Carclo plc

I'll just start with a few introductions for those of you who don't know us. My name's Joe Oakley, I'm the chairman. To my immediate left, Frank Dorenbosch, the CEO, and to his left, Ian Tickias, CFO. The bit of introduction is, I believe you should be able to submit questions at any time during the presentation, and then we'll come back to them and answer them at the end. I think the key takeaway for me it's really steady progress, a really robust performance and we've delivered what we said we were going to deliver. In a moment Frank and Ian will take you through the details and I don't want to steal their thunder, but there is one thing I wanted to just pick out and highlight. Some three years ago we set off on a journey As we're now moving into the next phase of our strategy where we're seeking growth on top of our stable platform that we've now delivered, I think it's important to remember that we will continue our focus on cost discipline, we'll continue our focus on capital discipline, Thank you, Joe. So yes, good morning, and thank you all for joining us. As Joe said, I'm Frank Yorambos, I'm the CEO of Carco. And today we are presenting on half-year results. And besides Joe, I'm also very pleased to say that we have delivered on our projection. So through the agenda, this morning presentation will have three parts. First, I will take you through the journey, the transformation we've executed over the past three years. Ian Tikias, our CFO, We'll then walk you through the status, the financial results, and what they mean for a balance sheet. And I will close with the future, how we scale this platform further. So, let's begin. When I took over Helm at Cardlo in 2023, we set out to transform this business from volume to value. Three years on, the transformation is complete. We've rebuilt the portfolio, We strengthened the margins, we improved capital efficiency, and we fortified the balance sheet. This was disciplined, structured, and deliberate. So let me show you what we delivered. Before we discuss financials, let me start with something more important, safety. We maintained our incident frequency ratio at 0.6, There is a saying we use internally, safety is operational excellence in disguise. When you perfect the art of preventing accidents, you accidentally perfect everything else. This is not just good ethics, it is good business. This culture of operational excellence flows through everything we do, equality, efficiency, You will see that in the numbers. So we delivered on our projections. Four numbers will tell the complete story. 10.1% return on sales as we transitioned from volume to value. 28.8% return on capital employed to optimize capital deployment. 1.4 times leverage, strengthening our balance sheet. and 57.2 million in revenue by a disciplined portfolio repositioning. Four metrics, one story, from volume to value. So let me put those numbers in context. In 2003, we had set medium-term targets that were ambitious, and 25% return on capital employed. We have now exceeded both 10.1% return on sales and 28.8% return on capital employed. This wasn't luck. It was portfolio discipline and operational focus. And we've done it while reducing leverage from 2.5 times in FY22 to currently 1.4 times. Control before growth. That was the plan, and we lived it. This chart shows the portfolio transformation from FY22 to today. We stopped the manufacturing contracts, which would deliver insufficient margin when we would have started that with manufacturing. We've also accident low margin capital intensive business. 13 million The overall asset revitalization project is now behind us, and we are now moving to focus ourselves on scalable growth and innovation programs. And in the past three and a half years, we have grown the chosen CTP manufacturing solutions by 4% cumulative growth rate, and speciality by 14%, both on a constant currency basis. The results first at FY23 when we started. Our portfolio margin has expanded from 4.1% to 10.1% return on sales. Our capital productivity has quadrupled. And our balance sheet leverage has improved from 2.5 to 1.4. The portfolio reset is complete. We now focus our talent, capital, and engineering capabilities on highly critical opportunities in regulated markets. So here's what it looks like across our divisions. Our CQP manufacturing solutions demonstrate the disciplined portfolio management and strategic resilience. In FY23, we generated 92 million from our core focus portfolio. The COVID-19 PCR testing boom temporarily inflated FY23 results as that market normalized story, our deliberate pivot towards high-value life science and safety and security solutions. Since FY24, we have delivered consistent growth, reaching $90 million in the trading 12 months after year 2016. This steady upward trajectory reflects the strength of our repositioned portfolio and validates our strategic focus on sustainable, high-value market segments. The business we've built today is more resilient It's more focused, it's more valuable, and positioned for continued growth in markets with strong structural demands. As speciality, $10 billion was delivered, with 14% human-level growth rates in the last three and a half years, mainly driven by aerospace manufacturing. The C2P design and engineering operates on a project basis, driving natural volatility. FY24's P reflected our asset revitalization program, addressing years of underinvestment across our partnerships. With operational excellence restored and margins expanded, we're pivoting to growth and innovation programs, recurring revenue streams built on sustained asset quality. We're staying on top of our maintenance to ensure we will never slip back. The portfolio is optimized for sustainable growth in high-reliability precision solutions in restricted regulated markets of life sciences, aerospace, and safety and security. Strategic assets are complete, low-margin, capital-intensive business is eliminated. The result, Carglo has stronger margins, enhanced rookie, and a scalable platform for