We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Carclo Plc | LSE:CAR | London | Ordinary Share | GB0001751915 | ORD 5P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.40 | -3.36% | 11.50 | 11.00 | 12.00 | 12.00 | 11.50 | 11.50 | 244,064 | 16:28:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Plastics,resins,elastomers | 143.45M | -3.96M | -0.0539 | -2.13 | 8.44M |
TIDMCAR
RNS Number : 3865A
Carclo plc
21 January 2020
Carclo plc
Interim Report and Accounts
Half Year Ended 30 September 2019
Summary of Results
Carclo plc is a public company whose shares are quoted on the Main Market of the London Stock Exchange. The Group is a global provider of value-adding engineered solutions for the medical, optical and aerospace industries.
The financial highlights for the first half of the financial year to 31 March 2020, being the six months to 30 September 2019 ("H1 2020"), are summarised below:
H1 2020 H1 2019(2) GBP000 GBP000 ----------- ------------- ---- Revenue from continuing operations 56,115 49,935 ----------- ------------- ---- Underlying(1) operating profit from continuing operations 3,322 2,128 --------------- ------------- ---- Underlying(1) profit before tax from continuing operations 2,087 1,263 --------------- ------------- ---- Underlying(1) earnings per share from continuing operations 2.2p 1.2p --------------- ------------- ---- Statutory operating (loss)/profit (4,169) 4,273 ----------- ------------- ---- Statutory (loss)/profit before tax (5,554) 3,352 ---- Basic (loss)/earnings per share (8.3p) 3.5p ---- Net debt excluding IFRS16 lease liabilities 26,758 35,919 ----------- ------------- ---- Net debt including IFRS16 lease liabilities 31,689 n/a ----------- ------------- ---- IAS 19 retirement benefit liability 51,349 29,463 --- ---------- ------------- ---- Revenue from continuing operations Technical Plastics 52,440 46,814 Aerospace 3,675 3,121 Total 56,115 49,935 Underlying operating profit from continuing operations Technical Plastics 4,642 3,209 Aerospace 718 606 Unallocated (2,038) (1,687) Total 3,322 2,128 Underlying EBITDA from continuing operations 6,345 4,301 ------------------------------------------------ -------- --------
-- H1 2020 saw strong performances from the two continuing businesses (Aerospace and Technical Plastics)
-- Revenue from continuing operations increased by 12% to GBP56.1m (H1 2019: GBP49.9m)
-- Underlying operating profit from continuing operations increased by 56% to GBP3.3m (H1 2019: GBP2.1m)
-- The LED Division, where the principal Wipac UK and smaller Wipac Czech businesses were exited after the period-end, continued to have significant performance issues. The results of the two disposed businesses are shown as discontinued operations whilst the results of the remaining Optics Business are included in those of the Technical Plastics Division. The two Wipac businesses reported a combined loss, before exceptional costs, of GBP2.7m (H1 2019: profit of GBP2.4m)
-- Exceptional costs from continuing operations were GBP1.9m (H1 2019: GBP0.2m) with GBP2.8m (H1 2019: nil) also incurred in respect of discontinued operations
-- Group statutory loss before tax was GBP5.6m (H1 2019: GBP3.4m profit)
-- Solid progress was made in improving the financial position of the Group with net debt, excluding IFRS16 lease liabilities, reducing to GBP26.8m at 30 September 2019 (30 September 2018: GBP35.9m)
-- Negotiations with the bank and pension trustee over the long-term funding position of the Group remain on-going, with no certainty that a satisfactory outcome will be reached
Notes:
(1) underlying results are those calculated before discontinued operations and exceptional items. A reconciliation to statutory figures is set out in the Financial Review below.
(2) the results for H1 2019 have not been restated following the implementation of IFRS 16 Leases from 1 April 2019. The impact of the implementation of IFRS 16 is set out in the Financial Review below.
Commenting on the results, Mark Rollins (Chairman) said:
"The strong results of the continuing businesses, along with the exit from the Wipac businesses after the period end, demonstrate the clear progress being made to stabilize the business. Whilst significant challenges remain in reaching agreement on the long-term funding of Carclo with the lending bank and pension trustee, the encouraging operational performances of the Technical Plastics and Aerospace Divisions provide a foundation on which a sustainable future for the Group might be developed."
Enquiries
Carclo plc Mark Rollins - Chairman 01924 268040 FTI Consulting Nick Hasell / Susanne Yule 020 3727 1340
Forward looking statements
Certain statements made in these report & accounts are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events to differ materially from any expected future events or results referred to in these forward-looking statements.
Alternative performance measures
The alternative performance measures are defined in the Financial Review, with a reconciliation to statutory figures also included to aid the user of these accounts. The Directors believe that alternative performance measures provide a more useful comparison of business trends and performance. The term 'underlying' is not defined under IFRS and may not be comparable with similarly titled measures used by other companies.
Overview
Trading Performance
The Group delivered good trading performances from both the Technical Plastics ("CTP") and Aerospace Divisions (collectively the "continuing operations"), with Group revenue from continuing operations increasing by 12% to GBP56.1m (H1 2019: GBP49.9m) for the six month period to 30 September 2019 ("H1 2020"). This revenue growth, together with improved operational performances in a number of CTP operations, resulted in underlying operating profit from continuing operations increasing by 56% to GBP3.3m (H1 2019: GBP2.1m).
As previously reported, the LED Division continued to have significant performance issues, with two of the three businesses in the Division for sale throughout much of the period. These two businesses, Wipac Czech and Wipac UK, were exited after the period end with their results reported as discontinued operations in these results. As the only other business in the Division, the Optics business based in Aylesbury, UK, was retained following the sale of the Wipac operations. Its results are included in continuing operations within the CTP Division.
The continuing businesses incurred significant exceptional costs during the period in external advisor fees associated with the ongoing negotiations for the long-term financing of the Group. Due to: these exceptional costs, which were GBP1.9m (H1 2019: GBP0.2m); the two Wipac businesses reporting a combined operating loss, including exceptional costs, of GBP5.6m (H1 2019: profit of GBP2.4m); and finance costs of GBP1.4m (H1 2019: GBP0.9m), the Group statutory loss before tax was GBP5.6m (H1 2019: GBP3.4m profit).
Underlying earnings per share from continuing operations for H1 2020 were 2.2 pence (H1 2019: 1.2 pence). The statutory loss per share for the period, for all operations, was 8.3 pence compared to earnings per share of 3.5 pence for H1 2019.
Cash generated from all operations for H1 2020 increased to GBP14.6m (H1 2019: GBP1.6m) as a result of the improved trading performance from continuing operations and the one-off realisation of certain Wipac assets resulting from the previously reported decision, taken mid-way through the period, to exit three mid-volume automotive lighting programmes.
As a result of this higher than usual cash generation in the period, net debt, excluding operating lease liabilities, fell to GBP26.8m at 30 September 2019 (30 September 2018: GBP35.9m and 31 March 2019: GBP38.5m). IFRS 16 (Leases) was implemented for the first time from 1 April 2019 and net debt, including the consequent operating lease liabilities, was GBP31.7m at the end of the period.
Whilst much progress has been made, the Group's long-term financing position is not yet agreed and negotiations, which are on-going with the lending bank and pension trustee, continue to consume significant financial resource and management time with a satisfactory outcome not yet certain.
The half-yearly financial report and results have not been audited by the Group's auditors.
Operations - Continuing
The CTP Division provides value-adding engineered solutions for the medical, optical and other industrial markets mainly using plastic injection molding and assembly technologies. Its largest market is the medical diagnostic market which continues to see steady long-term growth. In H1 2020 most of the Division's operations benefited from both the overall growth in the market as well as from a number of new programme wins, largely from existing customers as operational performance improved.
In addition, CTP India, whose largest customer makes ATM machines, saw a marked increase in its market share and benefited from the key customer's newest product ramping up in volume. Activity in CTP Czech was, however, negatively impacted by the loss of a major industrial customer following its acquisition and the acquiror consolidating its product range. This reduction had been anticipated with the facility footprint successfully reduced in the period, mitigating the impact of the revenue loss on the operation's profitability. The Optics business, which was retained following the Wipac sale with its results now included within the CTP Division, performed in line with expectations.
The Aerospace Division provides, through facilities in the UK and France, cable assemblies and specialist machined parts to the commercial and military aerospace markets. A large proportion of the Division's sales are spares and consequently revenues are sometimes variable. Its commercial sales are mainly for Airbus programmes. H1 2020 saw a healthy level of spares orders together with increasing Airbus build-rates and some market share gains on machined parts in the UK.
Operations - Discontinued
Two of the three businesses making up the historic LED Division were involved in the design, development and manufacture of low volume automotive lighting products for high value cars. As previously reported, the main Wipac UK business struggled to meet customer requirements, as it attempted to launch a high number of new programmes into a highly unstable manufacturing environment. With the Group unable to fund the significant losses and cash requirements of the business, decisions were taken, mid-way though H1 2020, to: exit three mid-volume programmes and monetise some of the related assets; sell the two automotive operations; and to halt further funding for these businesses, instead seeking and receiving customer support to fund them through to their sale.
In the second half of the six month reporting period the three mid-volume programmes were successfully moved out of Wipac and both Wipac businesses were exited after the period end: Wipac Czech on 20 November 2019 through a sale to Magna Automotive Europe GmbH for Euro 1.1m and Wipac UK, through an insolvent "pre-pack" sale, to Wuhu Anrui Optoelectrics Co. Ltd for GBP10.5m on 20 December 2019. Further details of these transactions, which have been previously reported, are set out later under "Post Balance Sheet Events" in the Financial Review. Given their exit from the Group, the two Wipac businesses are reported as discontinued operations in these results.
Strategy
Over the past twelve months the Group's key strategy focus, driven through necessity, has been to seek to ensure the future survival of the Group through: stemming the significant cash outflows associated with Wipac growing rapidly in a very weak operational environment; improving the operational performances of the CTP and Aerospace businesses; and providing a long-term funding solution for the Group.
