Carclo (LSE:CAR) — Annual General Meeting

0:01 Good morning, Oregus and Venerable. Good morning. It's now 10:30 and as there are more than two members present in person, I'd like to begin today's proceedings and declare the twenty twenty five Annual General Meeting open. By way of introduction, for those who don't know me, my name is Joe Oatley. I'm the line's Executive Chair of CARCLO PLC. I'm pleased to welcome those people who have made it here in person and those who have joined virtually via the Investor Week company platform. Before we begin, a couple of housekeeping points. Firstly, if you've got your mobile phone with you, can you please make sure it is switched off or on silent and also that no device is being used to record the meeting. Secondly, I'm advised there are no planned firearms during the meeting. So if a fire alarm does sound, please leave the building by the nearest exit, receive the assembly point on Ropenick Street.

0:49 We shouldn't need you for litmus since we are on the Ground Floor. Today's meeting is being recorded so that shareholders and other stakeholders who cannot be present can view it on the company's website in due course. For those of you who've joined virtually via the Investor Day Company platform, your microphones have been muted to avoid any unsold interruptions. Please note if you've joined via the platform you're not able to vote. If you have any questions to the board you're able to submit these via the portal and the board will respond to key questions submitted at the end of the meeting. I'm joined here today by my fellow directors. I'd like to briefly introduce them before we begin. On my left I have Frank Durenbosch, the CEO, and on my right, Ian Tickias, the CFO. Also, I'd like to welcome you, Ian, to your first CARCLO AGM. If you keep from me who's on screen, you should be able to see behind me are Rachel Amy on my left.

1:47 She is the chair of the Audit and Risk Committee another Non Director and Natalia Kosmina Non Executive Director and Chair of the Remuneration Committee. Before we move to the formal business of today's meeting, I'd like to take a few moments just to reflect on the past year and the achievements your company has made. It's marked significant transformation for CARCLO and we had an excellent year. We're now a safer, more efficient and more profitable business than it was before we started our turnaround. Just under three years ago we set out our strategy to focus on margin over volume, improve our cash flow, ensure we have solid foundations before seeking future growth. We've delivered on this first phase of the strategy. To achieve it we focus on operational excellence and effectiveness across all of our manufacturing plants around the world, care of which is ensuring we have a relentless drive for safety and I'm incredibly proud we've improved our safety performance dramatically in the year.

2:47 From a financial performance we delivered a significantly improved performance with both our key measures of return on sales and return on capital employed well on the way to our medium term targets of 1025% respectively. Alongside this we significantly reduced our net debt by close management of cash, both working capital and capital expenditure, and we also secured new financing facilities from BZ Commercial Finance, and we reached an agreement on our pension scheme valuation deficit of our contributions. Operationally, we took decisive steps to reshape our business. In The US, the closure of our Tucson site and consolidation into Pennsylvania was completed on time and on budget, bringing a more efficient and effective manufacturing platform.

3:34 Looking to the future, we started to invest in research and development, which I think really is the first for the company, with our Lifetech Solutions Incubator, where we aim to develop our own proprietary products for the future. In terms of sustainability, 98% of our UK electricity consumption is now from renewable sources. Our carbon intensity fell 9% and as I mentioned earlier our safety records have improved significantly with incident rates down 74%. Our strong culture of responsibility and awareness are now firmly embedded across the group. Together CARCLO has successfully overcome a challenging period and emerged stronger, more resilient and better equipped to navigate future uncertainties. These achievements have placed us on a firm footing from which we can now embark on the second phase of our strategy to deliver robust and sustainable growth and then deliver value and continue for success for all of our stakeholders.

4:27 You may not have time to read the trading update that we put out this morning. If you have, you'll have seen that year to date trading has been in line with our expectations, with slightly stronger margin performance than we'd expected, offsetting revenues very slightly lower than we'd expected. Our expectations for the full year, the steady underlying growth and robust margin performance, remain unchanged. On behalf of the Board, I'd like to thank our colleagues across the group, our shareholders and partners for their patience and support through the past year. We'll now move to the formal business of today's meeting, after which we'll have plenty of time for questions. The notice at the Annual General Meeting together with explanatory notes was sent to shareholders on the September 2 and accordingly the requisite notice of the meeting has been given.

5:15 With your permission I'd like to take the notice concerning the meeting as read. Thank you. The notice of the meeting includes 15 items of business for consideration today. An explanation of each is included in the circular, but in summary the first four resolutions include involve the approval of the 2025 annual report and accounts, the remuneration policy, remuneration report, as well as the deferred bonus plan. In accordance with best practice resolutions numbers five to nine can show in the election and re election of directors. Additional information on directors could be found between pages sixty one and sixty two of the annual report. Resolution 10 is to approve the newly appointed external auditor ASMAIC LLP.

