Enodis has announced an H1 GBP39 million loss. The pessimistic outlook in the US has led to slower sales for the catering equipment company. Enodis has radically restructured, closing US plants and laying off 10% of its workforce. The savings will put Enodis in a better position for the coming year, but it looks like it will be some time before the catering market picks up.
Another company has fallen foul of the US economic downturn. UK catering equipment company Enodis, formerly Berisford, watched pre-tax profits tumble GBP79 million compared to last year’s H1 results, leaving it with a GBP39 million loss. The results were an improvement on the worst-case scenario given in the company’s most recent profit warning in March, leaving investors slightly reassured, but the year was still a disappointment.
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Enodis described market conditions as difficult, although it expressed confidence for a better second half.
The company should certainly have a better bottom line. The results were hurt by one-off costs totaling GBP46.3million from a legal settlement, accounting revisions, write-offs and restructuring charges. The restructuring included the closure of several US plants and the sacking of 900 employees. Over the next six months, the cost cutting should produce savings of GBP15 million, largely from reduced salary costs, and these savings should be sustained in the long run. Enodis is concentrating on putting itself in a strong position for when trading conditions improve.
However, the market is unlikely to see a sudden upturn. Enodis’ US business, in particular has suffered from slower demand. Many restaurants are putting off the opening of new outlets and the refitting of old ones until they are more certain what the next few years will bring. Enodis has a significant presence in the US and is going to find it hard to protect its business from economic pressures in that region. The company is certainly not in a worse position than many of its catering equipment rivals and its radical cost cutting will help it get through the lean times. But, until US businesses are confident that the worst is over, there is likely to be less investment in upgrading kitchen equipment.
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