A bittersweet update from engineer Molins (MLIN:AIM) reveals weak fourth quarter trading but a big increase in new orders for its next financial year.
The profit warning sends shares 8% lower to 49p despite reassurance from chief executive Tony Steels that order intake, a measure of work won but not yet shipped, is 80% higher compared to the same period in 2015.
Poor fourth quarter profitability was driven by customers ordering lower margin products and a delay in deliveries into early 2017.
But Molins' packaging machinery division benefited from new contract wins and that bodes well for profitability in the next 12 months, according to analyst Sanjay Jha at Panmure Gordon.
Jha has maintained a ‘buy’ recommendation on the stock, despite cutting 2016 pre-tax profit estimates by 50% to £0.7m.
Profit estimates for Molins' 2017 financial year are being held by Jha at £3.2m.
Net debt is expected to increase from £3.2m at Molins' last year-end to £3.6m by 31 December 2016, Jha estimates, driven by dividend payments in excess of cash flow.
