11th Jan 2019 08:36
LONDON (Alliance News) - Plastic products maker Carclo PLC warned Friday its annual results are expected to be "significantly" below its previous expectations after its LED technology division was hit by issues and its boss stands down to take the lead at this key unit.
Shares in Carclo were 33% lower at 52.02 pence on Friday. Carclo's financial year runs to the end of March.
Carclo explained its subsidiary Wipac - which is the main unit of its LED technology division - had been "very successful" in winning low-volume automotive lighting programmes as well as some in mid-volume projects.
Wipac has, however, initially struggled to "meet customer requirements".
"Unfortunately, this situation worsened in the third quarter as the short term operational growing pains continued longer than we had anticipated as demand grew," Carclo explained in a statement.
"The consequences of this have been significant with adverse operational variances, expedited freight deliveries and poor customer service leading to additional unplanned costs and, very recently, to delays in new programme awards and the profit recognition thereon," Carclo continued.
The firm has made progress in reducing this customer backlog. But this process will take time to complete.
The cost of this process and the loss of profit due to the delayed new programme awards, however, means Carclo now expects profitability at the LED division to "fall significantly short of our previous expectations for the current financial year."
Elsewhere, the Technical Plastics unit continued to see "solid progress" since the interim period. The operational improvement programme was delivering "encouraging results" even if at a "slower rate than anticipated". Operating profit, therefore, is expected to be broadly similar to the year prior, but with the second half much improved over the first.
Carclo's smaller Aerospace unit continues to perform "slightly" ahead of expectations and "well ahead" of the year prior.
All told, with the troubles faced by its LED technologies unit, Carclo now expects results for the year ending March to be "significantly below" its previous expectations. The firm added that it expects the second half performance to be "similar" to that in the first.
For the six months ended September, Carclo generated GBP3.4 million in pretax profit on GBP71.5 million revenue.
Of this, 59% of revenue was generated by its Technical Plastics unit and 36% by its LED Technologies unit with the remainder from Aerospace. The LED Technologies unit, however, generated nearly 50% of operating profit at the firm.
Carclo also expects financial 2019 net debt levels to be "slightly above" the GBP31.5 million levels reported the year prior. This is due to a delay in getting customer approval for tooling a "major mid-volume contract", the firm explained.
With the growth of Wipac seen as "critical" for the "future success" of Carclo, Chief Executive Officer Chris Malley has stood down in order to lead the LED unit as CEO with immediate effect.
A new group CEO is now being sought. In the meantime, Chair Mark Rollins has become the executive chair.
Full-year results will be released by Carclo on June 4.
Related Shares:
Carclo