28th Mar 2008 07:00
SWP Group PLC28 March 2008 SWP Group plc HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 Financial Highlights: • These results are the Group's first to be reported under International Financial Reporting Standards (IFRS) which all AIM listed companies are obliged to adopt for accounting periods commencing on or after 1 January 2007. The adoption of IFRS represents an accounting change only and does not affect the operations or cash flows of the Group. Comparative figures for the six months ended 31 December 2006 and the year ended 30 June 2007 have been restated accordingly. • Turnover for the six months ended 31st December 2007 increased by 9.1% to £10,964,000 (2006 £10,050,000) with operating profits climbing to £660,000 (2006 £120,000). With increased finance costs of £298,000 (2006 £276,000) pre-tax profits amounted to £362,000 (2006 Loss £156,000). • With both Fullflow and Crescent of Cambridge treading water in financial terms during this period following record results at each subsidiary for the year ended 30th June 2007 the improvement in operational results lies in the performance of DRC following a period of restructuring and the successful outcome of litigation pursued against the owners of Ulva which allowed the Group to acquire this business and the intellectual property which vests in the Ulva brand on 29th November 2007. The results reported below incorporate the trading results for Ulva for the three weeks up to Christmas 2007 from the date of acquisition. Unaudited Unaudited Six months Six months ended 31st ended 31st December 2007 December 2006 £'000 £'000 Turnover 10,964 10,050Operating profit 660 120Profit/(loss) before and after tax 362 (156)Earnings per share 2.12p (0.92)p Operational Highlights Fullflow For the six months under review, Fullflow's sales increased by 12.8% to £7.6million. Unfortunately this still left Fullflow significantly short of itsrevenue targets and because overhead costs, mainly in the form of staff numbers,had been increased to support the extra planned growth, operating profit fell by14.4%. In the UK, there was a significant dearth of the sort of large projects whichhave constituted Fullflow's bread-and-butter in past years, and what ended up asa similar sales level to the previous year was derived from a higher number ofsmaller projects such as schools, offices and hotels. This is a trend which weexpect to continue as developers, who now have to pay business rates on emptybuildings and are also having to face up to what is a far less certain market,become less and less willing to construct large buildings on a speculativebasis. In France, on the other hand, the market as a whole was stronger, with demandfor large distribution warehouses continuing unabated. However increasedcompetition - mainly in the form of smaller operators offering cheaper prices -meant that, as in the UK, sales levels were flat and margins lower, with theresult that a small operating loss was registered. However there are now signsthat a number of contractors are realising that cheaper prices do notnecessarily lead to lower overall costs and we are optimistic that a number ofour customers who elected to give one or two of our competitors a try willreturn to the fold and boost our sales levels in the period ahead. In Spain our Madrid-based operation continued to achieve good progress, both interms of sustaining its rapid rate of sales growth and, just as importantly,attaining higher levels of efficiency and thus higher margins. In recent yearsinvestment in distribution warehouses, which represent a very important marketfor Fullflow's specialist rainwater drainage system, has lagged behind both theUK and France, but this situation is changing rapidly and should underpinfurther sales growth in the months ahead. As mentioned in the Annual Report, wehave doubled the size of our premises and created a network of technical salesmanagers to seek out new customers and new markets. We firmly expect our Spanishoperation to provide an increasingly important contribution to our overallprospects for at least the next two or three years. Plasflow, which specialises in the design and manufacture of polyethylene pipefittings and fabrications, also achieved significant progress in the periodunder review, although in its case a substantial increase in sales wasaccompanied by a drop in margins arising partly from the transfer of itsmetalworking operation to Fullflow and partly from some sharp increases in theraw material prices. However this ought to be a temporary setback and recentdevelopments on the sales front suggest that Plasflow is set to continue