RNS Number:9635Q
SWP Group PLC
28 March 2008
SWP Group plc
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
Financial Highlights:
* These results are the Group's first to be reported under International
Financial Reporting Standards (IFRS) which all AIM listed companies are
obliged to adopt for accounting periods commencing on or after 1 January
2007. The adoption of IFRS represents an accounting change only and does not
affect the operations or cash flows of the Group. Comparative figures for
the six months ended 31 December 2006 and the year ended 30 June 2007 have
been restated accordingly.
* Turnover for the six months ended 31st December 2007 increased by 9.1%
to �10,964,000 (2006 �10,050,000) with operating profits climbing to
�660,000 (2006 �120,000). With increased finance costs of �298,000 (2006
�276,000) pre-tax profits amounted to �362,000 (2006 Loss �156,000).
* With both Fullflow and Crescent of Cambridge treading water in financial
terms during this period following record results at each subsidiary for the
year ended 30th June 2007 the improvement in operational results lies in the
performance of DRC following a period of restructuring and the successful
outcome of litigation pursued against the owners of Ulva which allowed the
Group to acquire this business and the intellectual property which vests in
the Ulva brand on 29th November 2007. The results reported below incorporate
the trading results for Ulva for the three weeks up to Christmas 2007 from
the date of acquisition.
Unaudited Unaudited
Six months Six months
ended 31st ended 31st
December 2007 December 2006
�'000 �'000
Turnover 10,964 10,050
Operating profit 660 120
Profit/(loss) before and after tax 362 (156)
Earnings per share 2.12p (0.92)p
Operational Highlights
Fullflow
For the six months under review, Fullflow's sales increased by 12.8% to �7.6
million. Unfortunately this still left Fullflow significantly short of its
revenue targets and because overhead costs, mainly in the form of staff numbers,
had been increased to support the extra planned growth, operating profit fell by
14.4%.
In the UK, there was a significant dearth of the sort of large projects which
have constituted Fullflow's bread-and-butter in past years, and what ended up as
a similar sales level to the previous year was derived from a higher number of
smaller projects such as schools, offices and hotels. This is a trend which we
expect to continue as developers, who now have to pay business rates on empty
buildings and are also having to face up to what is a far less certain market,
become less and less willing to construct large buildings on a speculative
basis.
In France, on the other hand, the market as a whole was stronger, with demand
for large distribution warehouses continuing unabated. However increased
competition - mainly in the form of smaller operators offering cheaper prices -
meant that, as in the UK, sales levels were flat and margins lower, with the
result that a small operating loss was registered. However there are now signs
that a number of contractors are realising that cheaper prices do not
necessarily lead to lower overall costs and we are optimistic that a number of
our customers who elected to give one or two of our competitors a try will
return to the fold and boost our sales levels in the period ahead.
In Spain our Madrid-based operation continued to achieve good progress, both in
terms of sustaining its rapid rate of sales growth and, just as importantly,
attaining higher levels of efficiency and thus higher margins. In recent years
investment in distribution warehouses, which represent a very important market
for Fullflow's specialist rainwater drainage system, has lagged behind both the
UK and France, but this situation is changing rapidly and should underpin
further sales growth in the months ahead. As mentioned in the Annual Report, we
have doubled the size of our premises and created a network of technical sales
managers to seek out new customers and new markets. We firmly expect our Spanish
operation to provide an increasingly important contribution to our overall
prospects for at least the next two or three years.
Plasflow, which specialises in the design and manufacture of polyethylene pipe
fittings and fabrications, also achieved significant progress in the period
under review, although in its case a substantial increase in sales was
accompanied by a drop in margins arising partly from the transfer of its
metalworking operation to Fullflow and partly from some sharp increases in the
raw material prices. However this ought to be a temporary setback and recent
developments on the sales front suggest that Plasflow is set to continue its
emergence as a significant player in its chosen markets. In particular, the fact
that we have managed to satisfy the very demanding requirements of the nuclear
industry not only augurs well in terms of the potential for further progress in
that sector but also acts as a reference point for Plasflow to use in its
discussions with customers in other markets.
