Half Yearly Report

SWP Group plc (the "Group")

Half Yearly Results

for the six months ended 31 December 2014

Financial Highlights

n Group sales decreased by 13% to £8.632M (2013: £9.920M).

n Operating profit before exceptional costs and amortisation of intangible assets fell by 44% to £480K (2013: £863K).

n Profits before tax decreased by 44% to £347K (2013: £624K).

n Earnings per share decreased to 0.14p per share (2013: 0.25p).

n Group bank debt reduced by 49% to £859K (2013: £1.692M).

n Finance lease obligations increased to £954K (2013: £13K).

n Profit attributable to associate increased to £82K (2013: £15K).

n Capital expenditure in period increased to £703K (2013: £128K).

Operational Highlights

n New production line at ULVA in Telford delivering to plan in terms of productivity, efficiency, yield and quality.

n New production facilities and factory established at West Bromwich in West Midlands to house manufacturing of ULVAGRP by May/June 2015.

n Nuclear business at Plasflow at increased levels.

n Fullflow International development in accordance with plan.

n Temporary drop in sales at ULVA due to timing of projects.

n Orderly closure of Crescent of Cambridge Limited to eliminate losses.

n Continued commitment to R&D to develop ULVA brands.

n Maintained cost control throughout the various businesses.

n Strengthening of management teams at both ULVA and Fullflow through recruitment of key personnel.

Alan Walker, Executive Chairman, commented:

"The results delivered in this six month period reflect the adverse timing associated with project led businesses. ULVA continues to make progress and we expect the arrival of ULVAGRP for the new 2015/2016 financial year to be welcomed by the market. Prospects for 2015/2016 appear to be encouraging for this quality business. 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. The closure of Crescent whilst disappointing will eliminate losses and senior management time can be more profitably deployed in the promotion of our core activities"

Chairman's Statement

Corporate Review

When I last reported to shareholders at our most recent Annual General Meeting I was able to report that following the strong results recorded for the year to 30th June 2014, we anticipated steady if unspectacular results for the current year. This has proved to have been the case primarily due to the project led nature of our two principal businesses, ULVA, a leading supplier of specialised materials designed to reduce Corrosion Under Insulation ("CUI") and Fullflow, a leading supplier in the delivery of syphonic rainwater management systems to a wide cross-section of international customers.

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. Turnover has in the main centred on an increased number of smaller projects due to the timing of further major international projects where ULVA has been specified, falling into periods outside the current financial year.

Financial Results

The sharp upturn in economic activity in the United Kingdom has witnessed greater enquiry levels within Fullflow's core business in the UK, which extends beyond the construction industry, into the provision of fabricated and welded pipe solutions to the nuclear sector from Plasflow's dedicated facilities based in Rotherham. Market conditions have improved despite competitive pressures. At the same time 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. At least in the short run over the next two to three years ULVA benefits from the transparency over a number of large projects where ULVAShield has been specified which should provide significant revenue streams going forward.

Revenue in the period declined to £8.63M (2013: £9.92M) with operating profits before exceptional costs and amortisation of intangible assets falling to £480K (2013: £863K) or by 44.3%. Profits before taxation fell to £347K (2013: £624K) with earnings per share declining to 0.14p per share (2013: 0.25p).

Group Bank Debt

A consistent feature of the Group's results over the past three years has been our ability to reduce bank debt throughout the recession to the current low levels of gearing. This is primarily due to the incidence of strong cash generation within ULVA which has not only permitted the reduction in borrowings, but also allowed the business to invest heavily in its future through two major capital expenditure programmes to which I refer below.

On a straight year-on-year comparison, bank debt has declined to £859K (2013: £1.692M) or 49.2% notwithstanding the investment of £1.721M in capital expenditure in the year to 30th June 2014 and a further £703K in the six months to 31st December 2014. Against this, however one has to take cognisance of the introduction of finance leases which have been entered into of £799K at 30th June 2014 which have since reduced to £595K as at the period end on 31st December 2014 (2013: £4K). The return on capital within ULVA is considerable as is its ability to fund and discharge the lease obligations over the next three years.

As in previous years the Consolidated Statement of Financial Position remains robust with investment in the modernisation and expansion into plant and equipment of a bespoke nature financed largely through cash generated within the business.

Operational Highlights

ULVA

ULVA specialises in the manufacture of systems to reduce corrosion under insulation (CUI) in the oil, gas and petrochemical sectors.

Less than a year has passed since the commissioning of the process line in Telford for the manufacture of the ULVAShield range of products but the substantially extended operations are already very much "the way we do things around here" which is of great credit to ULVA's operations team. Productivity, efficiency, yield and quality are all precisely to plan.

The business is now well into the launch of its new ULVAGRP product range. Product formulations and recipes were completed over one year ago which has allowed the complete range of third party testing and accreditation to be undertaken and established. The complete range of moulding tools is now in place ready to commence supply of the ULVAClad pre-cured system. The commercial launch at Offshore Korea in November 2014 generated substantial interest ahead of the commencement of supply in the final quarter of the financial year ending on 30th June 2015. A new facility has been established in West Bromwich in order to take advantage of the historical skill base that has been long established as a centre of excellence for the UK in the area, for this particular technology. Installation of the "designed for purpose" process line, which is being designed and manufactured at a specialist company in Germany, will take place during April and May 2015 with commercial supply following almost immediately. 

