Regulatory News item
REG-SWP Group PLC Half Yearly Report
Released: 30/03/2009
Released: 30/03/2009
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20090330:Rnsd6484P
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RNS Number : 6484P
SWP Group PLC
30 March 2009
SWP Group plc
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
Financial Highlights:
The six months to December 2008 have seen the Group record highly respectable
results given the parlous state of the world economy which is suffering the
deepest recession that has been experienced for a number of decades. Most
markets have been adversely affected and we have not been immune to the
difficulties encountered by the industrial engineering and construction sectors
within which most of our business operate.
These results and the comparatives for the corresponding period in 2007 are
reported under International Financial Reporting Standards (IFRS) which all AIM
listed companies are obliged to adopt and will be reported in this format from
now on.
Turnover for the six months ended 31st December 2008 increased by 17.3% to
£12,864,000 (2007 - £10,964,000) and operating profit before amortisation of
acquired intangibles rose to £863,000 (2007 - £660,000) an increase of 30.3%.
With finance costs more or less static at £294,000 (2007 - £298,000) pre tax
profits increased to £452,000 (2007 - £362,000).
Market conditions for both Fullflow Group and Crescent were particularly
challenging during the period as these businesses are more closely aligned to
the difficulties within the building and construction sectors. On the other hand
the DRC/Ulva divisional activities which include industrial engineering are more
centred on being specified in many project situations in diverse locations
ranging from the UK to Eastern Europe, the Middle East, Asia and the Pacific
Rim. The integration of the recently acquired Ulva brand into the Group and its
interface with the Group's production unit at DRC is complete and operating
entirely as planned albeit subject to a few months delay as explained below.
Unaudited Unaudited
Six months Six months
ended ended
31.12.08 31.12.07
£'000 £'000
Turnover 12,864 10,964
Operating profit 863 660
Profit before tax 452 362
Profit after tax 407 362
Profit per share 2.30p 2.12p
Operational Highlights
Fullflow
In what can most generously be described as challenging market conditions,
Fullflow produced a reasonable overall performance. Sales to third parties
increased by 6.4% to £8.1 million and operating profit was maintained at roughly
last year's level.
Generally Fullflow's markets were significantly affected by the deterioration in
the global economy. In recent years a significant proportion of Fullflow's
business has come from the widespread development of large distribution
warehouses but this sector of the market has more or less evaporated, with
developers being unwilling or unable to proceed with speculative projects and
the majority of potential users (mainly retailers or logistics specialists)
being unwilling to take on additional commitments against a background of
declining retail sales. This trend has been especially evident in the UK but it
has also affected France and Spain.
UK
In the UK, construction of industrial and retail premises also declined and,
despite enjoying a reasonable degree of success in the financially more robust
public sector, Fullflow's sales levels suffered accordingly. Margins also
continued to come under pressure as the market falls gave rise to yet more
intense competition. Until some of these pressures lift - perhaps as a result of
one or more of our competitors failing - all we can do is maximise the number of
projects we bid for, work hard to put forward a more compelling proposition than
our competitors and then achieve high standards at every phase of the design and
installation process in the hope that at least a proportion of our customers are
encouraged to place repeat business.
France
In France, revenue levels were up by 6%, but because our business plan had been
predicated on even higher revenues and had involved the recruitment of
additional staff, this failed to translate into extra profit. Order intake
during the period was also disappointing and since the period end we have had no
alternative but to implement a significant redundancy plan, with all the
complexity and problems which such action involves in France. However, having
completed what has been a painful process, we believe that from what is now a
smaller and more cohesive base we can begin to build a business which will
provide a consistently high level of service to its customers and a healthy
level of return to the Group.
Spain
In Spain, revenue levels were marginally up but fell well short of plan, with
the result that operating profit reduced significantly. Spain's economic
problems relate less to the credit crunch than to what has evolved into a
serious crisis in the property sector but the overall effect is the same -
higher unemployment levels, falling house prices, lower retail sales and a
collapse of consumer and business confidence. However, against such an
unpromising background our business is demonstrating considerable resilience and
while there is little chance of us achieving the financial targets which we set
for the year, we can look forward with a reasonable degree of confidence to the
future. With several substantial projects in the pipeline there is every reason
to think that we may even achieve significant progress during the next 18
months.
Plasflow
Plasflow, which operates mainly in markets less affected by the economic
downturn than at the other Fullflow businesses, produced an impressive set of
results. Progress has been made in a number of areas, with significant sales
being secured through a partnering arrangement with a major pipe producer, and
further project-based work being carried out for a major contractor in the
nuclear power industry. Plasflow's reputation for delivering a combination of
product quality and high service standards is beginning to spread and we are
confident that the business can maintain its growth path for the foreseeable
future.