The strong results of the continuing businesses, along with the exit from the Wipac businesses after the period end, demonstrate the clear progress being made to stabilize the business. Whilst significant challenges remain in reaching agreement on the long-term funding of Carclo with the lending bank and pension trustee, the encouraging operational performances of the Technical Plastics and Aerospace Divisions provide a foundation on which a sustainable future for the Group might be developed.
Financial Position
Net debt, excluding IFRS16 lease liabilities, was GBP26.8m at 30 September 2019, with overseas operations holding GBP8 million in cash and UK borrowings close to GBP35 million.
Total UK bank facilities at 30 September 2019 were GBP40.0m, including a revolving credit facility of GBP30.0m, due to expire on 31 January 2021, and an overdraft facility of GBP10.0m. In mid-January 2020, the lending bank received two initial distributions, totaling GBP5.0m, from the Administrator of Wipac Limited, following its insolvency and subsequent sale. At the same time, the Group's overdraft facility reduced in line with the receipts to GBP5.0m, leaving total UK bank facilities at GBP35.0m at the date of this report.
The deficit, in respect of the Group's defined benefit pension, included on the Group's balance sheet at 30 September 2019, was GBP51.3m. The Group has an agreement in place, effective until January 2021, to make contributions of GBP2.7m per annum.
Negotiations are currently ongoing with the bank, to renew the bank lending facilities beyond their current expiry at the end of January 2021, and with the pension trustee, to agree the level of future contributions to the pension scheme. The future contribution level, which is likely to be higher than currently, has to be affordable for the Group and acceptable to the pension trustee. The negotiations with the bank and pension trustee are inter-dependent and are expected to be concluded before the financial year end.
Dividend
Given the financial performance and position of the Group, the Board is not recommending the payment of a dividend in respect of H1 2020 (H1 2019: nil). The payment of dividends will only recommence when the Group's finances are on a more stable and stronger footing and no dividend is envisaged to be paid in respect of the current year.
Board Changes
There have been a number of changes to the Board since the beginning of the year.
Antony Collins, who had been fulfilling the role of Chief Restructuring Officer since he joined the Group at the end of May 2019, was appointed Group Chief Executive and joined the Board with effect from 1 October 2019. At this time, the Group's Chairman, Mark Rollins, ceased to act in an executive capacity and returned to his Non-executive Chairman role.
In July 2019, the Group Finance Director, Sarah Matthews-DeMers informed the Board that she would be leaving the Group at the end of October 2019 to take up the Chief Finance Officer role at AB Dynamics plc. Ed Watkinson was appointed Group Chief Finance Officer designate on 30 September 2019 and took over on Sarah's departure in an interim capacity only. He did not join the Board and, following the sale of Wipac, left the Group on 9 January. A search for his successor is close to completion.
External Auditor
As reported in the 2019 Annual Report, KPMG LLP has been the Group's external auditor since September 2005. Whilst KPMG was reappointed as auditor by shareholders at the General meeting on 19 December, the Group is currently in the process of holding a tender for future audit services in which KPMG LLP has chosen not to participate.
Going Concern
Existing bank facilities have been extended until 31 January 2021 and an agreement is in place with the Pension Trustee for the level of company contributions to the pension scheme over the same period. The forecast projections for the Group's performance over this twelve-month period have been reviewed by the Directors and, based on their assessment, the Directors consider that there is a material uncertainty related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern and that it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business. However, subject to the ongoing support of the Group's lending bank and an affordable funding agreement being reached with the Pension Trustee, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its financial statements.
Outlook
CTP continues to make solid cash generative progress and the results for the Division, for the financial year to 31 March 2020 ("FY2020") are expected to be comfortably ahead of those for FY2019, with the outcome for the second half anticipated to be similar to the strong second half performance of the prior year. Aerospace, operating in a niche market having limited growth, is also anticipated to deliver healthily profitable results for FY2020 with a second half result similar to the first. However, the Group's long-term financing position is not yet agreed and negotiations, which are on-going with the lending bank and pension trustee, continue to consume significant financial resource and management time with a satisfactory and affordable outcome not yet certain.
Divisional Review
Technical Plastics Division (continuing operations)
GBP000s H1 2020(1) H1 2019(1) Change Revenue 52,440 46,814 12% ----------- ----------- ------- Underlying Operating Profit 4,642 3,209 45% ----------- ----------- ------- Margin 8.9% 6.9% ----------- ----------- -------
Note (1): The Optics business, based in Aylesbury (UK), was retained by the Group following the sale of Wipac. Its results - revenue of GBP3.633m (H1 2019: GBP4.060m) and underlying operating profit of GBP0.466m (H1 2019: GBP0.626m) - are included in the table above for both periods. These results were previously included in those of the LED Division.
The Technical Plastics Division now operates out of nine facilities, two in the UK (including the Optics business), four in the USA and one each in the Czech Republic, India and China. Each country, other than the Czech Republic, saw increased revenue in H1 2020, compared with H1 2019, as the key medical diagnostic market grew, and improved operational performance and customer service led to market shares gains in a number of geographies. In addition, India, whose largest customer makes ATM machines, saw a marked increase in its market share and benefited from the key customer's newest product ramping up in volume. Overall the Division saw revenue increase by 12% to GBP52.4m in H1 2020 (H1 2019: GBP46.8m) with GBP1.3m of the increase due to favourable foreign exchange movements. With the strategy to increasingly focus on production volumes, tooling revenue declined in the period, representing only 7% of Divisional revenue in H1 2020 (H1 2019: 11%).
Underlying operating profit increased as a result of the revenue growth and effective cost control. The Czech operation also reported an improved profit, with the negative impact of the loss of a major industrial company, following its acquisition and the acquiror consolidating its product range, having been anticipated and the facility footprint successfully reduced in the period. India reported the strongest profit growth as the facility, which had been expanded in prior years, saw much improved footprint utilisation. In total, the Technical Plastics Division reported underlying operating profits for the first half of 2020 of GBP4.6m (H1 2019: GBP3.2m), with GBP0.1m of the increase due to favourable foreign exchange movements. This 45% improvement was achieved despite tooling profits declining to GBP0.3m (H1 2019: GBP0.8m).
As a consequence, the Technical Plastics Division's operating profit margin improved to 8.9% for H1 2020 (H1 2019: 6.9%).
Aerospace Division (continuing operations)
GBP000s H1 2020 H1 2019 Change Revenue 3,675 3,121 18% -------- -------- ------- Underlying Operating Profit 718 606 18% -------- -------- ------- Margin 19.5% 19.4% -------- -------- -------
Both Bruntons, in the UK, and Jacottet, in France, saw healthy increases in revenue during H1 2020 compared with the same period in 2019. This was largely due to build rate increases at Airbus, market share gains by a key customer for arrestor ropes, improved levels of spares activity and a large customer increasing stocks ahead of Brexit. Overall, Divisional sales increased by 18% to GBP3.7m (H1 2019: GBP3.1m).
Operating profit for the Division increased broadly in line with revenue as the improved contribution generated was partially offset by increased costs, particularly at Bruntons where employee costs rose ahead of inflation in order to retain the required skills in the business. As a result, underlying profit for the Division increased by around 18% to GBP0.7m (H1 2019: GBP0.6m). Operating margins remained around the 19.5% level.
Wipac businesses (discontinued operations)
GBP000s H1 2020(1) H1 2019(1) Change Revenue 21,919 21,520 2% ----------- ----------- ------- Underlying Operating (Loss) / Profit (2,747) 2,361 n/a ----------- ----------- ------- Margin n/a 11.0% ----------- ----------- -------
Note (1): The Optics business, based in Aylesbury (UK), was retained by the Group following the sale of Wipac. Its results - GBP3.633m revenue (H1 2019: GBP4.060m) and underlying operating profit of GBP0.466m (H1 2019: GBP0.626m) are included in the results of the CTP Division.
Discontinued operations consist of the two Wipac automotive lighting businesses: a major manufacturing and design facility in the UK and a smaller design facility in the Czech Republic. As described earlier, both facilities were in sale processes for the latter three months of the period and were exited after the period end. Further details of these transactions are set out in the "Post Balance Sheet Events" paragraph of the Financial Review below.
As fully described in the Annual Report and Accounts for the year ended 31 March 2019, Wipac experienced severe operational and financial difficulties during the second half of that year as a result of significant number of new programmes being launched into a very weak operational environment. This led to customers experiencing delivery delays and quality issues and the Wipac business reporting significant monthly losses and cash outflows at the start of H1 2020. This situation was in significant danger of adversely affecting the viability of the Carclo Group unless action was taken. Consequently, during H1 2020 the businesses were put up for sale and three mid-volume programmes were exited, with some related assets realised. Operational management was also strengthened and Carclo stopped funding the Wipac business, instead obtaining financial support from the customer base through temporary price surcharges, to allow the businesses to continue to operate whilst the sale processes took place.
The result of these actions were: an improved operational performance, and near elimination of delivery arrears; a business operating around break-even since August, largely due to a significant increase in the size of the temporary price increases from that time; and, ultimately, a successful exit from both Wipac businesses after the period end.
Against this background, production sales revenue grew very strongly as programmes awarded in prior years were launched, although total sales were only up 2% at GBP21.9m in H1 2020 (H1 2019: GBP21.5m) as customers avoided awarding any new programmes to Wipac, resulting in a steep decline in revenue from design, development and tooling from GBP13.5m in H1 2019 to GBP1.8m in H1 2020.
The operational difficulties, combined with the steep decline in the historical higher margin design, development and tooling activity, led to Wipac making significant losses in the first few months of the period. As mentioned above, these monthly losses were mitigated in the final two months of the period through a marked increase in the level of customer support. As a result, H1 2020 saw the two Wipac operations report a combined underlying loss, before exceptional costs, of GBP2.7m (H1 2019: GBP2.4m underlying operating profit).
Financial Review
The additional financial information set out below should be read in conjunction with the commentary included earlier in the Overview and Divisional Review sections of this report.
IFRS 16 - Leases
The Group has applied IFRS 16 for the first time in the period ended 30 September 2019. As permitted by the standard, comparatives for H1 2019 have not been restated and the impact on net assets has been recognised within retained earnings as at 1 April 2019.
