Carclo Share Discussion Threads

[rivaldo] 25/11/2016 12:12

Most likely simply a case of one institution buying a load of shares from another and thereby clearing the dead weight which has been holding back the share price.

The rapid movement upwards since the transaction was reported backs this up.

On a P/E almost in single figures, and with the pension issue quickly clearing given that bond yields are now back to levels seen earlier in the year, CAR is an out and out bargain imho given the prospects already outlined for H2 and beyond for the core businesses.

[gleach23] 25/11/2016 09:44

Thanks for highlighting rivaldo - prompted me into a top up I had been mulling over.

[rivaldo] 25/11/2016 09:19

Nice - 1.97m shares just reported bought at 120p. Should clear any overhang nicely.

[dontay] 24/11/2016 09:10

Thanks illis... whatever the motivation for acquiring, it seems to be a reasonably established and lucrative business... rather than any new ground breaking tech... not sure what it brings to the table but presuming it has 'in house' benefits in the designing of CAR's plastic products... hopefully even Carclo won't be able to balls this one up! :)

[queeny2] 23/11/2016 23:23

:) spoil sport my middle name

[illiswilgig] 23/11/2016 23:19

Dontay/Queeny,

my cynical suspicion is that the owners of PTD wanted out for one reason or another and CTP couldn't afford their key tooling supplier to be hanging in the breeze, let alone be bought by a competitor.

The few numbers released make it look like a good acquisition - but I can't help feeling it's a defensive move dressed up to look like a move into new territory. In a previous life I have bought up suppliers to bring them inhouse and lock in their technology. Worked well for me but I do understand the dangers.

Vertical Integration. Oh Queeny don't be such a spoilsport. I note that PTD client base is almost exclusively medical devices so that puts them back into CTP's core market rather than a general toolmaker. You may be overly pessimistic but your point is well made!

cheers

[dontay] 23/11/2016 17:16

queeny2... everyone seems to think that this acquisition is a lucrative move for CAR... no reason to suspect it won't be... so know real problem... but I just couldn't/can't get my head around why CAR would want to go into this market... why go into a business that seems to makes and supplies the tools... that makes the plastic moulding machines that CTP and other plastic moulding business use.

[queeny2] 23/11/2016 16:49

Dontay, exactly that - is this (at least in part ) a core business for CTP or a new business. Being an old guy I don't like vertical integration unless very clearly explained to me, and I don't like very small companies like CAR not sticking to what they know how to do and sell. In CAR's case their record of straying from their reservation needs no mention.

So I am seeking clarity on this.

[dontay] 23/11/2016 16:33

Riv... I think queeny2's question is a fair point, it was something I had wondered about and although PTD activities as a tool maker, as the blurb points out, is not a market that CAR served... it could well be the case that CAR were actually a customer of that PTD niche market and it could indeed be the case that they have bought one of their suppliers. I doubt we will ever know... but it seems to have been a good move.... whatever!

[rivaldo] 23/11/2016 15:57

It seems clear to me that the acquisition has introduced CAR to new markets "not currently served by Carclo" - from the RNS:

"The Acquisition of PTD has been under consideration since November 2015 and represents an opportunity to acquire a US based business that provides technical, design, tooling, prototyping and moulding solutions to predominantly blue chip medical device businesses in the North East of the US. The business operates out of a circa 29,000 square foot facility with Class 7 and Class 8 cleanrooms. PTD serves a niche market not currently served by Carclo."

[illiswilgig] 23/11/2016 11:24

That's good news for CTP Riv. Lots of Jam tomorrow then.

But what I can never figure out is just how much it will boost the revenues of CTP's US plants and more importantly the profit and cashflow back to the parent.

The risk is that despite these good news developments capital spending needs to keep increasing and cashflow/profits don't rise as fast as the debt and pension holes continue to rise. Or more likely that the rise in cash and profits don't reduce the debt and pension funds significantly.

Silver lining mind you - the recent acquisition seems very profitable according to the figures.

