Plans to strengthen balance sheet at Superglass likely to dilute shareholder equity

Superglass, a manufacturer of glass mineral fibre insulation products, said Wednesday that it plans to strengthen its balance sheet, but warned this is likely that any refinancing measure would result in significant dilution to existing shareholders' equity.

Superglass, a manufacturer of glass mineral fibre insulation products, said Wednesday that it plans to strengthen its balance sheet, but warned this is likely that any refinancing measure would result in significant dilution to existing shareholders' equity.

The company said that trading conditions continue to be "extremely challenging" and that the delay in the recent transition from CERT to Green Deal is causing a major gap in activity within the retrofit market for both loft and cavity insulation.

This has combined with abnormally low levels of housebuilding activity in the UK by historical standards, the net effect is a surplus of UK-based insulation manufacturing capacity and highly competitive market conditions, which in turn are detrimentally affecting the company's operating profits and cash flow.

In a statement it said: "The assessment is that Superglass can be strongly cash generative at the operating level in the future, even at current depressed market volumes and prices.

"Looking beyond the current financial period, there are grounds for greater optimism in Superglass' core markets. The board expects that government stimuli will generate a gradual increase in UK housebuilding activity from 2014 onwards; and the current gap in retrofit activity should correct itself within a timescale of 6-12 months as the flagship Green Deal and ECO initiatives become fully operational."

Currently the group is operating within the terms of its bank facilities, however, debt amortisation payments are due to resume in November 2013 and Superglass is scheduled to repay £8.2m of debt over the three years to November 2016.

It said that so long as market conditions remain as they are now, these debt service obligations will be unsustainable.

Superglass also said the first phase of Project Phoenix remains on track to be completed in April 2013. It has reassessed the aggregate deliverable cost savings arising from Phoenix and other related initiatives and has confirmed previous estimates of a reduction in the company's annual operating cost base of £5.0m. It expects the first full year of savings is expected in 2013/14.

The share price fell 45% to 6.25p by 15:35.

NR

Recommended

Share tips of the week – 30 September
Share tips

Share tips of the week – 30 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
30 Sep 2022
The best British tech stocks from a thriving sector
Share tips

The best British tech stocks from a thriving sector

Move over, Silicon Valley. Over the past two decades the UK has become one of the main global hubs for tech start-ups. Matthew Partridge explains why,…
29 Sep 2022
These 3 top value stocks offer
Share tips

These 3 top value stocks offer

Professional investor Adam Rackley of Cape Wrath Capital highlights three overlooked value stocks to buy.
29 Sep 2022
Three top-notch Asian stocks to buy
Share tips

Three top-notch Asian stocks to buy

Professional investors Adrian Lim and Pruksa Iamthongthong, managers of the Asia Dragon Trust, pick three of their favourite Asian stocks to buy now.
23 Sep 2022

Most Popular

What to do as the age of cheap money and overpriced equities ends
Investment strategy

What to do as the age of cheap money and overpriced equities ends

The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losin…
29 Sep 2022
Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022
Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?
Budget

Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?

The government has launched the biggest dash for growth in 50 years, relaunching an approach known as supply-side economics. What is the plan – and wi…
30 Sep 2022