International
We have always made it clear that international expansion represents a
fundamental element of Fullflow's strategy and it is therefore very pleasing to
report that the company has won a large order for the design and installation of
a syphonic rainwater system for the new terminal currently under construction at
Doha Airport in Qatar. Little benefit from this order will be seen in the
current financial year but it will help to provide some real substance next year
and it is possible that further work in the area will follow. Partnering
arrangements have also been established in Singapore and Korea and similar
arrangements covering other jurisdictions are at discussion stage. If Fullflow
is to continue to expand and produce a growing profit stream it is essential
that we make progress in as many new markets as possible and this is a challenge
which our management team both understands and is ready to take on.
Crescent of Cambridge
The UK market place in which Crescent operates has seen a significant fall in
activity levels. This is consistent with the economic conditions which prevail
whereby construction projects are either cancelled or in many cases put on hold.
That said, Crescent is more cohesive and streamlined than it has been for a very
long time particularly as our own risk management controls have dictated swift
and decisive action on the part of management to balance reduced activity levels
with cost reductions in every department within the organisation. This has given
us the opportunity to refine not only our product offering to selected customers
but to restructure our cost base to ensure that we limit damage through the
worst of the recession and yet have the competence and skill base to expand
again when market conditions improve which assuredly they will, but we do not
know precisely when.
Crescent also benefits from its fair share of public works through HM Prisons
and/or Ministry of Defence contracts. Here again projects tend to suffer
interminable delays as customers face declining order books and funding issues
that contribute to reduced levels of activity. Competitive pressures exist as
producers and fabricators chase scarce orders but Crescent is able to compete on
price secure in the knowledge that the brand is respected for its association
with quality and customer service.
The investment in our Computer Aided Design Automation has been completed and
the system is now "live" and is beginning to deliver benefits. This tool will
play a significant role in reinvigorating Crescent's profits as and when the
recession clouds lift and market conditions return to normal.
DRC Polymer Products
When reporting our results for the year ended 30th June 2008 we brought to the
attention of shareholders the potential turnaround in fortunes for this recently
restructured business. During the six months under review we had to balance the
medium to long term needs of our Ulva business with the overriding requirement
for further investment in upgrading certain of DRC's process equipment. This
required a major overhaul of our calendering machine which had to be taken off
line for a number of weeks during last summer. This project was important and
not helped by the failure of one of the contractors commissioned to do the work
to meet their contractual obligations which resulted in significant delay. Had
this not been the case DRC's profits would have been further enhanced. We are
pleased to be able to report that this calender is now operating to our planned
utilisation factor and is supplying its sister company Ulva with high quality
Ulvashield for onward sale to its range of international oil, gas and
petrochemical customers.
The business of DRC continues to operate in its four defined market areas as
follows:-
Modular Build
This is a well-established stream where DRC's products are used in modular
roofing structures. Despite the economic climate order levels have remained
satisfactory and we continue to work closely with our valued customers who have
remained loyal to the brand.
Hylam IQ
This emerging product line has much potential. We now supply three water utility
companies in the UK and expect to work with several more in the near future. The
product is demonstrably able to detect water leaks on a highly cost effective
basis through the use of computer based technology which alarms the membrane
cover so as to identify the incidence of leaks, introduction of impurities
and/or acts of vandalism or terrorist attack. We are working closely with a
number of our customers in establishing this product as "the asset standard" for
the protection of drinking water reservoirs. After the commencement of the Asset
Management Plan 5 (AMP5) which commences on 1st April 2010 we believe this
product will play a more significant role in the organic development of DRC as
the producer of niche products which will be sold to an industry which has
eagerly embraced this new technology and is ready to specify our branded product
for installation in a whole range of reservoir projects. DRC has recently
strengthened its technical team through the recruitment of an electronics
engineer whose function it will be to monitor installations and assist in the
profitable development of our product.
FPA Membrane
Considerable progress has been made in further developing our market penetration
into the water industry where our product is Drinking Water Inspectorate (DWI)
approved for tank linings and baffle curtains in treatment tanks and vessels.
This has resulted in a recent large order from Oman and we anticipate future
orders of a similar nature from other companies in the Middle East. In the UK
similar benefits are likely to accrue from April 2010 onwards when AMP5 kicks in
and allows maintenance programmes to progress rapidly.
This product offering as in the case of Hylam IQ benefits from continuous effort
on the part of our management team to refine and improve the technical
competence of the products we manufacture and sell.
