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| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 5.58 | 75.08% | 13.00 | 12.50 | 13.50 | 13.50 | 9.65 | 9.65 | 2,174,625 | 16:35:26 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Plastics,resins,elastomers | 143.45M | -3.96M | -0.0539 | -2.50 | 9.91M |
From Apr 2019 to Apr 2024
TIDMCAR
RNS Number : 1123H
Carclo plc
13 November 2018
Carclo plc
("Carclo" or the "Group")
Half year results for the six months ended 30 September 2018
Carclo plc announces its interim results for the six months ended 30 September 2018.
Hot Features
Premium
Highlights
Half year Half year
ended 30 September ended
2018 30 September
2017
------------------------ ---------------
GBP000 GBP000
------------------------ ---------------
Revenue
------------------------ ---------------
Technical Plastics 42,756 43,748
------------------------ ---------------
LED Technologies 25,578 25,571
------------------------ ---------------
Aerospace 3,121 2,859
------------------------ ---------------
Total 71,455 72,178
------------------------ ---------------
Underlying* operating profit
------------------------ ---------------
Technical Plastics 2,532 3,243
------------------------ ---------------
LED Technologies 3,038 3,385
------------------------ ---------------
Aerospace 606 359
------------------------ ---------------
6,176 6,987
------------------------------ ------------------------ ---------------
Unallocated (1,687) (1,583)
------------------------ ---------------
Total 4,489 5,404
------------------------ ---------------
Underlying* profit before
tax 3,568 4,550
------------------------ ---------------
Profit before tax 3,352 4,550
------------------------ ---------------
Underlying* earnings per
share 3.7p 4.5p
------------------------ ---------------
* underlying is defined as before all exceptional items. See below for a reconciliation to statutory figures.
-- As previously highlighted, while the business made progress in a number of areas during the first half, trading results were below Board expectations, largely due to underperformance at Technical Plastics. This, together with production inefficiencies incurred on new production programmes in the LED division, resulted in the first half underlying operating profit being lower year on year.
-- Revenue decreased by 1% despite growth in LED production revenues mainly due to negative currency impacts. At constant currency revenue increased by 0.3%.
-- Underlying profit before tax decreased by 22% (14% at constant currency). We expect a greater than usual second half weighting in FY19 reflecting the phasing of new programmes in both the Technical Plastics and LED divisions.
-- In the Technical Plastics division, three new medical programmes were delayed by customers in the period but all entered production successfully towards the end of the first half of the year and this, together with planned new tooling programmes, supports the expected stronger second half performance.
-- In the LED Technologies division, Wipac has continued to be successful in winning new programmes, including nomination for two mid-volume electric vehicles, leading to a healthy level of design and development contract revenues. Production demand has been solid. All of the current year's planned new vehicle production programmes launched in the first half and this resulted in higher than anticipated manufacturing costs being incurred. Margins are expected to improve in the second half as production accelerates and initial start-up inefficiencies are eliminated.
-- The Aerospace division performed well against the prior year as a result of a more profitable mix and tight control over costs.
-- As anticipated, net debt rose to GBP35.9m at the half year (31 March 2018: GBP31.5m), reflecting the timing of capital investment and the payment profile of ongoing design, development and tooling programmes. The Group's financing remains well within banking covenants.
-- The Board anticipates full year trading will be in line with its expectations and the Group remains on track to grow substantially over the medium term.
Commenting on the results, Chris Malley, Chief Executive said:
"Operating margins in Technical Plastics are expected to improve in the second half as volumes in the new contracts ramp up and commercial and operational improvements are delivered. We have implemented a number of price increases, efficiency improvements and cost savings across the division, the benefit of which will positively impact margins in the second half of the year and beyond.
In LED Technologies, Wipac's success in securing new customer programmes, including in the strategically important mid volume sector, together with the new vehicle production programme launches has ensured we have a healthy production pipeline in this division for the medium term. The rate of growth has led to an increase in funding requirements and some short term operational growing pains which are being addressed through increased manufacturing capacity and strengthening of the management team.
Technical Plastics and LED Technologies are set to have a stronger second half performance based on the full effect of the new programmes, planned customer timings on projects and the expected improvement in margins. The Board anticipates that the Group will trade in line with its expectations for the full year, and that it remains on track to grow substantially over the medium term."
(*) Reconciliation of underlying earnings to statutory results
The Directors believe that adjusted measures provide a more useful comparison of business trends and performance. Adjusted results exclude exceptional items. The term adjusted is not defined under IFRS and may not be comparable with similarly-titled measures used by other companies.
All profit and earnings per share figures in these interim results relate to adjusted business performance (as defined above) unless otherwise stated. A reconciliation of adjusted measures to non-adjusted measures is provided below:
Statutory Adjustments Adjusted
Underlying operating profit (GBP'000) 4,273 216 4,489
---------- ------------ ---------
Underlying profit before tax
(GBP'000) 3,352 216 3,568
---------- ------------ ---------
Basic earnings per share (pence) 3.5 0.2 3.7
---------- ------------ ---------
Enquiries
Carclo plc 020 7067 0700 (today)
Chris Malley, Chief Executive 01924 268040 (thereafter)
Sarah Matthews-DeMers, Group Finance Director
Weber Shandwick Financial 020 7067 0700
Nick Oborne
A presentation for analysts will be held at 9.30 a.m. on 13 November 2018 at the offices of Weber Shandwick Financial, 2 Waterhouse Square, 140 Holborn, London EC1N 2AE.
Notes to editors
About Carclo
Carclo plc is a public company whose shares are quoted on the Main Market of the London Stock Exchange.
Carclo's strategy is to develop and expand its key manufacturing assets in markets where there remain significant further opportunities to drive shareholder value. To enhance profit margins and support its customers, the Group has been investing across its global footprint.
