13th Nov 2015 11:22
LONDON (Alliance News) - SWP Group PLC Friday said it will not pay a dividend for the last financial year following the lengthy delays it has faced in launching its new ULVAGRP system, and said it will not re-introduce dividends until the product is launched.
The industrial engineering group reported a small fall in pretax profit in the year ended June 30, to GBP1.3 million from GBP1.4 million a year earlier after revenue dropped to GBP13.2 million from GBP15.5 million.
An improved gross margin partially offset that revenue fall, with its gross profit remaining broadly flat year-on-year at GBP6.6 million.
SWP Group said it will not pay a dividend for the year because of the "significantly delay" it has experienced in launching its new ULVAGRP product line into the oil and gas market. In the previous financial year it paid a 0.09 pence per share dividend, which had been upped 20% from the previous year.
"As a result of the restructuring and the unforeseen failure of the German supplier to deliver a machine to specification, we face a significant delay to the launch of the new ULVAGRP product line into the oil and gas market. As a result and after much discussion the board has decided not to recommend the payment of a dividend in favour of using cash to exploit considerable opportunities and invest in the future of our two flagship businesses," the company said.
The ULVAGRP system is designed to compliment the company's existing ULVAShield system, which is a non-metallic cladding system that offers corrosion under insulation protection. Corrosion under insulation is a severe form of localised external corrosion that occurs in carbon and low alloy steel equipment that has been insulated.
SWP Group has been developing the ULVAGRP for several years and began manufacturing trials back in 2014 with a "reputable" German manufacturer which had a specialised process line that was required to manufacture the product.
SWP and the manufacturer then signed a contract for the German manufacturer to provide a process line so SWP could begin producing ULVAGRP, with the original plan for the new line to be commissioned and delivered in either April or May 2015.
However, SWP found that when that product was delivered to its new, purpose-built factory in Birmingham, England, it found the process line was not up to scratch and not able to produce SWP's desired product.
"The attitude and behaviour of this German company (which is in stark contrast to the professional approach of the Italian supplier of the Telford based process line for the production of ULVAShield) has resulted in a launch delay of more than one year which is a great disappointment to the Group's management, its shareholders and ULVA's customers," said SWP.
SWP has now entered into a contract with another process line manufacturer, but did not provide any guidance of when the product is likely to be launched.
"Much will depend on the timing of the launch of the ULVAGRP business which is unlikely to have much impact on the numbers for the financial year to June 30, 2016. As all other areas of the group are trading profitably and generating cash this eagerly anticipated launch is likely to permit a stronger period of growth," said Chairman Alan Walker.
SWP shares were up 3.9% to 6.75 pence per share on Friday morning.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
SWP.L