UK Small Caps

LONDON (ShareCast) - Offshore safety specialist Cosalt (LSE: CSLT.L - news) turned into losses for the half-year and warned that it could breach the leverage covenant in its banking facilities.

The group said its current facilities are insufficient for its working capital needs. "In the short term, there is a material risk that the Group could breach the leverage covenant contained in the Group's banking facilities at the next test date of 31 July 2009," said the group.

Cosalt has decided to raise additional equity funds through a placing and open offer. "HSBC (LSE: HSBA.L - news) and RBS (LSE: RBS.L - news) , the Group's principal bankers, remain fully supportive of the Group and are in final discussions about a number of amendments, conditional on the completion of a planned fundraising, to the banking terms which would provide an increased level of headroom," it said.

Following various exceptional costs and write downs totalling £3.9m, including £1m fees in respect of the extended banking facilities, the group posted pre-tax losses of £3.4m, against a profit of £0.8m last year. Turnover rose 7% to £52.9m.

Conditions in its markets became more difficult over the first half due to the general economic environment.

Due to the recent trends in trading, the group has implemented a cost reduction programme, expected to deliver net savings of over £1m in the current financial year and £3m per annum from October 2010 onwards.

"Whilst it has been a challenging first six months, due primarily to the impact of lower oil prices on demand for our offshore services and a generally more difficult economic climate for freight and port activity, we are now seeing an increase in order levels at Cosalt Offshore going into the second half of the year," said chairman David Hobdey.