TIDMSWP
RNS Number : 0009A
SWP Group PLC
26 March 2012
SWP Group plc (the "Group")
Half Yearly Results
for the six months ended 31 December 2011
Chairman's Statement
Corporate Review
At the Group's Annual General Meeting on 10(th) January 2012
convened to consider and approve the results for the year to 30(th)
June 2011 I highlighted the fact that the Group's activities are
largely project dependent and as such we were experiencing periods
of low as well as high activity levels due to the timing of product
installations over which we have no direct control.
Central to our sales programme for the current year at Ulva was
phase II of a large international project for a major oil company
where we had successfully completed material supply to phase I back
in 2008. Regrettably, due to the expansion of this large project
Ulva's role as the specified supplier of materials to reduce
Corrosion Under Insulation ("CUI") has been delayed until at least
2014. Whilst this is very frustrating for our Ulva team and is
having a very significant impact on Ulva's profits this year there
is some comfort that this project is destined to increase in volume
terms when the installation gets underway as Ulvashield is
specified by name. The supply of material has not been lost but
merely deferred until 2014 and beyond when it will once again
feature prominently as an important constituent of Ulva's sale
programme at that time. In the meantime Ulva continues to be
awarded new major projects on an ongoing basis and prospects remain
good.
Financial Results
The results for the six month period under review to 31(st)
December 2011 can only be described as disappointing. The economic
difficulties faced in our key markets have been widely recognised
in the media and have translated into reduced sales, intense
competition on pricing as well as muted demand as infrastructure
projects are either postponed or cancelled as a result of caution
on the part of investors or funding problems due to the banking
crisis. Sales in the period have fallen to GBP9,006,000 (2010
GBP12,702,000) partly due to the project delay at Ulva referred to
above but also low demand in Fullflow UK, France and Spain where
market conditions have deteriorated further. Operating profits
amount to GBP164,000 (2010 GBP1,429,000) before exceptional
expenses and the amortisation of acquired intangible assets. Losses
before taxation amount to GBP81,000 as compared to profits of
GBP1,154,000 for the comparable period of 2010.
Unaudited Unaudited
six months six months
ended 31.12.11 ended 31.12.10
GBP'000 GBP'000
Revenue 9,006 12,702
Operating profit before exceptional
costs and amortisation of intangible
assets 164 1,429
(Loss)/profit before tax (81) 1,154
Taxation - 313
(Loss)/profit after tax (81) 841
Earnings per share (0.04p) 0.42p (Note 1)
Note 1. The calculation of earnings per share in respect of the
six month period to 31 December 2010 has been restated to take
account of the bonus issue declared in 2011 of 10 new ordinary
shares for every ordinary share held in the Group ranking pari
passu.
These results reflect the interim period between the completion
of international projects by Ulva and the commencement of new
projects under specification in March 2012. Pleasingly, the results
at Crescent are much improved with a welcome return to profit and a
significant increase in the profitability at Plasflow where we are
a committed supplier to most of the nuclear installations in the
UK. The increase in profitability at both these businesses is
likely to continue for the remainder of this financial year.
Operational Highlights
Fullflow
The economic climate has not been conducive to the vibrancy of
the construction industry where Fullflow is traditionally active.
Our markets in Continental Europe have, like the UK, struggled as a
consequence of low demand, competitive pressures and a dearth of
large scale infrastructure projects where Fullflow tends to
thrive.
Having taken steps to eliminate operating costs from the
business back in 2010 Fullflow is in a strong position to respond
to any improvement in market conditions. Following the recruitment
of a new Fullflow Group Managing Director in November 2011 there
has been further significant progress in terms of process controls,
contract reviews and the management of risks within our entire
European business model.
A considerable amount of work has been undertaken to maintain
and improve operating margins within the business and focus is now
being directed towards efficiencies on site. A series of product
development initiatives is currently being researched as part of
Fullflow's programme of continuous improvement to both customer
service and product offering.
Of most importance within the entire Fullflow organisation,
which is now benefitting from improved leadership, is a focused
sales and marketing strategy in each of Fullflow's territories
designed to improve sales penetration across the board. As a market
leader, Fullflow is in an ideal position to innovate and work
cohesively with a number of key customers on a project by project
basis built on a mutual respect and recognition of what each party
expects to derive from such beneficial relationships.