Approximately three fifths of Group revenues are generated from the supply of fine tolerance, injection moulded plastic components, mainly for medical products. The balance of Group revenue is derived mainly from the design and supply of specialised injection moulded LED based lighting systems to the premium automotive industry.
Forward looking statements
Certain statements made in this announcement 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.
Group Interim Results
Overview of results
As previously highlighted, while the business made progress in a number of areas during the first half, trading results were below the Board's expectations largely due to underperformance at Technical Plastics. This, together with production inefficiencies in LED Technologies, resulted in the first half underlying operating profit being lower year on year.
Group revenues decreased by 1% to GBP71.5m (2017: GBP72.2m). On a constant currency basis revenues increased by 0.3%. Group underlying operating profits of GBP4.5m were 17% lower than for the comparative period last year (2017: GBP5.4m) due to the phasing of new programmes in both the Technical Plastics and LED divisions and the resultant impact on margins; on a constant currency basis underlying operating profits decreased by 14%.
Unallocated costs were marginally higher than the comparative period last year at GBP1.7m (2017: GBP1.6m). The IAS 19 pension finance charge at GBP0.4m (2017: GBP0.4m) was broadly in line with the comparative period last year. Underlying profit before tax decreased 22% to GBP3.6m (2017: GBP4.6m).
The Group generated profit before tax in the six months to 30 September 2018 of GBP3.4m (2017: GBP4.6m).
The underlying effective tax rate for the period is 24% (30 September 2017: 27.5%, 31 March 2018: 20.6%). The tax rate reflects the anticipated geographic split of taxable profits for the full year.
Underlying earnings per share for the six months to 30 September 2018 was 3.7p (2017: 4.5p).
Board and management changes
After serving on the Board for over 12 years, 6 of those as Chairman, Michael Derbyshire stood down at the AGM in July 2018. Mark Rollins, who joined the Board in January 2018 became Chairman. The Board would like to thank Michael for his service and his substantial contribution to the strategic direction of the Group.
Sarah Matthews-DeMers was appointed as Group Finance Director on 18 July 2018, joining from Rotork plc where she was Director of Strategy and Investor Relations. Joe Oatley was appointed as a Non-Executive Director and the Chairman of the Remuneration Committee with effect from 20 July 2018. Joe is also a Non-Executive Director at Wates Group Limited and Redhall plc and was previously Group Chief Executive of Cape plc.
The operational management teams in Technical Plastics and Wipac have also been strengthened to help drive improvement in our results.
Outlook
The Board expects the Group to report a stronger performance in the second half of the financial year. This reflects the full effect of the new programmes, improved operational performance and expected higher design and tooling profits at Technical Plastics, along with the benefit from the ramp up in production volumes and anticipated improvement in production efficiencies within Wipac.
As is normal within the Group's business, the achievement of its anticipated performance for the full year is dependent on key customers, particularly in Wipac, awarding new programmes in line with planned timescales in the second half.
Medium term prospects continue to be encouraging with robust demand from the medical sector and the opportunity for strong growth from the automotive sector as recently won automotive lighting programmes go into production.
The Board anticipates that the Group will trade in line with its expectations for the full year, and that it remains on track to grow substantially over the medium term.
Operating review
Technical Plastics ("CTP")
Half year Half year
ended 30 September ended
2018 30 September
2017
GBP000 GBP000
------------------------ ---------------
Revenue 42,756 43,748
------------------------ ---------------
Underlying operating profit 2,532 3,243
------------------------ ---------------
The Group's Technical Plastics business reported revenues of GBP42.8m (2017: GBP43.7m), a decrease of 2% on the comparative period last year. On a constant currency basis the division's revenues decreased by 0.2%. Divisional operating profits were GBP2.5m (2017: GBP3.2m) and the divisional operating margin was 5.9% (2017: 7.4%). This margin is expected to improve in the second half of the year due to the impact of the ramp up of new programmes and as benefits are realised from the operational improvements programme launched in January.
Our US business continued to experience operational challenges due to direct labour shortages. A significant investment in employee welfare was made during the period but labour turnover and scarcity has continued. Changes to shift patterns adopted in the first half along with new recruitment procedures are expected to mitigate the problem in the second half. We have appointed a new US Operations Director and Plant Manager at our main Pennsylvania operation and this new management team is focused on operational and other efficiency improvements under our previously highlighted operational improvements programme.
In the UK, margins have improved as new production programmes have commenced, using the additional capacity from the Mitcham facility expansion last year.
In India, the mainly non-medical business has stabilised and customer production schedules support our forecasts with a better mix of higher margin products.
Our facility in China experienced some issues with de-stocking in the local market; however, overall margins have been maintained through efficiency and commercial efforts.
Our Czech business has addressed the labour shortages experienced in the prior year and is expected to benefit from a new production programme which commenced shortly before the period end. As one of our non-medical programmes is scheduled to come to an end shortly after the end of the financial year, in October we announced a rationalisation of this facility. We expect to generate annual cost savings of GBP0.4m, with a payback of c.2.5 years on restructuring costs of c.GBP1.0m, the majority of which will be incurred during the second half. This supports our strategy of increasing our focus on medical work within the division.
As normal with this division, we have several new and replacement tooling and automation programmes anticipated to be awarded towards the end of the financial year and these will, once awarded and commenced, contribute to current year profitability.
Outlook
Operating margins in CTP are expected to improve in the second half as volumes in the new contracts ramp up and commercial and operational improvements are delivered. We have implemented a number of price increases, efficiency improvements and cost savings across the division, the benefit of which will positively impact margins in the second half of the year and beyond.
