Synnovia Guides For Revenue Growth But Profit Hurt By Rising Costs

LONDON (Alliance News) - Synnovia PLC said Tuesday it expects its trading for the year ending March 31 to be broadly in line with market expectations but does not expect this to translate into profit growth.

Shares in Synnovia were down 10% in morning trading at 99.60 pence each.

The company - which produces film packaging, sacks and pouches and industrial consumer components - said its revenue has continued to grow "strongly" but its ongoing hedging policy has negated any improvement seen in the strength of the dollar versus sterling.

Synnovia has six factories in the UK with two in Asia and one in the US.

The company - which changed its name in December from Plastics Capital - said cost pressures and delays in its Films division also hurt profit growth.

"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," said Chair Faisal Rahmatallah.

Synnovia said its Film division had a "challenging year", coping with capacity constraints, but expects revenue to increase 10%. The company said the unit is in a "very good" position for continued sales growth.

The company said there was some "teething problems" with some projects during the year. It had expected to "largely complete" them by the third quarter of the current financial year ending March 31, but now the projects are expected to conclude in the current quarter, the financial fourth quarter.

Sales conversion were hurt by capacity constraints but staff levels and training has increase, resulting in costs increasing ahead of revenue.

In the Industrial division, Synnovia said bearings sales have grown "significantly" in recent months, exceeding management expectations.