growth. That's the journey, and now, Ian will take over and get you through the numbers in detail. Thanks Frank. It is a pleasure to announce our half year results for the financial year 2026, which we believe demonstrate continued performance in line with our expectations. Starting with the overall group financial performance. On a reported headline basis, revenue has dropped That's something I will explain in more detail on the next slide, as it has been impacted by some FX headwinds, as well as comparing to HY25, which included revenue from sites impacted by our exit from the non-core activities completed a year ago. Despite this drop in reported revenue, we have grown underlying operating profit from 3.4 million in HY25 to 5.5 million this year. And alongside that, EBITDA has grown to 8.6 million, which is now 15% of revenue, when compared to 11% a year ago and 13% at the last year end in March. This excellent EBITDA delivery has driven positive cash generation, which, after accounting for the expected working capital outflow in the period, is still strongly positive at 3.9 million. Net debt now stands at 24.5 million. Now we'll cover the detailed movement in net debt later, but key to point out that this is now 3% lower than the same time last year. So moving to look at the revenue profile. The profile demonstrates the benefit FX impact of 1.5 million of revenue, primarily coming from the translation of our US business and the impact in the last six or seven months of the GBP US dollar rate, as well as other currencies from the various markets in which we operate. Within CTP, our focus has been on portfolio has dropped 2.9 million. As we have previously discussed, we have exited non-core, primarily short-run business. The final site exit related to this was in the comparative reporting period last year. Accordingly, there is 2.2 million revenue included in last year's numbers. So, pleasingly, allowing for this, On a like-for-like basis, our CTP manufacturing solutions revenue has grown by 4.5% in constant currency. The speciality division also continues to thrive and grow, and we report 14% growth in the business, driven primarily by the aerospace sector. As Frank has previously told you, we are delighted to deliver improved margins. This is demonstrated by exceeding the medium term target we set ourselves a couple of years ago by hitting a return on sales of 10.1%. This has come about through consistent delivery of improved margins over time. For this reporting period, we have continued to improve efficiencies through reduced wastage, materials usage, and more efficient power usage. This focus on a more streamlined value-added portfolio has enabled us to absorb increases in labour costs and some non-repeatable costs. So moving now to look at the divisional breakdown, and firstly with CTP. So as previously described, revenue is down on a reported basis. CTP manufacturing solution has increased 4.5% on a life-for-life basis, allowing for the $2.2 million from site closures last year. D&E revenue reduced by 44% to 4 million, and as a result of the portfolio reset, we have had lower customer activity, primarily in the US, which has been the key driver. Performance in EMEA, sorry, if you could just go back. Sorry, thank you. Project activity is strong in EMEA, We have grown operating profit due to the self-help increased efficiencies that I just mentioned. And through enhanced machine utilization, rigorous cost control initiatives, we have steadily improved margins for several reporting periods now. And this trend has continued throughout HRI 26. This sees our operating margin in CTP increase from 8.1%, 8.2%, sorry, to 13.8%. and is also up from the 12% at FY25. So turning now to speciality. The robust demand in aerospace coupled with a return to growth for light and motion in this business unit have driven operating profit margin to over 21%. So now moving to look at our cash generation. Strong EBITDA growth has driven operating cash generation of 3.9 million. This has been partially offset by an anticipated normalization of working capital. At the year end, we previously talked about working capital being And this has largely been unwound, as we anticipated. And accordingly, working capital is now at 7.5% of revenue. This is at the higher end of the range we have previously talked about and should now be at a normalised level. Looking at net debt, this has dropped to 24.5 million. On the next slide, please. So this has now dropped to 24.5 million when compared to a year ago. In comparing to the year end balance of 19.2 million, it has increased, and this is primarily due to the one-off pension deficit recovery payment made in April 25 of 5.1 million. This payment was made as part of the refinancing arrangements we completed in April. Our new facilities with our lending partner, BZ, is working very well and we are very pleased with this arrangement. Moving now to the topic of the pension scheme deficit. At the last results presentation, we discussed how we have been proactive in managing the deficit and acknowledging that the subject of the deficit has previously been somewhat ignored. I think it's important actions we are taking with a proactive approach to reducing the deficit. We are aligned and work collaboratively with the trustees, which is vital to managing the position and reducing the technical provisions deficit. Since March 21, the deficit has reduced from £83 million to £61 million at the end of March 25, and further reduced to around £53 million at the end of September. This has been achieved through a combination of higher investment returns and company contributions. Having a clear and agreed deficit recovery plan is important in de-risking cash flow for the company. This chart shows that as we have continued to deliver performance, growing EBITDA, we have also been able to manage the risk more closely, seeing pension administration costs come down and accordingly, cash cost and risk to the business is reduced. We will continue in our approach to further de-risk the