27th Mar 2015 10:04
LONDON (Alliance News) - SWP Group PLC Friday reported a drop in profit in the first half of its financial year due to the lumpy nature of revenue flows at one of its three businesses, but it managed to cut its bank debt by almost half even though it invested heavily in new production facilities.
It also said that it hasn't yet been affected by the sharp decline in oil prices, but could be affected towards the end of the decade if the low prices persist, while it had also taken the decision to close one of its businesses, spiral and helical stair maker Crescent of Cambridge, meaning it will have to book a provision in the second half.
The engineering company reported a pretax profit of GBP347,000 for the six months to December 31, down from GBP624,000 a year earlier, as revenue fell to GBP8.6 million from GBP9.9 million, mainly due to the timing of projects for its Ulva Insulation Systems business which produces products that reduce corrosion under insulation on pipes and vessels for the oil and gas and petrochemical industry.
"In the corresponding period last year ULVA benefitted from the carryover from the previous year of a major supply contract, the absence of which this year has resulted in reduced sales," it said. The ULVA business focused on an increased number of smaller projects in the half.
However, SWP is confident about ULVA's prospects, particularly as it will be launching a new cladding system product, ULVAGRP, into the market in the next financial year. "Prospects for 2015/2016 appear to be encouraging for this quality business," SWP said, although it warned about longer-term prospects should the low oil prices continue.
"ULVA's presence in the global oil and gas petrochemical markets has been largely unaffected by the rapid and dramatic fall in oil prices as most of the projects with which ULVA is associated have been in the planning phase for a number of years. In the event that the oil price remains at the current depressed level, it is envisaged that certain projects could be mothballed and/or postponed towards the end of the decade from 2019 onwards," it said.
Strong cash flow from the ULVA business meant the company was able to cut bank debt to GBP859,000, down 49% from GBP1.7 million a year earlier. That came despite an increase in capital expenditure to GBP703,000, from GBP128,000, as it built the facilities that will produce thje new ULVAGRP product.
SWP's other remaining businesses are The Fullflow Group, which produces systems to manage rainwater on large roofs, and Crescent Stairs, which produces design-to-order structural stairs. It is trying to expand the Fullflow business, including the Plasflow subsidiary that makes large diameter plastic pipework, particularly internationally.
"At Fullflow and Plasflow progress has been made but there remains a lot to do to fulfil the real potential of these brands on an international basis," admitted Chairman Alan Walker.
SWP took the decision to close down its Crescent of Cambridge business, which made spiral and helical stairs, saying it never really recovered from the financial crisis and ensuing economic downturn.
"Trading in the second half of the year is likely to improve against the performance in the first half save for the elimination of the activities at Crescent which will require an impairment provision on a once and for all basis as a "discontinued business", it said in an outlook statement.
"As we enter 2015/2016 the investment programme will have been completed and our focus will be entirely market facing as ULVA embarks upon its expansion plans on a multinational basis. We anticipate this will occur at much the same time as the group achieves its debt free status," it added.
SWP Group shares were down 7.7% at 9.00 pence Friday morning, a five-month low for the stock.
By Steve McGrath; [email protected]; @stevemcgrath1
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