Interim Results

18th Sep 2009 07:00



Press Release

18 September 2009

Hightex Group plc

("Hightex" or the "Group")

Interim Results

Hightex Group plc (AIM:HTIG), a leading designer and installer of large membrane roofs and façades worldwide, today announces its interim results for the six months ended 30 June 2009.

Financial Highlights of the first half year

	Revenue reached €7.3 million (2008: €8.3 million)
	Gross margin increased significantly to approximately 36.7% (2008: 25.7%)
	Maiden profit before tax of €147,000 (2008: loss €1.4 million)
	Cash balances €1.45 million as at 30 June 2009

Operational highlights

	Group returns to profitability for the first time since flotation in 2006
	Turnaround strategy, focusing on high value, high margin contracts has proved to be successful
	Full year 2009 revenues are expected to approach €20 million, underpinned by the €8.2 million contract for the refurbishment of the roof system of the Munich Olympic Hall and by continuing work on the Johannesburg and Cape Town stadiums
	In August 2009, Hightex won a €13 million contract for the new National Stadium in Warsaw, giving approximately €10 million of visible revenue for 2010

Commenting on the interim results, Charles DesForges, Executive Chairman of Hightex Group plc, said: "The return of Hightex to profitability is a result of the successful strategic turnaround programme that was initiated 15 months ago. The market for large area polymer membrane roofs and façades continues to increase as a result of the numerous cost, safety and design features that they offer. Our participation in a number of projects with global profile, such as the roof over the Centre Court at Wimbledon, ensures that Hightex remains at the forefront for upcoming projects and tenders. Accordingly the Directors believe there is significant opportunity for expansion and we look forward to the future with confidence"

- Ends -

For further information:

Hightex Group plc
Charles DesForges, Executive Chairman	Tel: +44 (0) 20 7603 1515
	www.hightexworld.com

Singer Capital Markets
Jeff Keating/Claes Spang	Tel: +44 (0) 20 3205 7500
	www.singercm.com

Media enquiries:

Abchurch Communications
Charlie Jack / Stephanie Cuthbert / Simone Alves	Tel: +44 (0) 20 7398 7718
[email protected]	www.abchurch-group.com

   CHAIRMAN'S STATEMENT

The Directors are delighted with the progress Hightex has made in the first half year of 2009, returning the Group to profitability for the first time since its flotation in 2006.

 

Some fifteen months ago the Directors took decisive steps, as part of a turnaround programme, to implement a more commercial approach throughout the business.  The central focus of this turnaround programme was on securing fewer but substantially larger contracts; increasing gross margins; and significantly reducing group overheads.  The Directors have pleasure in reporting that the results for the six months ended 30 June 2009 demonstrate that the initial turnaround in Hightex's performance has been successfully implemented.

Turnover in the first half year reached €7.3 million, compared with €8.3 million in the first half of 2008.  This reduction in revenues follows Hightex's increasing focus on higher margin contracts rather than merely achieving sales volume. However, the gross profit for the half year grew to €2.7 million (lifting the gross margin significantly to approximately 36.7%) compared with €2.1 million for the first six months of 2008 (equivalent to a gross margin of approximately 25.7%). 

The result before tax was a profit of €147,000, a modest number but one which must be compared with the substantial loss of €1.4 million recorded in the six months ended 30 June 2008 and the loss of €3.1 million reported for the full calendar year 2008.  After charging a deferred tax expense of €98,000, the earnings per share in the six months ended 30 June 2009 were 2 cents (loss per share of 1.20 cents in the first half of 2008 and a loss per share of 2.95 cents in the whole of 2008).

Turnover in the second half year of 2009 is expected to be substantially larger than the €7.3 million in the first half year and full year revenues are expected to approach €20 million.  The pipeline is now strong and growing, as described below, and the Directors now expect further growth in revenues in 2010 and beyond. 

  Operations

Membrane business 

During 2008, Hightex altered its focus, concentrating on fewer though larger projects with higher margins and is now benefitting from this approach in terms of profitability. 

