Carclo plc

Interim Report and Accounts

Half Year Results for the six months ended 30 September 2021

 

Carclo plc, a global provider of value-adding engineered solutions for the medical, diagnostics, optical, electronics and aerospace industries, announces its results for the six months to 30 September 2021 ("H1 2022").

 

The key financial performance measures for H1 2022 are summarised below:

		H1 2022	H1 2021
		£000	£000
Revenue from continuing operations		58,672	49,950
Underlying(1) operating profit from continuing operations	3,682		1,529
Underlying(1) profit before tax from continuing operations	2,279		437
Underlying(1) earnings per share from continuing operations	2.5p		0.0p
Statutory operating profit from continuing operations		5,769	227
Statutory profit/(loss) before tax from continuing operations		4,366	(865)
Statutory profit/(loss) for the period		5,487	(1,321)
Basic earnings/(loss) per share		7.5p	(1.8p)
Net debt excluding lease liabilities		21,613	24,415
Net debt		28,371	29,358
Retirement benefit obligations		33,407	58,121

 

Revenue from continuing operations
Technical Plastics (CTP)	56,583	47,214
Aerospace	2,089	2,736
Total	58,672	49,950
Underlying operating profit from continuing operations (1)
Technical Plastics (CTP)	4,784	3,226
Aerospace	227	484
Central	(1,329)	(2,181)
Total	3,682	1,529
Underlying EBITDA from continuing operations (1)	6,863	4,576

 

Highlights

 

· Strong trading momentum and operational execution throughout the period delivered significant growth in both revenues and underlying operating margins

· Total revenues of £58.7m, up 17.5% on the prior year (H1 2021: £50.0m)

o  Technical Plastics ("CTP") total revenues up 19.8% to £56.6m, tooling income up 48.2% to £9.1m, product sales up 15.6%

o  Higher tooling income reflects new business wins, further building the pipeline for future product sales growth

o  Aerospace revenue down £0.6m (23.6%) against a comparative period which benefited from the fulfilment of a strong pre-Covid order pipeline

· Underlying Operating Profit more than doubled to £3.7m (H1 2021: £1.5m) excluding the benefit of £2.1m of non-repeating US Covid grant income

· Statutory operating profit of £5.8m (H1 2021: £0.2m)

· Discontinued business income received of £0.7m from residual claims on LED Technologies business disposal (H1 2021: £nil)

· Net debt excluding lease liabilities at 30 September 2021 was £21.6m, a reduction of £2.8m compared to 30 September 2020.

· Net debt reduced by £1.0m to £28.4m (H1 2021: £29.4m), an increase of £0.8m in the six months to 30 September 2021, including £3.5m inventory increase mainly to protect materials availability against current supply chain uncertainties

· IAS19 Retirement Benefit liability down to £33.4m, reduced by £24.7m since September 2020 (and reduced by £3.9m since March 2021) from improved asset returns, additional employer contributions, and initiatives progressed with the Trustees

 

 

 

Notes:

(1)  underlying results are those calculated before discontinued operations, separately disclosed items and exceptional items. A reconciliation to statutory figures is set out below.

 

Reconciliation of non-GAAP financial measures - H1 2022

 

£m	Statutory	Exceptional items	Before exceptional	COVID-related US grant	Underlying
CTP operating profit	6,871	-	6,871	2,087	4,784
Aerospace operating profit	227	-	227	-	227
Central costs	(1,329)	-	(1,329)	-	(1,329)
Group operating profit from continuing operations	5,769	-	5,769	2,087	3,682
Net finance expense	(1,403)	-	(1,403)	-	(1,403)
Group profit before taxation	4,366	-	4,366	2,087	2,279
Taxation credit / (expense)	428	893	(465)	-	(465)
Group profit for the period from continuing operations	4,794	-	3,901	2,087	1,814
Profit on discontinued operations, net of tax	693	693	-	-	-
Group profit for the period	5,487	1,596	3,901	2,087	1,814
Basic earnings per share (pence)	7.5p	2.2p	5.3p	2.8p	2.5p

 

 

Commenting on the results, Nick Sanders, Executive Chairman, said:

 

"The Group continued to make good progress in the first half of the financial year. In common with many companies, we experienced significant Covid-related operational headwinds, but despite these delivered a strong set of financial results. Our first half performance is ahead of our expectations even after the impact of one-off benefits is removed.