6:01 Remaining resolutions are our standard authorisation resolutions relating to your authorisation to determine the remuneration of the officers, allotment of shares, the Disapplication of Preemption Rights, purchase Vorum shares and the hold of General Meetings other than age ends on short notice. I would now like to offer all shareholders and any corporate representatives the opportunity to ask questions about the resolutions that are being put forward today. Please for now could you limit your questions just about the resolutions? There'll be time at the end of the meeting for more general questions. If you'd like to ask a question about any of the resolutions please raise your hand. Please, before asking your question, state my name whether you're shareholder proxy or corporate representative.

6:50 Okay. No more questions on those? Thank you. As there are no more questions, I'll now explain the poll voting procedure. As noted in the AGM circular, we shall be inviting you to vote on a poll rather than a show of hands. I've appointed Equinity, 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 and you'll need this poll card to vote.

7:22 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 you've been appointed as a proxy, you'll need a separate poll card for each capacity in which you vote. If you need a third poll card, fees raise your hand. Shareholders who are here today who lodge their proxies by 10:30 on Wednesday this week need not complete a poll card unless they wish to change their vote. If you have cast a proxy vote in advance and decide to vote at the meeting, the votes at the meeting will supersede any proxy votes you may have already 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've given me discretion as to how to vote, I should be voting in favour of the resolution concerned. As mentioned earlier, shareholders who have joined the AGM online via the Investment Meet Company platform will not be able to vote online during the AGM.

8:16 If you need an additional poll card, again please raise your hand now. Thank you. Now turning to the poll process itself. When the poll procedure commences, you should complete your poll card in the places indicated by inserting full name and address of the shareholder, your name if your vote is a proxy or corporate representative, and cross in one of the spaces made for, against or withheld in respect to each of the resolutions. Please note that withheld votes is not a vote in law and will not be counted as a vote for or against a resolution. If your vote is not being cast entirely one way and respectable to your shares, you should enter the number of votes being cast alongside the separate processes you insert for that resolution. If you are using the poll card to vote only some of the shares registered in the shareholder's name, but not all of them, you should enter the number of shares who are voting on the card.

9:06 If you have any questions or indeed need assistance with filling in your card, speak to a representative of the registrar who will be available at the end of the meeting. The poll will remain open for ten minutes after the close of the meeting. Any questions on that whole procedure? As there are no more questions, I will now formally put to the meeting each of the resolutions as set out in the notice of meeting and declare the voting open. Once you have completed your cards, please ensure you sign them, hand them to a representative of our registrar. The results of the poll will be determined by the registrar or scrutineer. It will take a little while, and so the results of the AGM will be announced to the London Stock Exchange and published on the website as soon as we have them. We're now happy to take any questions of

9:53 a more general nature, including those submitted via the Investor Week Company platform to me. Hope I will get on my laptop in front of me. So now after any more general questions. Only a prokinmiki to ask her. Yes. Now is the time.

10:10 You may. Just bear a moment, Milton. We'll get a microphone to you. Just go with this. My name is Danny Levy, but before anybody ask me for tickets. Not this famous one. Not that one. I'm I'm a private shareholder. And, also, historically, I've got a bit of connections because came in from the area already for a merchant bank, and I suggested merging two companies. One was called English CARCLOTHING. The other one was CARCLOTHING. And I suggested merging the two companies, which they have done after I left. So I didn't benefit financially from my advice but that was fifty years ago. Since then I've seen literally hundreds of balance of statements of companies.

11:08 And but I found this one and the most technical that I couldn't follow with you. Basically, what exactly does the company make. You know, there are no no illustrations here. So no idea what the what what physically the company makes, what does and who who who does it sell it to, basically. You know, which which compares, which countries. They also the first the first thing I wanted to say was, naturally, all of you, the board for the outstanding chem bikes, the company in the past year, which makes a change. We usually get come to company in Italy. We tend to complain about the golf surface. And that's it. And and and I've already spoken to your chief executive officer.

11:57 He's straight to China. I was going to ask. So, that's basically it. Okay. Let me first of just comment on your point on share price because we run the company and we drive the performance

12:09 of the company. The share price is down to the markets and the shareholders, but we focus our minds very much on driving the performance of the company and delivering a long term success. In terms of a very brief summary of what we do and the markets and customers to which we sell, Frank, would you give a very, very brief summary of that? Yeah. So we changed a little bit from the CARCLO PLC company we were fifty years ago, where you were part of. So we're now a global, which is an engineering group, and we deliver products to markets like life science, aerospace, and safety and security. If you want to know specifically what we make in the life science, a big part of what we do is consumables for automatic testing for, so we call it in vitro diagnostics.

