Companies: CAR   

High-tech plastic components maker Carclo announced last week that it was buying up the remaining 25.6 per cent minority stake in Conductive Inkjet Technology (CIT). The move, which will cost a maximum of £2.07 million, looks a good one. CIT has developed a unique process for printing pure metals onto plastics, silicon and glass. The technology is on the verge of commercialisation, with a US partner set to commission the first production line based on CIT’s Metaljet printer. Now Carclo will get the full reward – and it could be substantial.

The technology has a wide range of applications – including radio frequency identification (RFID) antennas, sensors, keypads, switches and other printed circuits. CIT’s laser technology can produce extremely fine lines that are invisible to the naked eye. Revenue will come not only from manufacturing the Metaljet printing platforms but also from supplying a range of supporting products – including inks. The first contract manufacturing facility is set to start up in January next year. It is intended to supply a wide range of RFID antennas and flexible circuitry to prospective purchasers of the entire system. Carclo says there is a high level of interest from leading players in RFID technology and it is targeting the sale of three systems by March 2009. That will lead to a steady stream of revenues from inks and other consumables.

Separately, Carclo has confirmed it is in line to meet expectations for current trading. Three-quarters of group sales come from fine-tolerance, injection-moulded plastic components for use in the medical, automotive, telecom and electronics sectors. The strategy is to grow the specialist businesses, particularly in medical plastics and LED optics, expand in low-cost areas and invest in new technologies and proprietary know-how. The CIT deal clearly meets that last objective.

Expectations are for Carclo to lift profits in the year to the end of March 2008 from £4 million pre-tax to around £4.5 million. There should then be a sharp jump in 2008/09 – to around £6.5 million. That would take earnings to 9.3p per share, which leaves the current 111p share price (down from a 132p year’s high) looking attractive on any grounds. But for a business that controls potentially breakthrough technology, the rating is downright cheap.

Four years back, Carclo was laden down with debt and appeared to be going nowhere. But after good cash flow generation and a series of property disposals, debt has been reduced by nearly two-thirds to a very manageable £12.8 million. The final dividend was lifted by a half last year as a pointer to the way ahead. Capitalised at £63 million, Carclo is a solid, but potentially exciting, addition to any small company portfolio. Buy.

Carclo	LSE	£29.15m	51.00p	-0.50p
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