Half Year Results

Superglass Holdings PLC ("Superglass" or "the Company")

Interim Results

Superglass Holdings PLC, the UK's leading independent manufacturer of glass wool and mineral fibre insulation solutions, today releases its unaudited Interim Results for the six months ended 29 February 2016.

Highlights

· Revenue up 2% to £10.5m (2015: £10.3m)

· Sales volumes reduced by 2% and average selling prices increased by 4% year-on-year, reflecting a planned transition in business and product mix

· Loss Before Interest, Tax, Depreciation, Amortisation and Exceptional Items ("LBITDAE") reduced by £1.4m to £0.5m (2015: £1.9m)

· Production costs per tonne reduced by 9% and distribution costs per tonne reduced by 22% as compared with prior half-year

· Gross cash as at 29 February 2016 of £2.4m and net cash of £0.8m at the interim period end, providing adequate cash headroom

· Appointment of Allenby Capital as Joint Broker

Chairman's Statement

I am pleased to report a £1.4m reduction in LBITDAE for the six month period ended 29 February 2016, compared with the same period last year, albeit the Company still recorded an LBITDAE of £0.5m. Other than to re-balance inventory levels in September 2015 and in the traditionally short trading month of December, the Company traded at break even or positive EBITDAE on a monthly basis during the period and expects to report positive EBITDAE for the full year to 31 August 2016, for the first time since 2012 (2015 full year: LBITDAE of £2.3m).

The ongoing turnaround plan remains on track, with the delivery of planned cost savings and the continued repositioning of the business towards growing construction markets and higher value added products now yielding the positive margin improvements targeted.

As expected, the reduction in capacity has driven an increase in selling prices, with average prices in the six months 4% higher than in the same period last year. Following the implementation of the managed capacity plan, sales volume has reduced by 2% half-year on half-year, with lower margin business being replaced by new higher margin business offering a richer mix of products and greater growth opportunities. A further price increase has been implemented by all UK glass wool manufacturers from 1 February 2016 and, although early indications are encouraging, the extent to which this increase will hold in a market which remains highly price competitive, remains to be seen.

The Company's recently launched blowing wool solution for new build housing, Superwhite 34, has gained traction in the market, with a number of national and regional contractors now stocking and installing this British Board of Agrément certified product. The Company has also established new trading relationships with several substantial customers, as a consequence of the broader range of products the Company is now able to supply.

The cost savings anticipated following the closure of one of the Company's furnaces have been exceeded and a number of additional cost saving initiatives have been implemented in relation to raw materials, energy consumption and logistics. As a result of the above, combined with favourable energy pricing, the average production cost per tonne has reduced by 9% as compared with the first half of 2014/15. Distribution costs per tonne have fallen by 22% following a strategic review of the outbound logistics operation.

As previously outlined, the Group continues to work closely with Viridor, its waste glass supplier, to implement a long-term solution to provide a reliable supply of cullet of the desired quality specification. Whilst further progress has been made, the timescale for investment in Viridor's Newhouse facility has been extended to April 2017. 

The Company continues to trade broadly in line with management's expectations and with adequate cash headroom.

Results and Markets 

During the period, Company revenues increased by 2% compared to the previous financial year primarily due to three main factors:

· Two separate price increases, implemented on 1 March 2015 and 1 February 2016, in common with other UK glass wool manufacturers

· A withdrawal, as planned, from certain lower margin business, which was replaced by new higher margin business offering a richer mix of products and greater growth opportunities and with an increased UK domestic market focus

· The introduction of new, higher value products such as Superwhite 34

The Company remains focused on UK domestic construction markets and, in particular, customers that offer a better mix of value added products, with the benefit of a stronger mix offsetting downward pressure on commodity pricing.

Operations

The cost savings realised from the mothballing of one of the Company's furnaces in August 2015 have exceeded expectations. The Company has benefitted from falling energy prices and has secured additional raw material cost savings as following the strengthening of the procurement function. As a result, production costs per tonne have fallen by 9% as compared with prior year.

