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Laura2022 definitely isn't a ramper. If you look at past comments, they're generally well thought out, based on facts imparted in RNS's etc, non-provocative and usually make good sense (unlike others posting on here).
These past comments/recommendations demonstrate a good understanding of potential upcoming opportunities and value investing and the success they can deliver.
Taverham, I appreciate that most think of Sondrel being in its 'start up phase' because it went Plc in October 2022, however if you read the RNS from 21 October 2022 it states:
"Sondrel has grown over a period of 20 years and its previous designs have been included in well-known products such as Apple iPhone, Sony PlayStation, Meta's Oculus Quest virtual reality headset, Samsung, Google and Sony smartphones, JVC prosumer camcorders and Tesla and Mercedes-Benz cars."
Whatever Sondrel is, it isn't a start up and I agree with Trotsky that the company "failed to raise sufficient capital at its IPO" - quite a rookie mistake for a company that had already been around for some time.
@ asartara, you're kidding right, 4 institutional investors hold 60% of the shares (listed on CAB's website as significant shareholders), including BlackRock - easily available information so I'm not quite sure where you're getting your's from.
@SmoothOperater, I agree, same here - once they've achieved their expansion aims/ambitions, they can't keep making £100 ++ million in profits and not distribute a %age to the shareholders via dividends.
I believe in time, this will be a very good income share.
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.
But there was no need for them to do so, the sp had already stabilised yesterday following the RNS on Wednesday.
I'm not sure where caital losses would come into play given that they would have to sell shares to crystallise such (hypothetical) losses and I can't see them buying with one hand and selling with the other.
I'm sure they'll have the opportunity of share options in the future as befits their positions, however, just like everyone else, I believe, they'd like to see a profit on todays investment and are in the best position to know that's possible/probable.
Perhaps, the fact that Carclo's Enterprise Value (theoretical takeover price) is (according to Yahoo Finance) £47 million and (according to the recent TU) they have a total equity attributable to the equity holders of the company of nearly £30 million, they believe that the company is currently significantly undervalued.
This is undoubtedly a view shared by William Black/Armstrong Investments Limited who've recently increased their holdings in the company by 650,000 shares - confirmed in the after market (6.29 pm) TR1 on Tuesday that was largely ignored because of the RNS on Wednesday.
I totally agree Beza, a good point - if I'd just taken over at the helm, I'd have done exactly the same so that, not only did everyone know these things didn't 'happen on my watch', it also creates a watershed/datum for a fresh start.
Now looking to the future, If you take into account that the two main people have just purchased 500,000 shares today between them, that speaks volumes, talk about being 'in the know' and getting in at the right time.
Has anyone any idea as to what the likely amount of "an appropriate commercial settlement" would be in an instance like this?
10 million over 10 years = 100 million ----- is 8% - 10% 'appropriate' if so then that's as good as the MC.
Plus we've had tooling for PCR components paid for that we should be able to sell to other companies because whatever happens covid etc. isn't going away, probably explains why there are a good number of decent buys following the initial (standard) reaction to the RNS
What would you rather have : someone like PW at ARB telling you in April that the outlook for 2022 and beyond is very positive etc. only for 6 months later ARB's share price to be down by 90 % due to events that could/should have been potentially predictable for them as a risk factor or someone who presents a realistic and factual report on the financial/trading position of the company both now and into the forseeable future?
At least that way you've got a good realistic idea of what you're invested/potentially investing in.
The MM's had a field day on opening this morning because they know how a proportion of investors interpret factual/accurate but also to a degree, news leaning towards the positve side of things, pessimistically.
The information is just factual and presented that way, no mention of any issues with China (as previously speculated), given the current global conditions, I would say Carclo are doing a good job of 'holding their own'.
I particularly like the 23% increase in revenue (bodes well for the future) and the "Total equity attributable to the equity holders of the company" of nearly 30 million when the current market capitalisation is only 11.6 million.
(Contd):
'to achieve the best results'.
In other words the pension trustees will always work with the company on a long term plan of contribution repair that is fair and appropriate to both sides and more importantly allows the company to grow and prosper because that in turn secures the company's pension contributions.
The profits of the company have nothing to do with the total annual pension pay out as this comes from the (legally separate) pension fund. The pension fund will naturally rise and fall in value (all pension funds do) depending on investment strategy and market conditions but as long as it has a sizeable base (in this case nearly £156 million @ March 22) then it will cope with these rises and falls as it will have done in the past.
What also needs to be appreciated is that the assumptions made by the actuary on valuation are very cautious and therefore whilst the pension fund as it stands may be sufficient (in the real world) to meet its liabilities both now and in the future the actuarial valuation will always portray a 'worst case' scenario.
Going forward, one of the options available to the trustees (which has proven very popular over recent years) is to gradually secure like for like annuities with an insurance company (for an appropriate premium of course) which will proportionately reduce the liability on the scheme and therefore reduce the disparity between the 'real life' liability and the actuarial valuation liability.