 

Our primary focus has been to continue to ensure our employees and communities remain safe, whilst increasing output in line with customer demand. This has been achieved despite the continuing effect of mandatory lockdowns and production restrictions in some countries.

 

Demand for CTP products in the medical and diagnostic sectors has continued to increase from both existing and new customers and we expect this will continue in the post-pandemic period. Labour shortages and increased labour costs, particularly in the US, increased raw material costs and extended logistic lead times have all presented significant challenges in the first half. We have responded by implementing a range of measures and have been able to mitigate some of the impact of cost pressures by increasing prices.

 

While maintaining our usual high level of delivery performance has been difficult in recent months, and this situation will take some months yet to fully recover, we nevertheless have been able to strengthen our customer and supply chain relationships in working through these challenges together.

 

Encouragingly, our CTP businesses in Asia have performed strongly in line with our strategy to grow more rapidly outside of our traditionally strong US and European markets.

 

We have also benefited from strong demand for tooling with significant orders received for both replacement and new projects. Tooling orders are generally a precursor to production orders which provides us with optimism about future demand.

 

Our Aerospace division is also showing the early signs of recovery with order intake in the first half exceeding sales. A number of new contracts with existing and some new customers have also been secured. It will however take some time for these orders to feed through into sales and profit.

 

Central costs have been well managed, and our continued focus of cash management has again delivered good cash headroom and reduced bank debt.  The Group has also worked closely with the Pension Trustees to develop enhancements to the pension schemes which improve scheme benefits and reduce the overall deficit.

 

Subject to there being no significant deterioration in trading conditions as a result of supply chain or Covid-related disruption, the Board expects the positive commercial momentum seen in the first half to continue, with further product sales growth in H2. Trading margins for the second half are expected to be slightly lower than H1, reflecting the current higher cost environment. Nevertheless, the Board currently anticipates full year underlying trading will be slightly ahead of expectations, with the one-off benefits of the Covid-related grant income and contribution from discontinued operations incremental to this.

 

Enquiries

Carclo plc    Nick Sanders - Executive Chairman    01924 268040

FTI Consulting                                       Nick Hasell / Susanne Yule  020 3727 1340

 

Forward looking statements

Certain statements made in these report & 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 actual events to differ materially from any expected future events or results referred to in these forward-looking statements.

 

Alternative performance measures

The alternative performance measures are defined in the financial review of the Annual Report and Accounts (ARA) for the year ended 31 March 2021, 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. Operating profit before exceptional items is not referred to in the ARA for the year ended 31 March 2021.

 

 

Overview of Results

The Group delivered a strong trading performance in H1 2022, ahead of the Board's expectations, making progress over the prior year period on all the listed key performance measures. This was achieved despite continuing Covid-related headwinds on the Carclo supply chain, in common with many international businesses.

Comparing all results with H1 2021, Group revenues rose 17.5% to £58.7m (H1 2021: £50.0m).

Technical Plastics ("CTP") revenues rose 19.8% to £56.6m (H1 2021: £47.2m), including a 15.6% increase in product sales to £47.5m (H1 2021: £41.1m) and a 48.2% increase in tooling income to £9.1m (H1 2021: £6.1m).

The higher proportion of new and existing business converted into tooling income in the period will also help drive on subsequent product sales.

CTP underlying operating profit rose by 48.3% to £4.8m (H1 2021: £3.2m) as a result of improved tooling and product sales, with an additional £2.1m recognised in respect of a Covid-related US government loan which was forgiven and converted into grant income in H1 2022. All other Covid-related costs and credits are also included in operating profit. Other non-US Covid-related credits amounted to £0.1m in the period.

As anticipated, Aerospace revenue of £2.1m was down £0.6m on the previous period which benefited from a high pre-Covid order pipeline. Whilst the aerospace industry remains heavily impacted by the pandemic, the division continued to be profitable with £0.2m delivered in the period, a reduction of £0.3m. Encouragingly, the division is already seeing orders recover. These have been tracking ahead of revenues for the Aerospace business over recent months and will gradually benefit sales as the orders convert. 

On a constant currency basis revenue from continuing operations increased by 23.3%, and underlying operating profit by 149.7%.

