Carclo Regulatory News (CAR)

Carclo plc

("Carclo" or "the group")

Half year results for the six months ended 30 September 2010

Carclo plc, the technology led plastics group, today announces a robust first half performance in

line with the board's expectations.

Highlights

·; Period of excellent strategic progress

·; Encouraging financial results - profit before tax increased to £2.5 million (2009 - £1.7 million) and earnings per share increased by 31.8% to 2.9 pence (2009 - 2.2 pence)

·; Technical Plastics has performed well with underlying operating profits of £2.6 million (2009 - £2.0 million) and operating margins up 1.4% to 8.9%. Sales increased by 11.4% helped by strong growth from medical diagnostic and LED optical products

·; Precision Products was impacted by customer delays in supercar lighting programmes which resulted in underlying operating profits reducing to £0.4 million (2009 - £0.8 million). These programmes are now in production and a stronger second half performance is expected

·; Conductive Inkjet Technology ("CIT") has made significant progress during the first half of the financial year and has now completed the installation of the pilot line which will be used in the production of touch sensors for Atmel Corporation ("Atmel")

·; We have agreed to extend Atmel's preferential access to our production facilities subject to stretching minimum volume targets and a $10.0 million prepayment to CIT in respect of future supplies of coated film

·; Capital expenditure in the period totalled £2.8 million (2009 - 1.3 million) across a number of expansion and efficiency projects

·; Interim dividend increased to 0.7 pence per share (2009 - 0.65 pence per share)

Commenting on the results, Christopher Ross, chairman, said -

"The strategic progress made in the half year was excellent and the financial results were encouraging set against a background of continued economic uncertainty.

The second half of the financial year is set to build on this momentum. The group continues to benefit from growth opportunities in medical diagnostics and LED optics. Start-up costs on the supercar lighting projects are progressively reducing which will underpin an improved second half performance in this business.

Technical and commercial progress at CIT is very exciting and the board is determined to capitalise on the opportunities presented.

We have good, well positioned, growing businesses and great technological opportunities."

Enquiries

Carclo plc 020 7067 0700 (today)

Ian Williamson, chief executive 01924 268040 (thereafter)

Robert Brooksbank, finance director

Weber Shandwick Financial 020 7067 0700

Nick Oborne

Stephanie Badjonat

Clare Thomas

A presentation for analysts will be held at 9.30 a.m. on 23 November 2010 at the offices of Weber Shandwick Financial, Fox Court, 14 Gray's Inn Road, London WC1X 8WS.

Notes to editors

About Carclo

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.

Forward looking statements

Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events to differ materially from any expected future events or results referred to in these forward looking statements.

Overview

Carclo has made good progress in the first half of the current financial year. Technical Plastics continued to benefit from its niche position in the medical and LED optics sectors and its facilities in the lower cost regions generated record revenues. In Precision Products, a growing number of supercar lighting projects, which utilise state of the art LED optics, are progressively entering production and will help underpin revenue during the remainder of the financial year and beyond. Conductive Inkjet Technology is progressing well on its fine line project with Atmel Corporation, having completed the installation of the production line at its expanded facility in Cambridge.

Underlying operating profits of £2.3 million were modestly ahead of the prior year with good growth in Technical Plastics being offset by a reduction in Wipac's profits due to customer delays and start-up costs in the launch of a number of supercars which had been highlighted in previous statements.

The group generated a profit before tax in the six months to 30 September 2010 of £2.5 million (2009 - £1.7 million), benefitting from a net pension finance credit under IAS 19 of £0.5 million (2009 - a net charge of £0.2 million). Earnings per ordinary share increased by 31.8% to 2.9 pence.

The group's financial and funding position remains strong and this has allowed the group to undertake a number of expansion and efficiency related projects in the half year whilst retaining clear headroom on all of its bank facilities and covenants.