IFRS 16 has resulted in almost all leases now being recognised on the balance sheet, with an asset of GBP4.9m (the right to use the leased asset) and a liability of GBP4.9m (the liability to pay the lease rentals) being recognised at 30 September 2019. At 1 April 2019, the start of the period and the date of implementation, the corresponding amounts were GBP5.7m.
In addition, instead of charging a rental expense within operating profit, a depreciation on the right to use asset and a finance charge are now recognised in the income statement. Compared with the previous accounting treatment, these changes have increased the statutory operating profit for the first half by GBP0.1m but decreased the statutory profit before tax by GBP0.1m.
Central Costs
These consist principally of the costs of pension scheme administration, people employment, office rent and running costs, travel, share options and fees associated with the audit, the company's stock exchange listing and the bank facility. They total GBP2.0m for H1 2020 (H1 2019: GBP1.7m) with the largest constituent being employee salary costs of GBP0.6m. The main reason for the increase was GBP0.2m of central IT costs that had been recharged to Wipac operations but, because they will be unable to be recharged in the future, are required to be accounted for in continuing, rather than discontinued, operations. Central costs are expected to remain at a similar level in the future.
Exceptional Costs
The exceptional costs incurred for continuing operations in H1 2020 total GBP1.9m (H1 2019: GBP0.2m) and principally relate to: GBP1.5m for the costs of external advisers of the Company and its lending bank; the costs associated with independent third party consultants involved in the financial restructuring, including GBP0.2m for Antony Collins when operating in the role of Chief Restructuring Officer; GBP0.1m of additional costs paid to the auditor as a result of the extra work required because of the financial situation of the Group; and other costs such as redundancy and extraordinary bank fees related to the waiving and renegotiating of bank covenants. The largest amounts paid to external advisers were to PwC (GBP0.8m), for restructuring advice given to the Company, and to Grant Thornton (GBP0.3m), the financial advisers to the Group's lending bank, HSBC.
The exceptional costs associated with the discontinued businesses for H1 2020 total GBP2.8m. These costs principally relate to: a further GBP1.5m impairment, down to fair value, of the Wipac operation to reflect the subsequent actual sale proceeds of the business; a further GBP0.5m impairment in the value of the contract assets associated with the mid-volume programmes exited in the period; a write-down of GBP0.3m in the carrying value of inventory; and GBP0.5m for the fees of external advisers to Wipac in respect to the restructuring and sale of the business, with amounts paid to PwC of GBP0.4m being the major element.
The exceptional costs for H1 2020 may be analysed as follows:
Total GBPm Continuing Operations Discontinued Operations Group Professional advisers' fees for restructuring 1.5 0.5 2.0 ---------------------- ------------------------ ------- Consultants fees for restructuring 0.3 - 0.3 ---------------------- ------------------------ ------- Exceptional audit fee for y.e. 31 March 2019 0.1 - 0.1 ---------------------- ------------------------ ------- Impairment of Wipac assets - 1.5 1.5 ---------------------- ------------------------ ------- Impairment of mid-volume programme contract assets - 0.5 0.5 ---------------------- ------------------------ ------- Inventory write-down - 0.3 0.3 ---------------------- ------------------------ ------- Total Exceptional Costs 1.9 2.8 4.7 ---------------------- ------------------------ -------
Exceptional professional advisory fees have continued to be incurred at a similar rate during the three months since the end of the first half of the financial year. Whilst a modest reduction in the rate of spend can be expected following the sale of the Wipac businesses, these costs will not reduce substantially until the long-term funding position of the Group is secured.
Finance Costs
Total finance costs, for continuing and discontinued operations, in H1 2020 were GBP1.4m (H1 2019: GBP0.9m), consisting of net interest payable on bank loans and finance leases of GBP0.8m (H1 2019: GBP0.5m) and net interest on the defined benefit pension liability of GBP0.6m (H1 2019: GBP0.4m). The increases in costs were respectively due to the inclusion, for the first time due to the implementation of IFRS16, of interest costs on operating leases, and an increase in the defined benefit pension liability which significantly increases the imputed interest cost.
Tax
The H1 2020 accounts include a tax charge of GBP0.5m (H1 2019: GBP0.4m) on the profit before tax of continuing operations. The effective tax rate is much higher than the UK tax rate of 19% (2019: 19%) mainly because a deferred tax asset has not been recognized in respect of the UK losses, as there is no certainty that the losses will be utilized in the foreseeable future, which has had the effect of increasing the apparent underlying tax rate.
Working Capital and Capital Expenditure
Largely as a result of certain fixed asset, tooling and development cost asset realisations at Wipac, following the decision to exit three mid-volume automotive lighting programmes, working capital (being current assets less current liabilities) fell to GBP31.3m at 30 September 2019 (30 September 2018: GBP37.1m). Gross capital expenditure for the period, on a cash basis, was GBP3.3m (H1 2019: GBP3.2m) with the majority expended on injection molding machines. Proceeds for the sale of equipment, principally relating to the programme exits at Wipac, were GBP2.5m for the period (H1 2019: GBP0.3m).
Cash Flow, Net Debt and Banking Facilities
As a result of the one-off asset realisations at Wipac, and the improved financial performance of the CTP and Aerospace Divisions, cash generated from operations increased to GBP14.6m (H1 2019: GBP1.6m), despite the significant exceptional cash costs associated with external advisor fees.
This, combined with a normal level of net capital expenditure, resulted in net debt (excluding IFRS16 liabilities associated with operating leases) decreasing to GBP26.8m at 30 September 2019 (30 September 2018: GBP35.9m; 31 March 2019: GBP38.5m). Including IFRS16 liabilities net debt was GBP31.7m at the end of the period.
At 31 March 2019, the Group's total UK bank facilities were GBP47.0m of which GBP30.0m related to a revolving credit facility and GBP17.0m to an overdraft facility. The overdraft facility reduced by GBP2.0m on 1 July 2019 and by a further GBP5.0m before the end of September 2019, to GBP10.0m, as monies were received from the Wipac asset realisations. Total UK bank facilities at 30 September 2019 were GBP40.0m, with the revolving credit facility of GBP30.0m due to expire on 31 January 2021. In mid-January 2020, the lending bank received two initial distributions, totaling GBP5.0m, from the Administrator of Wipac Limited, following its insolvency and subsequent sale. At the same time, the Group's overdraft facility reduced by GBP5.0m, to GBP5.0m, leaving total UK bank facilities at GBP35.0m at the date of this report.
Pension
As reported in the Report and 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 GBP29.8m at 31 March 2018 to a deficit of GBP49.1m at 31 March 2019. This movement resulted from: an increase in liabilities as the AA corporate bond rate fell; an increase in assumed member longevity, following the results of an updated mortality study; and the requirement to account for guaranteed minimum pension benefit equalisation, following a High Court judgement handed down in October 2018 relating to the Lloyds Banking Group's defined benefit scheme. The deficit increased slightly during H1 2020 and stood at GBP51.3m at 30 September 2019 (30 September 2018: GBP29.5m), with strong investment returns largely offsetting the adverse impact of a further change in the assumption for the discount rate on liabilities to 1.80% per annum (31 March 2019: 2.40%).
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 GBP225k per month for the period to 31 January 2021. The total cash paid by the Company for the six-month period was GBP0.8m (H1 2019: GBP0.2m), 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.
Post Balance Sheet Events
As previously reported, the decision was taken mid-way through the half year to sell the two Wipac businesses, with both businesses being successfully exited after the end of the period.
Firstly, the entire share capital of Wipac Czech s.r.o. was sold on 26 November 2019 to Magna Automotive Europe GmbH for a total consideration of EUR1.1m, comprising EUR0.8m in cash and the assumption of EUR0.3m of outstanding liabilities. In the year to 31 March 2019, Wipac Czech reported operating profits of EUR0.1m and had gross assets of EUR0.9m at the end of that financial year.
Then, on 20 December 2019, the Group exited the Wipac UK business with Administrators being appointed to Wipac Limited who, immediately following their appointment, sold the business. The business and assets of Wipac Limited (in administration), other than those related to its Aylesbury based Optics business ("Optics"), were sold to Wipac Technology Limited, a newly formed wholly owned subsidiary of Wuhu Anrui Optoelectrics Co. Ltd, for a total consideration of GBP10.5m. The Group's defined benefit pension scheme and lending bank were the principal secured creditors of Wipac Limited and it is expected that approximately GBP3.5m of the net proceeds will be paid by the Administrator to the Group's pension scheme and approximately GBP5.0m will be used to reduce the outstanding drawn balance of the Group's revolving credit facility. In the year ended 31 March 2019, Wipac Limited generated a loss of GBP13.2m and had gross assets at 31 March 2019 of GBP46.3m.
Given their sale, the two Wipac businesses are reported as discontinued operations in these results. It is intended that full details of any profit or loss on sale of the businesses will be reported in the Report and Accounts for the year ended 31 March 2020.
Optics is a profitable standalone business, historically operating within the Wipac Limited legal entity, with its business closely related to the Group's Technical Plastics Division. Its principal supplier is CTP Czech. Immediately following the appointment of the Administrators, the Group acquired the business and assets (other than trade debtors) related to Optics, for a total cash consideration of GBP0.25m. The Administrators retained the Optics trade debtors and the Group will assist in their collection. In the year ended 31 March 2019, the Optics business generated a profit before taxation of GBP1.1m and had gross assets at 31 March 2019 of GBP3.5m. The results of the Optics business are now included in the results of CTP Division.
Alternative Performance Measures
In the analysis of the Group's financial performance and position, operating results and cash flows, alternative performance measures are presented to provide readers with additional information. This report includes both statutory and adjusted non-GAAP financial measures, the latter of which the Directors believe better reflect the underlying performance of the business and provides a more meaningful comparison of how the business is managed and measured on a day-to-day basis. Underlying results exclude certain items because if included, these items could distort the understanding of the performance for the year and the comparability between the periods. A reconciliation between the statutory and underlying financial measures is shown below.
