Well put, tradertrev. Yes - the deficit can effectively be seen as very long dated debt, comparable if not preferable to the sort/scale used by private equity. And when the equity value is a slither of the enterprise value - as is the case here - great things can happen if the company can organically get their liabilities down. The optionality here was fantastic value at sub 10p, but even after the move we have seen appears highly attractive imo. GLA |
That would be fine, if there was any net income, which currently there's not. |
Lame stocks. Deficit repayments should not be deducted from net income/free cash flow, any more than debt repayments should be deducted from net income/free cash flow. Is this not a fact? And as free cash flow is used to repay deficit and debt commitments, an increasingly large proportion of the enterprise value belongs to the equity holders, which typically results in a rising share price. So when you claim "large cash payments are going to repay the pension deficit" - what you are actually stating is that free cash flow is being spent making the equity more valuable. Well exactly. Hope that helps. |
wigwammer
They have to pay the pension deficit reduction payments out of cash, that is a fact. |
That's also my understanding, valueinvturn. A key part of the recovery strategy is getting asset turn higher by making better use of the excess equipment they already have. I would also point out that repaying liabilities out of free cash - such as the pension deficit - does not constitute an operating cost, and should not be deducted from net income or free cash flow when considering valuation (but that seems to be what some want to do). ATB |
17m market cap for a business generating 7m in free cashflow is too low. Very little of their plants are based here in the U.K. so their exposure to National Insurance increases in April is limited. |
Arthur about investment, having carclo spare capacity I don't think they have to spend a lot of Money for capex in the next future for this reasons they can manage any financial problem and avoid issue of capital |
Hi valueinvturn
I've just checked and you are correct, life expectancy has been reducing, although CAR's are not particularly conservative still, but maybe more realistic than I first thought.
You may have a fair point about investment, however at some point they will have to start replacing worn out plant, the question is can they improve the financial position enough before this is necessary. On that one I'm not sure. |
Thanks for your reply saadia110 |
It was in his weekend review available on X. It was just one sentence in the middle which read like "still holding CAR (reduced)". I think he is wrong to reduce. He sold out of OTB around 150ish and then on results bought back in (opening was 180) so much higher price. It is now 240+. So he does make mistakes and people should not see him as being infallible. |
Delayed buys now printing. Looks like the overhang is almost cleared. |
£17m mkt cap for a co generating c£7m in free cash ? Schroders were increasing their stake from 18% to 19% at higher share prices than current price. Looks good value now |
I don't see the pension issue as a problem, a lot has changed since the last revaluation |
Hi john99. Remember it is the life expectancy starting at age 65. The ONS currently estimate this to be 85 years for a male, so Carclo are 2.6 years under that estimate. Using the sensitivity tables in the AR that is a £14m addition. But that is £14m spread over the 20+ years maturity of the trust. Also, bear in mind that the current discount rate in the liability assumptions looks rather low relative to peers, which if normalised would likely have a positive offsetting effect. ATB |
I asked ChatGBT what actuarial life expectations for males are:-
UK - 81.92 years (2024)
US - 78.4 years (2023)
I've assumed males are most of the workforce. But they are figures for people BORN in 2024 or 2023. Of course Carclo's pensioners were born 67 or so years ago so the current figures above are pointless.
Oh, and by the way, consensus estimated EPS growth for 1,2 and 3 years is 114%, 112.6% and 60.5% - Sharescope.
Looking forward to Arthur's figures. |
Good to see some well argued discussions on this board, a timely reminder of how useful these boards can be at times.
I am definitely in the bull camp, clearly there are risks but with the market cap sub £20 m. I believe those risks are priced in. |
Hi Arthur, I reply below to your points
Pension liabilities: 82 live expectation Is fairly correct.average Life expectation Is reducing year by year
Cash flow: Carlo made a lot of investment in the past so It has a good spare capacity tò face a 4% cagr for the next couple of the years with a minimum amount of capex.futher the big part of the revenues of CTP division come from US where We have not seen yet the result of efficiency process. So in my opinion We Will see a good amount of cash generation in the future to face pension liability and reduce debts |
It's more about balancing facts and getting to the right answer. Sort of why I'm sitting on a very large profit, and you aren't sitting on a bean, old bean.. :) |
Such as yourself old bean. |
The most recent triennial actuarial valuation showed a significant REDUCTION in the actuarial deficit, with a further reduction expected following finalisation of the 2024 valuation. But it appears a few people here aren't going to let facts get in the way of a story. ATB |
Having luckily sold out probably at least 10 years ago. I also watch as an interested bystander. What I can never understand is why the pension deficit just keeps going up.
Have Carclo pensioners found the secret of eternal life. |
It is certainly a good summary of what an average investor might think. Why are Schroders buying? Carclo are a key supplier to the majority of the top 20 global medtech companies, a growing industry which tends to earn high double digit op margins. Carclo supply key components, typically constituting a very small part of the final cost structure, hence reliability is key. They often invest in both physical equipment and IP alongside the medtech. All of this explains why the company is likely to grow, earn higher margins and at lower cyclicality than most industrial suppliers. Sub £20m valuation due to pension deficit. But huge optionality given the long dated nature of the liability. Carclo may grow, see a step change in margin, rates may rise again...plenty of outcomes where Carclo multiples off a £20m base. Ps the U.K. constitutes sub 8% of sales, and is probably going to grow too.. ATB GLA |
I'm just an interested observer. |
Customisable watchlists with full streaming quotes from leading exchanges, such as LSE, NASDAQ, NYSE, AMEX, Bovespa, BIT and more.
Hot Features
Premium