Central costs have been well managed, and our continued focus on cash management has again delivered good cash headroom and helped reduce net bank debt to £21.6m (H1 2021: £24.4m). Central costs including pension administration costs reduced from £2.2m to £1.3m and finance costs increased from £1.1m to £1.4m. Finance costs comprise net interest payable on bank loans and leases of £1.0m (H1 2021: £0.7m) including bank commitment fees, and net interest on the defined benefit pension liability of £0.4m (H1 2021: £0.4m).

There were no exceptional costs recognised in the period (H1 2021: £1.3m). The Board concluded that Covid-related costs and credits, given the indeterminate nature of evaluating the additional costs, should all be included within operating costs.

A further residual £0.7m was received following final distribution by administrators of the discontinued LED business exited in December 2019, with the income being shown separately from continuing operations.

The Group statutory profit before tax was £4.4m (H1 2021: loss (£0.9m)).
 

Taxation was a credit of £0.4m against a statutory profit before tax of £4.4m, giving an effective tax credit rate of 8.5% (H1 2021: tax expense £0.5m giving a 52.7% effective tax rate on a pre-tax loss of £0.9m). The result includes a £0.9m credit from renewed deferred tax asset recognition from UK combined businesses which have returned to forecasting taxable profits, providing available tax losses to be set off against future profits. The underlying effective tax rate, after excluding the deferred tax credit of £0.9 million, amounts to 20.4% of underlying profit before tax (H1 2021: 104.3%).

 

Underlying earnings per share from continuing operations for H1 2022 was 2.5 pence (H1 2021: 0.0 pence). The statutory earnings per share for the period, for all operations, was 7.5 pence (H1 2021: loss of 1.8 pence).

Board changes

As reported in our Full Year Results on 30 June 2021, Peter Slabbert and David Toohey stepped down from the Board as Non-Executive Directors on 31 March 2021 and 30 April 2021 respectively.

Eric Hutchinson and Frank Doorenbosch were appointed to the Board as Non-Executive Directors on 7 January 2021 and 1 February 2021 respectively.  Eric became Chair of the Audit Committee in March 2021, taking over from Peter Slabbert. Frank took over as Chair of the Remuneration Committee in April 2021 following David Toohey's departure.

 

Financial Position

Cash generated from continuing operations during the first half was £2.0m (H1 2021: £0.6m), including increased cash payments (net of administration costs) into the pension scheme of £1.8m (H1 2021: £1.0m) and a net working capital increase of £3.3m (H1 2021: £2.3m), of which £3.5m related to inventory increases mainly to protect operations amidst post-Covid supply chain disruption.

Gross cash capital expenditure for the period was £3.5m (H1 2021: £0.8m).

As a result, net debt excluding lease liabilities reduced by £2.8m to £21.6m (H1 2021: £24.4m), and net debt reduced by £1.0m to £28.4m compared to 30 September 2021.

At 30 September 2021, the Group's total UK bank facilities were £33.6m of which £30.1m related to a term loan and £3.5m to a revolving credit facility.

No additional government COVID-19 support was received in cash during the period (H1 2021: £3.9m of which £2.6m was presented within interest bearing loans and borrowings).

The Group's IAS 19 pension deficit reduced to £33.4m as at 30 September 2021 (30 September 2020: £58.1m and 31 March 2021: £37.3m) on additional contributions made by the Group, backed by improved asset returns and initiatives progressed with the Trustees. No change was made in the discount rate assumption of 2.0% since March 2021 and no changes were made at this stage in the mortality assessments. No initial data has yet been released on the triennial actuarial valuation of March 2021. Relevant data here will be taken into account to the extent that it is available for IAS19 valuation purposes at the end of the financial year.

In accordance with the recovery plan agreed by the Pensions Regulator and pension scheme trustees, total contributions paid by the Company (for deficit recovery contributions and scheme administration costs) for the six-month period were £2.1m (H1 2021: £1.1m). Total contributions for the six-month period to 31 March 2022 are expected to be £1.8m.

Dividend
Under the terms of its financing agreements the Company is not permitted to make a dividend payment to shareholders up to the period ending in July 2023.

