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Lilleshall plunges on bank covenant breach

SHARES IN Lilleshall, the Berkshire-based provider of industrial services, plunged from 68p to 47.5p yesterday after the company announced it was in breach of its banking covenants with Lloyds Bank.

The company warned that after writing down the value of its loss-making plastic housewares business it does not have the money to redeem pounds 3.3m in redeemable preference shares held by GE Capital Investments. Lloyds has agreed to continue overdraft facilities due for renewal in May, but GE Capital is considering its position.

A trading statement said the two industrial services divisions supplying industrial fasteners (nuts, bolts and screws), tools and workwear made operating profits of pounds 4.3m in the year just ended. The rest of the building products division, now operating mainly in France, made a satisfactory profit. But losses at the plastic housewares business continue to worsen as retailers demand lower prices.

Some businesses have been sold in the past six months, including Ideal Williams, a maker of doors and windows, and St Helens Glass, which was sold last month to the management for pounds 1.5m. Together they made operating losses of pounds 3.5m for the year and incurred an operating exceptional charge of pounds 700,000. After other exceptional charges of pounds 17.3m, including a pounds 5m write-down of the plastic housewares business which triggered the breach of covenant, a loss of around pounds 20m is likely and no final dividend will be paid.

The new chief executive, Roger Feaviour, said in September that Lilleshall would focus on industrial services and dispose of the manufacturing divisions, including building products and plastic housewares. This has now become more urgent.