TIDMCAR
RNS Number : 1808W
Carclo plc
14 April 2023
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IN THE PUBLIC DOMAIN
14 April 2023
Carclo plc
("Carclo" or the "Group")
Full Year Trading Update
Carclo, a preferred and trusted partner of global customers,
providing high-precision critical components to the life sciences,
aerospace, optics, and technology industries, today provides an
update on trading for the financial year ended 31 March 2023 ("FY
2023").
During FY 2023, the Company encountered multiple significant
challenges, including the dissolution of a major manufacturing
contract, the adverse effects of rising input costs on margins, and
increasing interest rates. In response to this altered landscape,
the Board shifted the Group's strategy to focus on operational
excellence and cash generation. Although the final quarter of FY
2023 has shown early signs of the new strategy's benefits, the
overall full-year profit performance is anticipated to be below the
previous year. As a result of the new focus on cash generation, the
Group expects to deliver an improvement in net debt compared to the
position at the half year, whilst having continued to make
significant pension deficit repair contributions. The suppressed
Manufacturing Solutions margins and reduced Design &
Engineering activity within our Carclo Technical Plastics (CTP)
business have only been partially counterbalanced by increased
manufacturing volumes in CTP and a robust performance from our
Aerospace division.
Redefined Strategy
During the latter half of FY2023 it became clear that the
cash-intensive top-line growth strategy was unsustainable in the
current economic climate. As a result, the Board has refocused the
Group's strategy on margin expansion through operational excellence
and balance sheet strengthening via cash generation. Our investment
priorities now lie in supporting existing projects and continuous
improvement with a swift return on investment. While we have
already begun implementing this new strategy and there is still
much to accomplish, we are witnessing early positive indications of
enhanced margins and cash generation as FY2023 concludes.
Banking Arrangements
The Board continues to work with its lending bank, HSBC, to
ensure that there is appropriate ongoing financial support for the
business as it implements the new strategy. HSBC remain supportive
and the Group successfully reached an agreement with them to reset
the interest cover covenant for 31 March 2023. Discussions are
continuing with HSBC regarding the setting of appropriate covenants
for the forthcoming financial year.
Carclo Technical Plastics (CTP)
The CTP division achieved a robust revenue performance, despite
facing significant headwinds during the year. Activity in the
Design & Engineering segment reduced from the very high level
of the prior year, but remained above historical norms. The
Manufacturing Solutions segment delivered significant revenue
growth, primarily from our existing customers in the life sciences
sector , d emonstrating our ability to grow organically in our
chosen markets.
However, significant margin challenges offset this revenue
growth, particularly the unprecedented increase in input costs,
including soaring energy prices. While we have been able to pass on
some of the higher costs to customers, the time delay in doing so
has caused a significant drop in operating margins during the year.
The effect of the lower margins was only partially mitigated by
increased manufacturing volumes and we therefore expect the
divisional underlying operating profit to be materially lower than
the prior year.
We previously announced the dissolution of a significant
manufacturing contract and are engaged in ongoing discussions with
the customer to reach a commercial agreement for this contract.
Our current focus is on margin recovery through operational
efficiency and optimisation. We have begun our factory
specialisation journey in the EMEA region, with our UK facility
concentrating on long production runs and our Czech facility
focusing on short and medium-run products, prioritising flexibility
and rapid changeovers. We are now implementing this factory
specialisation strategy in the US. Our Chinese and Indian
operations demonstrate strong growth potential and enhance our
global presence. We expect a steady recovery in operating margins
in the near term as our new strategy starts to yield results.
Aerospace
Our Aerospace division is witnessing a robust recovery as the
aviation industry rebounds, with sales approaching pre-COVID
levels. The division's unique market position ensures margin
resilience amid inflation, and we expect solid profits and
operating cash flow for FY2023. Our focus lies in expanding sales
within existing markets and creating high-precision,
safety-critical solutions for specialised sectors.
Governance
The Board is dedicated to maintaining high governance standards
and regulatory compliance. We have restructured the Board,
separating the roles of Non-Executive Chairman and Chief Executive,
in line with the Corporate Governance Code. Rachel Amey's recent
appointment as a Non-Executive Director strengthens the Board, as
her financial expertise will help ensure adherence to best practice
in financial controls and governance.
Outlook
We remain dedicated to providing sustainable earnings growth and
value creation for our stakeholders, despite the persistent
challenges caused by inflationary pressures. Our new strategy
emphasises cash generation, stability, operational excellence, and
optimising our global footprint. We are implementing measures to
enhance manufacturing and supply chain efficiency while minimising
environmental impact. Our endeavours to optimise our global
footprint will enable us to serve our customers better, support
growth in key markets, and improve financial performance. We expect
the business to deliver a substantially improved performance over
the medium term as our focus shifts to enhancing margins and return
on capital.
About Carclo plc
Carclo plc is a public company whose shares are quoted on the
Main Market of the London Stock Exchange. The Group is a preferred
and trusted partner of global customers, offering high-precision
critical components that meet the needs of life sciences,
aerospace, optics, and technology industries .
LEI: 21380078MEM399JPI956
Enquiries:
Carclo plc 01924 268040
Frank Doorenbosch - Chief Executive Officer
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