13:00 So, you take your blood, you take other samples then put it into automatic testing, and we deliver the consumables in there. So, what we see in the annual report is where our products are used, not the product ourselves, because our product is always a part of our customers. We focus ourselves on The US, EMEA and APAC. Those are the regions where we sell in all the areas, both in life science and aerospace. We deliver around 60 to 70% of the top 10 customers in the specific segments. So, we always said we don't divulge the customer name as such, but we always play with the top customers in those regions.

13:46 Do you sell to the National Health Service? No, we sell to people who put diagnostics machines in and we supply them with the consumables. So they deal with National Health Service, we don't deal directly with them. You sell to them in days? We sell to our customers who have their machines who they use in National Health Service locations. Okay.

14:10 Can I suggest maybe next year you could show a few illustrations of the product? I will make sure they're in there and when I see you again next year, I'll promise you I'll have them But we assume you're still around so you will then have some physical in your sicko. Alright. Thank you, Frank. Jonathan. You have an r and d site for the my name is Ron. You have an r and d site for the Microsoft. Have you an R and D site for the aviation site? We are so what we're doing, we're doing more and engineering in our engineering site and we're currently also working on adjacent markets. So, we are very proud to do technical engineer products with our very high spec in medium to low volumes.

14:58 And we're now putting our engineering sites out to our customers to work on new solutions. We just made the new solution for a helicopter a gearing system together with our customers. It's co engineering. We are not making the complete helicopter work.

15:13 Do that engineering, because we think part of our value is our customers don't buy our products. They buy our solutions, our service, and the fact that our products give them the trust of where it is intended. Because we deliver in regulated markets, we deliver in very high reliable products, because our products are always key to the use. Them. So it's co development with our customers in house.

15:38 I ask another question please? Of course. Year you mentioned that a number of people moving out of China, American manufacturers, and you were hoping to change the business of those. Does that occur? Yeah, because from day one we said we're going to produce in China for China and as was said last year, yes we have customers due to the geopolitical changes have probably even accelerated this year who also wants to have the same type of product then instead of China one that they have now from, say, from The US. So, and because we now have

16:09 one CARCLO, we work with the same machines, with the same process, same standards, we could pick up molds from one location and put it into another location. And that has happened, and we have gained customers in the APAC region itself. So, our in the region, for the region strategy, which we started at the end of COVID when we saw how fragile the supply chain is. That decision has been very successful for us, especially currently in the current geopolitical situation.

16:38 Can I just ask Mark and the IT support in the corner? I have no questions online showing on the screen. Is that because there are no questions? That's correct. Okay. So we have markedly zero questions online. Think it's the first time we've ever had that. I'm not sure whether this is good or bad. Any more? We can obviously chat outside as well over at CARCLO Any more questions in the room? Last year you mentioned that we were having a problem in hiring staff in Socchot. Has that remained the problem or have you been able to put in that trap? We see the issue of getting colleagues all over the globe and when we were going to Scotland that also applies to that region. What we have now done, especially if you go to a twenty four hour run-in Scotland, we now put more machines in which we can now run the business, get more output out of the same sixteen hours we're doing there, efficiency comes in. So, it's not Scotland specifically where you find it difficult to get to work, keep people.

17:44 We are working on a major repayment program to make sure that that was it. And I So it has not hampered our output because that's the that's the biggest risk. You have to project, you have to project, but you can't deliver. And that's what we don't have yet. So we talked about putting more machines in, but getting a full 20 fourseven shifting in Scotland is still a challenge. So me commenting there were no questions online has probably prompted some people to hit their keyboards. So we do now have some questions online. I'll leave them out and then direct them left or right as appropriate. So we have Bob who's got two questions, I'm going to run them into one, if I may. Which movements or changes in your chosen markets is the business most vulnerable to and which changes could really accelerate your business?

18:38 I think that's quite a broad ranging question. Yeah, it is. But Frank, if I could

18:43 ask that to you, to speak in quite sort of general terms, that's what. Yeah, in general terms, is the use of the products and the need of those products. I think that will be most grown forward, but we do still see that markets as such in general are growing over the long term. So that's where you could see the risk is the whole market, because a lot of products we make are for a specific customer. Hence, we're doing the innovation in proprietary technologies, materials and products to also have a

19:14 wider bandwidth to the market to have a little bit more view and visibility on assets. And Tim?

