Interim Results

Carclo plc 05 December 2005 5 December 2005 Carclo plc Interim Results for the six months ended 30 September 2005 Key Points • Underlying operating profit from continuing operations increased. • Targeted debt level of £20 million achieved following the disposal of the card clothing business. • Investment in new technologies increased with the acquisition of a further 20% in Conductive Inkjet Technology ('CIT'). Operational control of CIT now achieved. • Profits in low cost region businesses increased significantly in the period. Commenting on the results, George Kennedy, chairman, said: 'Our strategy is clear and it is working. We are seeing good growth opportunities in our specialist and medical business. We are also seeing strong profit growth in our low cost region manufacturing facilities. These positive factors will become more evident in the second half and into next year. We continue to see difficult and uncertain markets in automotive components, both in the UK and the USA, and we will therefore manage our cost base and capacity according to demand. 'The drive to commercialise Conductive Inkjet Technology will continue apace. The decision to increase our investment in CIT indicates our confidence in the future potential of this technology and we expect further positive news from CIT during the coming six months.' -Ends- For further information please contact: Carclo plc Ian Williamson, chief executive On 5 December 2005: 020 7067 0700 Robert Brooksbank, finance director Thereafter: 01924 268040 Weber Shandwick/Square Mile Richard Hews 020 7067 0700 Susanne Walker A presentation for analysts will be held at 9.30 am at the offices of Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London WC1X 8WS Notes to editors • Carclo plc is a global supplier of technical plastic components. It is a public company whose shares are quoted on the London Stock Exchange. • 65% of sales are derived from the supply of fine tolerance, injection moulded plastic components, which are used in medical, automotive, telecom and electronics products. This business, Carclo Technical Plastics, operates internationally in a fast growing and dynamic market underpinned by rapid technological development. • 35% of sales are derived from the supply of manufactured systems to the automotive and aerospace industries. • Carclo's strategy is to grow rapidly in low cost manufacturing regions and to develop new technologies and products to underpin future growth. Chairman's statement Overview We are pleased with the group's progress in the first half of this financial year. Underlying operating profit from continuing operations increased and we achieved our target of reducing debt to around £20 million. We have increased our investment in new technologies with encouraging progress achieved during the period. This reflects our long stated strategy for the group of progressing new technological developments, growing the specialist moulding businesses and expanding manufacture in low cost regions. After rationalisation costs and exceptional bad debt charges of £0.5 million, operating profits from continuing operations were £1.3 million (2004 - £1.6 million). The group made a profit before tax of £0.8 million (2004 - £2.2 million which included profits on the disposal of properties of £1.5 million). The board has declared an unchanged interim dividend of 0.4 pence per ordinary share. Dividends will be posted on 6 April 2006 to shareholders on the register on 3 March 2006. The shares will be traded excluding the right to the dividend from 1 March 2006. International Financial Reporting Standards The results for the six months ended 30 September 2005 have been prepared under International Financial Reporting Standards adopted in the EU and the prior period information contained within the report has been restated on a comparable basis. A full analysis of the IFRS conversion was issued on 4 October 2005 and is available from Carclo's head office or on the corporate web site (www.carclo-plc.com). Financial position Net debt at 30 September 2005 was £20.2 million, a reduction of £7.9 million compared to 30 September 2004. This represents gearing of 89.6% (2004 - 120.6%) and is after deducting the pensions deficit of £26.5 million in determining the group's net assets. The group has cash and undrawn medium term facilities of £16.3 million available to fund future development. In addition the group has surplus properties with a net book value of £5.8 million which will be realised in due course. On 26 October 2005 the High Court approved the conversion of £41.8 million of the share premium account into a distributable reserve in the parent company accounts. Operating review Technical Plastics The Technical Plastics division reported slightly reduced operating profit of £0.7 million (2004 - £0.9 million) on sales of £27.5 million (2004 - £30.2 million). Operating profit was held back by the run down costs associated with the Eaglescliffe plant in the UK which was closed at the end of October. Compared to the prior year, operating profit in the Czech Republic and China increased significantly and is set to grow strongly in the second half. We are also seeing a good flow of new contracts in our specialist medical moulding operations which will deliver growth in the second half and into next year. Conditions in automotive markets remain difficult and we