Plastics manufacturer Carclo (CAR) is facing more uncertainty after issuing a damaging profit warning on Monday.
The company, which supplies components to the medical and electronics industries, says profit will be ‘significantly lower than previous expectations’ for the year to 31 March 2018.
Delays for the award of five significant contracts, plus the lack of increased demand from a major customer, have been dealt with savagely by investors. Shares in the company collapsed by more than 47% at one point, before settling at around a 38% decline, to to 78p.
SECOND HALF SURGE FAILS TO EMERGE
The forecast miss is not entirely surprising. Back in November the company admitted that it was relying on a big second half to match market expectations. Analyst at N+1 Singer estimated around two-thirds of pre-tax profit would have to be earned in the six months between October and March.
It has now become abundantly clear that this will not happen. Worse, Carclo is also anticipating slower profits growth next year also, to 31 March 2019.
The company is at least able to offer modest reassurance on net debt, saying ‘continues to operate well within covenant covenant levels’, according to N+1 Singer.
STRATEGIC SOLE-SEARCHING
Today's statement has sparked an urgent review of operations, with margins at its technical plastics division under the microscope.
It has also coincided with the departures of two senior board members. Finance director Robert Brooksbank has announced his resigned from 31 March 2018.
Non-executive chairman Michael Derbyshire will also stand down and the next AGM, in July. Between them, Brooksbank and Derbyshire have 26 years of service with Carclo.
Forecasts have been slashed by analyst at research house Equity Development, cutting full year pre-tax profit estimates for the March 2018 full year from £12.4m to £9m.
