Carclo Share Discussion Threads

[meijiman] 04/5/2020 19:05

Some good posts. Ironic in a way that the coro crisis may help their medical side. No surprise that anything aerospace related has gone south.Any proper re-rate needs some certainty on sorting borrowings/pension..as said above.

[laurence llewelyn binliner] 04/5/2020 18:18

The turnaround here is underway, the Group's net debt (including IFRS16 leases and subject to audit) at 31 March 2020 was £25.8m, (30 September 2019: £31.7m).

GBP +5.9M progress, 5M from the Wipac sale and c+£1M from H2 operating profits reducing overall borrowing..

The pension deficit is substantial and 2.7M committed to offset this shortfall until Jan 2021

H1-2020 CV19 impact could be somewhat offset by salary cuts/cost savings, but the exceptional costs associated with the discontinued businesses for H1 2020 total £2.8M.

H2 2019 earnings will have been reduced by some of the exceptional costs incurred from the Wipac exit and consultants/administrators fees..

If the company can demonstrate they can pull it back on track after the Wipac exit I see no reason why the banks/trustees would not extend/renew terms to enable the continuation of same progress, but running the group just to pay the pension deficit down, leaves a Q on the equity value for now..

Interesting times, we need to see the financials to get a view of how many of the exceptional costs have been worked through, and underlying profit for H2 stripping those out to see where they are and how long the journey is to get back to net cash positive....

[wigwammer] 04/5/2020 17:27

No certainties here! Well. Not quite true. You certainly can't lose more than 100% of your money. But it is feasible you could make many times 100% if things go well. High risk and high reward. ATB

[meijiman] 04/5/2020 17:25

I have made good money on Xaar recently where the company may be casting off the legacy of incompetent management. Similar to here really. Difference is though that Xaar has a decent balance sheet with plenty of cash.

[darrin1471] 04/5/2020 16:44

wigwammer: I appreciate your reasonable reply and possible explanation
I would accept an open explanation from the board saying the delay was due to auditors waiting to sign off while trustees and lenders come to an agreement. However the board only said "guidance from the Financial Conduct Authority that public companies should consider delaying preliminary announcements"
It could be that auditors and accountants in general are overwhelmed with work due to the effects of covid-19, which is understandable and acceptable.
It could be anything. I just didn't like the uncertainty.

[wigwammer] 04/5/2020 16:06

I was referring to your point "i'm concerned they have delayed their publication beyond June 2020 as I can see no reason for this other than FCA guidance".. to repeat, based on the experience in 2019 it is pretty easy to see the reason - the auditors won't sign off on the publication until agreement has been found with the trustees and lenders. This happened in July last year. All there in the RNS releases for those interested.

[bamboo2] 04/5/2020 16:05

I thought that the rns today seemed slightly at odds with the article from Pennsylvania a few weeks ago. Perhaps they are being cautious, in order that pull a rabbit out of the hat [so to speak] at later date?
I don't know the business very well though.

It looks as if the current outlook is possibly already in the price.

My chart shows today as another potential turn day, so hopefully we have seen the lows for a while.

There was a firm taking a stake here last year, perhaps they will increase their holding

[darrin1471] 04/5/2020 15:41

Fortuitous that they got rid of wipac before the car business in general went into meltdown.
Fortuitous medical diagnostic plastics are Carclo's largest market.
Unfortunate that sales and profits will be down in 2020 due to covid-19 when business is financially weak and needing to negotiate with banks and pension trustees.
Banks could also force a sale of the profitable parts to cover loans.

[wigwammer] 04/5/2020 14:50

Darrin - in a way the timing of Covid is fortuitous for them. Last year they reached agreement with the trustees and debt holders in July which, combined with the complication of accounting for the wipac business, resulted in the results day being pushed back. This year, the regulator is allowing them to push back the date anyway to allow for Covid. The upshot is that agreement was eventually reached last year, and my hope is that after an impressive year in 2019, trustees and lenders will be willing to give the new management a fair shot.

[darrin1471] 04/5/2020 13:04

I was thinking of taking a small stake before the rns, based upon the current demand for medical diagnostic plastics, which Carclo said was its largest market in their interim report.

Good news that FY2020 results were in line with expectations, however I'm concerned they have delayed their publication beyond June 2020 as I can see no reason for this other than FCA guidance.

Uncertainty over forward guidance is understandable.

Covid-19 "disruption has been more extensive in the first quarter of the current financial year". Disruption = falling sales and no "COVID-19 testing applications" bonus.
Social distancing and some limited shutdowns "will inevitably have a negative impact on profitability."
This company has little wiggle room for more disruptions.