itsemergence as a significant player in its chosen markets. In particular, the factthat we have managed to satisfy the very demanding requirements of the nuclearindustry not only augurs well in terms of the potential for further progress inthat sector but also acts as a reference point for Plasflow to use in itsdiscussions with customers in other markets. Internationally, Fullflow's planned push into other countries has proved to beless easy to achieve than expected, largely because of the difficulty in findingsuitable local partners. However in recent weeks we have achieved significantprogress in three potentially important markets and we are optimistic that thisprogress can be converted into an additional income and profit stream in therelatively near future. International expansion remains a fundamental plank ofour overall business growth strategy and we believe that significantopportunities exist in this area. Crescent of Cambridge The performance of Crescent during the traditionally quieter half of the yearwas adversely affected by the "summer floods" in 2007 which had a serious impacton one of Crescent's major customers. This caused delay throughout the supplychain with installations postponed by a number of months in some cases. Changeswithin the market demand greater levels of efficiency to such an extent thatinvestment in our Computer Aided Design Technology will come "on line" towardsthe end of this current financial year. These changes will shorten the timeperiod between approving a customer's design requirements through to theproduction and installation of the finished stair in strict conformity to thecustomer's specification. This is likely to increase Crescent's capacity toinnovate and produce and for this reason greater emphasis in future will bedirected towards sales and marketing in specialist areas within the staircasesector where growth opportunities exist for further expansion. Much requires tobe undertaken in this important area of the business to ensure Crescent's futuredevelopment. There is considerable evidence that the UK economy is slowing down in the faceof inflationary pressures, credit issues and global uncertainty. Like Fullflow,Crescent is heavily dependent on the construction industry which allied to thecommercial property sector faces a difficult economic future at this time. Thatsaid, the company continues to support a wide range of customers engaged in allsectors of the community including the Ministry of Defence, HM Prisons andincreasingly modular build. DRC Polymer Products The problems which bedevilled DRC over the years appear to be behind usfollowing a comprehensive restructuring of the operations and the introductionof new management. DRC is now profitable in its own right and will benefitsubstantially from its relationship with Ulva Insulation Systems Ltd its sistercompany to whom it will supply insulation membranes for application within oil,gas and petrochemical installations. DRC's traditional product offering to themodular build sector continues in line with expectations whilst the developmentof our "intelligent membrane" is spreading to a number of diverse utilityorganisations who recognise with increasing frequency the benefits on offer byinstalling such systems. DRC has taken active steps to research this specialistmarket in depth and a number of major projects have been identified and targetedto which our systems are ideally suited. The growth associated with these twolatter product areas is likely to be steady rather than spectacular whereas theopportunities presented through the reintroduction of supply arrangements withUlva offer growth possibilities of transformational proportions. For this reasonwe have embarked upon a modest capital expenditure programme within DRC'smanufacturing plant to upgrade the calendar line in order to improveproductivity yield and the underlying quality of the output in order to exploitthe synergies which exist between the manufacturing unit on the one hand and thebrand driven sales unit on the other. This product line will be a key driver ofgrowth in future. DRC has considerable expertise in terms of technicalcompetence and innovation and is likely to deploy future resources into thedevelopment of new products for specialist application to not only existing butalso complementary markets. Ulva Insulation Systems Shareholders will recall that when we issued our 2007 Annual Report in December2007 we disclosed that we had acquired the Ulva brand pursuant to the successfullitigation with its owners for breach of contract in the High Courts of Justiceback in July 2007. The acquisition of this brand took place