The Company's waste glass supplier, Viridor, has recently advised Superglass of a substantial delay in its planned investment in the Newhouse facility, which would facilitate the supply of high quality cullet to the Company under a long-term supply agreement. This project is now anticipated to be completed by April 2017 and remains subject to internal approvals within Viridor and the agreement of acceptable commercial terms with the Company.

The Company completed a planned investment in a new waste gas port over Easter 2016 which has further extended the life of the furnace. Planning for the replacement of the furnace, now scheduled for 2019/20, remains on track.

Following a strategic review of outbound logistics operations, the Company has rationalised its supplier base and implemented new load planning procedures which have reduced distribution costs per tonne by 22% as compared with the same period in the prior year.

Board

On 1 February 2016, Jan Holmstrom joined the Board as the representative of Peter Gyllenhammar AB, thereby strengthening the links between the Company and its largest shareholder.

On 21 March 2016, the Board announced that Chris Lea, Finance Director, is to leave the Company to take up the position of CFO at AIM-listed Indigovision Group plc. Chris will leave the business on a date still to be agreed, but no later than 30 June 2016. The process to appoint Chris' successor is well underway and a further announcement will be made in due course.

Executive

Stuart Rowell was appointed Group Business Development Director on 18 April 2016. Stuart joined the Company from consultancy firm Positive Momentum, where he specialised in sales transformation. Based at the Company's headquarters in Stirling, he will take responsibility for all domestic sales and exports and marketing and will also oversee the commercial function.

Dividends

The Company will not be paying an interim dividend. Whilst the Board intends to resume the payment of dividends when the Company's profitability, cash generation and underlying growth of the business so justifies, the Board has not considered it appropriate to recommend the payment of dividends and does not anticipate doing so in the current financial year.

Financing

There is a continued strong focus on cash management. The gross cash balance as at 29 February 2016 was £2.4 million. The net cash balance as at 29 February 2016 was £0.8m. Cash headroom remains adequate.

Appointment of Allenby Capital Limited as Joint Broker

The Company has been advised by N+1 Singer Advisory LLP since IPO in 2007. With the turnaround programme gathering momentum, the Board has decided that the Company would benefit from additional broking support and has appointed Allenby Capital Limited as Joint Broker with immediate effect.

Outlook

It is expected that the selling price increase seen in recent months will be sustained and planned volume growth realised, along with the delivery of incremental cost savings. The overall trading performance of the business continues to be broadly in line with management expectations as outlined in the recent trading update dated 10 March 2016, underpinning the Board's confidence in a return to positive EBITDAE in aggregate for the full financial year, for the first time since 2012. 

For further information, please contact:

Superglass Holdings PLC

Ken Munro, Chief Executive Officer 01786 451 170

Chris Lea, Finance Director

 N+1 Singer Advisory LLP

Sandy Fraser or Nick Owen 020 7496 3000

Allenby Capital Limited

David Hart or James Thomas 020 3328 5656

Charlotte Street Partners

David Gaffney 0131 516 5310

This announcement contains certain forward-looking statements with respect to the financial performance, financial position and businesses of Superglass Holdings PLC. These statements involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Except as required by law, Superglass Holdings PLC has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

Notes to the accounts

for the six months ended 29 February 2016

1 Basis of preparation

These interim financial statements represent the condensed consolidated financial information of the Company and its subsidiaries (together referred to as "the Group") for the six months ended 29 February 2016. They have been prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial Conduct Authority and the requirements of IAS 34 Interim Financial Reporting as adopted by the EU. The interim financial statements were approved by the Board of Directors on 27 April 2016. The interim financial statements do not constitute financial statements as defined in Section 435 of the Companies Act 2006 and do not include all of the information and disclosures required for full annual financial statements. 

They should be read in conjunction with the annual report and accounts 2015 which are prepared in accordance with IFRS as adopted by the EU and which are available on request from the Company's registered office or to download from www.superglass.co.uk.

