Carclo plc (CAR) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to Carclo's Annual General Meeting. It's now 9:30 a.m. And as there are more than two members present, I will begin today's proceedings and declare the 2026 AGM open. By way of introduction, my name is Joe Oatley. I'm the company's Non-Executive Chair. Pleased to welcome those who joined in person and those who have joined via the Spark Live program platform virtually. Before we begin, a couple of housekeeping points to mention. Firstly, could I ask everyone to ensure their mobile phones are either switched off or on silent and that no device is being used to record any part of the meeting. Secondly, I'm advised there are no planned fire alarm tests during the meeting. So if the alarm does sound, please leave the building via the nearest exit, proceed to the assembly point outside in the car park. Today's meeting is being recorded so that shareholders and other stakeholders who cannot be present can listen to it on the company's website in due course. For those of you who have joined virtually via the Spark Live platform, you'll be able to hear the live proceedings through the platform's audio feed. You have been muted to avoid any unnecessary interruptions. Please also note, if you've joined via Spark Live, you are not able to vote directly through the platform. If you have any questions to the Board, you may submit these via the Q&A function on the platform and we'll respond to questions submitted during or after the meeting. I'm delighted to be joined by members of our Board, Frank Doorenbosch, who joins us remotely; Ian Tichias, the CFO; Rachel Amey, Non-Executive Director, Senior Independent Director and Chair of the Audit and Risk Committee; and Natalia Kozmina, Non-Executive Director and Chair of the Remuneration Committee. In addition, we have our Company Secretary, Pheobe Greenwood. Representatives from Equiniti, our registrars; Panmure Liberum, our brokers; and joining remotely HaysMac, our auditors. Before we move to the formal business of today's meeting, I'd like to take a few moments to reflect on the past year and the achievements your company has made. Last year was a milestone for Carclo, a year in which the transformation we set out on in 2022 came to fruition with the business outperforming both of our medium-term financial goals of return on sales above 10% and return on capital employed above 25%. We achieved this by continuing our drive for operational excellence and making deliberate choice to walk away from low-margin short-run work and to concentrate our energy on the regulated life sciences and aerospace markets where our precision engineering is genuinely valued. Behind those headline figures sits a great deal of hard work across the group. Our Specialty division delivered impressive growth on the back of strong aerospace demand, and we brought new capacity on stream to keep pace. We secured an important long-term contract renewal with our largest life sciences customer. All of our operations in EMEA and Asia Pacific performed well and the consolidation of our U.S. manufacturing into Pennsylvania has delivered exactly the margin improvement we had hoped for. Throughout all this, our people have kept safety front and center with an incident frequency ratio matching the previous year's achievement of just 0.7 per 100,000 hours worked, and we're seeing further improvements on this so far this year. Taken together, this is a business that is leaner and more focused than it was a year ago. From these solid foundations, our focus now turns to driving sustainable, profitable growth through our Precision 2030 plan. We see growth opportunities across our key markets with our existing customers and in adjacent segments such as drug delivery and pharmaceuticals packaging. As we set out in the update we put out this morning, trading since the 1st of April has been characterized by robust margin performance with underlying operating profit and return on sales both ahead of prior year and revenue slightly below the same period last year. The lower volume reflects the phasing of our design and engineering programs and a slow start to the year for our CTP U.S. manufacturing business that we flagged when we put out our year-end results. As expected, volumes have recovered as we moved into the second quarter of the new financial year. In Aerospace, demand remains strong in both civil and defense applications, and we continue to grow the business. At the end of July, net debt was higher than prior year-end due to both the extension of leases to existing U.S. properties and the timing of working capital flows. The working capital outflow is expected to reverse by the end of the second quarter. And as such, net debt, excluding leases, at the end of the first half is anticipated to be in line with the prior year-end. Our expectations for the full year of steady underlying growth and a robust margin performance remain unchanged. On behalf of the Board, I'd like to thank our colleagues across the group, our shareholders and our partners for their commitment and support throughout the year. We will now move to the formal business of today's meeting, after which we'll allow some time for questions. The notice of meeting and explanatory notes were published on the company's website on the 14th of August 2026 and posted or made available to shareholders electronically. The resolutions are also displayed on the screen before you for ease of reference. The notice of meeting includes 13 items of business for your consideration today, and an explanation of each of these is included in the circular. I propose to take the notice of meeting, including all the resolutions which are being voted on as read and declare voting open. As noted in the circular, we shall be inviting you to vote on a poll rather than a show of hands, and I have appointed Equiniti, the company's registrar, to act as scrutineers. Only shareholders or their proxies or corporate representatives are entitled to vote on the poll. On registration, you should have been given a poll card. You will need this poll card to vote. If you wish to vote on the poll in more than one capacity, for example, if you're a shareholder in your own right and have also been appointed as someone else's proxy, you will need a separate poll card for each capacity in which you vote. And if you need a further poll card, please raise your hand and will be passed to you. Shareholders who are here today and who lodged proxies this week need not complete a poll card unless they wish to change their vote. And if you've cast a proxy vote in advance and you decide to vote at the meeting, your votes at the meeting will supersede any proxy votes you may have lodged. Many shareholders have already sent in a proxy appointing me to vote on their behalf. I will vote as they have instructed me. If they have given me discretion as to how to vote, I should be voting in favor of the resolution concerned. As mentioned earlier, shareholders who have joined the AGM online via Spark Live will not be able to vote directly through the platform during the AGM. You can vote at any time during the proceedings until I declare the poll closed. I will give you a clear prompt later in the meeting to warn of the close in voting once we've concluded answering any questions posed in relation to the resolutions themselves. As it will take some time to complete the poll procedure, the final results of the voting including the proxy votes on each of the resolutions will be announced and published on our website as soon as reasonably practicable after the meeting. We will now move on to the question-and-answer session for those queries relating just to the resolutions only, please. We'll have a separate Q&A session for queries relating to the general business later on. I would also note that our auditors, HaysMac, are with us remotely and are available to answer any questions you may have regarding the audit or the auditor's report. Ahead of today's meeting, the company invited shareholders to submit questions in advance. We have got one, but it's a general business one, so I'll deal with that later on. We haven't received any pre-submitted questions relating to the resolutions themselves. I will now pause to see if we have any questions again, just relating to the resolutions. None from the room and none online. Okay. There being no further questions, we'll now proceed to close this session and move to close the poll. Ladies and gentlemen, I confirm the poll is now closed, and we can now move to open the general question-and-answer session for queries relating to the business of the company more generally.

