12th Jul 2007 07:00
Superglass Holdings PLC 12 July 2007 For Immediate Release 12 July 2007 Superglass Holdings PLC FUNDRAISING AND FIRST DAY OF DEALINGS ON THE OFFICIAL LIST Superglass Holdings PLC ('Superglass' or the 'Group'), one of the UK's leading manufacturers of glass mineral fibre insulation products for the property market, is pleased to announce its flotation on the Official List of the London Stock Exchange today and the publication of its prospectus. Dealings in the Group's shares will commence at 8am. The Group's ticker symbol will be SPGH.L. • Superglass has placed £72.8m of existing shares with institutional and other investors on behalf of selling shareholders, NBGI Private Equity's Fund and Investec Private Bank Growth & Acquisition Finance via an oversubscribed Placing at a price of 180p. • Admission will provide the Group with access to capital markets to exploit expected organic and acquisitive growth opportunities given increasing demand in the UK and Europe for insulation products. • The market capitalisation on admission to the Official List is expected to be approximately £105m. • Established by Encon Limited in 1987, Superglass is the second largest supplier of glass wool insulation products in the UK. • There are currently only two other domestic manufacturers in the glass wool insulation market (BGI and Knauf). Imports to the UK are minimal given high transportation costs. • In August 2005, Superglass was the subject of a buy-out led by NBGI Private Equity, whose Fund acquired the majority shareholding investing alongside the management team. Most of the management have been with the business since it started in 1987 and John Smellie has led the team as Managing Director since 1990. • Using its strong brand name and distribution network, Superglass supplies glass wool quilt rolls, slabs and blowing wool, principally to the UK market and parts of Europe. Glass wool quilt rolls are mainly used in domestic, residential, agricultural and industrial applications, whilst slabs are used in the insulation of cavity walls in new buildings. Blowing wool comprises pelletised glass wool fibre which is injected into the cavity walls of existing buildings or new build housing before the cavity is sealed. • The market for glass wool insulation entered a growth phase in 2002. It is driven by a combination of government initiatives to reduce carbon dioxide (CO2) emissions and conserve energy by encouraging effective domestic insulation through its Energy Efficiency Commitment. Other market drivers include changes to UK Building Regulations, other regulatory changes at national and EU level, greater awareness of environmental issues and high levels of construction activity. • The market is forecast to grow by 37% between 2006 and 2010 as the third phase of the Energy Efficiency Commitment ('CERT') will commence by March 2008, and other key drivers continue to propel demand. • Following the expected end of CERT in 2011, estimates indicate that some 10 million lofts could have inferior insulation levels to those required in new build properties and 5.5 million cavity walls could require insulating, underpinning Superglass' market in the longer term. • Products are supplied to specialist distributors, contractors and builders' merchants. Two major customers, with whom Superglass have stable and long term trading relationships and formal supply agreements account for some 60% of its sales and provide good forward visibility of revenues. • Superglass' production facility is based in Stirling, Scotland and has a current manufacturing capacity in excess of 60,000 tonnes of glass wool fibre per annum. The configuration of this automated plant is such that it is highly flexible and production can be increased with minimal disruption and at relatively low capital cost, to meet increasing demand. • The Group has strong environmental credentials; using significant amounts of recycled glass in the production process and recycling waste products. The plant also has processes in place to control particulate emissions. • The Group has an excellent financial track record having consistently increased its turnover and profitability over the last 10 years. In the year ended 31 August 2006, Superglass reported turnover of £41.7m and EBITA of £10.1m. Strong cash generation is expected to enable a progressive dividend policy to be adopted. • Strong prospects for the domestic market for glass wool insulation provide opportunities for organic growth, whilst there is also scope for Superglass to consolidate its limited presence in the European market through targeted acquisitions. Other possible acquisitions could provide access to complementary insulation products or new applications for existing products. • Brewin Dolphin Investment Banking is acting as Sponsor and Broker to the Group. • Other advisers to the flotation are as follows: •Legal advisers to the Placing - Dickinson Dees •Legal advisers to Superglass - Eversheds LLP •Reporting Accountants - KPMG LLP On the plans for flotation, John Smellie, Managing Director of Superglass said: 'I am delighted to announce our flotation on the London Stock Exchange. We believe that Superglass has now reached a stage in its development where its strategic objectives can be more readily achieved as a publicly quoted company. 