THE INFORMATION
CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE
INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO.
596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT,
THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC
DOMAIN
Carclo plc
("Carclo" or the
"Group")
Full Year Results for the year ended 31
March 2024 (unaudited)
Carclo plc, the leading global provider of
high-precision components, offering comprehensive services from
mould design, automation and production to assembly and printing,
serving the life sciences, aerospace, optics and tech sectors,
announces its unaudited results for the financial year ended 31
March 2024 ("FY24").
The key financial performance measures for the
year are as follows:
|
|
Year ended
31 March
2024
£000
|
Year ended
31 March
2023
£000
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
|
Revenue
|
132,672
|
143,445
|
|
Underlying operating profit
|
6,647
|
5,939
|
|
Exceptional items
|
(4,857)
|
(4,710)
|
|
Operating profit
|
1,790
|
1,229
|
|
|
|
|
|
Underlying earnings per share - basic -
continuing operations
|
1.1p
|
0.4p
|
|
Basic loss per share - continuing
operations
|
(4.5)p
|
(5.4)p
|
|
Net debt
excluding lease liabilities
|
18,290
|
22,490
|
|
Net
debt
|
29,457
|
34,360
|
|
IAS 19
retirement benefit liability
|
37,186
|
34,493
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
CTP Design & Engineering
|
21,570
|
20,077
|
|
CTP Manufacturing Solutions
|
103,473
|
116,737
|
|
Aerospace
|
7,629
|
6,631
|
|
Total
|
132,672
|
143,445
|
|
|
|
|
|
Underlying
operating profit
|
|
|
|
CTP
|
9,417
|
7,321
|
|
Aerospace
|
1,699
|
1,520
|
|
Segmental
total
|
11,116
|
8,841
|
|
Central
|
(4,469)
|
(2,902)
|
|
Total
|
6,647
|
5,939
|
|
|
|
|
|
Segmental
underlying return on sales
|
8.4%
|
6.2%
|
|
|
|
|
Financial performance:
We have prioritised the control of
capital investment, working capital management and tight control
over costs in order to increase cash generation and to increase
return on capital.
· Revenue from
continuing operations decreased by 7.5% (4.5% at constant currency)
to £132.7m (FY23: £143.4m).
· Underlying
operating profit from continuing operations was £6.6m (FY23:
£5.9m).
· Cash generated
from operations was £15.6m (FY23: £7.8m).
· Statutory
operating profit from continuing operations was £1.8m (FY23:
£1.2m).
· Net exceptional
costs in the year were largely driven by rationalisation costs
incurred in CTP and totalled £4.9m (FY23: £4.7m), of which the cash
cost was £0.6m (FY23: £2.2m).
· Net debt of
£29.5m (FY23: £34.4m). Net debt has reduced by £4.9m from prior
year, reflecting strong working capital management and the increase
in operating performance, placing Carclo on a sound footing for the
future. On 5 July 2024, the Group successfully extended the
facilities with the Company's lender for the multicurrency term and
revolving facilities agreement to 31 December
2025.
Strategic highlights:
· Fortifying our
financial position for long-term success - Delivered reduction of
our net debt to uEBITDA ratio, through streamlining our asset base
for better returns, optimised our working capital position and
focused capital expenditures.
· Factory
specialisation and standardisation - Completed the reconfiguration
of our APAC and EMEA facilities for specific product lines and
standardising production processes, which has led to substantial
gains in efficiency and product quality, supported by the
integration of advanced manufacturing technologies and targeted
workforce training. The reconfiguration in the US in
ongoing.
· Organic growth
through strategic partnerships - Expanded and deepened our
strategic alliances to deliver process optimisation, new back-end
automation and enhanced material utilisation.
· Embracing
sustainability for a greener future - The "Zelda" project delivered
strong results, which reduced external waste through material
utilisation improvements. Our energy focus led to a reduction in
tonnes of CO2e per million £ of revenue. 98% of electricity used in
the United Kingdom now comes from renewable resources.
· Empowering unity,
driving breakthroughs - Through "One Carclo" we launched employee
engagement initiatives, promoting diversity and inclusion, and
encouraged cross-functional teamwork between all sites, all of
which drives our performance.
Sustainability highlights:
· Leading the way
in sustainability - Carclo is advancing "Project Zelda," our
ground-breaking initiative to reduce waste and enhance energy
efficiency. Initiating our shift to renewable energy in the UK
exemplifies our commitment to sustainability.
· Strengthening
supply chain sustainability - In partnership with EcoVadis, we've
elevated our sustainability practices throughout our supply chain,
placing us in the top 35% of companies globally-a significant rise
from last year's top 50%.
· Engaging
communities, creating lasting social value - We actively promote
and encourage our employees to engage in community support through
initiatives like volunteering for charity events, such as the Royal
Marsden Hospital walk, and partnering with educational institutions
for skills development and training. Additionally, we prioritise
safety and sustainability, celebrating milestones like
accident-free days across our sites and investing in
energy-efficient technologies and green community
projects.
Commenting on the results,
Frank Doorenbosch, Chief Executive Officer
said:
"Carclo has undergone a lot
of change and adaptation in the last year. We have faced
difficulties, but we have also prioritised health and
safety, enhanced our financial position, and fortified our
position for
lasting and stable growth.
Looking to the future, our strategy will centre on reigniting
our innovation engine. We will focus on enhancing product
development, refining processes, and investing in our talented
team. The strategic closure of our short-run operations in Derry
and the consolidation of assets and talent in Pennsylvania will
streamline our operations and drive innovation.
With a clear vision, a robust strategy, and
our
commitment to our customers and employees, we are
confident in our ability to navigate the challenges ahead and
appear as a stronger, more resilient organisation. The future holds
great promise for Carclo, and we are excited to embrace the
opportunities that lie ahead."
Further
Information
|
Please contact:
|
|
|
Frank Doorenbosch, Chief Executive Officer,
Carclo plc
|
+44 (0) 20 8685 0500
|
|
Eric Hutchinson, Chief Financial Officer, Carclo
plc
|
+44 (0) 20 8685 0500
|
Forward-looking
statements
Certain statements made in this annual report
and 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 outcomes to differ materially
from those expected.
Alternative
performance measures
A reconciliation to statutory numbers is
included within the Finance Review. The term "underlying" is not
defined under IFRS and may not be comparable with similarly titled
measures used by other companies.
Chief Executive Officer's
Review
As we wrap up the year, Carclo's journey through
a dynamic and challenging business environment has strengthened our
foundation, pivotal in reshaping Carclo as a premier strategic
partner for multicomponent solutions in the life sciences,
precision technology, optics and aerospace markets. Carclo enhances
functionality and performance with our comprehensive offerings,
including design and engineering for moulds, injection moulding,
assembly, decorating, and supply chain solutions. Our sophisticated
medical devices, essential industrial components, and aerospace
parts meet stringent safety standards. Carclo plc is a trusted,
one-stop shop dedicated to addressing the complex needs of our
global customers.
Despite significant changes in our organisation,
we successfully reduced lost time incidents. By mandating the
reporting of all incidents, near misses and hazards, we gained more
precise insights into health and safety risks. Our relentless drive
for Health & Safety has led to a positive trend in lost time
incidents per 100,000 hours worked (the incident frequency rate).
Our second Carclo Safety Week was highly successful, driving
motivation participation and positively impacting our
business.
Carclo faced a number of external challenges
during the year, including continued high inflation and interest
rates, supply chain disruptions and fluctuating raw material costs.
We overcame these obstacles through strong teamwork as One Carclo,
leveraging our collective expertise and resilience to adapt and
thrive in a rapidly changing environment. During the year we
continued the implementation of our EMEA restructuring plan,
announced the closures of the Derry and Tucson sites and
reallocated the assets initially installed for the manufacturing
contract that did not materialise. Our strategic focus, rigorous
cost management, optimised operational efficiencies and strong
supplier relationships have allowed us to navigate these challenges
effectively. Our investment in advanced manufacturing strategy and
technologies has bolstered our production capabilities, ensuring we
remain agile and competitive in a volatile market.
These efforts have addressed immediate
challenges and laid a solid foundation for sustainable growth and
profitability. Our commitment to continuous improvement and
innovation ensures that we can capitalise on future opportunities
and deliver long-term value to our stakeholders.
For FY24, we set out four key priorities to
improve performance to achieve our strategic goals: strengthening
balance sheet, maximising asset utilisation, improving margins over
top-line growth, and maximising the value from our global
footprint. Our exceptional team has risen to the occasion and
delivered progress on all fronts.
Strengthening balance sheet:
We have fortified our financial foundation through strict
cash management, selective capital investment, improved working
capital positions, and enhanced business performance. These
measures have prepared us to weather economic uncertainties and
seize growth opportunities. As a result, our net debt to
uEBITDA leverage in FY24 is now 2x (FY23: 2.5x) and working capital
as a percentage of revenue has been driven close to our target
range of 5.0% and 7.0%
Maximising asset utilisation: Our team has
effectively realigned our EMEA operations and made significant
strides in the US. The strategic closure of our short-run facility
in Derry and the consolidation of resources and talent in
Pennsylvania, which includes the forthcoming closure of our Tucson
site, have optimised our operations, enhancing our asset
utilisation as evidenced by increased revenue per pound invested in
net fixed assets.
Improving margins over top-line
growth: In our CTP Division, we have implemented a
range of initiatives to enhance operational efficiencies and
optimise our product mix. We have increased profitability by
implementing factory specialisation, with different facilities
focusing on medium and long-run products. Leveraging advanced
manufacturing technologies and fostering strong customer
relationships has improved our margin, enhancing the value of
projects.
Maximising the value of our global
footprint: We have leveraged our international
presence to both deliver local service and support our global
customers as well as to drive efficiency and innovation through a
number of strategic actions in FY24. We have implemented factory
specialisation for medium and long runs in the EMEA region, which
has streamlined our operations and improved productivity. In the US
we ceased our short-series production, closing our Derry, NH
facility. We are optimising our operations by focusing production
and talent in Pennsylvania, leading to the recently announced
closure of our Tucson facility. We are equipping our facility in
Greensburg, PA, to become an assembly-focused site, resulting in
more efficient specialized operations in the different PA sites,
mirroring our successful EMEA model. The improved Greensburg
facility is also our Design & Engineering (D&E) centre in
PA enhancing customer support and serving as a training hub for our
technical talent. We have bolstered our global production
capabilities by reallocating assets strategically and investing in
advanced sustainable manufacturing technologies. These actions
ensure we remain competitive, optimise operational efficiencies and
deliver superior value to our customers. Our global strategy
enhances our market position and reinforces our commitment to
continuous improvement and long-term profitability.
Financial
overview
In a year of unpredicted challenges and
significant victories, we made significant progress in improving
both our financial health and the robustness of our operations,
reflecting the effectiveness of our strategic decisions. Our Return
on Capital Employed ("ROCE") increased from 9.7% in FY23 to 13.1%
in FY24. We delivered an improved contribution margin over last
year of 36.0% on a revenue of £132.7m. Our FY24 underlying EBIT
reached £6.6m, marking an increase of 21.8% from FY23 at a constant
exchange rate. Cash generated from operations grew to £15.6m, up
100.8% against the prior year. We maintained streamlined
operational cash management, resulting in working capital as a
percentage of revenue at 7.9% in FY24 (FY23: 11.0%). Additionally,
we reduced our net debt / uEBITDA from 2.5x to 2.0x in FY24,
highlighting the effectiveness of our debt management
strategy.
Strategic
achievements and operational highlights
Despite challenging market conditions, Carclo
has demonstrated remarkable resilience and made notable progress
across our business units over the past year. Our core
divisions have delivered improved performance, achieved significant
milestones, and driven our success through their dedication,
capability, and innovative approaches.
Divisional
Performance: CTP
Design & Engineering
("D&E")
Our Design & Engineering business has
thrived, driven by our dedication to precision and excellence in
every customer project. Activity has focused on "Asset
Revitalisation", a distinctive program to support operational
excellence by upgrading existing manufacturing systems, which will
continue in the coming years.
In the US we have invested in our first
technology centre and developed in-house training programmes for
process operators, ensuring continuous education for our team and
enhancing our processing knowledge. These investments have
streamlined our operational efficiency and increased client
satisfaction, positioning us for sustainable growth and unmatched
value delivery.
Strategically, we are introducing D&E as a
standalone service, strengthening our market position and unlocking
new growth opportunities. The expanded application of our D&E
capabilities allows us to serve a broader client base and cement
our position as precision engineering leaders.
Manufacturing Solutions
("MS")
Our Manufacturing Solutions business has made
significant progress in operational excellence and strategic
realignment, despite a 8.3% revenue decline on a constant currency
basis. Including the effect of currency movements, CTP
MS experienced a year-on-year revenue decrease from £116.7 m to
£103.5 m, influenced by several strategic and market factors. The
reduction in revenue was largely due to the cessation of PCR
COVID-19 testing, which impacted our customers' volumes.
Additionally, we strategically curtailed short-run and loss-making
business segments, further refining our focus on sustainable and
profitable growth. Although these actions led to a decrease in
sales, they position us for a stronger and more stable financial
future.
The successful execution of our factory
specialisation strategy in EMEA has been pivotal to our improvement
performance. By focusing on advanced process optimisation, we have
significantly increased throughput, product quality, and
competitiveness, achieving a structural increase in our Overall
Equipment Effectiveness (OEE) and maintaining a strong asset
utilisation of 3.3x. OEE is our comprehensive metric that evaluates
how effectively our manufacturing operation is utilised by
measuring three key components: availability, performance, and
quality. These advancements in OEE have reduced operational costs
and delivery times, benefiting our clients through improved service
delivery and reliability.
Continuing our strategic realignment, we are
centralising our North American assets and talent in Pennsylvania
which will further enhance our global platform. This shift allows
us to achieve more significant economies of scale and foster a more
agile production environment, enabling us to adapt swiftly to
market fluctuations and meet evolving customer demands.
CTP Profitability
Focusing on margins, we have achieved an
increase in contribution margin compared to prior year, resulting
in a remarkable 28.6% increase in uEBIT for our CTP business
compared to FY23. Our margin improvement demonstrates the
effectiveness of our strategic initiatives and positions us to
seize future growth opportunities. By continuing to drive
operational excellence and strategic alignment, we are
well-positioned to strengthen our manufacturing capabilities and
deliver unparalleled value to our customers.
Divisional Performance:
Aerospace
Our Aerospace division has achieved record
revenue of £7.6m (FY23: £6.6m) and near-record profits,
successfully navigating the post-COVID aerospace recovery. Growth
continues in our high-end engineering and machining product lines,
driven by our development in precision machining techniques. Our
strong performance in Southeast Asia, where we outpaced the high
regional market growth, now accounts for nearly 10% of our
aerospace revenue, highlighting our quality-driven
approach.
A key driver of our success is the robust growth
in our machined precision solutions. We are expanding our precision
machining capabilities and infrastructure in both our UK and French
site to support this success. These investments solidify our
position as a preferred partner in the aerospace supply chain,
enabling us to deliver large-scale, innovative solutions. By
collaborating closely with our customers, we develop tailored
solutions that provide a competitive edge and strengthen long-term
partnerships.
Moving forward, our Aerospace division is poised
to leverage its strengths, adapt swiftly to market changes, and
deliver exceptional value to customers and stakeholders. With
record sales, an improving supply chain and targeted investments,
we are well-positioned to maintain our growth momentum, solidify
our leadership in the aerospace niche and expand in the South Asian
market.
By continuing to prioritise quality,
reliability, and innovation, our Aerospace division will capitalise
on widening its offering in a growing market and drive sustainable
growth. We will further strengthen our industry relationships,
expand our capabilities and deliver cutting-edge solutions that
meet the evolving needs of our global aerospace
customers.
Sustainability
commitment
Sustainability is a cornerstone of our strategic
vision. Over the past four years, we have improved our CO2e
efficiency year by year, reducing tonnes of CO2e per £1m revenue
from 155.3 to 142.6 which is particularly commendable given the
recent 7.5% reduction in revenues. Our commitment to sustainable
practices includes Project Zelda, which is already showing
promising results in improved process and material management-an
essential second step in our journey to operational excellence.
Additionally, we have enhanced our Ecovadis score, moving from the
top 49% of companies to the top 35%, reflecting our dedication to
exceeding industry standards.
By investing in greener technologies and
renewable energy, and fostering a culture of sustainability, we
drive long-term environmental and social benefits. Our commitment
to sustainability strengthens our market position and positively
impacts the planet, aligning with our goal of delivering superior
value to our customers and stakeholders.
Looking Ahead:
strategic focus
As we look ahead, I am excited and optimistic
about the opportunities that lie before us. The team completed the
initial steps of building the foundation and specialising our
factories in Asia and EMEA, and the US team is making good progress
on their journey. The improvements we can still make in material
and processing optimisation will be the next step on our long-term
journey to "Lights Out Manufacturing."