Outlook

Subject to there being no significant deterioration in trading conditions as a result of supply chain or Covid-related disruption, the Board expects the positive commercial momentum seen in the first half to continue, with further product sales growth in H2. Trading margins for the second half are expected to be slightly lower than H1, reflecting the current higher cost environment. Nevertheless, the Board currently anticipates full year underlying trading will be slightly ahead of expectations, with the one-off benefits of the Covid-related grant income and contribution from discontinued operations incremental to this.

Principal Risks and Uncertainties

In the Annual Report for the year ended 31 March 2021 a detailed review of the principal risks faced by the Group, and how these risks were being managed, was provided. We continue to face, and proactively manage, the risks and uncertainties in our business and, whilst the Board considers that these principal risks and uncertainties have not materially changed since the publication of the 2021 Annual Report, it is worth noting that:

· COVID-19 related uncertainty continues as to the impact on the Group's markets and geographies evolving over time. It is possible that the Group's operations, its supply chains and customer demand could continue to be further impacted, particularly in the US, where labour and material shortage experience has been most acute;

· the impact of Brexit has to some extent become intertwined with post-Covid impact on labour and materials resource shortages in the supply chain and as such is seen as a lesser but contributory factor in the COVID-19 risks identified above; and

· during the current period significant new tooling agreements have been either entered into or progressed with new and existing customers.  These agreements and pending subsequent agreements for the supply of manufactured product are subject to operational execution risk.

Going Concern

These interim financial statements have been prepared on a going concern basis as detailed in Note 1 to these interim accounts.  While headroom against banking covenants has increased significantly over the last 6 months, it should continue to be noted that any material manifestation of the above risks, individually or in combination, could lead to a breach of the Group's banking covenants.  Management has considered the impact of potential mitigations including improved trading, cost saving and working capital management initiatives, as well as compensation from customers in respect of delays and it considers that the potential benefits from these give sufficient comfort that the downside risks can be mitigated. If it were not possible to mitigate a potential breach the bank would be approached to request that it considers issuing a waiver for any covenant that may be breached.

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 parties' transactions and changes therein).

 

By order of the Board,

Nick Sanders  Phil White 
Executive Chairman       Chief Financial Officer
 

18 November 2021

 

Glossary of Terms

CONSTANT CURRENCY	Retranslated at the prior half-year's average exchange rate. Included to explain the effect of changing exchange rates during volatile times to assist the reader's understanding
GROUP CAPITAL EXPENDITURE	Non-current asset additions
NET BANK INTEREST	Interest receivable on cash at bank less interest payable on bank loans and overdrafts. Reported in this manner due to the global nature of the Group and its banking agreements
NET DEBT	Cash and cash deposits less loans and borrowings. Used to report the overall financial debt of the Group in a manner that is easy to understand
NET DEBT EXCLUDING LEASE LIABILITIES	Net debt, as defined above, excluding lease liabilities.  Used to report the overall non-leasing debt of the Group in a manner that is easy to understand
EBITDA	Profit before interest, tax, depreciation and amortisation adjusted to exclude all exceptional and separately disclosed items
UNDERLYING	Adjusted to exclude all exceptional and separately disclosed items
UNDERLYING EBITDA	Profit before interest, tax, depreciation and amortisation adjusted to exclude all exceptional and separately disclosed items
UNDERLYING EARNINGS PER SHARE	Earnings per share adjusted to exclude all exceptional and separately disclosed items
UNDERLYING OPERATING PROFIT	Operating profit adjusted to exclude all exceptional and separately disclosed items
UNDERLYING PROFIT BEFORE TAX	Profit before tax adjusted to exclude all exceptional and separately disclosed items
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS	Statutory operating profit adjusted to exclude all exceptional items

 

 

