued
Group
CTP Aerospace Central total
£000 £000 £000 £000
The segment results for the year ended 31 March 2023 were as follows:
Consolidated income statement
Continuing operations:
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 / (liabilities) 74,231 4,688 (67,313) 11,606
Other segmental information
5,474 287 49 5,810
Capital expenditure on property, plant and equipment
Capital expenditure on computer software 36 - - 36
Capital expenditure on other intangibles 68 - - 68
Depreciation 7,516 223 76 7,815
Impairment of property 783 - - 783
Amortisation of computer software 43 - 101 144
Amortisation of other intangibles 67 - - 67
Impairment of intangible assets 208 - - 208
Disaggregation of revenue
Major products/service lines
Manufacturing 116,737 6,631 - 123,368
Tooling - Design & Engineering 20,077 - - 20,077
136,814 6,631 - 143,445
Timing of revenue recognition
Products transferred at a point in time 117,038 6,631 - 123,669
Products and services transferred over time 19,776 - - 19,776
136,814 6,631 - 143,445
Notes to the accounts continued
5. Exceptional items
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Continuing operations
Rationalisation costs (971) (1,101) (3,404)
Past service cost in respect to retirement benefits (1,020) - -
Net costs arising from cancellation of future supply agreement (396) - (877)
Settlement / (costs) in respect to legacy claims 292 - (302)
Credit arising on the disposal of surplus properties - 769 769
Doubtful debt and related inventory provision - - (896)
Exceptional items recognised in operating profit (2,095) (332) (4,710)
The cash element of exceptional items is a net £0.4 million outflow and a
future net cash inflow of £0.4 million.
Rationalisation costs during the six months ended 30 September 2023 relate to
the restructuring and refinancing of the Group. These include £0.4 million
of costs following the announcement of the closure of the Group's US Derry NH
facility being primarily asset provisions and impairments (31 March 2023:
£1.0 million), £0.3 million central employee related costs following
reorganisation, £0.2 million costs to ensure compliance with the Group's
principal bank financing arrangement and £0.1 million other restructuring
related costs.
During the period to 30 September 2023 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 £1.0 million past service cost in the income statement
(approximately 0.8% of liabilities).
On 30 May 2023, the Group signed a full and final settlement agreement with a
leading global OEM customer who had decided not to proceed with the production
phase of their project. An impairment review was undertaken in the year to
31 March 2023, with final settlement providing evidence that impairment
existed and a resultant impairment cost of £0.9 million was recognised as an
exceptional item at that date. During the current period, a further £0.9
million impairment has been recognised in order that the fixed assets not
intended for continued use within the business be written down to management's
best estimate of recoverable amount at 30 September 2023, see note 11 for
further details. Also, during the period, ancillary assets relating to this
customer were sold at a loss of £0.2 million. Although the details of the
agreement remain confidential, as reported in the annual report and accounts
for the year to 31 March 2023, offsetting these costs is a £0.6 million gain
received on final settlement and recognised in the current period.
During the period to 30 September 2023 the Group received notice from its
third-party advisor there would be no obligation on Carclo plc to make payment
to settle two of the health-related claims that had been provided for at 31
March 2023. As such, the provision held at that date, £0.3 million, has
been released back to exceptional items.
6. Net finance expense
Six months ended Six months ended 30 September Year ended
30 September 31 March
2023 2022 2023
£000 £000 £000
Continuing operations:
The expense recognised in the condensed consolidated income statement
comprises:
Interest receivable on cash and cash deposits 283 60 218
Interest payable on bank loans and overdrafts (1,559) (1,030) (2,569)
Lease interest (422) (303) (674)
Other interest (118) - (59)
Net interest on the net defined benefit liability (819) (337) (665)
Net finance expense (2,635) (1,610) (3,749)
Notes to the accounts continued
7. Income tax (credit) / expense
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Continuing operations:
The credit / (expense) recognised in the condensed consolidated income
statement comprises:
Current tax expense on ordinary activities (701) (795) (1,370)
Deferred tax credit / (expense) on ordinary activities 772 (74) (558)
Current tax credit / (expense) on exceptional items 259 (114) 491
Total income tax credit / (expense) recognised in the condensed consolidated 330 (983) (1,437)
income statement
The half year tax credit represents 13.2% of statutory loss before tax (6
months to 30 September 2022: tax expense 59.5%) based on the estimated average
effective tax rate on ordinary activities for the full year.
The half year underlying effective tax rate amounts to 17.6% credit of
underlying loss before tax and exceptional items (6 months to 30 September
2022: 43.8% expense).