Ulvashield
The production of Ulvashield is of significant importance to the dynamics of
DRC. Ulva based in Telford is DRC's single biggest customer and counts for at
least half of DRC's sales. Our new management has settled in well whilst our
production team has responded superbly to this leadership and new direction
following both the restructuring and the acquisition of the Ulva brand. Demand
for the Ulva product is steady and offers the ability within DRC to maximise
capacity utilisation so that greater levels of productivity have been recorded
in recent months than ever before. As the order levels from Ulva continue to
increase for onward supply to oil, gas and petrochemical majors for the
management of "corrosion under insulation" we believe that the profitability of
DRC will continue to grow.
The combination of niche products manufactured by DRC for use in industrial
engineering applications which are largely unaffected by the economic recession
leaves DRC poised for a period of rapid expansion in conjunction with its sister
company Ulva Insulation System where the dynamics of growth are referred to
below.
Ulva Insulation Systems
During the six months under review considerable progress was made in
establishing both our short term and medium term strategic plans for this new
business within our expanding Group which is increasingly reinforced by brand
ownership. Nowhere is this more evident than with the Ulva brand which has
become synonymous with the provision of non-metallic cladding applied to
pipelines, tanks and vessels in locations as widely spread as the UK, Europe,
the Caspian, the Middle East, the Far East and the United States. Our plans
involve the harvesting of a range of projects involving major oil, gas and
petrochemical companies around the world where our product is recognised as
delivering superior performance in the management of corrosion under insulation
("CUI") and therefore specified as the "asset standard" both for onshore and
offshore configurations. In the longer term we aim through the development of
clear lines of communication and understanding with our customers to influence
the "specification" that is written at the very inception of the project and/or
at the point of origination.
Notwithstanding the delay in DRC being able to supply a continuous flow of
Ulvashield last summer and early autumn Ulva has produced highly satisfactory
results in the six months ended on 31st December 2008. Since then a number of
large scale projects have got underway which is likely to keep the manufacturing
plants at both DRC and in Telford occupied for the rest of 2009.
As part of our global commitment to this product line we have established a
small office in Malaysia (Kuala Lumpur) and recruited specialist sales and
marketing expertise with close links to the major oil and gas producers based in
a region that takes in China, Singapore, Korea, Malaysia, Thailand and Vietnam.
This offers substantial opportunities for organic sales growth.
The cohesion and operating efficiency now created between DRC and Ulva pursuant
to their integration within the Group is most encouraging with no obvious limit
to our operating capacity at least in the short to medium term. It is
anticipated that sales would have to rise by a significant amount before there
is a requirement to make additional capital investment in the business. We plan
to exploit this competitive advantage.
The business is well managed and controlled from its base in modern facilities
in Telford. Whilst there is much to do management has a clear focus on both our
short term aspirations and the longer term need to invest in the future both in
terms of international expansion and the need for product development in order
to continuously enhance our product offering to an increasing number of
discerning internationally based customers.
Earnings per share
So far as these relate to ordinary activities of the Group underlying EPS have
risen by 8.5% to 2.30p against 2.12p in the same period of 2007.
Staff
We are better managed in 2009 than at any stage of the Group's history. Young
and vibrant management has been recruited by each of the operating companies
with the staff taking pride in what they do and what they achieve for the Group.
To each and every member of staff I offer on behalf of the Board sincere thanks
for the effort and commitment that is expended in driving forward our stated
aims and ambitions. This is contributing to the welcome improvement in the
Group's overall performance.
Current Trading
and Prospects
The rest of 2009 promises to be highly challenging on all fronts. The
performance of Fullflow and Crescent is inevitably being coloured by the effect
of the economic downturn on the construction industry. At DRC and Ulva, on the
other hand, the second half of the year offers much scope for further
development of our sales initiatives just as long as the planned projects arrive
on schedule and in the quantities expected.
Overall we continue as a Group to grow organically as customers recognise the
merit in working with a Group which benefits from its portfolio of niche brands
all of which have their part to play in helping to develop this focused Group
into the profitable multinational businesses to which we and shareholders
aspire.
