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Carclo — All going to plan

Carclo (LN: CAR)

Last close As at 06/08/2026

—

— 0.00 (0.00%)

Market capitalisation

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More on this equity

Research: TMT

Carclo — All going to plan

Both of Carclo’s larger divisions, Technical Plastics (TP) and LED Technologies, grew in line with management expectations during FY17, while the smaller Aerospace division continues to experience stable trading conditions. FY18 has started well with the announcement of a second mid-volume project for Wipac. This new award underscores the relevance of the recent FLTC acquisition, which substantially enhances Wipac’s ability to progress multiple projects simultaneously. We leave our estimates unchanged but slightly increase our indicative sum of the parts valuation.

Analyst avatar placeholder

Written by

TMT

Carclo

All going to plan

Pre-close trading update, contract award & acquisition

Tech hardware & equipment

13 April 2017

Price

135.00p

Market cap

£99m

Net debt (£m) at end September 2016 (prior to October placing raising £7.7m net)

27.6

Shares in issue

73.0m

Free float

93.1%

Code

CAR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.4

(5.1)

(5.4)

Rel (local)

1.8

(6.7)

(19.5)

52-week high/low

163.8p

112.0p

Business description

Carclo is a specialist in high-precision plastic moulding principally in healthcare, optical and automotive applications. Its two main end-markets are high-volume medical consumables and low-volume, very high-value automotive lighting, typically for supercars.

Next events

Prelims

6 June 2017

Analysts

Anne Margaret Crow

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

Carclo is a research client of Edison Investment Research Limited

Both of Carclo’s larger divisions, Technical Plastics (TP) and LED Technologies, grew in line with management expectations during FY17, while the smaller Aerospace division continues to experience stable trading conditions. FY18 has started well with the announcement of a second mid-volume project for Wipac. This new award underscores the relevance of the recent FLTC acquisition, which substantially enhances Wipac’s ability to progress multiple projects simultaneously. We leave our estimates unchanged but slightly increase our indicative sum of the parts valuation.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/15

107.5

7.1

7.9

2.8

17.1

2.1

03/16

119.0

8.8

10.1

0.9

13.4

0.7

03/17e

130.0

10.7

11.6

0.0

11.6

N/A

03/18e

140.6

12.7

13.1

0.0

10.3

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

TP benefiting from expansion to support customers

TP growth depends primarily on expansion of capacity to meet demand from new and existing customers. Production at the facility in Taicang, completed in H216, ramped up during FY17 to support demand for disposable medical consumables from a global healthcare customer. This was supplemented with new business wins and the drive to secure further work continues. Work doubling capacity at the Bangalore facility is ongoing and scheduled for completion this summer. The integration of the Precision Tool & Die business, acquired in October 2016 to enhance the prototyping offer, is progressing well with the first batch of synergistic projects underway. Importantly operating margin is expected to have reached management’s stated target of 10%.

FLTC acquisition supports further Wipac growth

LED Technologies’ growth depends primarily on winning and executing programmes to design and develop lighting for the luxury and supercar sector. Wipac has recently achieved its target of securing a second mid-volume programme, on a vehicle for the hybrid market. Existing programmes are running to plan. The FLTC acquisition will enable Wipac to go after additional mid-volume programmes now that it has the design capability to work on multiple programmes in parallel.

Valuation: Auto contracts to close valuation gap

Based on a sum-of-the-parts valuation, which recognises that half of Carclo’s operating profit is derived from the supply of specialist products for healthcare and pharmaceutical applications, we arrive at an indicative valuation range of 153-162p (previously 148-156p). Newsflow regarding further automotive contract wins should help close the valuation gap.

FLTC acquisition

On 30 March 2017, Carclo acquired FLTC, an independent automotive design company based in Czech Republic, for an initial consideration of c £0.9m and a deferred consideration of up to £0.5m plus a cash and working capital adjustment of up to £0.5m (net of cash). The consideration was payable in cash, funded from the group’s short-term debt facilities. The deal increases Wipac’s existing LED lighting design team by about one quarter, enhancing the division’s ability to address multiple opportunities in the low and medium volume prestige automotive segments simultaneously.

