Brammer shares plummet as company 'lacks focus'

Industrial supplies and services distributor Brammer issued an update on its trading and financial position on Friday, reporting group sales per working day at constant currency as down 2% in the third quarter.

The London-listed firm said UK sales per working day were down 1% against the prior year, with an improved Buck & Hickman performance.

Bearing and power transmission sales per working day were down a further 6%, and it saw a stock reduction of £30m at constant currency, in line with the board’s plans.

The declining sales and reduced levels of supplier support led to an operating loss in the quarter, and accordingly, the board said it does not expect to report a pre-tax profit for the full year 2016.

It did confirm that a standby underwriting agreement had been entered into with Investec for a rights issue of up to £100m, to be launched no later than the announcement of the full year results for the year to 31 December 2016, in Q1 2017.

No final dividend would be proposed for the year ending 31 December, however.

“I have been impressed by the market position and the expertise and the quality of people the group has built over the last few years,” said chief executive Meinie Oldersma.

“However, an over-emphasis on expansion of the products and services has resulted in a lack of focus on some of Brammer's core key areas, whilst significantly increasing costs in other areas.

“This is a good business, but it will require time to get that focus back onto core products, with the effective processes to support it.”

Oldersma said in the near term, the board was anticipating continuing decline in sales in the company’s more profitable core products, which, combined with its drive to reduce levels of stock, has led to reduced levels of supplier support and a significant impact on margins.

“These factors have led to an operating loss in the third quarter, and accordingly we do not expect to report a pre-tax profit for the full year 2016.”

Oldersma added that the company is actively developing its plans to move the business forward, with strong recognition within the business of the need for change.

“The proposed rights issue will reduce the group's structural indebtedness significantly and provide the group with the appropriate capital structure to deliver this improved performance.”

At 0955 BST, shares in Brammer were down 31.16% at 87.25p.