on 29th November2007 and therefore Ulva's trading only features within these results for thethree weeks up to Christmas 2007. The product involves the sale and distributionof Hypalon based membranes used for both weather and fire protection overthermal insulation to pipes or vessels used within the oil, gas andpetrochemical industries. During the past four months the business has been successfully integrated intothe Group and in particular is working cohesively with both its traditionalsuppliers but also with its sister company DRC Polymer Products with whom supplyarrangements exist and with whom technical synergies as well as economies ofscale will produce long term financial benefits to the Group as a whole. This business based at Telford in Shropshire is well managed and offerspotential for rapid expansion through its ability to achieve specificationglobally in not only the United Kingdom but the Far East, Middle East, Europe aswell as the United States of America. At the present time we are activelyresearching the worldwide capabilities of this product with a view to developinga global strategy so that its full potential can be exploited over time in amanner designed to maximise both brand awareness and profitability. By the timewe write to shareholders later this year we expect to be able to report furtheron our strategic ambitions for this product line. Current Trading Trading in the second half of the year has begun very positively with Ulvamaking a substantial contribution to the Group for the first time whilst theother three subsidiaries, namely Fullflow, Crescent and DRC each remainprofitable. Active steps are being taken to manage the Group's working capitalso as to facilitate expansion of our key operations whilst also generating cashin order to pay down bank debt as rapidly as possible. Future Prospects The shape and balance of our business is more dynamic than ever before. In thisregard whilst sales of our specialist building products depend to a large extenton the economic activity associated with the construction and buildingindustries we have a counter balance to the volatile nature of these industriesthrough our active participation in the oil and gas sector on a global basis.With fuel and energy prices recently reaching all time highs it is likely thatthis Group will develop at a faster pace than we would ordinarily have expected.We are in a strong position in a rapidly developing and changing market placethrough our specialised range of products to capitalise on the opportunitiesthat arise in both the UK and abroad in order to deliver strong organic growth.Greater levels of profitability and enhanced shareholder value are likely tofollow. SWP has laid down strong foundations to take full advantage of the expandingmarkets in which we operate and the Group will strive to maximise all growthopportunities. We look forward with confidence to the remainder of 2008 andbeyond. J.A.F. WalkerChairman27th March 2008 SWP Group plc HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 Unaudited Consolidated Income Statement Six months Six months Six months Year ended ended ended 31.12.07 ended 31.12.06 30.06.07 31 December Unaudited Unaudited Audited 2007 £'000 £'000 £'000 Turnover 10,964 10,050 20,844 Operating expenses (10,304) (9,930) (19,776) -------- -------- -------- Operating profit 660 120 1,068 Finance income 1 - 1 Finance costs (299) (276) (597) -------- -------- -------- Profit/(loss) on ordinary activities before taxation 362 (156) 472 Income tax expense - - (44) -------- -------- -------- Profit/(loss) for the period 362 (156) 428 -------- -------- ======== Basic profit/(loss) per share (pence) 2.12p (0.92)p 2.51p -------- -------- ======== Diluted profit/(loss) per share (pence) 2.12p (0.92)p 2.51p ======== ======== ======== Turnover and operating profit all derive from continuing operations Unaudited Consolidated Balance Sheet As at As at As at As at 31 December 31.12.07 31.12.06 30.06.07 2007 £'000 £'000 £'000 Non-current assets Intangible assets 480 39 29 Property, plant and equipment 4,808 4,554 4,697 Trade and other receivables 738 652 543 Deferred tax assets 678 678 678 -------- -------- -------- 6,704 5,923 5,947 -------- -------- -------- Current assets Inventories 3,509 3,218 3,176 Trade and other receivables 7,046 5,442 6,399 -------- -------- -------- 10,555 8,660 9.575 -------- -------- -------- -------- -------- -------- Total assets 17,259 14,583 15,522 -------- -------- -------- Current liabilities Trade and other payables (5,261) (3,925) (4,810) Current tax liabilities (1,387) (1,112) (1,015) Obligations under finance leases (179) (182) (172) Bank