Carclo unlikely to pay dividend after yield slump wipes out reserves

While business remains in line with expectations, Carclo warned it is unlikely to be able to pay its dividend after the slump in corporate bond yields since the Brexit led to a "significant" increase in its pension deficit.

At its June annual results Carclo, which has seen generally strong trading from its LED technology, Technical Plastics and aerospace divisions so far in the financial year to 31 March, had declared a final dividend of 1.95p per share, which is due to be paid on 7 October.

As the bond yield is used to discount group pension liabilities, if the corporate bond yield remains at its current low level the resulting increase in the pension deficit will wipe out the company's distributable cash reserves.

"Whilst the board is disappointed that the final dividend is now unlikely to be capable of being paid due to these legal and accounting constraints, it intends to resume the company's progressive dividend policy once legal and accounting circumstances allow," the main market-listed company said.