At the end of August, Carclo (CAR) was forced to pull its 1.95p final dividend after its distributable reserves were wiped out by an increase in the pension deficit, itself caused by a sharp contraction in gilt yields. Although long-dated UK bond yields have recovered to a significant degree, management is still taking a prudent stance on the possible reinstatement of payments. Nevertheless, the market responded positively to a strengthening trading performance at the half-year mark, which saw underlying profits rise by 19 per cent to £4.85m.
Much of the improvement is down to the momentum established at the technical plastics unit, where operating profits increased by 37 per cent in the period under review. Admittedly, as the division derives the bulk of its revenues outside the UK, the top line has benefited from sterling's depreciation since the EU referendum. But looking ahead, there's certainly potential for organic revenue growth given the expansion of the group's facility in Arizona, together with projects to drive up capacity in Asian markets.
The pound's fall also means the group's foreign-denominated borrowings are bigger once translated. And the surge in retirement benefit obligations, in net terms up from £18.9m to £42.6m, has reduced the equity base, leaving the group more highly levered.
Peel Hunt predicts cash profits of £17.3m for the March 2017 year-end, leading to EPS of 11.7p, rising to £19.6m and 13.3p in 2018 (from £14m and 10.1p in FY2016).
| CARCLO (CAR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 117p | MARKET VALUE: | £85.4m | |
| TOUCH: | 117p-119p | 12-MONTH HIGH: | 169p | LOW: 110p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 27 | |
| NET ASSET VALUE: | 23p* | NET DEBT: | 161% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 57.2 | 4.1 | 4.5 | 0.9 |
| 2016 | 63.3 | 4.8 | 5.6 | nil |
| % change | +11 | +18 | +24 | - |
Ex-div: Payment: *Includes intangible assets of £21.7m, or 30p a share | ||||
