9th Sep 2014 08:44
LONDON (Alliance News) - Insulation manufacturer Superglass Holdings PLC Tuesday said its full-year trading fell slightly short of expectations, despite an improvement in its performance in the second half, and said it expects to secure a new financing facility this month, along with a potential equity issue, in order to fund its cost saving plans.
The company said revenue for the year to August 31 was down 5% year-on-year, with overall trading for the full year falling short of management expectations, order patterns remaining volatile and order visibility expected to remain low. It said, however, there was an improvement in its performance in the second half of the year, with revenue up 10% in the period.
Superglass said it achieved positive earnings before income, tax, depreciation and amortisation in July and August, but said it is not yet generating positive net cash on a monthly basis. Superglass said, however, that the upturn in trading has been driven by recent increases in volumes and an improvement in its product mix, with growing sales of higher margin products.
The group has recently restructured its business to focus on construction markets, amid continued difficult trading conditions in the UK insulation market and, in particular, negligible demand from government energy efficiency schemes, with no near-term pick-up anticipated. All these difficult conditions were cited by the company in its outlook for the year, in which it said it expects the scale and pace of revenue and earnings growth to be weaker than it had anticipated.
Superglass said it has met its cost saving targets for the year and has outlined plans to make another GBP1.9 million in annual savings. It said some of the savings needed in the manufacturing process will require fixed and working capital investment of GBP1.1 million, with a cut in manufacturing capacity in the medium term from the second half of its current financial year.
It said it would require additional capital to implement the measures, including investment in infrastructure, further development of its research and development capabilities and the provision of more flexibility and headroom should the company suffer further trading volatility.
Some of that new financing is set to come from GBP4.8 million in banking facilities the group expects to have in place this month. The new financing would replace its existing debt arrangements with Clydesdale Bank. Superglass said that while the financing will cover the company's foreseeable trading needs, it would not be sufficient to fund the additional cost-saving initiatives it wants to pursue.
Superglass also said it has received unsolicited approaches to buy its trading subsidiary and has appointed advisers to approach some other potential buyers to gauge their interest. The company said the approaches made so far do no reflect the value of the business, its invested capital, nor its future potential and would therefore provide unacceptable returns to its shareholders.
As part of the potential sale process of the company, a proposal has been made to underwrite a discounted equity issue by the company of not less than GBP5 million. The proposal is said to be supported by a significant number of Superglass shareholders and, though highly-dilutive for the current equity, the company said the proposal would allow it to pursue its cost-saving plans and address any foreseeable funding requirement for the group.
Shares in Superglass dropped heavily on the news, down 17% to 20.00 pence on Tuesday, making it the biggest faller on AIM.
By Sam Unsted; [email protected]; @SamUAtAlliance
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