At Plasflow considerable progress has been made with this state
of the art supplier to not only the water utility companies but
also most of the nuclear installations which operate in the United
Kingdom. For Health and Safety reasons, maintenance is an
increasingly important driver within the UK and worldwide nuclear
industry and Plasflow plays a pivotal role in finding technical
solutions to the many engineering challenges which the nuclear
plants encounter on a regular if not continuous basis.
Plasflow is on course to record its most profitable result in
this financial year and with a strong order book there is every
reason to expect this momentum to continue into 2013 and
beyond.
Polymer Membrane Division
Ulva
As explained above the activity level for Ulva in this six month
period has been below par purely and simply due to gaps between the
conclusion and commencement of international projects. A greater
level of transparency allied to the award of further nominated
specifications by multinational oil and gas companies provides
confidence that we are very much on the correct path to success.
The number of multinational oil and gas companies who specify Ulva
has and continues to grow as they recognise the technical benefits
of using the Ulva system backed by a service package designed to
ensure that the installed product fulfills customer expectations.
This is designed with one aim in mind which is the extension of the
useful operating life of the client's installed pipework. Ulva is
in the process of expanding its international reach into new
countries where on and offshore development features
prominently.
DRC
Production of Ulva continues to be undertaken at DRC from where
we also sell the Hylam range of polymer based products. We have
significant spare capacity and will be able to respond to increased
project activity from Ulva's international client base. Management
has experienced a number of production difficulties arising from
the demonstrable failure of an equipment supplier to install
equipment in conformity with an agreed specification. This has
called for creative solutions to maintain continuity of supply of
our products albeit at increased cost. Plans are now at an advanced
stage to procure permanent solutions to what has been a source of
considerable inconvenience over an extended period of time.
Hylam Uniroof
In the period since the withdrawal of DuPont from the
manufacture of Hypalon, with the resulting increase in the cost of
our base material, CSPE, of 140% DRC had been attempting to develop
an alternative lower cost mineral paper backed roofing membrane.
Despite its best efforts, DRC has been unable to develop a product
which aspires to DRC's quality standards. The modular build market,
into which the product is supplied, albeit a declining market, is
in most instances unable to bear the increased cost associated with
the CSPE based product with the consequence that whilst DRC remains
active in this market, volumes are now substantially reduced.
Hylam IQ
The spend by water utilities in the AMP5 period to date has been
considerably lower than projected. Additionally, there has been
evidence that with certain customers and competitors, DRC has not
been competing on a level playing field. As a consequence Hylam IQ
activity is at this time restricted.
Hylam FPA
The Drinking Water Inspectorate (DWI) approved product continues
to enjoy good demand in potable water applications for tank lining
and baffle curtains in service reservoirs. This niche product
enjoys demand both in the UK and further afield in applications
based in the Middle East.
Crescent
Crescent has endured extremely difficult market conditions over
the past three years. In anticipation of the downturn in the
construction sector and the consequential impact on the demand for
steel stairs costs were significantly reduced so as to manage risk
and improve the operational gearing of the business as markets
begin to show signs of recovery. Whilst it has to be said that
there are no perceptible signs of improvement in market conditions
as a whole Crescent, under new leadership, has improved its
performance considerably and has been restored to profit during the
six months under review.
The management at Crescent has shown considerable skill and
adaptability in facing the challenges in a market that is
characterized by the demise of competitors as well as margin
pressures arising from unrealistic pricing on the part of
competitors chasing business at all cost. This is not a route which
Crescent intends to follow. Further progress in terms of
profitability is anticipated in the second half of this financial
year and Crescent's prime focus will be in strengthening its sales
and marketing initiatives in order to win market share within its
targeted fields of broadening expertise.
Staff
In common with many Groups facing difficult challenges in market
conditions which remain subdued the Board of SWP recognises the
considerable amount of effort that has been, and continues to be,
expended in the further development of the Group here in the UK and
also abroad. We express our gratitude to all employees who remain
dedicated to the delivery of our strategy which remains firmly in
place for the future.
Current Trading and Prospects
The current financial year as a whole is destined to be one of
disappointment as our two principal brands namely Fullflow and Ulva
mark time in conditions which are not conducive to project led
businesses which depend on levels of confidence and economic
prosperity. In the case of Fullflow we need to see signs of
economic growth which in turn lead to a return to public spending
and available funding for infrastructure projects. On the other
hand Ulva's trading pattern is fortunately very different and,
notwithstanding the economic difficulties, Ulva's opportunities
continue to excite as the pipeline of future international projects
where Ulvashield is specified increases month on month.
