29th Mar 2007 13:38
SWP Group PLC29 March 2007 SWP Group PLC Interim Report 2006 for the six months ended 31 December 2006 Chairman's Statement Results After reporting a return to profit during the financial year which ended in June 2006, we are disappointed to have to advise shareholders that we incurred a loss for the first six months of the new financial year. On sales of £10,050,000 (2005: £9,472,000) we recorded an operating profit of £120,000 (2005: £302,000) but this was not sufficient to cover net interest costs of £276,000 (2005: £260,000), the overall result being a loss of £156,000 (2005: £42,000 profit). Review of Operations The above figures reflect a mixed performance on the part of our three subsidiaries, with Fullflow recording a marked increase in sales and profits, Crescent achieving modest progress on both fronts and DRC suffering a significant setback following a period which had appeared to mark the start of a long-awaited improvement in its results. Fullflow Group Fullflow produced a strong set of results for the period under review. Overall sales increased by 19% with its mainland European operations once again accounting for the bulk of this growth. In a business where the majority of sales are derived from teams of installers fitting specially designed lengths of fabricated pipe on sites which are commonly a long way from base, and at heights of up to 35 metres from the ground, the fact that significant levels of revenue growth have been attained reflects much credit on the resourcefulness and organisational capability in each of Fullflow's management teams. In both France and Spain the increasing acceptance of syphonic drainage systems as an alternative to the traditional gravity option has worked very much in our favour and we remain confident that we have the necessary resources and ambition to exploit this trend whilst at the same time improving the efficiency of our operations and the quality of our service. Success in this respect will create a strong platform for future growth. In the UK the market remains extremely competitive but we retain the belief that the majority of developers and contractors are intent on seeking out the best value in the market as opposed to the cheapest price and for this reason we are continuing to invest additional resource in areas such as product quality and project delivery. Fullflow is the only company of its kind in the UK which operates an externally audited QA system and has the benefit of British Board of Agreement certification as well. Fullflow is also in the process of establishing a partnering agreement with a company specialising in the provision of rainwater harvesting or rainwater recovery systems which involve the collection of rainwater and its subsequent use in "grey" applications such as toilet flushing, vehicle washing and irrigation. Such systems offer the users of buildings significant savings in relation to water consumption and at the same time provide a positive environmental impact. Needless to say they are becoming an increasingly popular option among forward-thinking developers and it is a very natural progression for Fullflow to include this option in its product portfolio. At Plasflow much effort has been expended in seeking out new third party business opportunities and although the results for the first six months were not spectacular order intake since the end of the period has increased significantly and the business is set for a period of substantial growth. Crescent of Cambridge Crescent's performance during the period under review was broadly in line with expectations. Sales increased by just under 10% but one particularly difficult low margin contract resulted in operating profit increasing by only 4%. However as with Plasflow these results do not entirely reflect what has been happening behind the scenes. A number of new initiatives have been adopted right across the main functions of the business - sales, design, manufacturing and installation - and the result is that Crescent is now not only equipped to handle significantly higher levels of business but has also gone out into the marketplace and won some large new orders which are filling the extra capacity. The dynamics of the business have changed fundamentally and we expect this to show through very clearly in the next few months - and hopefully for a long time thereafter. As is the case with Fullflow, it is increasingly evident that the UK's largest and most successful contractors prefer to deal with reliable, professional subcontractors who deliver consistent quality and service as opposed to chasing the short-term savings offered by some of the smaller but less reliable operators. Crescent has entered the second leg of the year with its order book at an all time high. DRC Polymer Products In recent years this company has suffered from a variety of setbacks and problems but at every crossroads there has seemed to be the prospect of a significant new opportunity just around the corner: and sure enough last year DRC finally appeared to be on the cusp of achieving the long-awaited breakthrough to higher sales and a regular profit stream. However all such hopes were dashed when DRC's relationship with its biggest single customer broke down around the middle of last year. This matter is now before the Courts, but while DRC is optimistic of securing some level of financial recompense for its customer's alleged breach of contract, the lost turnover will have a material impact on DRC's short and medium term results. The management team continues to seek alternative routes to market for product lines which have become demonstrably acceptable to the oil and petrochemical industries over an extended period of time. This is a big challenge and inevitably is taking time to establish new distribution channels where product integrity and specification remains all important. Sales of some other products have either slowed or failed to grow as expected and although the company's flagship "Intelligent Membrane" product has generated a lot of positive interest, sales to date have been lower than hoped for, at least partly because the timescale between initial enquiry and product delivery is often frustratingly long. Overall DRC's sales in the six months fell substantially and are running at a level which is financially unsustainable with the present organisational structure. Accordingly following a strategic review we are in the process of reducing the company's cost base so as to align this with the current revenue streams to ensure that DRC does not continue to act as a drag on what would otherwise be an expanding and successful Group. Current Trading Trading in the second half of the year has begun very positively, with Crescent in particular producing exceptional returns in the first two months. Turnover and profits are also well up at Fullflow and would have been even higher had it not been for a number of large projects in France being delayed. All Fullflow's businesses have enjoyed strong levels of order intake and these should underpin sales and profit in the coming months. Only DRC is currently underperforming and it is receiving considerable attention from the Group's senior management. Future Prospects Despite our disappointment at having to report losses at the interim stage we retain our confidence that the Group is on course to deliver significantly improved results in both the short and medium terms. Both Crescent and Fullflow have the necessary skills, experience and market position to benefit from the favourable conditions which are likely to prevail in the markets which they serve and we are determined that by one means or another we will stem the significant losses which have once again emerged at DRC. We look forward to reporting