Carclo plc

Carclo did not state a headline revenue or EPS figure in the transcript, but said reported revenue fell year on year, with around GBP 2.6 million of the decline from FX translation and GBP 2.2 million from exited products in H1 FY25. Operating profit margin reached 11%, return on sales rose from under 5% to 11% over the FY22-FY26 period, and return on capital employed rose from 9.5% to over 29%. Net debt to EBITDA moved from 2.5x to 1.3x over the four-year reset period, cash from operations increased from under GBP 7 million to GBP 12 million, and the effective tax rate improved from 67% to 44%. For FY27, management expects trading to be weighted to the second half and expects to deliver positive organic revenue for the full year; long-term targets are revenue compounding above 8%, net debt below 0.5x EBITDA by FY31, return on sales at or above 10%, and return on capital at or above 25%.

Frank Doorenbosch framed the last four years as a deliberate choice to make Carclo “better rather than bigger,” emphasizing portfolio simplification, stronger engineering focus and exits from low-return work. He said the business now has a stronger platform for growth and highlighted Precision 2030 as a shift from turnaround to growth, with expansion in life sciences, aerospace and adjacent markets such as wearables, GLP-1 drug delivery and pharmaceutical packaging. His tone was confident and strategic, but he also noted that growth must not come at the expense of returns, repeatedly referencing the goal of keeping return on sales at or above 10%.

Ian Tichias said FY26 delivered stronger earnings quality, improved profitability, a successful refinancing and continued solid cash generation. He pointed to 11% operating profit margin, net debt leverage of 1.3x, annual pension contributions of GBP 3.5 million under the deficit recovery plan, and a one-off GBP 5.1 million pension contribution tied to refinancing; he also said pension cash costs are now about 19% of underlying EBITDA versus almost 30% a few years ago. He stressed that the reported effective tax rate fell from 67% to 44%, and that the business is targeting lower leverage over time while preferring to use capital internally rather than pay a dividend right now.

Analysts asked for clarification on pension payments, and management explained there is a GBP 3.5 million annual deficit recovery contribution for the next four years, plus a one-off GBP 5.1 million payment made as part of refinancing, with further recovery payments planned after that period. On dividends, management said any payout would need lender agreement under the covenants and that the company currently sees better uses for capital in internal investment. In a growth question about wearables and continuous glucose monitoring, Frank said Carclo is investing in micro molding and liquid silicone rubber capacity, is focused on new product cycles rather than price-led wins, and is not looking to sacrifice return on sales below 10%.