Specifications from the oil and gas majors remain at encouraging
levels.
Strategically our focus has always been fixed very firmly on the
achievement of medium to long-term growth and while we do not
expect either the general economic environment or conditions in our
specific markets to exhibit much improvement in the short term we
remain confident that the plans we have for the future ongoing
organic development of the Group are those which will deliver
profitable growth for shareholders over time.
J A F Walker
Chairman
Unaudited Consolidated Statement of Comprehensive Income
Six months Six months Year
ended 31.12.11 ended 31.12.10 ended
Unaudited Unaudited 30.06.11
GBP'000 GBP'000 Audited
GBP'000
Revenue Note 1 9,006 12,702 24,526
Cost of sales (5,410) (7,692) (14,913)
---------------- ---------------- ----------
Gross profit 3,596 5,010 9,613
Operating expenses (3,413) (3,581) (7,572)
---------------- ---------------- ----------
183 1,429 2,041
Exceptional operating expenses (20) (66) (287)
Amortisation of intangible
assets acquired through business
combinations net of deferred
tax (82) (83) (165)
Share based payment (19) - (38)
---------------- ---------------- ----------
Operating profit before royalty 62 1,280 1,551
Royalty - - (701)
---------------- ---------------- ----------
Operating profit 62 1,280 850
Financial income - - 16
Financial costs (143) (126) (318)
---------------- ---------------- ----------
(Loss)/profit on ordinary
activities before taxation (81) 1,154 548
Income tax charge - (313) (78)
---------------- ---------------- ----------
(Loss)/profit for the period (81) 841 470
---------------- ---------------- ----------
Total comprehensive income
Profit for the period and
total comprehensive income
attributable to equity holders
of the company (81) 841 470
---------------- ---------------- ----------
Basic earnings per share (pence)
Note 2 (0.04)p 0.42p 0.24p
---------------- ---------------- ----------
Diluted earnings per share
(pence) (0.04)p 0.41p 0.24p
---------------- ---------------- ----------
Note 1 Turnover and operating profit all derive from continuing operations.
Note 2. The calculation of earnings per share in respect of the
six month period to 31 December 2010 has been restated to take
account of the bonus issue declared in 2011 of 10 new ordinary
shares for every ordinary share held in the Group ranking pari
passu.
Unaudited Consolidated Statement of Changes in Equity
Called Share Capital Re-valuation Retained Total
up share premium reserve reserve earnings
capital account
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2010 92 13,205 41 229 305 13,872
Result for the
period - - - - 824 824
Bonus issue 924 (924) - - - -
Capital reorganisation - (12,281) - - 12,281 -
Purchase of treasury
shares - - - - (154) (154)
---------- --------- --------- ------------- ---------- --------
At 30 June 2010 1,016 - 41 229 13,256 14,542
Result for the
period - - - - 841 841
Share based payment - - 17 - - 17
Purchase of treasury
shares - - - - (152) (152)
---------- --------- --------- ------------- ---------- --------
At 31 December
2010 1,016 - 58 229 13,945 15,248
Result for the
period - - - - (371) (371)
Dividend - - - - (402) (402)
Share based payment - - 21 - - 21
Purchase of treasury
shares - - - - (36) (36)
---------- --------- --------- ------------- ---------- --------
At 30 June 2011 1,016 - 79 229 13,136 14,460
Result for the
period - - - - (81) (81)
Share based payment - - 19 - - 19
Purchase of treasury
shares - - - - (115) (115)
---------- --------- --------- ------------- ---------- --------
At 31 December
2011 1,016 - 98 229 12,940 14,283
---------- --------- --------- ------------- ---------- --------
Unaudited Consolidated Statement of Financial Position
As at As at As at
31.12.11 31.12.10 30.06.11
GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 8,430 8,679 8,550
Property, plant and equipment 5,561 5,686 5,635
Trade and other receivables 557 513 587
Deferred tax assets 624 643 624
---------- ---------- ----------
15,172 15,521 15,396
---------- ---------- ----------
Current assets
Inventories and work in progress 3,624 4,338 3,795
Trade and other receivables 6,313 9,066 6,775
----------
9,937 13,404 10,570