The Group's underlying effective tax rate is lower than the underlying UK tax
rate of 25.0% (6 months to 30 September 2022: 19.0%) because losses are not
recognised in the UK for deferred tax purposes. This is partially offset by
the payment of withholding tax on dividends and royalties from certain tax
jurisdictions.
Deferred tax assets and liabilities at 30 September 2023 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 and the main rate of corporation tax
became 25% from 1 April 2023. Overseas taxes are calculated at the rates
prevailing in the respective jurisdictions.
8. (Loss) / earnings per share
Continuing operations:
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 period.
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 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
2023 2022 2023
£000 £000
£000
(Loss) / profit after tax (2,168) 668 (3,957)
(Loss) / profit attributable to non-controlling interests - - -
(Loss) / profit after tax, attributable to equity holders of the parent (2,168) 668 (3,957)
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
Shares Shares Shares
Weighted average number of ordinary shares in the period 73,419,193 73,419,193 73,419,193
Effect of dilutive share options in issue 15,974 376,151 15,974
Weighted average number of ordinary shares (diluted) in the period 73,435,167 73,795,344 73,435,167
Notes to the accounts continued
8. Earnings per share continued
76,598 of 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 period as they are antidilutive. These options could potentially
dilute basic earnings per share in the future.
In addition to the above, the Company also calculates a (loss) / earnings per
share based on underlying (loss) / profit as the Board believe this provides a
more useful comparison of business trends and performance. Underlying (loss)
/ profit is defined as (loss) / 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 (loss) / profit to underlying
(loss) / profit used in the numerator in calculating underlying (loss) /
earnings per share:
Six months ended Six months Year ended
ended
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
(Loss) / profit after tax, attributable to equity holders of the parent (2,168) 668 (3,957)
Exceptional - rationalisation costs, net of tax 890 1,023 3,070
1,020 - -
Exceptional - past service cost in respect to retirement benefits
218 - 752
Exceptional - net costs arising from cancellation of future supply agreement,
net of tax
Exceptional - (Settlement) / costs in respect to legacy claims, net of tax (292) - 302
- (577) (578)
Exceptional credit arising on the disposal of surplus properties, net of tax
- - (673)
Exceptional - doubtful debt and related inventory provision, net of tax
(Loss) / profit after tax but before exceptional items, attributable to equity (332) 1,114 262
holders of the parent
Underlying operating profit 2,232 3,593 5,939
Finance revenue 283 60 218
Finance expense (2,918) (1,670) (3,967)
Income tax credit / (expense) 71 (869) (1,928)
Underlying (loss) / profit attributable to equity holders of the parent (332) 1,114 262
Notes to the accounts continued
8. Earnings per share continued
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
2023 2022 2023
Pence Pence Pence
Basic (loss) / earnings per share (3.0) 0.9 (5.4)
Diluted (loss) / earnings per share (3.0) 0.9 (5.4)
Underlying (loss) / earnings per share - basic (0.5) 1.5 0.4
Underlying (loss) / earnings per share - diluted (0.5) 1.5 0.4
9. 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.
10. 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
2023 2022 2023
£000 £000 £000
Net book value at the start of the period 23,463 22,714 22,714
Additions 77 59 104
Disposals - - (14)
Amortisation (85) (105) (211)
Impairment - - (208)
Effect of movements in foreign exchange (319) 1,912 1,078
Net book value at the end of the period 23,136 24,580 23,463
Included within intangible assets is goodwill of £22.7 million (31 March 2023
- £23.0 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 2023, 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.
In the year ended 31 March 2023, a customer-related intangible asset
recognised on acquisition of the US Derry, NH facility was fully impaired as
the Group now has minimal trading with the customers to which it related, the
cost was recognised as an exceptional item in that year of £0.2 million.
Notes to the accounts continued
11. 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
2023 2022 2023
£000 £000 £000
Net book value at the start of the period 45,321 46,964 46,964
Additions 3,886 2,859 5,810
Depreciation (3,876) (3,814) (7,815)
Disposals (384) (207) (484)
Impairment (1,006) - (783)
Reclassification of assets held for sale - (65) (64)
Effect of movements in foreign exchange (165) 3,716 1,693
Net book value at the end of the period 43,776 49,453 45,321
Of the net book value at 30 September 2023, £23.3 million is land and
buildings and £20.5 million is plant and equipment (31 March 2023: £25.5
million and £19.9 million respectively). Additions to 30 September 2023
were £0.7 million to land and buildings and £3.2 million to plant and
equipment, disposals were land and buildings £0.1 million and plant and
equipment £0.3 million.