LED Technologies
Half year Half year
ended 30 September ended
2018 30 September
2017
GBP000 GBP000
--------------------- ---------------
Revenue 25,578 25,571
--------------------- ---------------
Underlying operating profit 3,038 3,385
--------------------- ---------------
The Group's LED Technologies division is made up of the Wipac premium automotive lighting business, based in Buckingham, UK and the LED Optics and aftermarket business, based in Aylesbury, UK.
Overall, revenue was flat at GBP25.6m (2017: GBP25.6m). Production revenues increased as further programmes moved into the manufacturing phase, while, as expected, project revenues decreased due to a change in the profile of the contract portfolio. Divisional operating profit reduced by 10% to GBP3.0m (2017: GBP3.4m) due to the previously highlighted initial start-up inefficiencies and increased investment in overheads necessary to deliver the increased production volumes.
Design, development and sub contract tooling revenues, which in aggregate made up over half of Wipac's sales, were ahead of our expectations and all projects are on target. The recently announced nomination to supply lighting for two new mid-volume electric vehicles supports the Group's strategy of expansion into this area and provides good visibility over production volumes for the medium term. The market for automotive lighting projects remains strong and we continue to be confident that Wipac is well placed to deliver significant growth into the future.
Automotive lighting product sales for the period were ahead of the prior year although, with an unprecedented number of new product launches, margins were below the prior year due to higher manufacturing costs incurred during the start-up phase. All of the current year's planned new vehicle programmes have now launched. Given manufacturing output is still ramping up, we anticipate several more months of improving efficiencies prior to production settling to a steady state. We have enhanced our senior operations team to bring in leaders with extensive experience of managing higher volume automotive production.
In the medium term, as the new mid-volume contracts come into production, we expect production revenues to become a larger proportion of Wipac's sales, thereby improving the predictability and stability of revenues and profits.
In order to deliver this growth, additional warehousing and office space has been secured close to our Buckingham facility. A new North American production facility is likely to be required in the short to medium term to deliver one of the new mid-volume contracts.
The Aylesbury based LED Optics business continued to generate stable sales against a market backdrop of increasing product commoditisation.
Outlook
In LED Technologies, Wipac's success in securing new customer programmes, including in the strategically important mid volume sector, together with the new vehicle production programme launches, has ensured we have a healthy production pipeline in this division for the medium term. The rate of growth has led to an increase in funding requirements and some short term operational growing pains which are being addressed through increased manufacturing capacity and strengthening of the management team.
Aerospace
Half year Half year
ended 30 September ended
2018 30 September
2017
GBP000 GBP000
--------------------- ---------------
Revenue 3,121 2,859
--------------------- ---------------
Underlying operating profit 606 359
--------------------- ---------------
The Group's Aerospace business had a solid first half performance, with revenues 9% higher at GBP3.1m (2017: GBP2.9m) and underlying operating profits 69% higher at GBP0.6m (2017: GBP0.4m). Spares demand has stabilised and a number of new programmes have moved into production since the prior period.
This business continues to be both profitable and cash generative for the Group.
Outlook
The prospects for the business remain encouraging.
Financial position
The Group generated cash from operations of GBP1.6m (2017: GBP3.5m) with working capital increasing by GBP5.3m (2017: GBP4.4 million) due mainly to increased sub contract tooling activity. Capital expenditure in the six months to 30 September 2018 on a cash basis was GBP3.1m (2017: GBP5.7m), the majority of which relates to investment in production machinery in Wipac and our UK Technical Plastics business to support new business.
As anticipated, net debt has risen since the last financial year-end to GBP35.9m (31 March 2018: GBP31.5m), reflecting the timing of capital investment and an increase in working capital due to the investment and payment profile of ongoing design, development and tooling programmes. In addition, net debt reflects the continuing weakness of sterling on the translation of the Group's foreign currency denominated borrowings.
The Group's pension deficit, net of applicable deferred tax, decreased to GBP24.5m as at 30 September 2018 (31 March 2018: GBP24.7m). This was mainly due to a slightly higher discount rate based on increased corporate bond yields. The cash cost of the pension scheme has remained at similar levels with the annual recovery plan payment of GBP1.2m made subsequent to the 30 September 2018 period end. The Group's next triennial valuation as at 31 March 2018 is underway.
On 26 October 2018, a High Court judgement was made involving the Lloyds Banking Group's defined benefit pension schemes. The judgment concluded the schemes should be amended to equalise pension benefits for men and women in relation to guaranteed minimum pension benefits, an issue which affects many other defined benefit pension schemes. We are working with the trustees of our scheme and our actuarial advisers to understand the impact on the scheme liabilities, but estimate that an adjustment of cGBP3m is likely to be recognised in the second half.
Risks and uncertainties
In the Annual Report for the year ended 31 March 2018 we provided a detailed review of the risks faced by the Group and how these risks are managed. We continue to face, and proactively manage, the risks and uncertainties in our business and, while recognising the economic uncertainty around Brexit, the Board does not consider that the principal risks and uncertainties have changed since the publication of the 2018 Annual Report.