'Our business is performing well and is entering into a period of strong growth driven by a recognised global need to reduce the level of greenhouse gas emissions. We believe that a quotation on the Main Market will provide the Group with access to additional funding enabling us to achieve our growth aspirations whether organically or by acquisition.' For further information, please contact: Superglass Holdings PLC John Smellie, Managing Director 01786 451 170 Tony Kirkbright, Finance Director Buchanan Communications Diane Stewart/Karen Morrison/Tim Anderson/ Nick 0131 226 6150 / 0207 466 5000 Melson Brewin Dolphin Investment Banking Andrew Kitchingman 0113 241 0130 Graeme Summers 0191 279 7300 Brewin Dolphin Securities Limited, a member of the London Stock Exchange, authorised and regulated by the Financial Services Authority, is acting for the Company only and will not be responsible to any other persons for providing the protections afforded to clients of Brewin Dolphin Securities Limited or for advising such person on the matters referred to in this announcement. Brewin Dolphin Securities Limited has not approved the contents of, or any part of, this announcement. KEY INFORMATION ON SUPERGLASS BACKGROUND The Superglass Group is a leading manufacturer and supplier of glass wool thermal insulation products to the UK market. The Group's principal trading subsidiary, Superglass Insulation, was established by Encon Limited in 1987, when a rock wool manufacturing facility in Stirling was acquired. Having converted this plant to the production of glass wool products, a successful entry was made into the market through the distribution network of Encon Limited and by winning business from other smaller distributors and contractors by providing a flexible service that enabled relatively small quantities to be ordered on short delivery times. Superglass Insulation remained a subsidiary of Encon Limited until August 2005 when NBGI Private Equity's Fund and certain members of the management team, who had been responsible for running the business since 1987, acquired the company by way of a management buy-out. MANUFACTURING FACILITIES The production facility is located on the Thistle Industrial Estate in Stirling on a site totalling approximately 60,000 square metres of which some 23,000 square metres comprises manufacturing facilities, warehousing and offices occupied by the Group. Superglass holds the freehold to the site and unused space is sub-let on short term leases with unexpired terms of less than five years. Superglass has two fully automated production lines, each of which comprises a gas/oxygen fired furnace, rotary fiberising technology for fibre production, conveyor systems, curing ovens and finishing and packing equipment. PRODUCTS AND APPLICATIONS Thermal insulation is used in applications where there is a requirement to reduce heat transfer. Insulation products can be manufactured from a range of materials including mineral fibres (of which the main types are glass wool and rock wool), polyurethane foams, polystyrene, paper based cellulose, cork and sheep's wool. Mineral wool products represent the largest segment of the UK insulation market and account for 95 per cent of all retrofit cavity wall insulation installations and 90 per cent of all loft insulations 1. Superglass focuses solely on the manufacture and sale of glass wool mineral fibre products for the following principal sectors: Percentage of total sales by volume Contractors 49 Specialist distribution 35 Builders' merchants 8 Export* 7 Other 1 * Includes sales to Republic of Ireland Source: Unaudited management sales analysis for the 12 months to August 2006 Glass wool products have two primary uses: •Loft insulation, either at ceiling level between the joists ('cold roof' applications) or at rafter level under the roof and held in place with a suitable liner board ('warm roof' applications); and •Cavity wall insulation using slabs of glass wool (known as batts) inserted in the wall cavity during construction or by injecting blowing wool into the cavities of existing buildings: blowing wool comprises pelletised glass wool either in 'white wool' form (virgin fibre extracted at the interim manufacturing stage before it is converted into finished matting) or in 'yellow wool' form (made from by-products of the manufacturing process). There are also a number of other uses of glass wool, including cladding of industrial buildings, lagging of pipes and water tanks and insulation incorporated within industrial equipment and consumer products. 1 Review of the UK Insulation Sector Supply Chain, Energy for Sustainable Development Limited, 15 December 2005 MARKETS In total, the UK market for mineral wool was estimated to be worth approximately £285 million in 2005 with glass wool accounting for approximately 60 per cent of this. It has since entered a period of strong growth, generated by a combination of the effects of the UK government's commitment to reduce CO2 emissions (by 26-32 per cent by 2020 and 60 per cent by 2050) and conserve energy by encouraging effective domestic insulation, together with regulatory change at both national and EU level and high levels of activity in the residential construction sector. Projections from a report by the Competition Commission (entitled: A report on the proposed acquisition of Superglass Insulation Limited by Knauf Insulation Limited, November 2004) indicates that the glass wool insulation market could grow by 37 per cent. between 2006 and 2010. By 2009, the Competition Commission assessed that total sales of glass wool could amount to approximately 300,000 tonnes per annum compared to an estimated 2006 tonnage of 206,000. The Directors believe that these projections remain valid. GOVERNMENT INITIATIVES It is a commonly held view that climate change is a major environmental challenge which stems largely from human activity and carbon dioxide emissions. In 1997, as a first step in responding to this challenge, the UK government signed up to the Kyoto Agreement and thereby committed to cutting greenhouse gas emissions by 12.5 per cent. (compared to the 1990 level) by 2010. The UK has since committed to a 20 per cent reduction in carbon dioxide emissions and with around 40 per cent. of carbon dioxide emissions in the UK coming from buildings, improvements to the energy efficiency of buildings in the UK would significantly contribute to the achievement of these targets. In order to progress towards satisfying these commitments, the government developed an action plan called 'Energy Efficiency: The