Carclo plc

("Carclo" or "the group")

Half year results for the six months ended 30 September 2011

Carclo plc, the technology led plastics group, today announces a solid first half performance in line with the board's expectations.

Highlights

·       Period of continuing strategic development and consolidation

·       Underlying operating profit of £2.3 million (2010 - £2.3 million)

·       Technical Plastics maintained strong revenue streams of £29.2 million (2010 - £29.1 million) helped by continued growth in its medical business.  Reflecting high tooling and design and development revenues in last year's first half, underlying operating profits reduced to £2.0 million (2010 - £2.6 million). The second half of the year is expected to be stronger than both the first half of this year and the second half of the prior year

·       Precision Products benefited from the growth in LED based supercar lighting business, with new programme wins and production build on existing programmes helping underlying operating profits to increase to £1.1 million (2010 - £0.4 million)

·       Precision Products has now finalised the terms for the withdrawal from the volume automotive communication business and a provision of £1.2 million has been made largely in respect of the non-cash asset impairment

·       Conductive Inkjet Technology ("CIT") has made excellent progress during the first half of this year. Yields are good and are improving further as we refine our procedures

·       Carclo Diagnostic Solutions ("CDS") has made significant technical progress

·       Strong cash generation from operations of £4.9 million (2010 - £1.5 million)

·       The bank refinancing exercise has now been completed with new committed facilities in place until November 2015

·       Interim dividend increased to 0.75 pence per share (2010 - 0.7 pence)

Commenting on the results, Christopher Ross, chairman, said -

"Our businesses are performing well. Whilst we are mindful of the uncertain world economic environment, we expect further progress in our second half and are on track to deliver good growth for the year as a whole, and recent contract awards will underpin further growth next year.

Progress at CIT is exciting, with the touch screen application set to deliver a transformational contribution to the group; CIT also has many other opportunities for growth and the board is focussed on delivering the value of this growth to shareholders. The CDS investment is progressing well and has significant long term potential.

The balance sheet is strong and our financing is secure.

The group remains very well placed."

Enquiries

A presentation for analysts will be held at 9.30 a.m. on 22 November 2011 at the offices of Weber Shandwick Financial, Fox Court, 14 Gray's Inn Road, London WC1X 8WS.

Notes to editors

About Carclo

Carclo plc is a technology led plastics group. It is a public company whose shares are quoted on the London Stock Exchange.

Two thirds of sales are derived from the supply of fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products. This business, Carclo Technical Plastics, operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

A third of sales are derived from the supply of specialised precision products to the premium automotive and aerospace industries. Carclo is a leader in the development of high power LED lighting for supercars.

Carclo's strategy is to develop new technologies and products to drive future growth. Its investment in Conductive Inkjet Technology is at the heart of the newly emerging market for very low cost printed electronics.

Forward looking statements

Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events to differ materially from any expected future events or results referred to in these forward looking statements.

Overview

Carclo has traded in line with the board's expectations for the first half of the current financial year and the group is positioned for a much more profitable second half performance. Technical Plastics remains in a strong position developing its niche in the medical diagnostics and LED optics sectors and has increased its global capacity with the expansion of its Indian business. In Precision Products a number of new supercar lighting projects have been won which will utilise our expertise in state of the art LED optics to generate growth through to the year end and beyond. CIT continues to make significant progress, especially on the Fine Line Technology project and yields are good and are improving further as we refine our procedures.

Underlying operating profits of £2.3 million were in line with the prior year with a stronger performance at Wipac and in our Aerospace businesses offsetting an anticipated reduction in operating profits in Technical Plastics.

The group generated profit before tax in the six months to 30 September 2011 of £1.3 million (2010 - £2.5 million), after the recognition of an impairment charge of £1.2 million in respect of our planned exit from the Ford volume automotive communication business. Consequently, basic earnings per ordinary share decreased by 44.8% to 1.6 pence, although underlying earnings per share increased to 3.4 pence (2010 - 3.2 pence). Operating cash generation was strong, assisted by efficient working capital management.

Financial position

Net debt at 30 September 2011 was £19.0 million, slightly up on the group's net debt a year ago (2010 - £17.9 million) and a small improvement on the year end net debt at 31 March 2011 (£19.1 million). This represents gearing on assets (excluding the net pension deficit) of 31.3% (2010 - 30.1%). Cash generated from operations was £4.9 million (2010 - £1.5 million), boosted by a £1.0 million improvement in working capital (2010 - investment of £2.1 million).

Capital expenditure in the six months to 30 September 2011 amounted to £1.9 million (2010 - £2.9 million). Technical moulding facilities in the UK have been upgraded to further increase and improve manufacturing capacity for optical and medical products and investment has commenced in the Czech Republic to install clean room medical production facilities. Investment in new technologies has continued at a high level with £1.0 million (2010 - £0.8 million) invested in development costs at CIT and CDS.