The placing at 120p raised a lot more than just the cost of the acqusition - so I'd read between the lines that the combination of the placing funds and not paying the dividend was just in the nick of time (again).

The apparent horror of the pension deficit and debt keeps the share price down. I managed to buy a few more at well under 120p so can I feel smug yet? Not until I see the debt start to go down as profts and cash finally rise faster no matter how big the pile of Jam looks from here!

cheers

[rivaldo] 23/11/2016 11:12

Interesting article about Wincanton, with this extract re their pension deficit which exactly mirrors CAR's timetable - note the CEO's comment, showing that the deficit has recovered fast in recent weeks and is now not that much more than it was at Wincanton's last March year end:

http: //www.stockopedia.com/content/sif-portfolio-avesco-amp-macfarlane-plus-should-i-add-wincanton-159365/?utm_source=Stockopedia&utm_campaign=cd87f1d0ef-Newsletter_23_November_2016_Non_Members&utm_medium=email&utm_term=0_268b4798a8-cd87f1d0ef-31275461

"In my view, the main quality risk is the group’s pension deficit. Low bond yields have caused this to rise from £105.6m in March, to £169.2m at the end of September. Wincanton made extra pension payments of £14.4m in 2015, and £20.9m in 2016. These are substantial amounts that have a big impact on free cash flow.

But this could soon change. In his Q&A with Paul Scott, Wincanton’s CEO said that the deficit had fallen by £50m “in the last few weeks”. If bond yields continue to rise, pension deficits could shrink fast."

[rivaldo] 23/11/2016 07:43

VEC's interims this morning (they're CAR's partner re VR315) show it's progressing well - this is a generic version of the blockbuster Advair and is forecast to be a big winner:

"VR315 US, (fluticasone proprionate/salmeterol), our partnered programme with Hikma for a generic version of Advair® Diskus® for the treatment of asthma and COPD in adolescents and adults for the US. In April 2016, the US FDA accepted an ANDA filing made by Hikma and Vectura recognised a milestone receipt of $10 million. The FDA has provided Hikma with a GDUFA goal date of 10 May 2017. Vectura will receive $11 million on approval of the file plus a royalty on net sales of VR315 in the US.

Our partner Hikma, is currently one of only two companies to have publicly filed and had accepted a generic ANDA filing for Advair® Diskus®. Both companies' applications have been accepted and are in a FDA regulatory review process."

[queeny2] 22/11/2016 14:27

hey illis!

'the other one that I've already forgotten' - exactly ditto, I simply can't remember it even now. Point-of-sale diagnostics or summat.

I tried to approach these results with interest, and a willingness to be long CAR for the first time ever, but but but I lost interest.

If I knew what bond yields would do I wouldn't be here, so all I can say is that a pension fund deficit plus debt that approaches the market cap certainly provides some leverage, up and down. I wouldn't fancy a banana skin right now.

[illiswilgig] 22/11/2016 13:51

Hello Queeny,

good to *see you* on the board. I was away when all the excitement happened and missed it all.

At first glance the H1 results look the typical curates egg. Easy to condemn the management for slipping on yet another banana skin, though in truth the pension deficit is not exactly news and I have expressed concerns before.

The current state of bond yields is/was extreme. But is it the new normal? To assume that the pension deficit is real would require bond yields to remain at this extreme level and all the pensioners to meet the projected longevity.

In an alternate view the management might be congratulated for managing to thread the company through the eye of the CIT and Pension needles and avoiding rescue rights issues and the like.

In view of CAR's current poor cashflow which stems from the high level of capex, cancelling of the dividend can be seen as a good move in the short term? Painful though it is for the shareholders.

That's if you believe that all the cash being invested in CTP and LED will lead to a good return. Though to be fair all of the investment so far in these divisions appears to be earning a good return - the spectre of CIT and the other one that I've already forgotten does tend to loom large in the memory.

It's on my list to have a closer look at the results but I'm not sure that I will learn much from the tea-leaves - pretty much everything to play for going forwards once the capex is converted into cashflow and above all to remember that this is CAR we are talking about!