Most of the first half year's revenues arose in connection with work performed on the roof of the FNB Soccer City Stadium in Johannesburg and the façade of the Green Point Stadium in Cape Town, both of which will host matches in the 2010 FIFA World Cup in South Africa; the membrane roof over the Dolce Vita Tejo Shopping Mall outside Lisbon, Portugal; and the membrane roof of the Olympic Hall in Munich, Germany.  In addition, work was completed on the membrane element of the new retractable roof over the Centre Court at the All England Lawn Tennis & Croquet Club, Wimbledon: this modern, highly visible, retractable roof, which enables all weather play during the Championships at Wimbledon, opened to critical acclaim in May 2009. 

In August 2009, Hightex announced that, with its joint venture partners, it had been awarded the contract to supply the complete roof system for the new National Stadium in Warsaw, Poland. This stadium is being built in connection with the UEFA 2012 European Football Championship, which will take place in Poland and the Ukraine.  The roof will consist of a radial cable system supporting the fixed outer portion of nearly 55,000 square metres of PTFE/glass membrane, with a retractable inner roof in the more flexible PVC/polyester membrane with a surface area of some 11,000 square metres.  The design work has commenced and completion is expected by April 2011.  The total contract value for the joint venture is approximately €78 million, of which Hightex's share is about €13 million. Hightex expects that about 80% of these revenues will fall in 2010 with the balance coming in 2011.

Hightex has a healthy pipeline of projects.  In some cases, tenders have been submitted and Hightex is waiting for the declaration of the result.  One sizeable tender relates to a membrane roof in North America, for which Hightex has formed a joint venture with an appropriate American entity.  In other cases, the tender stage has not yet been reached, but where possible Hightex is working with the architect or structural engineer to seek to gain a good position when the project moves to tender.  The locations of these potential projects include continental Europe, the Middle East and Australasia.  The geographical spread demonstrates Hightex's international reputation. 

The FIFA 2014 Football World Cup will take place in Brazil, where 12 stadia will be constructed or remodelled. Hightex has made several visits to that country and has identified its potential local partner. 

Solar business

Hightex's wholly owned subsidiary SolarNext AG ("SolarNext") has developed a proprietary solar cooling and heating system in kit form which can be retro-fitted to many kinds of structures. By February 2009, more than €3.5 million had been invested in this project, with the result that SolarNext had designed and produced a proprietary air-conditioning system, driven by solar thermal energy and managed by an innovative multi-function system controller. In 2008, SolarNext sold 23 of these chillers for an aggregate sales value of approximately €526,000. 

On 25 February 2009, Hightex announced that following a strategic review of its solar cooling business, the Directors had concluded that the working capital requirements to move SolarNext to the commercialisation phase, including increased production volumes and recruiting a larger sales force, were beyond the then capacity of Hightex to finance.  The Directors therefore reduced SolarNext's operations to ensure that the Group's focus and resources were devoted to the successful and growing membrane business, whilst retaining a skeleton staff in order to retain the intellectual property until economic circumstances permitted SolarNext's products to be commercially exploited.  

Before the strategic review, net cash outflow in a full year on SolarNext was estimated to amount to approximately €1.5 million.  Following the strategic review of SolarNext, its estimated net cash outflow is estimated to fall to the much reduced amount of approximately €600,000 in 2009 and a maximum of €400,000 per annum in 2010 and thereafter.  

  

Outlook

The Directors believe that the world-wide market for tensile polymer membrane structures will grow for several reasons, the most important of which include

	light weight - polymer membrane weighs approximately 2.5% of the equivalent area of glass, reducing the amount of steel and concrete needed to support the roof and allowing far greater spans than are possible with glass;
	energy efficiency - the design can incorporate coatings which will reduce ongoing energy and cooling costs;
	safety - awareness is growing that membrane is a far safer material than glass in structures where the public congregate, such as airports, shopping malls or stadia; and
	regular sporting events - which give rise to the continuing need for new or upgraded stadia.