The interim financial statements for the current and previous period are unaudited. This interim financial statement has not been reviewed by the Company's auditor. The comparative figures for the financial year ended 31 August 2015 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The Independent Auditors' Report was: (i) unqualified; (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

In determining whether the Group's 2016 interim financial statements can be prepared on a going concern basis, the Directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowings facility and the risks and uncertainties relating to the business activities in the current economic climate.

The key factors considered by the directors were;

· the rate of growth in demand across construction markets and the impact of changes in Government-led demand generating initiatives such as ECO/Green Deal;

· movements in input prices and the availability of credit from suppliers;

· the ability of the Group to maintain its frequency of receipt of trade receivables and the credit risk associated with these balances;

· the competitive environment in which the Group operates;

· the potential actions that could be taken in the event that revenues are lower than expected in order to protect cash flows and operating profit;

· the ability of the Group to realise planned selling price increases; and

· the finance facilities available to the Group, including the availability of any short-term funding required.

The Group prepares regular forecasts and projections of revenues, profits and cash flows that are essential for identifying areas on which management can focus to improve performance and mitigate possible adverse impact of a deteriorating economic outlook. They also provide projections of working capital requirements and adherence to banking covenants.

The Directors have reviewed the trading and cash flow forecasts as part of their going concern assessment, including downside sensitivities, which take into account the uncertainties in the current operating environment.

Having considered all the factors impacting the Group's business and having prepared relevant financial projections and sensitivities, including financial projections which allow for reasonably possible downsides to the Group's base case projections, and taking account of mitigating actions that can be taken in periods when headroom is tight, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, a period of time not less than 12 months from the date of this report. Accordingly, the Directors continue to adopt the going concern basis in preparing this Interim Report.

2 Significant accounting policies

The interim financial statements are prepared on the historical cost basis (except in relation to convertible shares and intangible assets arising on business combinations which are stated at fair value) and are presented in Pounds Sterling, rounded to the nearest thousand.

The preparation of the interim statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities and income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of the judgements made about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. There has been no material change to the approach taken by Directors in considering estimates and judgements considered to be critical compared to that applied and detailed in the annual report and accounts 2015.

The Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 August 2015.

2 Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group as disclosed in its consolidated financial statements as at and for the year ended 31 August 2015.

3 Segment information

The Group has only one class of business: the manufacturing and sale of insulation materials and, as a result, has only one reportable segment with no aggregation having been applied. The reportable segment has been identified with reference to the activities of the Group and the information used by the Chief Operating Decision Maker (the Board). The performance of the segment is assessed by reference to its gross profit.

Manufacture and sale of insulation

All revenue is from external customers with no inter-segment revenues given the existence of only one operating segment.

The segment gross profit is reconciled to the total profit before income tax as shown in the Consolidated Statement of Comprehensive Income.

All of the assets of the Group are managed by the Board on a central basis. All of the assets of the Group are deemed to be attributable to the reportable segment and, as a result, no separate reconciliation of segment assets to the total assets figure on the Balance Sheet is necessary.

Other information

The Group operates predominantly within the UK and Ireland with some worldwide sales, largely in the EU. Revenue is attributed to external customers based on the location of the customer.

Major customers

There were two customers (six months ended 28 February 2015: two; year ended 31 August 2015: two) that accounted for in excess of 10% of the Group's revenue. These customers accounted for £4.5 million (six months ended 28 February 2015: £3.4 million; year ended 31 August 2015: £8.0 million).

4 Exceptional items

Items of exceptional income and expenditure in the period to 29 February 2016 relate to the settlement of a trailer fire claim and redundancy costs as a result of reorganisation.

Items of exceptional income and expenditure in the year to 31 August 2015 include a gain on repayment of borrowings, accelerated depreciation on the mothballing of a furnace, goodwill impairment and an unexpected supplier invoice relating to a true-up exercise covering six prior years. Reorganisation costs relate to professional fees related to the aborted sale process and compensation for loss of office and related costs.

