SUPERGLASS Holdings has seen its shares plunge 17 per cent after announcing trading remains tough and it is considering a proposal to raise at least £5 million of new funding.

The insulation manufacturer said sales have grown 10 per cent in the second half of the financial year to August 31, mainly on the back of improvements in the new build housing and construction sectors. However, demand from government-backed energy efficiency schemes is "negligible" with no improvements expected in the coming months.

Revenue in the year was five per cent behind the £24.4m booked in 2013, meaning it is likely to be around £23.2m when the full financial results are released later this year.

While positive earnings before interest, taxation, depreciation and amortisation were posted in July and August, the AIM-listed business is not yet generating positive net cash on a monthly basis.

Superglass, which has its headquarters in Stirling, said: "Overall trading for the full year was slightly behind management expectations and order patterns remain volatile with order visibility expected to continue to remain low for the foreseeable future."

Further annual cost savings of £1.9m have been identified but the company will have to invest £1.1m to make the changes, which includes reducing manufacturing capacity.

Superglass said: "Additional capital is required to implement these measures, invest in the infrastructure of the operations, further develop [research and development] capability, and to provide greater flexibility and headroom in the event of any further volatility in trading."

Chief executive Alex McLeod said: "We remain committed to protecting the 150 jobs in Stirling. The primary objective with reducing manufacturing capacity is to improve the operational efficiency of our plant."

Alongside that Superglass confirmed it had received "unsolicited" approaches to acquire its main trading subsidiary, Superglass Insulation Limited.

As a result the board appointed advisors to approach other potential buyers in order to gauge interest.

Superglass said: "In the opinion of the board the offers received do not currently reflect the value inherent in the business, the invested capital, nor its future potential. For the avoidance of doubt, the sale process did not envisage an offer for the shares of Superglass Holdings PLC and the board has not received any approach nor is it engaged in any discussions which may lead to an offer for the shares of Superglass Holdings PLC."

However as part of the sale discussions, the company received a proposal to underwrite a discounted equity issue of at least £5m.

According to Superglass that plan has the support of some of its larger shareholders.

Among those with significant stakes in the business are W&R Barnett Group, Ennismore Fund Management, River & Mercantile Asset Management and City Financial Investment Company.

Superglass said: "Although by its nature highly dilutive for the current equity, in the board's opinion the implementation of this proposal would enable the latest cost-saving plan to be implemented and address any foreseeable funding requirement of the group and is, therefore, under active consideration."

New banking facilities of up to £4.8m are expected to be in place by the end of this month which will replace the existing one with Clydesdale Bank. Net debt was at £400,000 at August 31.

Mr McLeod said Superglass will announce the identity of its new banking partner and further details on the possible equity issue in the coming weeks.

Shares closed down 4p at 20p.