Condensed consolidated income statement
																																					Six months ended								Six months ended									Year ended
																																					30 September								30 September				31 March
																																					2021								2020									2021
																																					unaudited								unaudited									audited
																												Notes									£000								£000									£000
Continuing operations:
Revenue																												4									58,672								49,950									107,564
Underlying operating profit																																					3,682								1,529									4,840
COVID related US government grant income																												7									2,087								-									-
Operating profit before exceptional items																																					5,769								1,529									4,840
Exceptional items																												6									-								(1,302)									4,490
Operating profit																												4									5,769								227									9,330
Finance revenue																												8									34								57									42
Finance expense																												8									(1,437)								(1,149)									(2,701)
Profit / (loss) before tax																																					4,366								(865)									6,671
Income tax credit / (expense)																												9									428								(456)									(457)
Profit / (loss) after tax but before profit on discontinued operations																																					4,794								(1,321)									6,214
Discontinued operations:
Profit on discontinued operations, net of tax																												6									693								-									1,198
Profit / (loss) for the period																																					5,487								(1,321)									7,412
Attributable to:
Equity holders of the parent company																																					5,487								(1,321)									7,412
Non-controlling interests																																					-								-									-
																																					5,487								(1,321)									7,412
Earnings / (loss) per ordinary share																												10
Basic - continuing operations																																					6.5				p				(1.8)				p					8.5 p
Basic - discontinued operations																																					0.9				p				-				p					1.6 p
Basic																																					7.5				p				(1.8)				p					10.1 p
Diluted - continuing operations																																					6.5				p				(1.8)				p					8.5 p
Diluted - discontinued operations																																					0.9				p				-				p					1.6 p
Diluted																																					7.5				p				(1.8)				p					10.1 p
Condensed consolidated statement of comprehensive income
																																					Six months ended								Six months ended									Year ended
																																					30 September								30 September				31 March
																																					2021								2020									2021
																																					unaudited								unaudited									audited
																																					£000								£000									£000
Profit / (loss) for the period																																					5,487								(1,321)									7,412
Other comprehensive income / (expense):
Items that will not be reclassified to the income statement
Remeasurement gains / (losses) on defined benefit scheme																																					2,730								(20,714)									(6,540)
Total items that will not be reclassified to the income statement																																					2,730								(20,714)									(6,540)
Items that will or may in the future be classified to the income statement
Foreign exchange translation differences																																					913								(79)									(2,939)
Net investment hedge																																					(205)								(18)									1,084
Deferred tax arising																																					236								57									137
Total items that will or may in future be classified to the income statement																																					944								(40)									(1,718)
Other comprehensive income / (expense), net of income tax																																					3,674								(20,754)									(8,258)
Total comprehensive income / (expense) for the period																																					9,161								(22,075)									(846)
Attributable to:
Equity holders of the Company																																					9,161								(22,075)									(846)
Non-controlling interests																																					-								-									-
Total comprehensive income / (expense) for the period																																					9,161								(22,075)									(846)
Condensed consolidated statement of financial position
																																								30 September								30 September					31 March
																																								2021								2020										2021
																																								unaudited								unaudited										audited
																																Notes								£000								£000										£000
Non-current assets
Intangible assets																																12								22,214								22,863										21,848
Property, plant and equipment																																13								43,632								40,127										43,218
Deferred tax assets																																								1,500								338										384
Trade and other receivables																																								114								116										112
Total non-current assets																																								67,460								63,444										65,562
Current assets
Inventories																																								16,355								13,968										12,821
Contract assets																																								6,131								3,519										2,898
Trade and other receivables																																								23,172								19,665										19,254
Cash and cash deposits																																16								10,394								23,379										15,485
Current tax assets																																								538								-										-
Total current assets																																								56,590								60,531										50,458