Internationally, Fullflow's planned push into other countries has proved to be
less easy to achieve than expected, largely because of the difficulty in finding
suitable local partners. However in recent weeks we have achieved significant
progress in three potentially important markets and we are optimistic that this
progress can be converted into an additional income and profit stream in the
relatively near future. International expansion remains a fundamental plank of
our overall business growth strategy and we believe that significant
opportunities exist in this area.
Crescent of Cambridge
The performance of Crescent during the traditionally quieter half of the year
was adversely affected by the "summer floods" in 2007 which had a serious impact
on one of Crescent's major customers. This caused delay throughout the supply
chain with installations postponed by a number of months in some cases. Changes
within the market demand greater levels of efficiency to such an extent that
investment in our Computer Aided Design Technology will come "on line" towards
the end of this current financial year. These changes will shorten the time
period between approving a customer's design requirements through to the
production and installation of the finished stair in strict conformity to the
customer's specification. This is likely to increase Crescent's capacity to
innovate and produce and for this reason greater emphasis in future will be
directed towards sales and marketing in specialist areas within the staircase
sector where growth opportunities exist for further expansion. Much requires to
be undertaken in this important area of the business to ensure Crescent's future
development.
There is considerable evidence that the UK economy is slowing down in the face
of inflationary pressures, credit issues and global uncertainty. Like Fullflow,
Crescent is heavily dependent on the construction industry which allied to the
commercial property sector faces a difficult economic future at this time. That
said, the company continues to support a wide range of customers engaged in all
sectors of the community including the Ministry of Defence, HM Prisons and
increasingly modular build.
DRC Polymer Products
The problems which bedevilled DRC over the years appear to be behind us
following a comprehensive restructuring of the operations and the introduction
of new management. DRC is now profitable in its own right and will benefit
substantially from its relationship with Ulva Insulation Systems Ltd its sister
company to whom it will supply insulation membranes for application within oil,
gas and petrochemical installations. DRC's traditional product offering to the
modular build sector continues in line with expectations whilst the development
of our "intelligent membrane" is spreading to a number of diverse utility
organisations who recognise with increasing frequency the benefits on offer by
installing such systems. DRC has taken active steps to research this specialist
market in depth and a number of major projects have been identified and targeted
to which our systems are ideally suited. The growth associated with these two
latter product areas is likely to be steady rather than spectacular whereas the
opportunities presented through the reintroduction of supply arrangements with
Ulva offer growth possibilities of transformational proportions. For this reason
we have embarked upon a modest capital expenditure programme within DRC's
manufacturing plant to upgrade the calendar line in order to improve
productivity yield and the underlying quality of the output in order to exploit
the synergies which exist between the manufacturing unit on the one hand and the
brand driven sales unit on the other. This product line will be a key driver of
growth in future. DRC has considerable expertise in terms of technical
competence and innovation and is likely to deploy future resources into the
development of new products for specialist application to not only existing but
also complementary markets.
Ulva Insulation Systems
Shareholders will recall that when we issued our 2007 Annual Report in December
2007 we disclosed that we had acquired the Ulva brand pursuant to the successful
litigation with its owners for breach of contract in the High Courts of Justice
back in July 2007. The acquisition of this brand took place on 29th November
2007 and therefore Ulva's trading only features within these results for the
three weeks up to Christmas 2007. The product involves the sale and distribution
of Hypalon based membranes used for both weather and fire protection over
thermal insulation to pipes or vessels used within the oil, gas and
petrochemical industries.
During the past four months the business has been successfully integrated into
the Group and in particular is working cohesively with both its traditional
suppliers but also with its sister company DRC Polymer Products with whom supply
arrangements exist and with whom technical synergies as well as economies of
scale will produce long term financial benefits to the Group as a whole.
This business based at Telford in Shropshire is well managed and offers
potential for rapid expansion through its ability to achieve specification
globally in not only the United Kingdom but the Far East, Middle East, Europe as
well as the United States of America. At the present time we are actively
researching the worldwide capabilities of this product with a view to developing
a global strategy so that its full potential can be exploited over time in a
manner designed to maximise both brand awareness and profitability. By the time
we write to shareholders later this year we expect to be able to report further
on our strategic ambitions for this product line.
