Manufacturer issues profit warning after contract delays
Manufacturer Carclo has this morning issued a profit warning, with its performance in the current financial year expected to be “significantly lower than previously planned.”
The Ossett-based firm, a global supplier of technical plastics products, had said in November that it was expecting a stronger second half performance across the Group but today said that this is not now expected to be achieved.
As a result, shares in the firm plummeted 46% in early morning trading.
Carclo said: “Accordingly, the Board now expects the Group’s performance for the current financial year to be significantly lower than previously planned.”
It said that while their operational issues is its Technical Plastics division had been addressed, there had been an unexpected delay in the awarding of two large tooling and automation contracts.
The firm added: “In addition, a large and long standing non-medical customer which had been indicating a strong second half for our moulded components has not yet increased its orders. The impact of these factors is such that the division’s profit for the current year is now expected to be significantly below expectations.”
Within LED Technologies, the Group’s LED super car lighting business has performed as anticipated and new product launches have continued to be made on time.
However, while the Wipac business has continued to operate well, delays in the award of three new contracts are expected to materially reduce the division’s profit for the current year. It is still anticipated that Wipac will be successful in winning a number of these programmes despite the uncertainty on timing.
Carclo said: “The Board expects the Group’s profits for the year ending 31st March 2018 to be significantly lower than its previous expectations. In addition, as a consequence of some of these delayed projects and lower customer orders, the Board has now reduced its profit expectations for the 2018/19 financial year albeit these revised expectations will still represent healthy year on year growth.”
The Board said it recognised there is an ongoing reliance upon winning new tooling and automation contracts to drive profitability in Technical Plastics.
They added: “However it is also cognisant that such reliance must be offset by higher and more sustainable underlying operating margins from existing business and therefore targeting improved margins has been an ongoing initiative. In view of the disappointing reduction in anticipated profitability for the current year, a more fundamental and urgent review of operating efficiencies and margins at this division is to be undertaken.”
The Group’s financing remains healthy and it continues to operate well within its banking covenants.
Carclo added: “While this is a setback, the Board believes that the medium term outlook for the Group remains positive. The LED Technologies business is still expected to grow significantly, moving forwards as the previously awarded mid-volume programmes commence production from 2019, and the new medical programmes won in Technical Plastics are expected to underpin good growth in this division.”
Meanwhile, the Group’s finance director, Robert Brooksbank, is to leave Carclo after 14 years to pursue other career and business opportunities. The Board is to recruit a new finance director and in the meantime Richard Ottaway, Group financial controller and company secretary, will act as the interim chief financial officer from 1 April 2018.
In addition, Michael Derbyshire will retire from the Board at the Group’s Annual General Meeting in July 2018 after nearly six years as chairman and over 12 years as a non-executive director.
Mark Rollins, who joined the Board as non-executive director on 1 January 2018, will become chairman.
