LONDON (ShareCast) - (Sharecast News) - LPA Group's shares plunged after the maker of long-life LED lighting and electrical connectors reported a sharp fall in orders.


Reporting first-half results, LPA said its order book had been hit by changes in the market for trains, for which the company supplies lights and other components.

Operating profit before exceptional items for the six months to the end of March rose 45.4% to £1.1m as revenue increased 28.9% to £13.9m but order entries fell 43.4% to £8.4m as orders failed to keep pace with sales. The order book dropped to £16m from £22m.

The AIM-traded company's shares fell 24% to 122p at 09:18 BST

The UK government has changed its procurement policy for trains to a shorter duration, whereas longer-term contracts favoured LPA. The procurement of 7,000 new trains in the UK, ten times the annual average, has also prompted rail companies to buy trains from non-UK companies that do not buy from LPA.

The flood of new trains has meant trains that might have needed upgrading have been retired, reducing routine orders for LPA. Outside the UK, Japan and other export markets are subject to increased competition from Chinese and Korean competitors.

LPA said it had pursued export opportunities created by imported trains and had won £1.8m of orders for LED lighting and power sockets from a new supplier to the UK market. The company is seeking similar contracts from other companies while developing new products and opening in new markets. It is also spending £1m to improve processes and increase automation to cut manufacturing costs.

Michael Rusch, LPA's chairman, said: "The levels of sales and profits in the current year are exceptional and may be under pressure next year, but the funnel of opportunities, which leads to the pipeline of orders and order entry, is very encouraging. The group is in robust shape and we look forward to the future with great confidence."

The company also announced a management overhaul as a move towards adopting corporate governance standards for smaller companies. Rusch will become group president and will be replaced as chairman on 1 October by Peter Pollock, who is currently chief executive. Paul Curtis, who runs LPA's electrical equipment division, will become chief operating officer and, once the revamp has settled, down, will step up to be chief executive.

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