As usual in these circumstances a combination of reasons:
General market conditions are far from ideal at the moment, I see the current situation/share price as similar to March 20 at the onset of covid when the share price fell to roughly 5p and subsequently reached a 14 x high of 70p in May 21. The big difference is that Carclo are in a far better and stronger position than they were in March 20 and judging by the information we do get, are growing and expanding.
Individual share prices 'ebb and flow' (especially when there is a lack of any real news). It's been said many times before that communication to shareholders and the market isn't one of the Carclo's strong points and whilst I agree that the turnaround of the company had to take precedence, now that this has been achieved and it is on an upward trajectory, it would be greatly helpful (and also nice to know) if the company could share some of this positive news with us. I think one of the problems is that Carclo is a well established company that'll be celabrating its centenary in 2 years and past tradition (imo) seems to dictate a modest and even cautious approach to rns communications.
Shareholders in particular and the market in general start to lose interest (because of the lack of real news) and consequently the share price starts to drift, this triggers shareholder's 'stop loss positions' which then compounds the situation making it worse.
Other commentators who post on sites like this and advfn regarding the pension situation who either don't have the full facts or haven't done sufficient research before posting and therefore paint an unnecessarily negative picture of the real situation.
The following information is taken from 2022 annual report:
Carclo’s UK defined benefit pension scheme, having long since CLOSED to new entrants, is mature and large compared with the size of Carclo. The scheme is backed by substantial assets amounting to £155.8 million at 31 March 2022.
(In line with similar UK companies, new employees, post closure, have been offered membership of a defined contribution scheme).
Outside of the UK, retirement benefits are determined according to local practice and funded accordingly.
(These arrangements carry no risk to the company).
In the UK, Carclo plc sponsors the Carclo Group Pension Scheme, which provides defined benefits (whilst these will be inflation proofed via RPI/CPI, this will be capped at probably between 3% & 5% - so the fact that inflation is around 10% atm is irrelevant). This is a legally separate, trustee-administered fund holding the Scheme’s assets to meet long-term pension liabilities for some 2,662 current and past employees as at 31 March 2022.
What has to be appreciated is the 2,662 figure can only decrease over time thereby reducing the liability and that this is a long term arrangement that requires the mutual co-operation of the pension trustees and the company in order to achieve the best resu
There's no question that Carclo have started borrowing as it's stated early in the recent trading update, "We have continued to invest in capital equipment to support long-term growth, largely financed by an increase in net debt." which in itself is a pretty impressive turnaround, a few years ago, they wouldn't have been able to borrow a bag of beans.
Bear in mind that the bank facilities are subject to four covenants tested on a quarterly basis:
Underlying interest cover, net debt to underlying EBITDA, core subsidiary underlying EBITA and core subsidiary revenue.
So they wouldn't have been able to increase borrowings without adequately satisfying these requirements.
Therefore whilst the claim, IC have stated "Higher costs stunt manufacturing growth" that's certainly not the case here, (considering all the positive statements in the recent TU), in fact it's just the opposite and given that the borrowing has been to invest in capital equipment (i.e. more machines, more revenue, more profit etc.) as opposed to e.g. cashflow then, looking forward, I see nothing but positives for Carclo.
It's also very possible in the short term that the share price could take off, just as it did between Feb and May last year when investors start to realise the potential of Carclo going forward and if Frankseluk2 (Fri 17:31) is right about the delayed after hours trades/mopping up the sells, it's very feasible that some already have.
In the TU, the BoD made the statements:
"Going forward the business will continue to execute on the growth strategies developed for each of these divisions, with further significant investment in capability and capacity planned for FY 2023".
"As well as additional employer contributions made towards reducing the pension deficit, a range of other scheme initiatives have been introduced aimed at enhancing members' benefits whilst reducing the deficit, and these are expected to continue to contribute positively in the coming years". ------- (Furthermore the triennial valuation of the pension scheme at 31 March 2021 should be finalised by about June 2022 - hopefully just in time for the FY2022 Annual Report - which may further reduce the pension deficit.
"Despite the challenging backdrop, the division has been awarded significant new tooling contracts (which are a leading indicator of future growth) by an existing large customer and consequently it is anticipated that new production lines will be installed in CTP businesses around the globe in line with our long-term strategy. This will in turn lead to continuing long term revenue growth".
Given the above positive statements/situation, the way the share price has behaved recently is totally bizarre and as WarrenBJunior says (Sat 12:11) all you can do is take advantage by topping up.
GLA
According to the 2020 accounts, the companys banking agreements/covenants are in place until 2024 some 2 years away so all I can conclude is that they're negotiating to extend them beyond this date. Either way their banking arrangements seem to be safe for the foseeable future and now that Omicron has subsided, cash flow/footfall should've returned to normal levels.