Condensed consolidated income statement
Six months ended Six months Year ended
30 September ended 30 31 March
2018 September 2018
unaudited 2017 unaudited audited
Notes GBP000 GBP000 GBP000
-------------------------------------- ----- -------- --------------- ----------
Revenue 4 71,455 72,178 146,214
Operating profit before exceptional
items 4,489 5,404 10,811
Exceptional items 5 (216) - (904)
-------------------------------------- ----- -------- --------------- ----------
Operating profit 4 4,273 5,404 9,907
Finance revenue 6 57 57 99
Finance expense 6 (978) (911) (1,839)
Profit before tax 3,352 4,550 8,167
Income tax (expense) / credit 7 (813) (1,253) 325
Profit after tax 2,539 3,297 8,492
======== =============== ==========
Attributable to -
Equity holders of the parent 2,539 3,297 8,492
Non-controlling interests - - -
-------- --------------- ----------
2,539 3,297 8,492
======== =============== ==========
Earnings per ordinary share 8
Basic 3.5p 4.5 p 11.6 p
Diluted 3.5p 4.5 p 11.6 p
======== =============== ==========
Condensed consolidated statement of comprehensive income
Six months
Six months ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
unaudited unaudited audited
GBP000 GBP000 GBP000
-------------------------------------------- ------------------- -------------- ----------------
Profit for the period 2,539 3,297 8,492
Other comprehensive income -
Items that will not be reclassified to
the income statement
Remeasurement gains on defined benefit
scheme 696 3,004 2,150
Deferred tax arising (80) (422) (392)
Total items that will not be reclassified
to the income statement 616 2,582 1,758
------------------- -------------- ----------------
Items that are or may in the future be
classified to the income statement
Foreign exchange translation differences 945 (1,119) (2,238)
Deferred taxation arising (178) - 138
Total items that are or may in future
be classified to the income statement 767 (1,119) (2,100)
Other comprehensive income, net of income
tax 1,383 1,463 (342)
Total comprehensive income for the period 3,922 4,760 8,150
=================== ============== ================
Attributable to -
Equity holders of the parent 3,922 4,760 8,150
Non-controlling interests - - -
------------------- -------------- ----------------
Total comprehensive income for the period 3,922 4,760 8,150
=================== ============== ================
Condensed consolidated statement of financial position
30 September 30 September 31 March
2018 2017 2018
unaudited unaudited audited
Notes GBP000 GBP000 GBP000
-----------------
Assets
Intangible assets 10 25,824 25,456 25,311
Property, plant
and equipment 11 49,722 45,848 46,446
Investments 7 7 7
Deferred tax assets 8,774 10,344 8,731
Trade and other
receivables 142 - 143
Total non current
assets 84,469 81,655 80,638
------------------- ------------------- -----------------
Inventories 20,032 19,176 19,812
Trade and other
receivables 51,098 38,559 46,449
Cash and cash
deposits 15 10,867 19,271 12,962
Non current assets
classified
as held for sale 12 - 200 200
Total current assets 81,997 77,206 79,423
Total assets 166,466 158,861 160,061
------------------- ------------------- -----------------
Liabilities
Interest bearing
loans
and borrowings 31,385 29,820 29,253
Deferred tax
liabilities 4,109 5,862 4,070
Provisions 323 - 323
Trade and other
payables 311 101 208
Retirement benefit
obligations 13 29,463 29,838 29,798
Total non current liabilities 65,591 65,621 63,652
------------------- ------------------- -----------------
Trade and other payables 27,893 21,764 28,313
Current tax liabilities 1,511 2,866 731
Provisions 98 494 161
Interest bearing loans and borrowings 15,401 19,077 15,185
Total current liabilities 44,903 44,201 44,390
Total liabilities 110,494 109,822 108,042
------------------- ------------------- -----------------
Net assets 55,972 49,039 52,019
=================== =================== =================
Equity
Ordinary share
capital issued 18 3,671 3,664 3,664
Share premium 7,359 7,359 7,359
Translation
reserve 7,179 7,230 6,234
Retained earnings 37,789 30,812 34,788
Total equity attributable to equity holders
of the parent 55,998 49,065 52,045
Non-controlling interests (26) (26) (26)
------------------- ------------------- -----------------
Total equity 55,972 49,039 52,019
=================== =================== =================
Condensed consolidated statement of changes in equity
Attributable to equity holders of the company
Non-
Share Share Translation Retained 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 2018 3,664 7,359 6,234 34,788 52,045 (26) 52,019
Adjustment on initial application of
IFRS 15 (net of tax) - - - (69) (69) - (69)
Adjusted 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 gains 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 half year period - unaudited
Balance at 1 April 2017 3,650 7,359 8,334 24,946 44,289 (26) 44,263
Profit for the period - - - 3,297 3,297 - 3,297
Other comprehensive income -
Foreign exchange translation differences - - (1,104) - (1,104) - (1,104)
Remeasurement gains on defined benefit scheme - - - 3,004 3,004 - 3,004
Taxation on items above - - - (422) (422) - (422)
Transactions with owners recorded directly in
equity -
Share based payments 14 - - (13) 1 - 1
Balance at 30 September 2017 3,664 7,359 7,230 30,812 49,065 (26) 49,039
======= ======= =========== ======== ======= =========== =======
Prior year period - audited
Balance at 1 April 2017 3,650 7,359 8,334 24,946 44,289 (26) 44,263
Profit for the period - - - 8,492 8,492 - 8,492
Other comprehensive income -
Foreign exchange translation differences - - (2,238) - (2,238) - (2,238)
Remeasurement gains on defined benefit scheme - - - 2,150 2,150 - 2,150
Taxation on items above - - 138 (392) (254) - (254)
Transactions with owners recorded directly in
equity -
Share based payments - - - (40) (40) - (40)
Exercise of share options 14 - - (262) (248) - (248)
Taxation on items recorded directly in equity - - - (106) (106) - (106)
Balance at 31 March 2018 3,664 7,359 6,234 34,788 52,045 (26) 52,019
======= ======= =========== ======== ======= =========== =======
Condensed consolidated statement of cash flows
Six months ended Six months Year ended
30 September ended 31 March
2018 30 September 2018
unaudited 2017 audited
unaudited
Notes GBP000 GBP000 GBP000
-------- --------- -------------- -----------
Cash generated from operations 14 1,649 3,545 6,257
Interest paid (524) (507) (1,016)
Tax paid (103) (642) (1,693)
Net cash from operating activities 1,022 2,396 3,548
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 333 54 48
Interest received 57 57 99
Acquisition of property, plant
and equipment (3,128) (5,745) (8,773)
Acquisition of intangible assets - computer
software (64) (63) (350)
Net cash outflow from investing activities (2,802) (5,697) (8,976)
Cash flows from financing activities
Drawings on term loan facilities - 750 750
Repayment of finance leases (206) - -
Cash outflow in respect of performance
share plan awards (52) (248) (248)
Net cash (outflow) / inflow from financing
activities (258) 502 502
Net decrease in cash and cash equivalents (2,038) (2,799) (4,926)
Cash and cash equivalents at beginning
of period (2,223) 3,381 3,381
Effect of exchange rate fluctuations on
cash held 221 (388) (678)
Cash and cash equivalents at
end of period 15 (4,040) 194 (2,223)
======== ======== ========
Notes on 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 2018 has been prepared on the basis of the accounting policies set out in the audited accounts for the year ended 31 March 2018 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, but has been reviewed by the auditors and their report to the company is set out below.
