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REG - SWP Group PLC - Half Yearly Report
Released: 17/03/2010
Released: 17/03/2010
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RNS Number : 6692I
SWP Group PLC
17 March 2010
SWP Group plc (the "Group")
Half Year Report
for the six months ended 31 December 2009
Chairman's Statement
Corporate Review
When I last wrote to shareholders in November 2009 in respect of the year's trading to 30th June 2009 I described the
difficult market conditions in which we were operating as "a year of containment". The subsequent six month period to 31st
December 2009 has not witnessed any material improvement in the economic climate whereas your Group has made significant
progress within its two main operating businesses, namely, at Fullflow a leader in rainwater management as well as at Ulva
which has recorded further growth in the supply of materials for the management of corrosion under insulation ("CUI") to an
increasing number of oil and gas majors operating in a wide range of international territories.
Our other operating subsidiaries at Crescent of Cambridge (metal staircases) and DRC Polymer Products (membranes) which
continue to serve primarily the construction sector have continued to mark time in depressed market conditions through
rigorous cost containment against a background of reduced levels of activity and demand.
Financial Highlights
Under the above circumstances we are entitled to be very pleased with the results achieved for the six month period to 31st
December 2009. With overall sales largely flat at £12,349,000 (2008: £12,864,000) the quality of our earnings has been
enhanced due to the favourable mix of business which has been skewed in favour of our Ulva brand thereby increasing average
gross margins to 41.3% from 38.4% recorded in the corresponding period in 2008. Operating profits before amortisation of
acquired intangibles amounted to £1,140,000 (2008: £863,000) an increase of 63.4%. With lower interest rates and reduced
debt levels finance costs fell to £149,000 as compared to £294,000 for the corresponding period in 2008. Pre tax profits
advanced to £1,178,000 (2008: £452,000) an increase of 160% compared to the same period one year earlier.
Profits attributable to shareholders amounted to £858,000 (2008: £407,000) after taking into account a full tax charge made
up of current corporation tax (see Note 5) of £99,000 and the release of deferred tax assets of £221,000 booked in earlier
years in compliance with IAS12.
The Group is utilising its losses carried forward from earlier years in an efficient and effective manner thereby limiting
the cash impact of corporation tax liabilities incurred as a result of improved profitability.
Unaudited six months ended 31.12.09 £'000 Unaudited six months ended 31.12.08 £'000
Turnover 12,349 12,864
Operating Profit 1,327 746
Profit before tax 1,178 452
Profit after tax 858 407
Profit per share 4.78p 2.30p
452
Profit after tax
858
407
Profit per share
4.78p
2.30p
Financial Structure
At the Group's Annual General Meeting held in London on 13th January 2010 shareholders approved the various resolutions
placed before them including, inter alia, the bonus issue of ten new shares in addition to each share currently held
ranking pari passu as well as the elimination of our share premium account through its transfer to pure equity and retained
earnings. The formal ratification for this is currently passing through the Courts and we anticipate that by year end the
entire process of strengthening the Group's balance sheet will have been completed. Based on the Group's trading
performance to date this year your directors expect to be in a position to declare a maiden dividend for the year ending
30th June 2010 if the momentum which has been created is successfully maintained.
Operational Highlights
Fullflow
Against a backdrop of generally depressed market conditions, Fullflow produced a very satisfactory result for the period.
Although sales suffered an overall decrease, a combination of efficiency improvements, material cost reductions and
overhead savings meant that Fullflow's operating profit increased significantly compared to the equivalent period last
year.
Fullflow is increasingly an international business, and UK sales, including those of Plasflow, accounted for less than 40%
of total sales in the period. This was partly due to the impact of the large projects being undertaken at Doha Airport in
Qatar and Madrid Barajas Airport in Spain, but progress was achieved on a number of other fronts and with UK construction
markets likely to remain at a low ebb for the foreseeable future it is important that Fullflow continues to develop its
international operations.
In this regard it is expected that progress will be achieved on three main fronts: firstly by winning more major
international projects (such as Airports for example) which Fullflow will take on directly, secondly by helping its
existing international partners to generate extra business and thirdly by extending its network of international partners.
Already there is movement on at least some of these fronts and Fullflow has just secured its first order for a project in
Vietnam. There is even the possibility of one of our partners entering the vast and potentially lucrative market in China.