Receiving notice from a leading global OEM CTP customer in December 2022 that
they would not be proceeding into the production phase of a project was deemed
by management to be an event that might be an indicator of impairment at 31
March 2023. An impairment review was undertaken, with final settlement
providing evidence that impairment existed. The Directors undertook an
exercise to determine the recoverable amount of assets that were earmarked for
use on this project where recoverable amount is the higher of value in use and
fair value less costs of disposal. There are a number of machines which
management decided not to repurpose within the business and as a result, an
impairment charge of £0.485 million was recognised in the year ended 31 March
2023 being the difference between net book value at year end and fair value
less costs to dispose. These assets remain on balance sheet at 30 September
2023, with no intended use, and as such management have reviewed the
recoverable amount of the assets at this date. Fair value less costs to
dispose 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. In
the period to 30 September 2023, a further impairment of £0.861 million has
been recognised as an exceptional cost to write the current carrying value
down to FVLCD, see right-of-use assets below.
The announced closure of the US Derry, NH facility is deemed by management to
be an event that might be an indicator of impairment. Management have
undertaken a review of the fixed assets that were not impaired at 31 March
2023 and determined that they should be fully impaired as fair value less
costs to dispose is estimated to be £nil, resulting in an impairment charge
of £0.145 million recognised as an exceptional cost.
FVLCD is a level 3 measurement which is based on inputs which are normally
unobservable to market participants, including offers received and managements
experience of selling similar assets.
Notes to the accounts continued
11. Property, plant and equipment continued
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
2023 2022 2023
£000 £000 £000
Net book value at the start of the period 12,451 11,713 11,713
Additions 2,063 2,002 3,469
Depreciation (1,701) (1,321) (2,817)
Asset transferred to right-of-use assets from owned property, plant and - 372 372
equipment
Derecognition of right-of-use assets (93) (233)
(207)
Impairment (861) - (485)
Effect of movements in foreign exchange 30 1,020 432
Net book value at the end of the period 11,889 13,579 12,451
Of the net book value at 30 September 2023, £5.5 million is land and
buildings and £6.4 million is plant and equipment (31 March 2023: £6.2
million and £6.2 million respectively). Additions to 30 September 2023 were
£0.7 million to land and buildings and £1.3 million to plant and equipment
with disposals of £0.1 million to land and buildings.
The impairment presented within right-of-use assets in the current period is
in respect to the OEM global customer assets referred to above.
12. 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
2023 2022 2023
£000 £000 £000
(125,038) (128,079)
Present value of funded obligations (134,091)
Fair value of scheme assets 88,355 103,151 99,598
Recognised liability for defined benefit obligations (36,683) (24,928) (34,493)
Notes to the accounts continued
12. Retirement benefit obligations continued
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Movement in the net liability for defined benefit obligations recognised in
the condensed consolidated statement of financial position:
(34,493) (25,979) (25,979)
Net liability for defined benefit obligations at the start of the period
1,750 2,392 4,142
Contributions paid
Net expense recognised in the condensed consolidated income statement (2,221) (1,140) (2,079)
(1,719) (201) (10,577)
Remeasurement losses recognised in other comprehensive income
(36,683) (24,928) (34,493)
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
2023 2022 2023
£000 £000 £000
Movements in the fair value of Scheme assets:
Fair value of Scheme assets at the start of the period 99,598 155,780 155,780
2,362 2,057 4,085
Interest income
Loss on Scheme assets excluding interest income (9,576) (49,846) (51,251)
1,750 2,392 4,142
Contributions by employer
(5,397) (6,429) (11,744)
Benefit payments
(382) (803) (1,414)
Expenses paid
88,355 103,151 99,598
Fair value of Scheme assets at the end of the period
Actual loss on Scheme assets (7,214) (47,789) (47,166)
Notes to the accounts continued
12. Retirement benefit obligations continued
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Movements in the present value of defined benefit obligations:
Defined benefit obligation at the start of the period 134,091 181,759 181,759
Interest expense 3,181 2,394 4,750
Actuarial loss due to scheme experience - - 4,897
Actuarial gains due to changes in demographic assumptions - - (7,539)
Actuarial gains due to changes in financial assumptions (7,857) (49,645) (38,032)
Benefits paid (5,397) (6,429) (11,744)
Past service cost 1,020 - -
Defined benefit obligation at the end of the period 125,038 128,079 134,091
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
The principal actuarial assumptions at the balance sheet date (expressed as
weighted averages) were:
Discount rate at period end 5.55% 5.30% 4.90%
Inflation (RPI) (non-pensioner) 3.30% 3.55% 3.25%
Inflation (CPI) (non-pensioner) 2.80% 3.05% 2.75%
Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less 3.30% 3.55% 3.25%
Allowance for revaluation of deferred pensions of CPI or 5% p.a. if less 2.80% 3.05% 2.75%
Allowance for pension in payment increases of RPI or 5% p.a. if less 3.10% 3.45% 2.90%
Allowance for pension in payment increases of CPI or 3% p.a. if less 2.20% 2.55% 2.00%
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 3.75% 3.75% 3.80%
3% p.a.
