Redhall’s profits warning after trading setback

ENGINEER Redhall Group issued a profits warning yesterday and said second half trading will be below expectations.

The Wakefield-based company said that activity in the nuclear sector continues to be adversely affected.

Redhall won two new framework contracts within the nuclear sector in the first half of the financial year, but said that the order intake on these contracts has been slower than it initially anticipated.

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The firm said that steps have been taken to resize the businesses to suit current activity levels and this has resulted in further exceptional restructuring costs in the second half.

It said that while activity levels and opportunities in the manufacturing segment are promising, the cash cost of restructuring has led to an increase in the company’s working capital requirements.

It said that its bankers, HSBC, remain supportive of the group.

Redhall has been pursuing Vivergo for £16.7m following the renewable energy firm’s decision to terminate the engineering company’s work at a new biofuels plant at Saltend in 2011.

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“We continue to await the judgement on the Vivergo case which was heard in November last year,” Redhall said.

“We are hopeful of a judgement in the near future, and will update the market as appropriate.”

Analyst Andy Smith, at Charles Stanley, said; “Redhall still awaits the judgement on the Vivergo case which was heard last November.

“This is outside of management’s control, but nevertheless it is disappointing to see that it still hasn’t been resolved.

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“As a reminder, Vivergo represents a material uncertainty especially as there is an unprovided receivable of around £9.8m on the balance sheet, relating to 2011 work.”

Analyst David Buxton, at FinnCap, said: “The group has announced that trading in its second half has been disappointing and results are expected to be below previous market expectations.”

He added that the nuclear operation has seen a lower level of activity, with some slower trading also seen at its engineering operation.

“As a result we reduce our 2013 earnings per share forecast by 35 per cent,” he said.

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“This is a disappointing setback for the group, which has been hit by several problems over recent years.

“The shares are likely to react negatively today on this downbeat news, but we still see longer-term value once near-term issues are resolved.”

Redhall’s shares closed down almost 20 per cent, a fall of 11p to 45p.