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Contract delays to affect H218 performance

Update | Technology | 22 Jan 2018

Carclo has recently announced that its FY18 performance is likely to be lower than previously expected. This is because of contract delays affecting both the Technical Plastics (CTP) and LED Technologies (LED) divisions as well as a delay to the anticipated ramp-up in a non-medical project for CTP, which management expected would benefit H218. We reduce our FY18 and FY19 estimates, introduce FY20 estimates and revise our indicative valuation range from 177-187p/share to 145-154p/share.


Technology-LED plastics

Outlook | Technology | 03 Oct 2017

Carclo is focusing investment on its two larger established businesses – Technical Plastics (CTP) and LED Technologies (LED). Here a differentiated offer and long-term relationships with customers provide good earnings visibility and higher probability of a sustainable return. This strategy delivered strong revenue and profits growth during FY17. Despite a temporary setback at CTP during H118, which was balanced by outperformance at LED, growth appears set to continue, underpinned by contracts with blue-chip customers.


Trading well but bond yields affecting dividend

Update | Technology | 01 Sep 2016

The two divisions driving growth o Technical Plastics and LED Technologies o are both performing well and in line with management expectations, so we leave our earnings estimates unchanged. However, low corporate bond rates have resulted in a significant increase in the pension deficit, meaning that management may not be able to use the profit growth to fund Carclo's progressive dividend policy. As the dividend suspension does not reflect any issues with profits growth, we reiterate our earnings estimates, which look for 15% adjusted PBT growth in FY17.


Looking to wider horizons

Update | Technology | 22 Jun 2016

The FY16 results showed that the core businesses of Technical Plastics and LED Technologies are continuing to grow revenues and expand margins. Management talks with enthusiasm about driving Technical Plastics into exciting new production technologies, and in LED Technologies the win of a medium volume sports car programme could lead to a significant increase in revenues and profits in the medium term. However, in our view, the relative earnings multiples still do not fully reflect the quality and potential of these businesses.


Recovery postponed

Update | Technology | 23 Jan 2019

Carclo has announced that the issues associated with initiating multiple low-volume lighting programmes in parallel that adversely affected H119 have continued throughout Q319. At the interim stage management believed that these issues would be resolved by the end of Q3, supporting a second half recovery, but now expects that second half profit levels will be similar to the first half. We revise our estimates, cutting EPS by 37% in both FY19 and FY20.


FY19 likely to be a game of two halves

Update | Technology | 16 Nov 2018

As flagged in the October trading update, Carclo’s H119 performance was adversely affected by delays in commencing three medical programmes. Moreover, all of the new vehicle production programmes planned for FY19, with their attendant start-up inefficiencies, started during the first six months. While these events held back first-half performance, they augur well for a second-half recovery. We therefore leave our estimates broadly unchanged. The reduction in our indicative valuation from144-153p to 125-133p reflects a 24% drop in the prospective P/E multiple for automotive peers since June, rather than a change in Carclo’s investment proposition.


FY19 expectations unchanged despite slow first half

Flash note | Technology | 12 Oct 2018

Carclo has announced that three new medical programmes were delayed by customers during H119 and that while these programmes had all entered production successfully by the end of the period, the delays resulted in H119 underperformance for the Technical Plastics division (CTP). Although the LED division performed in line with management’s expectations and the smaller Aerospace division beat expectations, H119 trading for the group as a whole was below management’s expectations. Since management expects to correct the first half shortfall in the second half, we leave our estimates unchanged.


Positioned for recovery

Update | Technology | 05 Jun 2018

Delays in the placement of certain customer project awards and weaknesses in operational performance, particularly in the Technical Plastics division, meant that Carclo did not meet management's original FY18 profit targets, although the performance was in line with revised guidance. Most of the delayed contracts have now been placed and management has taken steps to improve margins. Demand from medical customers for precision plastic moulding and for LED lighting in luxury cars, supercars and mid-volume models remains good so we leave our estimates and valuation range broadly unchanged.


Positioned for H2 recovery

Update | Technology | 23 Nov 2017

As flagged at the AGM in September, performance at Carclo’s Technical Plastics division (CTP) was held back by key new programmes slipping from H118 to H218 as well as some operational issues, which have been largely resolved. This was balanced by outperformance in the LED Technologies division (LED), where the level of design, development and tooling activity was ahead of expectations. Management anticipates that full year trading will be in line with expectations, so we leave our estimates broadly unchanged.


Strong growth in profits as expected

Update | Technology | 15 Jun 2017

Carclo has refocused investment in its established businesses (Technical Plastics and LED Technologies), where a differentiated offer and long-term relationships with customers provide good earnings visibility and higher probability of a sustainable return. This strategy delivered strong revenue and profits growth during FY17. This growth appears set to continue, underpinned by contracts with blue-chip customers. We increase our estimates of revenues attributable to Technical Plastics while slightly reducing PBT and EPS to reflect higher IAS 19 finance charges. We raise our indicative valuation to 181-191p (previously 153-162p).


All going to plan

Update | Technology | 13 Apr 2017

Both of Carclo's larger divisions, Technical Plastics (TP) and LED Technologies, grew in line with management expectations during FY17, while the smaller Aerospace division continues to experience stable trading conditions. FY18 has started well with the announcement of a second mid-volume project for Wipac. This new award underscores the relevance of the recent FLTC acquisition, which substantially enhances Wipac's ability to progress multiple projects simultaneously. We leave our estimates unchanged but slightly increase our indicative sum of the parts valuation.


Continued progress since interims

Flash note | Technology | 01 Feb 2017

Carclo has announced that H217 trading remains strong and the outlook for the full year is in line with its expectations. Growth is being driven by the two larger divisions, Technical Plastics (TP) and LED Technologies, while the Aerospace division is experiencing stable trading conditions. We leave our estimates unchanged, but note potential currency upside should foreign exchange rates remain at current levels for the remainder of FY17.