Underlying Underlying GBPm Statutory Exceptional items Group Continuing CTP operating profit 4.6 - 4.6 4.6 Aerospace operating profit 0.7 - 0.7 0.7 Central costs (3.9) 1.9 (2.0) (2.0) --------------------------------------------------- ---------- ------------------ ----------- ------------ Group operating profit from continuing operations 1.4 1.9 3.3 3.3 Group operating loss from discontinued operations (5.6) 2.8 (2.8) - Other finance expense (1.4) - (1.4) (1.4) --------------------------------------------------- ---------- ------------------ ----------- ------------ Group (loss) / profit before taxation (5.6) 4.7 (0.9) 1.9 Taxation (0.7) - (0.7) (0.7) --------------------------------------------------- ---------- ------------------ ----------- ------------ Group (loss) / profit for the period (6.3) 4.7 (1.6) 1.2 Basic (loss) / profit per share (pence) (8.3p) n/a (1.8p) 2.2p --------------------------------------------------- ---------- ------------------ ----------- ------------
Principal Risks and Uncertainties
In the Annual Report for the year ended 31 March 2019 a detailed review of the principal risks faced by the Group and how the risks were being managed was provided.
These risks related to:
Funding and banking covenants
Operational execution risk
Reliance on major customers
Reliance on major projects
Management bandwidth
Pensions
Global economy
Political uncertainty including "Brexit"
IT security breach / system failures
Whilst the Board considers that these principal risks and uncertainties have not materially changed since the publication of the 2019 Annual Report it is worth noting:
-- the sale of Wipac after the period end, which can be expected to reduce the operational execution and reliance on major projects risks;
-- the departure on 9 January 2020 of the Group CFO, which is likely to lead to a short-term increase in the management bandwidth risk; and
-- the ongoing negotiations with the lending bank and pension trustee which, although not necessarily increasing the risks, bring the realisation of the funding and pensions risks closer in time.
Going Concern
Net debt at 30 September 2019 was GBP26.8m (excluding operating lease liabilities), an encouraging reduction from GBP38.5m at 31 March 2019. The decrease was largely as a result of the decision, taken mid-way through the reporting period, to exit three mid-volume programmes at Wipac, with monies subsequently received from customers in respect of the work done on the design, development and tooling for these programmes.
The Directors have reviewed the detailed cash flow forecasts that have been prepared for a period in excess of two years from the date of the approval of these financial statements. The Directors have also considered the debt facilities available to the Group which currently comprise of an overdraft facility of GBP5.0m and a GBP30.0m revolving credit facility maturing at the end of January 2021, a period of twelve months from the date of this report.
The bank covenants were renegotiated during the period, as part of the on-going financing discussions, with the main applicable covenants at 30 September 2019 being Interest Cover of greater than 1.75x and a Net Debt: EBITDA ratio of less than 4.50x. These were both met, based on the September management accounts, at the period end with Interest Cover being 3.27x and Net Debt: EBITDA being 3.21x. Under the cash flow forecast base case, the Group's financing is forecast to remain within the available facilities and covenants for at least the twelve-month forecast period.
A number of assumptions that have been made in the forecast including:
-- The lending bank continuing to offer sufficient facilities
The base case cash flow forecast and hence the going concern assessment have been prepared on the basis that the bank continues to extend a sufficient overdraft facility for the period to January 2021, in addition to the GBP30m revolving credit facility.
-- An affordable funding agreement being reached with the Pension Trustee
The Group's defined benefit pension scheme has a sizeable funding deficit. Until 31 January 2021, a total of GBP2.7m per annum is being paid to the scheme by the Group. Negotiations for a long-term funding agreement are on-going and it is likely that a higher-level of contributions will be required. The base case cash flow forecasts and hence the going concern assessment have been prepared on the basis that an affordable level of contributions can be agreed.
-- Suppliers continuing to offer normal commercial credit terms
Certain credit insurers have removed cover on the Group. To date this has not had a material impact on the cash flows. The cash forecast assumes that suppliers continue to offer normal commercial credit terms. Any move to acceleration of supplier payments could impact on cash requirements.
-- Customers paying invoices to terms
Any significant delay in receiving payment could impact on headroom.
-- Ongoing trading performance
The CTP Division has won a number of new sales programmes which are due to start in the current financial year. Any delay in commencement or in the ramp up of forecast volumes or failure to deliver revenue and margin growth could reduce headroom, as could any material trading underperformance in the remaining businesses or loss of existing customers.
-- Capital investment projects completing on time and on budget
The CTP Division has won a number of new sales programmes which require capital investment. If this investment is not completed on time and on budget, there could be further cash requirements for the Group
Financial sensitivity modelling was carried out which assessed the impact of the risks noted above both individually and in aggregate on both headroom and bank covenants.
The Board concluded that in the event of any of these individual risks occurring and having a material impact on the forecasts, the Group would require the support of its lenders by way of additional overdraft facility and/or covenant waiver or deferral.
Based on their assessment, the Directors consider that there is a material uncertainty related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern and that it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business. However, subject to the ongoing support of the Group's lending bank and an affordable funding agreement being reached with the Pension Trustee, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its financial statements.
Responsibility Statement
We confirm to the best of our knowledge:
(a) the condensed consolidated set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board,
Mark Rollins Antony Collins Chairman Group Chief Executive
20 January 2020
Glossary of Terms
CONSTANT CURRENCY Retranslated at the prior half-year's average exchange rate. Included to explain the effect of changing exchange rates during volatile times to assist the reader's understanding GROUP CAPITAL EXPITURE Fixed asset additions ------------------------------------------ NET BANK INTEREST Interest receivable on cash at bank less interest payable on bank loans and overdrafts. Reported in this manner due to the global nature of the Group and its banking agreements ------------------------------------------ NET DEBT Cash and cash deposits less current and non-current interest-bearing loans, borrowings and finance leases. Used to report the overall financial debt of the Group in a manner that is easy to understand ------------------------------------------ UNDERLYING Adjusted to exclude all exceptional items ------------------------------------------ UNDERLYING EBITDA Profit before interest tax, depreciation, amortisation adjusted to exclude all exceptional items ------------------------------------------ UNDERLYING EARNINGS PER SHARE Earnings per share adjusted to exclude all exceptional items ------------------------------------------ UNDERLYING OPERATING PROFIT Operating profit adjusted to exclude all exceptional items ------------------------------------------ UNDERLYING PROFIT BEFORE TAX Profit before tax adjusted to exclude all exceptional items ------------------------------------------ Condensed consolidated income statement Six months Six months Year ended ended ended 30 30 September September 31 March 2019 2018 2019 restated* restated* unaudited unaudited audited Notes GBP000 GBP000 GBP000 ------------- --- ---------------- ------- ----- ----- ----- --------- --------- --------- Revenue - continuing operations 4 56,115 49,935 105,340 Operating profit before exceptional items - continuing operations 3,322 2,128 6,390 Exceptional items - continuing operations 5 (1,930) (216) (4,507) Operating profit - continuing operations 4 1,392 1,912 1,883 Finance revenue - continuing operations 6 51 35 35 Finance expense - continuing operations 6 (1,286) (900) (1,926) Profit / (loss) before tax - continuing operations 157 1,047 (8) Income tax expense - continuing operations 7 (501) (407) (2,931) (Loss) / profit after tax but before loss on discontinued operations (344) 640 (2,939) (Loss) / profit on discontinued operations, net of tax (5,747) 1,899 (15,693) (Loss) / profit after tax (6,091) 2,539 (18,632) ========= ========= ========= Attributable to - Equity holders of the parent (6,091) 2,539 (18,632) Non-controlling interests - - - (6,091) 2,539 (18,632) ========= ========= ========= Earnings per ordinary share 8 Basic - continuing operations (0.5) p 0.9 p (4.0) p Basic - discontinued operations (7.8) p 2.6 p (21.4) p Basic (8.3) p 3.5 p (25.4) p Diluted - continuing operations (0.5) p 0.9 p (4.0) p Diluted - discontinued operations (7.8) p 2.6 p (21.4) p Diluted (8.3) p 3.5 p (25.4) p ========= ========= ========= The Group initially applied IFRS 16 at 1 April 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the date of initial application. *The comparative information is restated on account of the amounts presented in the condensed consolidated income statement under discontinued operations which relate to the two Wipac businesses exited after the end of the period, as detailed in Note 22 Post balance sheet events. Condensed consolidated statement of comprehensive income Six months Six months Year ended ended ended 30 September 30 September 31 March 2019 2018 2019 unaudited unaudited audited GBP000 GBP000 GBP000 ----------------------------------------- ------------ ------------ -------- (Loss) / profit for the period (6,091) 2,539 (18,632) Other comprehensive income - Items that will not be reclassified to the income statement Remeasurement (losses) / gains on defined benefit scheme (2,450) 696 (16,293) Deferred tax arising - (80) (5,260) Total items that will not be reclassified to the income statement (2,450) 616 (21,553) ------------ ------------ -------- Items that are or may in the future be classified to the income statement Foreign exchange translation differences 2,363 945 1,260 Net investment hedge (704) - (425) Deferred tax arising (136) (178) (61) Total items that are or may in future be classified to the income statement 1,523 767 774 ------------ ------------ -------- Other comprehensive (expense) / income, net of income tax (927) 1,383 (20,779) Total comprehensive (expense) / income for the period (7,018) 3,922 (39,411) ============ ============ ======== Attributable to - Equity holders of the parent (7,018) 3,922 (39,411) Non-controlling interests - - - Total comprehensive (expense) / income for the period (7,018) 3,922 (39,411) ============ ============ ======== Condensed consolidated statement of financial position