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 2018 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 2018 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 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 13 November 2018 and is being sent to shareholders on 23 November 2018. Copies are available from the Company's registered office and can also be downloaded 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.
Net debt at 30 September 2018 was GBP35.9m, rising from GBP31.5m at 31 March 2018 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 quantum and timing of certain cash flows in the twelve month forecast period for ongoing design, development and tooling programmes is inherently uncertain. Accordingly, 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. The Group's financing remains within banking covenants at 30 September 2018 and is forecast to remain within the available facilities and covenants for at least the twelve month forecast period.
Based on their assessment, 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 condensed interim 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 2018. The 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 15 Revenue from Contracts with Customers (see A) and IFRS 9 Financial Instruments (see B) from 1 April 2018. A number of other new standards are effective from 1 April 2018 but they do not have a material effect on the Group's financial statements.
A. IFRS 15 Revenue from Contracts with Customers
The Group has adopted IFRS 15, 'Revenue from Contracts with Customers', for the year ending 31 March 2019. This establishes a comprehensive framework for determining whether, how much and when revenue is recognised. The majority of the Group's transactions are unaffected by IFRS 15, however when the standard is applied to customer contracts for design, development and tooling projects in both the Technical Plastics and LED Technologies divisions this leads to a difference in the timing of recognising revenue. The impact of the timing difference varies from contract to contract.
As permitted by the standard, the Group has taken advantage of the modified transitional provisions and the results for the year ended 31 March 2018 remain as previously reported. Under the modified approach the cumulative approach of initially applying the standard is recognised at 1 April 2018 with no restatement of prior periods.
The following adjustment has been made to brought forward retained earnings and recognised in the Condensed Consolidated Statement of Changes in Equity:
Impact of adopting
IFRS 15 at 1
April 2018
GBP000
Retained earnings
Profit before tax 69
Related tax -
Impact at 1 April 2018 69
The impact of adoption in the period to 30 September 2018 can be seen below and arises primarily from timing differences due to measuring the progress of LED premium automotive lighting contracts using an output method of measuring progress towards complete satisfaction of performance obligations, based on milestones reached under IFRS 15 rather than the cost to cost ("percentage completion") method used under IAS 18 and IAS 11.
Impact on the condensed consolidated As reported Adjustments Amounts without
statement of financial position adoption
as at 30 September 2018 of IFRS 15
GBP000 GBP000 GBP000
Other non current assets 84,469 - 84,469
------------ ------------ ----------------
Non current assets 84,469 - 84,469
Inventories 20,032 - 20,032
Trade and other receivables 51,098 1,845 52,943
Other current assets 10,867 - 10,867
------------ ------------ ----------------
Current assets 81,997 1,845 83,842
------------ ------------ ----------------
Total assets 166,466 1,845 168,311
============ ============ ================
Retained earnings 37,789 (57) 37,732
Other equity 18,183 - 18,183
------------ ------------ ----------------
Total equity 55,972 (57) 55,915
------------ ------------ ----------------
Other non current liabilities 65,591 - 65,591
------------ ------------ ----------------
Non current liabilities 65,591 - 65,591
Current tax liabilities 1,511 - 1,511
Trade and other payables 27,893 1,902 29,795
Other current liabilities 15,499 - 15,499
------------ ------------ ----------------
Current liabilities 44,903 1,902 46,805
------------ ------------ ----------------
Total liabilities 110,494 1,902 112,396
------------ ------------ ----------------
Total equity and liabilities 166,466 1,845 168,311
============ ============ ================
Impact on the condensed consolidated As reported Adjustments Amounts without
income statement and other adoption
comprehensive income in the of IFRS 15
six months ended 30 September GBP000 GBP000 GBP000
2018
Revenue 71,455 1,845 73,300
============ ============ ================
Operating profit 4,273 (57) 4,216
------------ ------------ ----------------
Total comprehensive income 3,922 (57) 3,865
============ ============ ================
The details of the new significant accounting policies and the nature of the changes to previous accounting policies in relation to the Group's goods and services are set out below.
Under IFRS 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control whether at a point in time or over time requires judgement.
i) Technical plastics
The Technical Plastics segment supplies fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products. Technical plastics revenues comprise two typical project types; manufacturing and tooling projects.
Manufacturing
The majority of Technical Plastics' business is in product manufacturing.
Control of manufactured finished goods transfers to customers on delivery. Therefore revenue is recognised at a point in time, at the same time as individual manufactured products are delivered to customers. There is no significant impact on revenue recognition resulting from the move from IAS 18 to IFRS 15.
Tooling
The Technical Plastics business also produces injection moulding tools for the customer.
Under IAS 18 tooling contract revenue was attached to a single performance obligation and was recognised over time using a cost to cost approach (i.e. the "percentage of completion method".) Under IFRS 15, an input method of measuring progress toward complete satisfaction of the performance obligation is used based on costs incurred. Accordingly, there is no significant impact on revenue recognition resulting from the move from IAS 18 to IFRS 15 in relation to tooling revenues within Technical Plastics.
ii) LED Technologies
The LED Technologies segment designs and supplies specialised injection moulded LED based lighting systems for the premium automotive industry and supplies LED optics for various industries.
