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Low & Bonar PLC (LWB)

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Friday 14 December, 2018

Low & Bonar PLC

Trading Update

RNS Number : 4590K
Low & Bonar PLC
14 December 2018

Low & Bonar PLC

("Low & Bonar" or the "Group")

Year-end trading update

Low & Bonar PLC, the international performance materials group, today issues an update on the Group's trading and financial position for the year ended 30 November 2018, ahead of the publication of its results for the year on 30 January 2019.

Key points


Tough market and trading conditions largely unchanged during fourth quarter;



Benefits of self-help initiatives realised in the second half although raw material costs continue to present a significant headwind;



Board expects to report underlying profit before taxation and amortisation for the year to 30 November 2018 of circa £17 million;



Successful focus on working capital, with year-end net debt at £129 million and the net debt to EBITDA ratio expected to be circa 3.3x;



Continuing focus on improving operations, including working capital, and strengthening differentiated market positions;



The disposal of the Civil Engineering business continues to be actively explored; and



Board reviewing the Group's capital structure and exploring options to reduce net debt, including a potential equity issue.

Current trading

Following Low & Bonar's trading update of 25 September 2018, conditions affecting the Group's markets have remained largely unchanged during the fourth quarter.

Sales growth on a like for like basis of 2% has led to Group revenue for the year ended 30 November 2018 of £432 million.  

In CTT, progress is now well underway in addressing long-standing operational issues and the Board remains confident that these will be permanently resolved during the forthcoming financial year as improvements in manufacturing practices are embedded. Short term progress has been impacted by a fire in October in the division's coating plant in the Czech Republic, which has resulted in lost production. Production is expected to resume in early 2019.   

Pleasingly, Civil Engineering continued to improve its performance through the fourth quarter and entered the new financial year on a stable footing. The process to divest this business has been initiated and is being actively explored.

The benefits of business improvement and cost reduction programmes initiated earlier in the year have been delivered, as expected, during the second half. However, margins across the Group continued to be adversely impacted by previously reported increases in raw material and freight costs, particularly in the B&I and CTT business units. The Board currently expects, subject to audit, to report underlying profit before taxation and amortisation for the year ended 30 November 2018 of circa £17 million.

The focus on improved working capital management has continued. However, the combination of higher raw material costs and challenging trading conditions through the year have partially offset the impact of these actions on reducing net debt. Consequently, the Board expects to report net debt at 30 November 2018 of £129 million, representing a net debt to EBITDA ratio of circa 3.3x.

In January 2018, the Board identified several strategic areas of focus in order to drive sustainable improvement in the Group's performance and financial position. Progress has been made in all of these areas, notably strengthening senior management, reducing working capital, cost reduction and simplifying the organisation. In 2019 there will be further initiatives to improve customer focus, to optimise manufacturing performance and to manage raw material cost volatility. The Board believes that the Group is establishing a firmer operational footing from which to pursue its medium-term objectives.

The Board believes that to support its long-term objectives, a stronger balance sheet would provide greater flexibility to invest, where necessary, in its operational and commercial strategic initiatives. As such the Board is reviewing the Group's capital structure and considering options to reduce the level of net debt, including a potential equity issue.

The Board recognises the importance that shareholders place on the Group paying a dividend as part of an overall return. It is also mindful that the Group's dividend policy should be consistent with its profitability and cash generation as well as the wider objectives of the business. Subject to finalisation of the full-year accounts, the Board expects to recommend payment of a reduced final dividend for the year ended 30 November 2018.

As announced on 3 December 2018, Ian Ashton has now joined Low & Bonar as Group CFO and Simon Webb will step down from the Board on Monday 17 December.

For further information, please contact:

Low & Bonar PLC

Philip de Klerk

Group CEO


Ian Ashton

Group CFO

Instinctif Partners

020 7457 2020

Matthew Smallwood

Rosie Driscoll


The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR") EU no.596/2014. Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Forward looking statements

This announcement includes statements that are, or may be deemed to be, "forward looking statements". These forward looking statements can be identified by the use of forward looking terminology, including, but not limited to, the terms "believes", "estimates", "anticipates", "expects", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts.

By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond our ability to control or predict. All forward-looking statements in this announcement are based upon information known to the Group on the date of this announcement. Accordingly, no assurance can be given that any particular expectation will be met and readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as at the date of this announcement. Forward looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and liquidity may differ materially from those expressed or implied in the forward looking statements contained in this announcement. In addition, even if the results of operations, financial condition, and liquidity are consistent with the forward looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: changes in the competitive framework in which the Group operates and its ability to retain market share; the Group's ability to generate growth or profitable growth; the Group's ability to generate sufficient cash to service its debt; the Group's ability to control its capital expenditure and other costs; significant changes in exchange rates, interest rates and tax rates; significant technological and market changes; future business combinations or dispositions; and general local and global economic, political, business and market conditions. The Group's principal risks and uncertainties are described in greater detail in the annual report. In light of these risks, uncertainties and assumptions, the events described in the forward looking statements in this announcement may not occur.

Other than in accordance with its legal or regulatory obligations, the Group does not undertake any obligation to update or revise publicly any forward looking statement, whether as a result of new information, future events or otherwise. Nothing in this announcement shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

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