---------- ---------- ----------
Total assets 25,109 28,925 25,966
---------- ---------- ----------
Current liabilities
Trade and other payables (3,969) (5,967) (5,046)
Current tax liabilities (153) (226) (189)
Obligations under finance leases (7) (27) (14)
Bank loans and overdrafts (1,455) (2,402) (1,408)
---------- ---------- ----------
(5,584) (8,622) (6,657)
---------- ---------- ----------
Non-current liabilities
Bank loans (2,916) (2,368) (2,488)
Deferred tax liabilities (2,326) (2,682) (2,361)
Obligations under finance leases - (5) -
---------- ---------- ----------
(5,242) (5,055) (4,849)
---------- ---------- ----------
Total liabilities (10,826) (13,677) (11,506)
---------- ---------- ----------
NET ASSETS 14,283 15,248 14,460
========== ========== ==========
Capital and reserve
Called up share capital 1,016 1,016 1,016
Capital reserve 98 58 79
Revaluation reserve 229 229 229
Retained earnings 12,940 13,945 13,136
---------- ---------- ----------
TOTAL EQUITY 14,283 15,248 14,460
========== ========== ==========
Unaudited Consolidated Statement of Cash Flows
Six months Six months Year ended
ended 31.12.11 ended 31.12.10 30.06.11
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit after tax (81) 841 470
Adjustments for:
Net finance costs 143 126 302
Corporation tax charge - 313 154
Depreciation of property, plant
and equipment 142 184 294
Amortisation of intangible assets 120 118 249
Profit on disposal of plant and
equipment - (2) (1)
---------------- ---------------- -----------
Operating cash flows before movement
in working capital 324 1,580 1,468
Decrease/(increase) in inventories
and work in progress 171 (646) (103)
Decrease in receivables 492 188 2,492
Decrease in payables (1,166) (1,150) (2,402)
Interest paid (126) (142) (321)
Interest received - - 16
Corporation tax paid (36) (207) (178)
---------------- ---------------- -----------
Net cash inflow from operating
activities (341) (377) 972
---------------- ---------------- -----------
Cash flow from investing activities
Investments - (25) (191)
Purchase of property, plant and
equipment (40) (114) -
Proceeds from disposals of property,
plant and equipment - 6 39
---------------- ---------------- -----------
Net cash outflow from investing
activities (40) (133) (152)
---------------- ---------------- -----------
Cash flow from financing activities
Dividend paid - (402)
Bank loans received - - 450
Bank loans repaid (664) (474) (659)
Purchase of treasury shares (115) (152) (188)
Finance lease repayments, net 21 (16) (34)
---------------- ---------------- -----------
Net cash outflow from financing
activities (758) (642) (833)
---------------- ---------------- -----------
Net increase in cash and bank
overdrafts (1,139) (1,152) (13)
Cash, cash equivalents and bank
overdrafts at
beginning of period (316) (303) (303)
---------------- ---------------- -----------
Cash, cash equivalents and bank
overdrafts at end of period (1,455) (1,455) (316)
================ ================ ===========
Notes to the Interim Report
1. Basis of Preparation
The Interim Financial Statements have been prepared using
accounting policies consistent with International Financial
Reporting Standards as adopted in the European Union and in
accordance with International Accounting Standards (IAS) 34 Interim
Financial Reporting.
The financial information for the six month periods ended 31
December 2011 and 31 December 2010 has not been audited by the
Group's auditors and does not constitute accounts within the
meaning of s240 of the Companies Act 2006. The financial
information for the year ended 30 June 2011 is an abridged version
of the Group's accounts which received an unqualified auditors'
report and did not contain a statement under s237(2) or (3) of the
Companies Act 2006 and have been filed with the Registrar of
Companies.
The same accounting policies, presentation and methods of
computation are followed in these interim financial statements as
were applied in the preparation of the Group's financial statements
for the year ended 30 June 2011 and which are expected to apply as
at 30 June 2012.
2. Taxation
Interim period income tax is accrued based on the estimated
average annual effective income tax rate.