continue to manage our cost base in line with the available demand. A significant customer in the USA, Delphi Corporation, filed for chapter 11 protection shortly after the period end and a provision of £0.1 million has been reflected in the half year accounts. This provision is lower than previously indicated in the statement made on 10 October due to the recent US court ruling which enabled Delphi to pay up to 75% of outstanding amounts, subject to certain conditions being met. Precision Products This division generated an increased operating profit of £1.5 million (2004 - £1.3 million) on turnover of £15.2 million (2004 - £15.9 million). Operating margins increased from 8.1% to 10.1% through good cost control. We have established a joint venture with our Indian partner, Suprajit Engineering Limited, to supply control cables to the Precision Products division. This purpose built manufacturing facility is nearing completion and is expected to come into production in January 2006. The out sourcing of control cable manufacture and assembly to the Indian JV will allow the UK facility to be relocated to a smaller specialist manufacturing facility. Innovation Over the past three years Carclo has been investing in new and innovative products and processes. The most advanced of these investments is Conductive Inkjet Technology ('CIT') which has developed an innovative process to print conductive metals digitally onto a variety of substrates. The main focus of development in the last year has been the application of this process to print antennas for the RFID tag industry. In July Carclo increased its shareholding in CIT to 70% by acquiring an additional 20% of the shares for £1.6 million, funded by a vendor placing. A major step forward in commercialising CIT's technology took place in November when CIT, with our USA based partner Preco Industries Inc., launched the MetalJet 6000 printing line at a major European exhibition. The interest from potential customers has been very encouraging. Carclo Technical Plastics is preparing for volume production of components for a security application which incorporates CIT technology. Carclo Technical Plastics jointly owns a patent with Stanelco plc for injection moulded water soluble capsules for drug delivery and dietary supplements. We have made encouraging progress in the last few months with this technology. We are working closely with a customer who intends to use the technology in veterinary applications and have high level discussions underway with major drug delivery companies on the human application of the technology. Disposal of ECC Card Clothing In June Carclo disposed of its card clothing business which generated net cash inflows of £5.4 million in the period after attributable disposal costs and net cash transferred with the business. The consideration for the disposal was based on the carrying value of the assets sold. However, costs of £0.6 million and a pension charge of £0.3 million were incurred on the disposal which resulted in a charge of £0.9 million. The board At the annual general meeting in September 2005 I was pleased to announce the appointment of Christopher Ross as my successor as chairman with effect from 1 January 2006. I am also pleased to announce that Michael Derbyshire and Bill Tame will be joining the board as non executive directors effective 1 January 2006. Michael, who qualified as a chemical engineer, was formerly chief executive of Whitecroft plc and is currently chairman of Racal Acoustics Global Limited, Allied Textiles Limited and PD Group Limited, all private equity backed companies. Bill is currently finance director of Babcock International Group plc. Prior to that he worked for 17 years at Courtaulds plc, the last four years as finance director of the Asia-Pacific business before moving to Scapa Group plc as group finance director. This will be my last chairman's statement. I would again like to thank all those employed by Carclo during my time as chairman for their support and would like to wish Christopher and the rest of the board every success in the future. Outlook Our strategy is clear and it is working. We are seeing good growth opportunities in our specialist and medical business. We are also seeing strong profit growth in our low cost region manufacturing facilities. These positive factors will become more evident in the second half and into next year. We continue to see difficult and uncertain markets in automotive components, both in the UK and the USA, and we will therefore manage our cost base and capacity according to demand. The drive to commercialise Conductive Inkjet Technology will continue apace. The decision to increase our investment in CIT indicates our confidence in the future potential of this technology and we expect further positive news from CIT during the coming six months. George Kennedy 5 December 2005 Consolidated income statement Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 £'000 £'000 £'000 _________________________________________________________________________________________________________ Revenue Continuing operations 42,711 46,126 91,795 Discontinued operations 2,536 8,189 15,879 _________ _________ _________ 45,247 54,315 107,674 _________________________________________________________________________________________________________ Underlying operating profit Continuing operations - before adjustments 