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Low & Bonar shares slump as boss steps down and firm issues profit warning

The company said it will focus on completing the disposal of the civil engineering division and on exploring other opportunities to maximise shareholder value in the short-term
Low & bonar
The performance materials specialist under-performed. The US-China trade dispute hurt sales at the group's Colbond business

Performance materials firm Low & Bonar PLC (LON:LWB) announced the resignation of chief executive Philip de Klerk as it issued a profit warning after a disappointing first half.

De Klerk will step down as boss and leave the board on July 1.

Non-executive chairman, Daniel Dayan, will switch to an executive role until a new CEO has been found.

READ: Low & Bonar looking to raise £54mln in bid to slash debts

The company said it has decided that a change of leadership is required to “accelerate delivery of the transformation programme” that started in late 2018.

“In addition to implementing performance improvement and cost reduction initiatives, the board will focus on completing the disposal of the civil engineering division and on exploring other opportunities to maximise shareholder value in the short-term,” it added.

Low & Bonar cuts full-year guidance

In a separate trading statement, the group tempered its full-year earnings expectations as its first-half performance was “materially behind” the previous year.

It said the ongoing trade dispute between the US and China hurt sales at its Colbond business, which makes composites for civil engineering, building and industrial applications.

Colbond sales in the Asia Pacific in the year to date are behind the prior year. In Europe, Colbond sales are slightly lower than last year due to a softer automotive market, but the second quarter is showing an “improved trajectory”, the group said.

Sales in the coated technical textiles (CTT) division have also lagged, in part due to weak demand in transport markets, particularly in Germany and Eastern Europe.

Low & Bonar said it will take longer than expected to regain customer loyalty and improve sales at CTT despite quality improvements.

In the US, order books have increased on new business won, offsetting lower volumes from a large customer of the Enka air and water cleaning materials business.

However, a slowdown in revenue and ongoing Enka manufacturing issues have weighed on US margins.

Legacy issues taking longer than expected to resolve

On its plans to sell the civil engineering unit, the company said it continues to expect the disposal of the construction fibres and needle-punched non-wovens businesses within the division to be completed in the current financial year.

Net debt at mid-year is expected to be below £110mln.

“Despite weaker performance, and considering the likely impact of the CE disposals, the board expects to meet banking covenants at both the mid and full year,” it said.

“As set out in January in the Group's 2018 financial results announcement, 2019 is a year of transition as the group simplifies its portfolio and structure while working to improve operational performance.

“Progress is being made, but it is taking longer than anticipated to resolve some of the legacy issues during a challenging period.”

Peel Hunt downgrades recommendation 

Peel Hunt cut its rating to 'hold' from 'buy' and lowered its target price to 15p, pending disposal of the CE business to relieve the balance sheet pressure, and improved operating performance at CTT.

The broker lowered its 2019 pre-tax profit forecast by 45% to £9mln and its 2020 pre-tax profit estimate by 40% to £12.0mln.

Shares plunged 23% to 11p in morning trading. 

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