One of the characteristics of Fullflow is that its management teams consist in the main of relatively young and highly
committed individuals. These teams have now been in place for some years and we believe that there is now an excellent
blend of youth and experience which has the potential to drive the business on to further success. In addition both
Fullflow and Plasflow are widely respected for the quality of their products and the service levels which they provide and
even at a time when market conditions mean that price has assumed a higher level of importance than ever, these assets
provide the best possible platform from which to build lasting relationships and sustainable success.
Crescent of Cambridge
Crescent's UK market has remained static and whilst enquiry levels have been strong, too few projects have attracted the
necessary funding. The Crescent team is patiently awaiting recovery whist maintaining vigorous cost control.
Crescent has always provided a premium product to the more discerning end of the market and continues to do so today
without compromise on issues of quality, service and compliance despite the difficult market conditions which have seen
some contractors installing non-compliant stairs procured solely on price.
Despite the difficult conditions, investment has continued in the enhancement of the design automation software which is
now fully integrated with the manufacturing system and providing front end tendering cost information based on current live
costs. This is especially helpful when negotiating in price sensitive market conditions. This key investment is expected to
underpin Crescent's ability to grow revenues whilst containing the cost base when recovery begins.
Revenues and profitability have been in line with expectation following the restructuring, which was completed in the last
financial year, with the exception of one bad debt flowing from the Haymills insolvency which impacted profit by £46,000.
DRC Polymer Products
DRC Polymer Products has a number of challenges with which its management team are preoccupied. Specialist chemicals and
raw materials are used in the production of most of DRC's products which are sourced from all over the world. The weakness
of sterling is therefore of concern to us in terms of cost control and the protection of sustainable margins. In addition
to this there are a number of technical projects in which DRC is currently investing which are being profiled on the
company's equipment, all of which are designed to enhance the company's product offering to a wide range of valued
customers. Technical development is likely to command greater levels of time, commitment and resources in future and is
constantly under review.
Modular Build
Hylam Uniroof remains the product of choice for the sector and DRC's focus remains on providing a high level of service to
its loyal customers, some of which are operating at quite markedly reduced activity levels. Overall, the activity continues
at an acceptable level and the team is ready to ramp-up volume when the market picks-up.
Hylam IQ
A fourth UK water utility adopted the Hylam IQ intelligent membrane system in the period under review awarding DRC
contracts for three reservoirs. Elsewhere activity has been limited pending the commencement of the new five year AMP
period in April 2010. The outlook for Hylam IQ is positive with a number of key projects in the pipeline.
FPA Membrane
The Drinking Water Inspectorate (DWI) approved Hylam FPA membrane range has been extended to meet specific client driven
requirements and has been selected for a number of substantial projects in the UK and international markets. Sales in the
period under review have been steady but the outlook is positive for this niche engineered membrane.
Ulva
DRC continues to provide Ulva with a constant stream of high quality Ulvashield with good efficiency and low levels of
waste, which will grow in line with the development of the Ulva business. Ulva and DRC are also working collaboratively on
the further enhancement of the Ulvashield compound.
Ulva Insulation Systems
Corrosion Under Insulation (CUI) continues to be a subject in sharp focus for many of the Oil, Gas and Petrochemical
multinationals and operators. The extension of Ulva's presence and reach with effective sales offices in Houston and Kuala
Lumpur and the appointment of local agents in key markets has been well received and rewarded with the inclusion of the
system in a number of additional corporate specifications and a number of key new project specifications. Projects have
been completed or agreed for new customers in Japan, Brazil and two countries in South East Asia.
Ulva's offering has been extended to include full time site presence to assist the end client and installation contractor
in areas such as the achievement of best practice, quality assurance procedures and training. This service is currently
being utilised on two major projects for the Norwegian sector under construction in Korea and Holland.
Business performance for the period under review was very much in line with expectation and the outlook remains positive.
Earnings per share
Shareholders will be pleased to note that EPS has increased from 2.30p per share in the first half of 2008 to 4.78p per
share for the six month period to 31st December 2009 which equates to an increase (after tax) of 108%. This augers well for
the future and supports the Board's aspirations to enter the dividend list later this year.
Staff
The severity of the economic climate dictates that all employees within our Group are charged with the responsibility of
making stringent efforts to maximise the performance of the Group. In this regard we are grateful to staff at all levels
without whose dedication and commitment these vastly improved results would not have been possible.
