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Margin boost at Carclo

Carclo's balance sheet sheet has improved and the product range has widened since half-year results
June 7, 2017

Research analysts raised their target prices for Carclo (CAR) in unison on the publication of results for the year to March 2017, after the technical plastics group posted its fourth consecutive year of double-digit revenue growth. Granted, this year's numbers were partly helped by the fall in sterling - constant currency revenues were up a tenth*. But a record £87.8m intake in the core technical plastics division shows the group is adept at betting on the right niche products.

IC TIP: Buy at 152p

This is critical, as Carclo's clients in the clinical products, electronics and car manufacturing sectors have a keen nose for costs. It also explains this year's diversification into electric vehicles, LED lighting and even artificial hearts, through the twin acquisitions of FLTC and Precision Tool and Die.

Elsewhere, the ugly spike in the pension deficit that occurred after the post-referendum contraction in gilt yields has unwound enough for a dividend to be paid. However, as Carclo's pension scheme remains highly sensitive to corporate bond yields, management has taken the prudent step of delaying shareholder distributions until liabilities can be contained to a sustainable level.

Analysts at Peel Hunt expect adjusted pre-tax profits of £13m and EPS of 13.3p in the year to March 2018, up from £10.7m and EPS of 11.7p in 2017.

*7 June 2017: The original version of the article referred to the underlying profit margin. This has been changed.

CARCLO (CAR)

ORD PRICE:152pMARKET VALUE:£111m
TOUCH:146-154p12-MONTH HIGH:169pLOW: 110p
DIVIDEND YIELD:nilPE RATIO:13
NET ASSET VALUE:61p*NET DEBT:59%

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201386.53.24.42.55
201497.34.85.52.65
2015108-24.5-33.22.75
20161193.93.30.90
201713810.511.5nil
% change+16+169+248-100

Ex-div: na

Payment: na

*Includes intangible assets of £26.3m, or 36p a share.