insulation manufacturer Superglass yesterday revealed it had turned down a number of bids to take over its business, and warned of further cost cuts to come.
The Stirling-based group, which has been hit hard by a slower-than-expected take-up of Government-supported energy efficiency schemes, said it had appointed advisers for a potential sale of its major trading subsidiary after receiving an unsolicited approach.
But executives were disappointed after canvassing for further offers though they revealed they are considering a discounted share issue of “not less than £5 million”.
The revelation came as Superglass detailed new banking arrangements and clung to a pick-up in construction markets for better news.
It said trading conditions “continued to be difficult” thanks to excess manufacturing capacity, a highly competitive environment and continued pricing pressure and warned that demand from energy efficiency schemes was “negligible”, with no near-term improvement anticipated. But the company said it had fared better over recent weeks.
“By contrast, demand from construction markets is showing good growth fuelled by new-build housing activity and commercial construction,” Superglass said.
“Responding to this ongoing trend the group has been repositioned to focus on construction markets, with sales to that sector now accounting for 80% of UK revenues compared to 30% four years ago.
“Against this backdrop, the board is pleased to report that whilst revenues for the financial year ended 31 August 2014 were 5% behind the prior period, revenues in the second half of the year were 10% ahead of the equivalent prior period.”
Earnings before tax, interest, depreciation and amortisation were positive in the last two months of the year to the end of August, the Thistle Industrial Estate firm said.
“The recent upturn in trading has been driven by a step change in sales volume in recent weeks and is a clear reflection of the progress that has been achieved,” it added in a trading update.
“As well as recent increases in volumes, there have been improvements in product mix, with growing sales of higher-margin products.
“The board intends to continue to focus the group’s commercial strategy towards higher-value-added and higher-margin products.”
Superglass said it had drawn up plans for a further £1.9m in annualised savings, though manufacturing cuts would cost £1.1m and would reduce production capacity.
Further capital would be required to develop research and development operations and provide further flexibility in the event of further worsening of trading performance.
New banking facilities are expected to be in place by the end of this month, but these will not be sufficient to cover the anticipated costs.
“Whilst there are increasing signs of recovery and growth in construction markets, the poor uptake of Government energy efficiency schemes is expected to persist through the coming financial year and beyond,” Superglass said.
“As a result, it is the board’s view that the scale and pace of revenue and earnings growth is now expected to be more modest than previously anticipated.
“Against this backdrop the board believes that it is right to continue to maximise operational efficiency, reduce costs and take steps towards securing the additional capital required to support its competitive position.”
Superglass said a proposal to underwrite a discounted equity issue of not less than £5m had the support of “certain significant shareholders”, although it would dilute existing holdings.
But the company said the scheme would address the “foreseeable funding requirement” and was under “active consideration”.
Shares in Superglass closed the day down 16.6% at 20p.