overdrafts and loans (3,653) (3,684) (3,066) -------- -------- -------- (10,480) (8,903) (9,063) -------- -------- -------- Non current liabilities Bank loans (3,250) (3,250) (3,250) Deferred tax (394) (331) (394) liabilities -------- -------- -------- Obligations under finance leases (189) (265) (231) -------- -------- -------- Total liabilities (3,833) (3,846) (3,875) (14,313) (12,749) (12,938) -------- -------- -------- NET ASSETS 2,946 1,834 2,584 ======== ======== ======== Capital and reserves Called up share capital 85 85 85 Share premium account 11,878 11,878 11,878 Capital reserves 41 41 41 Revaluation reserve 1,669 1,459 1,669 Retained earnings (10,727) (11,629) (11,089) ======== ======== ======== TOTAL EQUITY 2,946 1,834 2,584 ======== ======== ======== Unaudited Consolidated Cash Flow Statement Six months Six months Six months Year ended ended ended 31.12.07 ended 31.12.06 30.06.0731 December Unaudited Unaudited Audited 2007 £'000 £'000 £'000 Cash flow from operations 107 54 1,346 Interest received 1 - 1 Interest paid (255) (266) (533) -------- -------- -------- Net cash (outflow)/inflow from operating activities (147) (212) 814 -------- -------- -------- Cash flow from investing activities Purchase of property, plant and equipment (270) (66) (332) Purchase of intangible assets (135) - (2) Proceeds for disposals of property, plant and equipment - 47 75 -------- -------- -------- Net cash outflow from investing activities (405) (19) (259) -------- -------- -------- Cash flow from financing activities Finance lease repayments (35) 215 47 -------- -------- -------- Net cash (outflow)/inflow from financing activities (35) 215 47 -------- -------- -------- Net (decrease)/increase in cash, and bank overdrafts (587) (16) 602 Cash, cash equivalents and bank overdrafts at beginning of period (6,316) (6,918) (6,918) Other loan repayments -------- -------- -------- Cash, cash equivalents and bank overdrafts at end of period (6,903) (6,934) (6,316) ======== ======== ======== Notes to the Interim Report 1 Basis of This interim report does not constitute statutory accounts of thePreparation group within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2006, which were prepared under UK generally accepted accounting principles (UK GAAP) have been filed with the Registrar of Companies. The auditors report on those accounts was unqualified and did not contain a statement under section 237 of the Companies Act 1985. The accounting policies applied in these unaudited interim financial statements are those that the group expects to apply in its annual Financial Reporting Standards (adopted IFRS), and those parts of the Companies Act 1985 that remain applicable to companies reporting under IFRS. 2 Taxation The tax charge for the previous year has been impacted by IFRS adoption adjustments (refer to the Company's separate 'Adoption of IFRS - Preliminary Restatement of 2006 Comparatives' report for further detail). 3 Dividends The Directors are not recommending the payment of an interim dividend. 4. Segmentalreporting Six months Six months Year ended ended 31.12.07 ended 31.12.06 30.06.07 Unaudited Unaudited Unaudited £'000 £'000 £'000 Revenue United Kingdom 6,388 6,715 14,130 Rest of Europe 4,576 3,335 6,714 -------- --------- -------- Total Revenue 10,964 10,050 20,844 -------- --------- -------- Operating profit United Kingdom 550 102 1,066 Rest of Europe 100 18 2 -------- --------- -------- Total operating profit 660 120 1,068 -------- --------- -------- Profit on ordinary activities before taxation United Kingdom 284 (162) 447 Rest of Europe 78 6 (19) -------- --------- -------- Total profit/(loss) on ordinary activities before taxation 362 (156) 428 -------- --------- -------- 5. Profit per Profit per share is calculated on the basis of shares 17,019,546share (2005: 16,189,199) which is the weighted average of the number of shares in issue during the period. The Company's share options are not dilutive for profit per share calculations because the share options' exercise prices are greater than the current market price.6. Cash flowgenerated fromoperating activities Six months Six months Year ended ended 31.12.07 ended 31.12.06 30.06.07 Unaudited Unaudited Audited £'000 £'000 £'000 Operating profit 660 120 1,068 Adjustments for Depreciation of plant property and equipment 159 167 384 Amortisation of intangible assets 9 12 15 Profit on disposal of plant and equipment - - (22) --------- --------- -------- Operating cash flows before movement in working capital 828 299 (1,455) Increase in inventories (333) (249) (207) Decrease/(increase) in receivables (842) 456 (392) Decrease/(increase) in