As at 30 September 2011 the total drawings on the group's £20.0 million medium term loan facilities were £19.0 million. These committed facilities have now been renewed with the group's existing banks for a further four years and these new facilities run until November 2015. The facilities are competitively priced in the current market and the covenant terms remain similar to the previous agreement. The group also has overdraft facilities totalling £11.6 million.

Since the start of the current financial year, equity markets have fallen which has resulted in the group's retirement benefit pension scheme deficit, on an IAS 19 basis, increasing from £9.1 million at 31 March 2011 to £21.2 million at 30 September 2011.

The board has declared an increased interim dividend of 0.75 per ordinary share. The dividend will be paid on 10 April 2012 to shareholders on the register on 2 March 2012. The shares will trade ex-dividend from 29 February 2012.

Operating review

Technical Plastics

Carclo Technical Plastics had sales of £29.2 million, up 0.2% on the same period last year. Operating profits, before rationalisation costs, reduced by £0.5 million to £2.0 million. Last year's first half benefited from high tooling and design and development revenues which are more evenly spread this year. As a consequence the second half in this division is expected to be stronger than last year.

Product sales continue to grow, led by our US medical diagnostic business. Demand from developing economies, especially China, is driving significant growth in customers serving the laboratory blood testing market. Our LED optics business continues to be the division's fastest growing segment with an increased volume of 17.2% over the corresponding period last year.

We continue to invest to support the growth of our medical and optical businesses. The upgrading of the facility in Scotland is now complete and enables the site to meet the stringent requirements for the clean environment moulding of optical components and provides additional capacity for new medical business. In the Czech Republic, state-of-the-art integrated clean room modules are being installed for medical manufacturing, and in China the facility is being modernised to meet customer requirements as a medical moulding facility.

Our newest facility in India has been very successful and we have recently been awarded a multi-million pound contract. This will require a further expansion of the manufacturing facility in India, the third such expansion in just 2 years. The capital cost of this expansion will fall in 2012 and the significantly increased sales will benefit our 2013/14 financial year.

Across the division, schedules remain generally firm. In recent weeks we have seen some customers reducing schedules, but in each case there has been a specific cause for the weakness - for example, we produce micro-moulded filters which are used in disk drives, and that industry is at a virtual halt as a result of the Thai floods. Provided these areas of weakness do not broaden into a generalised downturn, then we expect the division to deliver a strong second half and show year on year growth in profitability.

Precision Products

The Precision Products division generated sales of £18.3 million (2010 - £14.8 million), an increase of 23.6%. Underlying operating profits increased significantly on the comparable half year at £1.1 million (2010 - £0.4 million). The improvement in profitability reflects the growth of Wipac's LED based supercar lighting business. Wipac has continued to win new programmes and these will generate significant design, development and tooling revenues over the next two years.

Wipac has now finalised the terms for the withdrawal from automotive antennas and cables. This withdrawal will be complete by the year end and we have made a provision of £1.2 million to cover the predominantly non-cash impairment charge on the redundant assets.

The aerospace businesses generated good growth above the prior year with profits continuing to improve through a combination of sales mix and good cost control. These businesses continue to achieve strong operating margins and cash generation.

We expect the good performance of Precision Products to continue in the second half of the financial year

Conductive Inkjet Technology ("CIT")

CIT continues to be focussed on the Fine Line Technology ("FLT") for touch screen applications and progress has been excellent. Each week now, we use a small proportion of our pilot line capacity to simulate full-scale manufacture by producing in excess of 1 mile of circuitised film (touch sensors in reel to reel format), which is the equivalent of 150,000 smartphone screens. Yields are good and are improving further as we refine our procedures.

The second full scale production line will be commissioned by a third party in January 2012. Further third party owned production lines are now in final stages of planning and these are expected to be operational before mid-2012. Together these lines will provide a six-fold increase on the capacity of the Cambridge pilot line. The scale of the capacity increases underway is clear evidence of the size of the market and the commitment of our commercial partners.

We have provided production samples to the leading mobile device manufacturers for smartphones and tablets and are experiencing a significant ramp up in this sampling process. We are now providing samples of touch screens for devices that are in current production. Customer validation and accelerated life testing will be completed soon. The first production shipment will be determined by the customers' supply chain management and it is difficult to gauge exact timing. We are hopeful that this will take place in the fourth quarter of the current financial year, and as this event will trigger the $10.0 million prepayment from our partner, we will make an announcement on the Regulatory News Service.

Given that volume production of circuitised touch screens is expected to start within a few weeks either side of our financial year end, and the gradient of the ramp-up is not yet known, it is very difficult to forecast this year's sales and contribution from CIT. Excluding circuitised touch screens, we have orders in hand of approximately £0.5 million in our second half, which is a significant uplift on the first half, and we may, in addition, achieve some revenues from touch screens. Although full production ramp up may be a few weeks later than anticipated, we are very confident, on the basis of the increased capacity now committed, in the prospects for next year's sales.

Our resources remain almost exclusively focussed on the touch screen application, but we continue to make good technical and commercial progress in printed electronics, where we are now starting to see the benefit of our InkjetFlex rapid prototyping service delivering high volume opportunities for 2012. Our OLED lighting and organic photovoltaics projects continue to make good progress and we expect to see the first commercial opportunities develop within the next financial year. As the technical demands of the touch screen development level out, we plan to increase our commercial focus in these promising market areas.

Carclo Diagnostic Solutions ("CDS")

Carclo Diagnostic Solutions was formed to retain and develop ownership of the patents related to the hardware developments made by Carclo in support of Platform Diagnostics Limited ("PDL"). CDS also has a controlling interest in PDL's intellectual property rights. Significant technical progress has been made in the development of this technology package. Three distinctive platforms are under development. These are a simple test aimed at blood group type testing, a full quantitative assay measuring blood properties - coagulation and D-dimer, and a high-end device in partnership with EKF Diagnostics plc based on their innovative kidney function markers. We will shortly be releasing more information on these developments and seeking to extend our commercial partnerships.

Risks and uncertainties

In the annual report to shareholders in June 2011 we provided a detailed review of the risks faced by the group and how these risks are managed. We continue to face, and proactively manage, the risks and uncertainties in our business and there has been no significant change in the risks faced by the group.

Outlook

Our businesses are performing well. Whilst we are mindful of the uncertain world economic environment, we expect further progress in our second half and are on track to deliver good growth for the year as a whole, and recent contract awards will underpin further growth next year.

Progress at CIT is exciting, with the touch screen application set to deliver a transformational contribution to the group; CIT also has many other opportunities for growth and the board is focussed on delivering the value of this growth to shareholders. The CDS investment is progressing well and has significant long term potential.

The balance sheet is strong and our financing is secure.

The group remains very well placed.

Christopher Ross

Chairman

22 November 2011

Condensed consolidated income statement 

Condensed consolidated statement of comprehensive income

Condensed consolidated statement of financial position

Condensed consolidated statement of changes in equity

Condensed consolidated statement of cash flows

1.         Basis of preparation

The condensed consolidated half year report for Carclo plc ("Carclo" or "the group") for the six months ended 30 September 2011 has been prepared on the basis of the accounting policies set out in the audited accounts for the year ended 31 March 2011 and in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority and the requirements of IAS 34 "Interim Financial Reporting" as adopted by the EU.

The financial information is unaudited, but has been reviewed by the auditors and their report to the company is set out on page 20.

The half year report does not constitute financial statements and does not include all of the information and disclosures required for full annual statements. It should be read in conjunction with the annual report and financial statements for the year ended 31 March 2011 which is available either on request from the company's registered office, Springstone House, PO Box 88, 27 Dewsbury Road, Ossett, WF5 9WS, or can be downloaded from the corporate website - www.carclo-plc.com. 

The comparative figures for the financial year ended 31 March 2011 are not the company's statutory accounts for that financial year.  Those accounts have been reported on by the company's auditors and delivered to the Registrar of Companies.  The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under Section 498 (2) of the Companies Act 2006.

The half year report was approved by the board of directors on 22 November 2011 and is being sent to shareholders on

2 December 2011.  Copies are available from the company's registered office and can also be downloaded from the corporate website. 

The group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). 

2.         Accounting policies

The accounting policies, methods of computation and presentation applied by the group in this condensed consolidated half year report are the same as those applied by the group in its annual report and financial statements for the year ended 31 March 2011.

There have been no new standards, amendments or interpretations come into force for Carclo during the current financial year.

3.         Accounting estimates

The preparation of the half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. In preparing these half year financial statements, the significant judgements made by management in applying the group's accounting policies and the key source of estimation uncertainty were the same as those applied to the audited consolidated financial statements as at, and for the year ended, 31 March 2011.

4.         Segment reporting

At 30 September 2011, the group is organised into three, separately managed, business segments - Technical Plastics, Precision Products and Conductive Inkjet Technology.  These are the segments for which summarised management information is presented to the group's chief operating decision maker (comprising the main board and general executive committee).

The Technical Plastics segment supplies fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products.  This business operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

The Precision Products segment supplies systems to the automotive and aerospace industries and is a leader in the development of high power LED lighting for supercars.

The Conductive Inkjet Technology segment undertakes applied research into the digital printing of conductive metals onto plastic substrates.

Transfer pricing between business segments is set on an arm's length basis. Segmental revenues and results include transfers between business segments. Those transfers are eliminated on consolidation.

The segment results for the six months ended 30 September 2011 were as follows -

The segment results for the six months ended 30 September 2010 were as follows -