20 December 2011 – trading update

With the year end less than 2 weeks away, a trading update has been provided.  Sales in the second half of the year have been lower than in the same period in 2010 and margins have remained under pressure.  For the full year sales are expected to be approximately 9% lower than 2010 and headline operating profits will not now meet market expectations.  This is clearly disappointing news and the share price has slipped to a year low. 

There has also been an upturn in order intake in the fourth quarter of 2011.  A fully functional and enlarged factory means that the company believes firm foundations are in place for a good start to 2012.  Although it is clear that today’s update is unwelcome news, we remain convinced that long term prospects for the business are good.  In the medium term sustainable pre-tax profit of £2m per annum should be achievable and that would make the current share price look good value.  On balance, we now rate the shares as a SPECULATIVE BUY.