SWP Group PLC | Half YeaReport | FE InvestEgates3-us-west-2.amazonaws.com/.../SWP/SWP20140331.pdf · offer full protection without material degradation. The merits of Ulvashield as

3/31/2014 SWP Group PLC | Half Yearly Report | FE InvestEgate

http://www.investegate.co.uk/ArticlePrint.aspx?id=201403270700062688D 1/12

SWP Group PLC

Half Yearly Report

RNS Number : 2688D

SWP Group PLC

27 March 2014

SWP Group plc (the "Group")

Half Yearly Results

for the six months ended 31 December 2013

Financial Highlights

n Group sales increased by 11.7% to £9.920M (2012: £8.880M).

n Operating profits before exceptional costs and amortisation of intangible assets

rose by 60.4% to £863K (2012: £538K).

n Pre-tax profits increased to £0.624M (2012: £0.129M).

n Earnings per share advanced fivefold to 0.25p per share (2012: 0.05p).

n Group bank debt reduced by 42% to £1.692M (2012: £2.915M).

Operational Highlights

n International expansion continued to develop with projects in Norway, Finland and

Brazil.

n New production process line successfully trialled for Ulva.

n Increased quality orders received at Crescent.

n Nuclear business at Plasflow to return to expected levels in second half of the

year.

n Strengthening of management teams throughout the Group.

Alan Walker, Executive Chairman, commented:

"The performance of the Group has improved significantly during the six month period

under review. Market conditions are more conducive to the rate of organic expansion we

aspire to both in our home markets and internationally. Foundations have been laid so that

we can fulfil the many opportunities which lie before us as our brands continue to attract

global appeal"



Chairman's Statement

Corporate Review I am pleased to be able to reaffirm the positive news delivered to shareholders at our most

recent Annual General Meeting that the Group has emerged from the prolonged economic

recession in good shape with improved order books and an appetite for expansion

internationally. The Group's focus is primarily in two specific niche business areas

comprising Ulva which is a leading supplier of specialist materials designed to reduce

Corrosion Under Insulation ("CUI") to the oil, gas and petrochemical majors on a global

basis and Fullflow which is a leading European brand with global aspirations in the

provision of syphonic rainwater management systems to a diverse customer base ranging

from distribution warehouses, retail, schools, railway stations, sports stadia, airport

terminals, hospitals, car manufacturing and waste plants.

There was a significant upturn in orders from the commencement of the new financial year

starting on 1st July 2013 as market sentiment improved and confidence once again

returned in the expectation of renewed economic growth. Ulva has enjoyed a particularly

strong period of trading in line with management expectations following the delivery of

delayed orders deferred from the final quarter of the previous financial year. Crescent,

whilst remaining loss making, as a specialist manufacturer of spiral, helical and straight

metal staircases has built a strong and qualitative order book which when fully executed

will we anticipate restore this specialist producer to profit by the end of the current financial

year.

Financial Results The upturn in confidence levels and the economic recovery became apparent during the

six months to 31st December 2013. The absence of the distractions in the near impossible

Spanish market allowed Fullflow to focus on penetrating new markets primarily in Norway,

Finland and Brazil. The construction sector is often one of the last to recover after

economic recession but following such a pronounced lack of infrastructure projects market

activity has rebounded faster than could have been envisaged. Progress across our

various businesses has contributed to much improved operating profits:-

Unaudited

six monthsended31.12.13£'000

Unaudited

six months

ended

31.12.12

£'000

Revenue 9,920 8,880

Operating profit before exceptional costs and

amortisation of intangible assets

863

538

Profit/(loss) before tax 624 129

Taxation (122) (25)

Profit/(loss) after tax 502 104

Earnings per share 0.25p 0.05p

Revenue in the period advanced to £9.92M (2012: £8.88M) with operating profits before

exceptional costs and amortisation of intangible assets rising to £863K (2012: £538K) or

by some 60.4%. More importantly profits before taxation rose to £624K (2012: £129K) with

earnings per share advancing almost fivefold to 0.25p per share (2012: 0.05p).

