TIDMSWP
RNS Number : 8279A
SWP Group PLC
26 March 2013
Half Yearly Results
for the six months ended 31 December 2012
SWP Group plc (the "Group")
Half Yearly Results
for the six months ended 31 December 2012
Chairman's Statement
Corporate Review
The period covered by these half yearly results for the six
months to 31(st) December 2012 has demonstrated the sharp contrast
in the performance of a number of the Group's businesses. In the
case of Ulva which is a leading niche supplier of materials to
reduce Corrosion Under Insulation ("CUI") to the oil, gas and
petrochemical majors around the world, project demand has been
strong with significantly increased levels of profitability as
compared to the corresponding period in 2011. On the other hand our
construction industry businesses, where Fullflow and Crescent are
leading suppliers respectively of siphonic rainwater management
systems and metal staircases, sluggish demand particularly in the
French and Spanish markets has seen lower activity levels
consistent with the well publicised difficulties faced by the
construction industry both here in the UK and Continental
Europe.
Financial Results
Little has changed on the economic front as markets struggle to
cope with the economic downturn experienced in the UK and the other
European countries in which we operate. In particular the Spanish
economy is in a parlous state and as reported below we have been
forced to take decisive action in regard to the risks and the
prevailing market conditions facing Fullflow's activities in that
country. Elsewhere lack of infrastructure projects, funding
constraints and intense competition have translated into
competitors chasing lower volumes of available work sometimes at
prices that can only be regarded as commercially suicidal.
Fortunately, the same cannot be said in respect of Ulva's
presence in the oil and gas sector where despite the usual
competitive pressures there is a fertile international market based
on technical specifications where Ulva's track record over time
offers discerning customers not only quality products and design
solutions but site supervisory services that ensure delivery to the
full expectation of the end user.
Unaudited Unaudited
six months six months
ended 31.12.12 ended 31.12.11
GBP'000 GBP'000
Revenue 8,880 9,006
Operating profit before exceptional
costs and amortisation of intangible
assets 538 164
Profit/(loss) before tax 129 (81)
Taxation (25) -
Profit/(loss) after tax 104 (81)
Earnings per share 0.05p (0.04p)
In essence the strong performance at Ulva has to a degree been
counterbalanced by weak results within the Fullflow Group with the
exception of Plasflow where profits have been achieved in line with
expectation. Disappointing results have also been recorded at
Crescent which has been unable to sustain the recovery which it
achieved in 2011/2012.
Turnover has been flat at GBP8.88m (2011:GBP9.00m) whereas
operating profits have advanced by threefold as compared to the
corresponding period in 2011. Exceptional costs represent the
downscaling of Fullflow's business activities in Madrid which by
now are more or less complete.
Borrowings
The downward trend in the Group's debt obligations continues.
The pace of reduction is primarily dictated by the larger scale
projects in Ulva with debt being collected in the main by
Irrevocable Letters of Credit. Looking to the debt position at
30(th) June 2013 we anticipate a further significant decline by the
end of this financial year if the pattern of sales goes according
to plan.
Operational Highlights
Polymer Membrane Division
Ulva
Ulva has performed very much in line with the Board's
expectations in the first half of the year and this is projected to
continue for the full year. Overall, Ulva's results are expected to
be consistent with the previous year.
The business is currently transacting a number of prestigious
projects including the construction of a new LNG receiving terminal
in Japan and the construction of what will become, upon its
deployment, the most northerly located Floating Production, Storage
and Offloading (FPSO) vessel in the world, where Ulvashield had
been selected to help counter CUI in a particularly harsh
environment.