30 September 30 September 31 March 2019 2018 2019 unaudited unaudited audited Notes GBP000 GBP000 GBP000 ------------------------------------ ------ ------------ ------------ --------- Assets Intangible assets 10 24,800 25,824 24,144 Property, plant and equipment 11 38,833 49,722 42,495 Investments 7 7 7 Deferred tax assets 196 8,774 442 Trade and other receivables 49 142 126 Total non-current assets 63,885 84,469 67,214 ------------ ------------ --------- Inventories 15,312 20,032 19,657 Contract assets 2,044 22,417 20,264 Trade and other receivables 22,291 28,681 32,101 Cash and cash deposits 16 20,493 10,867 10,330 Assets held for sale 12 25,886 - - Total current assets 86,026 81,997 82,352 Total assets 149,911 166,466 149,566 ------------ ------------ --------- Liabilities Interest bearing loans and borrowings 34,439 31,385 1,048 Deferred tax liabilities 4,085 4,109 4,051 Provisions - 323 - Trade and other payables - 311 132 Retirement benefit obligations 14 51,349 29,463 49,121 Total non-current liabilities 89,873 65,591 54,352 ------------ ------------ --------- Trade and other payables 18,299 24,613 31,444 Current tax liabilities 583 1,511 867 Contract liabilities 2,065 3,280 2,540 Provisions 267 98 333 Interest bearing loans and borrowings 16,633 15,401 47,763 Liabilities directly associated with the assets held for sale 12 16,850 - - Total current liabilities 54,697 44,903 82,947 Total liabilities 144,570 110,494 137,299 ------------ ------------ --------- Net assets 5,341 55,972 12,267 ============ ============ ========= Equity Ordinary share capital issued 20 3,671 3,671 3,671 Share premium 7,359 7,359 7,359 Translation reserve 8,531 7,179 7,008 Retained earnings (14,194) 37,789 (5,745) Total equity attributable to equity holders of the parent 5,367 55,998 12,293 Non-controlling interests (26) (26) (26) Total equity 5,341 55,972 12,267 ============ ============ ========= The Group initially applied IFRS 16 at 1 April 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the date of initial application. Condensed consolidated statement of changes in equity Attributable to equity holders of the company ------- ------------------------------------------------------- --------- ----- -------------------- Share Share Translation Retained Non-controlling Total capital premium reserve earnings Total interests equity GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ------ ----- ----------------- ------- ------- ----------- -------- -------- ------------ --- ---------- Current half year period - unaudited Balance at 1 April 2019 3,671 7,359 7,008 (5,745) 12,293 (26) 12,267 Adjustment on initial application of IFRS 16 (net of tax) - - - - - - - Adjusted balance at 1 April 2019 3,671 7,359 7,008 (5,745) 12,293 (26) 12,267 Loss for the period - - - (6,091) (6,091) - (6,091) Other comprehensive income - Foreign exchange translation differences - - 2,363 - 2,363 - 2,363 Net investment hedge - - (704) - (704) - (704) Remeasurement losses on defined benefit scheme - - - (2,450) (2,450) - (2,450) Taxation on items above - - (136) - (136) - (136) Transactions with owners recorded directly in equity - Share based payments - - - 92 92 - 92 Balance at 30 September 2019 3,671 7,359 8,531 (14,194) 5,367 (26) 5,341 ======= ======= =========== ======== ======== ============ ========== Prior half year period - unaudited Balance at 1 April 2018 3,664 7,359 6,234 34,719 51,976 (26) 51,950 Profit for the period - - - 2,539 2,539 - 2,539 Other comprehensive income - Foreign exchange translation differences - - 945 - 945 - 945 Remeasurement losses on defined benefit scheme - - - 696 696 - 696 Taxation on items above - - - (258) (258) - (258) Transactions with owners recorded directly in equity - Share based payments - - - 152 152 - 152 Performance Share Plan Awards 7 - - (59) (52) - (52) Balance at 30 September 2018 3,671 7,359 7,179 37,789 55,998 (26) 55,972 ======= ======= =========== ======== ======== ============ ========== Prior year period - audited * Balance at 1 April 2018 3,664 7,359 6,234 34,719 51,976 (26) 51,950 Loss for the period - - - (18,632) (18,632) - (18,632) Other comprehensive income - Foreign exchange translation differences - - 1,260 - 1,260 - 1,260 Net investment hedge - - (425) - (425) - (425) Remeasurement losses on defined benefit scheme - - - (16,293) (16,293) - (16,293) Taxation on items above - - (61) (5,260) (5,321) - (5,321) Transactions with owners recorded directly in equity - Share based payments - - - 36 36 - 36 Exercise of share options 7 - - (97) (90) - (90) Taxation on items recorded
directly in equity - - - (218) (218) - (218) Balance at 31 March 2019 3,671 7,359 7,008 (5,745) 12,293 (26) 12,267 ======= ======= =========== ======== ======== ============ ========== Condensed consolidated statement of cash flows Six months Six months Year ended ended ended 30 September 30 September 31 March 2019 2018 2019 unaudited unaudited audited Notes GBP000 GBP000 GBP000 ------------------------------------- ----- ------------ ------------ -------- Cash generated from operations 15 14,635 1,649 4,145 Interest paid (560) (524) (1,202) Tax paid (348) (103) (1,107) Net cash from operating activities 13,727 1,022 1,836 Cash flows from investing activities Proceeds from sale of property, plant and equipment 2,500 333 333 Interest received 57 57 58 Acquisition of property, plant and equipment (3,296) (3,128) (6,897) Acquisition of intangible assets - computer software (16) (64) (87) Net cash from investing activities (755) (2,802) (6,593) Cash flows from financing activities Drawings on term loan facilities - - 241 Repayment of lease liabilities (2,334) (206) (453) Cash outflow in respect of performance share plan awards - (52) (52) Net cash from financing activities (2,334) (258) (264) Net decrease in cash and cash equivalents 10,638 (2,038) (5,021) Cash and cash equivalents at beginning of period (7,038) (2,223) (2,223) Effect of exchange rate fluctuations on cash held 260 221 206 Cash and cash equivalents at end of period 16 3,860 (4,040) (7,038) ============ ============ ======== Notes to the accounts 1. Basis of preparation
Except as outlined below, the condensed consolidated half year report for Carclo plc ("Carclo" or "the Group") for the six months ended 30 September 2019 has been prepared on the basis of the accounting policies set out in the audited accounts for the year ended 31 March 2019 and in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct Authority and the requirements of IAS 34 "Interim Financial Reporting" as adopted by the EU.
The financial information is unaudited.
The half year report does not constitute financial statements and does not include all of the information and disclosures required for full annual statements. It should be read in conjunction with the annual report and financial statements for the year ended 31 March 2019 which is available either on request from the Company's registered office, Springstone House, PO Box 88, 27 Dewsbury Road, Ossett, WF5 9WS, or can be downloaded from the corporate website - www.carclo-plc.com.
The comparative figures for the financial year ended 31 March 2019 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters which the auditors drew attention by way of emphasis without qualifying their report other than the material uncertainty that may cast significant doubt on the Group's and the parent Company's ability to continue as a going concern, and (iii) did not contain statements under Section 498 (2) of the Companies Act 2006.
The half year report was approved by the board of directors on 20 January 2020. Copies are available from the corporate website.
The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs").
Going Concern
In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.
The Directors have prepared base and sensitised cash flow forecasts for a period in excess of twelve months from the date of their approval of these condensed interim financial statements. The Directors have also considered the debt facilities available to the Group which are disclosed in note 16 to the condensed interim financial statements.
Net debt at 30 September 2019 was GBP31.7m, falling from GBP38.5m at 31 March 2019 and is forecast to peak in the third quarter of the financial year. The increase was driven by capital investment and timing of payment profile for ongoing design, development and tooling programmes. The Group's financing remains within banking covenants at 30 September 2019 and is forecast to remain within the available facilities and covenants for at least the twelve-month forecast period.
Existing bank facilities having been extended until 31 January 2021 and an agreement is in place with the Pension Trustee for the level of company contributions to the pension scheme over the same period. The forecast projections for the Group's performance over this twelve-month period have been reviewed by the Directors and, based on their assessment, the Directors consider that there is a material uncertainty related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern and that it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business.
Negotiations are currently ongoing with the bank, to renew the bank lending facilities beyond their current expiry at the end of January 2021, and with the pension trustee, to agree the level of future contributions to the pension scheme. The future contribution level, which is likely to be higher than currently, has to be affordable for the Group and acceptable to the pension trustee. The negotiations with the bank and pension trustee are inter-dependent and are expected to be concluded before the financial year end.
However, subject to the ongoing support of the Group's lending bank and an affordable funding agreement being reached with the Pension Trustee, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its financial statements.
Going concern is discussed in more detail in the management commentary that precedes these Financial Statements.
2. Accounting policies
Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 March 2019. The following changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 March 2019. The Group has initially adopted IFRS 16 Leases from 1 April 2019. A number of other new standards are effective from 1 April 2019, but they do not have a material effect on the Group's financial statements.
FRS 16 'Leases' is effective for all accounting periods beginning on or after 1 January 2019. The adoption of IFRS 16 means that lease agreements will give rise to both a right-of-use asset and a lease liability for future lease payables. The right-of-use asset will be depreciated on a straight-line basis over the life of the lease. Interest will be recognised on the lease liability, resulting in a higher interest expense in the earlier years of the lease term. The total expense recognised in the Income Statement over the life of the lease will be unaffected by the new standard. However, IFRS 16 results in the timing of lease expense recognition being accelerated for leases which would be currently accounted for as operating leases.
On a cash flow basis, the impact of transition to IFRS 16 is GBPnil and adoption of the standard will have no impact on the commercial operations of the business.
Transition:
As previously disclosed, the Group has adopted the modified retrospective transition approach, where the initial asset values will be equal to the present value of the future lease payments as at the date of transition.
The Group has also applied the following practical expedients:
-- To grandfather the definition of a lease on transition;
-- To rely on a previous assessment of whether leases are onerous in accordance with IAS 37 immediately before the date of initial application as an alternative to performing an impairment review;
-- To apply a single discount rate to a portfolio of leases with reasonably similar characteristics.
The Group has also applied the recognition exemption for short term leases and leases of low-value items.
Impact on the financial statements:
On transition the opening balances for the Consolidated Statement of Financial Position has been adjusted for the right-of use asset of approximately GBP5.7 million, with corresponding lease liabilities of approximately GBP5.7 million. As a result of applying IFRS 16 for the 6 months to 30 September 2019, in relation to the leases initially classified as operating leases, the Group has recognised GBP4.9 million of right-of-use asset and GBP4.9 million of lease liabilities.
