Carclo Share Discussion Threads

[2magpies] 31/8/2016 08:49

Facts are facts.

There is no such thing as scaremongering when it comes to stocks/shares, imo.

Anyone can check the facts and prove disprove.

So no need to worry, if you're right.

re 'Brexit': that was in June.

Are we really expected to believe that Corporate Bond yields have suddenly fallen since the x-div date?

Others may ave posted for years, perhaps, but did anyone see this coming? No. Look at the share price rise in the last week.

No one saw it. But the management must have known, imo.

[rivaldo] 31/8/2016 08:40

2magpies, the issue has arisen post-Brexit, so was not known at the ex-div date given subsequent events and yield movements.

There really is no point in over-reacting. Interesting to see which new posters turn up here to scaremonger.

[boadicea] 31/8/2016 08:40

Dealing with pension commitments follow some arcane and sometimes
anti-intuitive rules- e.g. a rise in bond prices results in a rise in
pension fund assets = 'Good'???
No!... because the maturity is fixed and the corresponding drop in
interest rates means that the increase in discounted commitment is
typically greater than the capital appreciation of the fund. The whole
system needs a rethink.

I suppose we should have seen this coming but it's in a relatively
uninteresting part of the accounts to the average observer.

It makes one wonder what world the central banks live in, where a
loosening of money policy has precisely the opposite effect of that
which (I hope) was intended - so another step on the road to hell,
as they say. The post-Brexit fall in the pound gave the BoE an
opportunity to raise rates without causing a harmful sterling
surge - but they did the opposite!

I think Woodcutter (above) has the right approach as this is a
particularly thick wood with no sign of getting out of it in a hurry.
There will be wider reaction to this news than just to CAR itself.

As Rivaldo says, there are ways of dealing with the dividend situation,
e.g. via a capital reorganisation to release other reserves although one
has to consider whether that is a sensible long term solution.

[jakedog2] 31/8/2016 08:39

woody,
excellent posts ! totally agree.

Thanks JD2

[woodcutter] 31/8/2016 08:38

It's been visible for years if you spend time analysing their accounts, it's all there.

wc

[2magpies] 31/8/2016 08:35

What this shows is a shocking lack of 'visibility'.

No telling what else there is that the market doesn't know - yet.

It could be sprung upon the market at anytime, without warning.

Loss of credibility re any forward-looking statements. Or, indeed ANY statements?

How long have they known about this potential deficit? Did they know about it before the ex-div date??

[woodcutter] 31/8/2016 08:30

One of the areas we as investors perhaps don't pay sufficient attention to is the statement on changes in equity in particular the column on retained earnings.

If you consider the balance sheet at the last set of prelims presented on 7th June this year:
2016
equity £32.88m
pension deficit £23.2m
retained earnings £23.46m

2015
equity £41.35m
pension deficit £12.13m
retained earnings £35.52m

Just look at the growth in pension deficit at the expense of the retained earnings.
If you review the statement in changes in equity you can see how the retained earnings have been constantly reducing to support the pension deficit.

in 2014/15 £13.44m went to support the pension deficit and
in 2015/16 £11.85m went to support the pension deficit

It now looks like the retained earnings are close to being wiped out.

In 2014 the equity in the business was over £70m it is now less than half that, all at the expense of the pension scheme deficit.

Great business poor balance sheet due to pensions issue imv.

as long as interest rates remain where they are i can't see any possibility of any future divdend payments and a significant amount of any profit is likely to have to be put towards the pension liabilites.

woody

[longshanks] 31/8/2016 08:23

Exactly so Riv: the issue here is technical rather than systemic.I accept Woodcutters point that pension obligations will become harder to meet - but that negates the very fine underlying performance at Carclo.

[rivaldo] 31/8/2016 08:16

The problem for CAR is simply that its distributable reserves have been wiped out by past write-offs etc. The pension deficit itself is perfectly manageable (though sizeable) given CAR's excellent prospects and decent cash flows.

So CAR simply need to put in place the legal/accounting steps to replenish the topco distributable reserves, which will take a little time (which explains the need for today's announcement) but should be relatively easy.

IMO this is a real bargain buying opportunity and we'll see a bounce from here.

