Year-End Trading Update
17 April 2019
Carclo plc ("Carclo" or the "Group")
Year-End Trading Update
Carclo plc ("Carclo" or the "Group"), a global manufacturer of fine tolerance injection moulded plastic parts mainly for the medical, automotive lighting and optics markets, issues this trading update for the year ended 31 March 2019 ahead of the Group announcing its full year results in June.
The Technical Plastics and Aerospace Divisions performed as anticipated in the year, with the second half seeing a much-improved performance from the Technical Plastics Division. This reflects the growing success of the ongoing operational improvement programme and controlled growth in volumes. A programme commenced just before the year-end to reduce the footprint of the Technical Plastics facility in the Czech Republic to further improve the site's future profitability. Overall, both the Technical Plastics and Aerospace Division saw year-on-year improvements in operating profits, with the Aerospace Division significantly ahead.
In Wipac, the main operating business in the Group's LED Technologies Division, production volumes have begun to increase in recent weeks although customer backlogs have remained largely unchanged as customer demand has risen, partly for Brexit related safety stock reasons. With some key personnel changes having been made in the past three months and a range of operational initiatives subsequently implemented, the Board is confident of further progress being made in improving output in the near-term. Given that a number of new mid-volume platforms go into production over the coming months and years, the revenue outlook for the business remains strong, with the opportunities and challenges this brings.
However, although progress was made in increasing production output, the costs of scrap, freight and production labour remained at higher than expected levels as an unprecedented number of new programmes were launched into the previously reported unstable manufacturing environment. This situation, combined with lower development and tooling revenue as fewer new programmes were awarded, a risk highlighted in the Group's statement on 11 January 2019, resulted in the profits for Wipac, and consequently the Group, falling below the Board's expectations for the year.
Exceptional costs associated with reorganising the Wipac business and restructuring the Czech Technical Plastics facility were broadly as anticipated in the range of £1.5m to £2.0m, of which around £0.4m was non-cash in nature. In addition, exceptional costs of around £3.0m associated with the equalisation of guaranteed minimum pensions ("GMP") are to be charged in the year. Work to determine the effect of the reduced profitability on the carrying value of goodwill will be finalised as part of the year end audit.
The Group's organisational structure has been simplified with the recently appointed interim COO role quickly being eliminated in order to provide greater clarity and swifter decision making. This move is seeing benefits with the local, recently enhanced, Wipac team leading the business with renewed focus and unified direction. Customers remain broadly supportive of our actions and, in a number of cases, are providing expert on-site assistance. In addition, discussions are ongoing for the earlier than planned customer reimbursement of monies incurred by Wipac for the design and development of future production programmes.
Group net debt at 31 March 2019 was in line with expectations, at slightly above the level at the half year. Given the ongoing discussions with customers referred to above, the net debt to EBITDA banking covenant test at 31 March 2019 was deferred by the bank for one month in advance of the year-end. The Group is financed through an overdraft facility and a £30m term loan maturing in March 2020, which will require refinancing in the coming months.
Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.
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Carclo plc 01924 268040
Richard Ottaway, Company Secretary
FTI Consulting 020 3727 1340
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