Bridon used to make and distribute all kinds of wire for uses ranging from fences to suspension bridges. In the past 18 months, however, Bridon has started to source cheap, low-margin, commodity wire from overseas and concentrate its manufacturing on specialist, high-margin wires.
The company improved operating margin to 2.4 per cent for 2.1 per cent in the half-year to 30 June. It said that once it had fully transferred over to the sourcing of commodity-type product from overseas, operating margins might rise to 7 per cent.
Overall taxable profits were pounds 1.1m compared with pounds 700,000. Turnover was broadly unchanged at pounds 163m, but the company said sales would have fallen by 5 per cent had it not been for the devaluation of sterling. Restructuring costs totalled pounds 2.1m, compared with pounds 500,000.
While the strategy shift makes Bridon optimistic in the long term, it is worried about sluggish trading. 'Market conditions are expected to remain relatively unhelpful,' Brian Clayton, the chairman, said.
Earnings per share were 1.6p, up from 1.3p, and the interim dividend was held at 1.25p. The downbeat comments prompted a 3p fall in the share price to 120p. However, the shares have risen from 34p a year ago.
BZW, the securities house, predicts full-year profits of pounds 1.6m, with earnings of 2.5p. That puts the shares on a forward p/e ratio of 48.Reuse content