Shares in the group dropped from 32.5p to 24p, following the announcement.
A group statement said: “In the current market conditions, with the company’s major subsidiary facing significantly reduced profitability in the second half, your board has decided to adopt a prudent approach.”
Pre-tax profit for the six months to 31 January fell from £1.9m to £1.2m in spite of an increase in turnover from £33m to £46.1m. Operating margins fell almost half to 3.2%.
Wescol blamed its falling margins on overcapacity in the market and complications in logistics following the switch of its steel supplier from British Steel to German firm Salzgitter, which has acquired a 26.2% stake in Wescol.
A third factor was that the firm deliberately underpriced its patented cellular steel beams – used to increase open spaces in new offices and warehouses – in an attempt to build market share in continental Europe.
The group also said that increased tender activity showed it was likely to benefit from a market recovery in the coming months.
