TIDMCAR
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 GBP66.9 million (H1 2023:
GBP72. 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
GBP 2.2 million (H1 2023: GBP3.6 million) with the GBP0.7 million
foreign currency gain in H1 2023 not repeated in H1 2024 (GBPnil).
On a constant currency basis, underlying operating profit was down
by GBP1. 1 million.
-- Net exceptional costs in the period were GBP2.1 million (H1
2023: GBP0.3 million) being primarily GBP1.0 million
rationalisation costs of which GBP0.4 million was cash. There is
also a GBP1.0 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 GBP11.4 million (H1 2023: GBP0.5 million) largely
driven by strict working capital management.
-- Net debt, including IFRS16 lease liabilities, decreased to
GBP29. 5 million (31 March 2023: GBP34.4m) 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
GBP000 GBP000
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
GBP000 GBP000
Cash generated from operations 11,439 512
H1
2024 FY 2023
GBP000 GBP000
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
H1 2024 H1 2023
Revenue GBP000 GBP000
CTP 63,072 69,133
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 +44 (0)1924
plc 268040
Eric Hutchinson - Chief Financial +44 (0)1924
Officer, Carclo plc 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 GBP66.9 million (H1 2023: GBP72.2
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
GBP000 GBP000
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 GBP 2.2 million (H1
2023: GBP3.6 million) largely due to a fall in demand for medical
components. Exchange gains of GBP0.7 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 GBP1.1 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 GBP1.0 million to GBP2.6 million
(H1 2023: GBP1.6 million) as a result of increasing market interest
rates. Finance costs include the imputed net interest on the
defined benefit pension liability of GBP0.8 million (H1 2023:
GBP0.3 million).
The Group incurred net exceptional operating costs of GBP2.1
million in the period (H1 2023: GBP0.3 million), comprising GBP1.0
million rationalisation costs primarily in respect of the central
division and CTP segment, GBP1.0 million past service cost in
respect of retirement benefits GMP equalisation, a further GBP0.4
million net costs in respect of the cancellation of the future
supply agreement announced earlier this year and a credit fo r the
release of GBP0.3 million provisions not required following
settlement of legacy claims.
Group loss before tax was GBP2.5 million (H1 2023: GBP1.7
million profit).
The income tax credit was GBP0.3 million (H1 2023: GBP1.0
million expense) and the underlying tax credit was GBP0.1 million
(H1 2023: expense GBP0.9 million). The effective tax rate was 1 3.2
% 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 GBP63.1 million (H1 2023: GBP69.1m),
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 GBP51.8 million (H1 2023:
GBP59.0m), 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 GBP11.3 million, up 11. 5 % compared
to the prior year (H1 2023: GBP10.2 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 GBP3.7 million
(H1 2023: GBP4.0 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 GBP0.4
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 GBP3.8 million (H1 2023: GBP3.0 million).
Aerospace return on sales ratio strengthened further to 2 6 .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 GBP 1.0 million (H1 2023: GBP0.7 million).
Central costs
Central costs increased by GBP1. 4 million to GBP2. 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 a ppointed 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 GBP4. 7
million during the first half to GBP17. 8 million (31 March : 2023
GBP22. 5 million). Total net debt decreased by GBP4. 9 million to
GBP29. 5 million (31 March 2023 : GBP34. 4 million). Cash was
GBP7.2 million (31 March 2023: GBP10.4 million).
Cash
Net cash inflow from operating activities during the first half
was GBP 8.5 million (H1 2023: net cash outflow GBP1.3 million),
comprising underlying EBITDA of GBP6.2 million (H1 2023: GBP7.5
million), net working capital inflows of GBP7.0 million (H1 2023:
outflow GBP4.7 million), net pension contributions of GBP1.4
million (H1 2023: GBP1.6 million), interest costs of GBP2.2 million
(H1 2023: GBP1.2 million), taxes of GBP0. 7 million (H1 2023:
GBP0.7 million), exceptional rationalisation costs of GBP0.4
million (H1 2023: GBP0.7 million). Focus on cash management
resulted in a working capital turnaround benefit of GBP11.7
million; with the current year working capital reducing by GBP7.0
million against a prior period increase of GBP4.7 million.