Our new procurement organisation is driving a
shift towards strategic sourcing and stronger supplier
partnerships. By fostering these collaborative relationships we
anticipate enhanced business performance in the short term and
sustained improvements in the medium term, including increased
efficiency, cost savings and a more resilient supply
chain.
In this rapidly evolving digital landscape, we
must heighten our vigilance in control and reporting. To build a
system that ensures strategic alignment, we need to streamline and
standardise our business support processes, much like we have done
in our manufacturing operations. By implementing best practices and
driving operational efficiency, we can enhance our ability to
respond swiftly to market changes and deliver consistent,
high-quality outcomes for our stakeholders.
We understand that the rigorous validation
processes surrounding our precision solutions can lead to delays in
scaling up new projects and products. However, we are working on
exciting new initiatives to diversify our customer base, expand
into new markets and broaden our product portfolio. While the path
to full-scale manufacturing takes time, we are committed to
bringing innovative solutions to our clients as efficiently as
possible.
In the long term, we aim to develop and
integrate proprietary technologies and products to enhance our
market offering. While we are excited about the potential of our
focused innovation incubator engine to drive this development, we
do recognise the importance of demonstrating immediate and tangible
growth. By prioritising our medium-term growth initiatives, we aim
to provide confidence to our stakeholders that we can achieve
sustainable and profitable growth while carefully advancing our
long-term strategic goals. This balanced approach reassures
stakeholders that we are committed to walking before we run,
ensuring steady progress and minimising risks associated with the
incubator.
Our unwavering commitment to enhancing the
customer experience is central to this strategic vision. We will
deliver high-quality products and services that exceed
expectations. Equipped with a great team, a clear strategic vision,
and a robust financial position, we can navigate the challenges
ahead and emerge as a more vital, resilient organisation. Our
steadfast dedication to our customers and employees will be crucial
to our success.
With this multifaceted approach, I am confident
that we will solidify our position as an industry leader in the
medium to long term and continue to create value for all our
stakeholders. I look forward to embarking on this journey together
and achieving great things.
Outlook
In the short term we remain focused on building
the strong foundation for our business. We expect that we
will continue to deliver margin expansion in FY25, as we see the
benefits of our US manufacturing rationalisation and improvement
programme. This margin expansion is anticipated to continue
into FY26 as we see the full year benefits of our operational
optimisation process, continuing our journey toward our strategic
goals of 10% return on sales and 25% return on capital
employed. We will focus on disciplined cash management and
anticipate that we will again deliver strong operational cash
conversion in FY25.
In the medium to long term, as we move into the
expansion phase of our strategic plan, we anticipate delivering
strong top line growth driven by both exposure to structural growth
markets and growing our share of wallet. As we grow, we will
maintain our capital and operational discipline to ensure this is
converted into strong earnings growth to deliver long-term value
creation for all of our stakeholders.
Closing
remarks
In closing, I am deeply grateful for the
unwavering dedication and hard work of our Carclo team. Their
commitment has been instrumental in driving our
achievements.
To our valued shareholders and customers, your
continued trust and support are the fuel that powers our relentless
pursuit of excellence. Together, we look forward to a future filled
with boundless opportunities and groundbreaking innovations. Thank
you once again for your steadfast support. Your partnership
inspires us to reach new heights and create lasting
impact.
Frank
Doorenbosch
Chief Executive
Officer
Finance
Review
This year was one full of challenges which drove
innovation in response to them, creating the focus on internal
self-help to put the business on a sound footing for the future, as
evidenced by the greatly improved performance in the second half of
the financial year.
The lower demand by key customers for PCR
testing and lost business in FY23 impacting the base business for
FY24, resulted in lower revenues of £132.7m against last year's
£143.4m. The impact of currency movement was marked, being a £4.5m
decrease on the prior year comparative.
Of the £132.7m achieved, £5.9m relates to work
not transferred from sites closed or being closed which, in effect,
lowers the base level of revenue as we start the new financial
year.
The underlying operating profit came in at
£6.6m, compared to £5.9m (or £5.5m at constant currency) in the
prior year. The prior year also benefited from foreign exchange
gains of £0.9m. Return on revenue was 5.0%, increasing by 0.9 of a
percentage point over 4.1% last year. The increase in profitability
was due to the actions implemented by our advanced process
optimisation programme increasing asset utilisation, improved
pricing processes, better purchasing and the drive to reduce waste,
which increased contribution margins, which were up by 4.0
percentage points to 35.9%. Overheads were slightly up at £40.9m
(FY23: £40.0m). The second half underlying operating profit was
£4.4m, representing a marked increase on the first half of FY24 of
£2.2m, resulting in £6.6m for the full year.
Exceptional net costs for the year amounted to
£4.9m, compared to £4.7m in FY23. The cash cost of these was £0.6m
compared to £2.2m in the prior year. Exceptional costs comprised
£3.4m rationalisation costs incurred in CTP for site closures and
related asset impairments, as well as other, largely employee
related central costs, £1.0m past service cost in respect of
retirement benefits GMP equalisation, £0.4m net costs in respect of
the work commenced to re-finance the Group, £0.2m net costs arising
from cancellation of the OEM customer supply agreement in the prior
year, £0.1m inventory provision relating to a customer who has
ceased trading, less £0.3m credit for the release of a legacy
health-related provision that is now settled.
Statutory operating profit is up £0.6m on prior
year to £1.8m (FY23: £1.2m).
Net finance costs increased by £1.8m to £5.6m
(FY23: £3.7m), this includes the imputed net interest on the
defined benefit pension liability of £1.8m (FY23: £0.7m). Finance
expense has increased despite a reduction in average net debt.
Interest on bank loans and leases has increased as a result of
sharp increases in base rates, with the average UK base rate in
FY24 being 5.0% compared to 2.3% in FY23. Pension interest,
although largely non-cash, has surged year on year, as a reduction
in discount rates adversely impacts liabilities to a greater extent
than assets are benefited.
Taxation credit for the year was £0.5m (FY23:
£1.4m expense).
Statutory loss after tax was £3.3m (FY23: £4.0m)
on continuing operations, giving a statutory loss per share on all
operations of 4.5 pence (FY23: 5.4 pence).
Underlying profit after tax was higher than
prior year at £0.8m (FY23: £0.3m), giving an underlying earnings
per share of 1.1 pence (FY23: 0.4 pence).
As we deliver on our strategic priorities, we
will continue to report those KPIs which we consider best
demonstrate the progress being made towards achieving our strategic
goals.
Financial
Position
Net Debt
During the year, we redirected our investment in
capital expenditure towards those with a rapid payback, focusing on
our continuous improvement strategy aimed at supporting asset
performance and utilisation. Tangible additions were £7.5m (2023:
£5.8m) mainly in support of major customer programmes. Of this
investment, £4.6m (FY23: £3.5m) was delivered via
leasing.
Following the shift in strategic focus,
improvements in our cash generation have reduced net debt. Net
debt, including IFRS16 lease liabilities, decreased in the year by
£4.9m to £29.5m (FY23: £34.4m). Net debt excluding leases decreased
£4.2m to £18.3m (FY23: £22.5m).
Cash
Cash generated from operations was £15.6m and
100.8% higher than the prior year (FY23: £7.8m), reflecting the
change in strategy from a focus on top-line growth to cash
generation via operational improvements and robust working capital
control. Efficient management of working capital was a key
contributor to cash performance and will continue to be our focus
moving forward.
The focus on cash management resulted in a
working capital turnaround benefit of £5.8m; with the current year
working capital reducing by £4.6m against a prior period increase
of £1.2m. Net cash outflow from investing activities during the
year was £2.4m (FY23: outflow £0.8m) driven by £2.9m for capital
investment in adapting production lines and facilities to improve
operating performance in FY25 and beyond.
Net cash outflow from financing activities
during the year was £12.1m (FY23: £4.7m), comprising £3.7m
repayment of lease liabilities (FY23: £4.1m) and net repayment of
other borrowings of £8.5m (FY23: £0.6m). There was an overall £4.4m
reduction in cash during the year (FY23: £2.0m).
Cash generated by the Group was principally
utilised to make capital investment and lease repayments,
pension deficit repair contributions, scheduled and unscheduled
bank loan repayments and interest payments.
Debt
Total debt decreased by £9.3m during the
financial year to £35.4m. It was reduced by £5.1m repayments of
term loans (of which £3.7m were unscheduled), £3.2m repayment of
the revolving credit facility, £3.8m repayments of lease
liabilities and other loans, £1.3m lease remeasurement and £0.6m
from positive foreign exchange movements. It was increased by £4.6m
from new lease debt.
Bank facilities
On 5 July 2024, the Group successfully extended
the facilities with the Company's lender for the multicurrency term
and revolving facilities agreement to 31 December 2025.
The debt facilities available to the Group on 31
March 2024 comprise term loans of £24.0m, denominated in sterling
9.2m, in US dollar 13.3m and in euro 4.9m. Of the sterling loan,
£2.3m will be amortised by 31 March 2025 and £3.8m will be
amortised in the period between 31 May 2025 and 30 November 2025
before the balance becomes payable by the termination date, 31
December 2025. The facility also includes a £3.5m revolving credit
facility, denominated in sterling, maturing 31 December 2025. The
revolving credit facility was largely repaid in the period, leaving
an amount drawn at 31 March 2024 of £0.3m (2023: £3.5m).
Moving forward, the Group remains committed to
prioritising the strengthening of its balance sheet and seeking
alternative sources of financing. We will continue to closely
monitor market conditions and work proactively with our bank to
ensure our ongoing financial stability and success.
Segmental
Overview
CTP division
CTP revenue of £125.0m was down 8.6% (5.5 % at
constant currency) (FY23: £136.8m) with underlying volumes lower
due to lower demand for PCR testing and lost business in
FY23.
CTP divisional operating profit before
exceptional items was £9.4m, £2.1m up on the prior year (FY23:
£7.3m), reflecting the benefits of the EMEA
restructuring and the start of restructuring in the
US. Resulting underlying operating profit return
on revenue grew to 7.5% (FY23: 5.4%).
The CTP business principally operates in three
key market sectors: Life Sciences, Precision Components and Optics.
The Life Science segment experienced a marked fall in healthcare
demand during the year, particularly in North America which is
exposed to the larger life science analytics market. New product
development activity remained high and is set to improve demand in
the medium to long term. Demand in our traditional optics market of
eyecare and aftermarket car-lighting significantly reduced,
reflecting the constraints that consumers have seen as the
cost-of-living increases. However, the products maintain a high
contribution margin on the lowered activity level.
Cost reductions are being implemented which
improved profitability in the second half, with this improved
performance expected to continue into the new financial year and
beyond. In the US, this included the strategic closure of our
facility at Derry and the start of the closure of our Tucson
facility, transferring production to our sites in
Pennsylvania.
CTP Design and Engineering activity grew
markedly with revenue at £21.6m, up 7.4% compared to the prior year
(FY23: £20.1m). CTP Manufacturing Solutions revenue was down
11.4% to £103.5m (FY23: £116.7m).
New control processes have been implemented to
mitigate the impact of material price inflation. Business is being
transferred to the APAC region and local marketing and sales
activity has generated new business there. The EMEA region has
implemented new energy efficiency initiatives, and the current
focus is on improving the cost base and efficiency of the business'
US operations. This had a significant positive impact on the
performance in the second half of this financial year. Loss making
operations, which have been closed or are in the process of being
closed, reported an operating loss in the year of £0.8m.
Aerospace division
In the Aerospace sector, we saw an impressive
growth in revenue to a record level of £7.6m, growth of 15.1%,
compared to £6.6m in FY23. This reflects increased demand as new
airframes are being built, with build programmes recommencing after
the COVID-19 lockdown, and new business won in South Asia. The
business has a solid reputation for product quality. These factors
drove operating profitability of £1.7m for the year, up by 11.8% on
the prior year's £1.5m, overcoming the inflation challenges seen in
all businesses. Our strategy to strengthen and deepen relationships
with existing customers with exploration for new customers is
achieving payback.
Central costs
Central costs increased by £1.6m to £4.5m,
pre-exceptional costs, largely due to the non-repeat of significant
foreign exchange gains in the prior year and investing in stronger
leadership of the company. We will continue to seek
ways to streamline our central expenses without compromising the
quality of service we deliver to the business.
Defined benefit
pension scheme actuarial valuation
The last triennial actuarial valuation of the
Group pension scheme was carried out as at 31 March 2021.
This reported an actuarial technical provisions deficit of £82.8m.
The statutory accounting method of valuing the Group pension scheme
deficit under IAS 19 resulted in an increase in the net liability
to £37.2m as at 31 March 2024 (2023: £34.5m).
Over the year, the Group's contributions to the
scheme were £3.5m (2023: £4.1m).
The pension maintains a 60% liability hedge via
Liability Driven Investments ("LDI") and bond holdings.
Disclosures under IAS19 may be volatile from
year-to-year. This is because the liabilities are measured by
reference to corporate bond yields whereas the majority of the
Scheme's assets are invested across a variety of asset classes that
may not move in the same way.
Treasury
The Group faces currency exposure on its
overseas subsidiaries and on its foreign currency transactions. In
addition, as set out in the principal risks and uncertainties as
presented in the annual report and accounts, the plc is reliant on
regular funding flows from the overseas subsidiaries to meet
banking, pension and administrative commitments. To manage this
complexity, we have enhanced the Group's management of cash, debt
and exchange risks by strengthening our treasury
function.
The Group reports trading results of overseas
subsidiaries based on average rates of exchange compared with
sterling over the year. This income statement translation exposure
is not hedged as this is an accounting rather than cash exposure
and as a result the income statement is exposed to movements in the
US dollar, euro, renminbi, Czech koruna and Indian rupee. In terms
of sensitivity, based on the FY24 results, a 10% increase in the
value of sterling against these currencies would have decreased
reported profit before tax by £0.8m.
Dividend
Under the terms of the extended bank facilities
agreement, the Group is not permitted to make a dividend payment to
shareholders up to the period ending 31 December 2025.
Alternative
performance measures
In the analysis of the Group's financial
performance, position, operating results and cash flows,
alternative performance measures are presented to provide readers
with additional information. The principal measures presented are
underlying measures of earnings including underlying operating
profit, underlying profit before tax, underlying profit after tax,
underlying EBITDA and underlying earnings per share.
This results statement 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. The Group's
alternative performance measures and KPIs are aligned to the
Group's strategy and together are used to measure the performance
of the business and form the basis of the performance measures for
remuneration. 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 of the Group's non-GAAP financial measures can be
found below.
We provide comparatives alongside all current
year figures. The term "underlying" 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 relate
to underlying business performance (as defined above) unless
otherwise stated. A reconciliation of underlying measures to
statutory measures for FY24 is provided below:
|
£000
Continuing operations:
|
Statutory
|
Exceptional
items
|
Underlying
|
|
CTP operating profit
|
6,158
|
(3,259)
|
9,417
|
|
Aerospace operating profit
|
1,649
|
(50)
|
1,699
|
|
Central costs
|
(6,017)
|
(1,548)
|
(4,469)
|
|
Group operating profit from continuing
operations
|
1,790
|
(4,857)
|
6,647
|
|
Net finance expense
|
(5,587)
|
-
|
(5,587)
|
|
Group (loss) / profit before taxation from
continuing operations
|
(3,797)
|
(4,857)
|
1,060
|
|
Taxation credit / (expense)
|
498
|
743
|
(245)
|
|
Group (loss) /
profit for the period
|
(3,299)
|
(4,114)
|
815
|
|
Basic (loss) /
profit per share (pence)
|
(4.5)p
|
(5.6)p
|
1.1p
|
The exceptional items comprise:
|
£000
|
Group1
|
|
Rationalisation costs
|
(3,360)
|
|
Past service cost in respect to retirement
benefits
|
(1,020)
|
|
Refinancing costs
|
(433)
|
|
Net costs arising from cancellation of future
supply agreement
|
(188)
|
|
Settlement / (costs) in respect to legacy
claims
|
284
|
|
Doubtful debt and related inventory
provision
|
(140)
|
|
Total
exceptional items
|
(4,857)
|
1. There were no exceptional
items in respect to discontinued operations in the year to 31 March
2024.
Post balance
sheet events and going concern
Post balance sheet events
On 5 July 2024 the Group's lending bank extended
the committed facilities to 31 December 2025.
Notice was given to the landlord on 12 April
2024 that the company would exercise the break option to exit the
leased buildings at Tucson, Arizona, USA on 1 October 2025
following the decision to close the facility at Tucson. The
reduction in the lease liability of £1.3m has been reflected in the
balance sheet at 31 March 2024 as the company was certain to exit
on closure.
Going concern
The financial statements are prepared on the
going concern basis.
On 5 July 2024 the Group's lending bank extended
the committed facilities to 31 December 2025. Since the year
end, the Company has commenced a process to refinance the existing
term loans and revolving credit facilities in order to provide the
strategic funding for the next phase of the business
development. Other than mentioned, since the year end there
have been no significant changes to the Group's liquidity
position.
As part of the original bank financing in August
2020 the Group became subject to four bank facility covenant tests.
