Carclo has exited from its loss-making Wipac business which has been acquired by Wuhu Anrui Optoelectronics, a manufacturer of LED-based automotive lighting. This ensures continuity for both customers and employees. Carclo’s pension scheme will receive £3.5m of the net proceeds of the sale while another £5.0m will be used to reduce debt. Our estimates will remain under review until the interims in mid-January.
The Wipac business reported a £13.3m operating loss during FY19 and required substantial cash investment. The disposal enables Carclo to focus on its two remaining divisions, which the board believes provide a solid, cash-generative foundation to build on for the future. During FY19, underlying EBIT from the Technical Plastics division (CTP) increased by 3% to £6.8m as the operational improvement programme addressing labour shortages and programme delays began to deliver results. The second half was much stronger than the first, reaching 9.2% underlying EBIT margin. The Aerospace division delivered a 74% jump in underlying EBIT to £1.3m. These encouraging performances continued in H120.
The Optics business, which was previously a standalone entity within Wipac, remains part of Carclo. This business provides design and distribution capability for the injection moulded industrial lighting optics manufactured by CTP Czech. Optics generated £1.1m profit before tax during FY19.
The disposal also helps further reduce the group’s net debt, which has already reduced substantially from £38.5m reported at end FY19, and its IAS 19 pension deficit, which was £49.1m at end FY19. Carclo is now in a more stable financial position from which to continue the long-term funding and pension contribution negotiations which are key to its future.