Underperformance of Technical Plastics division leads to disappointing results for listed manufacturer
Half-year trading results at listed plastic components manufacturer Carclo have been below expectations, largely due to the underperformance of its Technical Plastics division.
The Wakefield firm this morning announced its six month results to 30 September, adding: “This, together with production inefficiencies incurred on new production programmes in the LED division, resulted in the first half underlying operating profit being lower year on year.”
Its revenues for the period dropped to £71.4m, down from £72.1m for the same period last year. Pre-tax profits dropped to £3.3m from £4.5m. Net debt rose to £35.9m at the half year (31 March 2018: £31.5m), which Carclo said reflected the timing of capital investment and the payment profile of ongoing design, development and tooling programmes.
In its Technical Plastics division, three new medical programmes were delayed by customers in the period. Carclo added: “But all entered production successfully towards the end of the first half of the year and this, together with planned new tooling programmes, supports the expected stronger second half performance.”
Carclo said that in its LED Technologies division, Wipac continued to be successful in winning new programmes, including nomination for two mid-volume electric vehicles, leading to a healthy level of design and development contract revenues. It added: “Production demand has been solid. All of the current year’s planned new vehicle production programmes launched in the first half and this resulted in higher than anticipated manufacturing costs being incurred. Margins are expected to improve in the second half as production accelerates and initial start-up inefficiencies are eliminated.”
Despite the results, the firm was still optimistic about the full year. Carclo said: “The Board anticipates full year trading will be in line with its expectations and the Group remains on track to grow substantially over the medium term.
Chris Malley, chief executive, said: “Operating margins in Technical Plastics are expected to improve in the second half as volumes in the new contracts ramp up and commercial and operational improvements are delivered. We have implemented a number of price increases, efficiency improvements and cost savings across the division, the benefit of which will positively impact margins in the second half of the year and beyond.
“In LED Technologies, Wipac’s success in securing new customer programmes, including in the strategically important mid volume sector, together with the new vehicle production programme launches has ensured we have a healthy production pipeline in this division for the medium term. The rate of growth has led to an increase in funding requirements and some short term operational growing pains which are being addressed through increased manufacturing capacity and strengthening of the management team.
“Technical Plastics and LED Technologies are set to have a stronger second half performance based on the full effect of the new programmes, planned customer timings on projects and the expected improvement in margins. The Board anticipates that the Group will trade in line with its expectations for the full year, and that it remains on track to grow substantially over the medium term.”
In January, the firm issued a profit warning after it experienced contract delays, as a result, shares in the firm plummeted 46% in its early morning trading.