payables 454 (452) 500 --------- --------- -------- Cash flow from operations 107 54 1,346 ========= ========= ======== 7. Copies of Interim Report Copies of the interim report will be posted to shareholders in due course andare available from the Group head office at 4th Floor, Bedford House, 3 BedfordStreet, Strand, London WC2E 9HD or available to view from the Company's websiteat http://www.swpgroupplc.com. For further information or enquiries: J.A.F Walker D.J. Pett Oliver Scott / Richard KaufferChairman Director of Finance KBC Peel Hunt, Nominated Adviser and Broker Tel Office: 020 7379 7181 Tel Office: 020 7379 7181 Tel Office: 0207 418 8900Mobile: 07900 445623 Mobile: 07940 523135 31 December 2007 SWP Group Plc Adoption of International Financial Reporting Standards (IFRS) Preliminary restatement of 2006 comparatives Introduction Companies listed on the AIM market are required to adopt International financialReporting Standards (Adopted IFRS) for financial periods commencing on or after1 January 2007. SWP plc will report its results under IFRS as adopted by theEuropean Union for the year ended 30 June 2008. Its first results to be reportedunder the new standards will be for the six months ended 31 December 2007. In order to comply with Adopted IFRS, SWP is required to provide comparativenumbers. Included within this report is an analysis of how balance sheets andincome statements previously prepared under UK generally accepted accountingpractice ("UK GAAP") have changed under Adopted IFRS, and to explain theadjustments to reconcile the figures from one basis of accounting to the other.The main reconciling items and their effects on the balance sheet and incomestatement are set out as follows:- Appendix 1 - Transition Balance Sheet at 1 July 2006 - Balance Sheet at 31 December 2006 - Balance Sheet at 30 June 2007 Appendix 2 - Income Statement for the six months ended 31 December 2006 - Income Statement for the year ended 30 June 2007 IFRS 1 - First time adoption IFRS 1 'First time adoption of International Financial Reporting Standards'details the procedures a company must follow when adopting IFRS for the firsttime. It also gives companies the option of taking a number of exemptions to thefull requirements of IFRS in the year of transition. The group's date oftransition to IFRS is 1 July 2006 with the transitional year being the yearended 30 June 2007. The group has elected to take the following key exemption on transition to IFRS. - IFRS 3- Business combinationsThe Group has chosen not to restate historical business combinations that tookplace before the date of transition 1 July 2006. - The Group has chosen to apply a provisional fair value to thebusiness assets purchased in respect of the recent acquisition of the Ulva brandon the 28th November 2007 in accordance with the provisions of IFRS3 - Businesscombinations. Summary of IFRS adoption changes The adoption of IFRS represents an accounting change only, and does not affectthe operations or cash flows of the group. The effect of the adoption of IFRS onthe results of the group for the year ended 30 June 2007 is set out below: Summary of IFRS changesYear ending 30 June 2007 UK GAAP IFRS Change (£'000) (£'000) (£'000)Turnover 20,844 20,844 -Operating profit 1,068 1,068 -Profit before tax 472 472 -Profit/(loss) after tax 428 428 -Diluted profit per share 2.51p 2.51p -Net assets 2,503 2,584 81 IAS 12 - Income tax: deferred tax Under IAS 12, deferred tax should be recognised on the basis of taxabletemporary differences (subject to certain exceptions), which represents thedifference between the carrying value of an asset or liability and the amountused for taxation purposes (a balance sheet approach). Under UK GAAP, deferredtax is recognised on timing differences that arise from the inclusion of gainsand losses in the tax assessments in periods different to those in which theyare recognised in the financial statements (an income approach). The change toIFRS results in a proportion of deferred tax being recognised directly in equityon certain items that would not have given rise to deferred tax under UK GAAP. Accounting policy changes and financial effect The principal changes the Group has made to its accounting policies on adoptionof IFRS to those presented in the Financial Statements for the year ended 30June 2007 and their effect on the Financial Statements are as follows:(accounting policies that have not changed with the introduction of IFRS havenot been reproduced below) IFRS1 - Impact on cash flow statement The Group prepares the cash flow statement for both UK GAAP and the Adopted IFRSusing the indirect