J.A.F. Walker
Chairman
30 March 2009
SWP Group plc
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
Unaudited Consolidated Income Statement
Six months ended 31.12.08Unaudited Six months ended 31.12.07Unaudited Year ended 30.06.08Audited
£'000 £'000 £'000
Turnover 12,864 10,964 25,058
Operating expenses (12,001) (10,304) (23,052)
Operating profit before amortisationof acquired intangiblesNegative 863-(117) 660-- 2,006 6,175 -
goodwillAmortisation of acquired intangibles
Operating profit 746 660 8,181
Finance income - 1 50
Finance costs (294) (299) (639)
Profit on ordinary activities before taxation 452 362 7,592
Income tax expense (45) - 86
Profit for the period 407 362 7,678
Basic profit per share (pence) 2.30p 2.12p 45.05p
Diluted profit per share (pence) 2.30p 2.12p 45.05p
Turnover and operating profit all derive from continuing operations
Unaudited Consolidated Balance Sheet
As at 31.12.08 As at 31.12.07 As at 30.06.08
£'000 £'000 £'000
Non-current assets
Intangible assets 9,170 480 9,293
Property, plant and equipment 5,136 4,808 5,165
Trade and other receivables 462 738 549
Deferred tax assets 888 678 888
15,656 6,704 15,895
Current assets
Inventories 3,659 3,509 3,783
Trade and other receivables 10,175 7,046 9,459
13,834 10,555 13,242
Total assets 29,490 17,259 29,137
Current liabilities
Trade and other payables (8,116) (6,604) (8,418)
Current tax liabilities (348) (44) (271)
Obligations under finance leases (152) (179) (163)
Bank overdrafts and loans (4,047) (3,653) (6,475)
(12,663) (10,480) (15,327)
Non current liabilities
Bank loans (2,740) (3,250) -
Deferred tax liabilities (2,739) (394) (2,771)
Obligations under finance leases (19) (189) (117)
(5,498) (3,833) (2,888)
Total liabilities (18,161) (14,313) (18,215)
NET ASSETS 11,329 2,946 10,922
Capital and reserves
Called up share capital 89 85 89
Share premium account 12,534 11,878 12,534
Capital reserves 41 41 41
Revaluation reserve - 1,669 -
Retained earnings (1,335) (10,727) (1,742)
TOTAL EQUITY 11,329 2,946 10,922
Unaudited Consolidated Cash Flow Statement
Six months ended 31.12.08Unaudited Six months ended 31.12.07Unaudited Year ended 30.06.08Audited
£'000 £'000 £'000
Profit after tax 407 362 7,678
Adjustments for:
Negative goodwill arising on acquisition - - (6,175)
Net finance costs 294 298 589
Depreciation of property, plant and equipment 209 159 334
Amortisation of intangible assets 6 9 15
Amortisation of acquired intangibles 117 - -
Operating cash flows before movement in working capital 1,033 828 2,441
Increase in inventories 124 (333) (507)
Increase in receivables (629) (842) (3,276)
Increase in payables (350) 419 2,199
Net interest paid (310) (254) (589)
Net cash inflow from operating activities (132) (182) 268
Cash flow from investing activities
Purchase of property, plant and equipment (180) (270) (308)
Purchase of intangible assets - (135) (28)
Acquisition of business, net of cash - - (628)
Net cash outflow from investing activities (180) (405) (964)
Cash flow from financing activities
Issue of ordinary shares - - 660
Finance lease repayments - - (123)
Net cash inflow from financing activities - - 537
Net decrease in cash and bank overdrafts (312) (587) (159)
Cash, cash equivalents and bank overdrafts at beginning (6,475) (6,316) (6,316)
of period
Cash, cash equivalents and bank overdrafts at end of (6,787) (6,903) (6,475)
period
Notes to the Interim Report
1 Basis of Preparation The Condensed Interim Financial Statements have been prepared
using accounting policies consistent with International
Financial Reporting Standards and in accordance with
International Accounting Standards (IAS) 34 Interim Financial
Reporting.The financial information for the six month period
ended 31 December 2008 and 2007 has not been audited by the
Group's auditors and does not constitute accounts within the
meaning of s240 of the Companies Act 1985. The financial
information for the year ended 30 June 2008 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 1985 and have been filed with the
Registrar of Companies.The same accounting policies,
presentation and methods of computation are followed in these
condensed financial statements as were applied in the
preparation of the Group's financial statements for the year
ended 30 June 2008
2 Taxation Interim period income tax is accrued based on the estimated
average annual effective income tax rate.
3 Dividends The Directors are not recommending the payment of an interim
dividend.
4.Segmental reporting
Six months ended 31.12.08Unaudited Six months ended 31.12.07Unaudited Year ended 30.06.08Unaudited
Revenue £'000 £'000 £'000
United Kingdom 7,135 6,388 13,147
Europe 4,979 4,576 11,139
Far East 314 - 603
Middle East 436 - 169
Total Revenue 12,864 10,964 25,058
Operating profit
United Kingdom 489 550 7,673
Europe 176 110 426
Far East 37 - 64
Middle East 44 - 18
Total operating profit 746 660 8,181
5. Profit per share Profit per share is calculated on the basis of shares
17,729,546 (2007: 17,019,546) 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. 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 Bedford House, 1 Regal Lane, Soham, Ely, Cambridgeshire,
CB7 5BA 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: 01353 723270 Tel Office: 01353 723270 Tel Office: 0207 418 8900
Mobile: 07800 951151 Mobile: 07940 523135
This information is provided by RNS
The company news service from the London Stock Exchange
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