Net cash outflow from investing activities during the first half
was GBP1.7 million (H1 2023: inflow GBP0.2 million ) comprising
mainly GBP2.1 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 GBP10.0 million (H1 2023: GBP1.6 million), comprising GBP2. 1
million repayment of lease liabilities (H1 2023: GBP1.8 million)
and net repayment of other borrowings GBP7.9 million (H1 2023:
GBP0.9 million).
A negligible foreign exchange gain on cash (H1 2023: GBP1.1
million), coupled with the GBP 3.2 million net cash outflow (H1
2023: net cash outflow GBP2.7 million) resulted in an overall
GBP3.2 million reduction in cash during the first half (H1 2023:
GBP1.6 million).
Debt
Debt decreased by GBP8. 0 million during the first half of the
financial year to GBP 36.7 million. It was reduced by GBP4.4
million repayments of term loans (of which GBP3. 7 million were
unscheduled), GBP3.5 million repayment of the revolving credit
facility and GBP 2.1 million repayments of lease liabilities . It
was increased by GBP 1.8 million from new lease debt and by GBP 0.1
million from negative foreign exchange movements.
The debt facilities available to the Group at 30 September 2023
comprise term loans of GBP25.1 million, denominated in sterling 9.9
million, in US Dollar 13.3 million and in Euro 4.9 million. Of the
sterling loan GBP0.7 million will be amortised by 31 March 2024, a
further GBP2.2 million by 31 March 2025 and a final payment of
GBP1.3 million in May 2025 before the balance becomes payable by 30
June 2025. The facility also includes a GBP3.5 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 GBPnil
(31 March 2023: GBP3.5 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 GBP82.8
million (previously GBP90.4 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 GBP36.7
million at 30 September 2023 (31 March 2023: GBP34.5 million).
Remeasurement gains during the first half of the financial year
were GBP7.9m, due mainly to a change in the discount rate from
4.90% to 5.55%. These were offset by GBP9.6m 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 GBP1.0 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
GBP1.8 million (H1 2023: GBP2.4 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 Chief Financial
Officer Officer
29 November 2023
Reconciliation of non-GAAP financial measures - H1 2024
Exceptional
GBP000 Underlying 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 EXPITURE 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 Six months
ended ended Year ended
30 September 30 September 31 March
2023 2022 2023
unaudited unaudited audited
Notes GBP000 GBP000 GBP000
----------------- -------- --------------- ---------------- ---------------------
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
Notes GBP000 GBP000 GBP000
------------------------- --------- ----------------- ----------------- -----------
(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 GBP000 GBP000 GBP000
---- ---------- --- ----- ----- ------- ---- ------ ------------ ---------- -----------------------
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
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------ -------- ------------ ---------- -------- ---------------- --------
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
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
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
Balance at 30
September 2022 3,671 7,359 12,180 6,471 29,681 (26) 29,655
============ ======== ============ ========== ======== ================ ========
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
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Condensed consolidated statement of changes in equity
continued
Prior year -
audited
Balance at 1
April 2022 3,671 7,359 7,486 5,926 24,442 (26) 24,416
Loss for the
year - - - (3,957) (3,957) - (3,957)
Other
comprehensive
income-
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)
Balance at 31
March 2023 3,671 7,359 9,243 (8,641) 11,632 (26) 11,606
========== ========= ============ ========== ========== ================ =========
Condensed consolidated statement of cash
flows
30 September 30 September 31 March
2023 2022 2023
Unaudited Unaudited Audited
Notes GBP000 GBP000 GBP000
------------------------------------ ------ ------------- ------------- ---------
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 GBP25.1 million,
of which GBP0.7 million will be amortised by 31 March 2024, a further GBP2.2 million by 31
March 2025 and a final payment of GBP1.3 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 GBP3.5
million revolving credit facility, denominated in sterling, maturing on 30 June 2025.