Current Trading
Trading in the second half of the year has begun very positively with Ulva
making a substantial contribution to the Group for the first time whilst the
other three subsidiaries, namely Fullflow, Crescent and DRC each remain
profitable. Active steps are being taken to manage the Group's working capital
so as to facilitate expansion of our key operations whilst also generating cash
in order to pay down bank debt as rapidly as possible.
Future Prospects
The shape and balance of our business is more dynamic than ever before. In this
regard whilst sales of our specialist building products depend to a large extent
on the economic activity associated with the construction and building
industries we have a counter balance to the volatile nature of these industries
through our active participation in the oil and gas sector on a global basis.
With fuel and energy prices recently reaching all time highs it is likely that
this Group will develop at a faster pace than we would ordinarily have expected.
We are in a strong position in a rapidly developing and changing market place
through our specialised range of products to capitalise on the opportunities
that arise in both the UK and abroad in order to deliver strong organic growth.
Greater levels of profitability and enhanced shareholder value are likely to
follow.
SWP has laid down strong foundations to take full advantage of the expanding
markets in which we operate and the Group will strive to maximise all growth
opportunities. We look forward with confidence to the remainder of 2008 and
beyond.
J.A.F. Walker
Chairman
27th March 2008
SWP Group plc
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
Unaudited Consolidated Income Statement
Six months Six months Six months Year ended
ended ended 31.12.07 ended 31.12.06 30.06.07
31 December Unaudited Unaudited Audited
2007 �'000 �'000 �'000
Turnover 10,964 10,050 20,844
Operating expenses (10,304) (9,930) (19,776)
-------- -------- --------
Operating profit 660 120 1,068
Finance income 1 - 1
Finance costs (299) (276) (597)
-------- -------- --------
Profit/(loss)
on ordinary
activities
before taxation 362 (156) 472
Income tax expense - - (44)
-------- -------- --------
Profit/(loss)
for the period 362 (156) 428
-------- -------- ========
Basic profit/(loss)
per share (pence) 2.12p (0.92)p 2.51p
-------- -------- ========
Diluted profit/(loss)
per share (pence) 2.12p (0.92)p 2.51p
======== ======== ========
Turnover and operating profit all derive from continuing operations
Unaudited Consolidated Balance Sheet
As at As at As at As at
31 December 31.12.07 31.12.06 30.06.07
2007 �'000 �'000 �'000
Non-current assets
Intangible assets 480 39 29
Property, plant
and equipment 4,808 4,554 4,697
Trade and other
receivables 738 652 543
Deferred tax assets 678 678 678
-------- -------- --------
6,704 5,923 5,947
-------- -------- --------
Current assets
Inventories 3,509 3,218 3,176
Trade and other
receivables 7,046 5,442 6,399
-------- -------- --------
10,555 8,660 9.575
-------- -------- --------
-------- -------- --------
Total assets 17,259 14,583 15,522
-------- -------- --------
Current liabilities
Trade and other
payables (5,261) (3,925) (4,810)
Current tax
liabilities (1,387) (1,112) (1,015)
Obligations
under finance leases (179) (182) (172)
Bank overdrafts
and loans (3,653) (3,684) (3,066)
-------- -------- --------
(10,480) (8,903) (9,063)
-------- -------- --------
Non current liabilities
Bank loans (3,250) (3,250) (3,250)
Deferred tax (394) (331) (394)
liabilities -------- -------- --------
Obligations under
finance leases (189) (265) (231)
-------- -------- --------
Total liabilities (3,833) (3,846) (3,875)
(14,313) (12,749) (12,938)
-------- -------- --------
NET ASSETS 2,946 1,834 2,584
======== ======== ========
Capital and reserves
Called up share
capital 85 85 85
Share premium
account 11,878 11,878 11,878
Capital reserves 41 41 41
Revaluation reserve 1,669 1,459 1,669
Retained earnings (10,727) (11,629) (11,089)
======== ======== ========
TOTAL EQUITY 2,946 1,834 2,584
======== ======== ========
Unaudited Consolidated Cash Flow Statement
Six months Six months Six months Year ended
ended ended 31.12.07 ended 31.12.06 30.06.07