ULVA's presence continues to grow in terms of depth of specification and the number of projects being concurrently transacted which is being aided by the stability in ULVA's globally based team. As predicted the absence of a single large project in the current financial year will mean that overall results will not match the prior year. However, continued growth in the ULVAShield range of projects and customers combined with the anticipated flow of ULVAGRP systems gives cause for optimism for the financial year to 30th June 2016 ahead of the commencement of long awaited major projects thereafter.

ULVA continues to invest heavily in R&D in support of the requirement for innovative solutions from discerning customers and specifiers all over the world.

Fullflow

Shareholders will recognise that Fullflow's brand is synonymous with the provision of rainwater management systems to a wide range of customers on an increasingly global basis who appreciate the advantages of using modern technology to drain large roofscapes effectively and efficiently. This is increasingly prevalent when rainfall intensity is more volatile than in the past and climatic weather conditions are constantly changing.

Fullflow Group

In the United Kingdom market sentiment within the construction sector has continued to improve. Enquiry levels have increased across the board and there are encouraging signs that infrastructure projects particularly in the area of waste plants, crossrail and distribution centres as well as in the field of education through schools are areas of growth. In the UK, markets remain price sensitive with competitive pressures being applied by main contractors whose only objective criteria to assess the award of a contract appears to be "price". This excludes most if not all elements of the tender offerings including product warranty, insurance and quality of installation whether or not in accordance with specification. This is rapidly becoming an area of concern for the ultimate end user of these systems whose reliance on collateral warranties long after the main contractor has moved on is open to serious doubt as sub contractors disappear from the market into insolvency only to return shortly thereafter in another guise to resume their activities from where they left off. In such circumstances main contractors are doing their employers and indeed the image of the syphonic sector a disservice and potentially long term damage. Fullflow is embracing the challenges which this trend has created with customary vigour. Fullflow has been slow to react to the changing circumstances within the construction industry in the UK. However, the sales team has been strengthened and our product offering refined in a number of key areas so as to promote the advantages of specifying Fullflow's product offering which has installed well over 30,000 systems over the past 30 years. Technical innovation features prominently, the majority of which is designed to promote productivity and effectiveness on site. The results to the half year have been disappointing but the order book has been increasing and the measures taken to inject leadership and focus are expected to deliver improved results for the full year to 30th June 2015.

Fullflow International 

This rapidly expanding business in terms of territories and opportunities continues to please. The brand is associated with leadership in the field of syphonics and is being heavily promoted in countries such as Brazil, Mexico and Korea. The completion of the major infrastructure project in the shape of the Fiat/Chrysler car plant in Gionna, Brazil, was hailed by our customer as a huge success and represents a crucial example of Fullflow's capabilities in international markets through supply of components, design and project management allied to the competence of locally selected partners to supply locally sourced materials and installation labour. The results to the period end are entirely to plan and the expectations for the financial year are similar to those of last year. This well managed business represents a cornerstone in Fullflow's strategy of expanding internationally in line with increased globalisation of the brand.

Fullflow Systemé 

It is fair to say that whilst the UK suffered in the depths of recession during the period 2008 - 2012 the French economy remained fairly resilient. The economic fortunes of France have since declined and the country faces difficult economic conditions which are having a deleterious effect on its construction sector. For this reason we continue to take a cautious approach to our business in France. The principal feature of this current year lies in the execution of a major contract to install a large syphonic system into the new Stade de Lyon. This contract began with a slow and unproductive start which rendered the period results as disappointing but the project is now in full swing with delivery expected to complete in July 2015 in readiness for the new season in September 2015 when Lyon are expected to feature in the European Champions League if their form is sustained to the end of this soccer season. Elsewhere margins continue to be under pressure as we execute contracts on a national basis and we are taking stringent measures to the control of costs at a time of economic uncertainty.

Plasflow

I am happy to report that this business is enjoying a period of strong growth particularly in the field of supply to the nuclear sector where our experienced team is able to offer large scale pipework solutions to most of the UK nuclear plants under the ownership and control of EDF of France. There are three main strands to Plasflow's business activities. Firstly, as a sub contractor to each of the Fullflow businesses in the UK and internationally where fabrications of pipe and rail are carried out in Rotherham and dispatched to site wheresoever located. Secondly, as a fabricator of choice to a number of UK third party customers who recognise that through Plasflow's expertise and advanced welding techniques they enjoy good relations across a wide range of customers whose needs are aligned with the core competences on offer at Plasflow. Thirdly, as a major provider of pipe based solutions to meet the technically advanced requirements of the nuclear industry in the UK. As a core supplier in partnership with other major sub contractors to the nuclear industry, Plasflow has carved its own niche which has enabled it not only to record strong profits for the period but to anticipate a continuation to the end of the financial year to 30th June 2015 and beyond.

