Carclo Regulatory News (CAR)

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO. 596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN

Carclo plc

("Carclo" or the "Group")

Unaudited Preliminary Results for the year ended 31 March 2023

Carclo plc, a preferred and trusted partner of global customers, providing high-precision critical components to the life sciences, aerospace, specialised optics, and technology industries, announces its results for the financial year ended 31 March 2023 ("FY22/23").

The key financial performance measures for the year are as follows:

Continuing operations

Financial performance:

A shift in strategy prioritising operational performance improvement and increased cash generation against a backdrop of high inflation and rising interest rates.

· Revenue from continuing operations increased by 11.6% (3.8% at constant currency) to £143.4 million (FY21/22: £128.6 million).

· Underlying operating profit from continuing operations £5.9 million (FY21/22: £6.1 million).

· Cash generated from operations was £7.8 million (FY21/22: £6.8 million).

· Statutory operating profit from continuing operations £1.2 million (FY21/22: £8.9 million including £2.1 million one-off credit arising from the forgiveness of US government Covid-19 support loans).

· Net exceptional cost in the year of £4.7 million (FY21/22: £0.7 million gain), reflects £3.4 million rationalisation costs, £0.9 million costs arising from cancellation of future supply agreement, £0.9 million doubtful debt and related inventory provision, £0.3 million costs in respect to legacy claims, partially offset by a £0.8 million gain on disposal of surplus properties.

· Net debt of £34.4 million (31 March 2022: £32.4 million), £1.5 million of the increase is explained by movements in foreign exchange. After increasing in H1, adjusting for currency effects, net debt reduced by £2.1 million during H2, reflecting the start of the delivery of the revised strategy.

Strategic highlights:

· Fortifying our financial position for long-term success - Optimising resources, enhancing cash flow, and fuelling long-term success.

· Factory specialisation and standardisation - Driving operational excellence for enhanced efficiency and satisfaction.

· Organic growth through strategic partners - Strengthening relationships for mutual success.

· Embracing sustainability for a greener future - Innovating, reducing waste and driving positive environmental impact.

· Empowering unity, driving breakthroughs - Harnessing the power of collaboration, diversity and common purpose to redefine industry standards.

Sustainability highlights:

· Leading the way in sustainability - Launching of a worldwide initiative "Project Zelda" (Carclo's landmark sustainability initiative) to harness our power to reduce waste, increase energy efficiency and contribute to a greener, more sustainable world and create a positive societal ripple effect via local community involvement.

· Strengthening supply chain sustainability - Uniting with EcoVadis to prioritise sustainability, foster eco-friendly supply chain practices and drive positive environmental change.

· Engaging communities, creating lasting social value - Investing in local communities, fostering social inclusion and supporting initiatives that contribute to long-term societal well-being.

Commenting on the results, Frank Doorenbosch, Chief Executive Officer said: “This year has undoubtedly presented Carclo with its fair share of challenges, testing our mettle and resilience. However, I am proud to say that we have risen above these obstacles and proven our ability to adapt and thrive in a dynamic and evolving business landscape. Despite the headwinds of inflation, rising interest rates, and other economic challenges, our unwavering commitment to excellence has enabled us to achieve a slight increase in revenue, reaching £143.4 million, an increase of 11.6% on the prior year and 3.8% at a constant currency rate.

Our success can be attributed to our strategic approach, which includes agile pricing adjustments to mitigate the impact of inflation and energy surcharges. Furthermore, our commitment to operational excellence has been exemplified through the implementation of factory specialisation measures, allowing us to enhance efficiency, streamline processes, and optimise our performance across our diverse range of offerings, including Design & Engineering and Manufacturing Solutions.

In addition to navigating economic challenges, we have proactively addressed debt positions, rationalisation costs, and legacy issues, such as the successful settlement of the cancellation of a supply contracted framework agreement. Our improvement in cash conversion underscores our financial resilience and highlights the effectiveness of our strategic initiatives in managing inflation impacts and energy costs.

Looking ahead, I am filled with confidence and optimism for Carclo’s future. Our strategy, centered around factory specialisation, process standardisation, operational excellence, financial stability, and sustainability, positions us for continued success. I am immensely grateful to the exceptional Carclo team whose unwavering dedication and relentless pursuit of excellence have propelled us forward in this challenging year. Together, we will continue to achieve positive results and drive our ongoing success.”

Further Information

Forward-looking statements 

Certain statements made in this annual report and accounts are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause outcomes to differ materially from those expected.

Alternative performance measures 

Alternative performance measures are defined in the glossary on page 46. A reconciliation to statutory numbers is included on page 45. The Directors believe that alternative performance measures provide a more useful comparison of business trends and performance. The term “underlying” is not defined under IFRS and may not be comparable with similarly titled measures used by other companies.

Chief Executive Officer Review

Introduction

As I look back on the past financial year, it is evident that Carclo encountered a range of external challenges that required us to be resilient and adaptable. Yet, we approach the future with unwavering optimism. Despite the obstacles we faced, we have embraced a strategic transformation, and we are already witnessing promising early signs of progress. Our steadfast strategy, supported by a revitalised leadership team, sets the stage for long-lasting success and sustainability. 

The year in review

The past fiscal year presented us with numerous challenges, including rising debt costs, significant increases in input expenses, reduced demand for Covid-19 testing products and a tight labour market in key manufacturing locations. These hurdles prompted us to embark on a strategic transformation and reinforce our leadership team. As part of this transformative journey, we take pride in highlighting the increased diversity within our Board and senior executive team. We firmly acknowledge that diversity brings valuable fresh perspectives, fosters innovation and enhances decision-making.

Our strategic transformation focuses on operational excellence, robust financial health and the standardisation of processes and equipment to optimise asset utilisation, enhance efficiency and reduce complexity. We are energised and committed to deliver exceptional value to all stakeholders. Additionally, we are dedicated to sustainability, aiming to reduce waste and energy consumption while actively engaging with local communities.

Despite the economic challenges we faced, our revenues demonstrated resilience, increasing 3.8% at constant currency. This growth can be attributed to our successful collaboration on growth projects with our strategic customers. However, our margins, particularly in the CTP division, were impacted by time delay of passing on higher input costs. In addition, we absorbed some of these costs to uphold our commitment to our valued customers.

Encouragingly, we are beginning to witness the positive outcomes of our strategic actions, particularly within our EMEA manufacturing solutions business. This has resulted in stronger margins in the latter half of the year. The final quarter of FY22/23 revealed promising results from our new strategy where our EMEA manufacturing platform showcased improved operational performance in the second half of FY22/23, with higher asset utilisation and increased cash generation. These positive developments underline the effectiveness of our strategic approach.

Although our overall underlying operating profit performance for the year amounted to £5.9 million, which was lower than the previous year’s figure (FY21/22: £6.1 million), it is important to note that these results were achieved within a demanding economic climate. Despite the challenges, we remained focused on profitability and positioning the company for future growth.

The restructuring costs associated with our strategic shift were substantial but necessary for the long-term sustainability of our business. While we faced these challenges, we managed to improve our cash conversion rate from 42.6% in FY21/22 to 84.0% in FY22/23. As a result, our net debt at the end of the year remained relatively stable, compared to the previous year-end, considering constant currency factors. This achievement is particularly commendable given our ongoing commitments to bank interest, pension contributions, and growth capital expenditures.

I am delighted to report that the implementation of our new strategy and our focused efforts on cash generation yielded positive results. We were able to generate robust operational cash in the second half of the year, which significantly improved our position compared to the figures as of 30 September 2022. Since March 31, 2023, we have repaid £3.7 million of term loans ahead of schedule and reduced our RCF balance from £3.5 million to £2 million, leaving £1.5 million undrawn as of the end of June 2023.

These achievements underscore our dedication to strengthening our financial position and maintaining a solid foundation for future growth. Despite the challenges we faced, our commitment to effective financial management and cash generation strategies has paid off, positioning us favourably as we move forward.

Strategy

Recognising the shifting dynamics of our business environment, we have undertaken a rigorous strategic review. The result is a renewed blueprint for Carclo’s future, one that is flexible, robust and aligned with our mission.

At the heart of our strategy lies an uncompromising commitment to the safety and well-being of our workforce, customers and communities. We firmly believe that our success is underpinned by the health and prosperity of all our stakeholders. Hence, protecting and fostering this is not just a priority, it’s woven into our operational DNA.

Recognising the evolving dynamics in our business environment, the core of our strategy is anchored on operational excellence and robust financial health. Central to our tactical blueprint is the group-wide standardisation of our processes and equipment, an initiative aimed at optimising asset utilisation, enhancing efficiency, and reducing the cost of complexity.

In the short term, our focus is on achieving stability and maximising return from our existing resources. To that end, we are instituting stringent asset management practices including meticulous tracking, optimised deployment, and regular performance reviews, coupled with an investment in cost-efficient technologies and process improvements. By simplifying operations, we are effectively reducing the cost of complexity, increasing our agility and responsiveness.

In parallel, we’re fostering an ethos of knowledge-sharing and cross-functional collaboration to disseminate and implement best practices throughout the organisation. This strategic blend of resource maximisation, process standardisation, and collective learning not only drives up operational performance and reduces costs, but also enhances employee and customer satisfaction through the consistent and reliable delivery of high-quality products and services.

Our new direction includes a keen focus on product and factory specialisation, allowing each of our facilities to hone in on their unique strengths and minimise the cost of complexity. This approach sharpens our focus, ramps up efficiency, and elevates performance, thereby ensuring we deliver seamlessly to our global clientele across the entire gamut of our offerings – Design & Engineering and Manufacturing Solutions.

Our long-run facilities are 100% geared towards process optimisation and integrating advanced back-end automation, thereby enhancing throughput and quality. On the other hand, our medium-run facilities are tasked with increasing their agility, efficiently managing changeovers between runs and developing flexible automation systems to ensure continuity and productivity. The first region where we have completed the factory specialisation is EMEA, where the strategy is delivering the expected results. The next region we are addressing is the USA, albeit with different dynamics, where the focus will allow us to build a winning model. 

We are keen to shape Carclo into an engaging organisation with high energy drive, committed to high quality execution, when precision matters. To be ready to meet the evolving demands of our customers and the marketplace. Our strategy includes diversifying our portfolio whilst aiming for steady top-line growth.

We are committed to fortifying our balance sheet and decreasing our debt, with an emphasis on cash generation, prudent management of working capital and enhancing equipment utilisation. We are channelling our capital investments towards measures that improve safety, efficiency, yield and quality. Through enhanced project flexibility, leveraging on our well invested but underutilised machine park we will deliver growth.

When it comes to pricing, we are not racing to the bottom. Instead, we are committed to delivering exceptional value, underpinned by the high-quality and comprehensive support we offer.

Our team forms the heart of Carclo, their growth being a cornerstone of our strategy. We’re prioritising investments in their professional enhancement, creating dedicated Educational and Excellence Centres regionally. This initiative empowers our engineers with robust training and skills development programs, propelling process enhancements, automation advancements, and innovative product line creation. We believe that nurturing their talents and fostering a culture of innovation will be pivotal to our collective success. 

As part of our commitment to sustainability, we’ve launched our worldwide initiative, “Zelda”. Its primary objectives are to reduce waste sent to recycling by 50% within two years and decrease energy consumption per unit of production by 15% over three years through energy optimisation. Moreover, we are devoted to creating a positive societal ripple effect via local community involvement. 

We believe in being candid about our sustainability journey, and will consistently share updates on our achievements, challenges, and milestones.

Divisional performance

CTP Division

We have divided our CTP division into two separate businesses. Our Design & Engineering business is responsible for handling global customer development projects, while our Manufacturing Solutions business comprises our worldwide network of facilities, specialising in a comprehensive range of manufacturing services, encompassing injection moulding, assembly and supply chain solutions. Our CTP division has undertaken a substantial restructuring effort in the EMEA region to better align with customer needs and successfully navigate challenges such as rising input costs and labour shortages. The execution of our strategy, which includes standardising machines, processes, and global quality standards, coupled with clear factory specialisation, has revitalised our operational results in the region. We are now focused on implementing these strategies in the US region to further strengthen our position.

Through an unwavering commitment to operational excellence and a customer-centric approach, we are dedicated to achieving sustained profitability and creating long-term value. These principles guide our actions as we strive to exceed customer expectations, drive efficiency, and optimise our performance. By aligning our operations with customer needs and consistently delivering exceptional products and services, we aim to re-establish Carclo as a trusted industry leader and maximise value for our stakeholders.

Design & Engineering (D&E): 

In FY22/23, our Design & Engineering (D&E) business demonstrated robust revenue performance, generating total revenues of £20.1 million. While sales were lower compared to last year’s exceptional figures, they remained significantly higher than the average of the previous three years. This reflects the strength of our ongoing focus on the life sciences sector and strategic partnerships with existing customers.

By maintaining this strategic direction, we built a strong order book by the end of the year, positioning us favourably for continued success in the future. This is a testament to our ability to deliver value-added solutions and meet the evolving demands of our clients.

To further augment our capabilities and support our technical talent, we are establishing a state-of-the-art training facility at our Roseytown location in Pennsylvania. This facility serves as a dedicated space not only for validation purposes but, more importantly, for in-house training on manufacturing lines, mould technology, and material behaviour. It enables our team to continually refine their skills and expertise, empowering them to consistently deliver best-in-class solutions to our valued clients. This investment in our team’s development reinforces our commitment to excellence and ensures that we stay at the forefront of innovation in the industry.

Manufacturing Solutions (MS):

Our Manufacturing Solutions (MS) business serves as our global manufacturing and assembly platform, strategically divided into three regions: Americas, EMEA, and APAC. We have embarked on a focused journey of factory specialisation, emphasising operational excellence and minimising the complexities that arise in manufacturing processes.

In the first phase of our EMEA strategic reset, we are already witnessing the potential of our manufacturing platform through enhanced operational efficiency, increased asset utilisation, and improved labour efficiency. These early successes reinforce our confidence in the effectiveness of our strategic approach. In the Americas, our leadership team faces challenges posed by input cost increases and labour shortages. Addressing these challenges remains our team’s primary focus, and we are intensifying our efforts to execute the strategic positioning and factory specialisation of our US manufacturing platform.

Despite the hurdles faced, the MS business achieved modest revenue growth in FY22/23 at constant currency. Our revenues increased to £116.7 million (£104.9 million at constant currency). This growth was primarily driven by customer price increases that offset inflationary pressures and higher energy costs. By diligently managing these factors, we were able to maintain a positive revenue trajectory while navigating a challenging market environment.

Through our steadfast commitment to operational excellence and strategic focus on factory specialisation, we are confident in our ability to enhance our MS business’ performance, drive efficiencies, and maximize value for our stakeholders.

Aerospace Division

The Aerospace division has demonstrated a remarkable improvement in profit performance year-on-year, benefiting from the post-Covid-19 market recovery. Our revenue experienced impressive growth, reaching £6.6 million in the current fiscal year compared to £4.7 million in FY21/22, representing a substantial increase of 40.9%. This resurgence in the Aerospace Division’s performance is highly encouraging, highlighting our ability to adapt and thrive in evolving market conditions.

While our progress in the Aerospace Division is noteworthy, we did experience some challenges in our cash conversion rate due to constraints within the supply chain of specialised metals. However, our commitment to delivering high-quality products and services remains unwavering, positioning us for continued success and growth in the aviation industry.

With the aviation sector on an upswing, we are well-positioned to leverage this positive momentum. Our dedication to excellence, combined with our relentless focus on meeting customer expectations, enables us to capitalise on the opportunities that lie ahead. As we navigate challenges and pursue opportunities, we remain committed to maintaining our reputation as a trusted provider of superior products and services in the aerospace market.

Financing

Given the impact of rising interest rates and the high inflationary environment, we have worked closely with our lending bank to secure appropriate ongoing financial support for the business. We are pleased that we continue to be supported by the bank who have agreed to a more appropriate set of covenants during the period whilst we revitalise the business and implement our new strategy. After receiving written confirmation from the bank we are now awaiting the formal documentation to be signed, which is expected to be completed before the publication of the Group’s Annual Report and Accounts.

Sustainability and Corporate Responsibility

We have clearly defined our sustainability strategy in our worldwide initiative “Project Zelda”. We are first addressing the major contributors to our ecological footprint, being raw material and electricity usage. The team is focused on delivering a sustainable improvement in reducing, reusing and upcycling the materials used within our production processes. Overall targets to be reached in two years are:

We are enhancing our various community engagement initiatives, we have continued to invest in the growth and development of the regions in which we operate, creating opportunities for education, skill development, and employment.

Moving forward

The past year presented us with significant challenges, but it also marked a transformative period of renewed focus. We have implemented a new strategy, formed a new board, and established a diverse and dynamic leadership team, all fuelled by a high level of energy and unwavering commitment to our employees and customers. While there is still much work ahead, the early results from our new strategy are promising, instilling a sense of optimism and belief in a bright future.

Our positive outlook is supported by compelling evidence. We have successfully renegotiated our banking covenants, securing financial stability as we continue to implement our new strategic approach. Significant progress has been made in our Mitcham operations, further strengthening our confidence in the effectiveness of our initiatives. Furthermore, we have successfully reached a settlement agreement with the cancellation of a supply contract, reinforcing our ability to navigate challenges and capitalise on opportunities.

In conclusion, we acknowledge that FY22/23 presented its fair share of difficulties. However, we have already embarked on a new chapter and are turning the page towards a future brimming with possibilities. We have full confidence in our new strategy and leadership team, feeling that the best is yet to come. We extend our heartfelt appreciation to the staff at Carclo for their ongoing support during this transformative time. Together, we will navigate this transition and forge a path towards sustained success.

Frank Doorenbosch

Chief Executive Officer

11 July 2023

Finance review 

Our new strategy places a greater emphasis on operational performance improvement and cash generation in response to the challenges posed by high inflation and rising interest costs.

As we reflect on the past fiscal year, it's heartening to see how our Group has navigated the economic landscape, delivering a robust 11.6% growth in revenue (£143.4 million), or a solid 3.8% at constant currency, up from £128.6 million in FY21/22. This demonstrates not only the resilience of the markets we serve, but also the strength and continuity of our key customer relationships.

Our underlying operating profit came in at £5.9 million, compared to £6.1 million (or £6.7 million at constant currency) in the previous year, resulting in a return on sales of 4.1%, down slightly from 4.7% last year. This shift in profitability was primarily influenced by escalating cost inflation, most notably a sharp increase in energy costs, and the challenge these pose in terms of timely pass-through to customers.

Exceptional net costs for the year amounted to £4.7 million, compared to £1.4 million gain in FY21/22. The majority of these costs, £3.4 million to be exact, were cash settled. These costs encompassed £3.4 million in rationalisation expenses, £0.9 million stemming from the termination of future supply agreements, £0.9 million in doubtful debt and associated inventory provision, and £0.3 million related to legacy health claims. These costs were partly offset by a gain of £0.8 million from the disposal of surplus properties.

Overall, the financial year proved to be challenging but also demonstrated the Group's resilience and adaptability. Moving forward, we continue to focus on our commitment to creating long-term shareholder value and maintaining the trust of our strategic customers.

Statutory operating profit is down £7.7 million on prior year to £1.2 million (FY21/22: £8.9 million).

During the year, we experienced an increase in net finance costs, primarily due to rising interest rates, which amounted to £3.7 million (FY21/22: £3.0 million). This figure includes notional pension deficit interest charged of £0.7 million (FY21/22: £0.7 million).

Taxation charge for the year was £1.4 million (FY21/22: £0.8 million). The FY21/22 taxation charge benefited from a deferred tax credit of £0.7 million, being the recognition of a deferred tax asset on the UK projected profits at the time. However, this year, we have seen the reversal of that deferred tax asset due to the effects of the restructuring plans.

Statutory loss/profit after tax was £4.0 million loss (FY21/22: £5.8 million profit) on all operations, and £4.0 million loss (FY21/22: £5.1 million profit) on continuing operations, giving a statutory loss per share on all operations of 5.4 pence (FY21/22: 7.9 pence profit), and 5.4 pence loss on continuing operations (FY21/22: 7.0 pence profit).

Underlying profit after tax fell to £0.3 million (FY21/22: £2.3 million), giving an underlying EPS of 0.4 pence (FY21/22: 3.1 pence), on underlying operating profit of £5.9 million, down 2.6% on prior year (FY21/22: £6.1 million).

Cash generated from operations was £7.8 million and 14.7% higher than the prior year (FY21/22: £6.8 million), reflecting the change in strategy from a focus on top-line growth to cash generation via operational improvements and robust working capital control. Efficient management of working capital is a key contributor to cash performance. In addition, during the year a sale and leaseback raised £2.4 million after costs.

Cash generated by the Group was principally utilised to make capital investment and lease repayments, pension deficit repair contributions, scheduled bank loan repayments and interest payments. The Group’s full cashflow statement is set out on page 18. 

In recognition of the shift in strategic priorities we have refreshed the Group’s key externally reported KPIs to those which we consider will best demonstrate the progress being made towards achieving our strategic goals. These are set out on pages 26 and 27 of the Annual Report and Accounts.

A reconciliation of statutory to underlying non-GAAP financial measures is provided on page 45.

Net debt

During the year, we redirected our investment in capital expenditure towards a rapid payback, focussing on our continuous improvement strategy aimed at supporting asset performance and utilisation. Tangible additions were £5.8 million (FY21/22: £9.7 million) mainly in support of major customer programmes. Of this investment, £3.5 million (FY21/22: £6.8 million) was delivered via leasing.

Net debt, including IFRS16 lease liabilities, increased in the year by £2.0 million to £34.4 million (FY21/22: £32.4 million). Of this increase £1.5 million was due to foreign currency movements. Net debt excluding leases increased £1.0 million to £22.5 million (FY21/22: £21.5 million). Following the shift in strategic focus, improvements in our cash generation have resulted in a reduction of net debt including lease liabilities during H2 of £2.5 million.

CTP division

CTP revenue of £136.8 million was up 10.5% (2.5% at constant currency) (FY21/22: £123.9 million) with underlying volumes broadly flat.

CTP divisional operating profit before exceptional items was £7.3 million, £1.1 million down on the prior year, excluding £2.1 million of non-recurring income in the form of a US government Covid-19 grant.

In the face of high cost inflation, particularly in labour and energy prices, our CTP division encountered significant hurdles. The tightened labour markets, predominantly in the US, imposed further complications in the recruitment and retention of labour. These challenges underline the rapidly changing economic conditions we find ourselves grappling with, and underscore the necessity of our ongoing strategic adaptations. Although there were delays in passing on the impact of inflation to customers, CTP made significant progress during H2 in implementing both temporary energy surcharges and permanent pricing increases, resulting in an improved margin performance, particularly in the final quarter of the year.

The Group was met with an unforeseen development in December 2022 when a prospective new global OEM customer informed us, following the completion of the design and engineering phase, due to a contraction in the end-market demand for Covid-19 testing, the customer decided to suspend progression into the production phase of the original ten-year Framework Agreement. However, we moved swiftly and strategically to mitigate potential financial implications. On 30 May 2023, we successfully signed a settlement agreement that effectively neutralises the Group's financial exposure arising from the premature termination of this contract. This settlement is a testament to our resilience and flexibility in navigating unexpected circumstances.

Furthermore, we were able to quickly pivot and rapidly implement 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. We also signed a mutually satisfactory settlement agreement with the customer concerning working capital and recompense for business disruption.

There is a considerable potential to elevate CTP's operational performance even further, and we have taken steps to seize this opportunity. We've initiated fresh strategies designed to bolster both asset utilisation and our ability to meet customers' needs through factory specialisation. Our commitment to ceaseless improvement propels these initiatives, backed by the recent implementation of real-time operational data capture and reporting systems. This approach enables us to react more swiftly to developments, continuously refine our operations, and maintain our mission of delivering superior customer value.

Aerospace division

In the Aerospace sector, we saw an impressive uptick in revenue to £6.6 million, a surge of 40.9% (or 39.4% at constant currency), compared to £4.7 million in FY21/22. This marks a return to near pre-Covid-19 levels for this division, an accomplishment underpinned by strong operating profitability of £1.5 million for the year, more than doubling the prior year's £0.7 million. The market has demonstrated a robust recovery, and we have been agile in leveraging this momentum, securing increased order volumes predominantly from our existing customer base. Our strategy to strengthen and deepen relationships with these customers has evidently paid off, underlining the importance of customer retention in our overall growth plan.

Central costs

In terms of our overheads, we have seen a minor reduction in other Group and central underlying costs, which amounted to £2.9 million for this fiscal year, compared to £3.0 million in FY21/22. This slight decrease reflects our ongoing commitment to prudent cost management and operational efficiency. We will continue to seek ways to streamline our central expenses without compromising our quality of service we deliver to the business.

Total Group

Bank facilities

On 2 September 2022 the Group successfully refinanced the facilities with the Company's lender, concluding a first amendment and restatement agreement relating to the multicurrency term and revolving facilities agreement dated 14 August 2020.

As at 31 March 2023, total UK bank facilities were £32.8 million, of which £3.5 million related to a revolving credit facility (maturing on 30 June 2025) and £29.3 million in term loan facilities. £1.4 million of the term facility will be amortised by 31 March 2024 and a further £2.2 million by 31 March 2025. The balance becomes payable by the maturity date, 30 June 2025.

As previously reported at the half-year, increasing interest rates had limited the headroom on the Group's banking covenants, principally interest cover, which prompted the Group to seek an adjustment of its banking covenants to ensure sufficient funding.

Since then, we have worked closely with our bank, who have remained supportive throughout, and agreed to adjust the interest cover covenant at both the December 2022 and March 2023 testing points. As announced on 23 June 2023, we are pleased to confirm that we have now agreed on revised covenants covering the period to maturity at 30 June 2025, providing the required level of certainty over our funding.

Moving forward, the Group remains committed to prioritising the strengthening of its balance sheet and seeking alternative sources of bank financing for its growing US operations in the medium term. We will continue to closely monitor market conditions and work proactively with our bank to ensure our ongoing financial stability and success.

Defined benefit pension scheme actuarial valuation

The last triennial actuarial valuation of the Group pension scheme was carried out as at 31 March 2021. This reported a significantly reduced actuarial technical provisions deficit of £82.8 million (FY21/22: £90.4 million based upon the 31 March 2018 valuation).

The statutory accounting method of valuing the Group pension scheme deficit under IAS 19 resulted in an increase in the net liability to £34.5 million at 31 March 2023 (31 March 2022: £26.0 million).

Over the year, the Group’s contributions to the scheme were £4.1 million (FY21/22: £3.9 million).

During the year there was significant volatility in investment markets with bond and gilt yields spiking in the aftermath of the September 22 “mini budget”. The pension, which was maintaining an 80% liability hedge via Liability Driven Investments (“LDI”) and bond holdings, experienced a significant fall in the value of these assets, albeit less than the fall in the equivalent of the liabilities being hedged. Other scheme assets including property and global equity funds also experienced negative returns during the period with the resulting increase in the IAS 19 deficit.

Treasury

The Group faces currency exposure on its overseas subsidiaries and on its foreign currency transactions. In addition, as set out in the principal risks and uncertainties as presented in the Annual Report and Accounts, the plc is reliant on regular funding flows from the overseas subsidiaries to meet banking, pension and administrative commitments. To manage this complexity, we have enhanced the Group’s management of cash, debt and exchange risks by strengthening our treasury function.

The Group reports trading results of overseas subsidiaries based on average rates of exchange compared with sterling over the year. This income statement translation exposure is not hedged as this is an accounting rather than cash exposure and as a result the income statement is exposed to movements in the US dollar, euro, renminbi, Czech koruna and Indian rupee. In terms of sensitivity, based on the FY22/23 results, a 10% increase in the value of sterling against these currencies would have decreased reported profit before tax by £0.8 million.

Dividend

Given the restrictions on the payment of dividends contained within the amended and restated bank facilities agreement and the absence of distributable reserves required to make dividend payments, the Board is not recommending the payment of a dividend for the financial year FY22/23 (FY21/22: £nil). Under the terms of the restructuring agreement, the Group is not permitted to make a dividend payment to shareholders up to the period ending June 2025.

Alternative performance measures

In the analysis of the Group’s financial performance, position, operating results and cash flows, alternative performance measures are presented to provide readers with additional information. The principal measures presented are underlying measures of earnings including underlying operating profit, underlying profit before tax, underlying profit after tax, underlying EBITDA and underlying earnings per share.

This results statement includes both statutory and adjusted non-GAAP financial measures, the latter of which the Directors believe better reflect the underlying performance of the business and provides a more meaningful comparison of how the business is managed and measured on a day-to-day basis. The Group’s alternative performance measures and KPIs are aligned to the Group’s strategy and together are used to measure the performance of the business and form the basis of the performance measures for remuneration. Underlying results exclude certain items because, if included, these items could distort the understanding of the performance for the year and the comparability between the periods. A reconciliation of the Group’s non-GAAP financial measures is shown on page 45.

We provide comparatives alongside all current year figures. The term “underlying” is not defined under IFRS and may not be comparable with similarly titled measures used by other companies.

All profit and earnings per share figures relate to underlying business performance (as defined above) unless otherwise stated. A reconciliation of underlying measures to statutory measures for FY22/23 is provided below: 

The exceptional items comprise:

1There were no exceptional items in respect to discontinued operations in the year to 31 March 2023.

Post balance sheet events and going concern

Post balance sheet events

Upon completion of the Design and Engineering phase of our supply contract, we received an unexpected notice from a leading global OEM customer in December 2022. Citing a decline in the end-market demand for Covid-19 testing, they chose not to advance into the project's production phase. However, by 30 May 2023, we reached a settlement agreement that largely mitigates the financial risk the Group faced due to the early termination of the contract. The Group has recognised an exceptional cost in the year to 31 March 2023 of £0.9 million, most of which is to recognise assets on balance sheet at recoverable amount, see note 6 for further details. The Group will recognise an exceptional gain in the income statement to 31 March 2024 of approximately £0.6 million. Although the details of the agreement remain confidential, full and final settlement was received on 21 June 2023.

On 22 June 2023 the Group’s lending bank, agreed to an adjustment of the interest and the net leverage covenants related to the facilities due to mature on 30 June 2025. On 1 June 2023, a voluntary repayment of £0.4 million was made and on 30 June 2023, a further voluntary repayment of £3.3 million was made.

Going concern

The financial statements are prepared on the going concern basis.

Group performance during the year has enabled capital investment to be made whilst retaining a stable financial position with net debt excluding lease liabilities as of 31 March 2023 increasing to £22.5 million (31 March 2022: £21.5 million).

Net debt including lease liabilities at 31 March 2023 was £34.4 million (31 March 2022: £32.4 million), with the principal reason behind the increase being foreign exchange movements of £1.5 million.

On 2 September 2022, the Group successfully refinanced with the Company's bank, concluding a first amendment and restatement agreement relating to the multi-currency term and revolving facilities agreement dated 14 August 2020. The debt facilities available to the Group at 31 March 2023 comprise a term loan of £29.3 million, of which £1.4 million will be amortised by 31 March 2024 and a further £2.2 million amortised by 31 March 2025. The balance becomes payable by the termination date, 30 June 2025.

At 31 March 2023, the term loans were denominated as follows: sterling 14.2 million, US dollar 13.3 million and euro 4.9 million. The facility also includes a £3.5 million revolving credit facility, denominated in sterling, maturing on 30 June 2025.

Since the year-end there have been no significant changes to the Group's liquidity position. The term loan balances stood at sterling 10.2 million, US dollar 13.3 million and euro 4.9 million, totalling £27.0 million on 30 June 2023, with undrawn facilities of £1.5 million on the RCF. 

As part of the original bank financing in August 2020 the Group became subject to four bank facility covenant tests. The quarterly covenants to be tested are:

Core subsidiaries are defined as Carclo Technical Plastics Ltd; Bruntons Aero Products Ltd; Carclo Technical Plastics (Brno) s.r.o; CTP Carrera Inc and Jacottet Industrie SAS, with CTP Taicang Co. Ltd and Carclo Technical Plastics Pvt Co Ltd being treated as non-core for the purposes of these covenants.

Following a more than doubling of the base rate in the first half of FY22/23, the Group reassessed its forecasts and concluded there was insufficient headroom available to meet all the agreed banking covenants in the event of certain downside scenarios taking place. Breach of any of these covenants could lead to the creditors calling in their debt, leaving the plc insolvent. As a result, at the half year, in recognition of a potential covenant breach, the Group issued a material uncertainty warning over its ability to continue trading as a going concern. 

Since that time the Group has worked with the bank to amend the covenants and agreed adjustments to the Group’s interest cover covenant for both the December 2022 and March 2023 testing points. 

In December 2022 the Group announced the cancellation of a new business contract that would materially impact the results for FY22/23. Further discussions were held with the bank and, following a review of the Group’s 3-year plan up to March 2026, on 22 June the bank agreed in writing to the Group’s request to further amend the interest cover covenant to June 2025 and to an adjustment to the net debt to underlying EBITDA covenant to December 2023.

The revised banking covenants and thresholds are assumed to be in place throughout the going concern assessment period. However, there remains a material uncertainty over going concern until the formal documentation is signed, which is expected to be completed before the publication of the Group’s Annual Report and Accounts. A schedule of contributions is also in place with the pension trustees with an agreed £3.5 million to be paid annually until 31 October 2039. Additional contributions also agreed are 25% of any surplus of 2023/24 underlying EBITDA over £18 million payable from 30 June 2024 to 31 May 2025, extending to 26% of any 2024/25 surplus payable from 30 June 2025 to 31 May 2026.

In addition, the pension scheme has the benefit of a fifth covenant to be tested each year up to and including 2023. The test requires any shortfall of pension deficit recovery contributions when measured against Pension Protection Fund priority drift (which is a measure of the increase in the UK Pension Protection Fund's potential exposure to the Group's pension scheme liabilities), to be met by a combination of cash payments to the scheme, plus a notional (non-cash) proportion of the increase in the underlying value of the CTP and Aerospace segments based on an EBITDA multiple for those businesses which is determined annually. This test will be completed on the 31 March 2023 audited financial statements and management expect this covenant to be met.

The Group is subject to a number of key risks and uncertainties, as detailed in the Principal risks and uncertainties section in the Annual Report and Accounts. Mitigation actions are also considered in this section. These risks and uncertainties have been considered in the base case and severe downside sensitivities and have been modelled accordingly.

The Directors have reviewed cash flow and covenant forecasts to cover the period, at least twelve months from date of signing the consolidated financial statements, considering the Group's available debt facilities and the terms of the arrangements with the Group's bank and the Group pension scheme.

The base case forecast includes assumptions around sales, margins, working capital and interest rates. The sensitivity analysis has considered the risks facing the Group and has modelled the impact of each in turn, as well as considering the impact of aggregating certain risk types and shows that the Group is able to operate within its available facilities and meet its agreed covenants as they arise. Furthermore, the Directors have reviewed sensitivity testing, modelling a range of severe downside scenarios. These sensitivities attempt to incorporate identified risks set out in the Principal risks and uncertainties section of the Annual Report and Accounts.

Severe downside sensitivities modelled included a range of scenarios modelling the financial effects of loss of business from: discrete sites, an overall fall in gross margin of 1% across the Group, a fall in Group sales of 3% matched by a corresponding fall in cost of sales of the same amount, and interest rate risk. 

The Group is not exposed to vulnerable sectors or vulnerable countries but does have certain key customers, which create risks and uncertainties. These risks and uncertainties are documented and the mitigating actions being taken are covered in detail in the Principal risks and uncertainties section in the annual report and accounts.

On the basis of this forecast and sensitivity testing, the Board has determined that it is reasonable to assume that the Group will continue to operate within the facilities available and will be able to adhere to the covenant tests to which it is subject throughout at least the twelve-month period from the date of signing the financial statements. 

Accordingly, these financial statements are prepared on a going concern basis. 

David Bedford

Chief Financial Officer

11 July 2023

Consolidated income statement 

for the year ended 31 March 2023

Consolidated statement of comprehensive income

for the year ended 31 March 2023

Consolidated statement of financial position

as at 31 March 2023

Approved by the Board of Directors and signed on its behalf by

Consolidated statement of changes in equity for the year ended 31 March 2023

Consolidated statement of cash flows

for the year ended 31 March 2023

Notes on the preliminary statement

1 Basis of preparation

The financial statements included in this preliminary announcement have been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct Authority, and the principles of UK-adopted international accounting standards, but do not comply with the full disclosure requirements of these standards. The financial information for the year ended 31 March 2022 is derived from the statutory financial statements for that year which have been delivered to the Registrar of Companies. The auditor reported on those financial statements: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or (3) of the Companies Act 2006. The financial information has been prepared on a going concern basis under the historic cost convention basis except that derivative financial instruments, share options

and defined benefit pension plan assets are stated at their fair value.

The unaudited financial information contained in this announcement does not constitute the statutory financial statements of the Group as at and for the year ended 31 March 2023, but is derived from those financial statements, which have been prepared in accordance with UK-adopted international accounting standards. The financial statements themselves will be approved by the Board of Directors and reported on by the auditor and then subsequently delivered to the Registrar of Companies. The Group expects to publish full consolidated statements on or around 28 July 2023. Accordingly, the financial information for FY22/23 is presented as unaudited in this announcement.

The financial statements are prepared on the going concern basis.

Group performance during the year has enabled capital investment to be made whilst retaining a stable financial position with net debt excluding lease liabilities as of 31 March 2023 increasing to £22.5 million (31 March 2022: £21.5 million).

Net debt including lease liabilities at 31 March 2023 was £34.4 million (31 March 2022: £32.4 million), with the principal reason behind the increase being foreign exchange movements of £1.5 million.

On 2 September 2022, the Group successfully refinanced with the Company's bank, concluding a first amendment and restatement agreement relating to the multi-currency term and revolving facilities agreement dated 14 August 2020. The debt facilities available to the Group at 31 March 2023 comprise a term loan of £29.3 million, of which £1.4 million will be amortised by 31 March 2024 and a further £2.2 million amortised by 31 March 2025. The balance becomes payable by the termination date, 30 June 2025.

At 31 March 2023, the term loans were denominated as follows: sterling 14.2 million, US dollar 13.3 million and euro 4.9 million. The facility also includes a £3.5 million revolving credit facility, denominated in sterling, maturing on 30 June 2025.

Since the year-end there have been no significant changes to the Group's liquidity position. The term loan balances stood at sterling 10.2 million, US dollar 13.3 million and euro 4.9 million, totalling £27.0 million on 30 June 2023, with undrawn facilities of £1.5 million on the RCF. 

As part of the original bank financing in August 2020 the Group became subject to four bank facility covenant tests. The quarterly covenants to be tested are:

Core subsidiaries are defined as Carclo Technical Plastics Ltd; Bruntons Aero Products Ltd; Carclo Technical Plastics (Brno) s.r.o; CTP Carrera Inc and Jacottet Industrie SAS, with CTP Taicang Co. Ltd and Carclo Technical Plastics Pvt Co Ltd being treated as non-core for the purposes of these covenants.

Following a more than doubling of the base rate in the first half of FY22/23, the Group reassessed its forecasts and concluded there was insufficient headroom available to meet all the agreed banking covenants in the event of certain downside scenarios taking place. Breach of any of these covenants could lead to the creditors calling in their debt, leaving the plc insolvent. As a result, at the half year, in recognition of a potential covenant breach, the Group issued a material uncertainty warning over its ability to continue trading as a going concern. 

Since that time the Group has worked with the bank to amend the covenants and agreed adjustments to the Group’s interest cover covenant for both the December 2022 and March 2023 testing points. 

In December 2022 the Group announced the cancellation of a new business contract that would materially impact the results for FY22/23. Further discussions were held with the bank and, following a review of the Group’s 3-year plan up to March 2026, on 22 June the bank agreed to the Group’s request to further amend the interest cover covenant to June 2025 and to an adjustment to the net debt to underlying EBITDA covenant to December 2023.

The revised banking covenants and thresholds are assumed to be in place throughout the going concern assessment period. However, there remains a material uncertainty over going concern until the formal documentation is signed, which is expected to be completed before the publication of the Group’s Annual Report and Accounts.

A schedule of contributions is also in place with the pension trustees with an agreed £3.5 million to be paid annually until 31 October 2039. Additional contributions also agreed of 25% of any surplus of FY23/24 underlying EBITDA over £18 million payable from 30 June 2024 to 31 May 2025, extending to 26% of any FY24/25 surplus payable from 30 June 2025 to 31 May 2026.

In addition, the pension scheme has the benefit of a fifth covenant to be tested each year up to and including FY23. The test requires any shortfall of pension deficit recovery contributions when measured against Pension Protection Fund priority drift (which is a measure of the increase in the UK Pension Protection Fund's potential exposure to the Group's pension scheme liabilities), to be met by a combination of cash payments to the scheme, plus a notional (non-cash) proportion of the increase in the underlying value of the CTP and Aerospace segments based on an EBITDA multiple for those businesses which is determined annually. This test will be completed on the 31 March 2023 audited financial statements and management expect this covenant to be met.

The Group is subject to a number of key risks and uncertainties, as detailed in the Principal risks and uncertainties section in the Annual Report and Accounts. Mitigation actions are also considered in this section. These risks and uncertainties have been considered in the base case and severe downside sensitivities and have been modelled accordingly.

The Directors have reviewed cash flow and covenant forecasts to cover the period, at least twelve-months from the date of signing the consolidated financial statements, considering the Group's available debt facilities and the terms of the arrangements with the Group's bank and the Group pension scheme.

The base case forecast includes assumptions around sales, margins, working capital and interest rates. The sensitivity analysis has considered the risks facing the Group and has modelled the impact of each in turn, as well as considering the impact of aggregating certain risk types and shows that the Group is able to operate within its available facilities and meet its agreed covenants as they arise. Furthermore, the Directors have reviewed sensitivity testing, modelling a range of severe downside scenarios. These sensitivities attempt to incorporate identified risks set out in the Principal risks and uncertainties section of the Annual Report and Accounts.

Severe downside sensitivities modelled included a range of scenarios modelling the financial effects of loss of business from: discrete sites, an overall fall in gross margin of 1% across the Group, a fall in Group sales of 3% matched by a corresponding fall in cost of sales of the same amount and interest rate risk. 

The Group is not exposed to vulnerable sectors or vulnerable countries but does have certain key customers, which create risks and uncertainties. These risks and uncertainties are documented and the mitigating actions being taken are covered in detail in the Principal risks and uncertainties section in the Annual Report and Accounts.

On the basis of this forecast and sensitivity testing, the Board has determined that it is reasonable to assume that the Group will continue to operate within the facilities available and will be able to adhere to the covenant tests to which it is subject throughout at least the twelve-month period from the date of signing the financial statements. 

Accordingly, these financial statements are prepared on a going concern basis. 

Directors’ liability

Neither the Company nor the Directors accept any liability to any person in relation to this report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or mistaken statement or omission shall be determined in accordance with section 90(A) of the Financial Services and Markets Act 2000.

Responsibility statement of the Directors in respect of the annual report 

The Directors at the date of this statement confirm that to the best of their knowledge: 

2 Accounting policies

The accounting policies set out in the last published financial statements for the year to 31 March 2022 have been applied consistently to all periods presented in this preliminary statement, unless otherwise stated. 

Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3.

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group’s accounting period beginning on or after 1 April 2022. The following new standards and amendments to standards are mandatory and have been adopted for the first time for the financial year beginning 1 April 2022:

These standards have not had a material impact on the consolidated financial statements.

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group’s accounting period beginning on or after 1 April 2023. The Group has elected not to early adopt these standards which are described below.

The above are not expected to have a material impact on the financial statements.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

3 Accounting estimates and judgements

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

The estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and key sources of estimation uncertainty that the Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. Management has discussed these with the Audit and Risk Committee. These should be read in conjunction with the significant accounting policies provided in the Annual Report and Accounts.

Going concern

Note 1 contains information about the preparation of these financial statements on a going concern basis.

Key judgements –

Management has exercised judgement over the likelihood of the Group being able to continue to operate within its available facilities and in accordance with its covenants for at least twelve months from the date of signing these financial statements. This determines whether the Group should operate the going concern basis of preparation for these financial statements.

Impairment of assets

Note 12 contains information about management's estimates of the recoverable amount of cash generating units and their risk factors.

Key judgements –

Management has exercised judgement over the underlying assumptions within the valuation models and has applied judgement to determine the Group's cash generating units to which goodwill is allocated and against which impairment testing is performed. These are key factors in their assessment of whether there is any impairment in related goodwill or other assets. Goodwill at 31 March 2023 amounts to £23.0 million (31 March 2022: £22.0 million)

Management have exercised judgement when considering if there have been indicators of impairment. Where indications exist, management have estimated recoverable amount as detailed below.

Key sources of estimation uncertainty –

The Group tests whether goodwill has suffered any impairment and considers whether there is any indication of impairment on an annual basis. As set out in more detail in notes 12 and 13, the recoverable amounts may be based on either value-in-use calculations or fair value less costs of disposal considerations. The former requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the future cash flows, the latter method requires the estimation of fair value.

Details of the sensitivity of assumptions is included in note 12.

Pension assumptions

Note 16 contains information about management's estimate of the net liability for defined benefit obligations and their risk factors. The pension liability at 31 March 2023 amounts to £34.5 million (31 March 2022: £26.0 million).

Key sources of estimation uncertainty –

The value of the defined benefit pension plan obligation is determined by long-term actuarial assumptions. These assumptions include discount rates, inflation rates and mortality rates. Differences arising from actual experience or future changes in assumptions will be reflected in the Group’s consolidated statement of comprehensive income. The Group exercises judgement in determining the assumptions to be adopted after discussion with a qualified actuary. Details of the key actuarial assumptions used and of the sensitivity of these assumptions are included within note 6.

In the prior year, the Scheme introduced a right for members to Pension Increase Exchange (PIE). Having taken actuarial advice, the Executive management exercised judgement that, similar to the Bridging Pension Option adopted in the year to 31 March 2021, 40% of members would take the PIE option at retirement. There is no change to either assumption in the current year. Any change in estimate would be recognised as remeasurement gains/(losses) through the consolidated statement of comprehensive income.

Lease break options

The Annual Report and Accounts contain information about lease break options.

Key judgement –

Management has applied judgement when determining the expected certainty that a break option within a lease will be exercised.

Revenue recognition

As revenue from design and engineering contracts is recognised over time, the amount of revenue recognised in a reporting period depends on the extent to which the performance obligations have been satisfied.

Key judgements –

The revenue recognised on certain contracts in the CTP segment required management to use judgement to apportion contract revenue to the design and engineering performance obligations.

Key sources of estimation uncertainty –

Revenue recognised on certain contracts in the CTP segment required management to estimate the remaining costs to complete the design and engineering performance obligation in order to determine the percentage of completion and revenue to recognise in respect of those performance obligations.

Recognition of deferred tax assets

Information about the deferred tax assets recognised in the consolidated statement of financial position is included in the Annual Report and Accounts.

Key judgement –

Management have exercised judgement over the level of future taxable profits in the UK against which to relieve the Group's deferred tax assets. On this basis management believe it is no longer appropriate to recognise deferred tax assets (other than a £0.3 million deferred tax asset which is available to off-set against a deferred tax liability of £0.3 million arising on historic property revaluations) and at 31 March 2023 UK deferred tax assets of £0.7 million have been derecognised (31 March 2022: £0.7 million recognised).

Classification of exceptional items

Note 6 contains information about items classified as exceptional.

Key judgements –

Management has exercised judgement over whether items are exceptional as set out in the Group's accounting policy.

Non-current assets classified as held for sale

Note 14 includes information about non-current assets held for sale.

Key judgements –

Management has applied judgement in determining whether a sale is highly probable at 31 March 2023 and as such whether non-current assets are classified as held for sale at the balance sheet date. Management have determined that these criteria did not apply to any non-current assets at 31 March 2023.

4 Segment reporting

The Group is organised into two, separately managed, business segments – CTP and Aerospace. These are the segments for which summarised management information is presented to the Group's chief operating decision maker (comprising the Main Board and Group Executive Committee).

The CTP segment supplies value-adding engineered solutions for the life science, optical and precision component industries. This business operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

The Aerospace segment supplies systems to the manufacturing and aerospace industries.

The Central costs relate to the cost of running the Group, plc and non-trading companies.

The LED Technologies segment presented as a discontinued operation in the prior year was a leader in the development of high-power LED lighting for the premium automotive industry and was disposed of in the year to 31 March 2020. See note 5.

Transfer pricing between business segments is set on an arm’s length basis. Segmental revenues and results are after the elimination of transfers between business segments. Those transfers are eliminated on consolidation.

Analysis by business segment

The segment results for the year ended 31 March 2023 were as follows –

The segment results for the year ended 31 March 2022 were as follows –