Redstone cost cutting delays hit sales

Redstone has warned the City that sales in the current fiscal 2010 started April will be on a par with the previous six months, after admitting its £7m cost reduction programme is running behind schedule.

Redstone has warned the City that sales in the current fiscal 2010 started April will be on a par with the previous six months, after admitting its £7m cost reduction programme is running behind schedule.

In December, then chief executive Martin Balaam - who exited the business in the spring - said a reduction in orders, particularly in the construction sector, had forced it to hack chunks off its cost base.

A trading update issued by the firm today, ahead of the disclosure of results for the year-ended 31 March, revealed a delay in efforts to cut costs in the sales climate, meant it did not expect to achieve sequential growth in H1 this financial year.

"The delay in achieving the benefit of cost reduction measures in the current trading environment is expected to result in first half trading for the next financial year to be at a similar level to the previous six months," it stated.

That said, the management changes and additional cost reduction efforts should lead to sales in the second half of the year matching those in the first half of fiscal 2009.

Earning before interest, tax, depreciation and amortisation (EBITDA) for the year ended 31 March will be in the region of £7.5m to £8m.

In a statement, Alan Coppin, chief executive said: "We along with many other companies in our sector, have experienced weakness in overall trading conditions as a result of the current economic downturn."

He added that the board believed that the actions it had taken and was implementing positioned the firm to capitalise on improvements in trading conditions "as and when they arise".

The firm expects net debt to be in the region of £26m at the end of fiscal 2009 and will record an impairment charge of £32m pertaining to goodwill that is related to historical acquisitions.

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