Group Bank Debt As shareholders will recall it has been the Board's objective to eliminate bank debt through

the generation of profits and cash. Bank debt continues its inexorable decline and had

fallen by 31st December 2013 to £1.692M (2012: £2.915M) or by 42%. It has also fallen by



27.5% when compared to the last financial year end at 30th June 2013 and is destined to

fall yet further during the second half of the year to 30th June 2014.

It is pleasing to report that the Group's term loan (in euros) of €5.51M which was taken out

in April 2009 will be finally repaid on 20th April 2014 when it becomes fully amortised. The

retirement of bank debt throughout the entire period of the recession has been a prime

target and we will continue with this strategy until such debt is fully and finally eliminated.

The Consolidated Statement of Financial Position is strong and reflects the continued well

being of the Group as a whole.

Operational Highlights

Polymer Membrane Division Ulva

This business has been a genuine success story for our Group since its acquisition at the

end of November 2007 and has been a principal driver in terms of the generation of both

profits and cash. Ulvashield has now been assisting the oil and gas majors to combat the

onset of severe pipe corrosion for more than 20 years. Independent studies demonstrate

that even after 15 to 20 years in the harshest of climatic conditions Ulvashield continues to

offer full protection without material degradation. The merits of Ulvashield as a soft

jacketing membrane of choice are demonstrable with the benefits of positive field

experiences assisting in the specification of Ulvashield in major projects around the world,

both offshore and onshore.

Revenues in the period were in line with our expectations and somewhat ahead of the

corresponding period in 2012 as a consequence of benefitting from projects carried over

from the 4th quarter of FY2013 resulting from delays on new construction projects.

The new production process line referred to in our 2013 Annual Report has been trialled

successfully at the supplier's premises, producing quality saleable product. The line has

been approved for installation and commissioning at Telford which is now advancing

towards completion. We expect to be producing Ulvashield by the middle of April 2014 on

this new facility which we consider to be the opening of a new chapter in the development

of this highly specialised and successful business. Significant new capacity will become

available. Ulva has appointed a regional sales manager for Asia following an extended

candidate search. This region is particularly active in the construction of new FPSO's

(floating platforms facilities) and local presence in this region is essential to the

development of a coherent sales strategy.

A considerable amount of work and R&D expense has been channelled into extending the

range of complementary products on offer from Ulva as a leading technical brand. Ulva

GRP's development has progressed to final certification testing in readiness for a system

launch in 2014. This range of products will operate alongside the twenty plus year

"Ulvashield" veteran on a complementary basis.

Technical innovation will remain very much in the forefront of Ulva's strategic focus as will

the commitment to our provision of site services all of which is designed to deliver to the

end customer a protection system of choice in line with expectations.

Fullflow

As shareholders recognise the recession has had an adverse impact on the construction

sector for a number of years and has led to retrenchment as well as austerity due to the

lack of infrastructure projects. It is therefore pleasing to be able to report that market

sentiment has improved considerably during the six months to 31st December 2013. The

severe floods that occurred during January and February 2014 have brought into sharp

focus the many advantages of syphonic rainwater management systems which are

designed to evacuate rainwater from large areas of roof having due regard to the intensity

of rainfall rather than placing reliance on traditional dispersion by means of gravity. Fullflow

has particular expertise in the design, manufacture and installation of such systems



across a wide diversity of structures.

Fullflow Group in the United Kingdom has seen its order book improve during the periodwith the average order size increasing in value. Markets remain very price competitive with

main contractors taking on work at highly competitive rates. There are encouraging signs

that infrastructure projects are once again on drawing boards and that confidence in the

sector is being restored, albeit gradually. The arrival of a new Sales Director at Fullflow

after a prolonged candidate search is a welcome addition to Fullflow's senior management

team and is bringing focus and discipline into important geographic areas of the business

in the UK. Further key appointments at senior level are anticipated in the near future as we

strive to strengthen management. Fullflow has always been a technical leader. Product

innovation has led to the trialing of new products which are designed to increase

productivity and effectiveness of installation on site. On the successful outcome of the

trials it is expected that these products will be introduced both within the UK and Fullflow's

expanding operations abroad.