[ali47fish] 31/8/2016 08:16

why has this pension deficit problem no been flagged before- and why should it impact thsp so drastically

[woodcutter] 31/8/2016 07:54

I sold mine a while back as global central banks continued to drop interest rates into negative territory, I did similar with DVO. Pension liabilities are going to become a serious liability for many companies unless we see a strategic change in central bank thinking. Bond yields are going to continue to tighten as bond prices are pushed up imv.

Until we move away from the bonkers economics that we're currently witnessing, which incidentally the US is trying it's best to do, then any company with a significant pension liabilty is going to have to look seriously at it's dividend policy.

I'm completely avoiding all companies with large pension deficits at present as shareholder returns will be diminished in order to support the pension scheme liabilties.

And the world debt problem is too large to see any real change CB in policy.

This might help, it's pretty frightening imho.



woody

[rivaldo] 31/8/2016 07:38

The divi was declared prior to Brexit and to the subsequent bond yield movements, so it's nothing to do with CAR. The matter is purely administrative and will be dealt with in one of the ways I suggested above.

It's a real shame this technical issue deflects attention away from the very good trading update.

[batham1] 31/8/2016 07:20

Wot, no divi?! Declare that you'll pay one, wait until just after the qualification point and then say sorry it's not happening. Not good.

[rivaldo] 31/8/2016 07:19

Excellent trading update today:



- good growth and trading in line with year end expectations
- TP has had a "very good start", with additional production volumes awarded and Indian and Chinese expansion
- Wipac performing well and Optics finding "strong demand" - the latter is a definite upturn
- Aerospace trading nicely in line

The dividend postponement due to the pension deficit/lack of distributable reserves is a bit of a turn up, but undoubtedly, as the RNS notes, there will be a way of creating such reserves, probably via intercompany management charges or going to court to utilise other reserves like the share premium account in the usual way.

[rivaldo] 25/8/2016 12:24

..and nicely up as well, with buying at 155p now.

Exactly a week until the AGM update next Thursday.

[9degrees] 25/8/2016 10:27

ex div today

[longshanks] 23/8/2016 10:35

indeed it is riv.

Bought another 2k today to put under my pillow. Hurts to pay stamp duty when this trades like an AIM stock - though I guess I will get it "reimbursed" from the dividend due in October.

[rivaldo] 23/8/2016 10:12

I note that the car insulation/noise reduction group Autins floated this week on AIM and now has a £44m m/cap, having made just £0.9m PBT on £20m sales last year:



In comparison, CAR's Wipac likely made around £4.5m operating profit on £33m sales last year.

On a comparable basis Wipac on its own could be worth CAR's entire £103m m/cap and more!

Perhaps CAR should spin off Wipac separately (only joking). Anyway, with 11.15p EPS consensus forecast this year, it's another example of the undervaluation here.

[rivaldo] 22/8/2016 09:20

Welcome HH. I too am extremely confident about CAR's prospects.

A reminder that the AGM update is expected on Thursday week (1st September).

[hopeful holder] 10/8/2016 20:48

I bought these based upon a good offering, sensible company, good potential for share price to increase by a decent amount if good results are forthcoming. I strongly suspect that the next set of results should start to evidence its potential.I'm quite confident so added some more today.

[rivaldo] 09/8/2016 12:01

A diary note - the AGM is on 1st September, so not long now.

Hopefully the update will reflect the confidence in June's results:

"The group has delivered a strong operational and financial performance through the year and is well placed and focussed to drive further growth opportunities in the current year and beyond."

[rivaldo] 29/7/2016 07:28

CAR have for a long time produced the cartridges for Alere's Afinion POC machine. I assume they still do.

Yesterday this news came through that the FDA have backed "a hemoglobin A1C (HbA1C) test to diagnose diabetes" via an assay on the Afinion machine.

This would presumably be a big additional volume win for the Afinion machine and for CAR.

Note that "the Afinion HbA1C Dx would be the first HbA1C test labeled for point-of-care use to diagnose diabetes":

[andrewbaker] 18/7/2016 12:45

Hopefully the share price will rise soon, as people realise that Brexit won't disadvantage, and may well advantage, Carclo, given foreign currency sales. Maybe the holiday period will keep buyers off for a while, and they'll buy on their return to business, but this gives private/non-holidaying business people time to get in at a lower cost, IMHO.

[rivaldo] 18/7/2016 10:25

Finncap today say Buy with a 195p target - quite some upside from here: