26th Nov 2007 07:01
Superglass Holdings PLC26 November 2007 For Immediate Release 26 November 2007 Superglass Holdings PLC Maiden Preliminary Results for the year ended 31 August 2007 Superglass Holdings PLC ("Superglass" or the "Group"), one of the UK's leadingmanufacturers of glass mineral fibre insulation products is pleased to announceits maiden preliminary results for the year ended 31 August 2007 following itsflotation on the Main Market of the London Stock Exchange in July this year. Highlights • Flotation on the Main Market in July 2007, placing £72.8m of existing shares with investors • Good trading results ahead of expectations at IPO on a 12 month like for like basis - Revenue up 5.5% to £44.0m - EBITA up 10.9% to £11.2m - PBT (pre amortisation, exceptional items and non recurring costs) up 16.9% to £7.6m (after £825k non recurring debt interest) • Continuing capital investment programme - £10m invested over 4 years in 15 acre freehold manufacturing plant Chairman, Tim Ross commented: "With the anticipated demand from the CERT (CarbonEmission Reduction Target) programme combined with enhanced delivery capability,the company is well placed to capitalise on the opportunities which lie aheadand the Board looks forward with confidence." For further information, please contact:Superglass Holdings PLCJohn Smellie, Managing Director 01786 451 170 Tony Kirkbright, Finance Director Buchanan CommunicationsDiane Stewart/Karen Morrison/Tim Anderson/Nick 0207 466 5000Melson Brewin Dolphin SecuritiesAndrew Kitchingman 0113 241 0130 Chairman's Statement I was extremely pleased to be invited to become Chairman in February this year,ahead of the very successful flotation of the Company in July. I am equallydelighted to be able to report a strong trading performance in the year ended 31August 2007. Group turnover of £44.0M and EBITA before non-recurring items of £11.2Mdemonstrate the progress that was achieved during the year. This was despite thequieter market conditions as the final phase of the Government's EnergyEfficiency Commitment (EEC 2) drew to a close ahead of the anticipated demand in2008 resulting from its introduction of the three-year Carbon Emission ReductionTarget (CERT). Underlying Earnings Per Share increased (on a proforma basis) to11.5p. The Company's admission to the Main Market of the London Stock Exchange markedthe culmination of twenty years of innovation and hard work from the able teamled by our talented Chief Executive, John Smellie, following his initiative toestablish the company in 1987. £72.8M was successfully raised from investors toenable our previous private-equity backers to achieve a very satisfactoryrealisation. Our continuing profit momentum is attributable in part to a significant capitalinvestment programme in past years, which is now bearing fruit and will lead toincreased capacity of 70,000 tonnes per annum during 2008, in readiness for theCERT programme. We also benefited in the past year from price increasesintroduced at the end of 2006, greater use of recycled glass, improved energyefficiency and buoyant export markets. Since my appointment I have been much impressed by the motivation and work ethicof our staff and workforce at all levels. On behalf of the Board I would like totake this opportunity of thanking each and every one of them whose skill anddedication are at the heart of the company's ongoing success. Experience has taught us to expect very strong demand in the opening months ofthe Government's energy efficiency initiatives. In the latter part of the yearwe accordingly commenced a strategic build-up of finished goods stocks, ahead ofthe commencement of the CERT programme in the first part of 2008. With theanticipated demand from this programme combined with enhanced deliverycapability, the company is well placed to capitalise on the opportunities whichlie ahead and the Board looks forward with confidence. Tim RossChairman26 November 2007 Chief Executive's ReviewOverview I am delighted to be able to present my first report as Chief Executive of alisted company. Based in Stirling (Scotland), Superglass manufactures and supplies acomprehensive range of glass wool thermal insulation products for the UKstructural and domestic property market. The Group was originally established in1987 to acquire the Stirling based production facility which had formerly beenused to manufacture mineral wool for thermal insulation. The plant wassubsequently converted to glass wool production based on technology licensedfrom a US Engineering Company on the basis that due to lower weight and ease ofinstallation, glass would become the preferred product in the market. Under myguidance, manufacturing commenced later that year with a capacity of 5,000tonnes per annum. The plant has been substantially expanded and upgraded over the years,increasing both the capacity, currently approximately 60,000 tonnes per annum,and the range of products manufactured. Superglass has a strong track record ofgrowth and has remained consistently profitable. Superglass' success has been built on a number of key attributes including: •a high level of customer service and a flexible approach to customers' requirements, enabling us to break into an established supply chain and develop significant market share; •a high level of technical and production excellence; •the establishment of a flexible plant which has enabled capacity to be increased on a low cost basis and production to be flexed towards products with the highest demand; •a rigorous focus on improving efficiency and driving down waste to improve cost savings; and •the proven ability to maintain plant utilisation at a high level by selling product in Europe during periods of lower demand in the UK. The insulation market The UK insulation market is regulatory driven. Energy efficiency has beenidentified by the UK Government as 'the cheapest, cleanest and safest way ofmeeting its energy policy objectives'. Approximately 40% of UK carbon dioxideemissions come from residential buildings, therefore improving the energyefficiency of the UK's residential housing stock has been a key focus ofGovernment policy and will continue to be so, as Government aims to meet itschallenging (and soon to be legally binding) carbon dioxide reduction targets. Initiatives such as the Energy Efficiency Commitment (EEC), which sets bindingtargets for utility companies to reduce energy usage in existing properties, andthe introduction of new Building Regulations which require higher standards ofthermal efficiency in new buildings, have resulted in a significant increase indemand for insulation materials. This is set to continue. The May 2007 EnergyWhite Paper "Meeting the Energy Challenge" announced that EEC will be replacedby a new Carbon Emission Reduction Target (CERT) covering the period 2008-2011.This will require utility companies to achieve double the level of carbonsavings achieved under the current programme EEC2. Last week the Prime Ministerannounced that over the next 3 years 5 million homes will benefit fromdiscounted or free loft or cavity insulation as a result of new carbon emissionreduction targets. A Competition Commission report estimated that UK demand for glass woolinsulation will increase by up to 30% over the period 2007-2009 in volume alone(before any price inflation) based on estimates of targets under EEC3 which werelower than those currently being proposed under CERT. Significant further growthis expected thereafter as Building Regulations continue to tighten as theGovernment attempts to hit its target for all new homes to be carbon neutral by2016, and initiatives such as the requirement to include an Energy PerformanceCertificate within Home Information Packs start to make an impact. The recentWhite Paper also confirmed that utility companies will continue to have anobligation to improve energy efficiency under the CERT programme until at least2020. I am confident that these and other regulatory changes will have a positiveeffect on the future trading of Superglass. Manufacturing modifications and improvements Superglass has a scalable plant that was intentionally built so upgrades couldbe made at a relatively low cost. A number of modifications and improvements tobuild capacity have been made to increase capacity to its current level ofapproximately 60,000 tonnes. Improvements made to the plant since 2003 at a cost of approximately £10million, include: •improved environmental systems; •the refurbishment of both furnaces; •the number of and size of fiberisers has been increased; •curing ovens have been updated (increasing capacity); and •two automated packaging facilities have been installed (doubling the potential output). The Group has a capital expansion plan in place which aims to increase capacityto 70,000 tonnes during 2008 and with the potential for further capacityincreases beyond that. Environmental considerations Superglass is regulated by both the Scottish Environmental Protection Agency("SEPA") and Stirling Council. The Group has placed emphasis on environmentalissues which has resulted in the following environmental initiatives: •waste from the plant has been significantly reduced with the majority of fibre waste now recycled back into the process; •the majority of the wash water ( which is itself partly collected rain water) is now recycled in the process; •recycled glass is the main raw material in the process; •emissions are cleansed prior to release into atmosphere using our state of the art electrostatic precipitators; and •the plant is BAT (Best Available Technique) compliant in respect of environmental matters. Superglass will continue to work closely with SEPA to minimise the environmentalimpact of its plant. The relatively environmentally friendly nature of the plant also results insignificant cost savings, for example through reduced requirements for water,and through lower raw material requirements as a result of reduced wastage. Outlook Our strategy is to continue to expand and flex production capacity to meet theanticipated increase in the UK market as a result of the CERT programme and toincrease the Group's market share as a consequence. The Group also intends toleverage its reputation for technical excellence and customer service bydiversifying its operations both geographically and into complementary energyefficiency markets. John Smellie Chief Executive 26 November 2007 Financial ReviewResults On 16 August 2005, the Company acquired Superglass Group Limited ("SGL") andSuperglass Insulation Limited ("SIL"). The comparative period figures are forthe 17 months ended 31 August 2006 which includes the trading period of 54weeks. The trading results for the year ended 31 August 2007 were good and slightlyahead of our expectations at the time of the IPO. Turnover was £44.0m (2006:£41.7m) and EBITA was £11.2m (2006: £10.1m) on a 12 month like for like basis,increases of 5.5% and 10.9% respectively. The consolidated financial statements for the Group are reported in accordancewith international Financial Standards (IFRS) for the first time. IFRS Translation An explanation of the transition from UK GAAP is contained in the notes to theaccounts. The main item concerns the treatment of Intangibles. • Under UK GAAP, the management buy-out on 16 August 2005 gave rise to £28.3million of goodwill which was being amortised over 20 years. A requirement of IFRS is that the fair values of all intangible assets, including goodwill, must be recognised at acquisition and the Group has, therefore, allocated fair values to the following intangible assets: • Customer contracts are stated at the net present values of the future net cash flow benefits anticipated to arise from those contracts. The attributed valuation of £26.3 million is being amortised over six years, resulting in an annual charge of £4.4 million. • A licence agreement relating to the technology provided by Glass Inc. Under the terms of the agreement, the Group will no longer be liable to make royalty payments for the use of the technology from 1 December 2007 and a perpetual licence for its use is then granted by Glass Inc. The fair value of £ 0.5 million assigned to the agreement is therefore based on the fair value of all royalty payments required to acquire the perpetual licence discounted to take account of the lack of transferability of the technology rights. The attributed value is not amortised but is tested annually for impairment. • The remaining goodwill is attributable to competitive advantages that the Group has gained within its markets, including factors such as the reputation of its brand and its distribution network. This goodwill is not amortised but is tested annually for impairment. A deferred tax provision of £8.0 million was made at the date of the managementbuy-out in respect of the timing differences that arise as a result of thediffering accounting and tax treatment of the amortization charged to the profitand loss account in relation to the intangible assets under IFRS. Sales Total sales for 2007 increased by 1.3% over the 17 month period to 31 August2006 and 5.5% on a like for like basis. The increase reflected the full yeareffect of selling prices implemented at the end of FY 06, as raw material andenergy cost increases were passed on to customers. However the benefits of theincreased prices were partially offset by a movement of 13% from UK to exportvolume, as the UK markets reflected the effect of the approaching end of EEC2.Improved export sales arose from opportunities in Scandinavia. Operating profit EBITA before non recurring items rose from £10.4 million in the period ended 31August 2006 to £11.2 million with operating profit margins improving from 23.9%to 25.5%. This improvement was founded on a number of production efficiencyprojects resulting in lower energy input per tonne, increased levels of recycledbottled glass and improved transport utilisation. Non- recurring costs These represent the costs associated with the successful IPO in July 2007 andrepayment of loans to exiting private equity investors. In addition a dividendof £825,000 was paid to holders of A Ordinary Shares (part of the MBO financing)which has been treated as debt interest under IFRS. Taxation The effective tax charge for the group of 59.9% (2006: 39.4%) reflects the factthat the majority of the non recurring flotation costs are not allowabledeductions for corporation tax purposes. The underlying effective rate of 28.9%is below the standard rate of 30% largely due to prior year adjustmentsassociated with interest charges, previously disallowed as a result of 'thincapitalisation' rules. Dividends The directors intend to adopt a progressive dividend policy which will takeaccount of the profitability and underlying growth, while maintaining anappropriate level of dividend cover. The first dividend to holders of theOrdinary shares is expected to be declared in April 08 as an interim dividendfor the year ending 31 August 2008. Earnings per share Adjusted earnings per share was 68.7p (2006: 60.0p). Adjusted earnings are calculated by excluding amortisation of intangible assetsand exceptional costs. Adjusted earnings per share based on the number of sharesin issue at the year end would have been 11.5p. Borrowing facilities On 2 July 2007 the Group entered into an agreement with its bankers ClydesdaleBank, as a result of which revised banking facilities in the form of term loanfacilities of £28 million and an overdraft facility of £8million were providedto the group. The term loan facilities replace certain existing term loans originally providedby Clydesdale for the purpose of the acquisition of Superglass Insulation bySuperglass Group and were also available for the purpose of the repayments ofcertain amounts due by Superglass Group to the previous private equity ownersunder the terms of a deep discounted bond issued in August 2005. The new term facilities comprise two elements: •A facility of £23 million repayable in quarterly instalments, amortising over the life of the loan which is due for repayment by 31 July 2014 •A facility of £5 million repayable on 31 July 2014 Cashflows The Groups cash and cash equivalents reduced by £8.3million. This reductionlargely reflects the combined effect of strong cash inflows generated fromoperating activities of £5.5 million (2006: 3.8 million) with cash outflows onterm loan repayments to the bank and loan repayments to exiting private equityinvestors. The level of net debt at 31 August 2007 was £27.1m (2006: £29.9m). Treasury and financial risk management The Group aims to reduce financial risks wherever possible and ensure that ithas sufficient liquidity to meet all foreseeable needs. Forward currencycontracts in US Dollars are used to hedge foreign currency purchases ofmanufacturing consumables with the objective of minimising the effect offluctuations in exchange rates on future transactions and cashflows. Group income denominated in Euros has been largely offset by one-off expenditurein that currency. It is anticipated that forward contracts in Euros will be usedwhen such transactional matching can no longer be achieved. Separate bankaccounts are held for all currencies in which trade is conducted, in order tofacilitate the collection of debts and the management of currency positions. The Group has entered an interest rate swap with its bankers, Clydesdale Bank,fixing interest costs on borrowings of £20 million until August 2008 at a baserate of 4.65 per cent., thereafter reverting to LIBOR. Further swaps cap theinterest costs on borrowings of £12.5 million and £7.5 million at 5.5 per cent.for the years ending 31 August 2009 and 31 August 2010 respectively. The Group engages power consultants to assist in formulating a power purchasingstrategy in order to minimise fluctuations in input cost and provide a stablebasis on which to manage future energy costs. Flexible contracts have committedthe Group to forward purchases of an element of its power requirements for up to12 months ahead. Annual General Meeting The notice convening the Annual General Meeting, which will be held at StirlingManagement Centre on 21 January 2008 at 10:00am, is to be sent to shareholdersseparately with this report, together with the explanation of any items ofspecial business. Tony KirkbrightFinance Director 26 November 2007 Consolidated income statement for the year ended 31 August 2007 Note Year 17 month ended period ended 31 August 31 August 2007 2006 £000 £000 Revenue 44,029 43,493 Cost of sales (25,577) (25,740) Gross profit 18,452 17,753 Distribution expenses (5,538) (5,535) Administrative expenses - normal (6,401) (6,582) - non recurring relating to flotation of (1,675) - the group Other operating income 272 151 Operating profit before non recurring 6,785 5,787 costs Non recurring costs (1,675) - Operating profit 5,110 5,787 Financial income 345 524 Financial expenses (3,893) (4,231) Profit before tax 1,562 2,080 Taxation 2 (934) (820) --------- --------- Profit for the year/period attributable to equity holders of the parent 628 1,260 ========= ========= Earnings per share Basic earnings per share 3 6.4p 12.9p Diluted earnings per share 3 6.4p 12.9p Consolidated statement of recognised income and expense for the year ended 31 August 2007 Year 17 month ended period ended 31 August 31 August 2007 2006 £000 £000 Profit for the year/period and total 628 1,260 recognised income and expense attributable to equity holders of the parent ======= ======= Consolidated balance sheet at 31August 2007 2007 2006 £000 £000 £000 £000 Non-current assets Property, plant and 15,551 14,782 equipment Intangible assets 27,378 31,770 ---------- --------- 42,929 46,552 Current assets Inventories 3,088 1,536 Trade and other 3,920 2,678 receivables Cash and cash 134 8,448 equivalents Derivative financial 395 242 instruments --------- --------- 7,537 12,904 --------- --------- Total assets 50,466 59,456 Current liabilities Other interest-bearing 3,286 7,455 loans and borrowings Trade and other 11,423 9,794 payables Deferred government 110 60 grants Income tax payable 1,543 1,325 --------- --------- 16,362 18,634 Non-current liabilities Other interest-bearing 23,988 30,917 loans and borrowings Deferred government 321 240 grants Deferred tax 6,824 8,022 --------- --------- 31,133 39,179 Total liabilities 47,495 57,813 --------- --------- Net assets 2,971 1,643 ========= =========Equity attributable to equity holders of the parent Share capital 583 4 Share premium 1,108 379 Retained earnings 1,280 1,260 --------- --------- Total equity 2,971 1,643 ========= ========= Cash flow statement for the year ended 31 August 2007 Year 17 month ended period ended 31 August 31 August 2007 2006 £000 £000 Cash flows from operating activities Profit for the year/period 628 1,260 Adjustments for: Depreciation, amortisation and impairment 6,490 6,832 Net financial expense 3,548 3,707 Taxation 934 820 ---------- ---------- Cash from operating activities before 11,600 12,619 changes in working capital and provisions Increase in trade and other receivables (1,242) (643) Increase in stock (1,552) (124) Increase/(decrease) in trade and other 1,640 (2,572) payables ---------- ---------- Cash generated from the operations 10,446 9,280 Interest paid (3,020) (3,673) Tax paid (1,914) (1,854) ---------- ---------- Net cash from operating activities 5,512 3,753 ---------- ---------- Cash flows from investing activities Acquisition of subsidiary, net of cash - (30,231) acquired Acquisition of property, plant and equipment (2,603) (3,551) ---------- ---------- Net cash used in investing activities (2,603) (33,782) ----------- ---------- Cash flows from financing activities Proceeds from the issue of share capital 9 384 Shares repurchased (37) - Proceeds from new loan 28,000 40,873 Repayment of borrowings (38,338) (2,645) Payment of finance lease liabilities (32) (135) Dividends paid on shares classed as a (825) - liability ----------- ---------- Net cash (used in)/from financing activities (11,223) 38,477 ----------- ---------- Net (decrease)/increase in cash and cash (8,314) 8,448 equivalents Cash and cash equivalents at beginning of 8,448 - year/period --------- --------- Cash and cash equivalents at end of year/ 134 8,448 period ========= ========= Notes 1. Accounting policies Superglass Holdings plc ("the Company") is a company domiciled and incorporatedin the United Kingdom. The accounts were approved on 26 November 2007. Background and basis of preparation The Company was incorporated in the UK as Edger 509 Limited on 8 April 2005,changed its name to Superglass Holdings Limited on 20 December 2006 and wasre-registered as a public limited company on 3 July 2007. On 16 August 2005, the Company acquired Superglass Group Limited ("SGL") andSuperglass Insulation Limited ("SIL"). As a result the comparative financialinformation included within the income statement includes the tradinginformation for the group for the 54 weeks ended 31 August 2006. The Company andits subsidiaries comprise "the Group". Transition to Adopted IFRSs These are the Group's first financial statements prepared under Adopted IFRS andIFRS 1 First-time Adoption of International Financial Reporting Standards hasbeen applied as set out below. An explanation of how the transition to Adopted IFRS has affected the reportedfinancial position, financial performance and cash flows of the Group isprovided in the accounts These notes include reconciliations of equity andprofit or loss for comparative periods reported under UK Generally AcceptedAccounting Principles ("UK GAAP") to those reported for the same periods underIFRS. The date of transition to IFRS was 8 April 2005 (the date of incorporation ofSuperglass Holdings Plc) which was the beginning of the comparative period ended31 August 2006. Basis of preparation The financial statements are prepared on the historical cost basis except forintangible assets acquired in a business combination and derivative financialinstruments, which are stated at their fair values. The preparation of financial statements in conformity with Adopted IFRS requiresthe directors to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expense. The estimates and judgements are based on historical experience andvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making judgements aboutcarrying amounts of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates. The accountingpolicies set out below have, unless otherwise state, been applied consistentlyto all periods presented in these financial statements and in preparing theopening IFRS balance sheet at 8 April 2005. 2. Taxation Recognised in the income statement Year 17 month ended period ended 31 August 31 August 2007 2006 £000 £000 Current tax expense Current year 2,215 2,059 Adjustments for prior years (83) - 2,132 2,059 Deferred tax expense Origination and reversal of temporary (1,166) (1,239) differences Adjustment in respect of prior years and change (32) - in substantively enacted tax rate (1,198) (1,239) --------- --------- Total tax in income statement 934 820 ========= ========= Reconciliation of effective tax rate Year 17 month ended period ended 31 August 31 August 2007 2006 £000 £000 Profit before tax 1,562 2,080 Tax using the UK corporation tax rate of 30% 468 624 Non-deductible expenses 581 196 Overprovided in prior years (115) - --------- --------- Total tax in income statement 934 820 ========= ========= 3. Earnings per share The calculation of basic earnings per share and underlying earnings per share isbased on the profit attributable to ordinary shareholders as follows: 2007 2006 2007 2006 Earnings Earnings EPS EPS £000 £000 pence pence* Basic 628 1,260 6.4p 12.9p Adjusted for: Non recurring costs 1,675 - 17.2p - Amortisation of intangibles that 4,393 4,596 45.1p 47.1p attract no tax deduction --------- --------- --------- -------- Adjusted 6,696 5,856 68.7p 60.0p ========= ========= ========= ======== Diluted basic earnings per share 6.4 12.9 Diluted adjusted earnings per share 68.7p 60.0p * based on the weighted average number of shares in 2007 for comparativepurposes Undiluted earnings per share The weighted average number of shares used in each calculation is as follows: 2007 Number of shares Issued ordinary shares at beginning 383,333 of the period Effect of shares issued in 2006 - Effect of shares issued and 9,366,564 redeemed in 2007 ------------- Weighted average number of ordinary shares for the year/ 9,749,897 period ended 31 August ============= Diluted earnings per share 2007 Number of shares Weighted average number of ordinary shares for the year/ 9,749,897 period ended 31 August Effect of share options in use 10,339 ------------- Weighted average number of ordinary shares for the year/ 9,760,236 period ended 31 August ============= 4. Status of accounts The financial information set out above does not constitute the Group'sstatutory accounts for the years ended 31 August 2007 or 31 August 2006 but isderived from those accounts. Statutory accounts for the year ended 31 August2006 have been delivered to the Registrar of Companies, and those for the yearended 31 August 2007 will be delivered following the company's Annual GeneralMeeting. The auditors have reported on those accounts; their reports wereunqualified and did not contain statements under Section 237(2) or (3) of theCompanies Act 1985. These results were approved by the Board of Directors on 26 November 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SPGH.L