Premium Automotive Lighting
Manufacturing
Control of manufactured finished goods transfers to customers on delivery. Therefore revenue is recognised at a point in time, at the same time as individual manufactured products are delivered to customers. There is no significant impact on revenue recognition resulting from the move from IAS 18 to IFRS 15.
Tooling
Premium Automotive Lighting contracts are complex and vary in scope and detail.
The transaction price typically comprises the total design, development and tooling value as specified in the contract
For design, development and tooling, revenue is recognised over time using an output measure of value delivered to the customer for tooling design, development and production based on milestones reached.
Under IAS 18 design, development and tooling was typically accounted for as a single performance obligation under IAS 11 Construction Contracts; revenue was recognised over time using a cost to cost approach (i.e. the "percentage of completion method".) Because of the nature of design, development and tooling contracts within Premium Automotive Lighting, where contracts are complex and vary in scope and detail, an output method of measuring progress more accurately depicts the transfer of control of design, development and tooling to the customer than a cost to cost approach. The timing of revenue recognition for output based milestones may differ under IFRS 15 depending on the specific requirements of the contract compared to input costs in determining revenue recognition.
Payments to secure new supply contracts
Payments to secure new supply contracts are common business practice in the medium-volume automotive market. Such payments are accrued in full and without discounting at the point that they become committed with a corresponding asset being recognised for the cost of obtaining the contract. This asset is amortised over the life of the contract and in line with the recognition of the contract revenues as a proportion of the total contract revenue.
Such payments were not common in the low-volume automotive market and so there is no according adjustment on transition to IFRS 15.
iii) Aerospace
The Aerospace segment manufactures components for the aerospace industry.
Control of manufactured finished goods transfers to customers on delivery. Therefore revenue is recognised at a point in time, at the same time as individual manufactured products are delivered to customers. There is no significant impact on revenue recognition resulting from the move from IAS 18 to IFRS 15.
B. IFRS 9 Financial Instruments
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. The adoption of IFRS 9 Financial Instruments from 1 April 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements, however the overall impact on the interim financial information is not material. In accordance with the transitional provisions in IFRS 9, comparative figures have not been restated.
Trade receivables, contract assets and cash and cash equivalents will now be classified as amortised cost, rather than loans and receivables, however as these assets were accounted for at amortised cost under IAS 39, there is no change in the carrying amount.
Trade payables and bank loans and overdrafts continue to be classified as other financial liabilities and accounted for at amortised cost.
Regarding impairment, the Group has applied the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all assets held at amortised cost. The impact of the change in impairment methodology was not material.
3. Accounting estimates
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 2018.
4. Segment reporting
The Group is organised into three, separately managed, business segments - Technical Plastics, LED Technologies and Aerospace. 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 LED Technologies segment develops innovative solutions in LED lighting, and is a leader in the development of high power LED lighting for the premium automotive industry.
The Aerospace segment supplies systems to the manufacturing and aerospace industries.
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.
The segment results for the six months ended 30 September 2018 were as follows -
Technical LED Group
Plastics Technologies Aerospace Unallocated Eliminations total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- -------------- ---------- ------------ ------------- ----------
Consolidated income
statement
Total revenue 44,147 25,654 3,121 - (1,467) 71,455
Less inter-segment
revenue (1,391) (76) - - 1,467 -
Total external revenue 42,756 25,578 3,121 - - 71,455
Expenses (40,224) (22,540) (2,515) (1,687) - (66,966)
Underlying operating
profit 2,532 3,038 606 (1,687) - 4,489
Exceptional items 113 - - (329) - (216)
Operating profit 2,645 3,038 606 (2,016) - 4,273
========== ============== ========== ============ =============
Net finance expense (921)
Income tax expense (813)
Profit after tax 2,539
==========
Consolidated statement of
financial position
Segment assets 98,326 51,577 6,920 9,643 - 166,466
Segment liabilities (18,710) (13,171) (929) (77,684) - (110,494)
Net assets 79,616 38,406 5,991 (68,041) - 55,972
========== ============== ========== ============ =============
The segment results for the six months ended 30 September 2017 were as follows -
Technical LED Group
Plastics Technologies Aerospace Unallocated Eliminations total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ---------- -------------- ---------- ------------ ------------- ----------
Consolidated income statement
Total revenue 44,635 25,698 2,859 - (1,014) 72,178
Less inter-segment revenue (887) (127) - - 1,014 -
Total external revenue 43,748 25,571 2,859 - - 72,178
Expenses (40,505) (22,186) (2,500) (1,583) - (66,774)
Underlying operating
profit 3,243 3,385 359 (1,583) - 5,404
Exceptional items 178 - - (178) - -
Operating profit 3,421 3,385 359 (1,761) - 5,404
========== ============== ========== ============ =============
Net finance expense (854)
Income tax expense (1,253)
Profit after tax 3,297
==========
Consolidated statement of financial
position
Segment assets 96,032 43,574 6,473 12,782 - 158,861
Segment liabilities (17,069) (8,084) (654) (84,015) - (109,822)
Net assets 78,963 35,490 5,819 (71,233) - 49,039
========== ============== ========== ============ =============
The segment results for the year ended 31 March 2018 were as follows -
Technical LED Group
Plastics Technologies Aerospace Unallocated Eliminations total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ---------- -------------- ---------- ------------ ------------- ----------
Consolidated income statement
Total revenue 92,237 50,707 6,072 - (2,802) 146,214
Less inter-segment revenue (2,584) (118) (100) - 2,802 -
Total external revenue 89,653 50,589 5,972 - - 146,214
Expenses (82,980) (44,167) (5,225) (3,031) - (135,403)
Underlying operating
profit 6,673 6,422 747 (3,031) - 10,811
Exceptional items (98) - - (806) - (904)
Operating profit 6,575 6,422 747 (3,837) - 9,907
========== ============== ========== ============ =============
Net finance expense (1,740)
Income tax credit 325
Profit after tax 8,492
==========
Consolidated statement of financial
position
Segment assets 100,640 44,164 6,486 8,771 - 160,061
Segment liabilities (22,516) (9,698) (784) (75,044) - (108,042)
Net assets 78,124 34,466 5,702 (66,273) - 52,019
========== ============== ========== ============ ============= ==========
5. Exceptional items
Six months
Six months ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
--------------------------------------- ------------------ -------------- ---------------
Rationalisation and restructuring
costs (303) (71) (842)
Credit arising on the disposal of
surplus properties 137 71 4
Costs associated with proposed offer (50) - -
Impairment of CIT Technology - - (66)
(216) - (904)
================== ============== ===============
GBP0.215 million of rationalisation and restructuring costs relate to the Group's UK operations.