The most material lease liabilities relate to property, plant and equipment.
The impact on the Consolidated Income Statement reflects an increase to operating profit of approximately GBP0.1 million as the pre-IFRS 16 rental charge is replaced by a lower depreciation charge; EBITDA was increased by GBP0.8 million of which GBP0.7 million related to continuing operations. Profit before tax decreased by GBP0.1 million as a result of an increase in the interest charge of GBP0.1 million. We do not expect the adoption of IFRS 16 to have a material impact on the Group's effective tax rate.
There is no impact on cash flows, although the presentation of the Cash Flow Statement has changed, with an increase in net cash inflows from operating activities being offset by an increase in net cash outflows from financing activities (interest paid).
Accounting estimates 3. and judgements
The preparation of the half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. In preparing these half year financial statements, the significant judgements made by management in applying the Group's accounting policies and the key source of estimation uncertainty were the same as those applied to the audited consolidated financial statements as at, and for the year ended, 31 March 2019, with the addition of the following.
Discontinued operations
For assets that are classified as held for sale, significant judgement is required as to whether the criteria under IFRS 5 have been met, namely that the Group is committed to selling the asset or disposal group, active marketing has commenced and it is probable that the sale will be completed within 12 months.
The Group has deemed that the IFRS 5 criteria have been met in relation to the two Wipac businesses which were disposed after the balance sheet date, as detailed in Note 22 Post balance sheet events.
The results of the two Wipac businesses for the period have been presented as discontinued operations in the statement of profit or loss and the comparative period information has been restated accordingly.
4. Segment reporting
The Group is organised into three, separately managed, business segments - Technical Plastics, Aerospace and LED Technologies . These are the segments for which summarised management information is presented to the Group's chief operating decision maker (comprising the Main Board and Group Steering Committee).
The Technical Plastics segment supplies fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products. This business operates internationally in a fast growing and dynamic market underpinned by rapid technological development.
The Aerospace segment supplies systems to the manufacturing and aerospace industries.
The LED Technologies segment has been presented as a discontinued operation as detailed in Note 13 - it develops innovative solutions in LED lighting, and is a leader in the development of high-power LED lighting for the premium automotive industry.
Transfer pricing between business segments is set on an arm's length basis. Segmental revenues and results include transfers between business segments. Those transfers are eliminated on consolidation.
Technical LED Group Plastics Aerospace Technologies Unallocated Eliminations total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ------------- --- --------- --- ---------- ---------- ----------- ------------ ----------- ---------- The segment results for the six months ended 30 September 2019 were as follows - Consolidated income statement Total revenue 53,826 3,675 22,002 - (1,469) 78,034 Less inter-segment revenue (1,386) - (83) - 1,469 - Total external revenue 52,440 3,675 21,919 - - 78,034 Expenses (47,798) (2,957) (24,666) (2,038) - (77,459) Underlying operating profit 4,642 718 (2,747) (2,038) - 575 Exceptional items (22) (10) (2,814) (1,898) - (4,744) Operating profit 4,620 708 (5,561) (3,936) - (4,169) ========== ========== =========== ============ =========== Net finance expense (1,385) Income tax expense (537) Profit after tax (6,091) ========== Consolidated statement of financial position Segment assets 103,894 7,272 30,837 7,908 - 149,911 Segment liabilities (23,276) (1,575) (16,850) (102,869) - (144,570) Net assets 80,618 5,697 13,987 (94,961) - 5,341 ========== ========== =========== ============ =========== ========== Other segmental information Depreciation 2,763 130 249 25 - 3,167 Amortisation 55 - - 50 - 105 The Group's Aylesbury based Optics business ("Optics") operated historically and until 20 December 2019 within the Wipac Limited legal entity, but with its business closely related to the Group's Technical Plastics Division. Immediately following Administrators being appointed to Wipac Limited (see note 13) the Group acquired the business and assets (other than trade debtors) related to Optics. Therefore, the Optics business is shown as part of continuing operations within Technical Plastics Division and the comparatives have been restated to remove the Optics business from the LED Technologies segment and to present it within the Technical Plastics segment. The LED Technologies segment assets include GBP4.9 million of cash and cash equivalents which are not classified as assets held for sale. Technical LED Plastics Technologies Group restated Aerospace restated Unallocated Eliminations total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------- --- ------------- ---- --- ---------- ---------- ----------- ------------ -------------- ---------- The segment results for the six months ended 30 September 2018 following restatement for the presentation of the Optics business were as follows - Consolidated income statement Total revenue 48,205 3,121 21,596 - (1,467) 71,455 Less inter-segment revenue (1,391) - (76) - 1,467 - Total external revenue 46,814 3,121 21,520 - - 71,455 Expenses (43,605) (2,515) (19,159) (1,687) - (66,966) Underlying operating profit / (loss) 3,209 606 2,361 (1,687) - 4,489 Exceptional items 113 - - (329) - (216) Reorganisation costs - - - - - - Operating profit 3,322 606 2,361 (2,016) - 4,273 ========== ========== =========== ============ ==============
Net finance expense (921) Income tax expense (813) Profit after tax 2,539 ========== Consolidated statement of financial position Segment assets 102,268 6,920 47,635 9,643 - 166,466 Segment liabilities (22,042) (929) (9,839) (77,684) - (110,494) Net assets 80,226 5,991 37,796 (68,041) - 55,972 ========== ========== =========== ============ ============== ========== Other segmental information Depreciation 1,993 84 451 - - 2,528 Amortisation 47 - 67 49 - 163 Technical LED Plastics Technologies Group restated Aerospace restated Unallocated Eliminations total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------- --- ------------- ---- --- ---------- ---------- ----------- ------------ -------------- ---------- The segment results for the year ended 31 March 2019 following restatement for the presentation of the Optics business were as follows - Consolidated income statement Total revenue 101,281 6,720 39,704 - (2,854) 144,851 Less inter-segment revenue (2,663) - (191) - 2,854 - Total external revenue 98,618 6,720 39,513 - - 144,851 Expenses (90,554) (5,422) (44,588) (2,972) - (143,536) Underlying operating profit / (loss) 8,064 1,298 (5,075) (2,972) - 1,315 - - Proforma unaudited adjustment - exceptional price concession on exit of mid volume business - - 7,104 - - 7,104 Proforma unaudited adjusted operating profit / (loss) 8,064 1,298 2,029 (2,972) - 8,419 Rationalisation costs (563) - (922) (451) - (1,936) Costs associated with proposed offer - - - (52) - (52) Profit arising on the disposal of surplus properties 118 - - - - 118 Impairment of LED Technologies - - (8,479) - - (8,479) Charge in respect of retirement benefits - - - (3,559) - (3,559) Proforma unaudited adjustment - exceptional price concession on exit of mid volume business - - (7,104) - - (7,104) Operating profit 7,619 1,298 (14,476) (7,034) - (12,593) ========== ========== =========== ============ ============== Net finance expense (2,061) Income tax expense (3,978) Profit after tax (18,632) ========== Consolidated statement of financial position Segment assets 95,939 6,352 43,005 4,270 - 149,566 Segment liabilities (19,562) (1,046) (22,546) (94,145) - (137,299) Net assets 76,377 5,306 20,459 (89,875) - 12,267 ========== ========== =========== ============ ============== ========== Other segmental information Depreciation 4,161 178 919 2 - 5,260 Amortisation 76 103 - - - 179 Exceptional 5 costs Six Six months months Year ended ended ended 30 30 September September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ------ -------- --------------- ------------ -------- --- --------- --------- --------- Rationalisation and restructuring costs (1,930) (303) (1,935) Charge in respect of retirement benefits - - (3,559) Costs associated with proposed offer - (50) (52) Credit arising on the disposal of surplus properties - 137 118 Exceptional Items - continuing operations (1,930) (216) (5,428) --------- --------- --------- Rationalisation and restructuring costs - discontinued operations (1,313) - - Impairment of LED Technologies - discontinued operations (1,501) - (8,480) Exceptional Items - discontinued operations (2,814) - (8,480) --------- --------- --------- Exceptional Items - total operations (4,744) (216) (13,908) --------- --------- --------- Proforma Unaudited Adjustment - discontinued operations - - (7,104) Exceptional price concession on exit of mid volume automotive business --------- --------- --------- (4,744) (216) (21,012) ========= ========= ========= GBP1.9 million of rationalisation costs relate to the Group's UK operations. The GBP3.6 million charge in relation to retirement benefits in year ended 31 March 2019 relates to the cost of GMP equalisation.
The GBP7.1 million proforma unaudited adjustment in year ended 31 March 2019 related to the exceptional price concession on exit of mid volume automotive business. Net finance 6 expense Six Six months months Year ended ended ended 30 30 31 September September March 2019 2018 2019 GBP000 GBP000 GBP000 ----- --------- --------------- ----------- -------- --- ---- --- --------- --------- -------- Interest receivable on cash and cash deposits - continuing operations 51 35 35 Interest payable on bank loans, overdrafts and finance leases - continuing operations (704) (500) (1,138) Net interest on the net defined benefit liability - continuing operations (582) (400) (788) Net finance expense - continuing operations (1,235) (865) (1,891) --------- --------- -------- Interest receivable on cash and cash deposits - discontinued operations 6 22 23 Interest payable on bank loans, overdrafts and finance leases - discontinued operations (155) (78) (193) Net finance expense - discontinued operations (149) (56) (170) --------- --------- -------- Net finance expense (1,384) (921) (2,061) ========= ========= ======== 7 Income tax expense Six months Six months Year ended ended ended 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ------------------------------------ ------------- ------------- --------- The expense recognised in the condensed consolidated income statement comprises - Current tax (expense) arising on ordinary activities - continuing operations (501) (450) (1,361) Deferred tax credit arising on ordinary activities - continuing operations - - 1,525 Current tax credit arising on exceptional items - continuing operations - 43 - Deferred tax - exceptional derecognition of deferred tax assets - continuing operations - - (3,095) Total income tax (expense) / credit - continuing operations (501) (407) (2,931) ------------- ------------- --------- Current tax (expense) / credit arising on ordinary activities - discontinued operations (36) (406) 114 Deferred tax (expense) arising on ordinary activities - discontinued operations - - (278) Deferred tax - exceptional derecognition of deferred tax assets - discontinued operations - - (883) Total income tax (expense) / credit - discontinued operations (36) (406) (1,047) ------------- ------------- --------- Total income tax (expense) / credit recognised in the condensed consolidated income statement (537) (813) (3,978) ============= ============= =========
The half year accounts include an underlying tax charge of 94.0% of profit before tax (2018 - 24.0%) based on the estimated average effective income tax rate on ordinary activities for the full year. The Group's effective tax rate on ordinary activities is at a higher level than the underlying UK tax rate of 19.0% (2018 - 19.0%) mainly because a deferred tax asset has not been recognized in respect of the UK losses and also because the Group is earning a higher proportion of its profits in higher tax jurisdictions.
