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Fibreglass firm sees light from shake-up measures

FIBREGLASS insulation maker Superglass has recorded a widerinterim loss but hopes to be close to trading profitably again towards the end of its financial year as its turnaround programme gathers pace.

CHANGES: Superglass chief executive Alex McLeod insists the company is making good progress and there is expectation of profits further down the line.
CHANGES: Superglass chief executive Alex McLeod insists the company is making good progress and there is expectation of profits further down the line.

The Stirling business saw its revenue fall 17% from £13.7m to £11.4m in the six months to February 28 as government schemes such as the Energy Company Obligation (ECO) and Green Deal failed to deliver the expected volumes.

A 15% rise in sales to the construction sector and a 143% rise in export sales, from £379,000 to £1.16m, failed to offset the weakness in the publicly backed market segment.

In spite of cost savings realised as part of the company's turnaround plan pre-tax losses came in at £4.3m, compared to £2.9m in the same period of the previous financial year.

However, chief executive Alex McLeod insisted Superglass was making good progress and there is an expectation of trading on a break even basis, before interest, tax, depreciation and amortisation (EBITDA) charges, in the final quarter of the trading year.

The rate of EBITDA losses was said to have slowed significantly between January and March this year.

Mr McLeod said: "Superglass has continued to make progress in broadening its routes to market through an enlarged customer base and product range, including increasing its export sales."

Savings made under its Project Phoenix improvement programme are running at around £4m but the company is hoping to increase that to £5m across the full year.

Mr McLeod said the bulk of the sum saved so far had come through energy saving and reducing wastage.

A technique to better compress its products had also reduced the transport cost of products.

As a result it has been able to grow sales into Scandinavia, the Czech Republic and Poland.

Although export is less profitable than UK sales because of the transport costs involved Mr McLeod said it still generates a positive contribution.

Closer to home Mr McLeod said the improvement in the UK housing market was of benefit to Superglass in both newbuild properties and the repair, maintenance and improvement segments.

As a result of the increased demand in those parts of the market there has been some recovery in pricing which Superglass expects to continue into the second half of the financial year.

While ECO and Green Deal have failed to deliver Mr McLeod expects a further revision to the former scheme might offer some better prospects.

More detail on proposals to change ECO are expected later this summer and while the overall scheme is widely expected to be cut Mr McLeod said a likely focus on easy to fill cavity walls would tie-in well with Superglass's products.

He said: "Levels of activity in Green Deal and ECO continue to disappoint and the government's announcement to make changes to the ECO has created further uncertainty in the short term.

"For the medium term the likely changes to the ECO to focus more on low cost cavity wall measures combined with the exit of a restrictive supply agreement will be of material benefit to the company."

Superglass, which employs 155 people at its Stirling manufacturing plant, also confirmed it is in the process of moving its banking away from Clydesdale.

Chris Lea, finance director, confirmed the new bank would be announced in the next few months and provide additional financial headroom.

He said: "We have a couple of offers which we are putting up against each other just now before we decide which one we are going to go with.

"Clydesdale has been on quite a long journey with this business and taken quite a lot of pain.

"We are looking to move it into a new banking relationship that is better suited to the business going forward."

According to Superglass a new Viridor recycling plant is likely to help provide them with improved materials and lead to additional cost savings.

Mr Lea said: "We buy from Viridor at the moment but the investment they are putting in the plant will improve the quality of the raw material we receive.

"That will help us get further efficiencies in our process and a better quality product."

Shares in Superglass closed the day down 1.5p, or 3.5%, at 41.5p.

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