Metalrax looks to better year ahead

ENGINEERING group Metalrax has announced an £11.5m loss for 2009 although it has forecast a better year ahead based on a pick-up in business during the second half of last year.

Andrew Richardson, group chief executive, said 2009 had been a challenging year for many businesses and his was no exception.

“We operate across a broad range of sectors, all of which were impacted by the first wave of the global recession.

“However, we worked hard in 2009 to refocus the group and we exited the year a leaner, fitter business with a focused group of nine businesses. We are well placed for future growth and we anticipate meeting market expectations in 2010,” he said in the group’s results statement.

The full year operating loss before exceptional items of £0.6m was in line with expectations but benefits from a stronger second half, which saw a return to profit.

The depth of the recession hit the Birmingham-based business hard during the first half of the year, resulting in a loss of £1.4m. However, the encouraging picture in the second half saw this converted into a profit of £0.8m.

The group said cash generation from its continuing operations remained strong at £2m, which compared to £2.7m during 2008.

Revenues were down 15.3% to £61.2m, compared with £72.3m in 2008. Gross margin reduced year on year by 1.1% to 23.8%, compared with 24.9% in 2008.

Continuing operations made a £0.2m operating loss before exceptional items, goodwill impairment and share option costs, which compared with a £2.3m profit in 2008.

The group’s financial position was boosted during the year by a successful refinancing which resulted in £23.7m of banking facilities. It said this would provide a good base on which to continue its restructuring strategy.

The group is distancing itself from high volume, low margin products because it cannot compete with production costs in China and elsewhere.

Instead it is looking at high growth, high value sectors for its future development.

This strategy saw the disposal or restructuring of four businesses during the year, leaving the company with nine core businesses on which to build for the future.

“We have made good progress in achieving our ambition to ensure that our businesses operate in niche markets with significant growth potential,” said Mr Richardson.

He said that 2009 had seen the business focus on stopping losses, exiting non-core businesses and strengthening the strategic focus of the remaining businesses.

“We have de-risked our remaining nine businesses by reducing their reliance on declining markets and refocusing them on growing sectors.”

He said a good example of this was Weston Body Hardware which has reduced its exposure to the automotive and construction sectors by winning contracts to supply the renewable energy sector.  

“Focusing on the future, we have group-wide initiatives to drive growth. We are improving our sales pipeline and order book management processes in what have historically been manufacturing-led companies,” he added.

The Specialist Engineering division remains the group’s largest operation with seven businesses.

They delivered £39.2m of revenues compared to £46.9m in 2008, a decrease of 16.4%, and an operating profit before exceptional items of £1.6m, compared with £4.1m in 2008.

The group’s largest business, Cooper Coated Coil which coats steel for consumer, automotive, and printing markets had a challenging year with a decline in volume reflecting the difficulties faced by its end customers, many of which had lost contracts.