Half Yearly Results

Half Yearly Results

for the six months ended 31 December 2012

SWP Group plc (the "Group")

Half Yearly Results

for the six months ended 31 December 2012

Chairman's Statement

Corporate Review

The period covered by these half yearly results for the six months to 31st December 2012 has demonstrated the sharp contrast in the performance of a number of the Group's businesses. In the case of Ulva which is a leading niche supplier of materials to reduce Corrosion Under Insulation ("CUI") to the oil, gas and petrochemical majors around the world, project demand has been strong with significantly increased levels of profitability as compared to the corresponding period in 2011. On the other hand our construction industry businesses, where Fullflow and Crescent are leading suppliers respectively of siphonic rainwater management systems and metal staircases, sluggish demand particularly in the French and Spanish markets has seen lower activity levels consistent with the well publicised difficulties faced by the construction industry both here in the UK and Continental Europe.

Financial Results

Little has changed on the economic front as markets struggle to cope with the economic downturn experienced in the UK and the other European countries in which we operate. In particular the Spanish economy is in a parlous state and as reported below we have been forced to take decisive action in regard to the risks and the prevailing market conditions facing Fullflow's activities in that country. Elsewhere lack of infrastructure projects, funding constraints and intense competition have translated into competitors chasing lower volumes of available work sometimes at prices that can only be regarded as commercially suicidal.

Fortunately, the same cannot be said in respect of Ulva's presence in the oil and gas sector where despite the usual competitive pressures there is a fertile international market based on technical specifications where Ulva's track record over time offers discerning customers not only quality products and design solutions but site supervisory services that ensure delivery to the full expectation of the end user.

In essence the strong performance at Ulva has to a degree been counterbalanced by weak results within the Fullflow Group with the exception of Plasflow where profits have been achieved in line with expectation. Disappointing results have also been recorded at Crescent which has been unable to sustain the recovery which it achieved in 2011/2012.

Turnover has been flat at £8.88m (2011:£9.00m) whereas operating profits have advanced by threefold as compared to the corresponding period in 2011. Exceptional costs represent the downscaling of Fullflow's business activities in Madrid which by now are more or less complete.

Borrowings

The downward trend in the Group's debt obligations continues. The pace of reduction is primarily dictated by the larger scale projects in Ulva with debt being collected in the main by Irrevocable Letters of Credit. Looking to the debt position at 30th June 2013 we anticipate a further significant decline by the end of this financial year if the pattern of sales goes according to plan.

Operational Highlights

Polymer Membrane Division

Ulva

Ulva has performed very much in line with the Board's expectations in the first half of the year and this is projected to continue for the full year. Overall, Ulva's results are expected to be consistent with the previous year.

The business is currently transacting a number of prestigious projects including the construction of a new LNG receiving terminal in Japan and the construction of what will become, upon its deployment, the most northerly located Floating Production, Storage and Offloading (FPSO) vessel in the world, where Ulvashield had been selected to help counter CUI in a particularly harsh environment.

A number of initiatives aimed at stimulating further growth in the Ulva business are gaining momentum. The first key initiative is to selectively increase the skill and resource in the business. The U.S. arm of Ulva is very well equipped to support its customers and results in this territory are encouraging with two major new construction projects currently underway. The European team has been bolstered by the appointment of an Area Sales Manager from within the industry which will substantially improve Ulva's capability to support its customers close to home. Focus is very much on finding the right candidate to lead Ulva's activities in South East Asia in order to complete the sales team. Demand has remained strong for Ulva's site services team which has been extended to meet demand. The role of the site services team is to ensure that discerning, specifying end users receive precisely what is envisaged when the specification was written at the conclusion of the construction phase. This vital ingredient ensures that Ulva is fully engaged in assisting its customers to counter CUI as opposed to simply selling system components.

The second key initiative is the development and introduction of a new system to complement the existing Ulvashield system and add incremental sales volume. The product development process has been on-going for some time and is now at the pre-production prototype stage. Formal launch will take place later this year.

Visibility of the forward pipeline for this specification driven business gives cause for optimism.

DRC Polymer Products

The 'leasing' of the Hylam FPA business to a close trading partner of DRC has proven to be successful for all parties. DRC is receiving an assured income from the lease, DRC's customers have continuity of supply to high quality standards and DRC's partner has been able to realise growth in the business.

DRC's exit from the roofing sector means that its primary purpose is the manufacture of Ulvashield for its sister company. Substantial benefits accrue from rationalising the number of manufacturing locations operating within the Polymer Membrane Division and the Board of SWP has recently approved the purchase of a new state of the art manufacturing process line for the production of Ulvashield at Ulva's Telford factory location. This will lead to the cessation of DRC's activities with the corresponding reduction in the cost of operating the Soham factory. This positive rationalisation will have a beneficial impact on earnings for DRC during the year to 30th June 2014.

Fullflow

As has been the case for some time now the economic climate has had a profound effect on the Building and Construction sectors which is where Fullflow Group traditionally markets its bespoke designed systems and installations. In the UK a dedicated team has increased the quality and number of projects completed in the period but there has been a lack of major infrastructure projects such as airports and stadia where Fullflow has particular expertise. Systems have been installed at the Nissan factory in Sunderland and the Jaguar facility in Wolverhampton as well as a range of assignments across middle and south east England for the large supermarket chains and distribution outlets.

