Carclo Share Discussion Threads

[tjb23] 11/1/2017 16:56

Nice to see this breaking through the 137p resistance level

[wageslave] 11/1/2017 10:17

A reinstatement of the dividend would be the catalyst for more institutional buying - and we all know what that means.

[rivaldo] 11/1/2017 09:48

Looks encouraging online. At present I can only buy a maximum 12k at 141.4p, whilst I can sell 25k at 138.13p (the share price is nicely up today to around 139p despite the totally incorrect chart in the thread header).

I too am not particularly bothered about the dividend - it's the high growth and potential in the core medical and LED divisions which excite me. Especially on a P/E of only 10.

But I do believe that, especially if yields continue to solidify before the year end, there may well be a reinstatement of the year end dividend in the 31/3 results, even if it's a smaller amount simply as a statement of intent.

[illiswilgig] 11/1/2017 09:23

catscats

'patience required methinks...'

Oh yes, I can see you are a seasoned CAR investor.

I suppose that the restarting of dividend payments could help to give the shareprice a legup but I am more concerned to see the level of debt fall and cashflow improve before the board feel pressured into paying out cash just to send a message.

As a long term investor I find dividends and steady shareprice rises to be a pleasant accompaniment on the journey - but my main reason for remaining invested in CAR is growth in the relatively short term so I'm not that concerned about the divi particularly if it conflicts with investing for growth.

I have always felt that the pension deficit was a very useful excuse and sent a more acceptable message to investors than 'sorry we need the cash right now'

Sadly (for my regular income) I'd expect a couple of years before the divi returns and that debt will be falling nicely before that point.

More patience required :-)

cheers

[rivaldo] 11/1/2017 07:23

1gw, thanks for the analysis and good to see you buying more CAR.

Good vibes this morning from CAR's VR315 partner Vectura:



"An important part of our news flow for 2017 remains VR315, our generic Advair® Diskus® programme partnered with Hikma. This programme remains under FDA regulatory review and we continue to work closely with our partner through this process. VR315 has a GDUFA goal date of 10 May 2017 and is one of only two generic Advair® Diskus® ANDAs publicly filed and accepted."

[catscats] 10/1/2017 15:06

1gw, you are right that the deficit is likely to nominally go down due to a lower discount rate, but whether that will induce the board to pay a dividend is questionnable. As you say the deficit can easily get worse again (quickly)....the board would not want to be caught twice promising divs that they then find they can't afford. But just maybe the strength of the business will give them confidence and my caution will turn out to be wrong.

[1gw] 10/1/2017 14:28

catscats, I think the "write back" as far as discount rate is concerned should be fairly automatic at the end of the year. They will get their updated discount rate by taking their usual benchmark I would think and apply it and other updated assumptions (inflation expectations, mortality assumptions) to recalculate the liability, running key assumptions past the auditors. Having done a similar exercise to update the value of the fund assets they will calculate the updated deficit and adjust the accounts accordingly. There could be some discussion in the light of what happened with the dividend this year as to whether this slavish following of corporate bond yields is really the best way of setting the discount rate given the (expected to be temporary) distortions of QE - but I think that would help not hurt the situation.

Whether a reduction in liability is sufficient to get the share price up is another question - and in itself I would tend to agree that it won't be (because we all know that in future the deficit could move the other way again). But I do think the announcement of a resumption in the dividend could have an immediate impact on the share price, particularly if it was accompanied by a statement that the board thought that the health of the business meant they would now be able to continue with a progressive dividend policy for the foreseeable future.

[catscats] 10/1/2017 13:49

have been invested here (too) long time. hoping for more positive news at some stage, and maybe that will come from resumption of dividends. But in my (limited) experience write back on pension fund liabilities are like petrol pump prices - very quick to put up and slow to reduce. So i am not relying on that to get the price up. Business now seems stable with reaasonable prospects but margins are not stellar and debt is still IMO too high, so i doubt that the market will give this more than 10x p/e. ho hum - patience required methinks...

[queeny2] 10/1/2017 10:55

Good stuff 1gw, thank you.

[1gw] 10/1/2017 10:20

Having said all that, I think the recovery from 2.3% to 2.7% may well be enough to allow them to restart dividends, so I've just bought some more at 137p.

In the half-year report they said the move from 3.5% to 2.3% had increased liabilities by £34m [edit: actually "contributed to" this increase - with some due to rising inflation expectations or mortality assumptions perhaps]. So simply pro-rating, a move back to 2.7% should decrease liabilities by about £11m. Net of tax, getting on for £10m back on [edit] retained earnings I would hope. I would also hope that investment performance on the equity portfolio would at least cover liability increase due to increased inflation assumptions.

So maybe around £10m back on retained earnings due to the increase in corporate bond yields.

Retained earnings at end-September were £2.8m and a 2p dividend (for example) costs about £1.5m (73m shares). So given earnings-positive underlying business I would have thought they might already be confident enough to pay a dividend if discount rates stay at this level.