Fullflow Systemé in France is enjoying a strong period of growth in market conditionswhich are not viewed as conducive to expansion. The management team in France split its

business several years ago into a new installation business and a repair and maintenance

business in order to achieve sharper focus on customer alliances and framework

agreements. This is proving to be a successful strategy with the average order sizes

increasing considerably as the projects on which Systemé is engaged are amongst the

largest undertaken by the Group. Our French team has finally delivered the rainwater

management system to the ultimate satisfaction of Renault in Morocco. Later in 2014

Systemé will supply a rainwater management system to the new Stade de Lyon in line with

our proven expertise with sports stadia. Margins in the business remain under pressure

but enhanced volume is helping Systemé to achieve positive financial results at the interim

stage. Notwithstanding the fragile economy which exists in France this experienced team

is making good progress and is actively promoting syphonic technology as the system of

choice in France to a diverse range of customers and end users.

Fullflow International is a rapidly expanding business operating in a number of countrieswhere the Fullflow brand appears to have been accepted as the leading technology in the

provision of syphonic roof drainage systems. During the past year International has

delivered projects to the Coop in Norway and Google in Finland and expanded its

operations into Brazil with orders awarded on the largest infrastructure project in South

America, namely the JV between Fiat and Chrysler car plant in Goiana and the

International Airport of Viracopos Campinas outside Sao Paulo. The market appears to be

highly receptive to the Fullflow brand and there are many projects which our International

team expect to turn into meaningful orders over time. This new division has considerable

potential for profitable growth and is expected to record highly commendable results by the

financial year end to 30th June 2014 and beyond.

Plasflow based at Rotherham has experienced a difficult period in the half year ended 31stDecember 2013. As the main source of fabrications for and on behalf of the entire Fullflow

business in the UK, France and internationally the increased level of activity at Fullflow has

caused some degree of indigestion at Plasflow. Fortunately these issues have been

resolved through pragmatic reorganization and moving to a split shift production rota

designed to increase production capacity. As ever, Plasflow is well placed to benefit from

the repair and maintenance outages which are scheduled at most of the UK nuclear plants

under the ownership and control of EDF in France. During the period there was no

meaningful nuclear business available to Plasflow but orders have since been received in

December 2013 and February 2014 which when transacted in the 4th quarter of the current

financial year will help to improve Plasflow's overall performance for the full financial year

to 30th June 2014. Profits are forecast to be at a similar level to those recorded in 2013.

Crescent of Cambridge recovered its composure under the direct control of one of oursenior directors and a newly appointed general manager. New process controls were

introduced in a cohesive effort to create better team work at a time when the flow of orders

has been improving fast. Bottlenecks in the design department have been largely

eliminated. The order book at this time contains some very prestigious helical staircases



which reflect Crescent's considerable expertise in being able to manufacture complex

stairs in line with its reputation as a bespoke manufacturer renowned for an ability to

deliver a quality product. Whilst not yet profitable considerable progress has been made in

restoring Crescent to its profitable past when it delivered both profit and cash over an

unbroken period of 13 years. The improved economic climate has assisted in the recovery

process which has also benefitted from increased selling activity in and around London

where the award of large orders is helping to drive sales forward. Further computer based

design automation is being commissioned and Crescent has a number of plans which are

designed to improve not only the profitability of the business but also its operating

efficiency. Results for the current financial year are expected to improve which reflects

positive progress over the previous 12 month period.

Research & Development Each of our businesses is at the leading edge of technical development in its own

particular field. The Group has embarked upon a programme of product innovation and

development designed to provide greater competitive advantage to everything in which we

are engaged. The Research & Development budget is increasing and has the benefit of

taxation concessions given by the Government for profitable groups to invest in thereby

giving stimulus to the future of UK manufacturing industry. There are a number of product

innovations which will come to market at both Fullflow and Ulva in 2014 whilst the

continuous programme of computer aided design at Crescent is likely to improve operating

efficiency next year.