Total assets																																								124,050								123,975										116,020
Non-current liabilities
Loans and borrowings																																17								36,014								38,738										37,997
Deferred tax liabilities																																								4,577								4,315										4,393
Contract liabilities																																								-								426										866
Retirement benefit obligations																																14								33,407								58,121										37,275
Total non-current liabilities																																								73,998								101,600										80,531
Current liabilities
Loans and borrowings																																17								2,751								13,999										5,084
Trade and other payables																																								21,022								17,174										17,016
Current tax liabilities																																								534								558										17
Contract liabilities																																								8,654								3,877										5,461
Provisions																																								-								18										-
Total current liabilities																																								32,961								35,626										27,578
Total liabilities																																								106,959								137,226										108,109
Net assets / (liabilities)																																								17,091								(13,251)										7,911
Equity
Ordinary share capital issued																																19								3,671								3,671										3,671
Share premium																																								7,359								7,359										7,359
Translation reserve																																								6,277								7,011										5,333
Retained earnings																																								(190)								(31,266)										(8,426)
Total equity attributable to equity holders of the Company																																								17,117								(13,225)										7,937
Non-controlling interests																																								(26)								(26)										(26)
Total equity																																								17,091								(13,251)										7,911
Condensed consolidated statement of changes in equity
													Attributable to equity holders of the Company
								Share					Share							Translation									Retained																Non-controlling										Total
								capital					premium							reserve									earnings								Total								interests										equity
								£000					£000							£000									£000								£000								£000										£000
	Current half year period unaudited
	Balance at 1 April 2021							3,671					7,359							5,333									(8,426)								7,937								(26)										7,911
	Profit for the period							-					-							-									5,487								5,487								-										5,487
	Other comprehensive income:
	Foreign exchange translation differences							-					-							913									-								913								-										913
	Net investment hedge							-					-							(205)									-								(205)								-										(205)
	Remeasurement gains on defined benefit scheme							-					-							-									2,730								2,730								-										2,730
	Taxation on items above							-					-							236									-								236								-										236
	Total comprehensive income for the period							-					-							944									8,217								9,161								-										9,161
	Transactions with owners recorded directly in equity:
	Share based payments							-					-							-									19								19								-										19
	Balance at 30 September 2021							3,671					7,359							6,277									(190)								17,117								(26)										17,091
	Prior half year period unaudited
	Balance at 1 April 2020							3,671					7,359							7,051									(9,324)								8,757								(26)										8,731
	Loss for the period							-					-							-									(1,321)								(1,321)								-										(1,321)
	Other comprehensive income:
	Foreign exchange translation differences							-					-							(79)									-								(79)								-										(79)
	Net investment hedge							-					-							(18)									-								(18)								-										(18)
	Remeasurement losses on defined benefit scheme							-					-							-									(20,714)								(20,714)								-										(20,714)
	Taxation on items above							-					-							57									-								57								-										57
	Total comprehensive loss for the period							-					-							(40)									(22,035)								(22,075)								-										(22,075)
	Transactions with owners recorded directly in equity:
	Share based payments							-					-							-									93								93								-										93
	Balance at 30 September 2020							3,671					7,359							7,011									(31,266)								(13,225)								(26)										(13,251)
														Attributable to equity holders of the Company
									Share					Share							Translation									Retained																Non-controlling										Total
									capital					premium							reserve									earnings								Total								interests										equity
									£000					£000							£000									£000								£000								£000										£000
	Prior year - audited
	Balance at 1 April 2020								3,671					7,359							7,051									(9,324)								8,757								(26)										8,731
	Profit for the year								-					-							-									7,412								7,412								-										7,412
	Other comprehensive (loss) / income:
	Foreign exchange translation differences								-					-							(2,939)									-								(2,939)								-										(2,939)
	Net investment hedge								-					-							1,084									-								1,084								-										1,084
	Remeasurement losses on defined benefit scheme								-					-							-									(6,540)								(6,540)								-										(6,540)
	Taxation on items above								-					-							137									-								137								-										137
	Total comprehensive (loss) / income for the period								-					-							(1,718)									872								(846)								-										(846)
	Transactions with owners recorded directly in equity:																													-
	Share based payments								-					-							-									26								26								-										26
	Balance at 31 March 2021								3,671					7,359							5,333									(8,426)								7,937								(26)										7,911
Condensed consolidated statement of cash flows