Deferred tax assets and liabilities at 30 September 2019 have been calculated on the rates substantively enacted at the balance sheet date. The UK Finance Bill 2016 provides for a reduction in the UK corporation tax rate from 19% to 17% from 1 April 2020. This rate became substantively enacted on 6 September 2016. This will reduce the UK companies' future current tax charge accordingly.
A deferred tax asset has not been recognised at 30 September 2019 in respect of UK losses, capital allowances and future retirement benefit payments, as there is no certainty that they will be utilised in the foreseeable future.
8 Earnings per share The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent company divided by the weighted average number of ordinary shares outstanding during the period. The calculation of diluted earnings per share is based on profit attributable to equity holders of the parent company divided by the weighted average number of ordinary shares outstanding during the period (adjusted for dilutive options). The following details the profit and average number of shares used in calculating the basic and diluted earnings per share - Six months Six months Year ended ended ended 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ----- --- ------------------- ----- --------- --------- --- ------ --- --------------- --- ---------------- --------------- Profit after tax from continuing operations (344) 640 (2,939) Profit / (loss) attributable to ordinary shareholders from continuing operations (344) 640 (2,939) Loss on discontinued operations net of tax (5,747) 1,899 (15,693) Profit after tax, attributable to equity holders of the parent (6,091) 2,539 (18,632) =============== ================ =============== Six months Six months Year ended ended ended 30 September 30 September 31 March 2019 2018 2019 Shares Shares Shares ----- --- ------------------- ----- --------- --------- --- ------ --- --------------- --- ---------------- --------------- Weighted average number
of ordinary shares in the period 73,419,193 73,332,270 73,374,078 Effect of share options in issue - - - Weighted average number of ordinary shares (diluted) in the period 73,419,193 73,332,270 73,374,078 =============== ================ =============== In addition to the above, the Company also calculates an earnings per share based on underlying profit as the board believe this provides a more useful comparison of business trends and performance. Underlying profit is defined as profit before impairments, rationalisation costs, one-off retirement benefit effects, exceptional bad debts, business closure costs, litigation costs, other one-off costs and the impact of property and business disposals, net of attributable taxes. The following table reconciles the Group's profit to underlying profit used in the numerator in calculating underlying earnings per share - Six months Six months Year ended ended ended 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 -------- ----------------- -------- ---------- --- ------- --- ---------- --------- ----- ------------- (Loss) / profit after tax, attributable to equity holders of the parent (6,091) 2,539 (18,632) Continuing operations: Rationalisation and restructuring costs, net of tax 1,930 243 915 Credit arising on the disposal of surplus properties, net of tax - (111) (118) Costs associated with proposed offer, net of tax - 41 52 Charge in respect of retirement benefits, net of tax - - 3,559 Derecognition of UK deferred tax assets - - 1,975 Discontinued operations: Rationalisation and restructuring costs, net of tax 1,313 - 922 Impairment of LED Technologies, net of tax 1,501 - 8,480 Derecognition of UK deferred tax assets - - 883 Underlying (loss) / profit attributable to equity holders of the parent (1,347) 2,712 (1,964) Proforma unaudited adjustment - exceptional price concession on exit from mid-volume automotive business - - 7,104 Proforma unaudited adjusted (loss) / profit attributable to equity holders of the parent (1,347) 2,712 5,140 ========== ========= ============= Operating profit before exceptional items - continuing operations 3,322 2,128 6,390 Finance revenue - continuing operations 51 35 35 Finance expense - continuing operations (1,286) (900) (1,926) Income tax expense - continuing operations (501) (407) (2,931) Underlying profit attributable to equity holders of the parent - continuing operations 1,586 856 1,568 ========== ========= ============= The following table summarises the earnings per share figures based on the above data - Six months Six months ended ended Year ended 30 September 30 September 31 March 2019 2018 2019 Pence Pence Pence ---------------------------- ------------- ------------- ------------- Basic (loss) / earnings per share - continuing operations (0.5) 0.9 (4.0) Basic (loss) / earnings per share - discontinued operations (7.8) 2.6 (21.4) Basic (loss) / earnings per share (8.3) 3.5 (25.4) ------------- ------------- ------------- Diluted (loss) / earnings per share - continuing operations (0.5) 0.9 (4.0) Diluted (loss) / earnings per share - discontinued operations (7.8) 2.6 (21.4) Diluted (loss) / earnings per share (8.3) 3.5 (25.4) ------------- ------------- ------------- Underlying earnings per share - basic - continuing operations 2.2 1.2 2.1 Underlying (loss) / earnings per share - basic - discontinued operations (4.0) 2.5 (4.8) Underlying (loss) / earnings per share - basic (1.8) 3.7 (2.7) ------------- ------------- ------------- Underlying earnings per share - diluted - continuing operations 2.2 1.2 2.1 Underlying (loss) / earnings per share - diluted - discontinued operations (4.0) 2.5 (4.8) Underlying (loss) / earnings per share - diluted (1.8) 3.7 (2.7) ------------- ------------- ------------- Proforma unaudited adjusted (loss) / earnings per share - basic (1.8) 3.7 7.0 ------------- ------------- ------------- Proforma unaudited adjusted (loss) / earnings per share - diluted (1.8) 3.7 7.0 ------------- ------------- ------------- 9. Dividends paid and proposed No dividends were paid in the period or the comparative periods. As outlined in the annual report 2019 the Directors are not proposing an interim dividend for 2019/20. Intangible 10. assets The movements in the carrying value of intangible assets are summarised as follows - Six months Six months
ended ended Year ended 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ---------------------------- ------------- ------------- ------------- Net book value at the start of the period 24,144 25,311 25,311 Additions 16 64 87 Reclassification from tangible, non-current assets - - 47 Impairment arising on review of CIT Technology - - (1,365) Amortisation (105) (162) (279) Effect of movements in foreign exchange 745 611 343 Net book value at the end of the period 24,800 25,824 24,144 ============= ============= ============= Included within intangible assets is goodwill of GBP23.8 million (30 September 2018 - GBP24.5 million). The carrying value of goodwill is subject to annual impairment tests by reviewing detailed projections of the recoverable amounts from the underlying cash generating units. At 31 March 2019, the carrying value of goodwill was supported by such value in use calculations. There has been no indication of subsequent impairment in the current financial year. 11. Property, plant and equipment The movements in the carrying value of property plant and equipment are summarised as follows - Six months Six months ended ended Year ended 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ---------------------------- ------------- ------------- ------------- Net book value at the start of the period 42,495 46,446 46,446 Recognition of right-of-use asset on initial application of IFRS 16 5,741 - - Adjusted balance at the start of the period 48,236 46,446 46,446 Additions 6,179 5,033 7,822 Depreciation (3,167) (2,528) (5,260) Disposals (2,461) (21) (141) Reclassification - - (47) Impairment - - (7,115) Transfers to assets held for sale (see Note 12) (10,921) - - Effect of movements in foreign exchange 967 792 790 Net book value at the end of the period 38,833 49,722 42,495 ============= ============= ============= Included in the net carrying amount of property, plant and equipment are right-of-use assets as follows: As at 30 September 2019 GBP000 Total right-of-use assets 4,905 ============= Assets held 12. for sale The amounts presented in the statement of profit or loss under discontinued operations relate to the two Wipac businesses, with both businesses being sold after the end of the period, as detailed in Note 22 Post balance sheet events. Their assets, less directly associated liabilities, which have been sold after the balance sheet date have been as classified held for sale as detailed below: As at 30 September 2019 GBP000 Property, plant and equipment 9,431 Contract assets 1,898 Trade and other receivables 8,751 Inventories 5,806 Assets held for sale 25,886 ===================== Trade and other payables 14,682 Contract liabilities 849 Deferred tax liabilities 35 Interest bearing loans and borrowings 1,110 Trade and other payables 174 Liabilities directly associated with the assets held for sale 16,850 ===================== At the point at which the IFRS 5 criteria were met the disposal group's assets, less directly associated liabilities, were classified as held for sale and were held at fair value less costs to sell of GBP10.9 million. At the balance sheet date 30 September 2019 an impairment of GBP1.5 million was recognised using the fair value less costs of disposal of the disposal group. This impairment was allocated against property, plant and equipment. 13. Discontinued operations As previously reported, the decision was taken mid-way through the half year to sell the two Wipac businesses, with both businesses being successfully exited after the end of the period. Firstly, the entire share capital of Wipac Czech s.r.o. was sold on 26 November 2019 to Magna Automotive Europe GmbH. Then on 20 December 2019, the Group exited the Wipac UK business with Administrators being appointed to Wipac Limited and immediately, following their appointment, selling the business. The business and assets of Wipac Limited (in administration), other than those related to its Aylesbury based Optics business ("Optics"), were sold to Wipac Technology Limited, a newly formed wholly owned subsidiary of Wuhu Anrui Optoelectrics Co. Ltd. Therefore, both Wipac businesses have been treated as discontinued operations. The results of the discontinued operations are presented separately for the current period and for the comparative periods in note 4 Segment reporting as they now represent the whole of the LED Technologies segment following the restatement of segmental information in respect of the Optics business transferring to the Technical Plastics segment. 14. Retirement benefit obligations At 31 March 2019 the Group had a retirement benefit liability, as calculated under the provisions of IAS 19 "Employee Benefits", of GBP49.1 million. Since the start of the current financial year, positive asset returns of GBP17.0 million plus Group contributions of GBP0.8 million have been offset by GBP5.3 million of benefit payments, which has resulted in the scheme's assets increasing in value by GBP12.5 million from GBP166.3 million to GBP178.8 million. However, the impact of an increase in the discount rate used to evaluate the scheme's liabilities, from 2.4% at the start of the period to 1.8% has offset the interest expense arising on the liabilities which, combined with the benefit payments, has resulted in the value of the liabilities increasing by GBP14.7 million from GBP215.4 million to GBP230.1 million. As a consequence the scheme, on an IAS 19 basis, has increased from a GBP49.1 million liability at 31 March 2019 to a GBP51.3 million liability at 30 September 2019. 15. Cash generated from operations Six
