Acal claims strong underlying growth in first half

The London-listed firm said that for the first half, it expects to report further progress with double digit growth in underlying operating profit.

“Orders were 18% higher than the previous year, and sales 10% higher,” the board reported.

“In the Design & Manufacturing division, sales were 24% higher and in Custom Distribution 2% lower.

“Our outlook for the year remains unchanged.”

Acal said the business was continuing to perform well despite the general economic uncertainty.

As anticipated and reported in July, first half organic sales were slower, but as gross margins remained robust along with tight cost control, profitability levels had been maintained.

“Since the first quarter, orders have increased and are showing good levels of organic growth in line with our expectations of achieving stronger sales in the second half of the year.

“Second quarter orders grew organically by 3% over the prior year and September order intake was better than expected being 6% higher than prior year.

“First half group organic orders and sales were 1% and 8% lower respectively.”

Given the international nature of the group's business, Acal said it was benefitting from the translation effect of sterling's decline in value since the end of June, partly offset by the impact of higher dollar purchases.

“As part of our ongoing focus on efficiency improvements, a restructuring programme is being implemented in the Custom Distribution division that will reduce management numbers, close one unprofitable business subsidiary in Europe and reduce administrative costs whilst maintaining customer and sales focus,” the board said.

“This is in addition to the previously announced actions that have resulted in the closure of three small Nordic production sites and the further integration of purchasing and production processes in the Design & Manufacturing division.”

In total the actions - which were being implemented during the current financial year - were expected to achieve cost savings of £4m per annum and deliver sustained profitability improvements next year and beyond.

A one off associated exceptional cost of around £8m was expected to be incurred in the current year, relating primarily to people and property costs.

“Acquisitions remain an important part of the group's growth strategy and we have a pipeline of opportunities that are progressing well.

“The board remains confident in our future prospects as we continue to execute our strategy and we look forward to further updating shareholders at our interim results in November.”