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

Broker safety – your questions answered
Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
How demographics affects stock valuations
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Do you own shares in Sirius Minerals? Here’s what you need to do now
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Why investors should be “cautiously bullish” for 2020
Stockmarkets

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular

The rising dollar is proving bad news for most other assets – will it last?
Investment strategy

The rising dollar is proving bad news for most other assets – will it last?

Precious metals, stocks and pretty much every other asset has taken a tumble as the US dollar strengthens. Dominic Frisby looks at how long this trend…
23 Sep 2020
The electric-car bubble could get an awful lot bigger from here
Renewables

The electric-car bubble could get an awful lot bigger from here

The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and l…
24 Sep 2020
Why you should stuff your end-of-pandemic portfolio with Chinese stocks
China stockmarkets

Why you should stuff your end-of-pandemic portfolio with Chinese stocks

For an end-of-pandemic portfolio, you need assets that can cope with today’s volatility. And that, says Merryn Somerset Webb, means Chinese stocks.
14 Sep 2020