Chamberlin expects to return to profitability in the second half on back of stronger sales growth

Chamberlin PLC (AIM:CMH) saw its shares rise in early deals as the engineering firm said it made an encouraging start to the current financial year.

Shares were up 8.8% at 9.25p in the first half-hour of trading as the company said performance in the first half of the year (to 31 May 2022) will be comfortably in line with management expectations and it now expects to see stronger levels of sales growth and a return to profitability in the second half of the year.

As a result of improved second-half expectations, the board believes it will post full-year earnings of at least a penny per share.

In a trading update, the company said sales for the first quarter were in line with management’s expectations.

Net debt at the end of August, including asset leases of GBP1.9mln, had been whittled down to GBP3.0mlm from GBP4.6mln at the end of September 2020 and current cash “headroom” is said to be “comfortably in line with management expectations” at GBP1.1mln.

The COVID-19 pandemic continues to present global challenges to trading conditions, including escalating raw material costs, supply chain shortages and a slowdown in the automotive industry due to widely publicised electronic control unit (ECU) availability. In response to these challenges, the management team continues to reduce costs, improve efficiencies, and optimise pricing to improve margins and restore sustainable profitability to the group.

The company is directing resources to new product lines to rapidly reduce the firm’s reliance on the automotive industry. The board’s aim over the medium term is to replace the majority of the group’s traditional, low margin contract-based production, with much higher margin, premium consumer products. Further to this aim, the group is developing a range of cast-iron cookware under the Emba brand that it expects to launch in November of this year.

Petrel, Chamberlin’s specialist lighting business, is trading profitably and exceeding the board’s expectations with a very strong start to the year, the company revealed.

Meanwhile, the company’s Scunthorpe foundry operation continues to operate at, or near, full production levels in response to growing customer demand. Costs are being managed closely and operating profit is expected to exceed management expectations for the quarter ended 31 August 2021.

Chamberlin, which recently changed its fiscal year-end date, expects to publish the audited accounts for the 14 months to the end of May 2021 in late November. The firm expects to report revenue of GBP26 million and a loss of not less than GBP4.0 million (unaudited), in line with management’s expectations.

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