Bare knuckle fight of firm that had it all

CLITHEROE-BASED Ultraframe was once the shining star of East Lancashire's industrial scene. Founder John Lancaster effectively created the UK conservatory industry and the company grew rapidly to become a genuine world leader. When it floated on the Stock Exchange in 1997, it became a darling of the investment set who clamoured to buy shares in a business that was generating profits of more than £30 million a year. Today, as a threat of some job losses hangs over the 800-strong workforce at Clitheroe, Business Editor ANDREW CALVERT takes an in-depth look at a company that once seemed to have it all.

GROUP chief executive David Moore concedes Ultraframe is in a "bare-knuckle fight" to restore the company's fortunes - but it is one he is determined to win.

The company is still reeling from the aftermath of its fourth profits warning this year which saw its share price slump to an all-time low of 66p. At its peak in 2000, Ultraframe shares were trading at more than £6 each.

Over the past three years more than £500 million has been wiped off the company's value as investors have deserted Ultraframe in their droves.

Hit by a combination of aggressive competition, a changing marketplace and an expensive American adventure that has yet to produce any results, the company would be appear to be slumped on the ropes.

But David Moore refuses to let Ultraframe take on the role of the once-great champion who has taken on one fight too many. While admitting it has disappointed investors, he insists the company has everything in place to make a comeback that will see Ultraframe restored to its pre-eminent position in the conservatory market.

"We are in a bare-knuckle fight for market share," he said, "But we have the right people in place, the right range of products and we remain positive about the medium-term future of the business.

"The Board knows that it is their job to deliver shareholder value. We have not been doing that as well as we could, but we remain committed to our strategy."

Not everyone is convinced by Ultraframe's rallying cry. Leading City analyst Stephen Rawlinson has followed the company's fortunes since its floatation and has been dismayed by the succession of profit warnings - the latest last week which forecast pre-tax profits for 2004 down to £12 million.

"When its share price hit £6, Ultraframe was the company that couldn't make a mistake," he said. "They were achieving super-normal returns and were highly cash-generative. Since then, however, they have made every mistake in the book. It is showing all the classic symptoms of a company that is tired."

Rawlinson is particular scathing of Ultraframe's £85 million purchase of the American sunroom firm Four Seasons in 2000. It has since invested further millions in its US project, but expects it will continue to lose money this year.

"The US is a completely different place to do business in and they didn't get a handle on it," he said. "The acquisition has taken so much restructuring, it is hard to see why it was made."

Rawlinson believes the company should go private and is predicting a management buy-out some time in 2005. "Ultraframe is still a good business," he insisted. "It has a well-invested factory in Clitheroe, it is continuing to spend on research and development and it was good to hear they are streamlining the business.

"But the prospects are nowhere near as good as they were. My belief is that they will sell the US operation and do a management buy-out."

Lancashire stockbroker WH Ireland shares the view that Ultraframe will be sold. In its latest note on the company, David Gorman said investors' hearts had sunk after the announcement that sales for 2004 would be 18 per cent down on the previous year.

"This latest announcement sent the shares down to an all-time low and further strengthens the case for a 'take private'", he added.

David Moore, who has headed the company for the past four years, is adamant that Ultraframe is back on track. He said there had been a fundamental shift in the conservatories market over the past few years, with increased competition and a major change in the profile of the customers.

More people in their 30s were now buying a conservatory to create more space for their families, but did not want to spend as much as the traditional 50 plus Ultraframe customer.

Mr Moore said the company had invested millions of pounds in developing a new budget range of conservatory roofing systems and was confident it would pick up additional customers. DIY superstores and builders' merchants were also being added to its distribution network which Ultraframe believes will add further sales.

Mr Moore acknowledged that the company was "very disappointed" with progress in America.

But he remains confident it will ultimately delivery on its expectations.