LONDON (Alliance News) - Shares in Redhall Group PLC fell Thursday, after the engineering support services group reported a drop in revenues and widened its losses for the financial year ended September 30, 2013, having booked settlement charges relating to its dispute with Vivergo Fuels Ltd.
Redhall booked GBP10.9 million in exceptional items during the year, as result of restructuring charges, but more importantly an exceptional charge of GBP7.7 million associated with settlement charges in relation to its dispute with Vivergo.
The case relates to a contract for Redhall to provide piping and mechanical work on a biofuel plant acquired by Vivergo. The contract was terminated by Vivergo, complaining of delays.
Redhall recently accepted an offer made by Vivergo of GBP2.1 million in full and final settlement of all claims between the parties, an offer which fell considerably short of the amounts it was hoping for. However, the group said the risks and cost of pursuing an alternative strategy outweighed the disappointment of settling at this level.
"The Vivergo settlement is highly significant for Redhall. It draws a line under the long-running legal case removing uncertainty and further cost," said Chairman David Jackson in a statement.
Redhall said it made a pretax profit for the year of GBP1.1 million before incorporating the GBP10.9 million in exceptional items, and which resulted in an overall pretax loss of GBP9.9 million, bigger loss than the GBP4.7 million loss it reported the prior year.
Revenue for the year ended September 30 2013 was GBP113.1 million, down on the prior year of GBP119.5 million before exceptional items and GBP116.8 million after.
Sales increased 1.4% in its engineering division, despite the continuing difficult market conditions. It said the division enjoyed growth in revenues and margins across all areas, with particular growth within the telecoms sector.
In the nuclear division, sales fell by 13% compared with 2012, due to delays in both the decommissioning work and waste management projects, and with volumes associated with its major defence contract. It said the continuing uncertainty over the civil nuclear power projects also contributed to the shortfall.
The group said its manufacturing division saw sales fall 8.4%, as it was to some extent hit by the same issues facing its nuclear division, although the company said its manufacturing division enjoys a more diverse customer base. Redhall said it is seeking to broaden and expand the customer base even further.
Redhall said its current order book stands at GBP111 million, down from GBP119 million a year earlier.
Since year-end, the company disposed of its non-core operation in Northern Ireland, as part of a strategic move towards its efforts to de-risk the business and provide a better balance between manufacturing and contracting.
The group did not pay a dividend.
Redhall shares were trading 2.5% lower at 39.50 pence per share midday Thursday.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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