Crescent of Cambridge 

This small business operating from St Ives in Cambridgeshire has been a disappointing performer for several years and has never really recovered from the economic recession in the UK at which time sales volume declined to potentially uneconomic levels. The market for spiral and helical stairs is very fragmented. During the period the company has successfully completed the single biggest contract in Crescent's history in the City of London and yet the business has failed to make sufficient headway to justify continuing support from the parent whilst operating losses have continued to be recorded. Crescent's losses have had a negative impact on the Group's results for the six months to 31st December 2014. As a consequence and following receipt of planning permission to redevelop the company's factory and offices in St Ives, the Board embarked upon a strategic review of this subsidiary's operations and decided as a post balance sheet event in March 2015 to close the business in an orderly manner thereby eliminating the losses ahead of the new financial year from 1st July 2015. This is a disappointing outcome for this quality brand and will lead to an impairment provision as at 30th June 2015. However, the cash impact of this provision is considered to be modest when compared to the cost of continuing to fund losses at Crescent. The prospect of being able to redevelop the property assets in St Ives offers the Group significantly better returns than Crescent was considered likely to produce and the eventual sale of the property will help to generate further cash resources for investment in the Group's core activities. In recent times Crescent has required an increasing level of management resources from the parent that have been disproportionate and difficult to justify. The elimination of such distractions will release senior management in its efforts to promote both ULVA and Fullflow in their international expansion plans going forward.

Research & Development

As previously, the Group remains committed to be at the leading edge of technical development in each of the fields in which we operate. At Ulva there is an ongoing requirement to test and certify each of our products in order to meet the stringent specification requirements laid down by the oil and gas majors. The pace of product development and innovation is likely to quicken which we believe will set us apart from competition. At Fullflow there is less scope for innovation but patents have now been taken out on a fusion butt welding process which allows such joints to be welded at height in predetermined circumstances. Innovation and creative solutions have and will continue to be one of Plasflow's key competences and this is likely to continue for the foreseeable future.

Staff

There is a vibrancy to present market conditions which has allowed the Group to invest heavily in the future. The efforts to expand into ULVAGRP with the establishment of a brand new factory in the Midlands with associated manufacturing plant and equipment are key strategic developments as are the efforts within Fullflow and Plasflow to gain market share and improve profitability.

To all our employees the Board offers its sincere gratitude for the considerable efforts that are expended in the delivery of our strategic plans to expand the Group's two principal brands on an international basis.

Current Trading and Prospects

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". The commencement of manufacture of ULVAGRP will take place in the final two months of this financial year. Prospects for ULVA in 2015/2016 are very encouraging with expectations for the delivery of a number of projects for which ULVAShield is specified likely to accrue. In addition the introduction of ULVAGRP will begin as eagerly anticipated by the market and will be highly complementary to the existing range of ULVA products. Both at Fullflow and Plasflow there are many challenges to face but market conditions are favourable in each area of expertise. Both sales and operating

profits are expected to advance in the short and longer term.

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.

J A F Walker

Chairman

27th March 2015

Unaudited Consolidated Statement of Comprehensive Income

Unaudited Consolidated Statement of Changes in Equity

Unaudited Consolidated Statement of Financial Position

Unaudited Consolidated Statement of Cash Flows

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

The financial information for the six month periods ended 31 December 2014 and 31 December 2013 have not been audited by the Group's auditors and does not constitute accounts within the meaning of s240 of the Companies Act 2006. The financial information for the year ended 30 June 2014 is an abridged version of the Group's accounts which received an unqualified auditors' report and did not contain a statement under s237(2) or (3) of the Companies Act 2006 and have been filed with the Registrar of Companies.

The same accounting policies, presentation and methods of computation are followed in these interim financial statements as were applied in the preparation of the Group's financial statements for the year ended 30 June 2014 and which are expected to apply as at 30 June 2015.

2. Taxation

Interim period income tax is accrued based on the estimated average annual effective income tax rate. In reality this charge will not fall to be paid in cash due to the incidence of Annual Investment Allowances ("AIA") arising out of tax allowance on capital expenditure during the period. As a result of timing differences the payment of corporation tax is likely to be deferred thereby requiring provision for deferred tax only.

3. Post Balance Sheet Event

In March 2015 following a strategic review and receipt of a planning approval for the redevelopment of the buildings at the freehold site in St Ives, Cambridgeshire a decision was taken to cease trading at Crescent of Cambridge Limited and close the business in an orderly manner. This will lead to an impairment provision as at 30th June 2015 of which only a modest amount will fall to be paid in cash. This will be reported in the full year results to 30th June 2015 under the heading of "Discontinued Businesses".

4. Segmental Reporting

5. Income Tax Expense

Recognised in the income statement

6. Earnings Per Share

Earnings per share is calculated on the basis of 195,530,006 shares (2013: 203,275,006) 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 197,710,837 shares (2013: 204,930,006) which is the weighted average of the number of shares in issue during the period.

7. Copies of Half Yearly Report

Copies of the half yearly report are available to shareholders electronically via the Group's website at http://www.swpgroupplc.com or on request from the Group head office at Bedford House, 1 Regal Lane, Soham, Ely, Cambridgeshire, CB7 5BA.

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