positive news to shareholders later in the year J.A.F. Walker Chairman 29th March 2007 Consolidated Profit and Loss Account +------------+-------------------------------+--+--------+--+---------+--+--------+| Six months| | | Six| | Six| | || ended| | | months| | months| | || | | | ended| | ended| | Year|| 31 December| | |31.12.06| | 31.12.05| | ended|| 2006| | | | | | |30.06.06|+------------+-------------------------------+--+--------+--+---------+--+--------+| | | | £'000| | £'000| | £'000|+------------+-------------------------------+--+--------+--+---------+--+--------+| | | | | | | | || | | | | | | | || | | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| |Turnover | | 10,050| | 9,472| | 18,521|| | | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| | | | 120| | 302| | 748|| | | | | | | | || |Operating profit | | | | | | || | | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| | | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| |Net interest payable and | | (276)| | (260)| | (516)|| |similar charges | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| | | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| |(Loss)/profit on ordinary | | (156)| | 42| | 232|| |activities before taxation | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| |Taxation | | -| | -| | -|+------------+-------------------------------+--+--------+--+---------+--+--------+| | | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| | | | (156)| | 42| | 232|| | | | | | | | || |Retained (loss)/profit | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| | | | (0.92)p| | 0.27p| | 1.43p|| | | | | | | | || |Basic (loss)/profit per share | | | | | | || |(pence) | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+| |Diluted (loss)/profit per share| | (0.92)p| | 0.27p| | 1.43p|| |(pence) | | | | | | |+------------+-------------------------------+--+--------+--+---------+--+--------+ Consolidated Balance Sheet +------------+--------------------------------+--+--------+--+--------+--+--------+| As at| | | | | | | || | | | | | | | || 31 December| | | As at| | As at| | As at|| 2006| | |31.12.06| |31.12.05| |30.06.06|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | £'000| | £'000| | £'000|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Fixed assets | | | | | | || | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Intangible assets | | 39| | 19| | 42|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Tangible assets | | 4,554| | 4,272| | 4,411|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | 4,593| | 4,291| | 4,453|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Current assets | | | | | | || | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Stocks | | 3,218| | 2,783| | 2,969|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Debtors | | 6,094| | 5,423| | 6,550|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | 9,312| | 8,206| | 9,519|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Creditors: amounts falling due | | (8,903)| | | | (8,984)|| |within one year | | | | | | || | | | | | (8,521)| | |+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | 409| | | | 535|| | | | | | | | || |Net current assets/(liabilities)| | | | (315)| | |+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | 5,002| | | | 4,988|| | | | | | | | || |Total assets less current | | | | 3,976| | || |liabilities | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | 3,312| | | | 3,142|| | | | | | | | || |Creditors: amounts falling due | | | | | | || |after more than one year | | | | | | || | | | | | 3,069| | |+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Capital and reserves | | | | | | || | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Called up share capital | | 85| | 79| | 85|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Share premium account | | 11,878| | 11,134| | 11,878|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Capital reserve | | 41| | 41| | 41|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Revaluation reserve | | 1,459| | 1,479| | 1,459|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Profit and loss account | |(11,773)| |(11,826)| |(11,617)|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | 1,690| | 907| | 1,846|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | 5,002| | 3,976| | 4,988|+------------+--------------------------------+--+--------+--+--------+--+--------+ Consolidated Cash Flow Statement +------------+--------------------------------+--+--------+--+--------+--+--------+| Six months| | | Six| | Six| | || ended| | | months| | months| | || | | | ended| | ended| | Year|| 31 December| | |31.12.06| |31.12.05| | ended|| 2006| | | | | | |30.06.06|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | £'000| | £'000| | £'000|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Net cash inflow from operating | | 54| | 468| | 378|| |activities | | | | | | || | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Returns on investments and | | | | | | || |servicing of finance | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Net interest paid | | (257)| | (231)| | (496)|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Hire purchase interest | | (9)| | (16)| | (18)|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | (266)| | (247)| | (514)|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Investing activities | | | | | | || | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Payments to acquire fixed assets| | (66)| | (56)| | (197)|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Receipts from sales of tangible | | 47| | 7| | 32|| |fixed assets | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | (19)| | (49)| | (165)|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Financing | | | | | | || | | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Issue of ordinary share capital | | -| | -| | 750|| |net of | | | | | | || | | | | | | | || |expenses | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| |Other loan repayments | | -| | -| | (95)|+------------+--------------------------------+--+--------+--+--------+--+--------+| |Capital element of finance | | 215| | (105)| | (268)|| |leases and purchase payments | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | 215| | (105)| | 387|+------------+--------------------------------+--+--------+--+--------+--+--------+| | | | (16)| | 67| | 86|| | | | | | | | || |Net (decrease)/increase in cash | | | | | | |+------------+--------------------------------+--+--------+--+--------+--+--------+ Notes to the Interim Report 1 Financial information The interim results are unaudited and do not constitute statutory accounts. The comparative information contained in this report for the year ended 30th June 2006 does not constitute the statutory accounts for that financial year. Those accounts have been reported on by the Group's auditor and delivered to the Registrar of Companies. The report of the Auditor was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act. 2 Taxation There is no charge in the profit and loss account for taxation due to the fact that the Group has tax loss capacity to shelter the profits in the period under review. 3 Earnings per share Earnings per share is calculated on the basis of shares 17,019,546 (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 earnings per share calculations because the share options' exercise prices are greater than the current market price. 4 Dividends The Directors are not recommending the payment of an interim dividend 5 Copies of interim Copies of the interim report are being circulated toreport shareholders. Further copies are available from the Company's registered office at SWP Group plc, 4th Floor, Bedford House, 3 Bedford Street, London WC2E 9HD. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SWP.L