3. Segmental Reporting
Rainwater Metal staircases Polymer Corporate Total
management six months membrane six months six
six months ended 31 six months ended 31 months ended
ended 31 Dec 2011 ended 31 Dec 2011 31 Dec 2011
Dec 2011 Dec 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External revenues 5,312 980 2,714 - 9,006
Intergroup sales 591 - 344 - 935
------------ ----------------- ------------ ------------ --------------
Total revenues 5,903 980 3,058 - 9,941
Cost of sales (3,998) (630) (1,717) - (6,345)
------------ ----------------- ------------ ------------ --------------
Gross profit 1,905 350 1,341 - 3,596
Operating expenses (2,020) (294) (747) (352) (3,413)
------------ ----------------- ------------ ------------ --------------
(115) 56 594 (352) 183
Exceptional operating
expenses (10) (10) - - (20)
Amortisation of intangible
assets acquired through
business combinations
net of deferred tax - - - (82) (82)
Share Based Payment - - - (19) (19)
Intergroup royalty (charge)/income - - (369) 369 -
Intergroup management
fees - - (114) 114 -
Intergroup rent (charges)/income - - (36) 36 -
Operating (loss)/profit (125) 46 75 66 62
Financial income - - - - -
Financial costs (22) - (7) (114) (143)
Intergroup financial
charges (14) - (25) 39 -
------------ ----------------- ------------ ------------ --------------
(Loss)/profit on ordinary
activities before taxation (161) 46 43 (9) (81)
Income tax charge - - - - -
------------ ----------------- ------------ ------------ --------------
(Loss)/profit for the
period attributable
to equity holders of
the company (161) 46 43 (9) (81)
============ ================= ============ ============ ==============
Rainwater Metal staircases Polymer Corporate Total
management six months membrane six months six months
six months ended 31 six months ended ended 31
ended 31 Dec 2010 ended 31 31 Dec Dec 2010
Dec Dec 2010 2010
2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External revenues 7,792 957 3,953 - 12,702
Intergroup sales 1,294 - 305 - 1,599
------------ ----------------- ------------ ------------ ------------
Total revenues 9,086 957 4,258 - 14,301
Cost of sales (6,189) (788) (2,314) - (9,291)
------------ ----------------- ------------ ------------ ------------
Gross profit 2,897 169 1,944 - 5,010
Operating expenses (1,952) (370) (963) (296) (3,581)
------------ ----------------- ------------ ------------ ------------
945 (201) 981 (296) 1,429
Exceptional operating
expenses (19) - - (47) (66)
Amortisation of intangible
assets acquired through
business combinations
net of deferred tax - - - (83) (83)
Intergroup royalty (charge)/income - - (492) 492 -
Intergroup management
fees (151) (30) (44) 225 -
Intergroup rent (charges)/income - - (36) 36 -
Operating profit 775 (231) 409 327 1,280
Financial income -
Financial costs (14) - (19) (93) (126)
Intergroup financial
charges (14) - (26) 40 -
------------ ----------------- ------------ ------------ ------------
Profit/(loss) on ordinary
activities before taxation 747 (231) 364 274 1,154
Income tax (charge)/credit (189) 59 (92) (91) (313)
------------ ----------------- ------------ ------------ ------------
Profit/(loss) for the
year attributable to
equity holders of the
company 558 (172) 272 183 841
============ ================= ============ ============ ============
4. Income Tax Expense
Recognised in the income statement
Six months Six months Year
ended 31.12.11 ended 31.12.10 ended 30.06.11
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Current tax expense
Current year - UK corporation
tax - 130 144
Current year - overseas
tax - 90 10
Deferred tax movement - 93 (76)
Total tax expense in income
statement - 313 78
----------------- ---------------- ----------------
5. Earnings Per Share
Earnings per share is calculated on the basis of 203,275,006
shares (2010: 198,305,006) which is the weighted average of the
number of shares in issue during the period.
The diluted earnings per share is calculated on the basis of
191,980,006 shares (2010: 202,805,006) which is the weighted
average of the number of shares in issue during the period.
6. Copies of Interim Report
Copies of the interim report are available to shareholders
electronically via the Group's website or are available on request
from the Group head office at Bedford House, 1 Regal Lane, Soham,
Ely, Cambridgeshire, CB7 5BA or at http://www.swpgroupplc.com.
For further information or enquiries:
J.A.F Walker D.J Pett R. Kauffer
Chairman Director of Finance Peel Hunt LLP
Nominated Adviser & Broker
Tel: 01353 723270 Tel: 01353 723270 Tel: 0207 418 8900
Mobile: 07800 951151 Mobile: 07940 523135
This information is provided by RNS
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