5 Tax charge

The estimated effective rate of tax for the full year is 20% (six months ended 29 February 2015: 21%; year ended 31 August 2015: 21%). No provision has been made to increase the deferred tax asset as the directors do not believe there is sufficient certainty over the recoverability of this asset as yet. This position will be reviewed again at 31 August 2016.

6 Property, plant and equipment

The closing balance includes £413,000 (at 28 February 2015: £196,000; at 31 August 2015: £351,000) of assets under construction.

7 Intangible assets

8 Cash and cash equivalents

Within cash and cash equivalents there are no borrowing facility balances offsetting the cash at bank (28 February 2015 £nil; 31 August 2015 £nil.

9 Retirement benefit obligations

Superglass Insulation Limited operates a defined contribution Group Sponsored Personal Pension Plan, which is a qualifying pension scheme for auto-enrolment purposes. The assets of the scheme are held separately from those of the Company in independently administered funds. Employer contributions to the fund are recognised as an employee benefit expense in profit or loss when they are due. Contributions made in the period were £120,000 (six months ended 28 February 2015: £118,000; year ended 31 August 2015: £243,000).

10 Share capital

2016

In the six months to 29 February 2016 there were no changes to the capital structure in place.

2015

In the year ended 31 August 2015 the Group concluded a capital reorganisation, an issue of equity share capital and the refinancing of bank debt that was approved by shareholders at an Extraordinary General Meeting on 30 October 2014 and has the following impact:

The existing 25.0p ordinary shares were sub-divided into one ordinary share of 1.0p (post-capital reorganisation Shares) and one deferred share of 24.0p.

Following the capital reorganisation the equity share issue of 125,000,000 ordinary shares with a par value of 1.0p at an issue price of 5.0p proceeded, increasing the equity share capital of the Company by £6,250,000. Issue costs of £448,000 are recognised directly in equity.

During the year, the Group settled the secured bank loan of £2,500,000 at a discount of £370,000. One of the consequences of the refinance was to permit the conversion of the 2,800,757 convertible shares owned by the Group's bankers into ordinary shares in accordance with their terms. As at 31 August 2015 2,500,000 of these shares had been converted into ordinary shares.

11 Loss per share

The calculation of basic and diluted loss per share at 29 February 2016 was based on the loss attributable to ordinary shareholders of £1,817,000 (six months ended 28 February 2015: loss £2,829,000; year ended 31 August 2015: loss £8,582,000).

Adjusted loss per share

Adjusted loss per share at 29 February 2016 was 1.1 pence (six months ended 28 February 2015: loss 2.8 pence; year ended 31 August 2015: loss 2.9 pence). Adjusted loss per share is based on the loss attributable to ordinary shareholders after adding back amortisation of intangible assets and the impact of exceptional items. Adjusted loss amounts to £1,765,000 for the six months ended 29 February 2016.

Weighted average number of ordinary shares

During the six months to 28 February 2015 there was an issue of equity share capital as outlined in note 10. 

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12 Contingencies and commitments

13 Related party disclosures

The Group has a related party relationship with its Executive and Non-executive Directors. There is no change in the position disclosed in the Superglass Holdings PLC annual report and accounts for the year ended 31 August 2015.

14 Principal risks and uncertainties

The 2015 annual report sets out the principal risks and uncertainties faced by the Group at August 2015 and details the processes in place for managing those risks.

The directors do not consider these risk factors to have changed significantly and therefore the principal risks and uncertainties facing the Group for the remaining six months of the year are consistent with those set out in the 2015 annual report. However, there may be additional factors which are not currently known to the Group, or which we currently deem immaterial, which may also have an adverse effect on our business.

There have been no significant changes to the risk management process in the interim period.

Statement of Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors of Superglass Holdings PLC.

The directors confirm that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;

· the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

Ken Munro Chris Lea

Chief Executive Officer Finance Director