The quarterly covenants, and levels, to be tested are:
·
underlying interest cover (minimum
1.45 in March 2024, increasing to 2.60 by December
2025);
·
net debt to underlying EBITDA (2.75
maximum);
·
core subsidiary underlying EBITA (50%
minimum); and
·
core subsidiary revenue (75%
minimum).
Core subsidiaries are defined as Carclo
Technical Plastics Ltd; Bruntons Aero Products Ltd; Carclo
Technical Plastics (Brno) s.r.o; CTP Carrera Inc and Jacottet
Industrie SAS, with CTP Taicang Co. Ltd and Carclo Technical
Plastics Pvt Co Ltd being treated as non-core for the purposes of
these covenants.
A schedule of contributions is also in place
with the pension trustees with an agreed £3.5m to be paid annually
until 31 October 2039. Additional contributions also
agreed are 26% of any FY25 surplus over underlying EBITDA of
£18m.
The Group is subject to a number of key risks
and uncertainties, as will be detailed in the principal risks and
uncertainties section below. Mitigation actions are also considered
in this section. These risks and uncertainties have been
considered in the base case and severe downside sensitivities and
have been modelled accordingly.
The Directors have reviewed cash flow and
covenant forecasts to cover the period of at least twelve months
from the date of signing these consolidated financial statements,
considering the Group's available debt facilities and the terms of
the arrangements with the Group's bank and the Group pension
scheme.
The base case forecast includes assumptions
around revenue, margins, working capital and interest rates. The
sensitivity analysis has considered the risks facing the Group and
has modelled the impact of each in turn, as well as considering the
impact of aggregating certain risk types and shows that the Group
is able to operate within its available facilities and meet its
agreed covenants as they arise. Furthermore, the Directors have
reviewed sensitivity testing, modelling a range of severe downside
scenarios. These sensitivities attempt to incorporate identified
risks set out in the principal risks and uncertainties section of
this report.
Severe downside sensitivities modelled included
a range of scenarios modelling the financial effects of: loss of
business from discrete sites, an overall fall in gross margin of 1%
across the Group, a fall in Group revenue of 3% matched by a
corresponding fall in cost of sales of the same amount, and
interest rate risk. Under these scenarios
the Group would continue to meet minimum covenant requirements,
although with minimal headroom under these scenarios in the next 12
months. The downside testing did not allow for the benefit of any
action that could be taken by management to mitigate the impact of
the scenarios. Using the base case forecast the minimal underlying
operating profit headroom, observed on the underlying interest
cover covenant, would be £0.8m. This suggests that a £16m drop in
revenue or a 12% drop in underlying operating profit would result
in a breach of covenants.
The Group is not exposed to vulnerable sectors
or vulnerable countries but is dependent on certain key customers,
which create risks and uncertainties. These risks and uncertainties
and the mitigating actions being taken will be covered in detail in
the principal risks and uncertainties section of our annual report
and accounts.
On the basis of this forecast and sensitivity
testing, the Board has determined that it is reasonable to assume
that the Group will continue to operate within the facilities
available and will be able to adhere to the covenant tests to which
it is subject throughout at least the twelve-month period from the
date of signing the financial statements.
Accordingly, these financial statements are
prepared on a going concern basis.
Eric
Hutchinson
Chief Financial
Officer
Principal risks and
uncertainties
Carclo defines risk as uncertainty, whether
positive or negative, that will affect the outcome of an activity
or intervention.
The Group operates a risk management framework
to direct and control the organisation with regard to
risk.
Carclo's appetite for risk is categorised across
the Strategic, Operational, Financial and Compliance risk
categories of the business and is set out below. This operates as a
guide to management as to appetite levels in approaching risk to
help set priorities and levels of focus.
|
Risk
category
|
Risk
appetite
|
Description
|
|
Strategic
|
Moderate
|
The Group is prepared to take moderate risks to
realise its ambitions. In doing so, we aim to strike a balance
between our socio-economic role (low risk acceptance) and our
commercial targets (higher risk acceptance).
|
|
Operational
|
Very Low
|
The Group focuses on ensuring the efficiency and
continuity of business activities. We aim to reduce the risks that
threaten this continuity as much as possible. In the area of safety
and security, we do all we can to avoid risks that could put our
customers, internal and external employees or visitors in danger.
Therefore, our risk acceptance in this regard is very
low.
|
|
Financial
|
Low
|
We aim to maintain a solid financial position in
order to provide stability and value add to our stakeholders
including shareholders, our bank, the pension scheme trustees, our
suppliers, and customers, who are all connected to the Carclo
chain. The Group is not prepared to take risks that could
jeopardise its credit ratings or harm its key financial
relationships.
|
|
Compliance
|
Zero
|
The Group strives to comply with all applicable
laws and regulations, with a particular focus on safety and
security, environmental, competition, tendering and
privacy/information security laws.
|
The Board is responsible for creating the
framework for the Group's risk management to operate effectively
and for ensuring risk management activities are embedded in Carclo
processes. The Board is also responsible for ensuring that
appropriate and proportionate resources are allocated to risk
management activities. The Board undertakes risk management to
improve its understanding of the actual and potential risks to our
business as well as its resilience, performance, sustainability and
success, to enable it to assess and respond to new opportunities as
they arise and to provide fair and balanced information to
shareholders and potential shareholders.
The Board has carried out an assessment of the
principal risks facing Carclo plc, including those that would
threaten its business model, future performance, and overall
viability. This section on principal risks and uncertainties
details these risks and explains how they are being managed or
mitigated.
When assessing risk, the Board considers both
external (arising from the environment in which we operate) and
internal factors (arising from the nature of our business and its
internal controls and processes).
Management is accountable to the Board for
monitoring the system of internal control and for providing
assurance to the Board that it has done so.
An essential part of the risk management
framework is for management to monitor the framework's operation in
order to provide assurance throughout the management organisation
and to those responsible for governance that it is operating
effectively.
Management is continually enhancing processes
for ensuring that the risk management stages such as event
identification, risk assessment, selection of responses and risk
reporting are working.
This includes managers giving attention to
ensuring that risk registers are being updated for new or changing
risks and that internal controls are being adapted and developed
where necessary.
Local management takes ownership of the specific
risks relevant to their sphere of operations with the likely causes
and effects recorded within the risk register held at site level,
with corporate risks being identified within the Group Executive
Committee. The risks are scored based on likelihood and severity to
enable any significant risk to be readily identified and the
appropriateness of mitigations to be considered. The risk registers
are reviewed, challenged and debated to keep them up to date and
relevant to our strategy. Risks are escalated as
appropriate.
During the year all the key risks identified by
the sites were evaluated and aggregated, with the highest risks
reviewed in detail at the Group Executive Committee meetings. This
Committee then proposed the risks that it considered key to the
running of the business for evaluation at the Board
meeting.
The Board carried out a review of effectiveness
which concluded that the risk management process that had been in
place during the year was operating as documented and continued to
be appropriate.
A risk schedule is tabled at Audit & Risk
Committee and / or Board meetings at regular intervals, allowing
the Directors to discuss the key risks currently identified
alongside their mitigations and status of actions. This also
includes emerging risks as identified at Group Executive Committee
and Board meetings and instances of incurred losses against
identified risks to enable assessment of the appropriateness of the
mitigations.
The efficiency and effectiveness of existing
internal controls will continually be challenged to improve the
risk management framework.
The responsibilities of the Audit & Risk
Committee will be detailed in the FY24 annual report and accounts.
These responsibilities include the reviewing of the Group's risk
management systems. These are primarily designed to mitigate risk
down to an acceptable level, rather than completely eliminate the
risk, and the review can provide only reasonable and not absolute
assurance of effective operation, compliance with laws and
regulations and against material misstatement or loss.
The Group's management is responsible for the
identification, assessment, management and monitoring of risk and
for developing, operating and monitoring the system of internal
control. The Audit and Risk Committee receives reports from
management on the effectiveness of those systems it has
established.
Listed below are the most significant risks that
may affect the Group, although there are other risks that may occur
and impact the Group's performance.
|
Risks
|
Mitigation
|
|
1. Treasury
risk (funding, liquidity, foreign exchange ("FX"), and banking and
pension covenants)
|
|
Change:
increased
|
|
On 5 July 2024, the Group successfully agreed
with the Company's bank to extend the Company's facilities to 31
December 2025.
At 31 March 2024, total UK bank facilities were
£27.5m, of which £3.5m related to a revolving credit facility
(maturing on 31 December 2025) and £24.0m in term loan facilities
which expire on 31 December 2025.
There are covenants over interest cover, net
leverage, core subsidiary revenue and core subsidiary EBITA in
respect of the agreed £27.5m committed debt facility. These are
tested quarterly.
In terms of foreign exchange ("FX") risk, Carclo
plc has sterling, dollar and euro denominated bank debt and
sterling debt for the pension scheme. There is a risk that
insufficient income may be generated in foreign currencies, which
could impact the Group's ability to service the bank and pension
liabilities.
Strengthening of sterling against the
subsidiaries' functional currencies creates a downside risk to
P&L forecasts.
Potential interest rate increases could also
increase debt servicing costs by approximately £0.1m for each 0.25%
interest rate increase.
Volatility in performance has resulted in
exposure to credit risk due to uncertainty in supporting financial
covenants combined with the full year increasing cost of servicing
debt.
The majority of the Group's earnings are now
generated overseas, with the plc itself non-trading and therefore
requiring regular funding as a cost centre entity with committed
bank and pension debt repayments. If there was insufficient ability
for overseas subsidiaries to repatriate cash to the plc then it
could create a liquidity shortfall.
|
Funding and
liquidity planning and monitoring:
Group management monitors liquidity across all
regions through a rolling 13-week cash forecast and over the medium
term through annual three-year forecasting and regular in-year
reforecasts.
Since the inception of the bank facility in
August 2020 the Group has made capital repayments of £10.4m up to
the period ending 31 March 2024. The Group intends to continue to
make scheduled repayments when due and to further accelerate
repayment of the bank debt through additional unscheduled capital
repayments, on an event‑driven
basis.
Group cash headroom at 31 March 2024 against
bank facilities was £9.2m and net debt excluding lease liabilities
was £18.3m.
Bank and
pension covenant compliance
monitoring:
The Group maintains a regular dialogue with both
the bank and the pension scheme trustees. Covenant compliance is
reported monthly to the bank and pension scheme trustees in
tripartite reports and is reviewed alongside Group performance
regularly in tripartite quarterly management meetings with the
Chief Executive Officer and Chief Financial Officer.
Agreed bank and pension covenants have been met
continuously since establishing the initial £38m bank debt
facilities in August 2020.
Management of
FX exposures:
Divisional FX hedging
accountability
FX risk is managed at subsidiary level through
natural hedges or forward contracts where the FX commitment timing
and quantum is known and material. Subsidiary-level risk management
has been effective to date with relatively minor exchange gains and
losses recognised at subsidiary level.
Group FX hedging policies are in
place
These are set out in the Group finance manual to
help mitigate FX exposure in central treasury with reference to
latest currency cash flow and financial forecasts.
Individual material FX cash flow hedging is
applied where significant FX exposure may arise, such as from large
capital or project spend or sale contracts, or where significant
cash repatriations are assessed against net FX cash current and
forecast positions to determine whether hedging is
appropriate.
Multi-currency bank debt hedging in
place
USD 13.3m and EUR 4.9m of debt is held in
currency, providing a hedge over parts of the Group's net
investment in foreign operations.
Interest rate
management:
The Group uses forward yield curves to forecast
interest as part of its three-year planning process and runs
sensitivities around increasing interest rates.
Over the three-year plan period the Group is
targeting significant additional capital repayments on its debt
facilities. Although finance costs are anticipated to increase in
the short term due to recent market interest rate increases, the
reduction in debt will bring future finance cost
benefits.
Monitoring:
The Group generally aims to generate sufficient
cash to cover holding company funding requirements, although there
may be timing shortfalls to forecast, monitor and resolve with
funding where needed.
The Group monitors liquidity Group-wide by
country through a rolling 13-week cash forecast and over the medium
term through annual three-year forecasting.
Inter-company
charge processes in place:
Cash is regularly remitted to the UK from
subsidiaries via dividends, royalties and management service
recharges, such as IT, Group finance and management, as well as
from intra-group loans.
Subsidiaries regularly forecast their available
cash to remit over the short and medium time horizons, allowing UK
liquidity to be planned and managed.
Support from
professional tax and treasury advisors:
External advisors provide appropriate technical
and legal guidance on inter-company trading, management charges and
managing the appropriate and effective payments and receipts of
inter-company cash.
|
|
Risks
|
Mitigation
|
|
2. Operational
execution risk and management bandwidth/dependence on key
individuals
|
|
Change:
unchanged
|
|
CTP is currently going through a period of
change as it focuses on the delivery of significant improvements in
operational performance. This includes a number of critical
re-structuring projects which if not executed well will absorb
management time, impact customer relationships and hinder forecast
earnings growth and cash generation.
Continued scarcity of labour globally, but in
particular in the US, may impact the Group's ability to execute
both projects and production.
There are some key members of management with
significant experience of the business and upon whom the Group
particularly relies. There is a continuity risk in the case that
any of these individuals decide to leave the Group.
|
Regular risk
reviews:
The Group has developed an enhanced focus on
site-level risk management. Frequent management reviews between
risk owner and reporting managers are conducted.
Succession
planning:
The Group has commenced the roll-out of formal
succession planning across all management to identify and mitigate
the highest risks for cover and succession and implement plans to
reduce the risk of significant business impact from key dependent
loss.
Operational
excellence:
The Group is putting an increased focus on
operational excellence to ensure that the operational execution
risk is minimised. This involves investment in both people and
systems to ensure that the business meets both the needs of its
customers and also maximises the efficient usage of its assets.
Delivery of key restructuring projects is regularly monitored, and
the Board is kept appraised on progress to ensure projects are
delivered on time and on budget.
KPI reporting
and regular local and Group management
monitoring:
Performance execution is managed via enhanced
focus on management of risks at a local level, regular and frequent
management reviews between risk owners and reporting managers and
the use of operational KPIs reporting and monitoring.
|
|
Risks
|
Mitigation
|
|
3. Supply
chain disruption and political uncertainty, leading to increasing
input costs and extended lead times
|
|
Change:
unchanged
|
|
The disruption as a legacy of the pandemic on
global industries with diverse supply chain dependencies such as
Carclo continues, with increased supplier costs, delays, shortage
of labour and materials resource having a significant impact on
costs, profitability and customer service for the Group alongside
many industries.
Furthermore, political uncertainty such as the
Russian invasion of Ukraine, war in Gaza and heightened risk of
wider conflict threatening supply chain routes, and other overseas
trade issues such as US and China trade tariffs can naturally
affect decisions by our customers to invest and therefore impact on
our trading in those locations.
|
Process:
The Group Executive Committee and local
management monitor and review relevant supply chain risks and
political and trade developments regularly, using input from
advisors as appropriate, and establish action plans and strategies
accordingly, while engaging with trade associations and government
bodies.
Increasing risk
level:
Supply chain difficulties and increased costs
continued throughout 2023, particularly with regard to energy
supply. Current uncertainties around the supply of petroleum-based
material means that Carclo continues to work tactically and
specifically with priority areas of the supply chain and customer
delivery to minimise supply disruption, net cost impact, and
customer shortfalls in delivery. Post-pandemic materials and labour
shortages, subsequent higher cost, and greater delays in order
fulfilment exacerbated by the war in Ukraine continue to challenge
companies, including Carclo.
Offsetting
opportunities:
Management is putting an increased focus on
operational effectiveness and efficiency to mitigate the effects of
these challenges. Robust processes have been put in place to
respond to price inflation in a timely manner.
|
|
Risks
|
Mitigation
|
|
4. IT security
breach, systems failures
|
|
Change:
increased
|
|
Hacking and ongoing data security risk is a
concern for businesses everywhere. For listed companies like Carclo
the risk increases. There has also been a substantial rise in
cyber-criminal activity such as ransomware and trojan deployment
and an increase in sophistication and frequency of attacks has been
seen. Stakeholders and insurers are increasing the thresholds
required of cyber security greatly, and increased turbulence in the
global economy has further heightened the risk of unwanted systems
breaches.
Our IT systems process immense data volumes each
day. These systems contain confidential information about our
customers, employees and shareholders. A breakdown or system
failure may lead to major disruption for the businesses within the
Group, especially if network access is lost.
Breaches of IT security may result in
unauthorised access to or loss of confidential information,
breaches of government data protection legislation, loss or
stoppage of the business, reputational damage, litigation and
regulatory investigation or penalties.
Systems failure impact can have significant
operational and financial ramifications if connection is unable to
be restored quickly.
Limited cyber breaches have resulted in the
exploitation of internal control weakness through an intense social
engineering fraud. The weakness exposed was a lack of oversight
regarding the change to bank account details for supplier payments.
