Trading Update

20 May 2019

Low & Bonar PLC

Trading Update

Low & Bonar PLC (the "Group"), the international performance materials group, today issues the following trading update.

Trading performance to date in the second quarter of the year to 30 November 2019 is, as anticipated in the announcement made on 1 April, stronger than the first quarter. However, the rate of improvement is below that expected, due to continued weakness in some of the Group's end markets and the slow recovery of customer confidence in the Coated Technical Textiles ("CTT") division.

The ongoing Chinese/US trade dispute has created significant uncertainty in the Chinese market, impacting Colbond customers, and this has affected the sales trajectory in APAC in Q2. APAC sales are currently behind prior year for the year to date. Colbond sales in Europe are slightly lower than the prior year to date, with ongoing softness in the automotive market, but Q2 is showing an improved trajectory. In the US, order books are increasing as new business continues to be won, offsetting in part lower volumes from a large Enka customer as previously announced. However, slower revenue progression and the ongoing Enka manufacturing issues are holding back US margins.

In the CTT business, progress is being made, but it is now clear that, despite quality improvements in place, it will take longer than expected to regain customer loyalty and improve sales. Weak demand in transport markets, notably Germany and Eastern Europe, has also been a headwind.

As a result of the above, first half performance will be materially behind that of the prior half year. The Board continues to expect the improving sales trend to underpin a stronger second half, helped by the usual seasonality in the business, and also supported by further cost reductions already in process. In light of current trading and ongoing weakness in certain markets, the Board has lowered its expectations of full year performance.

The planned divestment of the Civil Engineering ("CE") division continues to proceed well. The sale processes for the two businesses in the division, Construction Fibres and Needle-Punched Non-Wovens, are still expected to conclude during the current financial year. The division has continued to trade in line with previous expectations.

The balance sheet remains a focus with net debt at mid-year expected to be below £110m. Despite weaker performance, and considering the likely impact of the CE disposals, the Board expects to meet banking covenants at both the mid and full year.

As set out in January in the Group's 2018 financial results announcement, 2019 is a year of transition as the Group simplifies its portfolio and structure while working to improve operational performance. Progress is being made, but it is taking longer than anticipated to resolve some of the legacy issues during a challenging period. The Board will take the actions necessary to improve performance in the short and longer-term.

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Notes:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR") EU no.596/2014. Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.