Financial position

Net debt at 30 September 2010 was £17.9 million, a similar level to the group's net debt a year ago. This represents gearing on assets (excluding the net pension deficit) of 30.1% (2009 - 33.3%). Cash generated from operations was £1.5 million (2009 - £2.6 million) and is net of a £2.1 million investment in working capital (2009 - £0.6 million). These funds have been used to fund additional expansion and efficiency related capital projects in the period whilst continuing the group's focus on technological investments. Capital expenditure in the six months to 30 September 2010 amounted to £2.8 million (2009 - £1.3 million), the same amount as invested in the whole of the last financial year. Technical moulding facilities in the UK have been upgraded to increase manufacturing capacity for optical and medical products and a sub-contract facility has been completed in China for the production of components for the Wipac business. Investment in new technologies has also continued with the new production line in Cambridge and £0.8 million incurred in respect of development costs (2009 - £0.6 million).

As at 30 September 2010 the total drawings on the group's £20.0 million medium term loan facilities were £18.2 million. These committed facilities are well priced and do not expire until June 2012. In addition, the group has overdraft facilities totalling £11.6 million. The two main covenant ratios relating to the group's bank facilities are interest cover and net debt to EBITDA and, as at 30 September 2010, the group has a comfortable level of headroom on both of these covenant tests.

The board has declared an interim dividend of 0.7 pence per ordinary share, an increase of 7.7% on the previous year's interim dividend. The dividend will be paid on 6 April 2011 to shareholders on the register on 4 March 2011. The shares will trade ex-dividend from 2 March 2011.

Operating review

Technical Plastics

The Technical Plastics division generated revenues of £29.1 million, up 11.4% on the same period last year. The additional volume contributed to operating profits, before rationalisation costs, increasing by £0.6 million to £2.6 million. Sales to the medical sector have grown strongly by over 15%, driven by a good recovery in volumes in the US operation and growth in the Chinese business. LED optics continues to be the group's fastest growing segment with sales of £1.9 million in the period, over 50% above that achieved in the same period last year. The continued shift in mix towards the higher margin medical and optical sectors resulted in operating margins being uplifted from 7.5% to 8.9% in the six months to 30 September 2010.

The group's focus on medical and optical products continues and investment in new facilities during the period will support further growth in these sectors. A facility in Scotland is being upgraded to meet the stringent requirements for the clean environment moulding of optical components and to provide additional capacity for new medical business. In the medical moulding facility at Mitcham, a state of the art automated clean room facility has been installed to support a key customer in the production of its innovative inhaler products. The group has also expanded its manufacturing facility in India to provide additional capacity to access local market opportunities.

Precision Products

The Precision Products division delivered sales of £14.8 million (2009 - £15.3 million). Operating profits were down on the prior half year at £0.4 million (2009 - £0.8 million). The drop in first half profitability reflects the start-up costs and some programme delays on the new supercar lighting programmes at Wipac. We have reported previously that two vehicle programmes have been subject to launch delays - these vehicles are now in production and will contribute significantly to second half sales. Accordingly, Wipac's second half sales and profitability is expected to improve as the start-up costs reduce and that improvement is set to continue next year.

The aerospace businesses generated revenues at a similar level to last year with profits improved through a combination of sales mix and good cost control. Whilst there is still no tangible sign of a sustained recovery in this sector, the business continues to generate an acceptable level of profit and cash flows.

Overall, therefore, the group expects to deliver a much stronger performance in Precision Products in the second half of the financial year.

Conductive Inkjet Technology ("CIT")

Our focus at CIT has been on completing the pilot line for our Fine Line Technology ("FLT") for the production of touch screen sensors for smart phones and high-end computing devices. Under the terms of our agreement with Atmel Corporation ("Atmel"), our partner in the FLT project, Atmel agreed to pay $1.0 million for preferential access to CIT's capacity subject to certain milestones, of which $0.5 million was received on signing of the agreement in December 2009. The second milestone was the installation of a dedicated pilot line production facility at CIT's premises in Cambridge. This was achieved at the end of September as announced in our half year trading update. The final milestone is the customer validation of the production facility. Atmel has now agreed to release the final $0.25 million payment under the December 2009 agreement.

