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The 3 year chart looks nice for a revers of the curve, and is that a shallow double bottom too?
Today's announcement seems to confirm my thought that the compensation payment was significantly less than £10m It was a framework agreement and not a cancelled order. I suspect the get out clauses for the customer may have meant that they were not contractually bound to much if anything. Carclo were paid for the work they did but had also incurred expense in putting the production capacity in place to be able to fulfil it. They say they've "reallocated to enhance projects with existing strategic partners." I'm hoping that this will improve the margins on those contracts by newer more efficient equipment and also leave spare capacity for new business. I got the impression that the 'leading global OEM ' was an existing Carclo customer before the 'Framework Agreement' but on rereading December 2020 announcement I can't see that mentioned. Am I reading into things something that wasn't there or was there some other mention? If they were previously a customer of Carclo for other products I wonder if they remain so?
Splendid news!
"Carclo Plc (LSE: CAR) is pleased to announce a positive conclusion to commercial discussions with a leading global OEM related to the cancellation of a future supply contract referred to in the Group's announcement on 7 December 2022.
The original ten-year Framework Agreement, announced in December 2020, covered the supply of a range of components for use in laboratory-based PCR diagnostic systems and was projected to deliver incremental sales of between by £10m to £15m annually.
Following the completion of the design and engineering phase, a contraction in the end-market demand for COVID testing influenced the customer's decision to suspend progression into the production phase. Despite this, Carclo has largely fulfilled and received payment for its design and engineering phase.
The Group has now signed a mutually satisfactory settlement agreement with the customer concerning working capital and recompense for business disruption. While the specifics of this agreement remain confidential, it is expected to largely offset the Group's financial exposure arising from the early termination of the contract.
Carclo has also rapidly implemented a plan to repurpose the production capacity assigned to this project. The majority of the capital investments, inclusive of infrastructure such as buildings, clean rooms, and state-of-the-art equipment, have been reallocated to enhance projects with existing strategic partners.
Frank Doorenbosch, CEO, reflected on the situation: "The cancellation, though regrettable, has served to highlight Carclo's capacity for agility and resilience. We have responded promptly, optimising our asset utilisation whilst continuing to focus on our strategy on stability and balance sheet fortification. These actions demonstrate our unwavering commitment to delivering securing long-term shareholder value." "
This is taking a considerable amount of time to come to an agreement so I presume it must be a considerable amount that they are discussing .The contract was was for over 10 years so while it is purely a guess it could be in excess of £10 million .
These new high profile investors are probably able to access such payments and realise there is a generous payment coming .
Parker & William Black...Black has also taken a position in Red Rock Resources, now that SP has taken a good kick in recently, with many on that board predicting doom & gloom.
DYOR...but investors get into 'guts' before they chuck money in...
Looks like an interesting move doesn't it?
Armstrong Investments have been active too in a number of stocks accumulating decent holdings.
Hopefully some green shoots after a torrid time.
Spoke to a chum of mine in the city last night and if you are right we are in for fireworks.
He is a very successful investor and no doubt sees value in Carclo !!
Hi is chairman of Holborn Assets with offices around the world.
https://holbornassets.com/who-we-are/our-people/philip-parker/
Hopefully he is someone who wants to buy the company considering it’s stinking cheap !!!!
I too drew a blank.
Anyone know who Philip Parker is?
I tried Googling "Philip Parker INVESTMENT" a few possible but nothing obvious¬
At the moment up 18% today on further interests
https://www.lse.co.uk/rns/CAR/holdings-in-company-jevj84f6ojeqqo9.html
At the momnt p 18% today on further interests
...for doing a Mike Ashley here. Up 25% on share price so far is racing ahead of the ASC bounce.
Armstrong investments aka William Black added circa 1/2 million on the 10th.The same day as someone was offloading 700k or so.
I genuinely hope you are right mropz. Your comments are positive and balanced.
I will be over the moon if I am proved wrong and this is the launch pad for a recovery.
I don't agree.
The trading update seems to me to be balanced, if somewhat repetitive on the negative news that we've all been aware of since December last year, with positive 'green shoots' for the future.
I don't think you can be too hard on Nick and Phil for the growth strategy they chose, after all the world is a significantly different place than what it was 2 to 2 1/2 years ago when we were just starting to come out of lockdown, I certainly never foresaw inflation/interest rates etc. increasing at the speed they did.
If I've one issue, it's the way the cancelled contract was allowed to happen in the first place and the subsequent time spent trying to negotiate a suitable settlement which still hasn't been sorted, (but I don't know how these things work), hopefully Carclo will have learned from this experience and it will serve them well in the future.
Given the number of positives stated in the update i.e. "we are witnessing early positive indications of enhanced margins and cash generation as FY2023 concludes" & "We expect a steady recovery in operating margins in the near term as our new strategy starts to yield results" & "HSBC remain supportive and the Group successfully reached an agreement with them to reset the interest cover covenant for 31 March 2023" etc. in no way says to me that a rights issue is under consideration or will be needed.