6. Net finance expense
Six months
Six months ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
---------------------------------- ------------------ -------------- ---------------
Interest receivable on cash and
cash deposits 57 57 99
Interest payable on bank loans,
overdrafts and finance leases (578) (490) (1,009)
Net interest on the net defined
benefit liability (400) (421) (830)
(921) (854) (1,740)
================== ============== ===============
7. Income tax expense
Six months
Six months ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
--------------------------------------------- ------------------ -------------- ----------------
The (expense) / credit recognised in the condensed
consolidated income statement comprises -
Tax (expense) / credit arising on
ordinary activities (856) (1,253) 122
Deferred tax credit arising on exceptional
items - - 11
Current tax credit arising on exceptional
items 43 - 192
Total income tax (expense) / credit
recognised in the condensed consolidated
income statement (813) (1,253) 325
================== ============== ================
The half year accounts include an underlying tax charge of 24.0% of profit before tax (2017 - 27.5%) 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% (2017 - 19.0%) as the Group is earning a higher proportion of its profits in higher tax jurisdictions.
During the six months ended 30 September 2018 a GBP0.080 million debit was recognised in other comprehensive income in respect of deferred tax arising on remeasurement gains on the defined benefit obligations.
Deferred tax assets and liabilities at 30 September 2018 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. The deferred tax asset at 30 September 2018 has been calculated based on the rate of 17% substantively enacted at the balance sheet date.
8. Earnings per share
The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent 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 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 ended Six months Year ended
ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
-------------------------------------- ----------- ------------- -----------
Profit after tax from continuing
operations 2,539 3,297 8,492
Loss attributable to non-controlling
interests - - -
Profit after tax, attributable to
equity holders of the parent 2,539 3,297 8,492
=========== ============= ===========
Six months ended Six months Year ended
ended
30 September 30 September 31 March
2018 2017 2018
Shares Shares Shares
-------------------------------------- ----------- ------------- -----------
Weighted average number of ordinary
shares in the period 73,332,270 73,416,599 73,210,394
Effect of share options in issue - 1,120 1,296
Weighted average number of ordinary
shares (diluted) in the period 73,332,270 73,417,719 73,211,690
=========== ============= ===========
In addition to the above, the Company also calculates an earnings per share based on underlying profit as the Board believe this to be a better yardstick against which to judge the progress of the Group. Underlying profit is defined as profit before impairments, rationalisation costs, one-off retirement benefit effects, exceptional bad debts, business closure costs, litigation 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 ended Six months Year ended
ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
--------------------------------------- ------- ------------- -----------
Profit after tax, attributable to
equity holders of the parent 2,539 3,297 8,492
Rationalisation and restructuring
costs, net of tax 244 58 651
Credit arising on the disposal of
surplus properties, net of tax (112) (58) (3)
Impairment review of CIT Technology,
net of tax - - 53
Costs associated with proposed offer, 41 - -
net of tax
Tax credit resulting from the US
Tax Cuts and Jobs Act - - (1,990)
Underlying profit attributable to
equity holders of the parent 2,712 3,297 7,203
======= ============= ===========
The following table summarises the earnings per share figures based on the above data -
Six months ended Six months Year ended
ended
30 September 30 September 31 March
2018 2017 2018
Pence Pence Pence
----------------------------------------- ------ ------------- -----------
Basic 3.5 4.5 11.6
====== ============= ===========
Diluted 3.5 4.5 11.6
====== ============= ===========
Underlying earnings per share - basic 3.7 4.5 9.8
====== ============= ===========
Underlying earnings per share - diluted 3.7 4.5 9.8
====== ============= ===========
9. Dividends paid and proposed
No dividends were paid in the period or the comparative periods.
As outlined in the annual report 2018 the Directors are not proposing an interim dividend for 2018/19.
10. Intangible assets
The movements in the carrying value of intangible assets are summarised as follows -
Six months ended Six months Year ended
ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------------------- ------- ------------- -----------
Net book value at the start of the
period 25,311 25,702 25,702
Additions 64 62 350
Disposals - - (1)
Impairment arising on review of CIT
Technology - - (66)
Amortisation (162) (139) (281)
Effect of movements in foreign exchange 611 (169) (393)
Net book value at the end of the
period 25,824 25,456 25,311
======= ============= ===========
Included within intangible assets is goodwill of GBP24.5 million (30 September 2017 - GBP24.1 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 2018, 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 ended Six months Year ended
ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Net book value at the start of the
period 46,446 43,423 43,423
Additions 5,033 5,745 9,275
Depreciation (2,528) (2,369) (4,732)
Disposals (21) (61) (69)
Effect of movements in foreign exchange 792 (890) (1,451)
Net book value at the end of the
period 49,722 45,848 46,446
======== ============= ===========
12. Non current assets classified as held for sale
As at As at As at
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
---------------------------------- -------- ------------- ---------
Surplus land and buildings - 200 200
Net book value at the end of the
period - 200 200
========= ============= =========
During the period ended 30 September 2018 the remaining property at the closed Harthill site was sold.
