Listed tooling company issues profits warning

CHESHIRE-based tooling company Brammer says declining sales and reduced levels of supplier support have led to an operating loss in its third quarter and it does not expect to make a pre-tax profit for the full financial year.

The company has entered into a standby underwriting agreement with Investec for a rights issue of up to £100m.

This will be launched before the announcement of the group’s full-year results for the year ending December 31, in the first quater of 2017.

The Knutsford-based listed company, which recently completed a £30m stock reduction programme, said: “Discussions will be held with the group’s debt providers to seek appropriate amendments to the current facilities, including the operation of certain financial covenants, to ensure the group has the appropriate level of committed debt facilities for its medium term requirements.”

Chief executive Meinie Oldersma said: “I have been impressed by the market position and the expertise and the quality of people the group has built over the last few years.
 
“However, an over-emphasis on expansion of the products and services has resulted in a lack of focus on some of Brammer’s core key areas, whilst significantly increasing costs in other areas.

“This is a good business, but it will require time to get that focus back onto core products, with the effective processes to support it.

“In the near term, we are anticipating continuing decline in sales in our more profitable core products, which, combined with our drive to reduce levels of stock, has led to reduced levels of supplier support and a significant impact on our margins.

“These factors have led to an operating loss in the third quarter, and accordingly we do not expect to report a pre-tax profit for the full year 2016.

“We are actively developing our plans to move the business forward and there is a strong recognition within the business of the need for change. The proposed rights issue will reduce the group’s structural indebtedness significantly and provide the Group with the appropriate capital structure to deliver this improved performance.”