Engineering group warns shareholders loss of contract will impact profits
BROWNHILLS engineering group, Castings, has warned shareholders the loss of a major contract is likely to mean a short-term dip in profits.
Chairman Brian Cooke used today’s annual results to try and reassure shareholders the loss of the contract at CNC Speedwell would only be a temporary blip on the performance of the business.
In its annual results statement, he said CNC had had a good year with improved profits, however the major contract had ended in the last quarter of the year.
Some new orders have been secured to part fill the vacant capacity but it is expected to take up to three years before this work is in full production.
“Replacement work will not come on stream immediately so it is expected profits will reduce during the current financial year. It is anticipated an improvement will be seen in financial year 17/18 and onwards,” he said.
“Our investment in additional machining facilities reflects our commitment to this area and the potential opportunities for growth in the short to medium term.”
In outlook, he added: “It appears that customer demands remain steady at the present time and unless there is a substantial change we will only see a temporary reduction in profits due to the changing situation at CNC Speedwell.
“It is also important that, whatever the result of the EU referendum, the Government return to the priority of focussing on the economy and recognising the important role of manufacturing in achieving higher levels of employment to the benefit of the country as a whole.”
The results show turnover of the group increased slightly to £132m (2015: £131m) with an increase in profits to £19.7m (2015: £17.5m).
Mr Cooke said the group’s foundries had enjoyed stable trading conditions throughout the year and increased profits compared with the previous year.
“I am pleased to report that we are making good progress at William Lee; a full reorganisation has taken place during the year to ensure standards are raised in line with the Brownhills foundry. We continue to review foundry production techniques and technologies across the group and invest in areas that will enhance the returns in this segment,” he said.
The company’s Brownhills warehouse is being extended so that part of the existing building can be used for expansion of the machining business; this will be complete by the end of the calendar year.