method. Consequently, adjustments made to working capitalitems on the balance sheet on conversion to Adopted IFRS lead to an adjustmentin the IFRS cash flow statement. There are no significant changes between cashflow from operating activities, investing activities and financing activities.No adjustments have been made to the cash flow statement on conversion. Appendix 1 --------------------------------------------------------------------------------------------------------------------BALANCE SHEET 1Jul06 31Dec06 30Jun07 IAS 12 IAS 12 IAS 12 Deferred Deferred Deferred UKGAAP tax IFRS UK GAAP tax IFRS UKGAAP tax IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000--------------------------------------------------------------------------------------------------------------------Non current assetsIntangible assets 42 42 39 39 29 29Property,plantand equipment 4,411 4,411 4,554 4,554 4,697 4,697Trade and otherreceivables 755 755 652 652 543 543Deferred tax assets 203 475 678 203 475 678 203 475 678 ------------------------------------------------------------------------------------------- 5,411 475 5,886 5,448 475 5,923 5,472 475 5,947 -------------------------------------------------------------------------------------------Current assetsInventories 2,969 2,969 3,218 3,218 3,176 3,176Trade and otherreceivables 5,795 5,795 5,442 5,442 6,399 6,399 ------------------------------------------------------------------------------------------- 8,764 8,764 8,660 8,660 9,575 9,575 -------------------------------------------------------------------------------------------Total assets 14,175 475 14,650 14,108 475 14,583 15,047 475 15,522 -------------------------------------------------------------------------------------------Current liabilitiesTrade and other payables (4,008) (4,008) (3,925) (3,925) (4,810) (4,810)Current tax liabilities (1,216) (1,216) (1,112) (1,112) (1,015) (1,015)Obligations under finance leases (92) (92) (182) (182) (172) (172)Bank overdrafts andloans (3,668) (3,668) (3,684) (3,684) (3,066) (3,066) ------------------------------------------------------------------------------------------- (8,984) (8,984) (8,903) (8,903) (9,063) (9,063) -------------------------------------------------------------------------------------------Non current liabilitiesBank loans (3,250) (3,250) (3,250) (3,250) (3,250) (3,250)Deferred tax liabilities (331) (331) (331) (331) (394) (394)Obligations under finance leases (95) (95) (265) (265) (231) (231) ------------------------------------------------------------------------------------------- (3,345) (331) (3,676) (3,515) (331) (3,846) (3,481) (394) (3,875)Total liabilities (12,329) (331) (12,660) (12,418) (331) (12,749) (12,544) (394) (12,938) -------------------------------------------------------------------------------------------NET ASSETS 1,846 144 1,990 1,690 144 1,834 2,503 81 2,584 ------------------------------------------------------------------------------------------- Capital and reservesCalled up share capital 85 85 85 85 85 85Share premium account 11,878 11,878 11,878 11,878 11,878 11,878Capital reserves 41 41 41 41 41 41Revaluation reserve 1,459 1,459 1,459 1,459 1,669 1,669Retained earnings (11,617) 144 (11,473) (11,773) 144 (11,629) (11,170) 81 (11,089) -------------------------------------------------------------------------------------------TOTAL EQUITY 1,846 144 1,990 1,690 144 1,834 2,503 81 2,584 =========================================================================================== Appendix 2 ------------------------------------------------------------------- Six months to Year to 31 Dec 06 30 June 07 IAS 12 IAS 12 UK GAAP Deferred IFRS UK GAAP Deferred IFRS tax tax £'000 £'000 £'000 £'000 £'000 £'000 ------------------------------------------------------------------- Revenue 10,050 10,050 20,844 20,844Operating (9,930) (9,930) (19,776) (19,776)expenses ------------------------------------------------------------------- Operating 120 120 1,068 1,068profitFinancial 1 1incomeFinancial (276) (276) (597) (597)costs ------------------------------------------------------------------- Profit/(loss) onordinaryactivities (156) (156) 472 472before tax Income taxexpenses (44) (44) -------------------------------------------------------------------Profit for (156) (156) 428 428period ------------------------------------------------------------------- Basicearnings (0.92)p (0.92)p 2.51p 2.51pper share(pence) Dilutedearnings (0.92)p (0.92)p 2.51p 2.51pper share -------------------------------------------------------------------(pence) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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