Synnovia PLC Trading Statement (4057Q)

TIDMSYN

RNS Number : 4057Q

Synnovia PLC

19 February 2019

Synnovia plc

(the "Company" or the "Business" )

Trading Update

Synnovia plc (AIM: SYN), the specialist manufacturer, provides an update on trading for the financial year to date and announces that it expects trading for the financial year ending 31 March 2019 to be broadly in line with market expectations.

Overall Trading

Revenue has continued to grow strongly, but this has not yet translated into the profitability growth that we expected. In part this is due to our ongoing hedging policy, which has negated an improvement that would have arisen from the US$ strength versus sterling over the period. It has also arisen because of cost pressures and unforeseen minor delays to the addition of new capacity in our Films Division. The Industrials Division has continued to perform well.

Industrial Division

Bearings sales have grown significantly over recent months, exceeding management's expectations and this growth is expected to continue over the next few months. We continue to add new business and are considering future capacity expansion through a move to a new production facility in Thailand.

Matrix activities continue to make good progress over prior year in line with our strategy of getting "closer to the customer" and broadening the range of die-cutting and die-making consumables that we have to offer. We have restructured our management team in China to strengthen our sales and operational capability there. We have also implemented a series of improvements to strengthen performance of our US distribution business.

Mandrel sales have recovered somewhat from the temporary reduction that we experienced in Q2/Q3 of the financial year, partly driven by new business wins. We are adding further capacity to our US operations so that more production can be transferred from the UK to the US over the course of the next financial year.

Film Division

The Films Division is having a challenging year coping with capacity constraints during the year, continuing strong growth and as management continue to integrate the three former separate businesses. Revenues in the Film Division have so far increased by 10% and in parallel we have implemented significant projects to add capacity and capabilities, including additional extrusion lines, an eight-colour printing press, new conversion machines, recycling equipment and warehousing infrastructure. All this should put us in a very good position for continued sales growth.

There have been some delays and teething problems with these projects which we expected to be largely complete in Q3 of the current financial year. However, most of these projects are now expected to conclude in Q4. Meanwhile, staff levels and training have been increased, whilst sales conversions have been held back until the capacity is in place. Costs have therefore risen ahead of revenue, negatively impacting profitability.

Commenting, Faisal Rahmatallah, Chairman, said:

"Significant organic growth continues to be achieved across both our Divisions. We continue to implement a programme which adds capacity to fulfil this demand and to enable future growth thereafter. Relatively small delays to this programme have been experienced in the Films Division and will restrict profit growth in the current financial year. Except for this disappointment we are satisfied with the progress the Company is making this year.

The change of the Company's name to Synnovia plc has seen a smooth transition and is acting as a strong signal to our organisation to do everything reasonably possible to reduce, recycle and re-use plastic waste.

Overall, we anticipate that our financial performance over the second half of the financial year will enable us to announce results that are broadly in line with market expectations."

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

For further information, please contact:

 
 Synnovia plc                    Tel: [phone] 
 Faisal Rahmatallah, Executive 
  Chairman 
 Nick Ball, Finance Director 
 
 Cenkos Securities               Tel: [phone] 
 (Nomad and joint broker) 
 Mark Connelly 
 Callum Davidson 
 
 Allenby Capital Limited         Tel: [phone] 
 (Joint broker) 
 David Hart 
 
 

Notes to Editor

Synnovia is a specialist manufacturer of industrial components and consumables. Applications for these products vary widely and examples include:

   --             Packaging for the food manufacturing and distribution - films, sacks and pouches 

-- Steering columns and instrument control knobs in the automotive industry - plastic ball bearings

   --             Hydraulic and industrial rubber hose manufacture - various types of plastic mandrel 
   --             Cardboard box manufacture - plastic creasing matrices 

Synnovia's business model is based on understanding customers' problems in depth, and then developing and mass producing proprietary, technical solutions for these problems.

The Business operates through two divisions, Films and Industrial, and has the majority of its production in six UK based factories, with a further three factories in Asia. Approximately 50% of its GBP83 million sales are made outside the UK to more than 80 countries.

Further information can be found on www.synnovia plc.co.uk

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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February 19, 2019 02:00 ET (07:00 GMT)