FLTC employs 35 engineers solely focused on automotive LED lighting design, ie with skill sets encompassing optical design, mechanical design, power electronics and systems integration. The FLTC team will be incremental to Wipac’s existing UK design team. By adding over 30 designers in one go, rather than attempting to achieve this through recruitment of individual people, Wipac will be able to work on more low and medium volume prestige car projects simultaneously. Wipac’s ability to expand had previously been limited by the rate at which it could find suitably qualified and experienced staff in the UK.

For the year ended December 2016, FLTC reported revenues of c £1.6m, generating c £0.4m profit before tax. Wipac currently accounts for one-third of FLTC’s revenues. Following the acquisition, FLTC will shift away from third-party activities, which are with the same customers as Wipac, and work exclusively on Wipac’s projects. Although the transaction is potentially earnings enhancing from FY18, we leave our estimates unchanged, other than balance sheet adjustments, until there is greater clarity on how well integration of the new design team is progressing. These adjustments increase our estimate of net debt at end FY17 from £24.3m to £25.6m.

Valuation

Examination of the comparators (Exhibit 1) shows that Carclo is trading on multiples that are substantially lower than those for healthcare companies. We therefore run a sum-of-the-parts calculation to determine an indicative FY18 P/E multiple for Carclo, as this methodology acknowledges that half of its divisional operating profit is attributable to the sale of products to the global healthcare industry. Where available, the P/E multiple applied to each division is the mean for each sector, as shown in Exhibit 2. There are a number of companies manufacturing high-volume medical products but the key one of relevance, which we use in the sum-of-the-parts calculation, is Gerresheimer, as its products are primarily for use in the medical/pharmaceutical test facilities, rather than for patient care (Ambu, Coloplast and Straumann). As can be seen from Exhibit 1, the latter trade on much higher multiples. This sample is therefore not used in the sum-of-the-parts calculation.

Applying a blended P/E multiple of 13.8x to Carclo’s FY18 EPS (13.1p) gives a preliminary indicative valuation of 180p. We think that Carclo’s relatively small market capitalisation merits some discount. However, the implied discount (26%) to this preliminary indicative valuation with a current share price of 133p is, in our opinion, too severe given the stability provided by long-term customer relationships combined with potential for growth in Carclo’s two main divisions. Applying a 10-15% discount gives a valuation range of 153-162p (see Exhibit 2). To cross-check, we apply the same methodology to calculate a blended sum-of-the-parts using the year two EV/EBITDA multiple from our sample of peers in the three segments. Our indicative value range of 153-162p gives a range of year 2 EV/EBITDA multiples of 7.0-7.4x (see Exhibit 1). The lower bound (7.0x) is equivalent to the blended year 2 EV/EBITDA multiple with a 10% discount applied. The upper bound (7.4x) is equivalent to the blended year 2 EV/EBITDA multiple with a 4% discount. Our valuation range was previously 148-156p/share. This modest increase reflects a substantial uplift in the average P/E multiples for aerospace companies.

Exhibit 1: Peer multiples

Name

Market cap ($m)

EV/sales
FY1 (x)

EV/sales FY2 (x)

EV/EBITDA FY1 (x)

EV/EBITDA FY2 (x)

P/E
FY1 (x)

P/E
FY2 (x)

Carclo at current price of 133p (11 April 2017)