In 2010 and beyond the Directors intend to grow the membrane business significantly. In 2010, visible revenues so far secured amount to approximately €10 million from the recently won contract for the National Stadium in Warsaw.  The Directors seek to secure at least two other contracts of a similar size through building on Hightex's reputation as an innovative and leading company in the design and installation of large area roofs and facades for structures throughout the world. 

In the case of SolarNext, Hightex has received some initial enquiries from trade and financial entities regarding the future of SolarNext and the Directors will respond to these enquiries with the aim of maximising the value for the shareholders of Hightex.

The increased commercial focus adopted from June 2008 has delivered its intended result in that it has secured efficiency gains from working on fewer larger contracts; increased gross margins; and significantly reduced group overheads.  The result of this change of approach is demonstrated by the achievement of a modest profit in the first six months of 2009 after reporting persistent losses since flotation in 2006. 

The Directors intend to continue their efforts to grow the membrane business; to increase the visibility of future revenues; and to find an appropriate partner for the solar cooling business. The Directors believe that Hightex enjoys significant opportunity for expansion of its membrane business and look forward to the future with growing confidence.

Charles DesForges

Chairman

18 September 2009

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Notes	6 Months	6 Months	12 Months
		30-Jun	30-Jun	31-Dec
		2009	2008	2008
		(Unaudited)	(Unaudited)	(Audited)
		€'000	€'000	€'000
Turnover		7,263	8,272	16,189
Cost of sales		(4,600)	(6,142)	(10,641)
Gross margin		2,663	2,130	5,548
Operating expenses:
Salaries and related expenses		(1,192)	(1,378)	(2,767)
Other operating expenses		(1,076)	(2,043)	(4,323)
Depreciation and amortisation		(162)	(191)	(263)
Underlying operating (deficit)/surplus		233	(1,482)	(1,805)
Accelerated amortisation charge		-	-	(534)
Foreign exchange translation losses		(46)	-	(836)
Operating (deficit)/surplus		187	(1,482)	(3,175)
Interest receivable		18	123	229
Interest payable		(58)	(52)	(134)
Net (deficit)/surplus before taxation		147	(1,411)	(3,080)
Taxation	3	(98)	(25)	(363)
Profit/(loss) for the period		49	(1,436)	(3,443)

  

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued)

Other comprehensive income
		6 Months	6 Months	12 Months
		30-Jun	30-Jun	31-Dec
		2009	2008	2008
		(Unaudited)	(Unaudited)	(Audited)
		€'000	€'000	€'000
Exchange differences in translating foreign operations		(225)	(14)	390
Other comprehensive income for the period, net of tax		(225)	(14)	390
Total comprehensive income for the period		(176)	(1,479)	(3,053)
Loss attributable to:
Owners of the parent		21	(1,465)	(3,529)
Non-controlling interests		28	29	86
		49	(1,436)	(3,443)
Total comprehensive income attributable to:
Owners of the parent		(204)	(1,465)	(3,139)
Non-controlling interests		28	29	86
		(176)	(1,436)	(3,053)
Earnings/(loss) per share (cents)
Basic	6	0.02	(1.20)	(2.95)
Diluted	6	0.02	(1.20)	(2.95)

  CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	30-Jun	30-Jun	31-Dec
		2009	2008	2008
		(Unaudited)	(Unaudited)	(Audited)
		€'000	€'000	€'000
Current assets
Cash and cash equivalents		1,448	2,735	2,191
Inventories and work in progress		594	155	134
Accounts receivable		4,627	6,308	4,224
Total current assets		6,669	9,198	6,549
Non-current assets
Goodwill		6,627	6,627	6,627
Intangible fixed assets	4	73	451	91
Property, plant and equipment (net)	5	1,217	868	1,374
Deferred tax assets		42	424	117
Total non-current assets		7,959	8,370	8,209
Total assets		14,628	17,568	14,758
Current liabilities
Trade accounts payable		2,780	3,289	2,316
Accrued liabilities and deferred income		2,664	4,453	3,546
Bank overdraft		85	-	82
Other accounts payable		1,042	840	1,482
Total current liabilities		6,571	8,582	7,426
Non-current liabilities
Accrued liabilities and deferred income		91	116	103
Other non-current liabilities		60	99	75
Total non-current liabilities		151	215	178
Shareholders' equity
Share capital	6	2,109	1,776	1,776
Share premium account	6	12,352	11,757	11,757
Accumulated losses		(6,930)	(5,052)	(6,726)
Total shareholders' equity		7,531	8,481	6,807
Minorities		375	290	347
Total liabilities and shareholder' equity		14,628	17,568	14,758