Net debt at 30 September 2023 was GBP29.5 million, a significant decrease from GBP34.4 million
at 31 March 2023 (30 September 2022: GBP36.8 million), GBP3.7 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 GBP3.5 million to
be paid annually until 31 October 2039. Additional contributions also agreed are 25% of any
surplus of 2023 / 24 underlying EBITDA over GBP18 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.
Group
CTP Aerospace Central Total
GBP000 GBP000 GBP000 GBP000
--------------------------------------- ---------------------- --------------------- --------------------------------- ------------------- -------------------------------- ----------------- ------------------ -----------------
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
Group
CTP Aerospace Central Total
GBP000 GBP000 GBP000 GBP000
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
GBP000 GBP000 GBP000 GBP000
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
Capital expenditure on property, plant and equipment 5,474 287 49 5,810
Capital expenditure on computer software 36 - - 36
Capital expenditure on other intangibles 68 - - 68
Depreciation 7,516 223 76 7,815
Impairment of property 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
GBP000 GBP000 GBP000
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 GBP0.4 million outflow and a future net cash
inflow of GBP0.4 million.
Rationalisation costs during the six months ended 30 September 2023 relate to the restructuring
and refinancing of the Group. These include GBP0.4 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: GBP1.0 million), GBP0.3 million central employee related costs following reorganisation,
GBP0.2 million costs to ensure compliance with the Group's principal bank financing arrangement
and GBP0.1 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 GBP1.0 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 GBP0.9 million was recognised
as an exceptional item at that date. During the current period, a further GBP0.9 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 GBP0.2 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 GBP0.6 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,
GBP0.3 million, has been released back to exceptional items.
6. Net finance expense
Six months ended Year ended
30 September Six months ended 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
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
GBP000 GBP000 GBP000
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 income statement 330 (983) (1,437)
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
GBP000 GBP000 GBP000
(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
Six months ended ended Year ended
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
(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
Exceptional - past service cost in respect
to retirement benefits 1,020 - -
Exceptional - net costs arising from
cancellation of future supply agreement,
net of tax 218 - 752
Exceptional - (Settlement) / costs in
respect to legacy claims, net of tax (292) - 302
Exceptional credit arising on the disposal
of surplus properties, net of tax - (577) (578)
Exceptional - doubtful debt and related
inventory provision, net of tax - - (673)
(Loss) / profit after tax but before
exceptional items, attributable to equity
holders of
the parent (332) 1,114 262
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 Six months Year
ended ended ended
30 30
September 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 Six months Year
ended ended ended
30 30
September September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
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 GBP22.7 million (31 March 2023 - GBP23.0
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 GBP0.2 million.
Notes to the accounts continued
Property, plant and
11. 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
GBP000 GBP000 GBP000
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, GBP23.3 million is land and buildings and GBP20.5
million is plant and equipment (31 March 2023: GBP25.5 million and GBP19.9 million
respectively).
Additions to 30 September 2023 were GBP0.7 million to land and buildings and GBP3.2 million
to plant and equipment, disposals were land and buildings GBP0.1 million and plant and
equipment
GBP0.3 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 GBP0.485 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 GBP0.861 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 GBPnil, resulting in an impairment
charge of GBP0.145 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
GBP000 GBP000 GBP000
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 equipment - 372 372
Derecognition of right-of-use assets (93) (207) (233)
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, GBP5.5 million is land and buildings and GBP6.4
million is plant and equipment (31 March 2023: GBP6.2 million and GBP6.2 million respectively).
