Carclo (LON:C1Y) has refocused investment in its established businesses (Technical Plastics and LED Technologies), where a differentiated offer and long-term relationships with customers provide good earnings visibility and higher probability of a sustainable return. This strategy delivered strong revenue and profits growth during FY17. This growth appears set to continue, underpinned by contracts with blue-chip customers. We increase our estimates of revenues attributable to Technical Plastics while slightly reducing PBT and EPS to reflect higher IAS 19 finance charges. We raise our indicative valuation to 181-191p (previously 153-162p).
Operating divisions continue to perform well
Group revenues grew by 16% year-on-year during FY17 to £138.3m as a result of good growth in both Technical Plastics (CTP) and LED Technologies, helped by favourable currency translation. Adjusted for constant currency, the 10% revenue increase was in line with our £130.0m estimate. Underlying operating margin rose by 60bp to 9.0%. Pre-exceptional PBT increased by 26% to £11.0m, slightly ahead of our £10.7m estimate. We expect growth during the forecast period to be driven by investment in capacity at CTP, which is underpinned by customer contracts, and new programme wins at Wipac, which now has three mid-volume projects to work on.
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