The recent interim results quantified the extent of the profit warning given
with the AGM statement in May. Turnover of some £250k was materially
below management and our own expectations.
Problems in the KleenAir supply chain and distribution channel caused the
company to miss a number of orders. Given that compliance deadlines are
now passed, those orders are now lost rather than deferred. KleenAir has
added a further supplier although, again, has no exclusivity.
Broader supply chain but another currency risk. The existing supplier is
Canadian and adverse currency movements were cited as contributing to
the profit warning. The further supplier is based in Germany and we note
the recent ECB decision to raise interest rates.
Key sales personnel and the technical Director left the company in March.
KleenAir has effected some replacement to date but clearly those departures
will have hit sales in the critical closing weeks of the first half.
Changes to TfL requirements and a new Mayor. The changes include a
late exemption granted to HGVs over 12.5 tonnes which has materially
lowered the potential total market size of the London LEZ. London’s new
cost-conscious Mayor may look closely at the LEZ’s anticipated £10m pa
operating costs.
We see little evidence yet that other cities are about to launch material
LEZ schemes. Instead we find several who are continuing to watch the
London experience with apparently mounting indifference. The risk is that
LEZs are seen as revenues (from penalty charges) foregone at a time of
national budget restraint. We have not modelled any business outside the
London LEZ.
The UK is already in a period of below-trend growth with a non-trivial risk
of a full recession. Budget squeezes are likely to hit not only city councils
but also corporates and their CSR programmes.