Obviously the successful conclusion of banking and pension negotiations are vital. Being an essential supplier of covid-19 testing products may put them in a slightly stronger position.

Bust or multibagger? May be worth a speculative punt after the next market crash if you believe one is coming.

[garth] 04/5/2020 11:15

Wig,

I really want to see them make it. I am agreement with your postings re the pension deficit. It would be a travesty if they didn't find a solution.

G.

[wigwammer] 04/5/2020 11:01

"The Board is pleased to announce that trading for the continuing businesses during the second half of FY2020 reflected a continuation of the positive momentum seen in the first half of the year. Consequently, the Board expects to report, subject to audit, underlying results for the continuing businesses for FY2020 in line with its expectations..." ... that's not a bad message to be relaying to the trustees.

[garth] 04/5/2020 07:36

This is the critical section, which IMO, sprinkles water on any hopes of a fire in the near term.

"Given the division's focus on the medical market, overall demand across the Technical Plastics business has remained relatively resilient, with a number of its products being used directly in COVID-19 testing applications. Notwithstanding continued demand, the implementation of governmental guidance on social distancing and some limited shutdowns have impacted efficiency and throughput across the Group, which will inevitably have a negative impact on profitability.

Demand for the Aerospace business has been significantly impacted by the downturn in the aerospace sector.

Management has already taken action to mitigate these challenges, including accessing government support programmes where available and a reduction in variable costs where appropriate. The Board has taken a 20% cut in fees and salaries for the first quarter of the new financial year. The Group remains focused on ensuring operational continuity where it can; however, it remains very difficult to predict how the ongoing crisis will affect performance going forward.

Outlook

Given the current levels of uncertainty it is not possible for the Board to provide near-term guidance on expected financial performance. As previously reported, discussions continue with the Group's lending bank and pension trustees in order to agree a long-term financing position for Carclo. Whilst these negotiations remain ongoing, there can be no certainty that a satisfactory and affordable agreement will be reached. The Group will make further announcements as appropriate."

Just a view. Not advice.

G.

[siddiqur] 04/5/2020 07:28

Rns any good ?

[wigwammer] 29/4/2020 12:42

If they just put the assets in cash and didn't mess about with them, we could pay back even the theoretical deficit by £1.75m pa instalments over the 29 years. That's workable. Instead - the trustees, aided and abetted by the regulator, have sought to close the deficit by punting risk assets over the shorter term. Derrrrrrr...

[wigwammer] 29/4/2020 12:03

Running through the numbers on pensions.Pension assets £166m.Pension liabilities £216m.Deficit £50m.Weighted average duration of liability 14 years 8 months, circa 29 year full maturity.So over the next 29 years they need to pay out to pensioners on average £7.5m pa, and they have a starting pot to draw from of £165m. That doesn't sound to me like such a bad situation. So you have to ask - what a strange regulatory environment we have that endangers businesses that evidently have (in all likelihood) the means to pay these very long term liabilities. Another thought - there are 3000 DB members on this closed scheme. That means each is due to receive on average a pension pot worth £715k. Jeeeez. Along with QE, bailed out house prices, balllooooning state debts, bankrupting perfectly good companies to meet insane DB commitments - the generations above me really knew how to take care of themselves! Someone else will pay it off, don't worry. Yes, I know the assets are likely a bit lower post the sell off, but they've got years and years to make it back, assuming the trustees and regulators apply a little sense.

[wigwammer] 29/4/2020 11:13

..but I'm not sure gossiping about the management team enlightens a great deal.

[wigwammer] 29/4/2020 11:09

This share is really sick..

[wigwammer] 29/4/2020 11:07

Probably doing well with it cos it was the best bit.

[meijiman] 29/4/2020 10:51

Carclo is hardly going to attract the highest calibre people to its Board. What gets me is that Avingtrans bought the best bit of Redhall (Booth). They seem to be doing well with it and reading between the lines implied it had been completely mismanaged.

[wigwammer] 29/4/2020 10:20

He was also the chief executive of Cape PLC, which was sold at a 46% premium in 2017.

[bamboo2] 28/4/2020 19:27

Bought a few yesterday on the potential turn mentioned earlier in the thread.
Given the small quantity of trades, and low volume, why the price monitoring rns?

[wigwammer] 20/4/2020 09:35

It was only 2 years ago the shares were valued at over £1, and consort made an approach at £1.16 (later withdrawn). Even then - the pension deficit was £30m. This seems like the totally wrong valuation and the trustees would be well advised not to screw themselves, pension holders and shareholders by making a bad choice.