False information led to the transfer of legitimate payments to a
fraudulent bank account, whilst some money was recovered through
the banking system and the crime insurer made a settlement for part
of the loss the company still suffered a financial loss.
|
Security
frameworks:
Carclo uses a security
password‑protected firewall to
help minimise the risk of fraudsters hacking into the system,and
has a number of security solutions to monitor and protect its users
and maintains its systems with up-to-date versions of all its major
applications.
During the last twelve months the Group has
implemented a comprehensive suite of cyber protection software
firewalls. Cyber controls have been put in place and are monitored
closely and significant levels of cyber security training continue
to be carried out across the Group. Multi-factor
authentication has been implemented across all Group
sites.
Multi-level
security and review:
IT management undertakes regular risk reviews to
keep data secure and construct a layered environment that provides
a countermeasure to the varying forms of cyber-attacks. Multiple
security applications, layers of back-up, limiting access to core
systems and restructuring IT in-house skill to proactively respond
to emerging cyber threats are some of the countermeasures now
activated.
Accelerating
cloud-based systems and security migration:
As part of the Group's new IT strategy the Group
is accelerating migration to cloud-based systems and security for
underpinning protection of Group systems as well as cost-efficiency
and effectiveness.
Reducing
Disaster Recovery lead times:
The business has a defined Disaster Recovery
process. Previous targets for full recovery in five days are now
being superseded by new solution plans to roll out 24-hour data
recovery and return to operations, which is tested each
year.
|
|
Risks
|
Mitigation
|
|
5. Reliance on
major customers and credit risk
|
|
Change:
unchanged
|
|
A substantial part of the Group's revenue is
concentrated in a relatively small number of large customers.
Details in relation to concentration risk have been disclosed in
note 3 of the FY24 annual report and accounts: segment reporting.
Any underperformance could lead to the loss of existing or future
business with the customer. Further, other competitive factors or
changes in customer behaviour could lead to a significant loss of
revenue. Pressures from price increases required to offset the
post-pandemic input cost inflation impact across the business and
international economies could trigger opposition from customers and
destabilise the relationship.
The largest concentration of customer risk is at
the India plant with predominantly one large global
customer.
We have a major end customer of the Aerospace
business, who along with the rest of the sector experienced a
downturn in the aerospace market due to the pandemic. Orders are
however now recovering strongly as air travel increases and
aircraft build rates are reverting to more normal
levels.
|
Management is putting an increased focus on
operational excellence to ensure that the Group retains its key
customers through class-leading cost, quality and delivery. The
Group has long-standing positive relationships with its key
customers and the high levels of investment the Group has made in
both production equipment and process know-how help to ensure the
longevity of those relationships.
Diversification of business is being sought
longer term where concentration levels are most high, such as
India. This will take time to develop.
Credit risk has been reduced significantly by
gaining credit insurance cover in the financial year for the whole
Group, including notably India and China, where previously credit
insurance cover was absent or limited.
Our policy has been to focus on major customers
who are blue-chip multi-nationals operating in the medical,
electronics and aerospace markets, providing a degree of credit
protection from strength, size and reputation.
|
|
Risks
|
Mitigation
|
|
6.
Pensions
|
|
Change:
unchanged
|
|
Carclo's UK defined benefit pension scheme,
having long since closed to new entrants, is mature and large
compared with the size of Carclo.
Whilst the interests of the Group and the
pension fund trustees are aligned in agreeing an affordable
schedule of deficit repair contributions, there is always some
element of risk that this will not be
achieved. Therefore, there remains a risk that
the Pensions Regulator may impose conditions on the Group that the
Directors deem to be unaffordable.
The Group expects it will be able to make the
payments set out in the schedule of contributions.
The PPF levy is a tax on the scheme's net
liability driven by the Group's credit risk. Any change in this
cost would be recognised in the Group income statement and whilst
it would be settled out of scheme assets, thus protecting the
Group's cash, it diminishes the deficit reduction effect of the
Company's contributions.
|
Trustee
liaison:
The Group fully engages with the scheme via the
Chair of the Trustees, who is responsible for the development of a
strategy to proactively manage assets, liabilities and
administrative costs of the scheme.
Trustee regular
monitoring:
Regular review of the pension scheme and Company
position is conducted currently in the form of tripartite meetings
between the bank, the trustees and the Company.
Deficit
reduction initiatives:
The Group works with the trustees on deficit
reduction initiatives. The Group offers eligible pensioners the
option to switch from a pension with indexed‑linked pension increases to a higher fixed
pension with no future increases. The Company has also introduced a
Bridging Pension Option
which reduced the accounting (IAS 19)
calculation of the scheme deficit and may also reduce the scheme
liabilities on the trustees' technical provisions basis.
PPF levy
management:
The Group continues to liaise with advisors and
the scheme's Chair in respect of PPF levy management and other
opportunities which can help benefit members and scheme
liabilities.
Enterprise
value growth:
Group management, with the support of the bank
and scheme, is focused primarily on growing Group enterprise value
to reduce the deficit relative to the size of the Group. The Group
has presented its budget and long-term plans to the scheme and the
bank.
Investment
strategy:
The Company has participated in Trustee Board
changes made to the scheme's investment management. The
Trustee Board has adopted an investment strategy with some risk to
enable asset growth to help reduce the scheme's deficit.
The Trustees elected to reduce the level of the
hedged technical provisions liability to 60% to help avoid the risk
of hedges becoming unsupportable should gilt yields rise again. As
a further stability measure, the scheme also maintains "cash flow
matching" bonds covering a large proportion of the expected pension
outflows for the next nine years.
|
|
Risks
|
Mitigation
|
|
7.Climate-related
risks
|
|
Change:
unchanged
|
|
The current global warming that is occurring
brings an increased number of risks (and opportunities) to the
Carclo Group, which, if not managed correctly, could have a major
impact on Carclo's operational and financial outcomes and could
lead to significant reputational damage.
|
Governance:
To ensure that Carclo complies with regulatory
requirements and also uniformly addresses the significant risks and
opportunities that climate change is bringing, Carclo has set up a
governance structure to provide central control with appropriate
delegation of authority to mitigate the risks posed.
Strategy:
Our strategy involves engaging with stakeholders
to better understand how the risks and opportunities are beginning
to manifest themselves in the everyday operations of our factories
and how best we might deal with them. We have also appointed an
external climate consultancy to undertake a thorough risks and
opportunities assessment to ensure that we align with regulatory
requirements and can, at the same time, de-risk our
business.
Risk
management:
Each business has been asked to identify risks
and opportunities associated with climate change within their areas
and these are then collated and considered centrally to ensure a
complete and uniform approach to risk and opportunities
management.
Metrics and
targets:
Carclo is a relatively large user of energy,
with its associated climate connotations. We have appointed an
external climate consultancy to define appropriate metrics and
targets for each area of the Group to help meet climate
obligations. The Board, through the governance structure that has
been set up, will review the consultancy's work and seek to
implement their recommendations to significantly improve our
intensity ratios over a period of time.
|
|
Risks
|
Mitigation
|
|
8. Future
global pandemics
|
|
Change:
unchanged
|
|
The COVID-19 pandemic was an unexpected shock to
the global economy and economic activity
was suppressed globally. Differing approaches
taken by different governments in response to virus mutations,
outbreaks and waves, including lockdowns and shutting non-critical
industry, created huge disruption to globalised supply
chains.
In the event of a further global pandemic or a
resurgence of a more serious variant of COVID-19 there may be a
risk to customer demand, supplier continuity and our own capability
to deliver, meaning the Group needs to adapt to continually
changing circumstances and be ready to respond at short
notice.
Despite the potential for increased demand from
our life science customers, changing working practices and
shutdowns would again have an impact on operational efficiency
which would likely adversely affect profitability. During the
pandemic the Group's Aerospace division witnessed a significant
reduction in customers' aircraft newbuild programmes and a similar
impact would be expected should a future global pandemic
arise.
In the event of any future pandemic the welfare
of our employees would continue to be our top priority and we now
feel better placed than previously to swiftly adopt new secure
working practices, including home‑based working, if required by government
protocols.
|
Whilst there is nothing specific that can be
done to prevent a future global pandemic at a Company level, Carclo
has learned how to continue to work, albeit at a reduced output,
during the COVID-19 pandemic and is now far better placed to deal
with a future pandemic than was the case in early 2020.
Home working, where possible, segregation of
factory operatives, self-checking for symptoms and a higher level
of stock items have all been found to be mitigants in reducing the
overall impact of any outbreak, notwithstanding that the health and
safety of our workforce is paramount.
|
Consolidated
income statement
for the year
ended 31 March 2024
|
|
Notes
|
2024
£000
|
2023
£000
|
|
|
|
|
|
|
Continuing
operations:
|
|
|
|
|
|
|
|
|
|
Revenue
|
4
|
132,672
|
143,445
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
operating profit
|
|
6,647
|
5,939
|
|
|
|
|
|
|
Exceptional items
|
5
|
(4,857)
|
(4,710)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
4
|
|
|
|
|
|
|
|
|
Finance revenue
|
6
|
424
|
218
|
|
Finance expense
|
6
|
(6,011)
|
(3,967)
|
|
|
|
|
|
|
Loss before
tax
|
|
|
|
|
|
|
|
|
|
Income tax credit / (expense)
|
7
|
498
|
(1,437)
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the
period
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
Equity holders
of the Company Non-controlling interests
|
|
(3,299)
|
(3,957)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
ordinary share
|
8
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
Consolidated
statement of comprehensive income
for the year
ended 31 March 2024
|
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
|
Loss for the
period
|
|
(3,299)
|
(3,957)
|
|
|
|
|
|
|
Other
comprehensive (expense) / income
|
|
|
|
|
|
|
|
|
|
Items that will
not be reclassified to the income statement
|
|
|
|
|
|
|
|
|
|
Remeasurement losses on defined benefit
scheme
|
|
(2,668)
|
(10,577)
|
|
Total items
that will not be reclassified to the income
statement
|
|
|
|
|
|
|
|
|
|
Items that are
or may in the future be classified to the income
statement
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation
differences
|
|
(2,387)
|
1,129
|
|
Net investment hedge
|
|
332
|
818
|
|
Deferred tax arising
|
|
33
|
(190)
|
|
|
|
|
|
|
Total items
that are or may in the future be classified to the income
statement
|
|
|
|
|
|
|
|
|
|
Other
comprehensive expense net of tax
|
|
(4,690)
|
(8,820)
|
|
|
|
|
|
|
Total
comprehensive expense for the year
|
|
|
|
|
|
|
|
|
|
Attributable to
-
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company
|
|
(7,989)
|
(12,777)
|
|
Non-controlling interests
|
|
-
|
-
|
|
Total
comprehensive expense for the period
|
|
|
|
Consolidated
statement of financial position
as at 31 March
2024
|
|
Notes
|
2024
£000
|
2023
£000
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
Intangible assets
|
10
|
22,197
|
23,463
|
|
Property, plant and equipment
|
11
|
40,071
|
45,321
|
|
Deferred tax assets
|
|
864
|
1,185
|
|
Total
non-current assets
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
Inventories
|
|
11,289
|
15,203
|
|
Contract assets
|
|
1,663
|
5,763
|
|
Trade and other receivables
|
|
18,800
|
21,383
|
|
Cash and cash deposits
|
|
5,974
|
10,354
|
|
Current tax assets
|
|
82
|
-
|
|
Total current
assets
|
|
|
|
|
Total
assets
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Loans and borrowings
|
12
|
6,753
|
5,046
|
|
Trade payables
|
|
10,005
|
13,085
|
|
Other payables
|
|
7,485
|
8,323
|
|
Current tax liabilities
|
|
564
|
372
|
|
Contract Liabilities
|
|
2,998
|
4,689
|
|
Provisions
|
|
721
|
473
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
Loans and borrowings
|
12
|
28,678
|
39,668
|
|
Deferred tax liabilities
|
|
2,890
|
4,917
|
|
Retirement obligations
|
13
|
37,186
|
34,493
|
|
Total
non-current liabilities
|
|
|
|
|
Total
liabilities
|
|
|
|
|
|
|
|
|
|
Net
assets
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Ordinary share capital issued
|
14
|
3,671
|
3,671
|
|
Share premium
|
|
7,359
|
7,359
|
|
Translation reserve
|
|
7,221
|
9,243
|
|
Retained earnings
|
|
(14,565)
|
(8,641)
|
|
Total equity
attributable to equity holders of the Company
|
|
|
|
|
Non-controlling interests
|
|
(26)
|
(26)
|
|
Total equity
|
|
|
|
Approved by the Board of Directors on 17 July
2024.
Consolidated
statement of changes in equity
for the year
ended 31 March 2024
|
|
Attributable to
equity holders of the Company
|
|
|
|
|
Share
capital
£000
|
Share
premium
£000
|
Translation
reserve
£000
|
Retained
earnings
£000
|
Total
£000
|
Non-controlling
interests
£000
|
Total
equity
£000
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2022
|
3,671
|
7,359
|
7,486
|
5,926
|
24,442
|
(26)
|
24,416
|
|
|
|
|
|
|
|
|
|
|
Loss for the
year
|
-
|
-
|
-
|
(3,957)
|
(3,957)
|
-
|
(3,957)
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income / (expense):
|
|
|
|
|
|
|
|
|
Foreign exchange translation
differences
|
-
|
-
|
1,129
|
-
|
1,129
|
-
|
1,129
|
|
Net investment hedge
|
-
|
-
|
818
|
-
|
818
|
-
|
818
|
|
Remeasurement losses on defined benefit
scheme
|
-
|
-
|
-
|
(10,577)
|
(10,577)
|
-
|
(10,577)
|
|
Taxation on items above
|
-
|
-
|
(190)
|
-
|
(190)
|
-
|
(190)
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income / (expense) for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions
with owners recorded directly in equity
|
|
|
|
|
|
|
|
|
Share-based payments
|
-
|
-
|
-
|
(33)
|
(33)
|
-
|
(33)
|
|
Taxation on items recorded directly in
equity
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1
April 2023
|
3,671
|
7,359
|
9,243
|
(8,641)
|
11,632
|
(26)
|
11,606
|
|
|
|
|
|
|
|
|
|
|
Loss for the
year
|
-
|
-
|
-
|
(3,299)
|
(3,299)
|
-
|
(3,299)
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive (expense) / income:
|
|
|
|
|
|
|
|
|
Foreign exchange translation
differences
|
-
|
-
|
(2,387)
|
-
|
(2,387)
|
-
|
(2,387)
|
|
Net investment hedge
|
-
|
-
|
332
|
-
|
332
|
-
|
332
|
|
Remeasurement losses on defined benefit
scheme
|
-
|
-
|
-
|
(2,668)
|
(2,668)
|
-
|
(2,668)
|
|
Taxation on items above
|
-
|
-
|
33
|
-
|
33
|
-
|
33
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive expense for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions
with owners recorded directly in equity:
|
|
|
|
|
|
|
|
|
Share-based payments
|
-
|
-
|
-
|
43
|
43
|
-
|
43
|
|
Taxation on items recorded directly in
equity
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance at 31
March 2024
|
|
|
|
|
|
|
|
Consolidated
statement of cash flows
for the year
ended 31 March 2024
|
|
Notes
|
2024
£000
|
2023
£000
|
|
|
|
|
|
|
Cash generated
from operations
|
15
|
15,615
|
7,778
|
|
|
|
|
|
|
Interest paid
|
|
(4,193)
|
(2,955)
|
|
Tax paid
|
|
(1,056)
|
(1,051)
|
|
|
|
|
|
|
Net cash from
operating activities
|
|
|
|
|
|
|
|
|
|
Cash flows from
/ (used in) investing activities
|
|
|
|
|
Proceeds from sale of intangible
assets
|
|
212
|
-
|
|
Proceeds from sale of property, plant and
equipment
|
|
-
|
1,390
|
|
Interest received
|
|
424
|
218
|
|
Purchase of property, plant and
equipment
|
|
(2,937)
|
(2,313)
|
|
Purchase of intangible assets
|
|
(95)
|
(104)
|
|
|
|
|
|
|
Net cash used
in investing activities
|
|
|
|
|
|
|
|
|
|
Cash flows
(used in) / from financing activities
|
|
|
|
|
Drawings on new and existing
facilities
|
|
-
|
359
|
|
Refinancing costs
|
|
(100)
|
(250)
|
|
Proceeds from sale and leaseback of property,
plant and equipment
|
|
-
|
1,222
|
|
Repayment of borrowings excluding lease
liabilities
|
|
(8,190)
|
(1,800)
|
|
Repayment of other loan facilities
|
|
(192)
|
(102)
|
|
Repayment of lease liabilities
|
|
(3,659)
|
(4,104)
|
|
|
|
|
|
|
Net cash used
in financing activities
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
(4,171)
|
(1,712)
|
|
Cash and cash equivalents at beginning of
period
|
|
10,354
|
12,347
|
|
Effect of exchange rate fluctuations on cash
held
|
|
(209)
|
(281)
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents comprise:
|
|
|
|
|
Cash and cash deposits
|
|
5,974
|
10,354
|
|
|
|
|
|
Notes on the
preliminary statement
The financial statements included in this
preliminary announcement have been prepared in accordance with the
Disclosure and Transparency Rules of the UK Financial Conduct
Authority, and the principles of UK-adopted international
accounting standards, but do not comply with the full disclosure
requirements of these standards. The financial information for the
year ended 31 March 2023 is derived from the statutory financial
statements for that year which have been delivered to the Registrar
of Companies. The auditor reported on those financial statements:
their report was unqualified, did not draw attention to any matters
by way of emphasis and did not contain a statement under s498(2) or
(3) of the Companies Act 2006. The financial information has been
prepared on a going concern basis under the historic cost
convention basis except that derivative financial instruments,
share options and defined benefit pension plan assets are stated at
their fair value.