Fullflow Systemé in France has experienced difficult trading conditions and has sustained a small loss at the half year. The economy in France is looking more fragile at this time and although the order book is well charged this stretches out over a number of months into the future with a tendency for postponement and delay to feature. The second half of the year will be challenging for the management team in Paris who are very experienced and capable of benefiting from any upturn in market trends.

Fullflow Sistemas in Spain has absorbed a considerable and unproductive amount of senior management time. The economic prognosis for the Spanish economy can only be described as fraught with difficulty and the construction sector is in particularly bad shape. A full scale review of the Spanish activities has been undertaken which concluded that the risks involved in operating within the Spanish market were disproportionate to the potential rewards on offer in market conditions which are not conducive to conducting good business with reasonable prospects of success. In the absence of a return on the equity invested we took the decision in January 2013 to close the Madrid facility. This market is now conditioned to granting average credit terms to customers of more than 180 days without in most cases the benefit of any credit insurance and under such circumstances there is no justification for Fullflow to remain active in this particular market.

Plasflow which has a state of the art fabrication facility based in Rotherham has performed strongly in the half year to 31 December 2012. The business is centered around producing pipe fabrications for Fullflow but in recent years has developed close links to the Nuclear Sector here in the UK. Strong strategic partnerships exist whereby Plasflow works closely with main contractors to develop pipe solutions for many of the UK's nuclear plants. There is good reason to expect Plasflow to develop and grow within this sector in line with the Group's aspirations for the future.

Crescent of Cambridge

Unfortunately the progress recorded in the year to 30th June 2012 has not been sustained in the six months to 31st December 2012 and the business has once again become loss making. The ongoing development of computer based design automation has produced benefits within the business as indeed has the strengthening of the sales team with the recruitment of an experienced Sales Manager but market conditions remain depressed and competitive influences have had an adverse impact on the trading outlook which has also been affected by poor levels of demand in an already depressed market.

Research & Development

The Group has for some time been actively engaged in product development across most of its activities. These extend to design automation at Crescent to new product initiatives at both Fullflow and Ulva where we expect to launch complimentary products later this year which are designed to add incremental revenue in both cases. They are also likely to add attractive and unique additions to the product portfolios on offer.

Training Programme

A number of training programmes have been run during the past year designed to equip our management teams with additional skills. Courses and seminars have been organised for all sales executives throughout the Group presented and operated by professional third party coaches. There have also been seminars in contractual documentation run by professional lawyers experienced in contract law as well as meetings with experts in the field of Health & Safety. The Group intends to provide management with more opportunities of this nature as part of a programme of continuous improvement in managing our various businesses.

Employees

Market conditions remain extremely difficult in most of the sectors in which we operate. As previously stated we are recruiting further sales and technical resources within Ulva so that we can provide professional expertise and coverage to key areas of the world where we anticipate sales growth.

Closer to home, cost control within our construction led businesses has to be the order of the day until such time as there is evidence of growth potential which our experienced teams are ready to exploit at the first signs of economic recovery.

Our employees continue to work diligently and my Board of Directors wishes to express its gratitude to staff in each and every business without whose dedication and commitment these improved results would not have been possible.

Current Trading and Prospects

Despite the depressed economic outlook the prospects for the Group remain positive. Our Ulva business continues to develop according to plan notwithstanding the long gestation periods involved in breaking into new territories.

We have greater levels of visibility for this project led business and we see considerable potential for growth over the period of the next five years. It is for this reason that the Group intends to deploy the necessary investment in both capital and human resources to ensure the delivery of future revenue streams and sustained profitability.

For our construction oriented businesses we envisage that short term growth is likely to be elusive but we believe that Fullflow in particular has considerable medium to long term opportunities available to it in international markets where its reputation and brand are highly respected. Locally we plan to maximise profitability through strategic relationships with long standing customers whilst maintaining a low cost profile thereby minimising exposure to risk at a time of demonstrable austerity.

J A F Walker

Chairman

22nd March 2013

Unaudited Consolidated Statement of Comprehensive Income

Note 1 Turnover and operating profit all derive from continuing operations.

Note 2. The calculation of earnings per share in respect of the six month period to 31 December 2011 has been restated to take account of the bonus issue declared in 2012 of 10 new ordinary shares for every ordinary share held in the Group ranking pari passu.

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 2012 and 31 December 2011 has 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 2012 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 2012 and which are expected to apply as at 30 June 2013.

2. Taxation

Interim period income tax is accrued based on the estimated average annual effective income tax rate.

3. Segmental Reporting

4. Income Tax Expense

Recognised in the income statement

5. Earnings Per Share

Earnings per share is calculated on the basis of 196,480,006 shares (2011: 198,459,965) 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 200,980,006 shares (2011: 198,980,000) which is the weighted average of the number of shares in issue during the period.

6. Copies of Half Yearly Report

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

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