19:23 Monfan Zahe here: Is there a foreign exchange strategy currently in place for CARCLO? For example, do we do any hedging? Ian, this sounds like the CFO. Yes, I'll say that, thank you. So we don't have a formal FX strategy. We've benefited in the past from a natural hedge to some degree in terms of our markets and how we trade. Clearly, probably picking up on the line in the statement that translating largely our US business has impacted with the sterling movement this year, So we are looking at what are the strategies we could adopt to try and mitigate that in the future. Thank you. On from Can you please comment on the recent investor roadshow? I'm guessing that's something to get some feedback on how it was received from the Prevans Frank.

20:14 Three seconds on that? Just in general terms rather than talking about anything specific. Yeah, I think so we went around to those more people interested in the company as we are going, we have turned the corner. I think then you become more interesting. It's always good to talk to investors. We like the interaction with the investors. So, when there is a request, we do that. The feedback has been very positive from people understanding where we are. I think it is for us easy to tell the story now when you are forward looking instead of looking at the site and making sure that the company stays afloat. So I think it's the right moment for investors to have conversations with us. We enjoy those conversations and we would motivate people to ask us for those conversations because we're proud of the company, of what we've done, proud of what these thousand people have changed in the last three years, and we're happy to talk to everybody about that.

21:09 And lastly, from Michael, can you explain your CapEx position and how much future CapEx is set aside for developing new products for new markets? Yeah, so I think over the last five, six years we spent around £40,000,000 in our business. It was in the beginning we spent all the money we didn't utilize. So the last three years we were focusing on utilizing it. In our innovations, on the investment on the innovations, what we're there looking for, we're looking for, we call them sponsors. So, key players in the market who use the product. Because we make a proprietary product, we need to still leave the service to market. So, to take the massive risk out of investing everything yourself and then you're going into the wrong path, we're now working with, we call them sponsors, with sponsors on projects. So, we're working with three, four sponsors on three, four projects, who can take that product which we make to market. We will then share the cost and we share the advantage, and the sponsor will have a head start in the market on the innovation.

22:14 So, that's how we try to balance it. But currently there's no limit on the investment. We're just trying to make sure that the CAPP as we invest has its return. I think that's just been something very clear, which we've done say nearly three years ago. We said everything we need to do, we need to make proper risk assessment and we have proper money. We allocate our capital and our capacity to where there is a return. And with the sponsor that's a much easier program. And we do have another one now that's just come in. A two part question from Chris. What's led to the lower design and engineering revenue in the first half of the year to date, And what visibility do you have on that if we're up in the second half, which we guided to in the trading update this morning?

23:01 And the second part is do you still believe The US could reach the same similar margins as the rest of the group? So I think Yeah? So two parts, the D and In D and E, I think we have done a lot of refurbishment for customers, and we put that focus in. When were tiring, we now moved a lot of the design engineering in. So that helped to boost the sales in the last year. So you now see a normalization of that. If you compare it to three, four years ago, everybody was aware of the big manufacturing framework agreement we had with one customer. We didn't come through, but we did all design engineering. We were paid for that design engineering. So that high level was followed by a massive asset revitalization program.

23:51 Hence we saw that it was going to go down. We expected to pick it up a bit earlier than it was. It didn't. We now have visibility on getting in new orders for new projects for new customers, but also we just got to receive the asset revitalization of one of our key customers. So that's the view on that. You got a point on that, because you've you've done this yesterday, is that the visibility we have in the second half is quite a large number of small things rather than just one big thing that's therefore very binary, so I think it gives us more confidence that even if one of those didn't quite happen, it didn't happen on time, because it's a number of smaller projects, it's much less volatile. And the second bit was The US margins. Yeah, we still are fully committed that the margins in US will be similar as the margins in Europe and the margins in APAC. And just come back to the FX strategy, how the fact that we produce in the region for the region takes a big part of the hedging.

24:51 Perfect! I think that is all the questions we have. Hold So on. Okay, one last question which I think we're not going to answer. So the question is what is your forward order book? We publish the numbers on the forward order book and we have long term contracts with a number of major customers, which gives us stickiness with those customers, but we don't publish the number and actually be very hard so to do because they typically are call off contracts in an event. Perfect thank you. That is all the questions. I'd like to thank everyone for attending today's meeting and wish you all to secure enough home for those who came in person and also thank you to everyone who joined by the Investor Week on the platform. That concludes the meeting. I declare ARPO is 2025 and general meeting closed.

25:45 As I said earlier, I'll remain open for another ten minutes, and if you'd like to have tea or coffee for those people in the room, join us next door. Thank you very much.