A number of initiatives aimed at stimulating further growth in
the Ulva business are gaining momentum. The first key initiative is
to selectively increase the skill and resource in the business. The
U.S. arm of Ulva is very well equipped to support its customers and
results in this territory are encouraging with two major new
construction projects currently underway. The European team has
been bolstered by the appointment of an Area Sales Manager from
within the industry which will substantially improve Ulva's
capability to support its customers close to home. Focus is very
much on finding the right candidate to lead Ulva's activities in
South East Asia in order to complete the sales team. Demand has
remained strong for Ulva's site services team which has been
extended to meet demand. The role of the site services team is to
ensure that discerning, specifying end users receive precisely what
is envisaged when the specification was written at the conclusion
of the construction phase. This vital ingredient ensures that Ulva
is fully engaged in assisting its customers to counter CUI as
opposed to simply selling system components.
The second key initiative is the development and introduction of
a new system to complement the existing Ulvashield system and add
incremental sales volume. The product development process has been
on-going for some time and is now at the pre-production prototype
stage. Formal launch will take place later this year.
Visibility of the forward pipeline for this specification driven
business gives cause for optimism.
DRC Polymer Products
The 'leasing' of the Hylam FPA business to a close trading
partner of DRC has proven to be successful for all parties. DRC is
receiving an assured income from the lease, DRC's customers have
continuity of supply to high quality standards and DRC's partner
has been able to realise growth in the business.
DRC's exit from the roofing sector means that its primary
purpose is the manufacture of Ulvashield for its sister company.
Substantial benefits accrue from rationalising the number of
manufacturing locations operating within the Polymer Membrane
Division and the Board of SWP has recently approved the purchase of
a new state of the art manufacturing process line for the
production of Ulvashield at Ulva's Telford factory location. This
will lead to the cessation of DRC's activities with the
corresponding reduction in the cost of operating the Soham factory.
This positive rationalisation will have a beneficial impact on
earnings for DRC during the year to 30(th) June 2014.
Fullflow
As has been the case for some time now the economic climate has
had a profound effect on the Building and Construction sectors
which is where Fullflow Group traditionally markets its bespoke
designed systems and installations. In the UK a dedicated team has
increased the quality and number of projects completed in the
period but there has been a lack of major infrastructure projects
such as airports and stadia where Fullflow has particular
expertise. Systems have been installed at the Nissan factory in
Sunderland and the Jaguar facility in Wolverhampton as well as a
range of assignments across middle and south east England for the
large supermarket chains and distribution outlets.
Fullflow Systemé in France has experienced difficult trading
conditions and has sustained a small loss at the half year. The
economy in France is looking more fragile at this time and although
the order book is well charged this stretches out over a number of
months into the future with a tendency for postponement and delay
to feature. The second half of the year will be challenging for the
management team in Paris who are very experienced and capable of
benefiting from any upturn in market trends.
Fullflow Sistemas in Spain has absorbed a considerable and
unproductive amount of senior management time. The economic
prognosis for the Spanish economy can only be described as fraught
with difficulty and the construction sector is in particularly bad
shape. A full scale review of the Spanish activities has been
undertaken which concluded that the risks involved in operating
within the Spanish market were disproportionate to the potential
rewards on offer in market conditions which are not conducive to
conducting good business with reasonable prospects of success. In
the absence of a return on the equity invested we took the decision
in January 2013 to close the Madrid facility. This market is now
conditioned to granting average credit terms to customers of more
than 180 days without in most cases the benefit of any credit
insurance and under such circumstances there is no justification
for Fullflow to remain active in this particular market.
Plasflow which has a state of the art fabrication facility based
in Rotherham has performed strongly in the half year to 31 December
2012. The business is centered around producing pipe fabrications
for Fullflow but in recent years has developed close links to the
Nuclear Sector here in the UK. Strong strategic partnerships exist
whereby Plasflow works closely with main contractors to develop
pipe solutions for many of the UK's nuclear plants. There is good
reason to expect Plasflow to develop and grow within this sector in
line with the Group's aspirations for the future.