31 December Unaudited Unaudited Audited
2007 �'000 �'000 �'000
Cash flow from
operations 107 54 1,346
Interest received 1 - 1
Interest paid (255) (266) (533)
-------- -------- --------
Net cash
(outflow)/inflow from
operating activities (147) (212) 814
-------- -------- --------
Cash flow from
investing activities
Purchase of property,
plant and equipment (270) (66) (332)
Purchase of intangible
assets (135) - (2)
Proceeds for disposals of
property, plant and
equipment - 47 75
-------- -------- --------
Net cash outflow from
investing activities (405) (19) (259)
-------- -------- --------
Cash flow from
financing activities
Finance lease repayments (35) 215 47
-------- -------- --------
Net cash
(outflow)/inflow from
financing activities (35) 215 47
-------- -------- --------
Net (decrease)/increase
in cash, and bank
overdrafts (587) (16) 602
Cash, cash equivalents
and bank overdrafts at
beginning of period (6,316) (6,918) (6,918)
Other loan repayments
-------- -------- --------
Cash, cash equivalents
and bank overdrafts at
end of period (6,903) (6,934) (6,316)
======== ======== ========
Notes to the Interim Report
1 Basis of This interim report does not constitute statutory accounts of the
Preparation group within the meaning of section 240 of the Companies Act
1985. Statutory accounts for the year ended 31 December 2006,
which were prepared under UK generally accepted accounting
principles (UK GAAP) have been filed with the Registrar of
Companies. The auditors report on those accounts was unqualified
and did not contain a statement under section 237 of the
Companies Act 1985.
The accounting policies applied in these unaudited interim
financial statements are those that the group expects to apply in
its annual Financial Reporting Standards (adopted IFRS), and
those parts of the Companies Act 1985 that remain applicable to
companies reporting under IFRS.
2 Taxation The tax charge for the previous year has been impacted by IFRS
adoption adjustments (refer to the Company's separate 'Adoption
of IFRS - Preliminary Restatement of 2006 Comparatives' report
for further detail).
3 Dividends The Directors are not recommending the payment of an interim
dividend.
4. Segmental
reporting
Six months Six months Year ended
ended 31.12.07 ended 31.12.06 30.06.07
Unaudited Unaudited Unaudited
�'000 �'000 �'000
Revenue
United Kingdom 6,388 6,715 14,130
Rest of Europe 4,576 3,335 6,714
-------- --------- --------
Total Revenue 10,964 10,050 20,844
-------- --------- --------
Operating profit
United Kingdom 550 102 1,066
Rest of Europe 100 18 2
-------- --------- --------
Total operating profit 660 120 1,068
-------- --------- --------
Profit on ordinary
activities before taxation
United Kingdom 284 (162) 447
Rest of Europe 78 6 (19)
-------- --------- --------
Total profit/(loss)
on ordinary activities
before taxation 362 (156) 428
-------- --------- --------
5. Profit per Profit per share is calculated on the basis of shares 17,019,546
share (2005: 16,189,199) which is the weighted average of the number
of shares in issue during the period.
The Company's share options are not dilutive for profit per
share calculations because the share options' exercise prices
are greater than the current market price.
6. Cash flow
generated from
operating activities
Six months Six months Year ended
ended 31.12.07 ended 31.12.06 30.06.07
Unaudited Unaudited Audited
�'000 �'000 �'000
Operating profit 660 120 1,068
Adjustments for Depreciation
of plant property and equipment 159 167 384
Amortisation of intangible
assets 9 12 15
Profit on disposal of
plant and equipment - - (22)
--------- --------- --------
Operating cash flows before
movement in working capital 828 299 (1,455)
Increase in inventories (333) (249) (207)
Decrease/(increase) in
receivables (842) 456 (392)
Decrease/(increase) in
payables 454 (452) 500
--------- --------- --------
Cash flow from operations 107 54 1,346
========= ========= ========
7. Copies of Interim Report
Copies of the interim report will be posted to shareholders in due course and
are available from the Group head office at 4th Floor, Bedford House, 3 Bedford
Street, Strand, London WC2E 9HD or available to view from the Company's website
at http://www.swpgroupplc.com.