The unaudited financial information contained in
this announcement does not constitute the statutory financial
statements of the Group as at, and for the year ended 31 March
2024, but is derived from those financial statements, which have
been prepared in accordance with UK-adopted international
accounting standards. The financial statements themselves will be
approved by the Board of Directors and reported on by the auditor
and then subsequently delivered to the Registrar of Companies. The
Group expects to publish full consolidated statements before the
end of July 2024. Accordingly, the financial information for FY24
is presented as unaudited in this announcement.
The financial statements are prepared on the
going concern basis.
On 5 July 2024 the Group's lending bank extended
the committed facilities to 31 December 2025. Since the year
end, the Company has commenced a process to refinance the existing
term loans and revolving credit facilities in order to provide the
strategic funding for the next phase of the business
development. Other than mentioned, since the year end there
have been no significant changes to the Group's liquidity
position.
As part of the original bank financing in August
2020 the Group became subject to four bank facility covenant tests.
The quarterly covenants, and levels, to be tested are:
· underlying
interest cover (minimum 1.45 in March 2024, increasing to 2.60 by
December 2025);
· net debt to
underlying EBITDA (2.75 maximum);
· core subsidiary
underlying EBITA (50% minimum); and
· core subsidiary
revenue (75% minimum).
Core subsidiaries are defined as Carclo
Technical Plastics Ltd; Bruntons Aero Products Ltd; Carclo
Technical Plastics (Brno) s.r.o; CTP Carrera Inc and Jacottet
Industrie SAS, with CTP Taicang Co. Ltd and Carclo Technical
Plastics Pvt Co Ltd being treated as non-core for the purposes of
these covenants.
A schedule of contributions is also
in place with the pension trustees with an agreed £3.5m to be paid
annually until 31 October 2039. Additional contributions also
agreed are 26% of any FY25 over underlying EBITDA of
£18m.
The Group is subject to a number of
key risks and uncertainties, as detailed in the principal risks and
uncertainties section above. Mitigation actions are also considered
in this section. These risks and uncertainties have been considered
in the base case and severe downside sensitivities and have been
modelled accordingly.
The Directors have reviewed cash flow and
covenant forecasts to cover the period of at least twelve months
from the date of signing these consolidated financial statements,
considering the Group's available debt facilities and the terms of
the arrangements with the Group's bank and the Group pension
scheme.
The base case forecast includes
assumptions around revenue, margins, working capital and interest
rates. The sensitivity analysis has considered the risks facing the
Group and has modelled the impact of each in turn, as well as
considering the impact of aggregating certain risk types, and shows
that the Group is able to operate within its available facilities
and meet its agreed covenants as they arise. Furthermore, the
Directors have reviewed sensitivity testing, modelling a range of
severe downside scenarios. These sensitivities attempt to
incorporate identified risks set out in the principal risks and
uncertainties section above.
Severe downside sensitivities
modelled included a range of scenarios modelling the financial
effects of: loss of business from discrete sites, an overall fall
in gross margin of 1% across the Group, a fall in Group revenue of
3% matched by a corresponding fall in cost of sales of the same
amount, and interest rate risk. Under these
scenarios the Group would continue to meet minimum covenant
requirements, although with minimal headroom under these scenarios
in the next 12 months. The downside testing did not allow for the
benefit of any action that could be taken by management to mitigate
the impact of the scenarios. Using the base case forecast the
minimal underlying operating profit headroom, observed on the
underlying interest cover covenant, would be £0.8m. This suggests
that a £16m drop in revenue or a 12% drop in underlying operating
profit would result in a breach of covenants.
The Group is not exposed to vulnerable sectors
or vulnerable countries but is dependent on certain key customers,
which create risks and uncertainties. These risks and uncertainties
are documented, and the mitigating actions being taken are covered
in detail in the Principal risks and uncertainties section
above.
On the basis of this forecast and
sensitivity testing, the Board has determined that it is reasonable
to assume that the Group will continue to operate within the
facilities available and will be able to adhere to the covenant
tests to which it is subject throughout at least the twelve-month
period from the date of signing the financial
statements.
Accordingly, these financial
statements are prepared on a going concern
basis.
Directors'
liability
Neither the Company nor the Directors accept any
liability to any person in relation to this report except to the
extent that such liability could arise under English law.
Accordingly, any liability to a person who has demonstrated
reliance on any untrue or mistaken statement or omission shall be
determined in accordance with section 90(A) of the Financial
Services and Markets Act 2000.
Responsibility
statement of the Directors in respect of the annual
report
The Directors at the date of this statement
confirm that to the best of their knowledge:
|
|
the financial statements, prepared in accordance
with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
|
|
|
the strategic report includes a fair review of
the development and performance of the business and the position of
the issuer and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and
uncertainties that they face.
|
The accounting policies set out in the last
published financial statements for the year to 31 March 2023 have
been applied consistently to all periods presented in this
preliminary statement, unless otherwise stated.
Judgements made by the Directors, in the
application of these accounting policies that have significant
effect on the financial statements and estimates with a significant
risk of material adjustment in the next year are discussed in note
3.
Certain new standards, amendments and
interpretations to existing standards have been published that are
mandatory for the Group's accounting period beginning on or after 1
April 2023. The following new standards and amendments to
standards are mandatory and have been adopted for the first time
for the financial year beginning 1 April 2023:
|
|
IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2 Making Material Judgements (Amendment):
Disclosure of accounting policies (effective date 1 January
2023);
|
|
|
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors (Amendment): Definition of accounting
estimates (effective date 1 January 2023); and
|
|
|
IAS 12 Income Taxes: Deferred tax related to
assets and liabilities arising from a single transaction (effective
1 January 2023).
|
These standards have not had a material impact
on the consolidated financial statements.
Certain new standards, amendments and
interpretations to existing standards have been published that are
mandatory for the accounting period beginning on or after 1 April
2024. The Group has elected not to early adopt these standards
which are described below.
|
|
IAS 1 Presentation of Financial Statements
(Amendment): Classification of liabilities as current or
non-current (effective 1 January 2024).
|
|
|
|
IFRS 16 Leases (Amendment): Lease liability in a
sale and leaseback; and
|
|
|
|
IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments (Disclosures) (Amendments): Supplier Finance
Arrangements (effective 1 January 2024).
|
|
The above are not expected to have a material
impact on the Group's results or net assets.
There are no other IFRS or IFRIC interpretations
which are endorsed by the UK Endorsement Board, that are not
yet effective, that would be expected to have a material impact on
the Group.
|
3.
|
Accounting
estimates and judgements
|
The preparation of the financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and
expenses.
The estimates and assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances. These estimates and
assumptions form the basis for making judgements about the carrying
values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of revision and
future periods if the revision affects both current and future
periods.
The following are the critical judgements and
key sources of estimation uncertainty that the Directors have made
in the process of applying the Group's accounting policies and that
have the most significant effect on the amounts recognised in the
financial statements. Management has discussed these with the
Audit and Risk Committee. These should be read in conjunction with
the significant accounting policies provided in the Annual Report
and Accounts.
Going
concern
Note 1 contains information about the
preparation of these financial statements on a going concern
basis.
Key
judgements
Management has exercised judgement over the
likelihood of the Group being able to continue to operate within
its available facilities and in accordance with its covenants for
at least twelve months from the date of signing these financial
statements. Judgement has been applied over forecast profit, debt
levels and interest rates, particularly base rates. This determines
whether the Group should operate the going concern basis of
preparation for these financial statements.
Impairment of
assets
Note 10 contains information about management's
estimates of the recoverable amount of cash generating units and
their risk factors.
Key
judgements
Management has exercised judgement over the
underlying assumptions within the valuation models and has applied
judgement to determine the Group's cash generating units to which
goodwill is allocated and against which impairment testing is
performed. These are key factors in their assessment of
whether there is any impairment in related goodwill or other
assets. Goodwill at 31 March 2024 amounts to £22.0m (2023:
£23.0m)
Management has exercised judgement when
considering if there have been indicators of impairment. Where
indicators exist, management have estimated recoverable amount as
detailed below.
Key sources of
estimation uncertainty
The Group tests whether goodwill has suffered
any impairment and considers whether there is any indication of
impairment either of this or other assets on an annual basis.
As set out in more detail in notes 10 and 11, the recoverable
amounts may be based on either value-in-use calculations or fair
value less costs of disposal considerations. The former requires
the estimation of future cash flows and the choice of a discount
rate in order to calculate the present value of the future cash
flows, the latter method requires the estimation of fair
value.
Details of the sensitivity of assumptions is
included in note 10.
Pension
assumptions
Note 13 contains information about management's
estimate of the net liability for defined benefit obligations and
their risk factors. The pension liability at 31 March 2024
amounts to £37.2m (31 March 2023: £34.5m).
Key sources of
estimation uncertainty
The value of the defined benefit pension plan
obligation is determined by long-term actuarial assumptions. These
assumptions include discount rates, inflation rates and mortality
rates. Differences arising from actual experience or future changes
in assumptions will be reflected in the Group's consolidated
statement of comprehensive income. The Group exercises judgement in
determining the assumptions to be adopted after discussion with a
qualified actuary. Details of the key actuarial assumptions used
and of the sensitivity of these assumptions are included within
note 13.
In the year to 31 March 2022 and the year to 31
March 2021, the Scheme introduced a right for members to Pension
Increase Exchange (PIE) and a Bridging Pension Option
respectively. Having taken actuarial advice, management
exercised judgement that, for each, 40% of members would take the
options at retirement. There is no change to either
assumption in the current year. Any change in estimate would
be recognised as remeasurement gains/(losses) through the
consolidated statement of comprehensive income.
Lease
The Annual Report and Accounts contains
information about imputed interest rates and lease break
options.
Key
judgement
Lease liabilities are measured initially at the
present value of the lease payments discounted using the rate
implicit in the lease, or where not readily determinable as is
generally the case, using the Group's incremental borrowing
rate. This requires management to apply judgement.
Management has applied judgement when
determining the expected certainty that a break option within a
lease will be exercised.
Revenue
recognition
As revenue from design and engineering contracts
is recognised over time, the amount of revenue recognised in a
reporting period depends on the extent to which the performance
obligations have been satisfied.
Key
judgements
The revenue recognised on certain contracts in
the CTP segment required management to use judgement to apportion
contract revenue to the Design and Engineering performance
obligations.
Key sources of
estimation uncertainty
Revenue recognised on certain contracts in the
CTP segment required management to estimate the remaining costs to
complete the Design and Engineering performance obligation in order
to determine the percentage of completion and revenue to recognise
in respect of those performance obligations. Costs to complete are
determined through consultation with the contract engineers and
changes to this estimate will therefore impact the amount of
revenue recognised
Recognition of
deferred tax assets
Information about the deferred tax assets
recognised in the consolidated statement of financial position is
included in the Annual Report and Accounts.
Key
judgement
Management has exercised judgement over the
level of future taxable profits in the UK against which to relieve
the Group's deferred tax assets. On the basis of this judgement,
with the exception of a £0.3m deferred tax asset which is available
to offset against a deferred tax liability of £0.3m arising on
historic property revaluations (2023: £0.3m), no UK deferred tax
assets have been recognised at period end.
Classification
of exceptional items
Note 5 contains information about items
classified as exceptional.
Key
judgements
Management has exercised judgement over whether
items are exceptional as set out in the Group's accounting
policy.
Expected credit
losses
The allowance for expected credit losses
("ECLs") is calculated on a customer-by-customer basis, using a
combination of internally and externally sourced information,
including expected future default levels and future predicted cash
collection levels.
Key sources of
estimation uncertainty
Management has applied judgement when setting
expectations, these are derived from past defaults/trends and
future projections.
Provisions
On 14 February 2024, the Group announced the
strategic consolidation and closure of its Tucson, Arizona, USA
facility, due to be completed by September 2024.
Key
judgements
Management has applied judgement when
determining what provisions to recognise at 31 March 2024 for costs
directly arising from the planned closure, where an obligation
exists at that date. Management has also used judgement to
assess whether there is any impairment of assets at the facility as
a result of the intended closure (see impairment of assets
above).
Key sources of
estimation uncertainty
Provision for employee redundancy and
dilapidation costs of the leased properties at Tucson, totalling
£0.7m have been estimated at 31 March 2024. Provisions
recognised are management's best estimate of the cost that will be
required to settle the Group's obligation at a future date.
Advice has been sought from a third party who has provided an
estimate of the cost to make-good the properties prior to exit,
however until the final cost is agreed with the lessor, this
remains an estimate. Following closure, any unused provision
will be released back to exceptional items as a credit in
FY25.
The Group is organised into two, separately
managed, business segments - CTP 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 Executive Committee).
The CTP segment supplies value-adding engineered
solutions from mould design, automation, and production to assembly
and printing for the life science, optical and precision component
industries. This business operates internationally in a
fast-growing and dynamic market underpinned by rapid technological
development.
The Aerospace segment delivers precise and
durable components for the safety and performance of aircraft to
manufacturing and aerospace industries.
The Central costs relate to the cost of running
the Group, plc and non-trading companies.
Transfer pricing between business segments is
set on an arm's length basis. Segmental revenues and results are
after the elimination of transfers between business segments. Those
transfers are eliminated on consolidation.
Analysis by
business segment
The segment results for the year ended 31 March
2024 were as follows:
|
|
CTP
(continuing)
£000
|
Aerospace
(continuing)
£000
|
Central
(continuing)
£000
|
Group
total
£000
|
|
|
|
|
|
|
|
Consolidated
income statement
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
External revenue
|
125,044
|
7,628
|
-
|
132,672
|
|
|
|
|
|
|
|
External expenses
|
(115,627)
|
(5,929)
|
(4,469)
|
(126,025)
|
|
|
|
|
|
|
|
Underlying operating profit / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
Exceptional operating items
|
(3,259)
|
(50)
|
(1,548)
|
(4,857)
|
|
|
|
|
|
|
|
Operating
profit / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
Net finance expense
|
|
|
|
(5,587)
|
|
Income tax credit
|
|
|
|
498
|
|
|
|
|
|
|
|
Loss for the
period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
statement of financial position
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
93,160
|
6,095
|
1,685
|
100,940
|
|
Segment liabilities
|
(31,728)
|
(1,739)
|
(63,813)
|
(97,280)
|
|
|
|
|
|
|
|
Net
assets
|
|
|
|
|
|
|
|
|
|
|
|
Other segmental
information
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure on property, plant and
equipment
|
6,736
|
585
|
166
|
7,487
|
|
Capital expenditure on computer
software
|
-
|
-
|
95
|
95
|
|
Depreciation
|
7,454
|
223
|
92
|
7,769
|
|
Impairment of property, plant and
equipment
|
1,892
|
-
|
-
|
1,892
|
|
Amortisation of computer software
|
31
|
-
|
70
|
101
|
|
Amortisation of other intangibles
|
62
|
-
|
-
|
62
|
The segment results for the year ended 31 March
2023 were as follows:
|
|
CTP
(continuing)
£000
|
Aerospace
(continuing)
£000
|
Central
(continuing)
£000
|
Group
total
£000
|
|
|
|
|
|
|
|
Consolidated
income statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External revenue
|
136,814
|
6,631
|
-
|
143,445
|
|
|
|
|
|
|
|
Expenses
|
(129,493)
|
(5,111)
|
(2,902)
|
(137,506)
|
|
|
|
|
|
|
|
Underlying operating profit / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
Exceptional operating items
|
(2,752)
|
-
|
(1,958)
|
(4,710)
|
|
|
|
|
|
|
|
Operating
profit / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
Net finance expense
|
|
|
|
(3,749)
|
|
Income tax expense
|
|
|
|
(1,437)
|
|
|
|
|
|
|
|
Loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
statement of financial position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
114,231
|
5,886
|
2,555
|
122,672
|
|
Segment liabilities
|
(40,000)
|
(1,198)
|
(69,868)
|
(111,066)
|
|
|
|
|
|
|
|
Net assets
|
|
|
|
|
|
|
|
|
|
|
|
Other segmental
information
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure on property, plant and
equipment
|
5,474
|
287
|
49
|
5,810
|
|
Capital expenditure on computer
software
|
36
|
-
|
-
|
36
|
|
Capital expenditure on other
intangibles
|
68
|
-
|
-
|
68
|
|
Depreciation
|
7,516
|
223
|
76
|
7,815
|
|
Impairment of property, plant and
equipment
|
783
|
-
|
-
|
783
|
|
Amortisation of computer software
|
43
|
-
|
101
|
144
|
|
Amortisation of other intangibles
|
67
|
-
|
-
|
67
|
|
Impairment of intangible fixed assets
|
208
|
-
|
-
|
208
|
Analysis by
geographical segment
The business operates in three main geographical
regions - the United Kingdom, North America and in lower-cost
regions including the Czech Republic, China and India. The
geographical analysis was as follows:
|
|
|
Net segment
(liabilities)/
assets
|
Expenditure on tangible and intangible
fixed assets
|
|
|
2024
£000
|
2023
£000
|
2024
£000
|
2023
£000
|
2024
£000
|
2023
£000
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
10,084
|
14,157
|
(39,006)
|
(40,329)
|
1,980
|
1,923
|
|
North America
|
68,474
|
70,955
|
21,846
|
27,909
|
4,867
|
3,204
|
|
Rest of world
|
54,114
|
58,333
|
20,820
|
24,026
|
735
|
787
|
|
|
|
|
|
|
|
|
The analysis of segment revenue represents
revenue from external customers based upon the location of the
customer.