Lastly, the statement, "and are engaged in ongoing discussions with the customer to reach a commercial agreement for this contract" is as clear an indication of compensation as you could ask for, I just wish they'd get on with it and then let us know how much they've negotiated, I'm working on the basis that the delay means that the BoD are going to ensure that fair compensation is paid.
Thanks boys….
“cash-intensive top-line growth strategy was unsustainable”. This update smells of a rights issue to strengthen the balance sheet in the future.
No talk of any compensation for the lost contract. Suggests we won’t get any.
Looks like you made the right call!
This is beginning to look very exciting. We have here that heady ****tail of value and growth. *Rubs hands in glee.* Someone has had a sell order at 14p for a very long time. But at 11.30am on Wednesday someone else put in a sizeable buy of perhaps 200,000 shares and more that filled the last of that sell order. We spiked above 14p for the first time this year.
It was the latest of a few lumpy buys that have been dropped in this month: https://finance.yahoo.com/quote/CAR.L/history/
If we can close the week and then the month at or above 14, then it could be very propitious for the technical picture of this share. A short squeeze could well be under way. It’s early days in the process - this is a multiyear play based on Carclo’s presence in some key growth markets - but I see a volcano rumbling here. This share is on a 4.5x earnings multiple for goodness’ sake!
Some interesting news to digest:
https://www.marketwatch.com/press-release/led-secondary-optic-market-booming-with-rising-demands-and-massive-opportunities-2023---2028-2023-02-22
(This one doesn’t mention Carclo by name but it is a player in the double-shot moulding market.)
https://www.marketwatch.com/press-release/2-shot-injection-molding-market-industry-analysis-database-for-period-from-2023-2028-2023-02-12
GLA and DYOR!
Funny you should mention chinese made drones cos i'm sure i heard summat on R4 recently about unease in the UK about using chinese sourced drones...
h**ps://www.express.co.uk/news/uk/1734445/police-news-chinese-drones-surveillance-suella-braverman-weather-balloon-shot-down
I agree testudo. Carclo operate in a growing market, and with debt and pension payments well covered by current free cash flow all that growth will fall into the laps of shareholders. Settlement relating to the cancelled contract should also improve sentiment. GLA
Share price is moving north on very small volume so I presume we are due an answer on the compensation package, who knows it might surprise us and wipe out a large chunk of their debt .
Hi all. New here. Long-time lurker, first-time poster. This is an exciting juncture for Carclo and several other businesses I’ve been watching that have taken a big hit in recent times (PHE and TGP on the LSE and NANO on the TSX). But it’s Carclo I find most compelling of a very interesting bunch.
The share hit a high (a classic double top) in January 2013 and went on a dramatic slide. When that downtrend was broken, in December 2014 and at about 90p, it went on to double over the next 30 months to about 180p, before resuming its downtrend. That slide that commenced in June 2017 has endured five-and-a-half years. It hit peaks in May and November 2021 and September 2022, without ever breaking out.
Yet next week, just by dint of time, (barring a calamity in price today) the share looks like opening above the trendline on the weekly chart for the first time across those 67 months. That is quite important, and the share - which has provably traded very technically - looks like it is making a bit of a move today.
It would take nothing to double in price (to where I initially invested with my SIPP and family funds) and that is why I have bought again today.
Still more intriguingly, though, are the Fibonacci levels in this recent downtrend. A retracement to the 50% Fib would take it to 91p, tantalisingly close to the several equal highs at 94p, and to the ICT fair-value gap to the swing low at 101p.
I consider these modest targets. In the longer term, the swing low at 316p should also be achievable.
The reason I think this is that there could be a tremendous amount of growth around the corner for Carclo with just a little bit of a pivot in what it does. Carclo has been active in the aerospace sector for 100 years. Its specialism there is, inter alia, applying technical plastics to electronic components and aerofoil blading.
Now consider this. The war in Ukraine has demonstrated one thing more than any other: the value of drones. Small, cheap drones and thousands of them. Currently these are sourced from China, which is hardly a reliable partner in a major defence-procurement exercise.
I would guess that, through a tweak of its existing capabilities, Carclo could quickly be in a position to deliver cheaply mass-produced, British-made drones to the MoD and other NATO partners, whether directly or as commissioned by a major defence contractor.
I am a humble retail investor with no inside knowledge whatsoever, but if management are not actively exploring this potential already, then they are letting shareholders down.
If they are, however, then the possibilities for Carclo are tremendous, and a 2000+ percent increase in the market cap (to c£200m) could be eminently achievable. In that event, the current fears over gearing and the pension deficit would become a negligible sideshow.
This is, to my mind, one of the most undervalued shares on the market.
BUT: DYOR and GLA.
Cheers,
?Testudo
Fantastic risk/reward here IMO. Have fully loaded back to level when it was sub 6p a few years back. Top line growing, experienced management in place, low cyclicality sales with large medtechs… once margins normalise at target 8-9%, all of the residual profit post pension/interest payments will fall in shareholders laps.. GLA :)