Six months months Year ended ended ended 30 30 September September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 ------------ --- -------------- ---- ------- ---- ------------- --------- --------- (Loss) / profit for the year - continuing operations (344) 640 (2,939) (Loss) / profit for the year - discontinued operations (5,747) 1,899 (15,693) (6,091) 2,539 (18,632) Adjustments for - Pension fund contributions in excess of service costs (777) - (1,238) Depreciation charge 3,167 2,528 5,260 Amortisation of intangible assets 105 162 279 Exceptional tangible fixed asset write down, arising on rationalisation of business 1,501 - 7,115 Exceptional impairment of intangible assets, arising on rationalisation of business - - 1,365 (Profit) / loss on disposal of other plant and equipment (24) (112) 7 Exceptional charge in respect of retirement benefits - - 3,559 Cash flow relating to provision for site closure costs (74) (63) (151) Share based payment charge 90 152 36 Financial income (57) (57) (58) Financial expense 1,441 978 2,119 Taxation 702 813 3,978 Operating cash flow before changes in working capital (17) 6,940 3,639 Changes in working capital (excluding the effects of acquisitions of subsidiaries) (Increase) / decrease in inventories (1,087) 97 456 Decrease / (increase) in contract assets 16,322 (22,417) (20,264) (Increase) / decrease in trade and other receivables (1,691) 18,192 14,799 Increase / (decrease) in trade and other payables 734 (4,443) 2,975 Increase in contract liabilities 374 3,280 2,540 ------------- --------- --------- Cash generated from operations 14,635 1,649 4,145 ============= ========= ========= 16. Cash and cash equivalents As As at at As at 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 --------------------------- ------------- ------------- --------- Cash and cash deposits 20,493 10,867 10,330 Bank overdrafts (16,633) (14,907) (17,368) 3,860 (4,040) (7,038) ============= ============= ========= Net 17. debt The net movement in cash and cash equivalents can be reconciled to the change in net debt in the period Six months Six months Year as follows - ended ended ended 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 --------- ---- ------------------ ---- -------- ------- ---- ----- --------- --------- --------- Net increase / (decrease) in cash and cash equivalents 10,638 (2,038) (5,021) Net drawings of term loan borrowings - - (215) Net repayment of / (new loans) other loans 5 - (26) Net repayment of / (proceeds from) finance leases 2,334 (1,771) (1,524) Lease liabilities recognised on transition to IFRS 16 (5,741) - - 7,236 (3,809) (6,786) Effect of exchange rate fluctuations on net debt (444) (634) (219) 6,792 (4,443) (7,005) Net debt at start of period (38,481) (31,476) (31,476) Net debt at end of period (31,689) (35,919) (38,481) ========= ========= ========= Net debt comprises - As As at at As at 30 September 30 September 31 March 2019 2018 2019 GBP000 GBP000 GBP000 --------- ---- ------------------ ---- -------- ------- ---- ----- --------- --------- --------- Cash and cash deposits 20,493 10,867 10,330 Bank overdrafts (16,633) (14,907) (17,368) Bank loans (30,597) (30,108) (29,893) Other loans (21) - (26) Finance lease liabilities measured under IAS 17 - (1,771) (1,524) Net debt before effects of IFRS 16 (26,758) (35,919) (38,481) Lease liabilities measured under IFRS 16 - included within interest bearing loans and borrowings (3,821) - - (30,579) (35,919) (38,481)
Lease liabilities measured under IFRS 16 - included within assets held for sale (1,110) - - Net debt (31,689) (35,919) (38,481) ========= ========= =========
At 31 March 2019, the Group's total UK bank facilities were GBP47.0 million of which GBP30.0 million related to a revolving credit facility and GBP17.0 million to an overdraft facility. The overdraft facility reduced by GBP2.0 million on 1 July 2019 and by a further GBP5.0 million before the end of September 2019, to GBP10.0 million, as monies were received from the realisations of disposed Wipac assets. Total UK bank facilities at the period end were GBP40.0 million, with the revolving credit facility due to expire on 31 January 2021. In mid-January 2020, the lending bank received two initial distributions, totalling GBP5.0 million, from the Administrator of Wipac Limited, following its insolvency and subsequent sale. At the same time, the Group's overdraft facility reduced by GBP5.0 million, to GBP5.0 million, leaving total UK bank facilities at GBP35.0m at the date of this report.
On transition to IFRS 16, the Group recognised additional lease liabilities of GBP5.7 million, as detailed in Note 18. At 31 September 2019, the Group's IFRS 16 lease liabilities were GBP4.9 million, of which GBP1.1 million relating to the Wipac businesses were classified as held for sale, as detailed in Note 12.
18. IFRS 16 Leases Impacts on transition: On transition to IFRS 16, the Group recognised additional right-of-use asset, and additional lease liabilities, recognising any differences in retained earnings. The impact on transition is summarised below: As at 1 April 2019 GBP000 --------------------------------------------- ------------ -------- Right-of-use asset presented in property, plant and equipment 5,741 Lease liabilities (5,741) Retained earnings impact - ======== Impacts for the period: The indicative impact of the adoption of IFRS 16 on the interim financial statements is the recognition of a right-of-use asset of approximately GBP4.9 million, with a corresponding lease liability of GBP4.9 million 19. Financial instruments The fair value of financial assets and liabilities are not materially different from their carrying value. There are no material items as required to be disclosed under the fair value hierarchy. 20. Ordinary share capital Number of shares GBP000 --------------------------------------------- ------------ -------- Ordinary shares of 5 pence each - Issued and fully paid at 31 March 2018 73,286,918 3,664 Shares issued on exercise of share options 132,275 7 Issued and fully paid at 30 September 2018, 31 March 2019 and 30 September 2019 73,419,193 3,671 21. Related parties Identity of related parties The Group has a related party relationship with its subsidiaries, its directors and executive officers and the Group pension scheme. Transactions with key management personnel Full details of directors' remuneration are disclosed in the Group's annual report. In the six months ended 30 September 2019, remuneration to current and former directors amounted to GBP0.426 million (H1 2019 - GBP0.544 million). Group pension scheme Carclo employs a third party professional firm to administer the group pension scheme. The associated investment costs are borne by the scheme in full. From 1 April 2007 to 21 July 2019, it had been agreed with the trustees of the pension scheme that, under the terms of the recovery plan, Carclo would bear the scheme's administration costs whilst ever the scheme was in deficit, as calculated at the triennial valuation. Carclo incurred an administration cost of GBP0.3 million, including GBP0.1million presented as exceptional costs, during the period which has been charged against other operating expenses (H1 2019 - GBP0.2 million). The total of deficit reduction contributions and administration costs paid during the period were GBP0.8 million (H1 2019 - GBP0.2 million). Post balance 22. sheet events
As previously reported, the decision was taken mid-way through the half year to sell the two Wipac businesses, with both businesses being successfully exited after the end of the period.
Firstly, the entire share capital of Wipac Czech s.r.o. was sold on 26 November 2019 to Magna Automotive Europe GmbH for a total consideration of EUR1.1m, comprising EUR0.8m in cash and the assumption of EUR0.3m of outstanding liabilities. In the year to 31 March 2019, Wipac Czech reported operating profits of EUR0.1m and had gross assets of EUR0.9m at the end of that financial year.
Then, on 20 December 2019, the Group exited the Wipac UK business with Administrators being appointed to Wipac Limited and immediately, following their appointment, selling the business. The business and assets of Wipac Limited (in administration), other than those related to its Aylesbury based Optics business ("Optics"), were sold to Wipac Technology Limited, a newly formed wholly owned subsidiary of Wuhu Anrui Optoelectrics Co. Ltd, for a total consideration of GBP10.5m. The Group's defined benefit pension scheme and lending bank were the principal secured creditors of Wipac Limited and it is expected that approximately GBP3.5m of the net proceeds will be paid by the Administrator to the Group's pension scheme and approximately GBP5.0m will be used to reduce the outstanding drawn balance of the Group's revolving credit facility. In the year ended 31 March 2019, Wipac Limited generated a loss of GBP13.2m and had gross assets at 31 March 2019 of GBP46.3m.
Given their sale, the two Wipac businesses are reported as discontinued operations in these results. It is intended that full details of any profit or loss on sale of the businesses will be reported in the Report and Accounts for the year ended 31 March 2020.
Optics is a profitable standalone business, historically operating within the Wipac Limited legal entity, with its business closely related to the Group's Technical Plastics Division. Its principal supplier is CTP Czech. Immediately following the appointment of the Administrators, the Group acquired the business and assets (other than trade debtors) related to Optics, for a total cash consideration of GBP0.25m. The Administrators retained the Optics trade debtors and the Group will assist in their collection. In the year ended 31 March 2019, the Optics business generated a profit before taxation of GBP1.1m and had gross assets at 31 March 2019 of GBP3.5m. The results of the Optics business are now included in the results of CTP Division.
23. Seasonality
There are no specific seasonal factors which impact on the demand for products and services supplied by the Group, other than for the timing of holidays and customer shutdowns. These tend to fall predominantly in the first half of Carclo's financial year and, as a result, revenues and profits are usually higher in the second half of the financial year compared to the first half.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR SEUEFSESSEIF
(END) Dow Jones Newswires
January 21, 2020 02:01 ET (07:01 GMT)
1 Year Carclo Chart |
1 Month Carclo Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions