Carclo Regulatory News (CAR)

9 Jun 2009 07:00



For immediate release 9 June 2009

Carclo plc

("Carclo")

The highlights for the year to 31 March 2009 are summarised below -

Underlying operating profits from continuing operations improved by 8.7%, led by an excellent performance in Precision Products

Continued good growth in medical and specialist optics, further improving the quality of the Technical Plastics business

Exit from automotive moulding work well timed

Investment in new technologies continues with Conductive Inkjet Technology revenues growing and the holding in Platform Diagnostics increasing to 29.8% (2008 - 12.5%)

Group debt increased due to currency retranslation impact but remains well within the group's facilities 

Total dividend for the year increased by 5.3% to 2.0 pence per share

Commenting on the results, Christopher Ross, chairman said - 

"The year just ended was another year of progress for the group. 

The deterioration in the global economy increases the uncertainty in the trading environment and inevitably results in some volatility in our customer base. 

Our medical and specialist optical business continues to grow and has been largely unaffected by the world recession. This, coupled with the cost reductions completed last year, should deliver growing profitability in the Technical Plastics division. 

In Precision Products we have recently seen a slow down in demand for aerospace components but we expect the sustained growth in Wipac's specialist lighting business to compensate to some extent for the lower demand in aerospace components and automotive antennas.

Our investment in new technologies is also starting to reap rewards and revenues from Conductive Inkjet Technology are growing steadily.

These are challenging and uncertain times but the board is confident of delivering further progress."

Enquiries:

Carclo plc	01924 268040
Ian Williamson, Chief Executive
Robert Brooksbank, Finance Director
Weber Shandwick Financial	020 7067 0700
Terry Garrett
James White

A presentation for analysts will be held at 9.30 a.m. on 9 June 2009 at the offices of Weber Shandwick Financial, Fox Court, 14 Gray's Inn Road, London WC1X 8WS

Notes to editors

Carclo plc is a technology led plastics group. It is a public company whose shares are quoted on the London Stock Exchange.

Two thirds of sales are derived from the supply of fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products. This business, Carclo Technical Plastics, operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

A third of sales are derived from the supply of specialised precision products to the premium automotive and aerospace industries. Carclo is a leader in the development of high power LED lighting for supercars.

Carclo's strategy is to develop new technologies and products to drive future growth. Its investment in Conductive Inkjet Technology is at the heart of the newly emerging market for very low cost printed electronics.

Chairman's statement

Overview

In the year to 31 March 2009 Carclo delivered an excellent performance against a background of economic turbulence. The highlights in the year were -

Underlying operating profits from continuing operations improved by 8.7%, led by an excellent performance in Precision Products

Continued good growth in medical and specialist optics, further improving the quality of the Technical Plastics business

Exit from automotive moulding work well timed

Investment in new technologies continues with Conductive Inkjet Technology revenues growing and the holding in Platform Diagnostics increasing to 29.8% (2008 - 12.5%)

Group debt increased due to currency retranslation impact but remains well within the group's facilities

Total dividend for the year increased by 5.3% to 2.0 pence per share

The Technical Plastics division performed well. Underlying operating profits were at the prior year level of £3.7 million on lower sales as higher margin medical and specialist optical sales offset the reduction in automotive volumes following the timely exit from this business in October 2008. The Precision Products division had a particularly good year, increasing its underlying operating profits by £0.4 million to £3.7 million. This was driven by continued growth in supercar lighting sales and another good performance in the aerospace business which benefited from the acquisition of Jacottet Industrie in July 2008. 

The group's profit before tax and exceptional charges increased by £0.5 million to £6.4 million. The exceptional charges of £2.7 million (2008 - £1.3 million) predominantly relate to the planned closure of a small UK facility following the withdrawal from low margin automotive work and the decision to accelerate the closure of another UK facility in order to reduce the group's cost base as the economic climate worsened. As a result, profit before tax was £3.7 million (2008 - £4.5 million) and basic earnings per share was 5.1 pence (2008 - 7.7 pence).

Cash flow and funding

Net debt at 31 March 2009 was £17.9 million (2008 - £13.7 million). The increase in debt arose as a consequence of the weakening of sterling which caused the US dollar and Euro denominated borrowings to increase. Excluding the impact of currency retranslation gains and losses, debt would have been at a similar level to the prior year.

During the last financial year, the group established medium term loan facilities totalling £20.0 million with its two principal UK bankers. These facilities fall due for renewal in 2012. In addition the group has other banking facilities totalling £11.9 million. The group is operating well within its facilities and bank covenants.

Dividend

The board is recommending a final dividend of 1.35 pence per share (2008 - 1.3 pence per share). This gives a total dividend for the year of 2.0 pence per share, an increase of 5.3% on the prior year. 

Subject to shareholder approval, dividend payments will be posted on 10 September 2009 to shareholders on the register at close of business on 7 August 2009. The shares will be traded excluding the right to the dividend from 5 August 2009.

Employees

I would like to thank all those employed by Carclo for their significant contribution during the year. In particular, the board would like to thank the employees in the UK and USA who accepted a deferral of pay and salary increases at the start of the new financial year in light of the ongoing economic uncertainty.

Outlook

The year just ended was another year of progress for the group. 

The deterioration in the global economy increases the uncertainty in the trading environment and inevitably results in some volatility in our customer base. 

Our medical and specialist optical business continues to grow and has been largely unaffected by the world recession. This, coupled with the cost reductions completed last year, should deliver growing profitability in the Technical Plastics division. 

In Precision Products we have recently seen a slow down in demand for aerospace components but we expect the sustained growth in Wipac's specialist lighting business to compensate to some extent for the lower demand in aerospace components and automotive antennas.

Our investment in new technologies is also starting to reap rewards and revenues from Conductive Inkjet Technology are growing steadily.

These are challenging and uncertain times but the board is confident of delivering further progress.

Christopher Ross

9 June 2009

Chief executive's review

Strategy and economic environment

Over the last few years we have executed a clear and consistent strategy to focus on our specialist businesses in medical plastics and LED lighting. We have also successfully created a global footprint with a good balance between the UK, USA and fast growing, low cost regions in Eastern Europe, China and India. Through this transition, we have invested for the long term in new technologies which are potentially transformational.

There is an unprecedented recession in the global economy and great uncertainty about the economic outlook. Our strategy has prepared the group well for these difficult conditions and we are very well placed to continue our progress.

Last year we took the decision to exit low margin automotive moulding in our Technical Plastics division. This involved transferring just under 20% of the division's sales to other suppliers, a transition that was completed by October 2008. The timing was indeed fortunate as automotive demand collapsed soon afterwards. In the USA, our second plant in Tucson Arizona was re-furbished as a clean medical facility and is now utilised on new medical programmes. 

In the UK, we elected to close a small plant in Llanelli following the decision to withdraw from low margin automotive moulding work. In addition, as the economy deteriorated, we pulled forward the planned exit from the Slough facility in order to reduce the group's cost base and have upgraded our Scottish plant for optical moulding. This completes the long programme of reorganisation of the group and we do not plan further significant rationalisation measures.

Our primary strategic focus is now the commercialisation of Conductive Inkjet Technology and developments related to our investment in Platform Diagnostics. In this review we have included a full update on both these investments. These are innovative technologies with massive commercial potential and in both cases the hard technical work is now complete. The challenge for the Carclo board is to deliver this potential for the benefit of our shareholders.

Despite the global economic gloom and uncertainty, these are positive and exciting times for Carclo.

Operating review

Carclo Technical Plastics

Underlying operating profits at £3.7 million were unchanged on sales which decreased to £55.0 million (2008 - £59.5 million). The operating margin increased to 6.8%. Behind these headline numbers is a dramatic shift in mix - on an annualised basis we exited from £10 million of automotive moulding and gained £6 million of new business in medical moulding and LED optics.

Demand in our second half was subdued compared with a strong first half performance. We have seen quite significant reductions in schedules from customers in the electronics industry and also in the small balance remaining in automotive markets, mainly in specialised optics. We have also seen some evidence of modest inventory corrections among our medical customers. Demand has now stabilised, however, and schedules in our medical business now reflect some underlying growth.

Our operations in China had a record year in terms of sales and profits - over half of sales are medical. Our new facility in India was completed and has made its first shipments. 

We continue to win new medical programmes and are also benefiting from the rapid growth of long standing customers such as Axis-Shield plc - a leader in the Point of Care diagnostics market. We have two active inhaler programmes - one of which is now moving into full scale manufacturing development - in preparation for product launch over the next two years.

Our niche LED optics business continues to deliver near 40% compound growth. We continue to invest in new products for this business and have increased technical and sales resources.

Carclo Precision Products

Underlying operating profits in Carclo Precision Products increased by 11.8% to £3.7 million on sales 48.3% ahead at £33.0 million. The sales increase was boosted by substantial tooling contracts for supercar lighting. Despite the economic uncertainty, Wipac continues to win new contracts for supercar lighting and no programmes have been cancelled - and so we remain confident that the pipeline of new vehicles will generate good growth for some years to come.

Wipac's communications business supplies antennas and cables principally to Ford. Not surprisingly in the second half of the year volumes in this business were about 30% down on the prior year. Schedules are now stable but we are not expecting much of a recovery in the short to medium term.

Wipac's aftermarket businesses have continued to trade well, helped by new product launches.

Our small aerospace business, Bruntons Aero, performed well and we took the opportunity to add to this business by acquiring Jacottet Industrie in France. Jacottet has performed well since its acquisition in July 2008. Bruntons and Jacottet, which supply aircraft control cables and components, have recently seen a reduction in demand which will reduce profitability in the coming year. 

Looking forward, we expect sustained growth in Wipac's specialist lighting business to compensate to some extent for lower demand in automotive antennas and aerospace cables.

Technology investments

Conductive Inkjet Technology ("CIT")

CIT has developed a proprietary range of catalytic inks for printing pure metal on plastic surfaces. 

The flagship application for CIT uses digital inkjet printing to produce Radio Frequency Identification ("RFID") antennas at high speed and very low cost. Additionally, CIT has developed and launched a flexographic printing process - opening up the technology to technical printers on a global basis.

Another variant of the CIT ink can be used with standard photo-lithography equipment to produce circuits with very fine features - line widths down to 10 microns or less.

CIT can derive revenues from the sale of inks and films, from sales of specialised printer and plating lines from the MetalJet range and from the supply of products and circuits based on the CIT technology.

CIT is at the core of printed electronics, a technology that will enable very low cost consumer electronics which will change the way we live.

Our work in the last year has been focussed on delivering a robust production process capable of high yield, high quality manufacturing at very low cost. Engagement with customers is now extensive, as described below, and the pace of commercialisation is expected to step up significantly this year.

Sensors and antennas

We have supplied production volume antennas to three of the leading global RFID inlay producers as well as to a range of smaller producers.

Last year we referred to a production contract for a combined RFID antenna and sensor used to monitor temperature in transit by logistics companies. We can now confirm that this customer is Infratab Inc, and the product is their patented 'Freshtime' intelligent tag. 

Our collaboration with a leading Korean conglomerate in the field of RFID continues. CIT's RFID antenna prototyping equipment, the Metaljet 600i, is working well and being used by our customer for antenna design. Production scale-up options will be investigated during this year.

We have established a new collaboration with one of the world's leading antenna designers and manufacturers in the field of mobile phones, Bluetooth and wireless LAN products. We have expanded our portfolio of useable base films in order that we can supply antennas in roll to roll form to be applied as an in-mould-label ("IML"). IML is a novel, low cost method of incorporating antennas into devices. Initial quantities have been ordered and supplied. We anticipate increasing our collaboration further in 2009/10.

We are working with around a dozen customers on sensor products in the medical, diagnostic, home entertainment and automotive fields. These are generally very high volume applications and we anticipate that some of these projects will deliver revenue streams during 2009/10.

We have now launched a flexographic ink based on the CIT patents. We have joint development agreements with two partners. These partners have advanced skills in flexographic printing and have identified volume applications for our technology. 

Displays and fine lines

Our collaboration with Cambridge Display Technology Ltd ("CDT") has progressed well by way of our Technology Strategy Board funded programme. We have a joint target to fabricate organic LED lighting devices by August 2009 and more advanced demonstrators by the end of the year. This programme is due to complete in July 2010. 

Along with Epigem Limited and Zytronic Displays Limited we have continued our joint development of alternative transparent electrodes for solid state displays. This project is now nearing completion and to date our role in this project has been successful.

Whilst our work with CDT is of a medium term nature, we are now developing our core technology toward a range of near term applications. The most important of these is to provide a circuit of fine sensor electrodes for use in capacitive touch screens. This project has been run in collaboration with one of the world's leading capacitive touch screen developers. Having successfully manufactured fully functioning prototype touch screens, we are now building partnerships to deliver a successful rollout of our technology in this very high growth application. The CIT based product offers better functionality and a significant cost breakthrough relative to alternative manufacturing solutions.

Our fine line technology also offers breakthrough opportunities across other applications. We are working with several other customers in applications including security protection circuits for point of sale data card systems and backplanes for low cost flexible type displays.

Solar cells

We continue to work with a European Solar Cell manufacturer and a number of interested research institutes on the application of our inks to improve the efficiency of the surface interconnection on silicon photovoltaic cells. We see this as a longer term project with no immediate plans for commercial exploitation.

Innovative display technology

As described below, CIT has been engaged in developing a new reader for Point of Care ("POC") diagnostic tests via Carclo's investment in Platform Diagnostics. As part of this development CIT has invented a highly innovative, very low cost, write once, non volatile digital display. In addition to medical diagnostics, we think that this innovation has significant potential in security labelling and smart consumer products. We will be actively promoting the technology over the coming year.

Platform Diagnostics ("PDL")

Platform Diagnostics was a venture capital backed company established to develop low cost POC diagnostic devices based on Capillary Agglutination Technology ("CAT"). In CAT, a reagent combines with an analyte in a sample (blood, urine etc) and forms an agglutinate of larger molecules. The agglutinate acts to slow down the flow of the sample in microcapillaries formed by precise moulding of a plastic 'chip'. The original PDL concept failed technically, and although further technical work showed some promise, the company needed additional financing to continue operations. 

In 2007, Carclo and BBI Holdings plc (then quoted on AIM, but now owned by Inverness Medical Innovations Inc. - the world leader in disposable POC tests) took over the financing and operations of PDL. PDL was converted into a holding company for the IPR and ongoing development was undertaken by development teams within Carclo and BBI. Carclo led the hardware development - device design, moulding and surface treatments - BBI led the chemistry development which was based on reagent chemistry for the D-dimer test already owned by BBI.

After a slow start, as much of the PDL work had to be revalidated, recent progress has been excellent and we now have a proof of concept assay based on BBI's proprietary chemistry. As a separate initiative Carclo has used CIT to develop a very low cost reader which can be integrated with the disposable chip. As mentioned above this low cost reader includes a patented write once, non volatile display - further details of which are available on the CIT web site (www.conductiveinkjet.com).

This device has very significant potential in the POC market. A low cost, disposable, quantitative test will open up new markets worldwide.

Carclo and BBI each have 29.8% of PDL which owns the CAT IPR. Additionally, Carclo has manufacturing rights and BBI has marketing rights to any products arising from the IPR. Carclo owns the rights to the CIT reader and display outright.

There is still further technical work to complete over the coming twelve months to extend the range of the D-dimer assay and to prove the concept with other analytes, but this project is now developing momentum and a sense of excitement.

Ian Williamson

9 June 2009

Finance director's review

Financial summary

	2009 £million	2008 £million
Turnover	87.4	81.3
Divisional operating profit	7.5	7.1
Unallocated	(1.3)	(1.4)
Underlying operating profit from continuing operations	6.2	5.7
Exceptional items	(2.7)	(1.3)
Net bank interest	(0.7)	(1.0)
IAS 19 net financing credit	0.9	1.1
Profit before tax	3.7	4.5
Taxation	(0.5)	-
Loss on disposal of discontinued operations	(0.3)	(0.2)
Profit attributable to ordinary shareholders	2.9	4.3
Ordinary dividend	(1.1)	(1.0)
Surplus for the year	1.8	3.3
Divisional operating margin from continuing operations	8.5%	8.7%
Basic earnings per share	5.1p	7.7p
Underlying earnings per share	9.8p	10.5p

Group turnover from continuing operations increased by 7.6% to £87.4 million (2008 - £81.3 million) and this was due to three main factors. Firstly, our Precision Products division benefited from a significant increase in design and development revenues generated from contract wins in specialist lighting at Wipac. Secondly, group revenues were boosted by the acquisition in July 2008 of Jacottet Industrie, the French aerospace business. Thirdly, reported turnover in our Technical Plastics division was boosted by the strength of the US dollar and Euro against sterling.

Underlying operating profit from continuing operations increased by 8.7% to £6.2 million (2008 - £5.7 million). Divisional operating profit increased to £7.5 million (2008 - £7.1 million) with unallocated central costs at a similar level to the prior year.

Profits in the second half of the year just ended were lower than in the first half due to the impact of the economic downturn on some parts of our business. However, in the coming year, we expect the first half, second half split to revert to normal with a larger proportion of group profits generated in the second half of the financial year.

Profit before tax was £3.7 million (2008 - £4.5 million). Included in profit before tax is a £0.9 million (2008 - £1.1 million) pensions net financing credit in compliance with the provisions of IAS 19 "Employee Benefits". The reduction in profit before tax compared to the prior year is due to the increased level of rationalisation costs of £2.4 million (2008 - £1.2 million) that were incurred during the year mainly on the closure of our Technical Plastics facilities at Llanelli and Slough. The total costs associated with the Llanelli closure were £0.5 million of which £0.4 million were cash costs including redundancy payments. The total costs borne in relation to the Slough closure were £1.6 million, of which £1.3 million are expected to be cash costs. These cash costs relate to redundancy payments and future liabilities on the Slough property lease which expires in February 2011.

Exceptional bad debts of £0.3 million (2008 - £0.1 million) were charged to profits and this relates to an additional provision on the net receivable from Delphi Corporation, a US customer which went into Chapter 11 in October 2005. 

Net bank interest payable was £0.7 million (2008 - £1.0 million). Although group net debt increased during the year to £17.9 million (2008 - £13.7 million), the group benefited from the decrease in both base and LIBOR interest rates.

The group tax charge for the year is £0.5 million (2008 - nil). This equates to an effective tax rate of 12.5% and reflects the group's continuing ability to benefit from prior period losses and tax planning initiatives. No UK tax was paid during the year, however, the group's Czech Republic and French subsidiaries were tax paying. 

The increased tax charge for the year resulted in underlying earnings per share reducing to 9.8 pence (2008 - 10.5 pence) despite the growth in underlying profit before tax.

A loss of £0.3 million (2008 - £0.2 million) was booked in respect of discontinued operations. This predominantly relates to the impairment of the value of two properties held for resale, in part offset by profit on the sale of the group's Prospect Mills property early in the financial year.

The profit attributable to ordinary shareholders was £2.9 million (2008 - £4.3 million). The board is recommending an increased final dividend of 1.35 pence per ordinary share (2008 - 1.3 pence per share).

Net debt and gearing

	2009 £million	2008 £million
Underlying cash flow	9.9	9.3
Interest and tax	(1.0)	(1.2)
Capital expenditure	(3.6)	(3.7)
Free cash flow	5.3	4.4
Pension payments above regular cost	(1.4)	(1.4)
Other non recurring	-	(0.9)
Sale of own shares	0.4	-
Equity dividends	(1.1)	(0.9)
Cash flow available for corporate activities	3.2	1.2
Development expenditure	(1.1)	(1.2)
Acquisitions and disposals	(2.4)	(0.9)
Exchange movement	(3.8)	-
Increase in net debt in year	(4.1)	(0.9)

Net debt comprises interest bearing loans and borrowings less cash and cash deposits.

Net debt increased in the year to £17.9 million (2008 - £13.7 million). This represents gearing of 34.0% (2008 - 27.6%) after excluding the net pension deficit.

The main reason for the increase in group net debt was the impact of the weakening of sterling on the retranslation of the group's US dollar and Euro net borrowings which increased the level of debt reported in sterling by £3.8 million.

Underlying cash flow from operations was £9.9 million (2008 - £9.3 million). Group working capital benefited from the closure of the Llanelli and Slough facilities during the year. Group capital expenditure was £3.6 million (2008 - £3.7 million) representing 105.6% of the total group depreciation charge (2008 - 111.9%). Free cash flow was £5.3 million (2008 - £4.4 million). 

Pension contributions of £1.4 million (2008 - £1.4 million) above the regular pension cash cost were made during the year. Other non recurring cash outflows of £0.9 million in respect of rationalisation were offset by the receipt of £0.9 million from the disposal of property and other fixed assets.

Development expenditure of £1.1 million (2008 - £1.2 million) is the capitalised cost of research and development expenditure on Conductive Inkjet Technology during the year. 

The net cash movement due to acquisitions and disposals of businesses during the year was an outflow of £2.4 million (2008 - £0.9 million). This was primarily due to the acquisition of the French aerospace business, Jacottet Industrie and the additional investment in Platform Diagnostics.

Financing

The group has medium term loan facilities totalling £20.0 million and these facilities do not expire until June 2012. As at 31 March 2009 the total drawings on these facilities were £19.3 million. In addition, the group also has overdraft and other bank facilities totalling £11.9 million. As part of the 2007 re-financing agreement the group provided the banks with security over the current assets of its three main UK trading subsidiaries. As at 31 March 2009 the value of this security was £17.8 million.

Under the facility arrangements the two main covenants are interest cover and net debt to EBITDA and as at 31 March 2009 the group had a very comfortable level of headroom on both these covenants.

Pensions

At 31 March 2009 the IAS 19 pension deficit was £12.9 million, net of deferred tax (2008 - a surplus of £0.6 million, net of deferred tax). This is due to the decrease in the value of plan assets that has resulted primarily from the decline in equity markets during the period. The IAS 19 current service cost for the year was £0.5 million (2008 - £0.7 million). The IAS 19 financing credit, which represents the difference between the expected return on plan assets and the financing charge on the pension scheme liability, was £0.9 million (2008 - £1.1 million). In the current financial year this credit will reverse and an IAS 19 financing charge of 

£0.4 million is expected.

The cash cost of employer pension contributions during the year was £0.5 million. During the year the group also paid in an additional £0.9 million under the recovery plan agreement with the trustees and, in addition, it paid £0.5 million of scheme administration costs including the annual Pension Protection Fund levy.

The triennial valuation date was 31 March 2009 and based on this valuation the group will be agreeing a revised recovery plan with the trustees. Based on initial discussions, it is hoped that the annual recovery plan payments will continue at the current level, although it is likely that the recovery plan period will be longer than the previous four year period which expires in 

October 2010.

Property disposals

During the year the group sold one surplus property for £0.8 million generating a profit of £0.3 million. As at 31 March 2009 the group had three further surplus properties with a net book value of £1.3 million. Since the year end, one of these properties has been sold resulting in net proceeds of £0.5 million, generating a small profit of £0.1 million. The remaining two surplus properties, which are included in the accounts as assets held for sale, are being actively marketed.

Acquisition of Jacottet Industrie

During the year the group acquired 100% of the share capital of Jacottet Industrie, a French aerospace cables business. The acquisition was for an initial cash consideration of €2.5 million on 31 July 2008 with a further payment of deferred consideration of €0.3 million being made on 2 January 2009. This business made a positive contribution to group profits in the year.

Conductive Inkjet Technology ("CIT")

The total investment in research and development at CIT in the year was £1.1 million (2008 - £1.2 million). These costs have been capitalised. In addition, capital expenditure of £0.4 million was incurred during the year.

The group balance sheet now includes intangible assets totalling £12.5 million in respect of CIT. £5.5 million of this amount is research and development cost which has been paid for by the group and capitalised. The remaining £7.0 million relates to the fair value assigned to patents and goodwill which has arisen from the accounting treatment of the acquisitions of the minority holdings from our original joint venture partner.

CIT generated revenues of £0.1 million during the year against which amortisation of £0.1 million was charged. Revenues are set to grow in the new financial year but the impact on group profits will be limited due to a commensurate increase in the amortisation charge in line with the group's amortisation policy.

On 30 September 2007 the group acquired the remaining minority shareholding in CIT. The cost of acquiring this holding included potential deferred consideration of £0.8 million conditional on the achievement of specific sales and profits thresholds in the period to 31 March 2010. Based on the performance of the business in the period to 31 March 2009, and our forecast for the year to 31 March 2010, it is estimated that a maximum of £0.4 million of this deferred consideration will be payable. Consequently, the balance of £0.4 million on the deferred consideration provision has been released and credited to retained earnings.

Platform Diagnostics ("PDL")

The investment in PDL was increased during the year from 12.5% to 29.8% at 31 March 2009. The cost of the incremental investment was £0.4 million. The group's investment in PDL is now accounted for as an associate in the group accounts and the carrying value of the investment at the year end was £0.7 million.

Robert Brooksbank

9 June 2009

Consolidated income statement 

 year ended 31 March

Notes		2009 £000	2008 £000
Revenue	2	87,436	81,274
Underlying operating profit
Operating profit before exceptional costs		6,212	5,713
- rationalisation costs		(2,435)	(1,244)
- exceptional bad debts		(270)	(93)
After exceptional costs		3,507	4,376
Operating profit before financing costs	2	3,507	4,376
Finance revenue		10,871	10,668
Finance expense		(10,727)	(10,542)
Profit before tax		3,651	4,502
Income tax expense		(456)	-
Profit after tax but before loss on discontinued operations		3,195	4,502
Loss on discontinued operations, net of tax		(270)	(250)
Profit after tax		2,925	4,252
Attributable to -
Equity holders of the parent		2,925	4,293
Minority interest		-	(41)
Profit for the period		2,925	4,252
Earnings per ordinary share	5
Basic		5.1 p	7.7 p
Diluted		5.1 p	7.6 p
Dividend per ordinary share	6
Arising in respect of the year		2.0 p	1.9 p
Paid in the year		1.9 p	1.6 p

Consolidated statement of recognised income and expense 

year ended 31 March

					2009 £000	2008 £000
Foreign exchange translation differences					1,759	2,493
Actuarial (losses) / gains on defined benefit schemes					(21,118)	10,339
Taxation on actuarial losses / (gains) taken directly to equity					5,914	(3,300)
Income and expense recognised directly in equity					(13,445)	9,532
Profit for the period					2,925	4,252
Total recognised income and expense for the period					(10,520)	13,784
Attributable to -
Equity holders of the parent					(10,520)	13,825
Minority interest					-	(41)
Total recognised income and expense for the period					(10,520)	13,784

Consolidated balance sheet 

as at 31 March

	Notes	2009 £000		2008 £000
Assets
Intangible assets		33,774		28,934
Property, plant and equipment		27,017		25,429
Investments		660		265
Deferred tax assets		7,794		2,273
Retirement benefit asset		-		857
Total non current assets		69,245		57,758
Inventories		11,399		9,661
Trade and other receivables		18,032		16,632
Cash and cash deposits		6,405		7,785
Non current assets classified as held for sale		1,302		1,271
Total current assets		37,138		35,349
Total assets		106,383		93,107
Liabilities
Interest bearing loans and borrowings		19,621		14,684
Deferred tax liabilities		4,519		3,785
Retirement benefit obligations		17,924		-
Provisions and deferred consideration liabilities		945		1,000
Total non current liabilities		43,009		19,469
Trade and other payables		16,626		14,417
Current tax liabilities		1,884		1,919
Provisions		475		-
Interest bearing loans and borrowings		4,658		6,847
Total current liabilities		23,643		23,183
Total liabilities		66,652		42,652
Net assets		39,731		50,455
Equity
Ordinary share capital issued	7	2,859		2,859
Share premium	8	3,916		3,916
Other reserves	8	3,656		3,669
Translation reserve	8	5,110		3,351
Retained earnings	8	24,190		36,660
Total equity attributable to equity holders of the parent		39,731		50,455

Consolidated statement of cash flows

year ended 31 March

	Notes	2009 £000		2008 £000
Cash generated from operations	9	7,500		6,942
Interest paid		(934)		(1,344)
Tax paid		(238)		(131)
Net cash from operating activities		6,328		5,467
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		930		47
Interest received		154		264
Cash flows on discontinued operations		(115)		(100)
Receipt of deferred consideration, net of related costs		-		937
Proceeds from sale of investments		-		2
Acquisition of business undertaking, net of cash acquired	3	(1,849)		(1,406)
Acquisition of minority interest		-		(148)
Acquisition of property, plant and equipment		(3,550)		(3,571)
Acquisition of intangible assets – computer software		(32)		(89)
Investment in Platform Diagnostics Limited		(406)		(215)
Development expenditure		(1,118)		(1,244)
Net cash from investing activities		(5,986)		(5,523)
Cash flows from financing activities
Proceeds from the issue of share capital		-		6
Proceeds from disposal of own shares		396		-
Drawings on term loan facilities		6,767		18,216
Repayment of borrowings		(6,516)		(17,288)
Payment of finance lease liabilities		-		(1)
Dividends paid		(1,073)		(890)
Net cash from financing activities		(426)		43
Net decrease in cash and cash equivalents		(84)		(13)
Cash and cash equivalents at beginning of period		1,139		991
Effect of exchange rate fluctuations on cash held		971		161
Cash and cash equivalents at end of period		2,026		1,139
Cash and cash equivalents comprise -
Cash and cash deposits		6,405		7,785
Bank overdrafts		(4,379)		(6,646)
		2,026		1,139

1.   Notes on the preliminary statement

The financial statements set out above do not constitute the company's statutory accounts for the years ended 

31 March 2009 and 31 March 2008, but are derived from those accounts. Statutory accounts for the year ended 

31 March 2008 have been delivered to the Registrar of Companies and those for the year ended 31 March 2009 will be delivered following the company's annual general meeting. 

The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under S 237 (2) or S 237 (3) of the Companies Act 1985.

2. Segment reporting

At 31 March 2009, the group is organised into two main business segments - Technical Plastics and Precision Products.

The primary segment reporting format is determined to be business segments as the group's risks and returns are affected predominantly by differences in the products and services provided. Secondary information is reported geographically. The operating business segments are organised and managed separately.

The Technical Plastics segment supplies fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products. This business operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

The Precision Products segment supplies systems to the automotive and aerospace industries.

Discontinued operations relate to the disposal of the group's automotive control cables business in May 2006 and the card clothing business in June 2005.

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's assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

Analysis by business segment

The segment results for the year ended 31 March 2009 were as follows -

	Technical Plastics £000	Precision Products £000	Unallocated £000	Eliminations £000	Group total £000
Income statement
Total revenue	55,033	33,000	135	(732)	87,436
Less inter-segment revenue	(620)	(112)	-	732	-
Total external revenue	54,413	32,888	135	-	87,436
Expenses	(50,691)	(29,144)	(1,389)	-	(81,224)
Underlying operating profit	3,722	3,744	(1,254)	-	6,212
Rationalisation costs	(2,274)	(54)	(107)	-	(2,435)
Exceptional bad debts	(270)	-	-	-	(270)
Operating profit before financing costs	1,178	3,690	(1,361)	-	3,507
Net finance credit					144
Tax					(456)
Loss on discontinued operations, net of tax					(270)
Profit after tax					2,925
Balance Sheet information
Segment assets	61,293	23,316	21,774	-	106,383
Segment liabilities	(10,232)	(8,885)	(47,535)	-	(66,652)
Net assets	51,061	14,431	(25,761)	-	39,731
Other segmental information
Capital expenditure on property, plant and equipment	2,040	1,039	404	-	3,483
Capital expenditure on computer software	2	18	12	-	32
Depreciation	2,530	586	162	-	3,278
Amortisation of computer software	17	26	7	-	50

Analysis by business segment

The segment results for the year ended 31 March 2008 were as follows -

	Technical Plastics £000	Precision Products £000	Unallocated £000	Eliminations £000	Group total £000
Income statement
Total revenue	59,460	22,255	67	(508)	81,274
Less inter-segment revenue	(508)	-	-	508	-
Total external revenue	58,952	22,255	67	-	81,274
Expenses	(55,237)	(18,907)	(1,417)	-	(75,561)
Underlying operating profit	3,715	3,348	(1,350)	-	5,713
Rationalisation costs	(1,078)	(6)	(160)	-	(1,244)
Exceptional bad debts	(45)	-	(48)	-	(93)
Operating profit before financing costs	2,592	3,342	(1,558)	-	4,376
Net finance costs					126
Tax					-
Loss on discontinued operations, net of tax					(250)
Profit after tax					4,252
Balance Sheet information
Segment assets	55,471	15,876	21,760	-	93,107
Segment liabilities	(12,062)	(6,933)	(23,657)	-	(42,652)
Net assets	43,409	8,943	(1,897)	-	50,455
Other segmental information
Capital expenditure on property, plant and equipment	2,244	576	681	-	3,501
Capital expenditure on computer software	14	43	32	-	89
Depreciation	2,533	503	116	-	3,152
Amortisation of computer software	12	20	24	-	56

 Analysis by geographical segment 

 

The business operates in three main geographical regions - the United Kingdom, North America and in lower cost  regions such as the Czech Republic and China.

The geographic analysis was as follows -

	External revenue		Segment assets		Expenditure on tangible fixed assets and computer software
	2009 £000	2008  £000	2009 £000	2008 £000	2009 £000	2008 £000
United Kingdom	32,156	33,540	2,808	25,067	2,373	2,559
North America	21,780	17,891	16,815	11,457	842	850
Rest of world	33,500	29,843	20,108	13,931	300	181
	87,436	81,274	39,731	50,455	3,515	3,590

The analysis of segment assets and capital expenditure is based upon the location of the assets.

3. Acquisition of subsidiary

On 31 July 2008, agreement was reached to acquire all of the share capital of the French aerospace business of Jacottet Industrie SA, for a cash consideration of €2.525 million, with a further payment of €0.3 million made based upon the performance of the business in the year to 30 September 2008.

The acquisition had the following effect on the group's assets and liabilities -

	Acquiree’s book value £000	Fair value adjustments £000	Acquisition amounts £000
Property, plant and equipment	132	-	132
Intangible assets	165	(87)	78
Inventories	478	(104)	374
Trade and other receivables	1,502	(31)	1,471
Trade and other payables	(1,164)	(94)	(1,258)
Net cash	487	-	487
Net identifiable assets and liabilities	1,600	(316)	1,284
Settled by -
Consideration paid			2,008
Deferred consideration			262
Acquisition costs			261
Goodwill			(1,247)
			1,284
The net cash flows in the period arising on the acquisition were -
Consideration paid			2,270
Acquisition costs			66
Net cash acquired with the business			(487)
Net cash outflow			1,849

The fair value adjustment to the assets acquired relates to the alignment of accounting policies with Carclo plc and the fair value associated with Jacottet's European customer base.

Goodwill has arisen on the acquisition of Jacottet at a premium to net assets and paid to secure a leading position in the supply of aerospace components, primarily to European markets.

In the eight month period of ownership, Jacottet contributed a profit before tax of £0.676 million.

4. Investment in Platform Diagnostics Limited

The group holds 29.8% of the voting equity of Platform Diagnostics Limited (2008 - 12.5%). On 2 February 2009, Carclo increased its stake in the company to 27.1% at which point the investment in the company was accounted for as an associate undertaking. The investment was further increased to 29.8% on 31 March 2009. The carrying value of the investment comprises -

			2009
			£000
Cost of investment			664
Share of profits and losses in Platform Diagnostics since becoming an associate			(11)
			653
At 31 March 2009 and 2 February 2009 the share of the fair value of the net assets of Platform Diagnostics Limited was negligible. Therefore the cost of investment predominantly relates to goodwill.    The accounting reference date for Platform Diagnostics Limited is 30 April.

5. Earnings per share

 The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders of the company divided by the weighted average number of ordinary shares outstanding during the year.

 The calculation of diluted earnings per share is based on profit attributable to ordinary shareholders of the company divided by the weighted average number of ordinary shares outstanding during the year (adjusted for dilutive options).

The following details the profit and average number of shares used in calculating the basic and diluted earnings per share.

		2009	2008
		£000	£000
Profit from continuing operations		3,195	4,502
Minority interest		-	41
Profit attributable to ordinary shareholders from continuing operations		3,195	4,543
Loss from discontinued operations		(270)	(250)
Profit attributable to ordinary shareholders		2,925	4,293
		2009	2008
		Shares	Shares
Weighted average number of ordinary shares in the year		56,838,958	56,061,842
Effect of share options in issue		315,296	563,170
Weighted average number of ordinary shares (diluted) in the year		57,154,254	56,625,012

In addition to the above, the company also calculates an earnings per share on the underlying profits as the board believe this to be a better yardstick against which to judge the progress of the group. Underlying profits are defined as profits before rationalisation costs, exceptional bad debts, site closure costs and the impact of property and business disposals, net of attributable taxes.

The following table reconciles the group's profit to underlying profit used in the numerator in calculating underlying earnings per share.

		2009	2008
		£000	£000
Profit attributable to ordinary shares		2,925	4,293
Rationalisation costs, net of tax		2,131	1,244
Exceptional bad debts, net of tax		236	93
Loss on disposal of discontinued operations, net of tax		270	250
Underlying profit attributable to ordinary shareholders		5,562	5,880

The following table summarises the earnings per share figures based on the above data -

		2009	2008
		pence	pence
Basic - continuing operations		5.6	8.1
Basic - discontinued operations		(0.5)	(0.4)
Basic – total		5.1	7.7
Diluted - continuing operations		5.6	8.0
Diluted - discontinued operations		(0.5)	(0.4)
Diluted – total		5.1	7.6
Underlying earnings per share – basic		9.8	10.5
Underlying earnings per share – diluted		9.7	10.4

 

6. Dividends paid and proposed

Ordinary dividends per 5 pence share declared in the period comprised -

			2009			2008
		£000	Pence		£000	pence
Final dividend for 2006/07		-	-		668	1.20
Interim dividend for 2007/08		-	-		339	0.60
Final dividend for 2007/08		734	1.30		-	-
Interim dividend for 2008/09		371	0.65		-	-
		1,105	1.95		1,007	1.80

The directors are proposing a final dividend of 1.35 pence per ordinary share for the year ended 31 March 2009. If approved at the annual general meeting on 3 September 2009, the dividend payment totalling £0.770 million will be paid on 10 September 2009 to shareholders on the share register at close of business on 7 August 2009.

7. Ordinary share capital 

		Number of
		Shares	£000
Ordinary shares 5 pence each
Authorised at 31 March 2008 and 31 March 2009		80,000,000	4,000
Issued and fully paid at 31 March 2008 and 31 March 2009		57,188,702	2,859

8. Reconciliation of movement in capital and reserve

 

9. Cash generated from operations

 

	2009	2008
	£000	£000
Profit before financing costs	3,507	4,376
Adjustments for -
Pension fund contributions in excess of service costs	(1,435)	(1,432)
Depreciation charge	3,278	3,152
Amortisation of intangible assets	156	112
Exceptional bad debt provision	270	93
Share of losses in associated undertaking	11	-
Profit on disposal of other plant and equipment	(54)	(4)
Write down of assets charged to rationalisation costs	369	150
Share based payment charge	105	128
Operating profit before changes in working capital	6,207	6,575
Changes in working capital (excluding the effects of acquisition and disposal of subsidiaries)
Increase in inventories	(329)	(436)
Decrease in trade and other receivables	920	827
Increase / (decrease) in trade and other payables and provisions	702	(24)
Cash generated from operations	7,500	6,942

ENDFR SSLFMASUSEEM