Elecosoft Regulatory News (ELCO)

26 Jan 2010 08:35



Eleco plc

("Eleco" or "the Group")

Trading update

The Board of Eleco, the specialist provider of Building Systems and Software to the construction industry, issues a trading update for the six months ended 31 December 2009 in advance of its Interim Results which it expects to release on 5 March 2010.

The Building Systems Division continues to experience tough trading conditions, evidenced in particular by the deferral both of order confirmations and site start dates in the precast concrete businesses, due in a number of instances to difficulties experienced by customers in arranging appropriate bank financing for their projects. The overall order book held by the Building Systems Division is similar to this time last year and it is not yet experiencing an upturn. Margins also remain tighter than anticipated. In addition, operations on site in November and December were affected more than usual by severe adverse weather conditions and this continues into January. In response to these challenging market conditions, the Division has implemented further cost reductions. 

Bell & Webster Concrete gained its first two contract awards with a combined order value of £9.3m for projects in the custodial sector, for which its Rooms accommodation system is particularly well suited. These orders will begin to benefit trading in the second half of our financial year.

The Timber Engineering companies serving the housing market have noted a gradual and encouraging improvement in trading conditions. Results of these companies were, however, impacted by significant legal costs incurred in relation to an ongoing dispute involving our German connector plate business. 

In contrast, the Software Division has benefited from a modest increase in overall sales and a substantial reduction in losses in its visualisation businesses. The Software companies are also seeing the benefits of improved coordination and performance management across the Division. As a consequence, the Software Division is expected to report a significant improvement in its results and profitability in the first half of the financial year.

The Group's balance sheet remains strong, with net bank borrowings of £2.2m. Cash continues to be closely managed and the defined benefit pension scheme has now ceased to accrue further benefits for members.

In December 2009, Craig Slater was appointed Chief Operating Officer of the Group. A comprehensive review of our Group strategy, operations and structure is underway. Capital expenditure is being moderated and concentrated on those projects that position the Group to take advantage of market opportunities.

Owing principally to the lower than anticipated outturn of our Building Systems businesses, the Group now expects to report an operating loss for the first half. Current trading indicates an anticipated moderate improvement in the performance of all our operations in the second half. However, the Board now anticipates that the Group results are likely to be below expectations for the full year.

The Board is confident that the measures it has taken to maintain the Group's sound financial position and its continuing investment in people, projects and products to maintain the clear competitive edge in the markets in which it operates will, over time, enable it to recover to its full potential.

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