Through Atmel we have been working closely with major mobile phone manufacturers and in the process have further developed the FLT technology. CIT's second generation chemistry ("Gen 2") produced line widths of approximately eight microns. These lines are barely visible to untrained eyes but in some applications there is a residual reflectivity which our end customers would like to eliminate, especially in high-end devices. We have, therefore, developed a third generation solution ("Gen 3") which has sub four micron lines and, to all intent and purposes, eliminates reflectivity.

We plan to use the Gen 3 chemistry for all production and the pilot lines will be upgraded from Gen 2 to Gen 3 in the new year. We therefore now expect to be production ready in mid 2011, a delay of about four months on our original plans, with volume production commencing during the second half of next year.

The probable scale of the touch sensor application continues to grow rapidly. We have extended the exclusive access granted under the December 2009 agreement to Atmel for up to ten years depending on the achievement of certain business levels. Atmel has agreed to take the lead in the ramp up of manufacturing capacity required to achieve the target sales revenues. Atmel will additionally make a prepayment of $10.0 million to CIT in respect of future supplies of CIT product. This prepayment is expected to be made in the second half of 2011. 

The minimum volumes included in this agreement are commercially very sensitive and we will not be able to disclose this information to shareholders. However, the touch sensor market is already large and is growing rapidly. Atmel has established a market leading position in this sector and, therefore, the revenues which CIT is expected to earn from this agreement are substantial and are material in the context of Carclo's prospective revenue and profit growth.

CIT's printed electronics business, InkJetFlex, continues to gain momentum. We are now supplying repeat production batches to two RFID tag producers - in both instances these are specialised applications requiring the higher performance characteristics of CIT's copper, and potential volumes in both cases are substantial. We continue to supply smaller quantities to a broad range of customers with a diverse spectrum of applications.

With our partner Cambridge Display Technology ("CDT"), we continue to develop an OLED based lighting product which uses CIT's Fine Line Technology to replace the ITO transparent conductors conventionally used in OLED lighting products.

We have entered into a new collaboration with Eight19 Limited, a Cambridge based company which has been set up to develop high efficiency organic photovoltaics. As with the CDT collaboration, CIT's technology is being used to produce the front transparent electrode for the device as a direct replacement for ITO. This joint programme is receiving funding from the Technology Strategy Board. This latest collaboration underlines yet again the unique position that CIT has developed in roll-to-roll printed electronics.

Platform Diagnostics ("PDL")

The group's joint development with BBI Holdings plc ("BBI") has made good progress. PDL is now in possession of a highly innovative disposable Point-Of-Care ("POC") blood testing device which has been demonstrated to work well using a D-dimer assay (used as a test in deep vein thrombosis). This device has taken longer than anticipated to develop as a number of manufacturing challenges have been identified and overcome, often using highly innovative techniques and know-how which have brought together Carclo's unique breadth of expertise in a number of fields. Carclo owns outright the IPR in both the innovative mechanical features of the device and the low cost electronics (based on CIT). The end product is technically innovative and provides a low cost adaptable platform to the POC sector. Over the next few months we will be looking to exploit this technology more broadly within the POC sector.

Risks and uncertainties

In the annual report to shareholders in June 2010 we provided a detailed review of the risks faced by the group and how these risks are managed. We continue to face, and proactively manage, the risks and uncertainties in our business and there has been no significant change in the risks faced by the group.

Outlook

The strategic progress made in the half year was excellent and the financial results were encouraging set against a background of continued economic uncertainty.

The second half of the financial year is set to build on this momentum. The group continues to benefit from growth opportunities in medical diagnostics and LED optics. Start-up costs on the supercar lighting projects are progressively reducing which will underpin an improved second half performance in this business.