   CONSOLIDATED STATEMENT OF CASH FLOWS

		6 Months	6 Months	12 Months
		30-Jun	30-Jun	31-Dec
		2009	2008	2008
		(Unaudited)	(Unaudited)	(Audited)
		€'000	€'000	€'000
Cash flows from operating activities
Operating profit/(loss) for the period:		187	(1,482)	(3,175)
Adjustments for:
Profit on disposal		(1)	-	(18)
Depreciation and amortisation		152	191	853
Net operating income before working capital changes		338	(1,291)	(2,340)
Changes in working capital:
Decrease/(increase) in inventories		(460)	67	84
Decrease/(increase) in accounts receivable		(403)	(782)	1,197
Deferred tax asset		-	-	(32)
(Decrease)/increase in accounts payable		(855)	2,009	795
Net cash used in operating activities		(1,380)	3	(296)
Interest paid		(58)	(71)	(100)
Income tax paid		(14)	(16)	(24)
Net cash used in operating activities		(1,452)	(84)	(420)
Cash flows from investing activities
Acquisition of property, plant and equipment		(55)	(146)	(269)
Acquisition of intangible assets		-	-	(773)
Proceeds from disposal of property, plant and equipment		-	-	22
Interest received		18	123	211
Net cash used in investing activities		(37)	(23)	(809)
Cash flows before financing		(1,489)	(107)	(1,229)
Cash flows from financing activities
Proceeds from issuance of ordinary shares		1,001	-	-
Costs of issue of shares		(73)	-	-
Proceeds from loan		-	400	400
Net cash provided by financing activities		928	400	400
Net increase/(decrease) in cash and cash equivalents		(561)	293	(829)
Cash and cash equivalents, beginning of period/year		2,109	2,530	2,530
Effect of foreign exchange on cash and cash equivalent		(185)	(70)	408
Cash and cash equivalents, end of period		1,363	2,753	2,109
Cash at bank and in hand comprises:
Cash and cash equivalents		394	194	388
Cash lodged under performance and warranty bonds		969	2,559	1,721
		1,363	2,753	2,109

  STATEMENT OF CHANGES IN COMBINED SHAREHOLDERS' EQUITY (Unaudited)

	Share capital	Share premium	Accumulated losses	Other com-prehensive income	Minority interest	Total
	€'000	€'000	€'000	€'000	€'000	€'000
Balances at 1 January 2008	1,776	11,757	(3,158)	(415)	261	10,221
Net deficit for the period	-	-	(1,465)	-	29	(1,436)
Currency translation differences	-	-	-	(14)	-	(14)
Balances at 30 June 2008	1,776	11,757	(4,623)	(429)	290	8,771
Net deficit for the period	-	-	(2,064)	-	57	(2,007)
Currency translation differences	-	-	-	390	-	390
Balances at 31 December 2008	1,776	11,757	(6,687)	(39)	347	7,154
Issue during the period	333	668	-	-	-	1,001
Costs of issue of shares	-	(73)	-	-	-	(73)
Net deficit for the period	-	-	21	-	28	(49)
Currency translation differences	-	-	-	(225)	-	(225)
Balances at 30 June 2009	2,109	12,352	(6,666)	(264)	375	7,906

1.  General information

Hightex Group plc ("Hightex" or "the Group") was incorporated in England on 28 June 2006. Since that date, the Group acquired its interests in its subsidiaries (together "the Group") such that the Group is now the holding company for the Group. The principal activity of the Group is the design, supply and assembly of polymer membrane structures for use in engineering and construction of technically advanced buildings.

The consolidated financial information is presented in Euros (€), unless otherwise stated.

