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.
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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
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