For further information or enquiries:
J.A.F Walker D.J. Pett Oliver Scott / Richard Kauffer
Chairman Director of Finance KBC Peel Hunt, Nominated Adviser and Broker
Tel Office: 020 7379 7181 Tel Office: 020 7379 7181 Tel Office: 0207 418 8900
Mobile: 07900 445623 Mobile: 07940 523135
31 December 2007
SWP Group Plc
Adoption of International Financial Reporting Standards (IFRS)
Preliminary restatement of 2006 comparatives
Introduction
Companies listed on the AIM market are required to adopt International financial
Reporting Standards (Adopted IFRS) for financial periods commencing on or after
1 January 2007. SWP plc will report its results under IFRS as adopted by the
European Union for the year ended 30 June 2008. Its first results to be reported
under the new standards will be for the six months ended 31 December 2007.
In order to comply with Adopted IFRS, SWP is required to provide comparative
numbers. Included within this report is an analysis of how balance sheets and
income statements previously prepared under UK generally accepted accounting
practice ("UK GAAP") have changed under Adopted IFRS, and to explain the
adjustments to reconcile the figures from one basis of accounting to the other.
The main reconciling items and their effects on the balance sheet and income
statement are set out as follows:-
Appendix 1 - Transition Balance Sheet at 1 July 2006
- Balance Sheet at 31 December 2006
- Balance Sheet at 30 June 2007
Appendix 2 - Income Statement for the six months ended 31 December 2006
- Income Statement for the year ended 30 June 2007
IFRS 1 - First time adoption
IFRS 1 'First time adoption of International Financial Reporting Standards'
details the procedures a company must follow when adopting IFRS for the first
time. It also gives companies the option of taking a number of exemptions to the
full requirements of IFRS in the year of transition. The group's date of
transition to IFRS is 1 July 2006 with the transitional year being the year
ended 30 June 2007.
The group has elected to take the following key exemption on transition to IFRS.
- IFRS 3- Business combinations
The Group has chosen not to restate historical business combinations that took
place before the date of transition 1 July 2006.
- The Group has chosen to apply a provisional fair value to the
business assets purchased in respect of the recent acquisition of the Ulva brand
on the 28th November 2007 in accordance with the provisions of IFRS3 - Business
combinations.
Summary of IFRS adoption changes
The adoption of IFRS represents an accounting change only, and does not affect
the operations or cash flows of the group. The effect of the adoption of IFRS on
the results of the group for the year ended 30 June 2007 is set out below:
Summary of IFRS changes
Year ending 30 June 2007
UK GAAP IFRS Change
(�'000) (�'000) (�'000)
Turnover 20,844 20,844 -
Operating profit 1,068 1,068 -
Profit before tax 472 472 -
Profit/(loss) after tax 428 428 -
Diluted profit per share 2.51p 2.51p -
Net assets 2,503 2,584 81
IAS 12 - Income tax: deferred tax
Under IAS 12, deferred tax should be recognised on the basis of taxable
temporary differences (subject to certain exceptions), which represents the
difference between the carrying value of an asset or liability and the amount
used for taxation purposes (a balance sheet approach). Under UK GAAP, deferred
tax is recognised on timing differences that arise from the inclusion of gains
and losses in the tax assessments in periods different to those in which they
are recognised in the financial statements (an income approach). The change to
IFRS results in a proportion of deferred tax being recognised directly in equity
on certain items that would not have given rise to deferred tax under UK GAAP.
Accounting policy changes and financial effect
The principal changes the Group has made to its accounting policies on adoption
of IFRS to those presented in the Financial Statements for the year ended 30
June 2007 and their effect on the Financial Statements are as follows:
(accounting policies that have not changed with the introduction of IFRS have
not been reproduced below)
IFRS1 - Impact on cash flow statement
The Group prepares the cash flow statement for both UK GAAP and the Adopted IFRS
using the indirect method. Consequently, adjustments made to working capital
items on the balance sheet on conversion to Adopted IFRS lead to an adjustment
in the IFRS cash flow statement. There are no significant changes between cash
flow from operating activities, investing activities and financing activities.