Health warning: my analysis only, to promote discussion. Certainly no advice intended. This is a complex area and I may well have made some mistakes in the above analysis.

[1gw] 10/1/2017 09:14

Update on corporate bond yields (Carclo pension deficit).

Barnett Waddingham have today published their update on corporate bond yields, showing that the ML UK 15-yr AA corporates rate had recovered to 2.7% at year end. While better than the end-September rate (2.3%), it is still significantly below the end-March rate of 3.4%. It is also still below the end-June rate of 2.9%.

Inflation expectations have also increased over the last quarter, adding to upward pressure on pension scheme liabilities, while equity market returns should have been good given general market performance which would tend to increase the asset side of the equation.

On balance, I'm disappointed. I had hoped that the gap to the end-March'16 yield position would have closed a bit more by end-year. I now hope for further moves up by end-March'17 to increase the chances of Carclo being able to resume dividend payments.

The latest BW note is linked below and I have pasted my previous post on the subject for context.


-------------------------------
1gw 16 Nov '16 - 17:41 - 206 of 281 0 0 Edit

I think you need to look at UK corporate bond yields rather than gilts in terms of the pension scheme discount rate issue. I noticed in the results (note 13), Carclo gave the change in discount rate:

3.5% 31st March
2.3% 30th September

In post 134 I gave the 15-yr AA ML Sterling Corporate bond yields quoted by Barnett-Waddingham as possible indicative discount rates:

3.37% 31st March
2.29% 30th September

So it looks like this may well be a reasonable proxy for the Carclo scheme discount rates.

Unfortunately I haven't been able to track down a good source of this rate (i.e. UK 15-yr ML sterling corp) other than the Barnett Waddingham publications - does anyone else have one?

In any event, the next BW publication should be out in early January giving the rate at 31st December. That should give us an indication of where the discount rate is likely to be and therefore what the chances are of getting a material reversal of the recent hit.

[abergele] 10/1/2017 08:21

Rivalado,
sorry,wrong information I printed,another shares performance,,from anybody who read my previous piece..

I mean the piece I typed ,not your last posted information which looks good,,any thanks to you.

[rivaldo] 09/1/2017 13:35

Continuing to creep up slowly, with buying at 137.56p today.

Every independent analyst says Buy now - forecasts for the year starting soon put CAR on a near single-figure P/E and a very good value PEG of only 0.8:

2017 2018
Date Rec Pre-tax (£) EPS (p) Pre-tax (£) EPS (p)
N+1 Singer 06-01-17 BUY 10.60 11.13 12.60 12.45
FinnCap 05-01-17 BUY 10.70 11.30 12.60 12.80
Edison 05-01-17 None 10.66 11.60 12.75 13.10
Peel Hunt 09-12-16 BUY 10.70 11.73 12.97 13.34

[abergele] 08/1/2017 15:12

Good news again Rivaldo,
We have had a bit of consolidation around the £1.35p area,and perhaps getting ready for that P.Hunt recommendation,,,wow,£1.90p..if only eh...gla lth's

[rivaldo] 05/1/2017 11:57

Peel Hunt today reiterate their Buy and 190p target:

[abergele] 04/1/2017 20:13

Thanks for that Rivaldo,nice news and the chart is still firmly positive.gla lth's

[rivaldo] 04/1/2017 09:53

N+1 Singer have this morning released their best ideas for 2017, and they highlight CAR's prospects for 2017 as follows:

"We are still positive on....Carclo (cheap and a potential play on rising bond yields alleviating the pension deficit)".

[jdb2005] 01/1/2017 19:41

Like this company & wish I had bought more CAR when below 120p

Buy on dips !!

[alexx] 28/12/2016 05:55

'116

0-60 in 3.8!

But you'd have to wait at traffic lights for months to be up against something that even managed 6.0 seconds.

[illiswilgig] 21/12/2016 17:21

BigT,

good on you.

you're not alone. Plenty of us have called CAR wrong at some time - I certainly have

Seasons Greetings,

cheers

[bigtbigt] 21/12/2016 17:10

Congrats all holders
Glad to say I was wrong expecting it to fall from 120
Happy Xmas

[amoore70] 21/12/2016 10:44

Glad to see some confidence coming back to this share. Doubled my holding at start of the week.

[abergele] 21/12/2016 09:04

Chart is looking stronger each week,
just a couple of pence short now of passing the 150 dma..
cross over that and the 200 dma is a hop away..about £1.38...quite do-able,imho

[rivaldo] 21/12/2016 08:44

Momentum building here now.

[rivaldo] 20/12/2016 08:30

Amoore70, I am similarly confident re CAR.

Ali47fish, the figures re Henderson's increased holding are all in the RNS via the link I've provided if you read the RNS. I don't really think I can say any more!