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Touch of magic for plastics group in screen revolution

Touchscreen phones are all the rage these days and it seems that everyone under the age of 40 either has one or wants one. These screens are made almost exclusively using a transparent conductive film known as indium tin oxide (ITO).

This works well enough on phones but it is less effective on larger devices such as tablets. It is also expensive and in short supply, but historically there has been no alternative. Now there is and it comes from a British plastics firm called Carclo. The group has invented a way to make touchscreens work using conductive ink technology. The potential for this is huge and Carclo shares should motor as profits surge.

CIT works using an extremely fine metal grid, where each strand of metal is about a tenth of the width of a human hair. Invisible to the naked eye, this grid is applied to a screen and responds to touch. It is cheaper than ITO and is also more effective, so it can be used on screens of any size.

The makers of mobile phones, tablets and computers are always trying to make their devices lighter, thinner and more glamorous looking, as well as cheaper and more efficient in terms of battery life.

CIT helps in every respect. Many smartphones and tablets have big black borders around them, which hide some of the circuitry that ITO film requires. CIT does not need that circuitry, so it can dispense with borders. It can even be used on curved surfaces, enabling manufacturers to make super-trendy products.

CIT could also be used in other electronic gadgets, such as coffee machines or even watches in the future.

Carclo has spent the past couple of years perfecting its technology, working with an American company called Atmel, one of the biggest touchscreen makers in the world.  Carclo makes the CIT and Atmel applies it to screens. Atmel’s customers include virtually every leading electronics business apart from Apple. 

Atmel does supply Apple’s main rival Samsung, however, as well as a number of other big Asian firms. Some of these are already using Carclo’s technology, but this has been limited to date as the company has been making sure everything works perfectly and that it has the capacity to fulfil demand.

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Now it is ready to roll. Atmel handed over $10 million (£6 million) last week as an upfront payment to facilitate future production.

Brokers took this as a solid endorsement of Carclo’s progress and its ability to deliver the new technology to Atmel over the coming year.

A new chief executive, Chris Malley, also took up the reins last week, following the retirement of former boss Ian Williamson. Malley has spent years working on CIT, so he is ideally placed to help Carclo expand. The business has two other divisions – making plastic components for medical devices and top-end LED lights.

These have delivered Carclo’s sales and profits to date but are expected to take an increasingly smaller role as demand for conductive ink technology takes off.

For the year ending today, Carclo is expected to deliver sales of £89 million and profits of £6 million. Next year, however, sales are expected to rise 23 per cent to £110 million, while profits are forecast to climb  75 per cent to £10.5 million, with further strong growth predicted for 2015.

Midas verdict: Carclo shares are 398p and should move higher. The company has devised a technology that makes touchscreen gadgets cheaper and better than they are already. In today’s world, that makes Carclo look like a winner. Buy.

Update: Personal Group

Ticker: PGH (traded on Aim market)

Contact: 01908 605000 or personal-group.com

Personal Group provides employee benefits such as health insurance, cut-price gym membership and discount vouchers for supermarkets. Midas recommended the shares last August when they were 3461/2p. Today they are 335p. That is hardly a sparkling performance, but shareholders should be patient.

Personal Group was run for many years by Christopher Johnston, who founded it in 1984 and stepped down as chairman late last year, a few months before turning 70.Before retiring, he appointed Mark Scanlon, a former manager at vacuum maker Dyson, as chief executive.

Scanlon, an energetic 44-yearold, is determined to make Personal Group grow faster than of late. To that end, he has expanded the sales team, pursued new opportunities and invested in customer service.

Personal Group works primarily with blue-collar workers and has 1.2million customers. Out of these, only 100,000 buy insurance, such as health cover and death benefits, from Personal. Scanlon aims to expand customer numbers generally but also to increase insurance sales as these are the most lucrative part of the business.

The group unveiled 2012 results last week, showing pretax profits down 17 per cent at £8.3million. The fall reflects restructuring costs and investment in the business - expenses that should deliver long-term growth.

Brokers predict profits of £8.9million for 2013, rising to almost £10million next year and more than £11million in 2015. Johnston may have retired, but he still owns 43 per cent of the company so dividend payments, which have always been generous, are expected to continue in the same vein.

The payout for 2012 rose two per cent to 17.8p and brokers predict a dividend of 18.6p for 2013, putting the shares on a healthy 5.5 per cent yield.

Midas verdict: Personal Group spent several years resting on its laurels but Scanlon is keen to inject momentum. Encouragingly, sales in the first three months of this year are the best ever. The shares have done little in the past few months but prospects are good and the dividend is generous, so hold. New investors might also want to buy for the long term.

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