TIDMCAR
RNS Number : 7769J
Carclo plc
29 April 2022
29 April 2022
Carclo plc
("Carclo" or the "Group")
Full Year Trading Update
Carclo, a global manufacturer, principally of fine tolerance
injection moulded plastic parts and aerospace components, today
provides an update on trading for the financial year ended 31 March
2022 ("FY 2022").
The Board is pleased to report that the business expects to
report a strong performance for the year, with revenue growth ahead
of, and underlying profits in line with, its expectations despite
the challenging macroeconomic backdrop. In addition, the Group
balance sheet has strengthened considerably throughout the course
of the year, in part driven by a reduction in the IAS 19 pension
deficit. We have continued to invest in capital equipment to
support long-term growth, largely financed by an increase in net
debt.
The impact of the pandemic continued to be felt throughout the
year albeit less through the direct impacts of lockdowns and plant
closures, and more through the secondary effects of labour
shortages and significant cost inflation. During the second half,
whilst demand has remained robust, the business faced more
challenging conditions in terms of recruiting labour in the US as
well as cost escalations across raw materials, energy, packaging,
freight and other overheads. Whilst the impact of raw material cost
increases can largely be passed on to customers (albeit with some
time lag) the overall impact of these increases reduced margins in
the second half particularly in the US operations. Price increases
are being negotiated with customers and this will continue into FY
2023 to offset the impact of the non-material cost increases.
Latterly the war in Ukraine has added to these inflationary
pressures.
The safety and wellbeing of the Carclo team has continued to be
foremost in the minds of the Board and in addition to the measures
introduced at the start of the pandemic a range of further actions
have been taken to support colleagues through these challenging
times. The Board is grateful for the positivity, resilience and
dedication shown by colleagues again this year.
In the first full trading year with a refreshed Board, the new
leadership team has focused on refining the Group's medium-term
strategy. Having received the final proceeds from the exit from the
LED technology business, the organisational structure has been
simplified to focus purely on CTP and Aerospace growth. Going
forward the business will continue to execute on the growth
strategies developed for each of these divisions, with further
significant investment in capability and capacity planned for FY
2023.
In addition, the Board has continued to build positive
relationships with pension trustees and banks. As well as
additional employer contributions made towards reducing the pension
deficit, a range of other scheme initiatives have been introduced
aimed at enhancing members' benefits whilst reducing the deficit,
and these are expected to continue to contribute positively in the
coming years.
Carclo Technical Plastics (CTP)
The CTP division performed well with demand continuing to grow
for medical and diagnostic products. The first half of the year was
strong, followed by a second half year performance impacted by cost
inflation noted above.
The new large customer contract reported in previous trading
updates has now entered production in the UK after an extended
period of prove out; the US production line is still in the prove
out stage but is expected to commence production in the early part
of FY 2023.
Despite the challenging backdrop, the division has been awarded
significant new tooling contracts by an existing large customer and
consequently it is anticipated that new production lines will be
installed in CTP businesses around the globe in line with our
long-term strategy. This will in turn lead to continuing long term
revenue growth. As a result, it is anticipated that capital
investment in the division will remain significant in FY 2023.
In addition to this large tooling order the division continued
to deliver on its longer-term growth strategy, introducing 17
additional new product lines across four of our global sites. We
have also secured five new significant accounts in target sectors
including pharmaceutical accounts in the Czech Republic and US, a
medical account in India, and China accounts added in the diabetes
and diagnostics sectors.
To date the war in Ukraine has not directly impacted any
operations other than through the impact of oil and energy price
increases feeding through into inflation. COVID-19 continues to
have the potential to impact the division through restrictions on
labour movement, currently these impacts are notably affecting our
India and China Operations.
The division also benefited from a US Government Loan related to
COVID-19 disruption being forgiven in the year; the resulting
profit was disclosed separately in the Interim Accounts income
statement.
Aerospace
The Aerospace division has continued to show good resilience,
remaining both profitable and cash generative in the year. Order
intake remained somewhat subdued in the first half but has improved
significantly in the second half and in particular in the last
quarter of the year. Additional business development resources have
been recruited with the objective of accelerating growth as the
industry recovers from the impact of the pandemic. The order growth
has come both from existing customers placing larger orders as well
as new customers. Margins have been maintained despite significant
cost increases in the second half.
As with CTP, the war in Ukraine has the potential to cause
disruption to customer supply chains but to date this has not had a
material impact on the division.
The division starts the new financial year with a healthy order
book and expects to see good revenue and profit growth in FY
2023.
Governance
The Group has operated with a refreshed Board over the last
12-month period, bringing strong and relevant experience to the
streamlined and re-focused Group. This complemented the new
Tripartite Agreement established with the Group's bank and pension
trustees to form a stable basis on which to continue to drive
renewed growth for the business.
Outlook
Demand in the Group's key markets remains strong coming into the
new financial year and this underpins continued confidence in
strong underlying revenue growth. However, the Group is seeing
significant headwinds largely due to the continued impact of
COVID-19, in particular in our China and India operations. In
addition, we remain mindful of the general market uncertainty
related to the impact of the war in Ukraine. The margin pressures
that have been experienced in the CTP division in the second half
of FY 2022 are expected to continue into the new financial year and
it is anticipated that trading in the early months of FY 2023 will
remain challenging. A number of initiatives are underway to
mitigate these impacts with the benefits of these making an
increasing contribution to margins over the course of FY 2023. For
the Aerospace division, the strong order intake in Q4 and the
increased focus on business development positions the division well
for FY2023, with further growth expected in the current year and
beyond.
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 global
provider of value-adding engineered solutions for the medical,
optical and aerospace industries.
LEI: 21380078MEM399JPI956
Enquiries:
Carclo plc 01924 268040
Nick Sanders - Executive Chair
FTI Consulting 020 3727 1340
Nick Hasell / Susanne Yule
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