Cautious customers knock profits at Cosalt

Shares plunged more than 11 per cent to 8.75p as Cosalt said conditions remain challenging while customers continue to defer spending.

But the group, which started life in the 19th Century as The Great

Grimsby Coal, Salt and Tanning Company, said it has "laid firm foundations" for development after a year of consolidation and restructuring.

Grimsby-based Cosalt raised 17m through a highly discounted placing and open offer last year to avoid breaching banking covenants. In 2008 it also quit the last of its legacy businesses, its caravan manufacturing arm.

Now, with secure finances in place, chief executive Mark Lejman said the company is looking forward to a stronger performance in the second half of this year.

"We have put a lot of work into making sure that this company is well positioned going forward," said Mr Lejman.

"We believe we are making that progress on margin and in offshore and we are hoping for an uplift in the second half of 2010."

The group is also focusing heavily on costs, and made 3m annual

savings in 2009 which included 55 job cuts. More cuts are planned for this year, it added.

Pre-tax profits before exceptional items fell 24 per cent to 5.5m in the year to the start of November, with revenues growing about three per cent to 107.8m.

In the 4.5bn offshore market, Cosalt supplies lifting equipment and inspection services to the oil and gas industries.

There it saw operating profits tumble 36 per cent to 5.3m, despite revenues growing about six per cent to 44.2m, as the falling oil price at the start of 2009 led customers to defer spending.

"We are not yet seeing the confidence to get back into more exploratory exploration work which is when we get the projects starting up," said Mr Lejman, although he added the firm is seeing "some signs of life" in Norway.

Contracts won over the year included a three-year deal worth up to

4.5m a year to supply all lifting equipment for BP's North Sea operations.

With the oil price now hovering around the $73 per barrel mark, Mr Lejman said he believes that will feed through to more confidence for oil majors, resulting in more business.

"If it stays where it is over a protracted period of time we will be okay," he said. "It's just a question of making sure that the

confidence is there."

In the 1bn marine sector Cosalt provides inspection and maintenance services for liferafts, lifeboats, lifejackets and fire equipment.

Marine operating profits more than doubled to 4.9m on broadly flat revenues of 63.6m. Over the year it launched several new products, including its Crewsader lifejackets.

"What we are seeing now is a slow recovery from the bottom," said Mr Lejman.

"There are signs of coming out of it but it's coming from a low position."

Analyst James Wheatcroft at house broker Evolution Securities cut his underlying earnings forecast for 2010 by 1.1m to 11.9m.

"The outlook is tough for its offshore division," he said. "Volume pressure in offshore has reduced margins as customers defer investment."

Cosalt added it is looking at "value enhancing moves" to lead consolidation in the industry. It also intends to expand into emerging markets.

Net debt stood at 18.6m at the year end, down from 26.8m a year earlier. However, the group will not pay a final dividend as it focuses on conserving cash.

Life-saving role on cruise liner

Cosalt is supplying lifejackets to Cunard's new 365m Queen Elizabeth cruise liner.

The eagerly anticipated vessel, which will set sail on its maiden voyage in October, will be equipped with 5,500 Premier lifejackets.

The order followed another recent contract from Cunard for 7,500 lifejackets for its new Azura cruise liner.

The 294m Queen Elizabeth will accommodate more than 2,000 passengers and is named after the first Queen Elizabeth liner, which was launched in 1938.

She is being fitted out in 1930s Art Deco style with a bowling green and croquet lawn.

Fully approved to MCA/UK SOLAS standards, the Premier lifejacket features a single quick release buckle, reflective tape and a whistle with lanyard.

It is designed for people with little or no experience of wearing a lifejacket.

Nick Dennison, Cosalt's sales director, said: "The contract confirms the ongoing popularity of the Premier lifejacket in the cruise market. We have a long-standing relationship with Cunard, which stretches back many years.

"We supplied the lifejackets for the Caronia in the 1970s and the Queen Elizabeth 2 in the late 1960s."