Staff

It has been most rewarding to see the manner in which staff have conducted themselves

post recession now that confidence has returned and hard work has been rewarded with a

flow of new orders. All of our Group companies are well positioned to exploit the many and

varied opportunities which are on offer both in the UK and further afield in international

markets.

Our employees are very dedicated and in many instances are required to travel long

distances over weekends and at times that are not conducive to family life. To each and

every one of our members of staff my Board of Directors wishes to express grateful

thanks for the sacrifices and efforts that are made on a regular basis and to their

contribution to the wellbeing of our Group.

Current Trading and Prospects Trading in the second half of the year is likely to be similar to the first half's positive

performance. Fullflow is expected to perform particularly well in France and internationally

whilst hopes remain high for improved results at Plasflow. Ulva continues to supply to its

range of international projects and strives to obtain transparency over those projects which

do not benefit from defined timescales and are outside Ulva's direct control. Ulva's

financial performance remains strong in line with projects successfully executed.

The next few months will be important for Crescent as its delivery of a number of important

projects will contribute to a year of successful recovery by 30th June 2014.

As a Group we continue to invest in R&D and the innovation which surrounds product

development. We are also attempting to add to our management teams skilled managers

who will be able to fit into our management style and help us to meet the many challenges

that we face not only in the UK but also internationally.

Your Board is happy to embrace current market conditions which offer considerable scope

for growth and opportunities to build from the platform that has been created for a profitable

debt free future.

J A F WalkerChairman27th March 2014



Unaudited Consolidated Statement of Comprehensive Income

Six

months

ended

31.12.13

Unaudited

£'000

Six months

ended

31.12.12

Unaudited

£'000

Year

ended

30.06.13

Audited

£'000

Revenue 9,920 8,880 14,317

Cost of sales (6,078) (4,848) (7,430)

Gross profit 3,842 4,032 6,887

Operating expenses (2,979) (3,494) (6,126)

863 538 761

Profit attributable to associate 15 - 38

Exceptional operating expenses (53) (202) (821)

Amortisation of intangible assets acquired

through business combinations net of

deferred tax

(83)

(82)

(165)

Share based payment (40) (21) (80)

Operating profit/(loss)

702

233

(267)

Financial costs (78) (104) (187)

Profit/(loss) on ordinary activities

before taxation

624

129

(454)

Income tax (charge)/credit (122) (25) 98

Profit/(loss) for the period for

continuing operations

502

-

(356)

Profit/(loss) for the period from

discontinued operations

- - (543)

Profit/(loss) for the period

502

104

(899)

Total comprehensive income

Net gain on revaluation of land and

buildings

- - 42

Deferred tax on revaluation of land and

buildings

- - (61)

Other comprehensive income for the

period

- - (19)

Profit/(loss) for the period and total

comprehensive income attributable to

equity holders of the company

502

104

(918)

Earnings per share from continuing

and discontinued operations

attributable to the equity holders of the

company during the year

Basic earnings per share (pence)

From continuing operations

From discontinued operations

0.25p

-

0.05p

-

(0.17)p

(0.27)p

0.25p 0.05p (0.44)p

Diluted earnings per share (pence)

From continuing operations

From discontinued operations

0.25p

-

0.05p

-

(0.17)p

(0.27)p

0.25p 0.05p (0.44)p



Unaudited Consolidated Statement of Changes in Equity

Calledup sharecapital

Capitalreserve

Re-valuationreserve

Retainedearnings

Total

£'000 £'000 £'000 £'000 £'000

At 1 January 2012 1,016 98 229 12,941 14,284Result for the period - - - 689 689Dividend - - - (151) (151)Share based payment - 23 - - 23

At 30 June 2012 1,016 121 229 13,479 14,845Result for the period - - - 104 104Share based payment - 21 - - 21Purchase of treasuryshares

- - - (26) (26)

At 31 December 2012 1,016 142 229 13,557 14,944Result for the period - - - (1,003) (1,003)Revaluation - - (19) - (19)Dividend - - - (151) (151)Share based payment - 59 - - 59Purchase of treasuryshares

- - - (9) (9)

At 30 June 2013 1,016 201 210 12,394 13,821Result for the period - - - 502 502Share based payment - 40 - - 40

At 31 December 2013 1,016 241 210 12,896 14,363 Unaudited Consolidated Statement of Financial Position As at

31.12.13£'000

As at31.12.12£'000

As at30.06.13£'000

Non-current assets Intangible assets 7,965 8,190 8,083Property, plant and equipment 5,216 5,474 5,159Trade and other receivables 297 488 301Deferred tax assets 402 472 422Investment 103 50 88 13,983 14,674 14,053

Current assets Inventories 2,570 3,151 3,239Trade and other receivables 6,117 5,494 4,823

8,687 8,645 8,062



Total assets22,670

23,319

22,115

Current liabilities

Trade and other payables (4,484) (3,099) (3,794)

Current tax liabilities (135) (250) (127)

Obligations under finance leases (9) - (13)

Bank loans and overdrafts (1,411) (2,094) (2,030)

(6,039) (5,443) (5,964)

Non-current liabilities

Bank loans (281) (821) (304)

Deferred tax liabilities (1,983) (2,111) (2,018)

Obligations under finance leases (4) - (8)

(2,268)

(2,932)

(2,330)

Total liabilities(8,307) (8,375)

(8,294)

NET ASSETS 14,363 14,944 13,821

Capital and reserve

Called up share capital 1,016 1,016 1,016

Capital reserve 241 142 201

Revaluation reserve 210 229 210

Retained earnings 12,896 13,557 12,394

TOTAL EQUITY 14,363 14,944 13,821

Unaudited Consolidated Statement of Cash Flows

Six monthsended31.12.13Unaudited

£'000

Six monthsended31.12.12Unaudited£'000

Yearended30.06.13Audited£'000

Profit/(loss) after tax

502

104

(899)

Adjustments for:

Net finance costs 78 104 191

Corporation tax (credit)/charge 122 25 (61)

Depreciation of property, plant and

equipment

71 128 313

Revaluation of properties - - 383

Amortisation of intangible assets 118 120 236

(Profit)/loss on disposal of plant and

equipment

- 3 (1)

Operating cash flows before movement in

working capital

891

484

162

Decrease/(increase) in inventories 669 (168) (256)

(Increase)/decrease in receivables (1,290) 2,967 3,825

Increase/(decrease) in payables 682 (2,677) (1,960)

Interest paid (80) (102) (197)

Corporation tax paid (94) (111) (185)

Net cash inflow from operating

activities

778

393

1,389



Cash flow from investing activities Purchase of property, plant and equipment (128) (80) (352)Purchase of intangible assets - - (9)Proceeds from disposals of property, plantand equipment

-

-

5

Net cash outflow from investingactivities

(128) (80) (356)

Cash flow from financing activities Dividend paid - - (151)Bank loans repaid (519) (409) (925)Purchase of treasury shares - (26) (35)Finance lease repayments, net (8) (22) (1) Net cash outflow from financingactivities

(527)

(457)

(1,112)

Net increase/(decrease) in cash andbank

overdrafts

123

(144)

(79)

Cash, cash equivalents and bankoverdrafts at

beginning of period

(993)

(914)

(914)

Cash, cash equivalents and bankoverdrafts at end of period

(870)

(1,058)

(993)

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 theEuropean Union and in accordance with International Accounting Standards (IAS) 34Interim Financial Reporting.

The financial information for the six month periods ended 31 December 2013 and 31December 2012 have not been audited by the Group's auditors and does notconstitute accounts within the meaning of s240 of the Companies Act 2006. Thefinancial information for the year ended 30 June 2013 is an abridged version of theGroup's accounts which received an unqualified auditors' report and did not contain astatement under s237(2) or (3) of the Companies Act 2006 and have been filed withthe Registrar of Companies. The same accounting policies, presentation and methods of computation are followedin these interim financial statements as were applied in the preparation of the Group'sfinancial statements for the year ended 30 June 2013 and which are expected toapply as at 30 June 2014.