2. Basis of preparation

This Interim condensed consolidated statement is unaudited and does not constitute statutory financial statements. The Interim condensed consolidated statement incorporates the results of the Group for the period from 1 January 2009 to 30 June 2009. The results for the year ended 31 December 2008 have been extracted from the statutory financial statements for Hightex for the year ended 31 December 2008 which are prepared under International Financial Reporting Standards ("IFRS") as adopted by the European Union. The interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008.

The interim consolidated financial statements for the six months ended 30 June 2009 have been prepared in accordance with IAS 34, Interim Financial Reporting.

The accounting policies, presentation and methods of computation have been followed in these unaudited interim financial statements as were applied in the preparation of the Group's annual financial statements for the year ended 31 December 2008, except for the impact of the adoption of the Standards and Interpretations described below:

IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009)

IFRS 8 is a disclosure Standard that has resulted in a re-designation of the Group's reportable segments (see note 8), but has had no impact on the reported results or financial position of the Group.

IAS 1 (revised 2007) Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009)

The revised Standard has introduced a number of terminology changes (including revised titles for the financial statements) and has resulted in a number of changes in presentation and disclosure. However, the revised standard has had no impact on the reported results or financial position of the Group.

The Interim financial information for the six months ended 30 June 2009 was approved by the directors on 18 September 2009.

3. Taxation

	30-Jun	30-Jun	31-Dec
	2009	2008	2008
	€'000	€'000	€'000
	(Unaudited)	(Unaudited)	(Audited)
Deferred taxation	(84)	(9)	(319)
Current taxation	(16)	(16)	(44)
Corporate taxation credit/(charge)	(98)	(25)	(363)

4. Intangible assets

 Movements in the cost, amortisation and net book value of assets are as follows:

			Six months ended 30 June 2009 €'000 (Unaudited)	Six months ended 30 June 2008 €'000 (Unaudited)	Year ended 31 December 2008 €'000 (Audited)
			€'000	€'000	€'000
As at beginning of period			91	501	501
Additions			-	124	269
As at period end			91	625	770
Amortisation			(18)x	(174)	(679)
Carrying amount			73	451	91

  5. Property, plant and equipment (unaudited)

	Leased assets	Tooling equipment	Fixtures, fittings & equipment	Total
	€'000	€'000	€'000	€'000
Cost
At 1 January 2008	389	460	900	1,749
Additions during the period	84	636	53	773
Disposals during the period	-	-	(5)	(5)
Foreign exchange adjustment	(25)	(46)	(14)	(85)
At 31 December 2008	448	1,050	934	2,432
Additions during the period	-	10	45	55
Disposals during the period	-	(39)	-	(39)
Foreign exchange adjustment	-	(38)	(2)	(40)
At 30 June 2009	448	983	977	2,408
Accumulated depreciation
At 1 January 2008	241	197	403	841
Provided during the period	82	64	126	572
Eliminated during the period	-	-	(1)	(1)
Foreign exchange adjustment	(18)	(18)	(18)	(54)
At 31 December 2008	305	243	510	1,058
Provided during the period	44	47	54	145
Eliminated during the period	-	-	-	-
Foreign exchange adjustment	(1)	(11)	-	(12)
At 30 June 2009	348	279	564	1,191
Net book value
At 30 June 2009	100	704	413	1,217
At 31 December 2008	143	807	424	1,374

  6. Share capital and (deficit)/surplus per share

a) Share capital (unaudited)

	2009	2008
	€ '000	€ '000
Authorised:
300,000,000 Ordinary shares of 1p each	4,454	4,454
Issued:
148,383,098 (2008:119,652,582) Ordinary shares of 1p each	2,109	1,776

b) Shares issued during the period (unaudited)

	Note	GBP	€	Shares	Share capital	Share premium
					€ '000	€ '000
At 1 January 2009				119,652,582	1,776	11,757
Shares issued on 11 June 2009	(i)	0.03	0.0349	28,730,516	334	668
Costs of issue of shares						(73)
				148,383,098	2,110	12,352

