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UPDATE 2-Redhall sees weak profit on production delays
April 5, 2012 / 10:09 AM / 5 years ago

UPDATE 2-Redhall sees weak profit on production delays

* Says a new contract resulted in production delays

* Shares plunge 26 pct

By Monika Shinghal

April 5 (Reuters) - British engineering support services group Redhall Group Plc forecast a lower-than-expected profit for the second half of the year, hurt mainly by production delays due to a new contract at its unit.

Shares in Redhall fell as much as 26 percent to 77 pence on Thursday on the London Stock Exchange.

In February, Redhall had said its unit Booth Industries was awarded a contract worth 20 million pounds ($31.8 million) for specialist engineered doors for the UK’s Atomic Weapons Establishment.

The contract was technically “challenging” and experienced production issues, Redhall said in a statement on Thursday.

However, the technical issues were resolved, Finance Director John O‘Kane told Reuters.

Redhall’s markets include nuclear, oil and gas, food, defence, safety and security and transport infrastructure.

O‘Kane said the future growth of the company would be driven by the UK government’s nuclear new build programme.

The government has proposed to reform the country’s electricity market, which will include creating contracts to reward producers of low-carbon electricity, such as nuclear power. It plans to lay the so-called Electricity Market Reform before Parliament in May.

“The company has some very good contracts in the nuclear new build for power stations,” FinnCap analyst David Buxton said.

Buxton, who has a “buy” rating and a price target of 175 pence on the stock, said he expects the shares to regain their value in the next 12 to 18 months. The stock has fallen 43 percent in the last one year.

Buxton reduced his pre-tax profit forecast by 1.5 million pounds to 4 million pounds for fiscal 2012.

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