The analysis of segment assets and capital
expenditure is based upon the location of the assets.
The material components of the Central assets
and liabilities are retirement benefit obligation net liabilities
of £37.2m (2023: £34.5m), and net borrowings of £24.3m (2023:
£31.3m).
One CTP customer accounted for 41.1% (2023:
28.4%) and another customer for 13.3% (2023:10.5%) of Group
revenues from continuing operations and similar proportions of
trade receivables.
No other customer accounted for more than 10.0%
of revenues from continuing operations in the year.
Deferred tax assets by geographical location are
as follows: United Kingdom £nil (2023: £0.3m), North America £0.8m
(2023: £0.8m), rest of world £0.1m (2023: £0.1m).
Total non-current assets by geographical
location are as follows: United Kingdom £20.6m (2023: £22.6m),
North America £26.3m (2023: £28.8m), rest of world £16.2m (2023:
£18.6m).
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
|
Rationalisation costs
|
(3,360)
|
(2,648)
|
|
Past service cost in respect to retirement
benefits
|
(1,020)
|
-
|
|
Refinancing costs
|
(433)
|
(756)
|
|
Net costs arising from cancellation of future
supply agreement
|
(188)
|
(877)
|
|
Settlement / (costs) in respect to legacy
claims
|
284
|
(302)
|
|
Doubtful debt and related inventory
provision
|
(140)
|
(896)
|
|
Credit arising on the disposal of surplus
properties
|
-
|
769
|
|
|
|
|
Rationalisation costs from continuing operations
during the period relate to the restructuring and rationalisation
of the Group. Costs are mostly relating to the announced Tucson,
Arizona, USA facility closure and the now closed Derry, NH, USA
manufacturing site as well as some other Central employee-related
costs. These include a combination of employee redundancy
costs, site closure provisions and asset impairment costs. Prior
year costs were similar in nature, being a mixture of employee
rationalisation and asset impairment costs arising from the
decision that the Derry manufacturing site would be closed in the
year to 31 March
2024.
During the year, the trustees of the Carclo
Group Pension Scheme identified that a group of members required an
adjustment to their benefits in respect of the requirement to
provide equal benefits to males and females following the Barber
judgment in 1990. In summary, the adjustment consisted of
decreasing the normal retirement age from 65 to 60 for some
members' benefits for some elements of service after 17 May
1990. This has resulted in additional liabilities in the
Scheme which have been accounted for as a £1.0m past service cost
in the income statement (approximately 0.8% of
liabilities).
Refinancing costs of £0.4m are legal and
professional costs incurred to ensure compliance with the Group's
principal bank refinancing arrangement which resulted in the
amendment deed signed 17 July 2023, as well as other Group
refinancing-related activities in respect to the Group's commitment
to seek alternative sources of bank
financing.
£0.2m net costs arising from cancellation of
future supply agreement relate to the OEM customer who gave notice
in December 2022. This includes £0.9m asset impairment (see
note 10), £0.2m loss on disposal of other related ancillary
equipment, less £0.7m being a credit recognised in the current year
for final settlement
received.
During the year to 31 March 2024, the Group
received notice from its third-party advisor that there would be no
obligation on Carclo plc to make payment to settle two of the
health-related claims that had been provided for in the prior
year. As such, the provision held at that date, £0.3m, has
been released back to exceptional items.
In the prior year, a customer of the CTP
division provided notice that it would be ceasing to operate.
Provision was made at the time for amounts not expected to be
recovered through credit insurance. A further £0.1m provision
for inventory has been charged in the current year, as it is not
now expected to be recovered.
The credit arising on the disposal of surplus
properties in the prior year is the profit arising on the sale and
leaseback arrangement of the CTP manufacturing site at Tucson,
Arizona, USA.
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
The expense recognised in the consolidated
income statement comprises:
|
|
|
|
|
|
|
|
Interest receivable on cash and cash
deposits
|
424
|
218
|
|
Interest payable on bank loans and
overdrafts
|
(3,141)
|
(2,569)
|
|
Lease interest
|
(1,042)
|
(674)
|
|
Other interest
|
(2)
|
(59)
|
|
Interest on the net defined benefit pension
liability
|
(1,826)
|
(665)
|
|
|
|
|
|
Finance expense
|
|
|
|
7.
|
Income tax
credit / (expense)
|
The credit / (expense) recognised in the
consolidated income statement comprises:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
United Kingdom corporation tax
|
|
|
|
Adjustments for prior years
|
(22)
|
(18)
|
|
|
|
|
|
|
|
|
|
Overseas taxation:
|
|
|
|
Current tax
|
(942)
|
(1,462)
|
|
Adjustments for prior years
|
(211)
|
110
|
|
|
|
|
|
Total current tax net expense
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax credit / (expense)
|
|
|
|
Origination and reversal of temporary
differences:
|
|
|
|
Deferred tax
|
1,419
|
(20)
|
|
Adjustments for prior years
|
193
|
17
|
|
Rate Change
|
61
|
(64)
|
|
|
|
|
|
Total deferred tax credit / (expense)
|
|
|
|
|
|
|
|
Total income tax credit / (expense) recognised
in the consolidated income statement
|
|
|
Reconciliation
of tax (credit) / expense for the year
The Group has reported an effective tax rate for
the period of 14.1% which is below the standard rate of UK
corporation tax of 25% (2023: 19%). The differences are explained
as follows:
|
|
£000
|
2024
%
|
£000
|
2023
%
|
|
|
|
|
|
|
|
Loss before tax
|
(3,797)
|
|
(2,520)
|
|
|
|
|
|
|
|
|
Income tax using standard rate of UK corporation
tax of 25% (FY22/23: 19%)
|
(949)
|
25.0
|
(479)
|
19.0
|
|
|
|
|
|
|
|
Expenses not deductible for tax
purposes
|
166
|
(4.4)
|
128
|
(5.1)
|
|
Income not taxable
|
(114)
|
3.0
|
(125)
|
5.0
|
|
Adjustments in respect of overseas tax
rates
|
(157)
|
4.1
|
155
|
(6.2)
|
|
Derecognition / (recognition) of deferred tax
asset previously recognised / (unrecognised)
|
-
|
-
|
669
|
(26.5)
|
|
Unprovided deferred tax movement
|
732
|
(19.3)
|
982
|
(39.0)
|
|
Adjustment to current tax in respect of prior
periods (UK and overseas)
|
232
|
(6.1)
|
(92)
|
3.7
|
|
Adjustments to deferred tax in respect of prior
periods (UK and overseas)
|
(193)
|
5.1
|
(17)
|
(0.7)
|
|
Foreign taxes expensed in the UK
|
(54)
|
1.4
|
210
|
(8.3)
|
|
Rate change on deferred tax
|
(61)
|
1.6
|
64
|
(2.5)
|
|
Foreign exchange currency loss
|
(100)
|
2.6
|
(58)
|
2.3
|
|
|
|
|
|
|
|
Total income tax (credit) / expense
|
|
|
|
|
Tax on items credited / (charged) outside of the
consolidated income statement:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Recognised in other comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange movements
|
33
|
(190)
|
|
|
|
|
|
|
|
|
|
Total income tax credited / (charged) to other
comprehensive income
|
|
|
|
8.
|
(Loss) /
earnings per share
|
The calculation of basic earnings per share is
based on the (loss) / profit attributable to equity holders of the
parent company divided by the weighted average number of ordinary
shares outstanding during the year.
The calculation of diluted earnings per share is
based on the (loss) / profit attributable to equity holders of the
parent company divided by the weighted average number of ordinary
shares outstanding during the year (adjusted for dilutive
options).
The following details the result and average
number of shares used in calculating the basic and diluted earnings
per share:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Loss after tax
|
(3,299)
|
(3,957)
|
|
|
|
|
|
Loss attributable to non-controlling
interests
|
-
|
-
|
|
|
|
|
|
Loss after tax, attributable to equity holders
of the parent
|
|
|
|
|
|
|
|
|
2024
Shares
|
2023
Shares
|
|
|
|
|
|
Weighted average number of ordinary shares in
the year
|
73,419,193
|
73,419,193
|
|
|
|
|
|
Effect of dilutive share options in
issue1
|
15,974
|
15,974
|
|
|
|
|
|
Weighted average number of ordinary shares
(diluted) in the year for loss per share calculation
|
|
|
|
Effect of dilutive share options in
issue
|
817,049
|
-
|
|
Weighted average number of ordinary shares
(diluted) in the year for underlying earnings per share
calculation
|
|
|
1There are 15,974 vested
share options outstanding that are yet to be issued. 817,049 of the
share options granted on 21 September 2023 have been excluded from
the calculation of weighted average number of dilutive earnings per
share in the current year as they are anti-dilutive. These
options could potentially dilute earnings per share in the
future.
In addition to the above, the Company also
calculates an earnings per share based on underlying profit as the
Board believes 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 separately disclosed one-off items and the
impact of property and business disposals, net of attributable
taxes.
The following table reconciles the Group's loss
to underlying profit used in the numerator in calculating
underlying earnings per share:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
|
|
|
|
Loss after tax, attributable to equity holders
of the
parent
|
(3,299)
|
(3,957)
|
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
Exceptional - rationalisation and restructuring
costs, net of tax
|
2,690
|
2,314
|
|
Exceptional - past service cost in respect to
retirement benefits, net of tax
|
1,020
|
-
|
|
Exceptional - refinancing costs, net of
tax
|
433
|
756
|
|
Exceptional - net costs arising from
cancellation of future supply agreement, net of tax
|
146
|
752
|
|
Exceptional - (settlement) / costs in respect to
legacy claims, net of tax
|
(284)
|
302
|
|
Exceptional - doubtful debt and related
inventory provision, net of tax
|
109
|
673
|
|
Exceptional - credit arising on the disposal of
surplus properties, net of tax
|
-
|
(578)
|
|
|
|
|
|
Profit after
tax but before exceptional items, attributable to equity holders of
the parent
|
|
|
|
|
|
|
|
Underlying operating profit
|
6,647
|
5,939
|
|
|
|
|
|
Finance revenue
|
424
|
218
|
|
Finance expense
|
(6,011)
|
(3,967)
|
|
Income tax expense
|
(245)
|
(1,928)
|
|
|
|
|
|
Profit after
tax but before exceptional items - continuing
operations
|
|
|
The following table summarises the (loss) /
earnings per share figures based on the above data:
|
|
2024
Pence
|
2023
Pence
|
|
|
|
|
|
Basic loss per
share
|
|
|
|
|
|
|
|
Diluted loss
per share
|
|
|
|
|
|
|
|
Underlying
earnings per share - basic
|
|
|
|
|
|
|
|
Underlying
earnings per share - diluted
|
|
|
|
|
|
|
|
9.
|
Dividends paid
and proposed
|
The Directors are not proposing a final dividend
for the year ended 31 March 2024 (31 March 2023: £nil). Under
the terms of the amended and restated bank facilities agreement,
the Group is not permitted to make a dividend payment to
shareholders up to the period ending 31 December 2025.
|
|
Goodwill
£'000
|
Patents
and
development
costs
£'000
|
Customer-
related
intangibles
£000
|
Computer
Software
£000
|
Total
£000
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2022
|
23,094
|
16,734
|
553
|
1,899
|
42,280
|
|
|
|
|
|
|
|
|
Additions
|
-
|
68
|
-
|
36
|
104
|
|
Disposals
|
-
|
-
|
-
|
(14)
|
(14)
|
|
Effect of movements in foreign
exchange
|
1,005
|
-
|
35
|
31
|
1,071
|
|
|
|
|
|
|
|
|
Balance at 31 March 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
-
|
-
|
-
|
95
|
95
|
|
Disposals
|
-
|
-
|
-
|
(356)
|
(356)
|
|
Effect of movements in foreign
exchange
|
(968)
|
-
|
-
|
(10)
|
(978)
|
|
|
|
|
|
|
|
|
Balance at 31
March 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2022
|
1,130
|
16,734
|
302
|
1,400
|
19,566
|
|
|
|
|
|
|
|
|
Amortisation for the year
|
-
|
6
|
61
|
144
|
211
|
|
Impairment
|
-
|
-
|
208
|
-
|
208
|
|
Effect of movements in foreign
exchange
|
(41)
|
-
|
17
|
17
|
(7)
|
|
|
|
|
|
|
|
|
Balance at 31 March 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation for the year
|
-
|
62
|
-
|
101
|
163
|
|
Disposal
|
-
|
-
|
-
|
(144)
|
(144)
|
|
Effect of movements in foreign
exchange
|
15
|
-
|
-
|
(7)
|
8
|
|
|
|
|
|
|
|
|
Balance at 31
March 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
amounts
|
|
|
|
|
|
|
At 1 April 2022
|
21,964
|
-
|
251
|
499
|
22,714
|
|
At 31 March 2023
|
23,010
|
62
|
-
|
391
|
23,463
|
|
At 31 March
2024
|
|
|
|
|
|
The Group has incurred research and development
costs of £0.2m (2023: £0.2m) which have been included within
operating expenses in the consolidated income statement.
In the prior year, a customer-related intangible
asset that had been recognised on acquisition of the US Derry, NH,
USA facility, was fully impaired as the Group has minimal trading
with the customers to which it related. The cost of £0.2m was
recognised as an exceptional item in that
year.
Impairment
tests for cash generating units containing
goodwill
Goodwill acquired in a business combination is
allocated at acquisition to the cash generating units ("CGUs") that
are expected to benefit from that business combination. The
carrying amount of goodwill is allocated to the Group's principal
CGUs, being the operating segments described in the operating
segment descriptions in note 4.
The carrying value of goodwill at 31 March 2024
and 31 March 2023 is allocated wholly to the CTP cash generating
unit as follows
At 31 March 2024, the recoverable amount of the
CTP cash generating unit was determined on a calculation of value
in use, being the higher of that and fair value less costs of
disposal ("FVLCD"). The recoverable amount calculated exceeds the
carrying amount of the CTP CGU by £8.9m. The results of
each produced the same answer, that there is no impairment of
goodwill.
The value in use calculations use cash flow
projections based upon financial budgets approved by management
covering a three-year period. Cash flows beyond the
three-year period are extrapolated using estimated growth rates of
between 1.5% and 4.3% (2023: 2.0% and 4.1%) depending upon the
market served.
The cash flows were discounted at a weighted
average pre-tax discount rate of 16.9% (2023: 9.3% - 10.4%). The
discount rate is calculated and reviewed annually and is based on
the Group's weighted average cost of capital. Changes in income and
expenditure are based on expectations of future changes in the
market. Sensitivity testing of the recoverable amount to reasonably
possible changes in key assumptions has been performed, including
changes in the discount rate and changes in forecast cash
flows.