2. Taxation Interim period income tax is accrued based on the estimated average annual

effective income tax rate.

3. Segmental Reporting

Rainwatermanagementsix months

Metalstaircasessix months

Polymer membranesix months

Corporatesix monthsended

Totalsix

months



ended

31 Dec 2013

ended

31 Dec

2013

ended

31 Dec

2013

31 Dec

2013

ended

31 Dec

2013

£'000

£'000 £'000 £'000 £'000

Revenue

External revenues 5,220 723 3,977 - 9,920

Intergroup sales 1,533 - - - 1,533

Total revenues 6,753 723 3,977 - 11,453

Cost of sales (5,304) (436) (1,871) - (7,611)

Gross profit 1,449 287 2,106 - 3,842

Operating expenses (1,353) (373) (837) (416) (2,979)

96 (86) 1,269 (416) 863

Profit attributable to

associate -- - 15 15

Exceptional operating

expenses (39)- - (14) (53)

Amortisation of intangible

assets acquired through

business combinations net

of deferred tax -

-

-

(83)

(83)

Share based payment - - - (40) (40)

Intergroup royalty

(charge)/income -

-

(789)

789

-

Intergroup management

fees -- (114) 114 -

Intergroup rent

(charges)/income -- (36) 36 -

Operating profit/(loss) 57 (86) 330 401 702

Financial costs (1) - - (77) (78)

Intergroup financial

charges (12)- - 12 -

Profit/(loss) on ordinary

activities before taxation 44

(86)

330

336

624

Income tax charge (9) 18 (65) (66) (122)

Profit/(loss) for the

period attributable to

equity holders of the

company 35

(68)

265

270

502

Rainwater

management

six months

ended

31 Dec 2012

Metal

staircases

six months

ended

31 Dec

2012

Polymer

membrane

six months

ended

31 Dec

2012

Corporate

six months

ended

31 Dec

2012

Total

six

months

ended

31 Dec

2012

£'000

£'000 £'000 £'000 £'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 233Financial costs (9) - - (95) (104)Intergroup financial

charges (14)- (31) 45 -

(Loss)/profit on ordinaryactivities before taxation (213)

(127)

342

127

129

Income tax charge - - (15) (10) (25)(Loss)/profit for theperiod attributable toequity holders of thecompany (213)

(127)

327

117

104

4. Income Tax Expense

Recognised in the income statement Six months

ended31.13.13Unaudited

£'000

Six months

ended

31.13.12

Unaudited

£'000

Year

ended

30.06.13

Unaudited

£'000

Current tax expense

Current year - UK

corporation tax

77 25 (73)

Current year - overseas tax 25 - 12

Deferred tax movement 20 - (37)

Total tax expense in income

statement122 25 (98)

5. Earnings Per Share Earnings per share is calculated on the basis of 203,275,006 shares (2012:

196,480,006) 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 204,930,006 shares

(2012: 200,980,006) 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

Chairman

SWP Group plc

Tel office: 01353 723270

Mobile: 07800 951251

D.J. Pett

Finance Director

SWP Group plc

Tel office: 01353 723270

Mobile: 07940 523135



Ranald McGregor-Smith

Corporate Finance Advisors

Whitman Howard

Tel office: 020 7812 3525

Richard Kauffer/Daniel Harris

Nominated Advisor & Broker

Peel Hunt LLP

Tel office: 020 7418 8900

This information is provided by RNSThe company news service from the London Stock Exchange

END IR UNRSRSKAOUAR

Documents

SWP Group PLC | Half YeaReport | FE InvestEgates3-us-west-2.amazonaws.com/.../SWP/SWP20140331.pdf · offer full protection without material degradation. The merits of Ulvashield as