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 4.30% 4.25% 4.35%
4% p.a.
Life expectancy years years years
Male (current age 45) 18.7 19.7 18.7
Male (current age 65) 17.8 18.8 17.8
Female (current age 45) 21.6 22.0 21.6
Female (current age 65) 20.4 20.9 20.4
Notes to the accounts continued
13. Cash generated from operations
Six months ended Six months ended Year ended
31 March
2023
£000
30 September 30 September
2022
£000
2023
£000
Continuing operations:
(Loss / profit for the period (2,168) 668 (3,957)
Adjustments for -
Pension scheme contributions net of administration costs settled by the (1,443) (1,869) (3,287)
Company
Pension scheme administration costs settled by the Scheme 75 280 559
Depreciation charge 3,876 3,814 7,815
Amortisation charge 85 105 211
Exceptional rationalisation costs (57) - 1,304
Exceptional past service cost in respect to retirement benefits 1,020 - -
Exceptional costs arising from cancellation of future supply agreement 1,027 - 751
Exceptional (settlement) / costs in respect to legacy claims (292) - 302
Exceptional profit on disposal of surplus property - (769) (769)
Exceptional doubtful debt and related inventory provision - - 896
Exceptional provision for staff costs - 330 -
Loss on disposal of intangible non-current assets - - 14
Profit on disposal of property, plant and equipment (14) - -
Share based payment charge / (credit) 15 78 (33)
Financial income (283) (60) (218)
Financial expense 2,918 1,670 3,967
Taxation (credit) / expense (330) 983 1,437
Operating cash flow before changes in working capital 4,429 5,230 8,992
Changes in working capital
Decrease in inventories 2,429 410 1,539
Decrease / (increase) in contract assets 2,306 (2,112) 2,388
Decrease / (increase) in trade and other receivables 2,111 (1,601) (1,656)
Decrease in trade and other payables (1,006) (2,669) (943)
Increase / (decrease) in contract liabilities 1,170 1,254 (2,542)
Cash generated from operations 11,439 512 7,778
14. Cash and cash deposits As at As at As at
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Cash and cash deposits 7,185 10,724 10,354
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 2023, Carclo plc's
overdraft of £8.8 million (31 March 2023: £6.5 million) has been recognised
within cash and cash deposits when consolidated due to a right of off-set
under a UK net overdraft arrangement.
Notes to the accounts continued
15. Net debt
As at As at As at
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Net debt comprises -
Cash and cash deposits 7,185 10,724 10,354
Term loan (24,695) (30,722) (28,950)
Revolving credit facility - (3,500) (3,500)
Lease liabilities (11,662) (13,057) (11,870)
Other loans (328) (275) (394)
Net debt (29,500) (36,830) (34,360)
The debt facilities currently available to the Group comprise a term loan of
£25.1 million (31 March 2023: £29.3 million), of which £0.7 million will be
amortised by 31 March 2024, a further £2.2 million by 31 March 2025 and a
final payment of £1.3 million in May 2025 before the balance becomes payable
by 30 June 2025.
An arrangement fee of £0.1 million became payable on 17 July 2023 following
the deed amendment to reset the interest cover and debt leverage covenants.
Half has been paid in the period to 30 September 2023 and the balance will be
settled by 31 March 2024.
At 30 September 2023, the term loans are denominated as follows: sterling 9.9
million, US Dollar 13.3 million and Euro 4.9 million. The facility also
includes a £3.5 million (31 March 2023: £3.5 million) revolving credit
facility, denominated in sterling, maturing on 30 June 2025. £nil balance
was drawn on this facility at 30 September 2023 (31 March 2023: £3.5
million).
