Getting back into shape

Trading remains uncertain, and cost-reduction measures continue to be implemented. Chamberlin is repositioning itself strategically, and will continue to develop its product offering into a wider range of industries. The group has been financially de-risked, but the shares are likely to tread water in the near term, given low earnings visibility.

• Trading outlook: Management is confident that sales will stabilise in the 1H 2021/22 financial year, and will then grow from the post-BorgWarner low, with growth gathering pace in 2H. The board expects “growth from all business units and a return to profitability and cash generation post our restructuring.”
• Business developments are positive: Management’s ongoing negotiations with customers include new volumes from both automotive and non-automotive customers, increased utilisation of machining capacity, a new contract for non-automotive light castings and high-margin products.
• Financial forecasts: Trading, while improving, remains uncertain. As yet, no financial forecasts are available for the year just ended March 2021 and the current trading year to March 2022.
• Risks: Potential risks include developments with automotive/non-automotive industries, UK export trading uncertainties following Brexit, and foreign currency and raw material price fluctuations. From a financial standpoint, the group has been significantly de-risked following the share placing and subscription.
• Investment summary: The shares have risen sharply since the lifting of the share trading suspension on 16 April 2021. Although, at this level, they represent the opportunity to invest in a cyclical stock with good operational leverage, they are likely to tread water in the near term until significantly brighter prospects become more visible.