No adjustments have been made to the cash flow statement on conversion.
Appendix 1
--------------------------------------------------------------------------------------------------------------------
BALANCE SHEET 1Jul06 31Dec06 30Jun07
IAS 12 IAS 12 IAS 12
Deferred Deferred Deferred
UKGAAP tax IFRS UK GAAP tax IFRS UKGAAP tax IFRS
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
--------------------------------------------------------------------------------------------------------------------
Non current assets
Intangible assets 42 42 39 39 29 29
Property,plant
and equipment 4,411 4,411 4,554 4,554 4,697 4,697
Trade and other
receivables 755 755 652 652 543 543
Deferred tax assets 203 475 678 203 475 678 203 475 678
-------------------------------------------------------------------------------------------
5,411 475 5,886 5,448 475 5,923 5,472 475 5,947
-------------------------------------------------------------------------------------------
Current assets
Inventories 2,969 2,969 3,218 3,218 3,176 3,176
Trade and other
receivables 5,795 5,795 5,442 5,442 6,399 6,399
-------------------------------------------------------------------------------------------
8,764 8,764 8,660 8,660 9,575 9,575
-------------------------------------------------------------------------------------------
Total assets 14,175 475 14,650 14,108 475 14,583 15,047 475 15,522
-------------------------------------------------------------------------------------------
Current liabilities
Trade and other payables (4,008) (4,008) (3,925) (3,925) (4,810) (4,810)
Current tax liabilities (1,216) (1,216) (1,112) (1,112) (1,015) (1,015)
Obligations under
finance leases (92) (92) (182) (182) (172) (172)
Bank overdrafts and
loans (3,668) (3,668) (3,684) (3,684) (3,066) (3,066)
-------------------------------------------------------------------------------------------
(8,984) (8,984) (8,903) (8,903) (9,063) (9,063)
-------------------------------------------------------------------------------------------
Non current liabilities
Bank loans (3,250) (3,250) (3,250) (3,250) (3,250) (3,250)
Deferred tax liabilities (331) (331) (331) (331) (394) (394)
Obligations under
finance leases (95) (95) (265) (265) (231) (231)
-------------------------------------------------------------------------------------------
(3,345) (331) (3,676) (3,515) (331) (3,846) (3,481) (394) (3,875)
Total liabilities (12,329) (331) (12,660) (12,418) (331) (12,749) (12,544) (394) (12,938)
-------------------------------------------------------------------------------------------
NET ASSETS 1,846 144 1,990 1,690 144 1,834 2,503 81 2,584
-------------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 85 85 85 85 85 85
Share premium account 11,878 11,878 11,878 11,878 11,878 11,878
Capital reserves 41 41 41 41 41 41
Revaluation reserve 1,459 1,459 1,459 1,459 1,669 1,669
Retained earnings (11,617) 144 (11,473) (11,773) 144 (11,629) (11,170) 81 (11,089)
-------------------------------------------------------------------------------------------
TOTAL EQUITY 1,846 144 1,990 1,690 144 1,834 2,503 81 2,584
===========================================================================================
Appendix 2
-------------------------------------------------------------------
Six months to Year to
31 Dec 06 30 June 07
IAS 12 IAS 12
UK GAAP Deferred IFRS UK GAAP Deferred IFRS
tax tax
�'000 �'000 �'000 �'000 �'000 �'000
-------------------------------------------------------------------
Revenue 10,050 10,050 20,844 20,844
Operating (9,930) (9,930) (19,776) (19,776)
expenses -------------------------------------------------------------------
Operating 120 120 1,068 1,068
profit
Financial 1 1
income
Financial (276) (276) (597) (597)
costs -------------------------------------------------------------------
Profit/
(loss) on
ordinary
activities (156) (156) 472 472
before tax
Income tax
expenses (44) (44)
-------------------------------------------------------------------
Profit for (156) (156) 428 428
period -------------------------------------------------------------------
Basic
earnings (0.92)p (0.92)p 2.51p 2.51p
per share
(pence)
Diluted
earnings (0.92)p (0.92)p 2.51p 2.51p
per share -------------------------------------------------------------------
(pence)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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