THE ALUMASC GROUP PLC – TRADING UPDATE
The Alumasc Group plc (ALU:L), the premium building and engineering products company, is providing a trading update relating to the year ended 30 June 2011.
Group revenues are expected to be in line with previous expectations. However, margins in the Building Products division for the fourth quarter were significantly lower than expected as a result of rising input costs that could not be recovered fully from customers, against a background of continued weakness in the UK construction market. In particular, the group’s Construction Products business experienced a 20% increase in steel costs towards the end of the financial year, with profitability further diluted by an increase in the proportion of lower margin export sales. Consequently, underlying group profit for the full year is expected to be ahead of last year, but below previous management expectations.
Net cash flow performance to the year end continued to be robust and remained ahead of expectations.
Alumasc Precision recovered strongly during the year, benefiting from international demand for aluminium components used mainly in off-highway diesel engines, and particularly those used in mining and construction vehicles being sold into emerging economies. In view of the strong resurgence at Alumasc Precision over the last eighteen months and the encouraging future prospects for this business, the impairment charge booked in 2009 is to be reversed. This will give a one-off, non-cash gain of £1.2 million in the financial year just ended. As a consequence, the group’s statutory profit before tax is expected to exceed underlying profit, and be well ahead of the prior year statutory result.
This impairment charge reversal will increase the book value of plant and equipment and therefore give rise to a higher depreciation charge of £0.3 million per annum in the 2011/12 financial year and beyond.
There is early evidence that a greater number of large buildings are now beginning to be funded, which could benefit Levolux, in particular, in the group’s 2012/13 financial year. This is broadly consistent with external construction industry forecasts as to the expected timing of a return to growth. In the meantime, export sales strategies are beginning to add incrementally to Alumasc’s revenues, and there are numerous initiatives across the group to mitigate the impact of the specific current weakness in the UK commercial new build sector, diversify routes to market and introduce new and innovative products.
Alumasc Precision continues to grow, although it is anticipated that growth will be at a more sustainable rate whilst the business prepares for the next phase of the project won last October to supply components for larger engine transmission systems, expected to start late in 2012.
In view of the continued strong group order book at Alumasc Precision, and the factors outlined above, the Board expects Alumasc to continue to make steady progress in 2011/12.
The Board will review the group dividend ahead of the announcement of its full year results in September in the light of current trading and future prospects at that time.
The results for the year ended 30 June 2011 will be announced on Tuesday, 6th September 2011. A presentation to analysts will be made at 9.30am on that day, at the offices of Peel Hunt, 111 Old Broad Street, London EC2N 1PH.
The Alumasc Group plc
Paul Hooper (Group Chief Executive) Tel: 01536 383821
Andrew Magson (Group Finance Director) Tel: 01536 383844
Simon Bloomfield Tel: 0207 367 8861