																	Six months ended				Six months ended				Year ended
																	30 September				30 September				31 March
																	2021				2020				2021
																	unaudited				unaudited				audited
													Notes				£000				£000				£000
Cash generated from operations													15				2,020				570				11,202
Interest paid																	(983)				(725)				(1,782)
Tax paid																	(486)				(342)				(1,023)
Net cash from / (used in) operating activities																	551				(497)				8,397
Cash flows from investing activities
Proceeds from sale of business, net of cash disposed																	693				-				1,250
Proceeds from sale of property, plant and equipment																	25				-				21
Interest received																	34				57				42
Purchase of property, plant and equipment																	(3,514)				(730)				(7,180)
Purchase of intangible assets - computer software																	(15)				(80)				(139)
Net cash used in investing activities																	(2,777)				(753)				(6,006)
Cash flows from financing activities
Drawings on new facilities																	-				32,221				36,454
Transaction costs associated with the issue of debt																	-				-				(380)
Repayment of borrowings excluding lease liabilities																	(2,247)				(28,147)				(31,666)
Receipt of government support loans													7				-				2,589				2,243
Repayment of lease liabilities																	(866)				(905)				(1,601)
Net cash (used in) / from financing activities																	(3,113)				5,758				5,050
Net (decrease) / increase in cash and cash equivalents																	(5,339)				4,508				7,441
Cash and cash equivalents at beginning of period																	15,485				8,352				8,352
Effect of exchange rate fluctuations on cash held																	248				(153)				(308)
Cash and cash equivalents at end of period													16				10,394				12,707				15,485
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 2021 has been prepared on the basis of the accounting policies set out in the audited accounts for the year ended 31 March 2021 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 2021 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 2021 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 18 November 2021.  Copies are available from the corporate website.
	The Group financial statements for the year ended 31 March 2021 were prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union ("Adopted IFRSs").
	Going concern
	The interim financial statements are 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 which were disclosed in Note 1, Basis of Preparation - Going Concern, to the Group's consolidated financial statements for the year ended 31 March 2021.
	Net debt at 30 September 2021 was £28.4 million, rising from £27.6 million at 31 March 2021 (30 September 2020: £29.4 million) and is forecast to increase over the twelve-month period driven by capital investment and net working capital outflows to support business growth. The Group's financing remains within banking covenants as at 30 September 2021 and the base case forecasts demonstrate that the Group has more than sufficient liquidity and covenant headroom throughout the forecast period.
	COVID-19 related uncertainty and the resulting supply chain disruption and cost increases continue to impact the Group's markets and geographies and the situation is evolving over time. It is possible that the Group's operations, its supply chains and customer demand could continue to be further impacted, particularly in the US, where labour and material shortage experience has been most acute.  Any material manifestation of these or other uncertainties could lead to a breach of the Group's banking covenants.
	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.
	Severe downside sensitivities modelled included a range of scenarios modelling the financial effects of loss of business from: discrete sites, an overall fall in gross margin of 1% across the Group, a fall in Group sales of 5% matched by a corresponding fall in cost of sales of the same amount, exchange risk and interest rate risk.  These sensitivities attempt to incorporate the risks arising from national and regional impacts of the global pandemic from local lockdowns, impacts on manufacturing and supply chain and other potential increases to direct and indirect costs.  The Group has the capacity to take mitigating actions to ensure that the Group remains financially viable, including further reducing operating expenditures as necessary.
	On this basis, the Directors have determined that it is reasonable to assume that the Group will continue to operate within the facilities available to it and that it will adhere to the covenant tests to which it is subject throughout the twelve-month period from the date of signing these condensed interim financial statements.  As such the Directors have adopted the Going Concern assumption in preparing these interim financial statements.
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 2021.  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 2021 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 2021 except for the following -
	Government grants
	Key judgement
	At 31 March 2021 management made a key judgement that there was insufficient certainty as to whether conditions attached to the $2.9 million of government loans in support of COVID-19 interruption had been met and therefore the proceeds were presented as loans and borrowings in the consolidated statement of financial position and no associated government grant income was recognised during that period.  On 5 May 2021 the Group received confirmation of forgiveness of the loan by the US Small Business Administration, resulting in its conversion from a loan to a grant.
	Confirmation of forgiveness provides certainty that all conditions attached to the loan have been met.  As such, the full £2.1 million ($2.9 million) was recognised as income in May 2021.
	Recognition of deferred tax assets
	Key judgement
	Management have exercised judgement over the level of future taxable profits in the UK against which to relieve the Group's deferred tax assets.  On this basis management believe it is appropriate to recognise deferred tax assets and at 30 September 2021 UK deferred tax assets of £0.9 million have been recognised (31 March 2021: £nil).
	Impairment of assets
	Key judgement
	Management have exercised judgement to determine that there are no indicators of impairment for intangible assets at 30 September 2021.

