Weak demand puts revenues on a slow burn for Aga Rangemaster

COOKER and boiler manufacturer AGA Rangemaster has seen dips in first half revenue and profits decline following weak demand for its iconic products.

The Midland-based firm said initial signs of a market improvement earlier in the year had not been sustained and Ireland in particular was proving a particularly tough market. Nevertheless, it said it was hopeful of making up the revenue shortfall with a strong autumn.

“In trading terms the group has seen the usual quiet summer period and is galvanised for a strong autumn sales push with lines like AGA Total Control and a resurgent Fired Earth in the forefront even if markets remain subdued,” it said.  

“We are focusing on home movers who are likely to find our newer models and lines particularly relevant to their needs and on export markets.  As a result of these and other initiatives the group expects to make up the revenue shortfall of the first half to show growth in the full year.”

Results for the first half to June 30, 2012 show revenue at £119.2m (2011: £121.4m), while pre-tax profit was down at £1.6m (2011: £4.2m).

In its interims statement, the firm said: “The initial signs of market improvements early in the year were not sustained resulting in a further period of weak demand – with the product introductions having maintained rather than expanded revenues.
 
“Good sales progress for AGA cookers and for Rangemaster in Europe and a much better performance by Fired Earth were the most encouraging features of a period in which consumers lacked confidence and the willingness to invest in their kitchens at anywhere close to the levels of five years ago.”

Nevertheless, it said that with operational gearing enhanced by ongoing rationalisation programmes, even a limited market pick up would readily improve the performance of the business.

Basic earnings per share for continuing operations were 1.9p (2011: 4.3p), while the board said it had decided not to pay an interim dividend.

Highlights within the period, such as they were, saw volumes up 4% in the firm’s classic AGA cookers, while it said there had been a positive response to the launch of its more fuel efficient iTotal Control cooker range.

The group is also hoping for a good response to the launch next month of its largest-ever five-oven cooker.

Elsewhere it said it had achieved European export growth for its Rangemaster range although Ireland remained tough. There was also a resurgence in its Fired Earth floor and wall tile operation with revenues up 7%.

William McGrath, chief executive, said: “The continued challenges in the economy and lack of activity in the property market have clearly had an impact on demand in the first half as customers delay purchasing big ticket items.

“However, our investment in innovation, efficiency drive and great product offer ensures that we are well placed to respond when the market recovers. Our recent collaboration with the Chinese group Vatti demonstrates the opportunities ahead to enter into new markets.”   
   
The Chinese collaboration is indicative of the firm’s approach to drive growth through overseas sales.

It said: “With the established UK and Irish markets likely to remain weak for some time in the current economic environment, the onus is on new markets such as China and on raising market penetration in markets like North America, where our market position is not yet fully developed.”

The group is also keeping more than a watching brief on its pension requirements.
 
It added: “In relation to the business, the pension scheme is large in scale although it is reasonably well funded for most scenarios.  This is a key factor in assessing the resources available for the development of the group.  The medium-term financing framework for the scheme includes constraints on dividend payments as resources need to be available to build the intrinsic strengths of the business.  The board is focused on achieving outcomes which are in the best interests of all stakeholders given these constraints.”

During the first half of 2012, the surplus on the accounting basis in the group’s main pension scheme at the end of 2011 of £6.8m moved to a deficit of £41.9m. The blame for this has been laid at the fall in the value of corporate bonds.