Board Changes
We are delighted to welcome onto the Board of our parent company Colin Stott who joined our Group back in October 2006 as a
consultant and who has worked tirelessly at both Crescent and DRC prior to taking over as managing director of Ulva where
he has had prime responsibility for not only its successful integration within the operating structure of this Group but
for the delivery of our international strategy designed to facilitate profitable growth both in the short and longer term.
Colin's considerable experience as an international operator will be invaluable to the Group in achieving our given
objectives within global markets as well as the exploitation of our brand portfolio.
Current Trading and Prospects
Notwithstanding the disappointing economic outlook in general the current period has started strongly and together with the
results posted for the first half the Board is confident that we will deliver very positive results for the financial year
to 30th June 2010. Many challenges exist but with the commitment, professionalism and energy of our team we remain
confident that we shall be able to exploit many of the opportunities which lie before us. The Board remains, as ever,
focused on further profitable growth allied to diligent control over costs and to maximising shareholder value. We look
forward with confidence to the remainder of 2009/2010 and beyond.
J A F Walker
Chairman
17th March 2010
Unaudited Consolidated Income Statement
Six months ended 31 December 2009 Six months ended 31.12.09 Unaudited £'000 Six months ended 31.12.08 Unaudited £'000 Year ended 30.06.09 Audited £'000
Revenue 12,349 12,864 24,745
Cost of sales (7,253) (7,928) (14,764)
Gross profit 5,096 4,936 9,981
Operating expenses (3,686) (4,073) (7,558)
1,410 863 2,423
Exceptional operating expenses - - (134)
Amortisation of intangible assets acquired through business combinations net of deferred tax (83) (117) (165)
Operating profit 1,327 746 2,124
Financial income - - 42
Financial costs (149) (294) (534)
Profit on ordinary activities before taxation 1,178 452 1,632
Income tax charge (320) (45) (37)
Profit for the period attributable to equity holders of the parent 858 407 1,595
Basic earnings per share (pence) 4.78p 2.30p 9.02p
Diluted earnings per share (pence) 4.78p 2.30p 9.02p
Financial costs
(149)
(294)
(534)
Profit on ordinary activities before taxation
1,178
452
1,632
Income tax charge
(320)
(45)
(37)
Profit for the period attributable to equity holders of the parent
858
407
1,595
Basic earnings per share (pence)
4.78p
2.30p
9.02p
Diluted earnings per share (pence)
4.78p
2.30p
9.02p
Turnover and operating profit all derive from continuing operations.
Unaudited ConsolidatedBalance Sheet
As at 31 December 2009 As at 31.12.09 £'000 As at 31.12.08 £'000 As at 30.06.09 £'000
£'000 £'000
Non-current assets
Intangible assets 8,936 9,170 9,045
Property, plant and equipment 5,087 5,136 5,114
Trade and other receivables 689 462 655
Deferred tax assets 924 888 1,150
15,636 15,656 15,964
Current assets
Inventories 3,901 3,659 3,972
Trade and other receivables 9,889 10,175 9,866
13,790 13,834 13,838
Total assets 29,426 29,490 29,802
Current liabilities
Trade and other payables (6,363) (8,116) (7,410)
Current tax liabilities (494) (348) (309)
Obligations under finance leases (98) (152) (117)
Bank loans and overdrafts (2,438) (4,047) (4,127)
(9,393) (12,663) (11,963)
Non-current liabilities
Bank loans (3,458) (2,740) (2,600)
Deferred tax liabilities (2,679) (2,739) (2,719)
Obligations under finance leases (24) (19) (47)
(6,161) (5,498) (5,366)
Total liabilities (15,554) (18,161) (17,329)
NET ASSETS 13,872 11,329 12,473
Capital and reserves
Called up share capital 93 89 89
Share premium account 13,205 12,534 12,534
Capital reserves 41 41 41
Revaluation reserve 229 - 229
Retained earnings 304 (1,335) (420)
TOTAL EQUITY 13,872 11,329 12,473
Called up share capital
93
89
89
Share premium account
13,205
12,534
12,534
Capital reserves
41
41
41
Revaluation reserve
229
-
229
Retained earnings
304
(1,335)
(420)
TOTAL EQUITY
13,872
11,329
12,473
Unaudited ConsolidatedCash Flow Statement
