Engineering group acknowledges ‘material uncertainties’ as debt hits £1.2bn

Engineering group Doncasters remains optimistic about its prospects despite ballooning debt, accounting irregularities in its Chinese operations and the recent collapse of its planned sale.

Doncasters’ directors acknowledged “the existence of material uncertainties, which may cast significant doubt on the group’s ability to continue as a going concern”, but remain confident it has sufficient headroom in its banking facilities.

The weakening of sterling increased the debt owed by engineering group Doncasters by more than £100m as its loans grew to £1.2bn.

It also had to restate its 2015 results after it identified “a number of accounting irregularities” in the results reported by its Chinese subsidiary. The changes resulted in reducing Doncasters’ 2015 revenues by £9.6m.

Its results for 2016 showed the group’s EBITDA – a measure of operational profitability – fell by one-quarter, to £82.6m. This was despite a 4% rise in sales, to £654.2m.

But it is optimistic about its operational performance, with an increasing order book, “generally favourable” markets and the positive impact of new products.

Doncasters’ chief executive David Smoot, who is also chief executive of Doncasters’ parent company Dubai International Capital, said: “2016 has been a year of positioning for growth through investment and prodcut introduction.

“The group has seen a substantial increase in its order book and a new product pipeline which is expected to lead to growth in sales and earnings in 2017 supported by encouraging market conditions.”

Staffordshire-based Doncasters was founded in the late 18th century, making it one of the country’s oldest manufacturers.

It employs 5,000 people across the group, which is headquartered in Burton-upon-Trent and has its R&D facility in Droitwich.

A planned sale to Chinese billionaire Wang Jing fell through in April, blaming anticipated problems getting approval from US authorities.

The group’s largest market is the USA, which contributes 45% of its total revenues. Europe brings in 28% and the UK 13%.