Crescent of Cambridge
Unfortunately the progress recorded in the year to 30(th) June
2012 has not been sustained in the six months to 31(st) December
2012 and the business has once again become loss making. The
ongoing development of computer based design automation has
produced benefits within the business as indeed has the
strengthening of the sales team with the recruitment of an
experienced Sales Manager but market conditions remain depressed
and competitive influences have had an adverse impact on the
trading outlook which has also been affected by poor levels of
demand in an already depressed market.
Research & Development
The Group has for some time been actively engaged in product
development across most of its activities. These extend to design
automation at Crescent to new product initiatives at both Fullflow
and Ulva where we expect to launch complimentary products later
this year which are designed to add incremental revenue in both
cases. They are also likely to add attractive and unique additions
to the product portfolios on offer.
Training Programme
A number of training programmes have been run during the past
year designed to equip our management teams with additional skills.
Courses and seminars have been organised for all sales executives
throughout the Group presented and operated by professional third
party coaches. There have also been seminars in contractual
documentation run by professional lawyers experienced in contract
law as well as meetings with experts in the field of Health &
Safety. The Group intends to provide management with more
opportunities of this nature as part of a programme of continuous
improvement in managing our various businesses.
Employees
Market conditions remain extremely difficult in most of the
sectors in which we operate. As previously stated we are recruiting
further sales and technical resources within Ulva so that we can
provide professional expertise and coverage to key areas of the
world where we anticipate sales growth.
Closer to home, cost control within our construction led
businesses has to be the order of the day until such time as there
is evidence of growth potential which our experienced teams are
ready to exploit at the first signs of economic recovery.
Our employees continue to work diligently and my Board of
Directors wishes to express its gratitude to staff in each and
every business without whose dedication and commitment these
improved results would not have been possible.
Current Trading and Prospects
Despite the depressed economic outlook the prospects for the
Group remain positive. Our Ulva business continues to develop
according to plan notwithstanding the long gestation periods
involved in breaking into new territories.
We have greater levels of visibility for this project led
business and we see considerable potential for growth over the
period of the next five years. It is for this reason that the Group
intends to deploy the necessary investment in both capital and
human resources to ensure the delivery of future revenue streams
and sustained profitability.
For our construction oriented businesses we envisage that short
term growth is likely to be elusive but we believe that Fullflow in
particular has considerable medium to long term opportunities
available to it in international markets where its reputation and
brand are highly respected. Locally we plan to maximise
profitability through strategic relationships with long standing
customers whilst maintaining a low cost profile thereby minimising
exposure to risk at a time of demonstrable austerity.
J A F Walker
Chairman
22(nd) March 2013
Unaudited Consolidated Statement of Comprehensive Income
Six months Six months Year
ended 31.12.12 ended 31.12.11 ended
Unaudited Unaudited 30.06.12
GBP'000 GBP'000 Audited
GBP'000
Revenue Note 1 8,880 9,006 20,922
Cost of sales (4,848) (5,410) (11,934)
---------------- ---------------- ----------
Gross profit 4,032 3,596 8,988
Operating expenses (3,494) (3,413) (7,466)
---------------- ---------------- ----------
538 183 1,522
Exceptional operating expenses (202) (20) (196)
Amortisation of intangible
assets acquired through business
combinations net of deferred
tax (82) (82) (165)
Share based payment (21) (19) (42)
---------------- ---------------- ----------
Operating profit 233 62 1,119
Financial income - - -
Financial costs (104) (143) (284)
---------------- ---------------- ----------
Profit/(loss) on ordinary
activities before taxation 129 (81) 835
Income tax charge (25) - (227)
---------------- ---------------- ----------
Profit/(loss) for the period 104 (81) 608
---------------- ---------------- ----------
Total comprehensive income
Profit for the period and
total comprehensive income
attributable to equity holders
of the company 104 (81) 608
---------------- ---------------- ----------
Basic earnings per share (pence)
Note 2 0.05p (0.04)p 0.30p
---------------- ---------------- ----------
Diluted earnings per share
(pence) 0.05p (0.04)p 0.30p
---------------- ---------------- ----------
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 2011 has been restated to take
account of the bonus issue declared in 2012 of 10 new ordinary
shares for every ordinary share held in the Group ranking pari
passu.