 

4.	Segment reporting
	The Group is organised into three, separately managed, business segments - Technical Plastics, Aerospace and Central.  These are the segments for which summarised management information is presented to the Group's chief operating decision maker (being the Group Executive Committee).
	The Technical Plastics segment supplies fine tolerance, injection moulded plastic components, which are used in medical, diagnostics, optical and electronic products. This business operates internationally in a fast growing and dynamic market underpinned by rapid technological development.
	The Aerospace segment supplies systems to the manufacturing and aerospace industries.
	The Central segment relates to central costs and non-trading companies.
	The LED Technologies segment presented as a discontinued operation was a leader in the development of high-power LED lighting for the premium automotive industry and was disposed of in the year to 31 March 2020 - see note 5.
	Transfer pricing between business segments is set on an arm's length basis. Segmental revenues and results shown below are after the elimination of transfers between business segments.
								Technical																											Total
					Plastics										Aerospace										Central									(continuing								Discontinued								Group
					(continuing)										(continuing)										(continuing)									operations)								operations								total
								£000									£000								£000										£000								£000								£000
	The segment results for the six months ended 30 September 2021 were as follows:
	Consolidated income statement
	Total external revenue							56,583									2,089								-										58,672								-								58,672
	Expenses							(51,799)									(1,862)								(1,329)										(54,990)								-				(54,990)
	Underlying operating profit / (loss)							4,784									227								(1,329)										3,682								-								3,682
	COVID related US government  grant income							2,087									-								-										2,087								-								2,087
	Operating profit / (loss) before exceptional items							6,871									227								(1,329)										5,769								-								5,769
	Exceptional operating items											-					-								-										-								-								-
	Operating profit / (loss)							6,871									227								(1,329)										5,769								-								5,769
	Net finance expense																																		(1,403)								-								(1,403)
	Income tax credit																																		428								-								428
	Profit from operating activities after tax																																		4,794								-								4,794
	Profit on disposal of discontinued operations, net of tax - see note 5																																		-								693								693
	Profit for the period																																		4,794								693								5,487
								Technical																											Total
								Plastics							Aerospace										Central									(continuing								Discontinued								Group
					(continuing)										(continuing)										(continuing)									operations)								operations								total
								£000									£000								£000										£000								£000								£000
	Consolidated statement of financial position
	Segment assets							117,433									6,107								510										124,050								-								124,050
	Segment liabilities							(38,973)									(751)								(67,235)										(106,959)								-				(106,959)
	Net assets									78,460							5,356								(66,725)										17,091								-								17,091
	Other segmental information
	Depreciation							2950									114								19										3,083								-								3,083
	Amortisation							38									-								60										98								-								98
	Disaggregation of revenue
	Major products/service lines
	Manufacturing							47,499									2,089								-										49,588								-								49,588
	Tooling							9,084									-								-										9,084								-								9,084
								56,583									2,089								-										58,672								-								58,672
	Timing of revenue recognition
	Products transferred at a point in time							47,499									2,089								-										49,588								-								49,588
	Products and services transferred over time							9,084									-								-										9,084								-								9,084
								56,583									2,089								-										58,672								-								58,672
																								Technical																										Group
																								Plastics										Aerospace								Central								total
																								£000										£000								£000								£000
	The segment results for the six months ended 30 September 2020 were as follows:
	Consolidated income statement
	Total external revenue																							47,214										2,736								-								49,950
	Expenses																							(43,988)										(2,252)								(2,181)				(48,421)
	Underlying operating profit / (loss)																							3,226										484								(2,181)								1,529
	Exceptional operating items																							(74)										(13)								(1,216)								(1,302)
	Operating profit / (loss)																							3,152										471								(3,397)								227
	Net finance expense																																																	(1,092)
	Income tax expense																																																	(456)
	Loss after tax																																																	(1,321)
	Consolidated statement of financial position
	Segment assets																							104,160										6,492								13,323								123,975
	Segment liabilities																							(30,191)										(1,049)								(105,986)				(137,226)
	Net assets																							73,969										5,443								(92,663)				(13,251)
	Other segmental information
	Depreciation																							2,755										133								15								2,903
	Amortisation																							103										-								41								144
	Disaggregation of revenue
	Major products/service lines
	Manufacturing																							41,086										2,736								-								43,822
	Tooling																							6,128										-								-								6,128
																								47,214										2,736								-								49,950
	Timing of revenue recognition
	Products transferred at a point in time																							41,086										2,736								-								43,822
	Products and services transferred over time																							6,128										-								-								6,128
																								47,214										2,736								-								49,950
							Technical																											Total
							Plastics						Aerospace											Central										(continuing								Discontinued								Group
							(continuing)						(continuing)											(continuing)										operations)								operations								total
							£000									£000								£000										£000								£000								£000