Luxury interior furnishings firm Walker Greenbank (WGB:AIM) warns profits will be hit by flooding at its Lancaster-based factory, sending the shares down 4.4% to 207.5p.
Heavy rain brought by 'Storm Desmond' has caused the company considerable distress. The blow is lessened by the fact the £130 million cap does hold a significant proportion of stock off-site.
In a short statement, Walker Greenbank reports that its Standfast & Barracks fabric printing factory suffered 'substantial flooding' as Desmond carried in unrelenting amounts of rain over the weekend.
Carrying out an urgent assessment of the flooding's effects, Walker Greenbank 'expects a period of disrupted production at the factory along with an adverse impact on machinery, stock and profits'.
CEO John Sach stresses the company, whose wallpaper factory in Loughborough is unaffected, has 'a comprehensive insurance policy, which covers flood damage and business interruption, and a claim has already been logged'. Investors can expect a further announcement once the extent of the damage has been appraised.
Investec Securities has placed its forecasts and price target under review, explaining 'the near-term disruption is clearly unhelpful, particularly given positive trading that had been seen across the group driven by underlying business investments. The extent of disruption and impact on the company is unclear, although we note a significant proportion of stock is held off-site.'
The broker says Standfast & Barracks produces stock accounting for around £18 million of sales – group turnover grew 6.3% to £83.4 million in the year to January 2015.
It writes: 'We understand that Walker Greenbank keeps circa £20 million of finished stock within its distribution network (based out of Milton Keynes) which will help the company fulfil near-term/existing orders. However there will be a portion of lost WIP (work in progress) stock within the factory as well as order disruption that is likely to have an impact in CY16.'
Outside of the company's control, the unfortunate flooding muddies the near-term profits outlook for Walker Greenbank, though Shares remains positive on the long-term growth story.
Not only is Walker Greenbank a compelling exports play, selling product into over 85 countries, it is also geared into growing consumer confidence, rising disposable income and a resurgent contracts sector in the UK, which remains its single biggest market.
The wallcoverings-to-fabrics maker's key competitive strengths include a heritage and contemporary brand portfolio, encompassing renowned British brands Sanderson and Morris & Co, as well as Zoffany, Harlequin, Scion and Anthology.
The AIM company also benefits from high-quality British manufacturing assets, where investment in innovative printing techniques distinguishes the business from rivals.