Unaudited Consolidated Statement of Changes in Equity
Called Capital Re-valuation Retained Total
up share reserve reserve earnings
capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2011 1,016 58 229 13,945 15,248
Result for the
period - - - (371) (371)
Bonus issue - - - (402) (402)
Capital reorganisation - 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 - - - (114) (114)
---------- --------- ------------- ---------- --------
At 31 December
2011 1,016 98 229 12,941 14,284
Result for the
period - - - 689 689
Dividend - - - (151) (151)
Share based payment - 23 - - 23
Purchase of treasury - - - - -
shares
---------- --------- ------------- ---------- --------
At 30 June 2012 1,016 121 229 13,479 14,845
Result for the
period - - - 104 104
Share based payment - 21 - - 21
Purchase of treasury
shares - - - (26) (26)
---------- --------- ------------- ---------- --------
At 31 December
2012 1,016 142 229 13,557 14,944
---------- --------- ------------- ---------- --------
Unaudited Consolidated Statement of Financial Position
As at As at As at
31.12.12 31.12.11 30.06.12
GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 8,190 8,430 8,310
Property, plant and equipment 5,474 5,561 5,525
Trade and other receivables 488 557 504
Deferred tax assets 472 624 472
Investment 50 - 50
---------- ---------- ----------
14,674 15,172 14,861
---------- ---------- ----------
Current assets
Inventories and work in progress 3,151 3,624 2,983
Trade and other receivables 5,494 6,313 8,445
----------
8,645 9,937 11,428
---------- ---------- ----------
Total assets 23,319 25,109 26,289
---------- ---------- ----------
Current liabilities
Trade and other payables (3,099) (3,969) (5,724)
Current tax liabilities (250) (153) (371)
Obligations under finance leases - (7) (10)
Bank loans and overdrafts (2,094) (1,455) (1,895)
---------- ---------- ----------
(5,443) (5,584) (8,000)
---------- ---------- ----------
Non-current liabilities
Bank loans (821) (2,916) (1,285)
Deferred tax liabilities (2,111) (2,326) (2,147)
Obligations under finance leases - - (12)
---------- ---------- ----------
(2,932) (5,242) (3,444)
---------- ---------- ----------
Total liabilities (8,375) (10,826) (11,444)
---------- ---------- ----------
NET ASSETS 14,944 14,283 14,845
========== ========== ==========
Capital and reserve
Called up share capital 1,016 1,016 1,016
Capital reserve 142 98 121
Revaluation reserve 229 229 229
Retained earnings 13,557 12,940 13,479
---------- ---------- ----------
TOTAL EQUITY 14,944 14,283 14,845
========== ========== ==========
Unaudited Consolidated Statement of Cash Flows
Six months Six months Year ended
ended 31.12.12 ended 31.12.11 30.06.12
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit after tax 104 (81) 608
Adjustments for:
Net finance costs 104 143 281
Corporation tax charge 25 - 231
Depreciation of property, plant
and equipment 128 142 286
Amortisation of intangible assets 120 120 240
Loss on disposal of plant and
equipment 3 - 1
---------------- ---------------- -----------
Operating cash flows before movement
in working capital 484 324 1,647
Decrease/(increase) in inventories
and work in progress (168) 171 812
Decrease in receivables 2,967 492 (1,587)
Decrease in payables (2,677) (1,166) 671
Interest paid (102) (126) (284)
Corporation tax paid (111) (36) (49)
---------------- ---------------- -----------
Net cash inflow from operating
activities 393 (341) 1,210
---------------- ---------------- -----------
Cash flow from investing activities
Investments - - (192)
Purchase of property, plant and
equipment (80) (40) 50
Proceeds from disposals of property,
plant and equipment - - 5
---------------- ---------------- -----------
Net cash outflow from investing
activities (80) (40) (237)
---------------- ---------------- -----------
Cash flow from financing activities
Dividend paid - - (151)
Bank loans repaid (409) (664) (1,314)
Purchase of treasury shares (26) (115) (114)
Finance lease repayments, net (22) 21 8
---------------- ---------------- -----------
Net cash outflow from financing
activities (457) (758) (1,571)
---------------- ---------------- -----------
Net increase in cash and bank
overdrafts (144) (1,139) (598)
Cash, cash equivalents and bank
overdrafts at
beginning of period (914) (316) (316)
---------------- ---------------- -----------
Cash, cash equivalents and bank
overdrafts at end of period (1,058) (1,455) (914)
================ ================ ===========
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 2012 and 31 December 2011 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 2012 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 2012 and which are expected to apply as
at 30 June 2013.