Six months ended 31 December 2009 Six months ended 31.12.09 Unaudited £'000 Six months ended 31.12.08 Unaudited £'000 Year ended 30.06.09 Audited £'000
Profit after tax 858 407 1,595
Adjustments for:
Net finance costs 149 294 492
Corporation tax charge 320 45 269
Depreciation of property, plant and equipment 185 209 414
Amortisation of intangible assets 123 123 243
Profit on disposal of plant and equipment - - (6)
Operating cash flows before movement in working capital 1,635 1,078 3,007
Decease/(increase) in inventories 71 124 (189)
Increase in receivables (57) (629) (735)
Decrease in payables (807) (336) (967)
Interest paid (147) (310) (612)
Interest received - - 2
Corporation tax paid (191) - (231)
Net cash inflow from operating activities 504 (73) 275
Cash flow from investing activities
Purchase of property, plant and equipment (158) (180) (384)
Purchase of intangible assets (14) - (10)
Proceeds from disposals of property, plant and equipment - - 27
Net cash outflow from investing activities (172) (180) (367)
Cash flow from financing activities
Issue of ordinary shares 675 - (44)
Term loan conversion to euro denomination 1,443 - -
Bank loans repaid (247) - -
Purchase of treasury shares (134) - -
Finance lease repayments - net (42) (59) (116)
Net cash inflow/(outflow) from financing activities 1,695 (59) (160)
Net increase/(decrease) in cash and bank overdrafts 2,027 (312) (252)
Cash, cash equivalents and bank overdrafts at beginning of period (3,477) (3,225) (3,225)
Cash, cash equivalents and bank overdrafts at end of period (1,450) (3,537) (3,477)
Bank loans repaid
(247)
-
-
Purchase of treasury shares
(134)
-
-
Finance lease repayments - net
(42)
(59)
(116)
Net cash inflow/(outflow) from financing
activities
1,695
(59)
(160)
Net increase/(decrease) in cash and bank
overdrafts
2,027
(312)
(252)
Cash, cash equivalents and bank overdrafts at
beginning of period
(3,477)
(3,225)
(3,225)
Cash, cash equivalents and bank overdrafts at end of period
(1,450)
(3,537)
(3,477)
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 2009 and 2008 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 2009 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 condensed financial statements
as were applied in the preparation of the Group's financial statements for the year ended 30 June 2009.
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 31.12.09 Unaudited £'000 Six months ended 31.12.08 Unaudited £'000 Year ended 30.06.09 Unaudited £'000
(i) Business Segments
Revenue
Rainwater management 7,433 8,224 15,389
Metal staircases 1,034 1,541 2,757
Polymer membrane 3,882 3,099 6,599
Corporate - - -
Total Revenue 12,349 12,864 24,745
Operating Profit
Rainwater management 487 209 801
Metal staircases (106) (149) (350)
Polymer membrane 404 157 616
Corporate 542 529 1,057
Total operating profit 1,327 746 2,124
(ii) Geographical Segments
Revenue
United Kingdom 5,770 7,135 12,421
Europe 4,366 4,979 8,972
Far East 1,721 314 2,847
Middle East 492 436 505
Total Revenue 12,349 12,864 24,745
7,135
12,421
Europe
4,366
4,979
8,972
Far East
1,721
314
2,847
Middle East
492
436
505
Total Revenue
12,349
12,864
24,745
5. Income Tax Expense
Recognised in the income statement
Six months ended 31.12.09 Unaudited £'000 Six months ended 31.12.08 Unaudited £'000 Year ended 30.06.09 Unaudited £'000
Current tax expense
Current year - UK corporation tax 99 45 269
Deferred tax movement 221 - (232)
Total tax expense in income statement 320 45 37
(232)
Total tax expense in income statement
320
45
37
6. Profit per Share
Profit per share is calculated on the basis of 17,934,296 shares (2008: 17,729,546) which is the weighted average of the
number of shares in issue during the period.
The Group's share options are not dilutive for profit per share calculations.
7. Copies of Interim Report
Copies of the half year 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 Group's website at
http://www.swpgroupplc.com.
For further information or enquiries:
J.A.F Walker D.J Pett R. Kauffer
Chairman Director of Finance KBC Peel Hunt
Nominated Advisor & Broker
Tel: 01353 723270 Tel: 01353 723270 Tel: 0207 418 8900
Mobile: 07800 951151 Mobile: 07940 523135 Mobile: 07841 673210
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