1,833 1,724 4,866 - rationalisation costs (379) (126) (649) - exceptional bad debt (125) - - _________ _________ _________ - total adjustments (504) (126) (649) __________________________________________________________________________________________________________ Operating profit - continuing operations 1,329 1,598 4,217 - discontinued operations (139) (73) (143) _________ _________ _________ Profit from operations 1,190 1,525 4,074 Loss on termination of operations - (249) (763) Profit on sale of properties - 1,457 1,462 _________ _________ _________ Operating profit before financing costs 1,190 2,733 4,773 Net financing costs (417) (541) (1,092) _________ _________ _________ Profit before tax 773 2,192 3,681 Income tax (expense)/income - (171) 45 _________ _________ _________ Profit after tax but before loss on discontinued operation 773 2,021 3,726 Loss on disposal of discontinued operation, net of tax (947) - - _________ _________ _________ (Loss)/profit after tax (174) 2,021 3,726 _________ _________ _________ Attributable to: Equity holders of the parent (166) 2,021 3,726 Minority interest (8) - - _________ _________ _________ (Loss)/profit for the period (174) 2,021 3,726 _________ _________ _________ Basic earnings per share (0.3)p 4.0p 7.3p Diluted earnings per share (0.3)p 4.0p 7.3p Dividend per share declared in the period 0.8p 0.8p 1.2p Consolidated balance sheet 30 September 2005 30 September 2004 31 March 2005 £'000 £'000 £'000 _________________________________________________________________________________________________________ Assets Intangible assets 18,863 15,399 15,365 Investments 10 10 10 Interest in joint venture 262 - - Property,plant & equipment 31,393 36,249 36,250 Deferred tax assets 9,937 7,298 9,945 _________ _________ _________ Total non-current assets 60,465 58,956 61,570 Inventories 8,545 13,836 13,685 Trade and other receivables 19,242 22,741 22,193 Cash and cash equivalents 13,265 7,443 9,938 Assets classified as held for sale 970 - - _________ _________ _________ Total current assets 42,022 44,020 45,816 _________ _________ _________ Total assets 102,487 102,976 107,386 _________ _________ _________ Liabilities Interest-bearing loans and borrowings 28,592 31,043 30,350 Deferred tax liabilities 3,874 2,815 3,547 Retirement benefit obligations 26,533 19,905 26,559 _________ _________ _________ Total non-current liabilities 58,999 53,763 60,456 Trade and other payables 14,663 19,554 19,639 Current tax liabilities 1,362 1,962 1,702 Dividends payable - - 204 Forward currency swaps (3) (4) 13 Interest-bearing loans and liabilities 4,897 4,407 5,442 _________ _________ _________ Total current liabilities 20,919 25,919 27,000 _________ _________ _________ Total liabilities 79,918 79,682 87,456 _________ _________ _________ _________ _________ _________ Net assets 22,569 23,294 19,930 _________ _________ _________ Equity Ordinary share capital issued 2,789 2,594 2,594 Share premium 44,540 41,772 41,772 Other reserves 1,270 1,146 1,265 Translation reserve 1,021 725 746 Retained earnings (27,014) (22,943) (26,447) _________ _________ _________ Total equity attributable to equity holders of the parent 22,606 23,294 19,930 Minority interest (37) - - _________ _________ _________ Total equity 22,569 23,294 19,930 _________ _________ _________ Consolidated statement of cash flows Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 £'000 £'000 £'000 _________________________________________________________________________________________________________ Cash flows from operating activities Profit before interest and taxation 1,190 2,733 4,773 Adjustments for: Amortisation of own shares 8 29 38 Pension fund contributions in excess of service costs (35) (244) (587) Depreciation charge 2,119 2,881 4,632 Exceptional bad debt provision 125 - - Profit on disposal of property - (1,457) (1,462) Loss / (profit) on disposal of other plant and equipment 28 (36) (142) Cash flows on closures charged in prior period (165) (1,103) (878) Share based payment charge 13 25 49 _________ _________ _________ Operating profit before working capital charges 3,283 2,828 6,423 Changes in working capital (excluding the effects of acquisition and disposal of subsidiaries) Decrease /(increase) in inventories 692 50 (69) Decrease in trade and other receivables 1,132 849 2,074 Decrease in trade and other payables (2,601) (2,189) (2,125) _________ _________ _________ Cash generated from operations 2,506 1,538 6,303 Interest paid (991) (809) (1,603) Tax recovered - 429 541 _________ _________ _________ Net cash from operating activities 1,515 1,158 5,241 Cash flows from investing activities Proceeds from sale of property, plant and equipment 82 2,180 2,212 Interest received 317 77 193 Disposal of subsidiary, net of cash disposed of 5,438 - - Acquisition of subsidiary, net of cash acquired (1,476) - - Acquisition of share in joint venture (262) - (95) Acquisition of property, plant and equipment (906) (2,078) (4,012) Development expenditure (220) - - Loan to joint venture (440) (399) (921) _________ _________ _________ Net cash from investing activities 2,533 (220) (2,623) Cash flows from financing activities Proceeds from the issue of share capital 2,963 - - Repayment of borrowings (2,584) (293) (487) Payment of finance lease liabilities (22) (43) (96) Dividends paid (613) (613) (613) _________ _________ _________ Net cash from