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 2012 ended 31 Dec 2012 31 Dec 2012
Dec 2012 Dec 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External revenues 4,505 727 3,648 - 8,880
Intergroup sales 322 - 1,066 - 1,388
------------ ----------------- ------------ ------------ --------------
Total revenues 4,827 727 4,714 - 10,268
Cost of sales (2,873) (541) (2,822) - (6,236)
------------ ----------------- ------------ ------------ --------------
Gross profit 1,954 186 1,892 - 4,032
Operating expenses (1,942) (313) (841) (398) (3,494)
------------ ----------------- ------------ ------------ --------------
12 (127) 1,051 (398) 538
------------ ----------------- ------------ ------------ --------------
Exceptional operating
expenses (202) - - - (202)
Amortisation of intangible
assets acquired through
business combinations
net of deferred tax - - - (82) (82)
Share Based Payment - - (21) (21)
Intergroup royalty (charge)/income - - (528) 528 -
Intergroup management
fees - - (114) 114 -
Intergroup rent (charges)/income - - (36) 36 -
Operating (loss)/profit (190) (127) 373 177 233
Financial income - - - - -
Financial costs (9) - - (95) (104)
Intergroup financial
charges (14) - (31) 45 -
------------ ----------------- ------------ ------------ --------------
(Loss)/profit on ordinary
activities before taxation (213) (127) 342 127 129
Income tax charge - - (15) (10) (25)
------------ ----------------- ------------ ------------ --------------
(Loss)/profit for the
period attributable
to equity holders of
the company (213) (127) 327 117 104
============ ================= ============ ============ ==============
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 2011 ended 31 31 Dec Dec 2011
Dec Dec 2011 2011
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)
============ ================= ============ ============ ============
4. Income Tax Expense
Recognised in the income statement
Six months Six months Year
ended 31.12.12 ended 31.12.11 ended 30.06.12
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Current tax expense
Current year - UK corporation
tax 25 - 217
Current year - overseas
tax - - 1
Deferred tax movement - - 9
Total tax expense in income
statement 25 - 227
---------------- ---------------- ----------------
5. Earnings Per Share
Earnings per share is calculated on the basis of 196,480,006
shares (2011: 198,459,965) 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
200,980,006 shares (2011: 198,980,000) which is the weighted
average of the number of shares in issue during the period.
6. Copies of Half Yearly Report
Copies of the half yearly 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
Chairman Finance Director
SWP Group plc SWP Group plc
Tel office: 01353 723270 Tel office: 01353 723270
Mobile: 07800 951151 Mobile: 07940 523135
Ranald McGregor-Smith Richard Kauffer/Daniel
Corporate Finance Advisors Harris
Whitman Howard Nominated Advisor & Broker
Tel office: 020 7811 3525 Peel Hunt LLP
Tel office: 020 7418 8900
This information is provided by RNS
The company news service from the London Stock Exchange
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