Trading Update, Acquisition and Notice of Results

RNS Number : 5448C
Corac Group Plc
20 January 2015

Corac Group plc
("Corac" or the "Company")

Trading Update, Acquisition and Notice of Results

Corac Group plc, the specialist engineering company, today publishes a trading update for its financial year ended 31 December 2014.

Financial Highlights

· Continued to improve financial performance across key measures with overall trading above expectations
· Cash performance much improved, with closing position well ahead of market expectations at £9.6m and above half year end position (30 June 2014: £8.9m).
· Increased closing Group order book compared to last year

Operational Highlights

· Mutually agreed exit from selected energy sector compression projects
· Recent UK and export submarine and heat exchanger orders announced total £13.4m
· Focus on key market sectors (aerospace & defence, energy & process) to accelerate growth and further improve performance

Financial overview

Overall trading is expected to be ahead of expectations with a reduced loss, significantly improved cash position and a growing order book. Discontinuing loss making legacy gas compression projects supports the further improvements expected in financial performance during 2015.

Good cash management and the expected reversal of working capital movements together with a strong order intake in the second half contributed to the delivery of improved cash at the year-end.

Operational overview

During the year the Group refocused its activities specifically toward the aerospace and defence sector and the energy and process sector.

As reported at the AGM in May, during the year we undertook a full evaluation of our compressor projects and the pipeline of future opportunities. Subsequently, we have concluded reviews with our partners involved in developing downhole compression (DGC) and in-pipe (IGC) applications. This took place as the global oil and gas market began to experience the current downturn. Joint decisions have now been made to cease projects in the United States, Italy and Saudi Arabia with immediate effect, and without impact on our current financial expectations.

We will continue to monitor with these partners the economic conditions in the sector and the future viability of the applications. All our other oil and gas activities are progressing as planned, as we continue to build upon the technology assets created over the last few years. The resulting projects are commercially sustainable, characterised by lower technical and financial risk to support our improving financial position.

Strong trading in the second half contributed to revenue growth in the defence sector and an order book more than double its opening value, with recently announced contracts in the UK and overseas. We also saw significant growth in revenue for our heat exchangers with improved quality, on-time delivery performance and conversion to EBITDA.

In the renewable energy sector, we delivered heat recovery systems to power generators, and delivered our first commercial steam turbo-expander, with ongoing detailed negotiations for worldwide manufacturing, distribution and sales of steam microturbines and compressors with our partner, Spirax-Sarco Engineering plc.

Proposed acquisition

In line with our stated strategy to develop our trading businesses, the Group today announces the proposed acquisition of a profitable Manchester based fabricator for a consideration of £0.8m using the Group's existing cash resources. Subject to conditions, completion is anticipated during the first quarter of this year.

The company will be integrated into our other activities in the region, where it will support internal requirements for fabrication. It also introduces new customers to the Group and adds capabilities to support existing projects in other sectors.

Notice of Results

The Group's Final Results for the year ended 31 December 2014 will be published on Tuesday 14 April 2015.

Phil Cartmell, Chief Executive of Corac Group said:

"Corac made good operational and commercial progress in 2014; trading is expected to be ahead of expectations with a reduced loss, robust net cash and an increased order book.

"In line with our strategic planning, the Group is successfully restructuring towards its core customer sectors and gaining maximum value from them. Business efficiencies and exit from costly legacy projects, have put us for the first time in a sustainable financial and operational position from which to achieve growth and improved performance."