company cash flows. So finally, from me, in summary, the business is more financially resilient. We have a stronger balance sheet with well-managed working capital and net debt. Delivering higher margins is now a solid trend, supporting good quality of earnings. and we continue to make sure our assets deliver more for the business. Thank you very much. Thank you, Ian. So you've seen the journey, you've seen the status. Let me now show you how we scale from here. Next slide, please. This pyramid shows our strategic roadmap. The foundation is complete. You saw the proven ES numbers, financial resilience, operating excellence. And that foundation gives us the platform to move into phase two, discipline expansion, and phase three, innovation. From control to growth, that's where we are now. Let me show you the markets we're targeting. We're positioned to intrigue high growth, highly regulated markets. The IVD solutions, so our diagnostic consumables, we partner with six of the top ten IVD OEMs, and the market is trading with 5.6% cumulative growth rate between now and 2030. Drug delivery, culture injectors and inhalers, Custom solutions with regulatory excellence. The market is growing with 10.8%, which is the fastest of the three, and delivering good opportunities for us. An aerospace for our extreme performance parts. We are the leader in the MRO cables and wires, and we're adding machining to our portfolio. high double-digit growth. We've got three restricted regulated markets, we've got strong positions, and we've got structural tailwinds. And we're focused on where we have competitive advances. So, why do we win in these markets? Three reasons. Technology, trust, and transformation. Technology. We've got 40 plus years of precision engineering experience. We've got ISO 13485, FEA, and AS9100 registered sites. And our manufacturing platform now delivers 85% plus overall equipment efficiency. Trust. We partner with key players in all these respective markets. Our average relationship tenure is 15 years plus. And with 98% plus on-time delivery performance, we also there deliver on our commitments. Transformation. We've delivered it. 10.1% for us, two and a half times, nearly two and a half times FY22. 28.8% Rokey, four times 22. And we've been approximately invested 14 million pounds in the period FY20, FY25 to uplift our organization. So, technology validates us, trust creates stickiness, and transformation proves execution. That's our competitive advantage. So, we are now investing to widen our competitive modes through proprietary innovation. The three priorities, the technology platform, for example, the CMALT, Our new modular tooling system that accelerates time to market for our partners by 40%. We build it once, we deploy it globally. It's scalable fabrication and replicatable region to region. In product innovation, working on an inhaler platform with integrated counter and reusable holder. And the material development, we're managing wet ability tuning markets. And digital intelligence. Our platform Syncura will be a digital layer for packaging and devices, real-time, order-ready and traceability. So innovation isn't an idea, it is a system, and our begins long before the product. We're building defensible IP that compounds our competitive So, let me bring this together in why we are confident in delivering sustainable profitable growth and ensuring value for all stakeholders. Again, we've achieved the milestones set in 2023. 10% return on sales, target met. 28.8% broke in, target exceeded. Recent highlights reinforce confidence. Safety culture is embedded with an IFR of 0.6. Five-year contract renewal for our major customer security in July. We've got $36 million in financing funding arranged in April. Now, we're focused on three growth priorities. Life sciences expansion, advancing our presence where high-precision solutions remain in robust demand. Speciality growth, sustaining the momentum in aerospace with our speciality division. and further margin enhancement, continuing the journey from volume provider to value solution partner. So yes, we are confident in delivering sustainable profitable growth and ensuring value for all stakeholders. So thank you and we're happy to take your questions. Thank you Frank. I'm slightly disturbed Hold on, let me refresh and see if it comes through with me. If not, maybe you'll have to use it. Okay. We do have one question coming from Chris, and the question is, looks like this is one for Ewan, just to warn you. Will the full year accounts include distributable reserves? the position to forecast our numbers for the full year, so it's quite difficult to actually answer that directly, but we are confident in terms of how we are performing at the moment and confident in delivering our full year numbers. Okay, thank you. Another one just came in from Andrew. In previous presentations, you reported on the improving trend in environmental sustainability for the group. Seeing that nothing is included this time, I wondered if you could provide an update on Yeah, I'm happy to tell that. So we do tend to focus on that in our full year results. But I can kind of talk to the fact that we measure our energy intensity ratio, which is a measure of our carbon emissions per million pounds of revenue. That's consistently dropped in the last three years. And actually the reporting period now for HY26 shows a continuation more on that until here okay i think if we have no further questions restructured in the right way, got the right platform. We've done it in two and a half, three years. That was within the plan. We always had medium term to get somewhere. I know people were very skeptical in the beginning, but we set the returns. We're there now. I think our return was roughly where the market asked us to be. And now it's for us delivering the growth in the future. So that was it. Thank you very much. Thank you everybody for joining. We hope to see you all in just over six months time when we're doing the full year results. Thank you very much. Thank you.