All other assumptions unchanged, a 1.6% (2023:
5.5%) increase in the discount rate to 18.5% (2023: 14.8% - 15.9%),
or an 8.1% (2023: 28.8%) decrease in underlying EBIT would reduce
the headroom on the CTP CGU to £nil. Should the discount rate
increase further than this or the profitability decrease further,
then an impairment of the goodwill would be likely.
|
11.
|
Property, plant
and equipment
|
|
|
Land and
buildings
£000
|
Plant and
equipment
£000
|
Total
£000
|
|
|
|
|
|
|
Cost
|
|
|
|
|
Balance at 31 March 2022
|
42,923
|
72,127
|
115,050
|
|
|
|
|
|
|
Additions
|
1,662
|
4,148
|
5,810
|
|
Disposals
|
-
|
(1,483)
|
(1,483)
|
|
Reclassification to assets held for
sale
|
(153)
|
-
|
(153)
|
|
Effect of movements in foreign
exchange
|
1,709
|
1,840
|
3,549
|
|
|
|
|
|
|
Balance at 31 March 2023
|
|
|
|
|
|
|
|
|
|
Additions
|
3,623
|
3,864
|
7,487
|
|
Disposals
|
(2,047)
|
(2,413)
|
(4,460)
|
|
Effect of movements in foreign
exchange
|
(1,382)
|
(1,528)
|
(2,910)
|
|
|
|
|
|
|
Balance at 31
March 2024
|
|
|
|
|
|
|
|
|
|
Depreciation
and impairment losses
|
|
|
|
|
Balance at 31 March 2022
|
16,463
|
51,623
|
68,086
|
|
Depreciation charge for the year
|
3,596
|
4,219
|
7,815
|
|
Disposals
|
-
|
(999)
|
(999)
|
|
Reclassification to assets held for
sale
|
(89)
|
-
|
(89)
|
|
Impairment
|
-
|
783
|
783
|
|
Effect of movements in foreign
exchange
|
704
|
1,152
|
1,856
|
|
|
|
|
|
|
Balance at 31 March 2023
|
|
|
|
|
|
|
|
|
|
Depreciation charge for the year
|
3,892
|
3,877
|
7,769
|
|
Disposals
|
(2,282)
|
(1,472)
|
(3,754)
|
|
Reassessment of lease term
|
1,310
|
-
|
1,310
|
|
Impairment
|
116
|
1,850
|
1,966
|
|
Reversal of impairment
|
-
|
(74)
|
(74)
|
|
Effect of movements in foreign
exchange
|
(701)
|
(1,149)
|
(1,850)
|
|
|
|
|
|
|
Balance at 31
March 2024
|
|
|
|
|
|
|
|
|
|
Carrying amounts
|
|
|
|
|
At 1 April 2022
|
26,460
|
20,504
|
46,964
|
|
At 31 March 2023
|
25,467
|
19,854
|
45,321
|
|
At 31 March
2024
|
23,326
|
16,745
|
40,071
|
At 31 March 2024, properties with a carrying
amount of £2.8m were subject to a registered charge in favour of
the Group pension scheme (2023: £2.6m) capped at £5.1m.
Property, plant and equipment includes
right-of-use assets.
On 14 February 2024, the Group announced the
intended closure of its Tucson, Arizona, USA facility. As a
result of this decision, it was deemed by management that at 31
March 2024 there was reasonable certainty that the exit options
within two of the property leases at that location, would be
exercised. As such, the lease liability was remeasured with a
corresponding adjustment recognised against the right-of-use assets
of £1.3m. Further, an impairment of £0.1m was recognised as an
exceptional charge, classified as rationalisation costs in note 5,
to impair the properties to value in use to expected closure
date.
The impairment to plant and equipment of £1.9m
includes £0.9m in respect to assets obtained for production on a
leading global OEM customer who in December 2022 gave notice that
they would not be proceeding into the production phase of their
project. Whilst an impairment of £0.5m was recognised in the
prior year, it was decided by management at 30 September 2023 that
as the assets remained on balance sheet with no intended use, they
should be impaired to recoverable amount, being fair value less
costs to dispose. A further impairment was recognised at
interim reporting date of £0.9m and there has been no change to
this assessment of recoverable amount at 31 March 2024. Also,
following the announcement of the intended closure of the Tucson,
Arizona, USA facility, management undertook an exercise to
determine the recoverable amount of assets located at this
site. The assets are a combination of both owned and leased,
and recoverable amount has been determined through either fair
value less costs of disposal or value in use. As a result of
this review, an impairment of £1.0m has been recognised within
exceptional items of which £0.6m is in respect to leased
assets.
In the prior year, the decision by the Directors
of the Group to proceed with a plan of rationalisation of the CTP
USA manufacturing footprint led to an impairment review of the
Derry, NH, USA site assets and ultimately an impairment charge of
£0.3m recognised as an exceptional cost in the prior year.
Assets that had been impaired in the year to 31 March 2023 were
sold for £0.1m more than their impaired value and as such, £0.1m of
the impairment provision has been reversed in the current year and
recognised as a credit in exceptional items at 31 March 2024.
FVLCD valuation uses an estimate of the value
which would be expected to be received from a third party in a sale
of the asset, net of estimated sale costs. This valuation is
a level 3 measurement which is based on inputs which are normally
unobservable to market participants, including offers received and
management's experience of selling similar assets. Refer to
note 10 for details of cash flows and assumptions used in value in
use calculations.
Reconciliation of movements of liabilities to
cash flows arising from financing activities:
|
|
Term loan
£000
|
Revolving credit
facility
£000
|
Lease
liabilities
£000
|
Other
loans
£000
|
Total
£000
|
|
Balance at 31 March 2022
|
30,260
|
3,500
|
10,870
|
122
|
44,752
|
|
Changes from financing
cashflows
|
|
|
|
|
|
|
Drawings on new facilities
|
-
|
-
|
-
|
359
|
359
|
|
Transaction costs associated with the
issue of debt
|
(500)
|
-
|
-
|
-
|
(500)
|
|
Repayment of borrowings
|
(1,800)
|
-
|
(4,328)
|
(102)
|
(6,230)
|
|
|
|
|
|
|
|
|
Effect of changes in foreign exchange
rates
|
818
|
-
|
373
|
15
|
1,206
|
|
Liability-related other
charges
|
|
|
|
|
|
|
Drawings on new facilities
|
-
|
-
|
4,955
|
-
|
4,955
|
|
Interest expense- presented within
exceptional items
|
69
|
-
|
-
|
-
|
69
|
|
Interest expense - presented within
finance expense
|
103
|
-
|
-
|
-
|
103
|
|
|
|
|
|
|
|
|
Equity-related other
changes
|
-
|
-
|
-
|
-
|
-
|
|
Balance at 31
March 2023
|
|
|
|
|
|
|
Changes from financing
cashflows
|
|
|
|
|
|
|
Drawings on new facilities
|
-
|
-
|
-
|
53
|
53
|
|
Transaction costs associated with the
issue of debt
|
(100)
|
-
|
-
|
-
|
(100)
|
|
Repayment of borrowings
|
|
|
|
|
|
|
|
(5,150)
|
(3,200)
|
(3,659)
|
(79)
|
(12,088)
|
|
Effect of changes in foreign exchange
rates
|
(332)
|
-
|
(229)
|
(33)
|
(594)
|
|
Liability-related other
changes
|
|
|
|
|
|
|
Drawings on new facilities
|
-
|
-
|
4,583
|
-
|
4,583
|
|
Reassessment of lease
liability
|
-
|
-
|
(1,349)
|
-
|
(1,349)
|
|
Termination of facilities
|
-
|
-
|
(49)
|
-
|
(49)
|
|
Interest expense - presented within
finance expense
|
214
|
-
|
-
|
-
|
214
|
|
|
|
|
|
|
|
|
Equity-related other
changes
|
-
|
-
|
-
|
-
|
-
|
|
Balance at 31
March 2024
|
|
|
|
|
|
|
13.
|
Retirement
benefit obligations
|
The Group operates a defined benefit UK pension
scheme which provides pensions based on service and final pay.
Outside of the UK, retirement benefits are determined according to
local practice and funded accordingly.
In the UK, Carclo plc sponsors the Carclo Group
Pension Scheme (the "Scheme"), a funded defined benefit pension
scheme which provides defined benefits for some of its members.
This is a legally separate, trustee-administered fund holding the
Scheme's assets to meet long-term pension liabilities for some
2,493 current and past employees as at 31 March
2024.
The trustees of the Scheme are required to act
in the best interest of the Scheme's beneficiaries. The appointment
of the trustees is determined by the Scheme's trust documentation.
It is policy that one-third of all trustees should be nominated by
the members. The trustees currently comprise two Company-nominated
trustees (of which one is an independent professional trustee, and
one is the independent professional Chairperson) as well as two
member-nominated trustees. The trustees are also responsible for
the investment of the Scheme's assets.
The Scheme provides pensions and lump sums to
members on retirement and to their dependants on death. The level
of retirement benefit is principally based on final pensionable
salary prior to leaving active service and is linked to changes in
inflation up to retirement. The defined benefit section is
closed to new entrants who instead have the option of entering into
the defined contribution section of the Scheme, and the Group has
elected to cease future accrual for existing members of the defined
benefit section such that members who have not yet retired are
entitled to a deferred
pension.
The Company currently pays contributions to the
Scheme as determined by regular actuarial valuations. The trustees
are required to use prudent assumptions to value the liabilities
and costs of the Scheme whereas the accounting assumptions must be
best
estimates.
The Scheme is subject to the funding
legislation, which came into force on 30 December 2005, outlined in
the Pensions Act 2004. This, together with documents issued by
the Pensions Regulator and Guidance Notes adopted by the
Financial Reporting Council, set out the framework for funding
defined benefit occupational pension plans in the
UK.
A full actuarial valuation was carried out as at
31 March 2021 in accordance with the scheme funding requirements of
the Pensions Act 2004. The funding of the Scheme is agreed between
the Group and the trustees in line with those requirements. These,
in particular, require the surplus or deficit to be calculated
using prudent, as opposed to best estimate, actuarial assumptions.
The 31 March 2021 actuarial valuation showed a deficit of £82.8m.
Under the recovery plan agreed with the trustees following the 2021
valuation, the Group agreed that it would aim to eliminate the
deficit, over a period of 18 years and 7 months starting from the
valuation date and continuing until 31 October 2039, by the payment
of annual contributions combined with the assumed asset returns in
excess of gilt yields. Contributions paid in respect of the year to
31 March 2023 amounted to £3.9m, £3.5m in respect of the year to 31
March 2024 and are agreed as £3.5m annually thereafter, plus
additional contributions of 26% of any surplus of 2024/25
underlying EBITDA over £18.0m payable from 30 June 2025 to 31 May
2026. These contributions include an allowance in respect of
the expenses of running the Scheme and the Pension Protection Fund
("PPF") levy of £0.9m in years ending 31 March 2024 and 2025 and
£0.6m in the year to 31 March 2026 and
beyond.
At each triennial valuation, the schedule of
contributions is reviewed and reconsidered between the employer and
the trustees; the next review being no later than by 31 July 2025
after the results of the 31 March 2024 triennial valuation are
known.
On 14 August 2020, additional security was
granted by certain Group companies to the Scheme trustees such that
at 31 March 2024 the gross value of the assets secured, which
includes applicable intra-group balances, goodwill and investments
in subsidiaries at net book value in the relevant component
companies' accounts, but which eliminate in the Group upon
consolidation, amounted to £207.8m (2023: £240.9m). Excluding the
assets which eliminate in the Group upon consolidation, the value
of the security was £29.9m (2023:
£37.7m).
For the purposes of IAS 19, the results of the
actuarial valuation as at 31 March 2021, which was carried out by a
qualified independent actuary, have been updated on an approximate
basis to 31 March 2024. There have been no changes in the valuation
methodology adopted for this period's disclosures compared to the
previous period's
disclosures.
The Scheme exposes the Group to actuarial risks
and the key risks are set out in the table below. In each instance
these risks would detrimentally impact the Group's statement of
financial position and may give rise to increased interest costs in
the Group income statement. The trustees could require higher
cash contributions or additional security from the
Group.
The trustees manage governance and operational
risks through a number of internal controls policies, including a
risk register and integrated risk management.
|
Risk
|
Description
|
Mitigation
|
|
Investment risk
|
Weaker than expected investment returns result
in a worsening in the Scheme's funding position.
|
The trustees continually monitor investment risk
and performance and have established an investment sub-committee
which includes a Group representative, meets regularly and is
advised by professional investment advisors. A number of the
investment managers operate tactical investment management of the
plan assets.
The Scheme currently invests approximately 68%
of its asset value in liability-driven investments, 30% in a
portfolio of diversified growth funds and 2% in cash and liquidity
funds. The objective of the growth portfolio is that in
combination, the matching credit, liability-driven investments and
cash components generate sufficient return to meet the overall
portfolio return
objective.
|
|
Interest rate risk
|
A decrease in corporate bond yields increases
the present value of the IAS 19 defined benefit
obligations.
A decrease in gilt yields results in a worsening
in the Scheme's funding position.
|
The trustees' investment strategy includes
investing in liability-driven investments and bonds whose values
increase with decreases in interest rates.
Approximately 60% of the Scheme's funded
liabilities are currently hedged against interest rates using
liability-driven investments.
It should be noted that the Scheme hedges
interest rate risk on a statutory and long-term funding basis
(gilts) whereas AA corporate bonds are implicit in the IAS 19
discount rate and so there is some mismatching risk to the Group
should yields on gilts and corporate bonds
diverge.
|
|
Inflation risk
|
An increase in inflation results in higher
benefit increases for members which in turn increases the Scheme's
liabilities.
|
The trustees' investment strategy includes
investing in liability-driven investments which will move with
inflation expectations with approximately 60% of the Scheme's
inflation-linked liabilities being hedged on a funded basis. The
growth assets held are expected to provide protection over
inflation in the long term.
|
|
Mortality risk
|
An increase in life expectancy leads to benefits
being payable for a longer period which results in an increase in
the Scheme's liabilities.
|
The trustees' actuary provides regular updates
on mortality, based on scheme experience, and the assumption
continues to be reviewed.
|
The amounts recognised in the statement of
financial position in respect of the defined benefit scheme were as
follows:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Present value of funded obligations
|
(130,420)
|
(134,091)
|
|
Fair value of scheme assets
|
93,234
|
99,598
|
|
|
|
|
|
Recognised liability for defined benefit
obligations
|
|
|
The present value of Scheme liabilities is
measured by discounting the best estimate of future cash flows to
be paid out of the Scheme using the projected unit credit
method. The value calculated in this way is reflected in the
net liability in the statement of financial position as shown
above.
The projected unit credit method is an accrued benefits valuation
method in which allowance is made for projected earnings
increases. The accumulated benefit obligation is an
alternative actuarial measure of the Scheme's liabilities whose
calculation differs from that under the projected unit credit
method in that it includes no assumption for future earnings
increases. In this case, as the Scheme is closed to future accrual,
the accumulated benefit obligation is equal to the valuation using
the projected unit credit method.
All actuarial remeasurement gains and losses
will be recognised in the year in which they occur in other
comprehensive income.
The cumulative remeasurement net loss reported
in the statement of comprehensive income since 1 April 2004 is
£54.101m.
IFRIC 14 has no effect on the figures disclosed
because the Company has an unconditional right to a refund under
the resulting trust
principle.
Movements in the net liability for defined
benefit obligations recognised in the consolidated statement of
financial position:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Net liability for defined benefit obligations at
the start of the year
|
(34,493)
|
(25,979)
|
|
|
|
|
|
Contributions paid
|
3,500
|
4,142
|
|
Net expense recognised in the consolidated
income statement (see below)
|
(3,525)
|
(2,079)
|
|
Remeasurement losses recognised in other
comprehensive income
|
(2,668)
|
(10,577)
|
|
|
|
|
|
Net liability for defined benefit obligations at
the end of the year
|
|
|
Movements in the present value of defined
benefit obligations:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Defined benefit obligation at the start of the
year
|
134,091
|
181,759
|
|
Interest expense
|
6,615
|
4,750
|
|
Actuarial loss due to scheme
experience
|
1,308
|
4,897
|
|
Actuarial gains due to changes in demographic
assumptions
|
(2,187)
|
(7,539)
|
|
Actuarial loss / (gains) due to changes in
financial assumptions
|
585
|
(38,032)
|
|
Benefits paid
|
(11,012)
|
(11,744)
|
|
Past service cost (see note 5)
|
1,020
|
-
|
|
|
|
|
|
Defined benefit obligation at the end of the
year
|
|
|
There have been no plan amendments,
curtailments, or settlements during the period.
The English High Court ruling in Lloyds Banking
Group Pension Trustees Limited v Lloyds Bank plc and others was
published on 26 October 2018, and held that UK pension schemes with
Guaranteed Minimum Pensions ("GMPs") accrued from 17 May 1990 must
equalise for the different effects of these GMPs between men and
women. The case also gave some guidance on related matters,
including the methods for equalisation.
The trustees of the plan will need to obtain
legal advice covering the impact of the ruling on the plan, before
deciding with the employer on the method to adopt. The legal advice
will need to consider (amongst other things) the appropriate GMP
equalisation solution, whether there should be a time limit on the
obligation to make back-payments to members (the "look-back"
period) and the treatment of former members (members who have died
without a spouse and members who have transferred out for
example).
In the year to 31 March 2020 the trustees
commissioned scheme-specific calculations to determine the likely
impact of the ruling on the Scheme. An allowance for the
impact of GMP equalisation was included within the accounting
figures for that year, increasing liabilities by 1.68%, thereby
resulting past service cost of £3.6m was recognised in the income
statement at that time. The Scheme has not yet implemented
GMP equalisation and therefore the allowance made in 2019 has been
maintained for accounting disclosures.
On 20 November 2020, the High Court issued a
supplementary ruling in the Lloyds Bank GMP equalisation case with
respect to members that have transferred out of their scheme prior
to the ruling. The results mean that trustees are obliged to
make top-up payments that reflect equalisation benefits and to make
top-up payments where this was not the case in the past.
