Chapelthorpe cuts debt and looks for opportunities

SPECIALIST fibre manufacturer Chapelthorpe today said that it had shown “considerable resilience” in the face of difficult trading conditions despite posting a loss.

Chairman Leslie Goodman said the group had been able to “mitigate many of the adverse factors impacting profitability and also reduce the group’s level of debt” in the 12 months to March 31 when it achieved sales on continuing operations of £86.2m compared to £87.4m a year earlier.

Pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA) were £2.8m against £3.1m a year ago, however exceptional costs including provisions for vacant leasehold premises led to an operating loss of £1.7m against £800,000 a year ago.

Chapelthorpe, which is based at Drighlington between Bradford and Leeds, said that adverse market demand in the US, mainly in the automotive sector where many of the major manufacturers are struggling, was partly offset by cost reductions and winning new business in other sectors.

Mr Goodman said that its European business had cut costs to help offset a fall in sales but falling raw material costs at the end of last year had provided “some relief on margins and working capital levels”.

He said the company will remain “alert to opportunities which markets may generate as other businesses in weaker financial positions seek solutions to their problems”.

Thanks to the sale of a 60% stake in its Specialist Coatings operation for £5.6m last year, year end debt was reduced to £6.7m from £8.4m.

Mr Goodman said: “In extremely challenging trading conditions and difficult credit markets, I am pleased to be able to report that our businesses have shown considerable resilience.”

He added: “This low investment need, together with the fall in working capital levels following the reduction in the price of raw materials, should help underpin the generation of good cash flows from operations in the immediate future. However, net borrowings still represent 2.4 times pre-exceptional EBITDA (2008: 2.8 times) and it remains a priority to reduce our debt further.

“Without doubt this year will be a challenging one and we approach it with caution given the uncertain effect of the current economic downturn on our customers and on the markets they serve.”