Carclo – looking for its shares, now 28.5p, to more than double while setting a new Target Price

28.04.2025

Three years ago, the business of

Carclo (LON:CAR) was facing ‘going concern’ pressures, however, its Management has since pulled its prospects around impressively and I see the potential for its shares to more than double in the next year or so.

The Business

The Carclo group is a global leader in high-precision components with comprehensive, end-to-end manufacturing capabilities.

With expertise spanning mould design, automation, production, assembly, and printing, the group supports critical growth sectors, particularly life sciences, aerospace, and optics, with tailored, precision solutions. 

Management Comment

Last Thursday, upon the group announcing the securing of refinancing arrangements, together with a Pension Scheme Valuation Update, CEO Frank Doorenbosch stated that:

"This refinancing represents a transformative reset of our financial foundation.

Our new facility with BZ, alongside the significant reduction in our pension deficit, is far more than a technical financial transaction - it embodies our commitment to the continuing transformation of Carclo.

We now stand ready to accelerate our growth trajectory with greater confidence and capability.

The Board and I extend our appreciation to our dedicated employees, loyal customers, collaborative suppliers, and supportive shareholders who have been instrumental in achieving this milestone.

Together, we are a stronger business and Carclo is well-positioned to deliver enhanced value for all our stakeholders in the years ahead."

The Equity

There are some 73.42m shares in issue.

The larger holders include Schroder Investment Management (19.24%), Janus Henderson Investors (9.88%), Hargreaves Lansdown Asset Management (4.80%), Columbia Threadneedle Asset Managers (4.35%), First Equity (3.65%), IG Markets (3.03%), Lakestreet Capital Partners (2.99%), Financiere de l’Echiquier (2.97%), HSBC Bank Market Maker (2.21%), and HSBC Global Asset Management (1.56%).

Broker’s View

At Panmure Liberum analyst Andy Smith rates the group’s shares as a Buy, with a recently increased Target Price of 63p, up from 47p.

For the year to end-March 2025, his estimates are for standstill revenues of £133.0m (£133.0m), but with more than doubled pre-tax profits of £2.4m (£1.0m), and earnings of 2.4p (1.1p) per share.

For the current year, his estimate is for sales of £146.0m, with more than doubled profits of £5.2m, generating 5.2p of earnings.

To end-March 2027, Smith sees £160.0m of group revenues, pushing up some £8.4m of profits and a very healthy 8.4p per share of earnings.

Referring to the refinancing and pension news, the analyst last week that:

“This is the news we have been waiting for with Carclo announcing new banking facilities of £36m (against a net debt forecast of £15.9m at March 2025 - split £21.1m debt, and cash £5.3m), and a lower actuarial pension deficit, down from £82.8m to £64.5m.

As our target price is dependent upon the value of the pension deficit, the lower value allows us to increase our target price to 63p from 47p.

We re-iterate our BUY recommendation with the new facilities allowing Carclo to invest in the business and the ability to look forward with confidence for the first time in several years as the material uncertainty over liquidity is removed.”

My View

I have followed this group for years during which it has had its ups and downs and is now pulling itself out of one of those down periods.

I called its turn too early last September, but my faith has been renewed since last week’s statement – so I now set a new Target Price.

Looking at the broker’s analyst estimates for profits and earnings over the next couple of years gives me some confidence that the upward momentum is very much stronger now.

The progression expected over the next few years makes the shares at the current 28.5p look like ‘petty cash’ – they could well double in due course and still look cheap.

(Profile 18.09.24 @ 38p set a Target Price of 50p)

(Profile 28.04.25 @ 28.5p set a Target Price of 38p)