Additions to 30 September 2023 were GBP0.7 million to land and buildings and GBP1.3 million
to plant and equipment with disposals of GBP0.1 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
GBP000 GBP000 GBP000
----
Present value of funded obligations (125,038) (128,079) (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 Year
ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
---------
Movement in the net liability for defined benefit
obligations recognised in the condensed
consolidated statement of financial position:
Net liability for defined benefit obligations at the
start of the period (34,493) (25,979) (25,979)
Contributions paid 1,750 2,392 4,142
Net expense recognised in the condensed consolidated income statement (2,221) (1,140) (2,079)
Remeasurement losses recognised in other comprehensive income (1,719) (201) (10,577)
Net liability for defined benefit obligations at the
end of the period (36,683) (24,928) (34,493)
Six months Year
ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
---------
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
Interest income 2,362 2,057 4,085
Loss on Scheme assets excluding interest income (9,576) (49,846) (51,251)
Contributions by employer 1,750 2,392 4,142
Benefit payments (5,397) (6,429) (11,744)
Expenses paid (382) (803) (1,414)
Fair value of Scheme assets at the end of the period 88,355 103,151 99,598
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
GBP000 GBP000 GBP000
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% p.a. 3.75% 3.75% 3.80%
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 4% p.a. 4.30% 4.25% 4.35%
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 Six months
ended ended
30 September
2023
Year
ended
30 September 31 March
2022 2023
GBP000 GBP000 GBP000
Continuing operations:
(Loss / profit for the period (2,168) 668 (3,957)
Adjustments for -
Pension scheme contributions net of administration costs settled by the
Company (1,443) (1,869) (3,287)
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
GBP000 GBP000 GBP000
Cash and cash deposits 7,185 10,724 10,354
The Group has a net UK multi-currency overdraft facility with a GBPnil net limit and a GBP12.5
million gross limit. At 30 September 2023, Carclo plc's overdraft of GBP8.8 million (31 March
2023: GBP6.5 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
GBP000 GBP000 GBP000
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 GBP25.1 million
(31 March 2023: GBP29.3 million), of which GBP0.7 million will be amortised by 31 March 2024,
a further GBP2.2 million by 31 March 2025 and a final payment of GBP1.3 million in May 2025
before the balance becomes payable by 30 June 2025.
An arrangement fee of GBP0.1 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 GBP3.5 million (31
March 2023: GBP3.5 million) revolving credit facility, denominated in sterling, maturing on
30 June 2025. GBPnil balance was drawn on this facility at 30 September 2023 (31 March 2023:
GBP3.5 million).
Reconciliation of movements of liabilities to cash flows arising from financing activities
Revolving credit Lease
Term loan facility liabilities Other loans Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------
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
Revolving credit Lease
Term loan facility liabilities Other loans Total
GBP000 GBP000 GBP000 GBP000 GBP000
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 GBP000
Issued and fully paid at 30 September 2022, 31 March 2023 and 30 September
2023 73,419,193 3,671
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 GBP0.5 million (30 September
2022: GBP0.5 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, GBP0.3 million (30 September 2022: GBP0.3 million) has been recognised
as a cost in the condensed consolidated income statement; a balance of GBP0.3 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 GBP0.322 million
(six months ended 30 September 2022 - GBP0.434 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 GBP0.292 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 GBP0.382 million during the period which has been
charged to the consolidated income statement, including GBP0.011 million presented as exceptional
costs, (30 September 2022: GBP0.803 million, of which GBP0.124 million was presented as exceptional).
Of the administration costs, GBP0.075 million was paid directly by the scheme (30 September
2022: GBP0.280 million). The total deficit reduction contributions and administration costs
paid during the period was GBP1.750 million (30 September 2022: GBP2.392 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 GBP0.4
million, being primarily to recognise Derry assets on the balance sheet at that date, at recoverable
amount. The Group estimates that a further GBP0.4 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.
INDEPENT 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
This information is provided by RNS, the news service of the
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END
IR DBBDBDXDDGXC
(END) Dow Jones Newswires
November 30, 2023 02:00 ET (07:00 GMT)
Carclo (AQSE:CAR.GB)
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