Carclo Regulatory News (CAR)

12 Jun 2006 07:00

Carclo plc12 June 2006 12 June 2006 Preliminary results for the year ended 31 March 2006 Key points The financial highlights for the year to 31 March 2006 are summarised below: • Underlying operating profits from continuing operations, before rationalisation and exceptional bad debt charges, increased to £4.5 million (2005 - £4.4 million). • Profit before tax was £1.7 million (2005 - £3.7 million) with earnings per share of 1.2 pence compared to 7.3 pence per share last year. • Margins have improved following the significant rationalisation programmes undertaken in recent years and the focus on medical product applications. • Profits have advanced strongly in the Czech Republic and China. • Conductive Inkjet Technology ("CIT"), which won the Plastic Industry award for the best technology achievement in 2005, is now an established stand alone development company. CIT became a subsidiary of Carclo in the year following the acquisition of an additional 20% equity stake which was funded by way of a share placing. • ECC Card Clothing disposed of in the year, generating net cash inflows of £5.2 million. • CTP Gills Cables, a manufacturer of control cables for the automotive industry, and the 50% holding in CTP Suprajit were disposed of profitably after the year end. • Carclo's focus on debt reduction has been successful with net debt reducing by £5.1 million to £20.8 million. Debt will further reduce subsequent to the completion of the CTP Gills Cables disposal and the receipt of deferred consideration on the ECC Card Clothing disposal. • The board has recommended a total dividend of 1.2 pence per share for the year (2005 - 1.2 pence). Commenting on the results, Christopher Ross, chairman said- "Our strategy is clear and it is working. Our medical and optical businessescontinue to exploit new opportunities, our businesses in low cost regionscontinue to grow and are delivering good profit margins and we have increasedour investment in new technologies and know how. We continue to reduce our exposure to automotive markets, as evidenced by thedisposal of the automotive control cables business following the year end, andto reduce group debt. The board remains encouraged by the progress of CIT andhas begun to review its options for the future funding of CIT and for theoptimisation of shareholder value from this investment. The last few years have been characterised by reducing turnover but increasingmargins as the group focuses on specialist businesses where we have keytechnological competencies. This trend will continue into the new financialyear. The improvement already seen in the quality of the group's earningsunderpins the board's confidence in the future progress of the group." For further information, please contact: Carclo plc On 12 June: 020 7067 0700Ian Williamson, chief executive Thereafter: 01924 268040Robert Brooksbank, finance director Weber Shandwick Square Mile 020 7067 0700Richard Hews / James White A presentation for analysts will be held 9.00a.m. at the offices of WeberShandwick Square Mile, Fox Court, 14 Gray's Inn Road, London WC1X 8WS Notes to editors • Carclo plc is a global supplier of technical plastic products. It is a public company whose shares are quoted on the London Stock Exchange. • 70% of sales are derived from the supply of fine tolerance, injection moulded plastic components, which are used in medical, telecom and electronics products. This business, Carclo Technical Plastics, operates internationally in a fast growing and dynamic market underpinned by rapid technological development. • 30% of sales are derived from the supply of systems to the automotive and aerospace industries. • Carclo's strategy is to grow rapidly in low cost manufacturing regions and to develop new technologies and products to underpin future growth. Chairman's statement Overview The year under review was one of significant change for Carclo. The compositionof the group changed with the disposal of Carclo's original core business, ECCCard Clothing, further investment in Conductive Inkjet Technology ("CIT") andthe disposal following the year end of CTP Gills Cables together with our shareof CTP Suprajit in India. The board also changed with the retirement of threenon executive directors and my appointment as chairman. Even the way in whichthe financial accounts are presented has changed this year with the adoption ofInternational Financial Reporting Standards ("IFRS"). What has not changed is our strategy. We have continued to grow our specialistmedical and optical businesses, expand our businesses in the Czech Republic andChina and invest in CIT and other innovative developments. Underlying operating profits from continuing operations, before rationalisationand exceptional bad debt charges, were ahead of the prior year at £4.5 million(2005 - £4.4 million). This was despite a 5.2% reduction in sales. Whilst salesreduced in our automotive businesses, profits increased sharply in our low costregion businesses and in our medical and optical operations. After exceptional charges of £2.4 million (2005 - £0.3 million) the groupreported a profit before tax of £1.7 million (2005 - £3.7 million). Theexceptional charges last year were net of profits on the disposal of surplusproperties of £1.5 million compared to a loss in the year under review of £0.2million. Cash flow and dividend Our balance sheet continues to strengthen. Debt reduced in the year by £5.1million to £20.8 million in line with our previously stated target for groupdebt. The sale of the ECC Card Clothing business generated a net cash inflow of£5.2 million. These disposal proceeds and business cash generation allowed us tomake additional contributions to the group pension schemes of £3.4 million.Additionally we raised £3.0 million from a share placing which funded theacquisition of a further 20% of CIT at a net cost of £1.5 million as well ascontributing to its further investment needs during the year. Following the year end the group's automotive control cables business has beendisposed of at a profit and it is expected to generate cash inflows of £3.2million, before costs, in the financial year just commenced. Over the next twoyears the deferred payments on the ECC Card Clothing and CTP Gills Cablesdisposals, together with the sale of two large freehold properties released bythese disposals, should generate additional cash inflows of approximately £6.0million. These will give the group an increasing level of resources to fundinvestment in growth and in new technologies. The board is recommending an unchanged final dividend for the full year of 0.8pence per share, giving a total dividend for the year at 1.2 pence per share.This dividend is now well covered by underlying earnings per share and when wehave greater certainty on the new pensions funding requirements we willdetermine the appropriate level of dividend for the group going forward. Subject to shareholder approval, dividend payments will be posted on 14September 2006 to shareholders on the register at close of business on 11 August2006. The shares will be traded excluding the right to the dividend from 9August 2006. Employees Another demanding year has seen employee numbers reduce by 480 to 1,239. Of thisreduction 301 employees left the group with the disposal of ECC Card Clothing.In addition Carclo Precision Products businesses reduced numbers by 93 as themanufacture of automotive systems was progressively outsourced to low costregions. I would like to thank all those employed by Carclo in the year under review fortheir significant contribution. The board On 1 January 2006 I was pleased to take over the position of chairman fromGeorge Kennedy who retired from the board. I would like to place on record theboard's gratitude to George for the guidance and leadership he has given sincejoining the board in 1993, particularly since becoming chairman in 1997. Barbara Richmond stepped down from the Carclo board on 31 March 2006, havingserved six years as a non executive director. I should like to take thisopportunity to thank Barbara for her valuable contribution to the strategicdevelopment and governance of the group. Michael Derbyshire and Bill Tame were appointed non executive directorseffective 1 January 2006. Michael is currently chairman of Racal AcousticsGlobal Limited and Allied Textiles Limited both private equity backed companies.Michael will chair the Carclo remuneration committee. Bill is finance directorof Babcock International Group plc and has assumed the Carclo roles of seniorindependent director and chairman of the audit committee. Outlook Our strategy is clear and it is working. Our medical and optical businessescontinue to exploit new opportunities, our businesses in low cost regionscontinue to grow and are delivering good profit margins and we have increasedour investment in new technologies and know how. We continue to reduce our exposure to automotive markets, as evidenced by thedisposal of the automotive control cables business following the year end, andto reduce group debt. The board remains encouraged by the progress of CIT andhas begun to review its options for the future funding of CIT and for theoptimisation of shareholder value from this investment The last few years have been characterised by reducing turnover but increasingmargins as the group focuses on specialist businesses where we have keytechnological competencies. This trend will continue into the new financialyear. The improvement already seen in the quality of the group's earningsunderpins the board's confidence in the future progress of the group. Christopher Ross 12 June 2006 Chief executive's review Strategic overview I write after another good year of progress. Our strategy is : • to grow our specialist businesses including medical plastics and LED optics Medical diagnostics is the fastest growing part of our business in the UK and USA and LED optics sales doubled in the year. Within Carclo Technical Plastics almost half of sales will be to medical and optical markets in the 2006/07 budget year. • to continue our expansion in low cost regions Profits advanced strongly at our Czech Republic and China operations which are enjoying sustained growth. • to increase our investment in new technologies and proprietary know how CIT is progressing very well and is now a stand alone development company working on an increasingly wide range of commercial applications for its technology. At the same time Carclo Technical Plastics has continued to develop its expertise in surface coatings with particular emphasis on medical diagnostic devices. Our focus on the growing areas of medical and optics has required us tocarefully review the other businesses within the group. At the beginning of theyear we sold ECC Card Clothing and immediately after the year end we disposed ofCTP Gills Cables ("Gills") to our joint venture partner in India, SuprajitEngineering Limited. Neither of these businesses fitted with our long termstrategy and these divestments release resources for re-investment in the growthbusinesses within the group. This is unlikely however to mark the end of ourinvolvement with India. Our relationship with Suprajit Engineering is excellentand we are jointly evaluating an investment in a new technical moulding facilityin Bangalore, India. To maximise value for Carclo, both of these disposals involve performancerelated deferred payments and retention by Carclo of substantial freeholdproperty. On a proforma basis (adjusting for the proceeds from the disposal ofGills) debt at the year end would have been £17.6 million. Over the next twoyears we expect to receive approximately £6.0 million in cash from the ECC CardClothing and Gills disposals - which will substantially reduce the remainingdebt on the group balance sheet. Accordingly, the management task is changingand we now have the market, financial resources and technological opportunity toaccelerate growth. As Carclo's core businesses have been transformed over the last few years, wehave actively sought to develop a new generation of managers. The transition isnow complete, these teams are ready for the challenge and I am confident thatthey will deliver the growth we expect. Operating review_______________________________________________________________________________ Carclo Carclo Technical Precision Plastics Products 2006 2005 2006 2005_______________________________________________________________________________Turnover - continuing operations £54.3m £59.1m £22.6m £22.2mUnderlying operating profit * £2.6m £2.3m £3.0m £3.0mNet assets £42.9m £44.1m £6.7m £7.2mUnderlying operating margin 4.7% 3.9% 13.2% 13.6%Return on capital employed * 6.0% 5.2% 44.7% 42.3%Average number of employees 929 1,058 227 239_______________________________________________________________________________* before rationalisation costs and exceptional bad debts Carclo Technical Plastics Underlying operating profits in Carclo Technical Plastics increased to £2.6million (2005 - £2.3 million) on sales of £54.3 million (2005 - £59.1 million).The decline in sales reflects our continuing strategy to reduce our automotiveexposure and to allow much improved margins in medical and optical to driveprofits forward. We expect sales to stabilise in the year just started as webuild volumes on the new medical programmes which we have won. Overall, margins improved by 0.8% to 4.7%. This remains well short of our mediumterm goal of approaching 10% operating margins in Technical Plastics. The secondhalf performance however was much better than the first half, with operatingmargins approaching 7%, and we are confident that this momentum will continue inthe year just started. Although we continue to adjust the cost base by modestrationalisation of capacity, the pace of rationalisation is reducing and, withimproved stability in our operations, productivity and efficiency are rising. Our operations in low cost regions, the Czech Republic and China, deliveredexcellent growth and profitability. This organic growth is set to continue as webenefit from the continuing transfer of our customers' assembly operations fromthe USA and Europe. Carclo Precision Products Sales and profits in Carclo Precision Products were essentially unchanged fromthe previous year. Wipac benefited from growth in the communications businessbut specialist lighting sales were down slightly on the prior year. Ouraerospace cable business performed well and is enjoying modest growth in sales. Looking forward we expect Wipac sales to be marginally down in the coming yearas certain lighting contracts reach the end of their model life. Discontinued operations Discontinued operations include two months of ECC Card Clothing and a full yearof Gills. Gills performed better than in the previous year but operating profits stillonly just covered the rationalisation costs incurred in preparing for theclosure of the main UK production site. Gills had a successful year in winningnew contracts for the Indian factory which commenced operation at the very endof the year and did not contribute to the financial results. Pensions Carclo has two defined benefit pension schemes with combined liabilities whichare large compared with the size of Carclo. Funding of the schemes has a directeffect on shareholders in terms of the market value of Carclo and on managementin terms of the time which is committed to managing these liabilities. Most members of the schemes were once employees of companies acquired by Carcloduring the 1980's and early 1990's. These companies were mainly in the wire andsteel industries and employment, at the point of acquisition, was already indecline. The pension schemes are therefore very mature - approximately threequarters of liabilities relate to pensions in payment. The number of pensionersis not increasing and the monthly pension payroll has been rising a littlefaster than the rate of inflation. Under IAS 19 "Employee Benefits" the group has a gross pension deficit of £22.4million, down from £26.6 million a year ago. This deficit is calculated byprojecting the pension payments decades into the future using very long termassumptions. The total is then discounted back to the present using the ten yearcorporate bond yield as a discount factor. This valuation of the liability isthen compared with the current market value of the assets. The pension schemes are invested in a mix of assets - in our case 44% UKequities, 32% corporate bonds and the balance in Government PFI projects,property and cash. This mix of investments should produce a long term returnbetter than bonds alone. When the scheme actuary and trustees look at funding ona scheme specific basis, they allow for a 1% excess return from the investmentportfolio above the corporate bond yield. Allowing for this excess return, theschemes are broadly in balance i.e. there is no deficit. Somewhat perversely,IAS 19 recognises the "excess return" in our income statement but ignores it inthe calculation of the balance sheet deficit. I find it much more helpful to look at the cash flows of the schemes. Thepension payroll of the larger scheme amounts to £5.9 million per annum. Therecurring income from the assets covers approximately 85.0% of the out goings.If the company, as sponsor, covers this modest cash flow deficit and meets therunning costs of the scheme, then the assets backing the scheme need never besold to fund current liabilities. Over the last three years Carclo has beeninjecting significantly more than this in deficit correction payments. The clear conclusion that I draw from this analysis is that the funding ofCarclo's pension liability is in a healthier state than would appear from theIAS 19 accounts. Pension funding is a manageable issue for Carclo. Ian Williamson 12 June 2006 Technological innovations Conductive Inkjet Technology ("CIT") Our 70% owned subsidiary, Conductive Inkjet Technology Limited, continues tomake very good progress. CIT is now a stand alone development company basedalongside the Cambridge Science Park, and with a dedicated team of chemists andengineers. During the year, most of our effort has been focused on thedevelopment of MetalJet 6000 - a high speed web printing line. The MetalJet 6000specification is aimed at the emerging market for RFID tags - where CIT's uniquetechnology offers a breakthrough on cost and performance. We have now completeddevelopment of MetalJet 6000 and commercialisation is in progress through ourpartner Preco Industries. We expect Preco to secure the first orders forMetalJet 6000 before the end of 2006. These initial contracts are likely to bein conventional smart card and flexible circuit applications with the highervolume RFID applications following later as the RFID market develops. CIT's resources are now being applied to much broader fields of application ofthe technology. This includes supporting Carclo Technical Plastics on the firstproduction application of CIT for an existing customer commencing volumeproduction in the autumn of this year. CIT has also received funding frompartners for joint development programmes across a wide range of applications -four key examples include semiconductor manufacturing, a high volume consumerproduct, aerospace composites and flat panel displays. We have also demonstrated "invisible conductors" using CIT technology. By usingUV laser technology we can write conductive tracks down to 5 micron widths -well below that visible to the naked eye. We are leading a consortium withCambridge Display Technology and Exitech, the laser equipment manufacturer,to produce novel displays using this very advanced technology. The consortiumhas been awarded a £0.24 million grant by the Department of Trade and Industry'sTechnology Programme to accelerate the development of CIT's "invisibleconductors". Soluble capsules Our joint project with Stanelco to develop injection moulded capsules forcontrolled release drug delivery has also made good progress. We now have acommitted launch customer and, on completion of the regulatory approvals earlynext year, the capsules will be commercially launched in the veterinary market.We continue to seek a partner for the human application of this technology.These products can be viewed on the Carclo web site www.carclo-plc.com. Throughthis project we have learned a great deal about how to overcome the mouldingissues with soluble polymers and in particular with Stanelco's Starpol 10/50. Weare confident that more product applications will develop around these newthermoplastic materials. Surface coatings and microfluidics Our research and development has been focused on surface coatings andmicrofluidics for some years. Our initial work was with thick film coatings -initially derived from our optical plastics know how. We have developed a worldleading competence in selectively applying such coatings - using digital inkjettechnology. We remain on track to commence high volume production using thistechnology for a prestige automotive instrumentation project. It was our work inthick film coatings that led us to the invention of conductive inkjettechnology. Over the last year, we have been investigating thin film coatings for use inlife sciences and medical diagnostics. We have established a technical andmarketing collaboration with Plasso Technology Limited - a spin out fromSheffield University - a leader in plasma polymerisation for surface treatmentof injection moulded plastics. We have already undertaken a number of jointdevelopment projects with major customers in the diagnostics field. Carclo Technical Plastics' key competence is in very fine tolerance injectionmoulding. We produce hundreds of millions of components with fine orifices(metered dose inhalers, cuvettes and probe tips) and micro-channels(microfluidics diagnostics devices such as the Genosis Fertell male fertilitytest device). We have undertaken in-house research on microfluidics and haveadditionally developed collaborations with leading research companies in thisfield. This work is aimed at the emerging technology of "lab on a chip" for"point of care" diagnostic devices. This is a natural development for Carclo Technical Plastics - we are already aworld leader in manufacturing disposables for diagnostic testing. This is thefastest growing part of our business and the move to "point of care" testingaway from laboratory based testing plays to our strengths in injection moulding,surface coatings, and optical design. Finance director's review ________________________________________________________________________________ 2006 2005 £million £million________________________________________________________________________________Turnover - continuing 76.6 80.8 _____________________Divisional operating profit 5.5 5.3Central costs (1.0) (0.9) _____________________Underlying operating profit from continuing operations 4.5 4.4Underlying operating profit from discontinued operations 0.5 0.7Exceptional items (2.4) (0.3)Net interest (0.9) (1.1) _____________________Profit before tax 1.7 3.7Taxation - -Loss on disposal of discontinued operation (1.1) - _____________________Profit attributable to ordinary shareholders 0.6 3.7Ordinary dividend (0.6) (0.6) _____________________Surplus for the year - 3.1 _____________________Divisional operating margin from continuing operations 7.2% 6.6%Basic earnings per share 1.2p 7.3pUnderlying earnings per share 7.8p 7.4p Financial summary In the financial year the group generated underlying operating profit fromcontinuing operations of £4.5 million (2005 - £4.4 million) benefiting from amore robust second half performance. This increase in underlying operatingprofit was despite a 5.2% decrease in turnover from continuing operations to£76.6 million (2005 - £80.8 million). The continuing improvement in underlyingprofitability is being driven primarily by the expansion of our Czech Republicand Chinese technical plastics businesses but also by our determined focus onreducing the cost base of our UK and USA businesses. Profit before tax from continuing operations was £1.7 million (2005 - £3.8million) and this reflects the impact of the cost of our continuedrationalisation programme as well as our prudent provisioning against tradedebts relating to two significant customer insolvencies. In addition, the groupdid not have the benefit this year of windfall profits from property disposals. In our expanded consolidated income statement we have disclosed separately thefinancial results of the group's discontinued operations. These include the fullyear's trading results of CTP Gills Cables Ltd, the disposal of which wascompleted on 12 May 2006, as well as two months trading at the ECC Card Clothingbusinesses, the sale of which was completed on 22 June 2005. At the year end net debt was £20.8 million (2005 - £25.9 million). The £5.1million reduction in net debt was principally due to the receipt of the proceedsfrom the disposal of the ECC Card Clothing businesses. Despite the reducedaverage level of debt, net bank interest payable has remained at £1.4 milliondue to the impact of significant increases in bank base rates in the USA. The group tax charge for the year was nil (2005 - nil) as the group continues tobenefit from the utilisation of tax losses and group tax planning strategies. The profit attributable to ordinary shareholders was £0.6 million (2005 - £3.7million). The board is recommending a maintained dividend for the year of 1.2pence per ordinary share. During the year the High Court approved the conversion of £41.8 million of sharepremium account into distributable reserves in the parent company accounts. Exceptional items Non-recurring rationalisation costs for the year totalled £1.0 million (2005 -£1.0 million). Rationalisation costs relating to continuing operations were £0.8million and the majority of these costs relate to the sustained re-structuringof our UK and USA technical plastics businesses in order to progressively drivedown the group's cost base and achieve a leaner manufacturing organisation. Site closure costs in relation to continuing operations amounted to £0.6 million(2005 - £0.8 million) and this relates to the cost of closing our Eaglescliffemanufacturing facility resulting in increased profitability in our UK technicalplastics business in the second half of the financial year. Site closure costsin relation to discontinued operations totalled £0.3 million and this representsthe cost of initiating the closure of our control cable manufacturing operationsprior to the disposal of the business. The group disposed of two surplus properties in the second half of the financialyear generating disposal proceeds of £1.0 million. The combined loss on disposalof £0.2 million was due to the sale of the Wilmington facility in the USA atbelow its book value. Unusually, the group experienced two major customer insolvencies during thefinancial year reflected by the £0.375 million exceptional bad debt provision.As detailed in our Interim Report, £0.125 million has been provided in respectof Delphi Corporation which filed for Chapter 11 protection in October 2005.Whilst the full amount of the trade debt currently remains outstanding, weexpect to recover approximately 75% of the outstanding receivable. The remaining£0.250 million exceptional bad debt provision represents a full provisionagainst the outstanding trade receivable in respect of LG Philips DisplaysSlovakia s.r.o, which is currently undergoing a court approved financialre-structuring. Net debt and gearing 2006 2005 £million £million_______________________________________________________________________________Underlying cash flow 9.9 10.1Interest and tax (1.4) (0.9)Capital expenditure, other than for expansion (2.3) (2.6) _____________________Free cash flow 6.2 6.6Pension payments above regular cost (3.4) (1.5)Other non recurring (0.8) -Issue of share capital 3.0 -Equity dividends (0.6) (0.6) _____________________Cash flow available for corporate activities 4.4 4.5Capital expenditure for expansion - (1.5)Development expenditure (0.9) -Acquisitions and disposals 2.7 (1.0)Exchange movement (1.1) 0.2 _____________________Decrease in debt in year 5.1 2.2 _____________________ Net debt comprises interest bearing loans and liabilities less cash and cashdeposits. Net borrowings reduced by £5.1 million in the year to £20.8 million (2005 -£25.9 million). This corresponds to a gearing of 48.4% (2005 - 67.2%) and isafter excluding the pension deficit, net of attributable deferred tax, of £15.7million in determining the group's net assets. Underlying cash flow from operations was £9.9 million (2005 - £10.1 million).Free cash flow was £6.2 million (2005 - £6.6 million). Free cash flow is afterthe £0.7 million cash cost of regular pension contributions but before the MFRdeficit correction payment and additional pension contribution relating to theECC Card Clothing disposal which totalled £3.4 million. Group capitalexpenditure of £2.4 million (2005 - £4.0 million) was lower than anticipatedreflecting the fact that the group's businesses are not yet in a plant andmachinery replacement cycle. Other non recurring cash out flows of £0.8 million included the cash impact ofrationalisation and closure costs of £1.9 million, partially offset by proceedsfrom the disposal of fixed assets of £1.1 million. The retranslation of the group's USA dollar denominated borrowings resulted innegative impact on debt of £1.1 million due to the relative strength of the USAdollar versus the pound at 31 March 2006 compared with 31 March 2005. The disposal of the ECC Card Clothing businesses generated net cash proceeds of£5.2 million. The group also raised funds of £3.0 million from the placing of anadditional 3.8 million shares which were issued in order to fund the acquisitionof an additional 20% of the shares in Conductive Inkjet technology ("CIT") for anet £1.5 million. The total funding requirement for CIT during the year was £1.3million, £0.9 million of which was incurred after the joint venture became a 70%owned subsidiary of the group. Disposal of the CTP Gills Cables business and Carclo's 50% shareholding in theIndian control cable joint venture, CTP Suprajit Automotive Private Ltd, isexpected to generate additional funds of £3.2 million over the next financialyear. In addition, the group expects to receive £0.6 million of deferredvariable consideration from the disposal of its ECC Card Clothing businessesduring the next financial year. The group's surplus property portfolio has a net book value of £5.0 million(including the surplus properties retained following the disposal of the ECCCard Clothing and CTP Gills Cables businesses) and it is the group's strategy tocontinue to realise proceeds from the sale of these surplus properties. Financing The group has assured medium term facilities of £29.6 million (2005 - £35.3million) with an average life of 1.5 years. The group is comfortably ahead ofits banking covenants and is set to further reduce net debt. Pensions These accounts have been prepared for the first time under the provisions of IAS 19 "Employee Benefits". Under IAS 19 the operating charge to income for theyear was £0.8 million (2005 - £0.8 million). IAS 19 also provides that afinancing charge or credit, being the difference between the interest charge onthe pension scheme liability and the expected return on scheme assets, is alsorecognised in the consolidated income statement. In the financial year justended this resulted in a credit of £0.5 million (2005 - £0.4 million) beingreflected under "Other finance revenue and expense". An additional pensionscurtailment charge of £0.3 million is included as part of the £1.1 million losson disposal of discontinued operations, as a result of the ECC Card Clothingbusiness ceasing to participate in the group pension schemes. Under IAS 19 the combined pension schemes deficit must be included in the groupbalance sheet. As at 31 March 2006 the IAS 19 deficit was £15.7 million, net oftax (2005 - £18.6 million). The improvement in the schemes deficit has resultedfrom a strong investment performance by the schemes assets. This has more thancompensated for the increase in the schemes liabilities caused by a significantdecrease in the discount rate assumption (reflecting falling bond yields) and atightening of the mortality assumptions, reflecting actual scheme mortalityexperience. The actual cash contributions into the schemes amounted to £4.1 million (2005 -£2.3 million). In addition to the regular cash contributions of £0.7 million,MFR deficit correction payments of £1.6 million were also made to the schemes.An additional contribution of £1.8 million was paid into the schemes on thedisposal of the ECC Card Clothing business. The payment of this "debt onemployer", which was based on a scheme specific calculation, was agreed with thePensions Regulator in order to achieve clearance for the disposal of thebusiness. International accounting standards The results for the year ended 31 March 2006 are the first set of financialresults to be prepared under International Financial Reporting Standards("IFRS") adopted in the EU and the prior period information included in thesereports and accounts has been restated on a comparable basis. A summary of thefinancial impact of the group's IFRS conversion is included at note 35 to theaccounts. A full analysis of the financial impact was issued on 4 October 2005and is available from Carclo's head office or on the corporate web sitewww.carclo-plc.com. The most significant impact of adopting IFRS was that the group's net assetsreduced from £48.2 million to £19.9 million as at 31 March 2005. This reductionwas primarily due to the impact of reflecting the pensions deficit on thebalance sheet under IAS 19 "Employee Benefits". As a consequence the groupagreed a revision of its banking covenants with its lending banks in order tobring them into line with the newly adopted International Accounting Standards. Conductive Inkjet Technology ("CIT") During the year, the group acquired an additional 20% of the shares in CIT for£1.6 million, thereby increasing its shareholding to 70%. The acquisition wasfunded by a vendor placing of 1,975,309 new ordinary Carclo shares at a price of81 pence per share. An additional £1.5 million was raised from a cash placing ofa further 1,851,851 new ordinary shares also at 81 pence per share in order toprovide funding for the ongoing development of the CIT programme. Prior to the date of the acquisition CIT was reflected in the group accounts asa joint venture under the equity method in accordance with IAS 31 "Interests inJoint Ventures". From 28 July 2005, the date of the acquisition of theadditional 20%, CIT has been accounted for as a subsidiary in accordance withIFRS 3 "Business Combinations". Following the acquisition, the intangible assetrepresented by the intellectual property owned by CIT has been included in thegroup balance sheet at fair value. Consequently, the intangible assets in thegroup balance sheet have increased by £5.9 million. Under the provisions ofIAS 38 "Intangible Assets" the fair value of these intangible assets will beamortised over their useful lives. The total investment in CIT during the year was £1.3 million (2005 - £1.0million) and the group has continued to capitalise these costs as developmentexpenditure. Business disposals On 22 June 2005 the group completed the disposal of its card clothing businessesgenerating net cash inflows of £5.2 million after transaction costs and net cashtransferred with the business. The transaction resulted in a loss on disposal of£1.1 million, the majority of which was due to the costs of undertaking thetransaction. The group has utilised the proceeds from the disposal to reduce debt and to makean additional payment of £1.8 million into the Carclo group pension schemes. Further deferred consideration of up to £1.7 million is based upon theachievement of certain performance criteria in the two years to 31 May 2007. Itis anticipated that the first tranche of this deferred consideration of £0.6million will be received during the current financial year. Properties with a combined net book value of £2.2 million were also retained andleased to the purchaser. Outline planning permission has been granted for theresidential development of the group's Plover Mills site in Huddersfield. It iscurrently intended that this site, which has a net book value of £1.7 million,will be sold after the expiry of the current lease on 31 December 2006. On 12 May 2006 the group disposed of the business and operating assets of CTPGills Cables Ltd, its UK control cable manufacturing business, as well as its50% shareholding in CTP Suprajit Automotive Private Ltd, its Indian JointVenture. An aggregate cash inflow of £3.6 million, before costs, is anticipated from thistransaction. Consideration of £1.4 million was received on completion and £0.4million will be received in due course as the repayment of a term loan. Thegroup also expects to receive an additional deferred payment estimated to be inthe region of £0.4 million and due in May 2008. This deferred element of theconsideration is based on the performance of the UK business during the twoyears to May 2008. The group will also retain and realise for cash the tradedebtors of the UK business, estimated to be £1.4 million. The proceeds from the disposal will be utilised to reduce the group's debt andit is also intended that an additional payment of up to £1.2 million will bemade into the Carclo group pension schemes representing the scheme specific debton employer triggered by the sale of the business. Robert Brooksbank 12 June 2006 Consolidated income statementyear ended 31 March 2006 2005 _________________________________________________________________ Continuing Discontinued Total Continuing Discontinued Total operations operations £000 operations operations £000 £000 £000 £000 £000________________________________________________________________________________Revenue 76,617 11,389 88,006 80,835 26,839 107,674________________________________________________________________________________Underlyingoperating profitOperatingprofit beforeexceptional costs 4,542 478 5,020 4,402 710 5,112- rationalisation costs (799) (165) (964) (384) (654) (1,038)- exceptional bad debts (375) - (375) - - - _____________________________________________________________Afterexceptionalcosts 3,368 313 3,681 4,018 56 4,074________________________________________________________________________________ Operating profit 3,368 313 3,681 4,018 56 4,074Site closure costs (615) (254) (869) (763) - (763)(Loss) /profit on saleof properties (237) - (237) 1,462 - 1,462 _____________________________________________________________Profit beforefinancing costs 2,516 59 2,575 4,717 56 4,773 Finance revenue 383 - 383 152 32 184Finance expense (1,728) (50) (1,778) (1,478) (190) (1,668)Other financerevenue - retirement benefits 9,041 - 9,041 8,525 - 8,525Other financeexpense - retirement benefits (8,522) - (8,522) (8,133) - (8,133) _____________________________________________________________ Profit/(loss) before tax 1,690 9 1,699 3,783 (102) 3,681 Income tax(expense)/income - - - (129) 174 45 _____________________________________________________________Profit aftertax but beforeloss ondiscontinuedoperation 1,690 9 1,699 3,654 72 3,726 Loss on disposal of discontinuedoperation, netof tax - (1,082) (1,082) - - - _____________________________________________________________Profit/(loss) after tax 1,690 (1,073) 617 3,654 72 3,726 ============================================================= Attributable to: Equity holdersof the parent 1,725 (1,073) 652 3,654 72 3,726Minority interest (35) - (35) - - - _____________________________________________________________Profit for theperiod 1,690 (1,073) 617 3,654 72 3,726 ============================================================= Earnings perordinary shareBasic 3.2 p (2.0) p 1.2 p 7.2 p 0.1 p 7.3 pDiluted 3.2 p (2.0) p 1.2 p 7.2 p 0.1 p 7.3 p Dividend perordinary share Arising in respect of the year 1.2 p 1.2 p Paid in the year 1.2 p 1.2 p Consolidated statement of recognised income and expenseyear ended 31 March 2006 2005 £000 £000________________________________________________________________________________ Foreign exchange translation differences 749 743Net (loss) / gain on hedge of netinvestment in foreign subsidiary (16) 3Actuarial losses on defined benefit schemes 593 (6,900)Other - (75)Taxation on items taken directly to equity (178) 2,076 _________________Income and expense recognised directly in equity 1,148 (4,153)Profit for the period 617 3,726 _________________Total recognised income and expense for the period 1,765 (427) ================= Attributable to:Equity holders of the parent 1,800 (427)Minority interest (35) - _________________Total recognised income and expense for the period 1,765 (427) ================= Consolidated balance sheetas at 31 March 31 March 2006 31 March 2005 £000 £000_______________________________________________________________________________ AssetsIntangible assets 24,868 15,365Property, plant and equipment 29,899 36,250Investments 11 10Investment in joint venture - -Deferred tax assets 8,681 9,945Trade and other receivables 1,100 - _________________________Total non current assets 64,559 61,570 Inventories 7,634 13,685Trade and other receivables 16,736 22,193Cash and cash deposits 11,258 9,938Assets classified as held for sale 2,078 - _________________________Total current assets 37,706 45,816 _________________________Total assets 102,265 107,386 _________________________ LiabilitiesInterest bearing loans and borrowings 26,765 30,350Deferred tax liabilities 3,851 3,547Retirement benefit obligations 22,383 26,559 _________________________Total non current liabilities 52,999 60,456 Trade and other payables 13,027 19,626Current tax liabilities 2,353 1,702Dividends payable 220 204Interest bearing loans and liabilities 5,249 5,468Liabilities associated with assets classifiedas held for sale 1,223 - _________________________Total current liabilities 22,072 27,000 _________________________Total liabilities 75,071 87,456 _________________________ Net assets 27,194 19,930 ========================= EquityOrdinary share capital issued 2,789 2,594Share premium 2,768 41,772Other reserves 4,160 2,170Translation reserve 1,479 746Retained earnings 14,833 (27,352) _________________________Total equity attributable to equity holders ofthe parent 26,029 19,930 Minority interest 1,165 - _________________________Total equity 27,194 19,930 ========================= Consolidated statement of cash flowsyear ended 31 March 2006 2005 £000 £000_______________________________________________________________________________ Cash flows from operating activities Profit before interest and taxation 2,575 4,773 Adjustments for:Pension fund contributions in excess of service costs (3,364) (1,548)Depreciation charge 3,734 4,555Amortisation of intangible assets 63 77Exceptional bad debt provision 375 -Loss / (profit) on disposal of property 237 (1,462)Loss / (profit) on disposal of other plant and equipment 32 (142)Impairment of assets on site closures 124 -Cash flows on closures charged in prior year (190) (878)Share based payment charge (6) 49 ___________________Operating profit before changes in working capital 3,580 5,424 Changes in working capital (excluding the effects ofacquisition and disposal of subsidiaries)Decrease / (increase) in inventories 898 (69)Decrease in trade and other receivables 3,121 3,035Decrease in trade and other payables (2,932) (2,087) ___________________Cash generated from operations 4,667 6,303 Interest paid (1,766) (1,603)Tax recovered - 541 ___________________Net cash from operating activities 2,901 5,241 Cash flows from investing activitiesProceeds from sale of property, plant and equipment 1,073 2,212Interest received 395 193Disposal of subsidiary, net of cash disposed of 5,201 -Acquisition of subsidiary, net of cash acquired (1,503) -Acquisition of share in joint venture (129) (95)Acquisition of property, plant and equipment (2,271) (3,940)Acquisition of intangible - computer software (64) (72)Acquisition of trade investment (1) -Development expenditure (861) -Loan to joint venture (833) (921) ___________________Net cash from investing activities 1,007 (2,623) Cash flows from financing activitiesProceeds from the issue of share capital 2,963 -Repayment of borrowings (4,548) (487)Payment of finance lease liabilities (17) (96)Dividends paid (644) (613) ___________________Net cash from financing activities 2,246 (1,196) Net increase in cash and cash equivalents 1,662 1,422Cash and cash equivalents at beginning of period 5,014 3,579Effect of exchange rate fluctuations on cash held 58 13 ___________________Cash and cash equivalents at end of period 6,734 5,014 =================== Cash and cash equivalents comprise:Cash at bank and in hand 11,258 9,938Bank overdrafts (4,524) (4,924) ___________________ 6,734 5,014 =================== Segmental reporting At 31 March 2006, the group is organised into two main business segments:Technical Plastics and Precision Products. A third business segment, ECC CardClothing, was disposed of on 22 June 2005. The primary segment reporting format is determined to be business segments asthe group's risks and returns are affected predominantly by differences in theproducts and services provided. Secondary information is reportedgeographically. The operating business segments are organised and managedseparately. The Technical Plastics segment supply fine tolerance, injection moulded plasticcomponents, which are used in medical, telecom and electronics products. Thisbusiness operates internationally in a fast growing and dynamic marketunderpinned by rapid technological development. The Precision Products segment supplies systems to the automotive and aerospaceindustries. 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 group's geographical segments are based on the location of the group'sassets. Sales to external customers disclosed in geographical segments are basedon the geographical location of its customers. Analysis by business segmentThe segment results for the year ended 31 March 2006 were as follows: Technical Precision Unallocated Eliminations Continuing Discontinued Group Plastics Products expenses total total £000 £000 £000 £000 £000 £000 £000_______________________________________________________________________________________________Income Statement Total revenue 54,328 22,586 - (297) 76,617 11,389 88,006Less inter-segmentrevenue (297) - - 297 - - - ____________________________________________________________________________Total externalrevenue 54,031 22,586 - - 76,617 11,389 88,006 Expenses (51,477) (19,609) (989) - (72,075) (10,911) (82,986) ____________________________________________________________________________Underlyingoperating profits 2,554 2,977 (989) - 4,542 478 5,020 Rationalisationcosts (538) (144) (117) - (799) (165) (964) Exceptionalbad debts (375) - - - (375) - (375) ____________________________________________________________________________Operating profit 1,641 2,833 (1,106) - 3,368 313 3,681 Site closure costs (615) - - - (615) (254) (869) Loss on saleof properties - - (237) - (237) - (237) ____________________________________________________________________________Profit beforefinancing costs 1,026 2,833 (1,343) - 2,516 59 2,575 ===========================================Net finance costs (826) (50) (876) Tax - - - _______________________________Profit for the period 1,690 9 1,699 =============================== Balance SheetInvestments - - 11 - 11 - 11Property, plantand equipment 20,188 5,340 4,371 - 29,899 - 29,899Intangible assets 15,807 23 9,038 - 24,868 - 24,868Other segmentassets 18,965 5,453 9,733 - 34,151 - 34,151Assetsclassified as held forsale - - 447 - 447 1,631 2,078Cash, otherfinancialassets and investments 2,588 667 8,003 - 11,258 - 11,258 ____________________________________________________________________________ Total assets 57,548 11,483 31,603 - 100,634 1,631 102,265 Trade and otherpayables 7,784 4,136 1,107 - 13,027 - 13,027Other segmentliabilities - - 220 - 220 - 220Tax liabilities 1,191 238 4,775 - 6,204 - 6,204Borrowings andother financialliabilities 5,675 443 25,896 - 32,014 - 32,014Retirementbenefit liabilities - - 22,383 - 22,383 - 22,383Liabilities inrespect ofassets held for sale - - - - - 1,223 1,223 ____________________________________________________________________________Total 14,650 4,817 54,381 - 73,848 1,223 75,071liabilities ____________________________________________________________________________Net assets 42,898 6,666 (22,778) - 26,786 408 27,194 ============================================================================ Other segmentalinformation Capital expenditureon property, plant and equipment 1,836 338 105 - 2,279 85 2,364Capital expenditureon other intangible assets 16 25 23 - 64 - 64Depreciation 2,517 566 117 - 3,200 534 3,734Amortisation ofintangible assets 58 2 3 - 63 - 63 Analysis by business segmentThe segment results for the year ended 31 March 2005 were as follows: Technical Precision Unallocated Eliminations Continuing Discontinued Group Plastics Products expenses total total £000 £000 £000 £000 £000 £000 £000________________________________________________________________________________________________ Income Statement Total revenue 59,117 22,195 - (477) 80,835 26,839 107,674Less inter-segmentrevenue (477) - - 477 - - - ______________________________________________________________________________Total externalrevenue 58,640 22,195 - - 80,835 26,839 107,674 Expenses (56,360) (19,167) (906) - (76,433) (26,129) (102,562) ______________________________________________________________________________ Underlyingoperating profits 2,280 3,028 (906) - 4,402 710 5,112 Rationalisationcosts (384) - - - (384) (654) (1,038) ______________________________________________________________________________ Operating profit 1,896 3,028 (906) - 4,018 56 4,074 Loss ontermination ofoperations (763) - - - (763) - (763) Profit on saleof properties - - 1,462 - 1,462 - 1,462 ______________________________________________________________________________Operatingprofit beforefinancing costs 1,133 3,028 556 - 4,717 56 4,773 =========================================== Net finance costs (934) (158) (1,092)Tax (129) 174 45 ________________________________Profit for the period 3,654 72 3,726 ================================Balance SheetInvestment - - 10 - 10 - 10Property, plantand equipment 21,509 5,457 4,905 - 31,871 4,379 36,250Intangible assets 15,180 51 134 - 15,365 - 15,365Other segment assets 21,246 5,946 10,779 - 37,971 7,852 45,823Assets classified asheld for sale - - - - - - -Cash, other financial assetsand investments 2,591 704 5,813 - 9,108 830 9,938 ______________________________________________________________________________ Total assets 60,526 12,158 21,641 - 94,325 13,061 107,386 Trade and otherpayables 9,224 4,433 1,483 - 15,140 4,486 19,626Other segmentliabilities - - 204 - 204 - 204Tax liabilities 1,119 358 3,772 - 5,249 - 5,249Borrowings andotherfinancial 6,054 201 29,515 - 35,770 48 35,818liabilitiesRetirementbenefit - - 26,559 - 26,559 - 26,559liabilities ______________________________________________________________________________Total 16,397 4,992 61,533 - 82,922 4,534 87,456liabilities ______________________________________________________________________________Net assets 44,129 7,166 (39,892) - 11,403 8,527 19,930 ============================================================================== Other segmental information Capital expenditureon property, plant and equipment 3,053 334 116 - 3,503 536 4,039Capital expenditureon other intangibleassets 27 - 31 - 58 - 58Depreciation 2,710 572 101 - 3,383 1,172 4,555Amortisation of intangible assets 59 - 18 - 77 - 77 Analysis by geographical segment by destinationThe analysis of results by geographical destination for theyear ended 31 March 2006 was as follows: United Kingdom North America Rest of world Group Total £000 £000 £000 £000Revenue Total externalrevenue 38,214 17,761 32,031 88,006Less revenueattributableto discontinuedoperations (3,950) (1,439) (6,000) (11,389) __________________________________________________________Revenue fromcontinuingoperations 34,264 16,322 26,031 76,617 ========================================================== The analysis of results by geographical destination for theyear ended 31 March 2005 was as follows: United Kingdom North America Rest of world Group Total £000 £000 £000 £000Revenue Total externalrevenue 47,077 22,521 38,076 107,674Less revenueattributableto discontinuedoperations (5,738) (4,129) (16,972) (26,839) __________________________________________________________Revenue fromcontinuingoperations 41,339 18,392 21,104 80,835 ========================================================== Analysis by geographical segment by origin The business operates in three main geographical regions - the United Kingdom,North American and in lower cost regions such as the Czech Republic and China. The analysis of results by geographical origin for theyear ended 31 March 2006 was as follows: United Kingdom North America Rest of world Group Total £000 £000 £000 £000Revenue Total externalrevenue 67,646 14,565 5,795 88,006Less revenueattributableto discontinuedoperations (9,773) (692) (924) (11,389) _______________________________________________Revenue fromcontinuingoperations 57,873 13,873 4,871 76,617 _______________________________________________Other segment informationSegment assets 28,440 9,810 11,722 49,972Unallocatedassets (22,778) - - (22,778) _______________________________________________Total assets 5,662 9,810 11,722 27,194 =============================================== Capital expenditure onproperty, plant andequipment 1,537 515 312 2,634Capitalexpenditure on otherintangible assets 48 16 - 64Depreciation 2,711 540 483 3,734Amortisation of intangibleassets 5 58 - 63 The analysis of results by geographical origin for theyear ended 31 March 2005 was as follows: United Kingdom North America Rest of world Group Total £000 £000 £000 £000Revenue Total externalrevenue 77,885 19,402 10,387 107,674Less revenueattributableto discontinuedoperations (16,964) (3,284) (6,591) (26,839) _______________________________________________Revenue fromcontinuingoperations 60,921 16,118 3,796 80,835 _______________________________________________Other segment information Segment assets 31,908 12,536 15,378 59,822Unallocatedassets (39,892) - - (39,892) _______________________________________________Total assets (7,984) 12,536 15,378 19,930 =============================================== Capital expenditure onproperty,plant andequipment 1,471 671 1,897 4,039Capital expenditure on other intangibleassets 31 27 - 58Depreciation 3,385 564 606 4,555Amortisationof intangible assets 18 59 - 77 Notes 1. The financial statements set out above do not constitute the company's statutory accounts for the years ended 31 March 2006 and 31 March 2005, but is derived from those accounts. Statutory accounts for the year ended31 March 2005 have been delivered to the Registrar of Companies and those forthe year ended 31 March 2006 will be delivered following the company's annualgeneral meeting. 2. The auditors have reported on those accounts; their reports were unqualified and did not contain a statement under S 237 (2) or S 237 (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange EN