13. Retirement benefit obligations
At 31 March 2018 the Group had a retirement benefit liability, as calculated under the provisions of IAS 19 "Employee Benefits", of GBP29.8 million. Since the start of the current financial year, positive asset returns of GBP0.7 million have been offset by GBP6.3 million of benefit payments which has resulted in the scheme's assets decreasing in value by GBP5.6 million to GBP164.5 million. However, the impact of an increase in the discount rate used to evaluate the scheme's liabilities, from 2.7% at the start of the period to 2.9% has offset the interest expense arising on the liabilities which, combined with the benefit payments, has resulted in the value of the liabilities decreasing by GBP5.9 million to GBP193.9 million. As a consequence the scheme, on an IAS 19 basis, has decreased from a GBP29.8 million liability at 31 March 2018 to a GBP29.5 million liability at 30 September 2018.
14. Cash generated from operations
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------------------- ------------- ------------- -----------
Operating profit 4,273 5,404 9,907
Adjustments for -
Pension fund contributions in
excess of service costs - - (1,227)
Depreciation charge 2,528 2,369 4,732
Amortisation of intangible assets 162 139 281
Exceptional impairment of intangible
assets, arising on rationalisation
of business - - 66
(Profit) / loss on disposal of
other plant and equipment (112) 7 22
Cash flow relating to provision
for site closure costs (63) (201) (209)
Share based payment charge /
(credit) 152 249 (40)
Operating cash flow before changes
in working capital 6,940 7,967 13,532
Changes in working capital
Decrease / (increase) in inventories 97 (327) (1,218)
Increase in trade and other receivables (4,225) (442) (8,842)
(Decrease) / increase in trade and
other payables (1,163) (3,653) 2,785
Cash generated from operations 1,649 3,545 6,257
============= ============= ===========
15. Cash and cash equivalents
As at As at As at
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------ ------------- ------------- ---------
Cash and cash deposits 10,867 19,271 12,962
Bank overdrafts (14,907) (19,077) (15,185)
(4,040) 194 (2,223)
============= ============= =========
16. Net debt
The net movement in cash and cash equivalents can be reconciled to the change in net debt in the period as follows -
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------- ---- -------------- -------------- -----------
Net decrease in cash and cash equivalents (2,038) (2,799) (4,926)
Net drawings of term loan borrowings - (750) (750)
Net proceeds of finance leases (1,771) - -
(3,809) (3,549) (5,676)
Effect of exchange rate
fluctuations on net debt (634) (52) 225
(4,443) (3,601) (5,451)
Net debt at start of period (31,476) (26,025) (26,025)
Net debt at end of period (35,919) (29,626) (31,476)
-------------- -------------- -----------
As at As at As at
30 September 30 September 31 March
2018 2017 2018
------------------------------------------- ---- -------------- -------------- -----------
Cash and cash deposits 10,867 19,271 12,962
Bank overdrafts (14,907) (19,077) (15,185)
Bank loans (30,108) (29,820) (29,253)
Finance leases (1,771) - -
-------------- -------------- -----------
(35,919) (29,626) (31,476)
============== ============== ===========
As at 30 September 2018 the Group's term loan of GBP30m was fully drawn. In addition the Group has access to GBP15m of overdraft, repayable on demand, plus an additional GBP2m of overdraft facility expiring at the end of February 2019.
17. Financial instruments
The fair values 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.
18. Ordinary share capital
Ordinary shares of 5 pence each -
Number of shares GBP000
---- -------------------------------------------- ------------------ -------
Issued and fully paid at 31 March 2017 73,007,668 3,650
Shares issued on exercise of share options 279,250 14
Issued and fully paid at 30 September
2017 and 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 73,419,193 3,671
================= =======
In the six months ended 30 September 2018, nil-cost options over 132,275 ordinary shares were exercised under a long term incentive plan at an average exercise price of 0.0 pence per share. The shares are fully paid.
19. 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 2018, remuneration to current and former directors amounted to GBP0.544 million (2017 - GBP1.063 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, it has 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 GBP0.247 million which has been charged against other operating expenses (2017 - GBP0.265 million).
20. Post balance sheet events
In October 2018, the Group made deficit recovery payments of GBP1.2 million in cash into the Group pension scheme in accordance with the agreed funding plan.
A UK High Court judgement was made on 26 October 2018 in respect of the gender equalisation of guaranteed minimum pensions ("GMPs") for occupational pension schemes. This will be treated for IAS 19 purposes as a plan amendment and will result in an increase in the pension deficit in the balance sheet and a corresponding past service cost in the income statement. This will be treated as an exceptional item so there will be no impact on underlying operating profit. It is expected that the impact of GMP equalisation will be in the region of GBP3.0 million based on an initial estimate as at the date of this report, but this estimate will be refined in line with emerging practice of the method to be used.
In October 2018 a rationalisation of the Czech facility was announced. We expect restructuring costs of c. GBP1.0m, the majority of which is expected to be incurred during the second half of the current financial year.
21. 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.
22. Responsibility statement
We confirm that to the best of our knowledge -
-- the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU;
-- the interim management report includes a fair review of the information required by -
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
By order of the Board
Chris Malley - Chief Executive
Sarah Matthews-DeMers - Group Finance Director
13 November 2018
Independent review report to Carclo plc
Conclusion
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2018 which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated statement of financial position, the Condensed consolidated statement of changes in equity, the Condensed consolidated statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
John Pass
For and on behalf of
KPMG LLP
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds LS1 4DA
13 November 2018
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
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