Also, a defined benefit scheme that received a transfer is
concurrently obliged to provide equalised benefits in respect to
the transfer payments and, finally, there were no exclusions on the
grounds of discharge forms, CETV legislation, forfeiture provisions
or the Limitation Act 1980.
The impact of this ruling was estimated to cost
£0.2m (approximately 0.1% of liabilities). This additional service
cost was recognised through the income statement as a past service
cost in the year ended 31 March 2021 and was presented within
exceptional items and therefore the impact of the ruling is allowed
for in the figures presented at 31 March
2023.
During the year to 31 March 2024, the trustees
of the Scheme identified that a group of members required an
adjustment to their benefits in respect of the requirement to
provide equal benefits to males and females following the Barber
judgement in 1990. In summary, the adjustment consisted of
decreasing the normal retirement age from 65 to 60 for some
members' benefits, for some elements of service after 17 May
1990. This has resulted in additional liabilities in the
Scheme which have been accounted for as a £1.0m past service cost
in the income statement, recognised as an exceptional cost
(approximately 0.8% of
liabilities).
The Scheme's liabilities are split between
active, deferred and pensioner members at 31 March as
follows:
|
|
2024
%
|
2023
%
|
|
|
|
|
|
Active
|
-
|
-
|
|
Deferred
|
28
|
29
|
|
Pensioners
|
72
|
71
|
|
|
|
|
Movements in the fair value of Scheme
assets:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Fair value of Scheme assets at the start of the
year
|
99,598
|
155,780
|
|
|
|
|
|
Interest income
|
4,789
|
4,085
|
|
Loss on Scheme assets excluding interest
income
|
(2,962)
|
(51,251)
|
|
Contributions by employer
|
3,500
|
4,142
|
|
Benefits paid
|
(11,012)
|
(11,744)
|
|
Expenses paid
|
(679)
|
(1,414)
|
|
Fair value of Scheme assets at the end of the
year
|
|
|
|
|
|
|
|
Actual gain / (loss) on Scheme assets
|
|
|
The fair value of Scheme asset investments was
as follows:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Diversified growth funds
|
27,484
|
28,463
|
|
Bonds and liability-driven investment
funds
|
63,777
|
68,365
|
|
Cash and liquidity funds
|
1,973
|
2,770
|
|
|
|
|
|
Total assets
|
|
|
None of the fair values of the assets shown
above include any of the Group's own financial instruments or any
property occupied, or other assets used by the Group.
All of the Scheme assets have a quoted market
price in an active market with the exception of the trustees' bank
account balance.
Diversified growth funds are pooled funds
invested across a diversified range of assets with the aim of
giving long-term investment growth with lower short-term volatility
than equities.
It is the policy of the trustees and the Group
to review the investment strategy at the time of each funding
valuation. The trustees' investment objectives and the processes
undertaken to measure and manage the risks inherent in the Scheme
are set out in the Statement of Investment Principles.
A proportion of the Scheme's assets is invested
in the BMO LDI Nominal Dynamic LDI Fund and in the BMO LDI Real
Dynamic LDI Fund which provides a degree of asset liability
matching.
The net expense recognised in the consolidated
income statement was as follows:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Past service cost
|
1,020
|
-
|
|
Net interest on the net defined benefit
liability
|
1,826
|
665
|
|
Scheme administration expenses
|
679
|
1,414
|
|
|
|
|
The net expense recognised in the following line
items in the consolidated income statement:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Charged to operating profit
|
662
|
1,242
|
|
Charged to exceptional items
|
1,037
|
172
|
|
Other finance revenue and expense - net interest
on the net defined benefit liability
|
1,826
|
665
|
|
|
3,525
|
2,079
|
The principal actuarial assumptions at the
balance sheet date (expressed as weighted averages) were
|
|
2024
|
2023
|
|
|
%
|
%
|
|
|
|
|
|
Discount rate at 31 March
|
4.85
|
4.90
|
|
Future salary increases
|
N/A
|
N/A
|
|
Inflation (RPI) (non-pensioner)
|
3.30
|
3.25
|
|
Inflation (CPI) (non-pensioner)
|
2.80
|
2.75
|
|
Allowance for revaluation of deferred pensions
of RPI or 5% p.a. if less
|
3.30
|
3.25
|
|
Allowance for revaluation of deferred pensions
of CPI or 5% p.a. if less
|
2.80
|
2.75
|
|
Allowance for pension in payment increases of
RPI or 5% p.a. if less
|
3.05
|
2.90
|
|
Allowance for pension in payment increases of
CPI or 3% p.a. if less
|
2.15
|
2.00
|
|
Allowance for pension in payment increases of
RPI or 5% p.a. if less, minimum 3% p.a.
|
3.75
|
3.80
|
|
Allowance for pension in payment increases of
RPI or 5% p.a. if less, minimum 4% p.a.
|
4.30
|
4.35
|
The mortality assumptions adopted at 31 March
2024 are 165% of each of the standard tables S3PMA/S3PFA (2023:
165% of S3PMA/S3PFA respectively), year of birth, no age rating for
males and females, projected using CMI_2022 (2023: CMI_2021)
converging to 1.0% p.a. (2023: 1.0%) with a smoothing parameter
7.0% (2023: 7.0%).
It is recognised that the Core CMI_2022 model is
likely to represent an overly cautious view of experience in the
near term. As a result, management has applied judgement and
has adopted additional weightings of 10% above the core parameters
for 2020, 2021 and 2022 data (2023: 10% of 2020 and 2021 data) to
represent possible future trend as a best estimate. This will
be kept under review in the future. These assumptions imply the
following life expectancies:
|
|
2024
|
2023
|
|
|
|
|
|
Life expectancy for a male (current pensioner)
aged 65
|
17.4 years
|
17.8 years
|
|
Life expectancy for a female (current pensioner)
aged 65
|
20.1 years
|
20.4 years
|
|
Life expectancy at 65 for a male aged
45
|
18.3 years
|
18.7 years
|
|
Life expectancy at 65 for a female aged
45
|
21.2 years
|
21.6 years
|
It is assumed that 75% of the post A-Day maximum
for active and deferred members will be commuted for cash (2023:
75%).
Pension Increase Exchange take-up was estimated
to be 40% on implementation in the year ended 31 March 2022; there
has been no change made to this assumption nor to the 2021 bridging
pension option take-up of 40%.
The pension scheme liabilities are derived using
actuarial assumptions for inflation, future salary increases,
discount rates, mortality rates and commutation. Due to the
relative size of the Scheme's liabilities, small changes to these
assumptions can give rise to a significant impact on the pension
scheme deficit reported in the Group statement of financial
position.
The sensitivity to the principal actuarial
assumptions of the present value of the defined benefit obligation
is shown in the following table:
|
|
2024
%
|
2024
£000
|
2023
%
|
2023
£000
|
|
|
|
|
|
|
|
Discount rate 1
|
|
|
|
|
|
Increase of 0.25% per annum
|
(2.45%)
|
(3,194)
|
(2.41%)
|
(3,228)
|
|
Decrease of 0.25% per annum
|
2.56%
|
3,334
|
2.51%
|
3,365
|
|
Decrease of 1.0% per annum
|
10.93%
|
14,253
|
10.71%
|
14,363
|
|
Inflation 2
|
|
|
|
|
|
Increase of 0.25% per annum
|
0.81%
|
1,057
|
0.64%
|
853
|
|
Increase of 1.0% per annum
|
3.09%
|
4,032
|
2.77%
|
3,711
|
|
Decrease of 1.0% per annum
|
(2.86%)
|
(3,730)
|
(2.61%)
|
(3,499)
|
|
Life expectancy
|
|
|
|
|
|
Increase of 1 year
|
4.25%
|
5,545
|
4.30%
|
5,765
|
|
|
|
|
|
Notes:
|
(1)
|
At 31 March 2024, the assumed discount rate is
4.85% (2023: 4.90%).
|
|
|
(2)
|
At 31 March 2024, the assumed rate of RPI
inflation is 3.30% and CPI inflation 2.80% (2023: RPI 3.25% and CPI
2.75%).
|
|
|
|
|
|
|
| |
The sensitivities shown above are approximate.
Each sensitivity considers one change in isolation. The inflation
sensitivity includes the impact of changes to the assumptions for
revaluation and pension increases.
The weighted average duration of the defined
benefit obligation at 31 March 2024 is ten years (31 March 2023:
twelve years).
The life expectancy assumption at 31 March 2024
is based upon increasing the age rating assumption by one year (31
March 2023: one year).
Other than those specifically mentioned above,
there were no changes in the methods and assumptions used in
preparing the sensitivity analysis from the prior year.
The history of the Scheme's deficits and
experience gains and losses is shown in the following
table:
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Present value of funded obligation
|
(130,420)
|
(134,091)
|
|
Fair value of Scheme asset
investments
|
93,234
|
99,598
|
|
Recognised liability for defined benefit
obligations
|
(37,186)
|
(34,493)
|
|
Actual gain / (loss) on Scheme assets
|
1,827
|
(47,166)
|
|
Actuarial gain due to changes in demographic
assumptions
|
2,187
|
7,539
|
|
Actuarial (loss) / gains due to changes in
financial assumptions
|
(585)
|
38,032
|
|
14.
|
Ordinary share
capital
|
Ordinary shares of 5 pence each:
|
|
Number
of shares
|
£000
|
|
|
|
|
|
Issued and fully paid at 31 March
2023
|
73,419,193
|
3,671
|
|
|
|
|
|
Issued and
fully paid at 31 March 2024
|
|
|
There are 15,974 vested shares outstanding in
respect of a buyout award granted to a former Director of the
Company. These are yet to be issued.
There are 4,606,957 potential share options
outstanding under the performance share plan at 31 March 2024
(2023: 2,857,752). No options vested during the year to 31
March 2024 (2023:
nil).
|
15.
|
Cash generated
from operations
|
|
|
2024
£000
|
2023
£000
|
|
|
|
|
|
Loss for the
year
|
(3,299)
|
(3,957)
|
|
|
|
|
|
Adjustments
for:
|
|
|
|
Pension scheme contributions net of costs
settled by the Company
|
(2,972)
|
(3,287)
|
|
Pension scheme costs settled by the
Scheme
|
151
|
559
|
|
Depreciation charge
|
7,769
|
7,815
|
|
Amortisation charge
|
163
|
211
|
|
Exceptional rationalisation costs
|
2,212
|
1,235
|
|
Exceptional past service cost in respect to
retirement benefits
|
1,020
|
-
|
|
Exceptional refinancing costs
|
125
|
69
|
|
Exceptional costs arising from cancellation of
future supply agreement
|
1,034
|
751
|
|
Exceptional costs in respect to legacy
claims
|
(283)
|
302
|
|
Exceptional doubtful debt and related inventory
provision
|
140
|
896
|
|
Exceptional profit on disposal of surplus
property
|
-
|
(769)
|
|
Profit on disposal of other plant and
equipment
|
(17)
|
-
|
|
Loss on disposal of intangible non-current
assets
|
-
|
14
|
|
Share-based payment charge /
(credit)
|
43
|
(33)
|
|
Cash flow relating to onerous lease
|
(177)
|
-
|
|
Financial income
|
(424)
|
(218)
|
|
Financial expense
|
6,011
|
3,967
|
|
Taxation expense
|
(498)
|
1,437
|
|
|
|
|
|
Operating cash
flow before changes in working capital
|
|
|
|
|
|
|
|
Changes in
working capital
|
|
|
|
Decrease in inventories
|
3,427
|
1,539
|
|
Decrease in contract assets
|
3,985
|
2,388
|
|
Decease / (Increase) in trade and other
receivables
|
2,128
|
(1,656)
|
|
Decrease in trade and other payables
|
(3,294)
|
(943)
|
|
Decrease in contract liabilities
|
(1,629)
|
(2,542)
|
|
|
|
|
|
Cash generated
from operations
|
|
|
|
16.
|
Post balance
sheet events
|
Notice was given to the landlord on 12 April
2024 that the company would exercise the break option to exit the
leased buildings at Tucson, Arizona, USA on 1 October 2025
following the decision to close the facility at Tucson. The
reduction in the lease liability of £1.3m has been reflected in the
balance sheet at 31 March 2024 as the company was certain to exit
on closure, see note 11.
On 5 July 2024 the Group's lending bank
extended the committed facilities to 31 December 2025.
Information for
shareholders
Reconciliation
of non-GAAP financial measures
|
Continuing operations:
|
Notes
|
2024
£000
|
2023
£000
|
|
|
|
|
|
|
Statutory loss
after tax
|
|
(3,299)
|
(3,957)
|
|
|
|
|
|
|
(Less) / add back: Income tax (credit) /
expense
|
7
|
(498)
|
1,437
|
|
|
|
|
|
|
Loss before
tax
|
|
|
|
|
|
|
|
|
|
Add back: Net financing charge
|
6
|
5,587
|
3,749
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
Add back: Exceptional items
|
5
|
4,857
|
4,710
|
|
|
|
|
|
|
Underlying
operating profit
|
|
|
|
|
|
|
|
|
|
Add back: Amortisation of intangible
assets
|
10
|
163
|
211
|
|
|
|
|
|
|
Underlying
earnings before interest, tax and amortisation
("EBITA")
|
|
|
|
|
|
|
|
|
|
Add back: Depreciation of property, plant and
equipment
|
11
|
7,769
|
7,815
|
|
|
|
|
|
|
Underlying
earnings before interest, tax, depreciation and amortisation
("EBITDA")
|
|
|
|
|
|
|
|
|
|
Loss before tax
|
|
(3,797)
|
(2,520)
|
|
|
|
|
|
|
Add back: Exceptional items
|
5
|
4,857
|
4,710
|
|
Underlying
profit before tax
|
|
|
|
|
|
|
|
|
|
Income tax
(credit) / expense
|
7
|
(498)
|
1,437
|
|
|
|
|
|
|
Add back: Exceptional tax credit
|
|
743
|
491
|
|
|
|
|
|
|
Group
underlying tax expense
|
|
|
|
|
|
|
|
|
|
Group statutory
effective tax rate
|
|
13.1%
|
(57.0%)
|
|
|
|
|
|
|
Group
underlying effective tax rate
|
|
23.1%
|
88.0%
|
|
|
|
|
|
|
Cash at bank and in hand
|
|
5,974
|
10,354
|
|
Loans and borrowings - current
|
|
(6,753)
|
(5,046)
|
|
Loans and borrowings - non-current
|
|
(28,678)
|
(39,668)
|
|
|
|
|
|
|
Net
debt
|
|
|
|
|
|
|
|
|
|
Add back: Lease liabilities
|
|
11,167
|
11,870
|
|
|
|
|
|
|
Net debt
excluding lease liabilities
|
|
|
|
|
|
|
|
|
|
A reconciliation between the Group's loss to
underlying profit used in the numerator in calculating underlying
earnings per share can be found in note 8.
|
|
|
|
Glossary
|
CASH CONVERSION RATE
|
Cash generated from operations divided by EBITDA
as defined below
|
|
COMPOUND ANNUAL GROWTH RATE ("CAGR")
|
The geometric progression ratio that provides a
constant rate of return over a time period
|
|
CONSTANT CURRENCY
|
Prior year translated at the current year's
average exchange rate. Included to explain the effect of changing
exchange rates during volatile times to assist the reader's
understanding
|
|
FIXED ASSET UTILISATION RATIO
|
Revenue from continuing operations divided by
tangible fixed assets
|
|
GROUP CAPITAL EXPENDITURE
|
Non-current 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 CASH FLOW
|
Cash generated from operations, add back pension
contributions net of pension administration costs and cash from
exceptional items, less total capex and net interest
paid
|
|
NET DEBT
|
Cash and cash deposits less loans and
borrowings. Used to report the overall financial debt of the Group
in a manner that is easy to understand
|
|
NET DEBT EXCLUDING LEASE LIABILITIES
|
Net debt, as defined above, excluding lease
liabilities. Used to report the overall non-leasing debt of the
Group in a manner that is easy to understand
|
|
NET DEBT TO UNDERLYING EBITDA RATIO
|
Ratio of net debt as defined above to underlying
EBITDA as defined below
|
|
EBIT
|
Profit before interest and tax
|
|
EBITDA
|
Profit before interest, tax, depreciation and
amortisation
|
|
UNDERLYING
|
Adjusted to exclude all exceptional
items
|
|
UNDERLYING EBIT
|
Profit before interest and tax, adjusted to
exclude all exceptional items
|
|
UNDERLYING EBITDA
|
Profit before interest, tax, depreciation and
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
|
|
OPERATIONAL GEARING
|
Ratio of fixed overheads to revenue
|
|
RETURN ON REVENUE
|
Underlying operating profit, as defined above,
from continuing operations, as a percentage of revenue from
continuing operations
|
|
RETURN ON CAPITAL EMPLOYED ("ROCE")
|
Underlying operating profit for the Group as a
percentage of assets employed, defined as working capital plus
tangible assets
|