If you'd like to ask a question in the same way as before, if you're in the room, please raise your hand. If you're online, please submit your question via the Q&A function online. And we'll do our best to answer as many questions as we can during the meeting. Okay. I'll move, first of all, to the pre-submitted question. And this one, once I've read it out, I'm going to hand it over to Frank to answer. So it's a question from Rob. You have previously covered the wearables opportunity and the fact that Carclo has invested in the capacity to produce the internal elements and also the liquid silicone rubber capacity for wearable sensors. Can investors assume from that, that CTP now has both the capacity and the capability to produce and assemble the complete wearable sensor? Given that the HealthTech wearables market is very large and looks set to materially expand, do you expect the wearables market to be meaningful to CTP in the short to medium term? And perhaps, Frank, it's not asked there, but perhaps you could talk about long term, that opportunity as well.

Yes. No problem. Thanks for the question. And I think it's right, both investors also as a business, in everything we invest, we expect a return. But as we always said that our sales cycles are fairly long. There won't be any short-term result of it in the, say, in the sales and the revenues. But on the medium to long term, this is a very important market. The products of the wearables become smaller and smaller. We've invested in micro molding and expanding our micro bonding capabilities, allowing us to make the very small products which are in the wearables. And with the liquid silicone rubber machines and capacity we have bought, we have now been able to apply the sealing also to it. So yes, we will be able to participate in the wearable sealing market. You always have to remember that the complete wearable also has a lot of technology and products in from our customers, but we will be working on those elements and especially the micro molding and the liquid silicone rubber helps us to put a position in that. But it is to work on the projects, work the project out. But in Life Science, cycles are fairly long. So don't expect anything this year or next year, but I expect that we are working on price because we're not investing in it when there is no prospect.

Thank you, Frank. So my machine is telling me there are no other questions. I'm just checking with my colleagues. So that was the only one. I'll give it just another few seconds to see if anything else comes up. Okay. We appear to have no other questions online. So I will now bring the Q&A to a close. That concludes the business of this meeting. Thank you for joining the meeting today. The proceedings, questions, votes and resolutions of the meeting will be recorded in the minutes. The final results of the meeting, including the exact voting figures, will be announced to the market and posted on our website as soon as practicable this afternoon. And I now declare the meeting closed.