Enough Waffle for now,

cheers

Disclosure - I am very long CAR and bought a few more at recent lows.

[abergele] 21/11/2016 17:27

Well we are through the 9 and 13 dma's,lets hope even further tomorrow,,,gla

[rivaldo] 21/11/2016 10:00

Here's the H1 investor presentation:



CAR achieved 5.6p EPS in H1 alone, and are well on track to meet and (imo) likely beat expectations of 11.2p EPS. And it looks like the two core CTP and LED divisions will have an even better H2 - backed up by bigger gains on currency movements:

"Outlook

• The Group has enjoyed a strong first half trading performance with all divisions
performing well and showing solid progress over the comparative period last year

• In particular, our strategy to invest in increased capacity in our Technical Plastics division is continuing to facilitate strong growth in revenues which is resulting in good margin appreciation. The exciting acquisition of Precision Tool & Die provides further capabilities and opportunities for this division and its customer base has been enthusiastic about the combination of our businesses leading to an enhanced offering

• In LED Technologies, our Wipac luxury and supercar lighting business has continued to perform well, benefiting from good product demand and its continuing ability to win new customer programmes and it is expected to deliver significant growth into the future

• The board confirms that the Group is trading in line with its expectations for the full year and expects the Group to have a stronger second half of the financial year, benefiting additionally from the anticipated contribution from the Precision Tool & Die acquisition"

[queeny2] 18/11/2016 13:13

I seem to have missed all this year's news, more or less up to speed now. I can see why people have been avoiding.

[yump] 18/11/2016 10:31

Given the history of CAR as a failed high growth possibility, therefore converting it into a possible modest growth possibility, I think the dividend issue was a big deal as it was at least giving some return and it follows on directly from the pension problem.

[queeny2] 18/11/2016 10:05

oh I missed the dividend fiasco, will go and read properly before commenting again.

[1gw] 18/11/2016 09:59

pldazzle - those are UK corporates, but perhaps rather shorter than 15-yr duration looking at the yields (or else higher rating than AA). I have looked quite hard to find the ML or Iboxx indices but in any event I am prepared to wait for the next BW update to see the snapshot at 31st December.

The point is just that on this particular issue (pension scheme discount rate) it looks to me like the wind is blowing in the right direction for Carclo and there's a reasonable chance (given actual reflationary policy by Trump to follow the rhetoric and maybe also some modest reflation by Hammond, or even just a borrowing binge by Trump) that by Carclo's year end the problem will have reversed.

In terms of whether all Carclo's lowly market valuation is down to the pension fund, I think not. But I think the fiasco over the dividend was maybe seen as just the latest in a string of mis-steps by the company which has undermined confidence in the management to follow through on what looks like a promising operational position. So perhaps a "surprise" reverse in the pension position might be seen as indicative of a more general turnaround in the company's fortunes.

[rivaldo] 18/11/2016 08:23

Good to see a cluster of director buys just announced - 67,000 shares, or around £80,000 between them:



Particularly encouraging to see the FD buying the most, around £32,000's worth at 120p.

[pldazzle] 17/11/2016 21:52

Apologies to lgw, and to everyone, for wrong link. Try this one:

[queeny2] 17/11/2016 16:38

thanks all.

yump - indeed.

Over many decades worries about pension funds have come and gone, I find it hard to figure that this p/e of what 10? is all based on pension fund concerns. I've looked at companies I thought were in shocking state because of the pension fund deficits and suddenly next year no-one mentions it.

I prob need to read back what the company have said last three or four results and presentations. If I have time.

For the first time ever I'm relaxed about the operations, having been (correctly) nihilist about touch screens and medical breakthroughs and (incorrectly?) more bearish than most on CTP margins and (correctly?) sceptical about what p/e CTP should be on.

I shall contemplate, but for the first time ever in many years I'm chilled about the operational downside. Pension fund and debt maybe are worries.