Government's Plan for Action: April 2004'. This plan has resulted in the implementation of a range of programmes to help reduce greenhouse gas emissions, including: • The Energy Efficiency Commitment (see further detail below); • The Climate Change Levy; • The Warm Front Programme; • The Decent Homes Programme; and • The EC Energy Performance of Buildings Directive. ENERGY EFFICIENCY COMMITMENT Under the Energy Efficiency Commitment ('EEC'), utility suppliers are required by the government to achieve targets for the promotion of improvements in domestic energy efficiency. Using less energy was highlighted in the government's Energy White Paper, 2003, as being the cleanest, safest and cheapest way of addressing the government's energy policy objectives. The successor programme to EEC, the Carbon Emissions Reduction Target ('CERT') which was announced in the May 2007 White Paper 'Meeting the Energy Challenge' will contribute to the climate change programme by helping to cut greenhouse gas emissions. EEC has also assisted the government's Fuel Poverty Strategy by requiring the utility companies to target at least 50 per cent. of the energy savings at certain low income domestic consumers. The first phase of EEC ran from 1 April 2002 to 31 March 2005 ('EEC1'). The second phase of EEC runs from 1 April 2005 to 31 March 2008 ('EEC2') and has required around double the level of activity of EEC1. CERT, the successor programme to EEC will run from 2008 to 2011 and has an energy saving target that is approximately double that of EEC2. BUILDING REGULATIONS Building standards, including insulation requirements for all new buildings in England and Wales, are set out in the Building Regulations 2000. In March 2006 Part L of the Building Regulations, which governs the conservation of fuel and power, was amended to further demonstrate the determination of the Office of the Deputy Prime Minister to ensure higher energy efficiency standards in buildings. The level of energy efficiency is to be determined by reference to an allowable level of carbon dioxide emissions. Regulations in Scotland and Northern Ireland are broadly similar to those in England and Wales, however they tend to be slightly behind England and Wales in terms of energy efficiency requirements SUMMARY FINANCIAL INFORMATION Year Year Year 6 month period 6 month period Ended Ended Ended ended ended 31 August 31 August 31 August 28 February 28 February 2004 2005 2006 2006 2007 £'m £'m £'m £'m £'m UK GAAP IFRS IFRS IFRS IFRS Audited Audited Audited Unaudited Audited Turnover 29,754 36,691 41,676 20,407 21,375 ------- ------- ------- -------- -------- EBITA 3,980 7,583 10,080 3,826 4,563 ------- ------- ------- -------- -------- Cash flow from operating activities 7,731 8,129 9,675 4,684 4,184 ------- ------- ------- -------- -------- DIRECTORS John Smellie, Managing Director John joined Cape Insulation in 1973 after a brief spell with Collins (Publishers), Glasgow where he was the Works Chemist. He worked with Cape Insulation until the end of 1984 having held various positions within the organisation from Works Chemist to Works Manager. After leaving Cape Insulation, he joined Encon in 1985 as the Managing Director of their manufacturing operation, Enconvertors. In this role he was instrumental in Encon identifying and establishing Superglass as a manufacturing operation. In 1987 he was appointed as General Manager of Superglass Insulation and in 1990 was made Managing Director. He led a team of six directors of Superglass Insulation that that participated in NBGI Private Equity's buy-out of the business from Encon in August 2005. He has a BSc in Applied Chemistry and a C. Eng in Fuel Technology. Tony Kirkbright, Finance Director Tony joined Encon in 1986 as Group Accountant from the Celcon Group Plc based in Leeds where he was a cost accountant of a division of that company. On joining Encon, Tony took responsibility for implementing the financial and commercial systems required for Superglass Insulation to operate as a stand alone entity when it was formed in 1987. He was appointed as Finance Director of Superglass Insulation in September 1990 and has since been involved in all aspects of the general management of the business. As Finance Director, Tony has also been responsible for the finances of the European subsidiaries of Encon in France and Germany which have since been sold. Tony is a qualified accountant. Tim Ross, Non-executive Chairman Tim Ross read law at Oxford University and qualified as a solicitor, working in the City of London and as a company legal adviser, before attending London Business School and moving into general management. He has considerable experience of the construction industry and related sectors. He was a main board director of George Wimpey PLC from 1991 to 1996 and is currently chairman of May Gurney Integrated Services plc and Hargreaves Services plc, deputy chairman of Connaught plc and a non-executive director of Ennstone plc and Lavendon Group plc, in addition to board positions with a number of other private or venture capital backed companies. He is a member of the Governing Councils of Clifton College and the University of Bristol. David Shearer, Non-executive Director David Shearer is an experienced corporate financier, board level strategic adviser and business manager with both UK and international experience. Prior to 2003 he held senior positions with Deloitte & Touche where he was a partner and latterly a UK Executive Board member of the firm. David is Chairman of Crest Nicholson Group Limited which recently acquired house builder Crest Nicholson plc, senior independent director of SMG plc and Renold plc, a non-executive director of Aberdeen New Dawn Investment Trust plc and Scottish Financial Enterprise and a governor of the Glasgow School of Art David is also an advisory board member of Martin Currie Limited and was formerly a non-executive director of HBOS plc.Related Shares:
SPGH.L