Plastics specialist Carclo’s (CAR) disappoints investors with the likely cancellation of its final dividend as lower UK corporate bond yields lead to an increase its pension deficit.
It says it cannot at present pay the dividend of 1.95p per share announced in June, warning that if corporate bond yields remain low, it will result in a significant rise in the firm’s pension deficit and may extinguish available distributable reserves.
Shares in Carclo fall 12.3% to 137.6p.
In response FinnCap reduces its rating from 'buy' to 'hold' and cuts its price target from 195p to 150p. It describes the dividend pause as an ‘unwelcome surprise but is reassured that trading is on track to hit full-year forecasts.
Elsewhere in today's update, Carclo says the technical plastics division has performed well with expected demand levels.
The company has also approved the expansion of its existing Indian facility, which is expected to complete by the end of next year.
Within LED technologies, Carclo’s luxury and supercar lighting business has performed well with design, development and tooling programmes progressing as expected, with consistent new business wins.
The group expects net debt to increase as a result of the weaker pound on re-translation of its medium-term loans.
However, Carclo says it also benefitted from a modest trading gain on the re-translation of profits due to the weaker currency.