financing activities (256) (949) (1,196) Net increase/(decrease) in cash and cash equivalents 3,792 (11) 1,422 Cash and cash equivalents at beginning of period 5,014 3,579 3,579 Effect of exchange rate fluctuations on cash held 97 71 13 _________ _________ _________ Cash and cash equivalents at end of period 8,903 3,639 5,014 _________ _________ _________ Cash and cash equivalents comprise: Cash at bank and in hand 13,265 7,443 9,938 Bank overdrafts (4,362) (3,804) (4,924) _________ _________ _________ 8,903 3,639 5,014 _________ _________ _________ Consolidated statement of recognised income and expenses Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 £'000 £'000 £'000 _________________________________________________________________________________________________________ Foreign exchange translation differences 404 349 336 Net(loss)/gain on hedge of net investment in foreign subsidiary (129) 376 410 Actuarial losses on defined benefit schemes - - (6,900) Amortisation and disposal of own shares 3 35 (75) Taxation on items taken directly to equity - - 2,076 _________ _________ _______ Income and expense recognised directly in equity 278 760 (4,153) (Loss) /profit for the period (174) 2,021 3,726 _________ _________ _________ Total recognised income and expense for the period 104 2,781 (427) _________ _________ _________ Attributable to: Equity holders of the parent 112 2,781 (427) Minority interest (8) - - _________ _________ _________ Total recognised income and expense for the period 104 2,781 (427) _________ _________ _________ Consolidated statement of recognised income and expenses Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 £'000 £'000 £'000 _________________________________________________________________________________________________________ Total equity at the start of the period 19,930 20,903 20,903 New share capital issued 195 - - Premium on new share capital 2,768 - - Exchange differences 275 725 746 Actuarial movement on retirement benefit obligations - - (6,900) Deferred tax on actuarial movement on retirement benefit obligations - - 2,070 Share based payments 26 25 49 Deferred tax on share based payments taken directly to equity - - 6 _________ _________ _________ Total movement recognised directly in shareholders' equity 3,264 750 (4,029) Profit attributable to ordinary shareholders (174) 2,021 3,726 Purchase of shares in joint venture - - (95) Amortisation of own shares (5) 29 38 Ordinary dividends on equity shares (409) (409) (613) _________ _________ _________ Total equity attributable to equity holders of the parent 22,606 23,294 19,930 _________ _________ _________ Minority interest (37) - - _________ _________ _________ Total equity at end of the period 22,569 23,294 19,930 _________ _________ _________ Notes to the consolidated interim financial statements 1. Basis of preparation EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidated financial statements of the company, for the year ended 31 March 2006, be prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the EU ('adopted IFRSs). The interim financial statements have been prepared on the basis of accounting policies set out in 'Carclo plc - Restatement under IFRS', a separate document issued on 4 October 2005 that has been published on the Carclo website ( www.carclo-plc.com) and which is also available on request. Further disclosure concerning the impact of IFRSs on the financial statements of the group can also be found in that document including the reconciliations required by IFRS1 'First Time Adoption of International Financial Reporting Standards'. The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. These consolidated interim financial statements have been prepared on the basis of IFRSs in issue that are effective or available for early adoption at the group's first IFRS annual reporting date, 31 March 2006. Based on these IFRSs, the board of directors have made assumptions about the accounting policies expected to be adopted when the first IFRS annual financial statements are prepared for the year ended 31 March 2006. The IFRSs that will be effective or available for voluntary early adoption in the annual financial statements for the period ended 31 March 2006 are still subject to change and to the issue of additional interpretation(s) and therefore cannot be determined with certainty. Accordingly, the accounting policies for the annual period that are relevant to this interim financial information will be determined only when the first IFRS financial statements are prepared at 31 March 2006. The preparation of the condensed consolidated interim financial statements resulted in changes to the accounting policies as compared with the most recent annual financial statements prepared under previous UK Generally Accepted Accounting Practises ('UK GAAP'). The accounting policies set out in the 'Carclo plc - Restatement under IFRS' document, have been applied consistently to all periods presented in these consolidated interim financial statements. They have also been applied in preparing an opening IFRS balance sheet at 1 April 2004 for the purposes of the transition to IFRSs, as required by IFRS 1. The comparative figures for the financial year ended 31 March 2005 are not the company's statutory accounts for that financial year. Those accounts, which were prepared under UK GAAP, have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. Segment reporting Segment information is presented in the consolidated interim financial statements in respect of the group's business segments, which are the primary basis of segment reporting. The business segment reporting format reflects the group's management and internal reporting structure. Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Business segments The group is comprised of the following main business segments: Technical Plastics - Precision trade moulding businesses. Precision Products - System and system manufacturing businesses. Another business segment, ECC Card Clothing was sold in June 2005. Segmental analysis Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 Operating Operating Operating Revenue Profit Revenue Profit Revenue Profit £'000 £'000 £'000 £'000 £'000 £'000 ___________________________________________________________________________________________________________________ Analysis by class of business Continuing operations Technical Plastics 27,498 697 30,232 865 58,640 2,280 Precision Products 15,213 1,532 15,894 1,285 33,155 3,492 ____________________ ____________________ ___________________ 42,711 2,229 46,126 2,150 91,795 5,772 Adjustments (504) (126) (649) 42,711 1,725 46,126 2,024 91,795 5,123 ____________________ ____________________ ___________________ Discontinued operations ECC Card Clothing 2,536 95 8,189 142 15,879 246 Adjustments (234) (215) (389) ____________________ ____________________ ___________________ 2,536 (139) 8,189 (73) 15,879 (143) ____________________ ____________________ ___________________ 45,247 54,315 107,674 Divisional operating _________ __________ _________ profit 1,586 1,951 4,980 Central administration costs (396) (426) (906) ________ ________ _______ Group operating profit 1,190 1,525 4,074 ________ ________ _______ Analysis by geographical area - by origin Continuing operations United Kingdom 33,463 1,567 35,566 1,858 71,881 4,447 United States of America 7,026 142 8,532 350 16,309 1,275 Rest of world 2,222 520 2,028 (58) 3,605 50 _____________________ ___________________ _____________________ 42,711 2,229 46,126 2,150 91,795 5,772 Adjustments United Kingdom (334) (126) (649) United States of America (170) - - _______ ______ ______ (504) (126) (649) Continuing operations _____________________ ___________________ _____________________ total 42,711 1,725 46,126 2,024 91,795 5,123 _____________________ ___________________ _____________________ Discontinued operations United Kingdom 920 (116) 3,029 (59) 6,004 (251) United States of America 650 71 1,577 115 3,093 267 Rest of world 966 140 3,583 86 6,782 230 2,536 95 8,189 142 15,879 246 Adjustments United Kingdom 9 (215) (283) United States of America (3) - (16) Rest of world (240) - (90) _____________________ ___________________ _____________________ (234) (215) (389) _____________________ ___________________ _____________________ Discontinued operations total 2,536 (139) 8,189 (73) 15,879 (143) _____________________ ___________________ _____________________ __________ ________ ________ Group revenue 45,247 54,315 107,674 __________ ________ ________ Divisional operating profit 1,586 1,951 4,980 Central administration costs (396) (426) (906) __________ ________ ________ Group operating profit 1,190 1,525 4,074 __________ ________ ________ Analysis by geographical area - destination United Kingdom 19,753 23,032 47,077 United States of America 8,921 11,415 22,062 Rest of world 16,573 19,868 38,535 __________ ________ ________ 45,247 54,315 107,674 __________ ________ ________ Independent review report to Carclo plc Introduction We have been engaged by the company to review the financial information set out on pages 3 to 11 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Listing Rules of the Financial Services Authority. 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. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual financial statements except where any changes, and the reasons for them, are disclosed. As disclosed in the Basis of Preparation note to the financial information, the next annual financial statements of the group will be prepared in accordance with IFRSs adopted for use in the European Union. The accounting policies that have been adopted in preparing the financial information are consistent with those that the directors currently intend to use in the next annual financial statements. As the Basis of Preparation note to the financial information explains, there is a possibility that the directors may determine that some changes to the accounting policies adopted in preparing the financial information are necessary when the group prepares its full annual financial statements for the first time in accordance with those IFRSs adopted for use in the European Union. This is because, as disclosed in the Basis of Preparation note, the directors have anticipated that certain standards, which have yet to be formally adopted for use by the European Union, will be so adopted in time to be applicable to the next annual financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 Review of interim financial information issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2005. KPMG Audit Plc Chartered Accountants, Leeds 5 December 2005 This information is provided by RNS The company news service from the London Stock Exchange

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