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 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 changes - - - - -
Balance at 30 September 2022 30,722 3,500 13,057 275 47,554
Notes to the accounts continued
15. Net debt continued
Term loan Revolving credit facility Lease liabilities Other loans Total
£000 £000 £000 £000 £000
Changes from financing cash flows
Drawings on new facilities - - - 161 161
Repayment of borrowings (700) - (2,490) (57) (3,247)
(700) - (2,490) 104 (3,086)
Effect of changes in foreign exchange rates (1,154) - (560) 15 (1,699)
Liability-related other charges
Drawings on new facilities - - 1,863 - 1,863
Interest expense - presented within finance expense 82 - - - 82
82 - 1,863 - 1,945
Equity-related other charges - - - - -
Balance at 31 March 2023 28,950 3,500 11,870 394 44,714
Changes from financing cash flows
Drawings on new facilities - - 1,841 74 1,915
Transaction costs associated with the issue of debt (100) - - - (100)
Repayment of borrowings (4,350) (3,500) (2,060) (121) (10,031)
(4,450) (3,500) (219) (47) (8,216)
Effect of changes in foreign exchange rates 95 - 11 (19) 87
Liability-related other changes
Interest expense - presented within finance expense 100 - - - 100
100 - - - 100
Equity-related other charges - - - -
Balance at 30 September 2023 24,695 - 11,662 328 36,685
16. Financial instruments
The fair value of financial assets and liabilities are not materially
different from their carrying value.
Except as described in note 11, there are no material items required to be
disclosed under the fair value hierarchy.
17. Ordinary share capital
Number
Ordinary shares of 5 pence each - of shares £000
Issued and fully paid at 30 September 2022, 31 March 2023 and 30 September 73,419,193 3,671
2023
Notes to the accounts continued
18. 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
The Board was expanded on 6 October 2022 with the appointment of Frank
Doorenbosch as Chief Executive Officer. Joe Oatley became Non-executive Chair
on 7 November 2022 with the departure of Nick Saunders, Executive Chair.
Rachel Amey was appointed as a new Non-executive Director on 1 March 2023.
This essential strengthening of the leadership team is necessary to ensure the
successful turnround of the Group and achieving the Carclo 2025 plan.
On 21 August 2023 the Board announced, with immediate effect, the resignation
of David Bedford as Chief Financial Officer, Company Secretary, and as a
Director of the Company. On the same day, Eric Hutchinson, formerly a
Non-Executive Director was appointed as Chief Financial Officer and Company
Secretary with immediate effect, thus becoming an Executive Director.
Also on 21 August 2023, Rachel Amey, a Non-Executive Director, was appointed
as Chair of the Audit & Risk Committee, Interim Chair of the Remuneration
Committee and Interim Senior Independent Director with immediate effect.
During the period to 30 September 2023, the Group was billed £0.5 million (30
September 2022: £0.5 million) by Thingtrax, a company that offers intelligent
manufacturing infrastructure as a service. Frank Doorenbosch, a Carclo plc
Executive Director, is also a Non-Executive Director of Thingtrax and, as
such, the company is identified as a related party. In the six months to 30
September 2023, £0.3 million (30 September 2022: £0.3 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 2023 and
will be recognised in the second half of the year to 31 March 2024.
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 2023, remuneration to
current and former directors amounted to £0.322 million (six months ended 30
September 2022 - £0.434 million).
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 2023, incorporating both deficit recovery contributions
and scheme expenses including PPF levy.
Carclo incurred administration costs of £0.382 million during the period
which has been charged to the consolidated income statement, including £0.011
million presented as exceptional costs, (30 September 2022: £0.803 million,
of which £0.124 million was presented as exceptional). Of the
administration costs, £0.075 million was paid directly by the scheme (30
September 2022: £0.280 million). The total deficit reduction contributions
and administration costs paid during the period was £1.750 million (30
September 2022: £2.392 million).
19. Post balance sheet events
On 25 October 2023, the Group announced the strategic decision to close its US
Derry NH facility. The Group has recognised exceptional costs in the six
months to 30 September 2023 of £0.4 million, being primarily to recognise
Derry assets on the balance sheet at that date, at recoverable amount. The
Group estimates that a further £0.4 million of costs will be recognised in
respect to the facility closure in the final six months to 31 March 2024.
20. 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 2023 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 2023 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), "Review 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 at 31 March 2024, principally due to continuation of high
interest rates, and therefore there is a risk that the interest cover covenant
may be breached under certain severe downside risk scenarios.
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.
Auditor's 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 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.
Mazars LLP
Chartered Accountants
30 Old Bailey
London
EC4M 7AU
Date: 29 November 2023
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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