122

0.9

0.9

7.3

6.3

11.5

10.2

Carclo at indicative value of 153p

151

1.0

1.0

8.1

7.0

13.2

11.7

Carclo at indicative value of 162p

159

1.1

1.0

8.5

7.4

14.0

12.4

Healthcare: patient implants and disposables

AMBU A/S-B

2,110

6.7

6.1

29.1

24.7

44.7

36.3

COLOPLAST-B

16,653

7.5

7.0

20.4

18.6

28.5

25.7

STRAUMANN HOLDING AG-REG

7,226

7.1

6.6

24.2

21.9

32.0

28.7

Healthcare: drug delivery and packaging

GERRESHEIMER AG

2,355

2.1

2.0

9.5

9.0

16.1

14.8

Automotive

AMERICAN AXLE & MFG HOLDINGS

1,298

0.5

0.5

3.3

3.3

5.0

5.2

BORGWARNER INC

8,127

1.1

1.1

6.5

6.2

11.2

10.3

BREMBO SPA

4,984

2.0

1.9

10.5

9.8

19.0

17.8

DELPHI AUTOMOTIVE PLC

20,221

1.4

1.3

8.0

7.6

11.5

10.5

FAURECIA

6,257

0.3

0.3

3.6

3.4

10.2

9.2

HALDEX AB

587

1.2

1.1

13.1

10.2

29.3

23.6

HELLA KGAA HUECK & CO

4,797

0.7

0.7

5.5

5.1

12.9

11.5

LEONI AG

1,659

0.4

0.4

5.7

5.2

13.5

11.8

MAGNA INTERNATIONAL INC

15,218

0.5

0.4

4.6

4.2

7.0

6.2

PARAGON AG

236

2.1

1.7

12.6

10.0

36.6

26.3

VALEO SA

15,512

0.8

0.7

6.2

5.6

14.1

12.4

VISTEON CORP

3,110

0.9

0.8

7.6

7.0

16.9

14.4

Mean

1.0

0.9

6.5

6.0

13.7

12.2

Aerospace

FACC AG

324

0.8

0.7

9.9

7.8

22.9

15.3

LATECOERE

399

0.7

0.6

9.6

7.2

14.7

11.7

SENIOR PLC

1,082

1.1

1.0

8.7

7.9

15.4

13.6

TT ELECTRONICS PLC

399

0.6

0.6

6.6

6.3

15.0

13.6

Mean

0.8

0.8

8.7

7.3

17.0

13.5

Source: Bloomberg, Edison Investment Research. Note: Prices at 6 April 2017. Grey shading indicates exclusion from mean

The share price has picked up from the low of 110p in November 2016 as investors have begun to recognise that the withdrawal of dividend payments announced in August does not imply problems with underlying trading performance and profits. Newsflow regarding further automotive programmes should help close the valuation gap.

Exhibit 2: SOTP indicative valuation

Division

% FY18e EBIT

P/E (x)

EV/EBITDA (x)

CTP

54.7%

14.8

9.0

LED

37.0%

12.2

6.0

Aerospace

8.3%

13.5

7.3

Blended P/E (x)

13.8

7.7

FY18e EPS

13.1p

Undiscounted indicative value

180.1p

7.7

Indicative value applying 4% discount

173.2p

7.4

Indicative value applying 10% discount

162.1p

7.0

Indicative value applying 15% discount

153.1p

6.6

Source: Edison Investment Research


Exhibit 3: Financial summary

£000s

2015

2016

2017e

2018e

2019e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

107,503

118,974

130,004

140,617

155,296

EBITDA

 

 

11,402

13,840

16,758

19,346

22,348

Operating Profit (before amort. and except.)