(i) On 11 June 2009, Hightex Group Plc placed 28,730,516 new ordinary shares at a placing price of 3 pence per share, raising £861,915 for the Group.

c) Share options and warrants (unaudited)

On 30 June 2009 and as at the date of this document, the Group had outstanding warrants to subscribe for 1,128,750 new ordinary shares as follows:

	Number of warrants	Exercise price per share	Expiry date
Issued in connection with the Placing of March 2006	1,128,750	0.1107419	01-Dec-10

d) Earnings/(loss) per share (unaudited)

 

(i) Basic

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the period:

Profit/(loss) attributable to equity holders of the Group: € 21,000 (2008: (€1,465,000))

Weighted average number of ordinary shares in issue: 124,441,001 (2008: 119,652,582)

Basic earnings/(loss) per share: 0.02 cents (2008: loss of (1.20) cents)

(ii) Diluted

Diluted earnings per share is calculated by adjusting the weighted number of ordinary shares in issue to assume conversion of all potential dilutive options over ordinary shares during the period:

Profit/(loss) attributable to equity holders of the Group:  €21,000 

Weighted average number of ordinary shares in issue: 123,797,243

Diluted earnings/(loss) per share : 0.02cents

In 2008, no potential ordinary shares were considered dilutive, as loss per share would decrease had the warrants in issue been exercised. This is in accordance with IAS 32.

7. Dividend

The directors do not propose the payment of an interim dividend.

8. Business Segments

The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker as defined in IFRS 8, in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and rewards approach, with the entity's "system of internal financial reporting to key management personnel" serving only as the starting point for the identification of such segments. As a result, following the adoption of IFRS 8, the identification of the Group's reportable segments has changed.

	Membrane Business	Metal-working Business	Solar Business	Consolidation	Total
	€'000	€'000	€'000	€'000	€'000
External revenue	6,525	646	92	-	7,263
Internal revenue	1,109	77	11	(1,197)	-
Total revenue	7,634	723	103	(1,197)	7,263
Earnings tax (EBT)	348	89	(357)	(i) 67	147
Assets	(ii) 9,342	627	118	(iii) (4,387)	6,669
Liabilities	9,136	258	1,781	(iii) (4,419)	6,756

i.	Exchange rate difference due to elimination of intercompany accounts.
ii.	The assets of membrane business are including the goodwill on consolidation of €6,627,000.
iii.	Elimination of intercompany accounts.

 

  

9. Related party transactions

9.1 Amounts due at period end

	Six months ended 30 June 2009 €'000 (Unaudited)	Six months ended 30 June 2008 €'000 (Unaudited)
	€'000	€'000
David Walker	98	28
Frank Molter	78	69
KM Immobilien	83	39
Charles DesForges & Associates	47	24
Charles Sebag-Montefiore	67	24
	373	184

9.2 Other related party disclosure

Adjacent factory building in Rimsting: An amount of €83,000 (30 June 2008: €83,000) was paid to KM Immobilien for the rent of the adjacent factory building in Rimsting under a lease which expires on 30 September 2012. This factory building is owned by KM Immobilien, a company controlled by F. Molter and K-M.A. Koch. F. Molter was a director throughout 2009: K-M.A. Koch was a director until 24 April 2008.

Karen Walker and Hightex UK Limited: An amount of €2,500 (30 June 2008: €2,500) was paid to Karen Walker, the wife of David Walker, as remuneration for her services as Company Secretary of Hightex UK Limited during the period.

10. Post balance sheet events

Hightex and its Joint Venture partners Cimolai Spa (of Pordenone, Italy) and Mostostal Zabrze Holding Sp Z.o.o (of Katowice, Poland) has been awarded the contract to supply the compete roof system for the new National Stadium Warsaw, Poland. This Stadium is being built in connection with the UEFA 2012 European Football Championship, which will take place in Poland and the Ukraine. The contract is worth approximately EUR 13 million to Hightex. 

The design work will commence immediately, with completion planned to take place in April 2011.

Hightex expects that about 80% of these revenues will fall in 2010 with the balance coming in 2011.

-ENDS-

ENDIR CKOKBOBKDACD

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