Earnings drop to £0.4m against £1.6m the previous year
Insulation manufacturer Superglass has reported flat revenues for the first half of the year at £32.4 million despite a three per cent rise in sales.
Earnings before tax and exceptional items dropped from £1.6 million last year to £0.4 million for the year to August 31, 2012.
The Stirling-based company said investment in new technology, part of a wider turnaround strategy called Project Phoenix, will improve product quality and save the firm around £1.4 million a year in costs.
Superglass had reported a 14 per cent rise in revenues for the first half of the year though sales dipped in the second half and sales prices “continued to be under pressure throughout much of the year”.
Trading for the year “fell short” of original forecasts “due to weaker than expected construction and CERT (Carbon Emissions Reduction Target) markets” the group said.
Rising energy costs also impacted on profits, Superglass said, and despite hedging some of its forward energy needs, energy prices rose on average by 22 per cent in the financial year, not including further rising costs in transportation.
Construction market activity was also lower than expected having declined by five per cent during the year.
Superglass agreed a £12 million debt-for-equity swap with Clydesdale Bank last year to reduce its debts to around £5 million.
Chief executive Alex McLeod warned there are as yet “no signs of any sustained improvement in the market and there continues to be great uncertainty over the transition from CERT to Green Deal when the former expires at the end of 2012”.
He added: “The UK Government's own economic assessment suggests that the volume of insulation sales under Green Deal will be lower in 2013 than in 2012 under CERT which must be contrary to the desired outcome.
“We continue to make representations to the UK Government to encourage initiatives to ensure an effective transition from CERT to Green Deal.”
Superglass said it raised £8 million in new equity funding and secured £2 million in Regional Selective Assistance grants from Scottish Enterprise during the financial year.
Phased repayment of a revolving credit facility has also been deferred, which Superglass said would provide “up to £2.9m of additional headroom” and loan covenant testing to resume in July 2013 on re-based targets.
The company said it is “aggressively attacking its cost base” through the Project Phoenix restructuring which it estimates will deliver £5 million in savings for the full financial year.
Superglass chairman John Colley said: "Superglass continues to make progress in its turnaround despite the difficult market conditions.
“With additional financial headroom and the investment programme set to deliver up to £5 million per annum of cost savings, the group is well positioned to capitalise on expected long-term market growth derived from a construction industry recovery and a fully established Green Deal framework.”