7,789

10,034

12,258

14,346

16,848

Intangible Amortisation

0

0

0

0

0

Exceptionals

(31,668)

(4,857)

(500)

0

0

Other

0

0

0

0

0

Operating Profit

(23,879)

5,177

11,758

14,346

16,848

Net Interest

(666)

(1,282)

(1,600)

(1,600)

(1,600)

Profit Before Tax (norm)

 

 

7,123

8,752

10,658

12,746

15,248

Profit Before Tax (FRS 3)

 

 

(24,545)

3,895

10,158

12,746

15,248

Tax

1,772

(1,708)

(2,558)

(3,187)

(3,964)

Profit After Tax (norm)

6,068

6,687

8,100

9,560

11,283

Profit After Tax (FRS 3)

(22,773)

2,187

7,600

9,560

11,283

Average Number of Shares Outstanding (m)

66.2

66.2

69.6

73.0

73.0

EPS - normalised (p)

 

 

7.9

10.1

11.6

13.1

15.5

EPS - normalised fully diluted (p)

 

 

7.9

10.1

11.6

13.1

15.4

EPS - (IFRS) (p)

 

 

(33.2)

3.3

10.9

13.1

15.5

Dividend per share (p)

2.8

0.9

0.0

0.0

0.0

EBITDA Margin (%)

10.6

11.6

12.9

13.8

14.4

Operating Margin (before GW and except.) (%)

7.2

8.4

9.4

10.2

10.8

BALANCE SHEET

Fixed Assets

 

 

66,065

66,660

75,900

81,600

84,300

Intangible Assets

26,000

20,257

24,177

24,877

25,577

Tangible Assets

31,721

36,597

41,917

46,917

48,917

Investments

8,344

9,806

9,806

9,806

9,806

Current Assets

 

 

49,362

59,635

65,399

69,021

77,955

Stocks

13,440

15,596

18,190

18,358

19,997

Debtors

24,367

26,647

30,631

32,689

35,910

Cash

10,855

16,692

15,878

17,274

21,348

Other

700

700

700

700

700

Current Liabilities

 

 

(27,515)

(33,428)

(34,587)

(35,350)

(36,950)

Creditors

(21,802)

(22,732)

(23,891)

(24,654)

(26,254)

Short term borrowings

(5,713)

(10,696)

(10,696)

(10,696)

(10,696)

Long Term Liabilities

 

 

(46,559)

(60,000)

(60,000)

(60,000)

(60,000)

Long term borrowings

(29,660)

(30,746)

(30,746)

(30,746)

(30,746)

Other long term liabilities

(16,899)

(29,254)

(29,254)

(29,254)

(29,254)

Net Assets

 

 

41,353

32,867

46,711

55,271

65,305

CASH FLOW

Operating Cash Flow

 

 

3,549

13,933

11,020

17,683

18,889

Net Interest

(650)

(861)

(1,600)

(1,600)

(1,600)

Tax

(712)

(1,253)

(2,558)

(3,187)

(3,964)

Capex

(7,912)

(9,593)

(9,000)

(11,500)

(9,000)

Acquisitions/disposals

0

0

(5,780)

0

(250)

Financing

103

20

7,700

0

0

Dividends

(1,752)

(1,821)

(596)

0

0

Net Cash Flow

(7,374)

425

(814)

1,396

4,074

Opening net debt/(cash)

 

 

17,680

24,518

24,750

25,564

24,168

HP finance leases initiated

0

0

0

0

0

Other

536

(657)

0

0

0

Closing net debt/(cash)

 

 

24,518

24,750

25,564

24,168

20,094

Source: Carclo accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Carclo and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Carclo and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Caledonia Mining — Doing everything you want a gold miner to do

Caledonia Mining (CMCL) beat its FY16 production target of 50kozpa by recording 50.4koz Au produced, with AISC costs down 12% y-o-y to US$912/oz, while C1 costs dropped 9% due to a commensurate annual increase of 18% in gold ounces produced. Investment continues at Blanket to raise production towards 80kozpa by 2021, with US$36m spent in the past two years alone, and another US$18m due in 2017 before capex drops off markedly. The central shaft is on track and on budget for completion in mid-2018 and is two thirds-complete. While this investment takes place, CMCL carries a sound cash balance of US$14.3m at end December 2016. The dividend yield is a high 3.8% and the stock is trading on a very low P/E of c 4x vs the FTSE miners index at 2.1% and 40x respectively.

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