Technical and commercial progress at CIT is very exciting and the board is determined to capitalise on the opportunities presented.

We have good, well positioned, growing businesses and great technological opportunities.

Christopher Ross

Chairman

23 November 2010

Condensed consolidated income statement 

Condensed consolidated statement of comprehensive income

Condensed consolidated statement of financial position

Condensed consolidated statement of changes in equity

Condensed consolidated statement of cash flows

1. Basis of preparation

The condensed consolidated half year report for Carclo plc ("Carclo" or "the group") for the six months ended 30 September 2010 has been prepared on the basis of the accounting policies set out in the audited accounts for the year ended 31 March 2010 and in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority and the requirements of IAS 34 "Interim Financial Reporting" as adopted by the EU.

The financial information is unaudited, but has been reviewed by the auditors and their report to the company is set out on page 20.

The half year report does not constitute financial statements and does not include all of the information and disclosures required for full annual statements. It should be read in conjunction with the annual report and financial statements for the year ended

31 March 2010 which is available either on request from the company's registered office, Springstone House, PO Box 88,

27 Dewsbury Road, Ossett, WF5 9WS, or can be downloaded from the corporate website - www.carclo-plc.com.

The comparative figures for the financial year ended 31 March 2010 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under Section 498 (2) of the Companies Act 2006.

The half year report was approved by the board of directors on 23 November 2010 and is being sent to shareholders on

3 December 2010. Copies are available from the company's registered office and can also be downloaded from the corporate website. 

The group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs").

2. Accounting policies

The accounting policies, methods of computation and presentation applied by the group in this condensed consolidated half year report are the same as those applied by the group in its annual report and financial statements for the year ended 31 March 2010, except as detailed below.

The following new standards, amendments or interpretations came into force for Carclo during the current financial year and have been adopted by the group from 1 April 2010 -

IFRS 3 (revised) Business combinations

IAS 27 (amendment) Consolidated and separate financial statements

IAS 39 (amendment) Eligible hedged items

The adoption of these standards and interpretations has not had a significant impact on the results for the period.

3. Accounting estimates

The preparation of the half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. In preparing these half year financial statements, the significant judgements made by management in applying the group's accounting policies and the key source of estimation uncertainty were the same as those applied to the audited consolidated financial statements as at, and for the year ended, 31 March 2010.

4. Segment reporting

At 30 September 2010, the group is organised into three, separately managed, business segments - Technical Plastics, Precision Products and Conductive Inkjet Technology. These are the segments for which summarised management information is presented to the group's chief operating decision maker (comprising the main board and general executive committee).

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 supply systems to the automotive and aerospace industries and is a leader in the development of high power LED lighting for supercars.

The Conductive Inkjet Technology segment undertakes applied research into the digital printing of conductive metals onto plastic substrates.

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 segment results for the six months ended 30 September 2010 were as follows -

The segment results for the six months ended 30 September 2009 were as follows -

The segment results for the year ended 31 March 2010 were as follows -

5. Rationalisation costs

6. Net finance income / (charge)

7. Income tax expense

The half year accounts include a tax charge of 26.0% of profit before tax (2009 - 20.5%) based on the estimated average effective income tax rate for the full year. The group's effective tax rate continues to run at a lower level than the underlying UK tax rate of 28.0% (2009 - 28.0%) as the group continues to benefit from prior period tax losses and tax planning initiatives.

8. Loss on discontinued operations, net of tax

In the six months ended 30 September 2010, costs of £0.032 million were incurred in relation to non current assets held for sale (2009 - £0.089 million). These assets were properties which were used by businesses which were sold in prior years. In the year ended 31 March 2010, one of the assets, a property based in Lichfield, was sold for £0.569 million, net of attributable costs, and generated a loss of £0.023 million.

9. 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 period.

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 period (adjusted for dilutive options).

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