Carclo Share Discussion Threads

[valuschmalu] 12/8/2020 19:02

So important to caveat that I'm not an actuary, there is some guesswork on my part and my calcs might be slightly out of date but here goes with my explanation on why we might have differences Wigwammer. Always happy to be proved wrong!

Firstly average cash outflow (not P&L charge) for past 3 years has been £13mn. Going back to 2013, averages out at £11mn which is why I used that (I went through last 6 years accounts to extract cashflow figures).

I started with assets of £160m and technical provision liabilities of £240m (as I think 2019 assets were £166mn). It is guesswork on my part that the provision is that high but as I said earlier I would not be surprised if the technical provisions deficit was £80mn+ given what rates have been doing and that the scheme is only 75% hedged for rates (100% for inflation).

The other element is that your liabilities grow as well as the discount factor unwinds which further increases the deficit.

I think Charo is right with his analysis and that is what concerns me too

[wigwammer] 12/8/2020 18:54

I can believe charo. The required returns over 26 years are so low with a starting point of £140m, that in all likelihood they would end up with a substantial surplus. But that does beg the question - why doesn't a larger manager take over the scheme, with the aim of generating such a surplus which they then keep?

[laurence llewelyn binliner] 12/8/2020 18:08

As reported in the Accounts for the year ended 31 March 2019, the deficit on the Group’s defined benefit pension scheme, which was closed to future accrual many years ago, moved from a deficit of £29.8m at 31 March 2018 to a deficit of £49.1m at 31 March 2019. The deficit increased slightly during H1 2020 and stood at £51.3m at 30 September 2019..

On 21 July 2019, agreement was reached with the Pension Trustee whereby the total contributions paid by the Company (for deficit recovery contributions and scheme administration costs) were set at £225k per month for the period to 31 January 2021. The total cash paid by the Company for the six-month period was £0.8m (H1 2019: £0.2m), with the increase mainly due to the fact that the annual deficit recovery payment was previously paid in a lump sum in October each year.

The last triennial actuarial valuation was carried out as at 31 March 2015.

The next triennial valuation as at 31 March 2018 was due to be finalised by 30 June 2019, but negotiations regarding the future level of contributions remain ongoing with an affordable solution yet to be agreed.

An update any time soon would be very welcome indeed...!

[charo] 12/8/2020 17:42

Having dealt with pension regulator they don't act commercially and have no concern for current employees and future but insist that all "deficits" be eliminated almost without care for future of business.So current and future earnings go to meet shortfalls leading to disinvestment and poor morale.
The "deficits" are often actuarial only and can often be wildly out .
The PFF live and love to take on the funds as they earn more the more they manage.
It is a scam .
No worthwhile management will take on such a thankless task when any improvement they make is taken from them.

[wigwammer] 12/8/2020 17:25

The easiest way I can explain is this. Starting asset base. Circa £140m. Pension charge £8m pa (not £11m). Implies average asset base of £76m over the 16 years. So to make up a £16m difference, they need to average £1m pa on a £76m asset base. A pittance. And that's before we consider compounding the asset return, or the point that they have 26 years to make up the difference (not 16). Make sense?

[wigwammer] 12/8/2020 17:04

Valu - with respect, that still doesn't make sense. Even if the deficit is £80m (a big jump from £50m last reported) - 16 payments of £4m is £64m. That leaves them needing to make up just £16m over 16 years on a current asset base of around £140m (sub 1% a year). My figures included the £8m pa outflow (not £11m) - but the result is the same - they have to make a pittance on those assets to make up the difference. Please can you show your basic calculations?

[valuschmalu] 12/8/2020 14:52

Again from memory the scheme is paying out approx £11m per annum in benefits so the asset base will go down over time so you need a combination of investment return and contributions to close the gap

[wigwammer] 12/8/2020 13:27

Valu - with respect, if they contribute £4m pa for 16 years then that alone totals £64m. Why would they need to compound anything like the returns you suggest?

[meijiman] 12/8/2020 12:12

When is the next update likely to be? Hopefully might help shed some light on these issues. Got to feel there is now a half decent company hidden away here just waiting to emerge.

[valuschmalu] 12/8/2020 11:40

I think when I back of the enveloped this a while back, it would take 16 years to clear a £80mn deficit based on £4mn fixed annual contributions and a 3.5% annual investment return which should be achievable in the real world if you assume global equities should be returning 5-7% and diversified credit 3-5%. Problem is tail wagging the dog here whereby trustees potentially not being prepared to work with real world assumptions and wanting to clear the deficit at all costs as quickly as possible which could end up destroying the company and ironically damaging pension entitlement for Carclo pensioners if it has to go to the pension rescue fund. If too much cash is sucked into the pension scheme then the company wont be able to grow thereby further weakening its financial strength. Vicious circle. All IMHO

[wigwammer] 11/8/2020 09:43

I ran a few numbers the other day to see what the asset return needs to be to pay off the deficit over time, and the conclusions are daft as a brush. The thing that stands out is - the average maturity of the liabilities is around 13 years, so around 26 years until full maturity. So they have 26 years, a £140m pension asset starting point which will generate a return over time, and a company currently paying £2.7m in pa - plenty of time and assets to make up the circa £70m shortfall. It is the trustees and regulators aiming to recover the deficit over a much shorter time period which is creating the problem. I can only assume the delays are costing even more in terms of fees and management time. Just let them get on with managing the business please!

[meijiman] 11/8/2020 09:24

50p is looking further away than ever. C'mon Carclo tell em it ain't so..........

[beeezzz] 06/8/2020 21:34

Not sure management are up to the job, always on the back foot.

If Sp gets back to 50p they should have rights issue...

[1gw] 04/8/2020 17:50

Sold some today.

[valuschmalu] 04/8/2020 08:57

Not sure what is the point of agreeing the 2018 pension deficit when they will only have to do the 2021 shortly thereafter. Surely the 2018 number is already out of date anyway? Total guess but given where rates are have to assume the net liability has grown to £80mn+ which would require punchy contributions of at least £3mn. But should still be manageable out of £10mn EBITDA. The delay is worrying though. They really should put out a statement

[beeezzz] 17/7/2020 22:53

2m - Pretty sure that was 100k buy today, something amiss the other day.

[mrgpearce] 17/7/2020 18:28

Having worked for these guys briefly, I know a few of the names, however my latest follow up after I left, I believe they gave up on their microfluidics platform. Glass and lasers present interesting alternatives...

[gerd212] 17/7/2020 15:54

Do Carclo still supply the cartridges for the Alere (Axis-Shield) Afinion units?

[2magpies] 17/7/2020 12:41

boadicea

may be worth an e-mail to the Co

[boadicea] 17/7/2020 10:38

Sorry - Double clicked on post. Duplicate now removed.

[boadicea] 17/7/2020 10:37

Those who have been around for a while may recall that CAR closed its CDS (Carclo Diagnostic Solutions) division in 2016 at some write-off cost. A little ironic that a principal sustainer of the company now comes from devices for the diagnostics industry. Presumably one of the original reasons for the interest in diagnostic devices was as a customer for precision plastics.
I believe they claimed some patents in the field. Could these now have any licensing value or, as seems likely, have they been abandoned?

[2magpies] 16/7/2020 08:39

So not a single 380k trade but total traded 380k?

[beeezzz] 14/7/2020 21:45

On yahoo chart about 3.05, other trades were small yet total was over 380k.

[2magpies] 14/7/2020 08:28

beeezzz

where did you see that trade?