Carclo (LON:C1Y) has recently announced that its FY18 performance is likely to be lower than previously expected. This is because of contract delays affecting both the Technical Plastics (CTP) and LED Technologies (LED) divisions as well as a delay to the anticipated ramp-up in a non-medical project for CTP, which management expected would benefit H218. We reduce our FY18 and FY19 estimates, introduce FY20 estimates and revise our indicative valuation range from 177-187p/share to 145-154p/share.
Delayed placement of contracts by customers
The operational issues affecting the CTP division that were noted at the interim stage have been addressed. However, the division continues to be affected by contract delays, specifically the award of two large tooling and automation projects. Management is seeking to reduce reliance on winning new tooling and automation contracts by improving underlying operating margins from existing business. In our November update, we noted that LED divisional growth was dependent on continuing to secure new projects. The award of three new contracts has been delayed due to customers changing their time horizons on vehicle launches. Management is confident that Wipac will be successful in winning a number of these programmes, but the delays will have an impact on divisional FY18 performance. Despite this setback, the group’s LED supercar lighting business has performed as anticipated and new product launches continue to be made on time.
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