Preliminary Results

Superglass Holdings plc

("Superglass" or the "Company or the "Group")

Preliminary Results for the Year Ended 31 August 2013

Superglass Holdings plc, the UK's leading independent manufacturer of glass fibre insulation solutions today announces its preliminary results for the year ended 31 August 2013.

Financial highlights

Trading Performance

Operational highlights

John Colley, Executive Chairman of Superglass commented:

"I am pleased to report that notwithstanding the difficult trading conditions Superglass made good progress on a number of fronts. This includes the successful completion of our planned capital investment programme, Project Phoenix, on schedule in April which will deliver significant ongoing savings for the business. We also concluded a successful refinancing in June which provides a strengthened and sustainable long term capital structure for the Group. Levels of activity in Green Deal and ECO continue to disappoint and consequently revenues in this area in the current financial year will be lower than originally anticipated by management. Our strategy for the current financial year is to open up further market opportunities for Superglass. Our focus will be to continue to reposition the business through product and service innovation, delivering enhanced product quality and outstanding customer service. Superglass is now positioned to take advantage of any recovery in its end markets and therefore deliver shareholder value."

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Chairman's Statement

I am pleased to report that Superglass made good progress during the year, successfully completing our planned capital investment programme called Project Phoenix on schedule in April. Project Phoenix, which cost £7.0m, has transformed the manufacturing capability of our plant in Stirling. The installation of best in class technology has, as expected, been delivering meaningful cost savings in the manufacturing process since completion. We expect the full year benefits from this project and other initiatives, totalling at least £5.0m per annum, to be delivered by the end of the current financial year.

This, together with the capital restructuring and refinancing completed in June, means Superglass is now exceptionally well placed to capitalise on growing activity in key construction markets.

The refinancing raised £12.9m by way of a share placing and the company also transferred at the same time to the AIM market. In addition, £5.7m of outstanding borrowings from Clydesdale Bank was converted into convertible shares in the Company. The refinancing has put Superglass in a positive net cash position and provides a strengthened and more sustainable long-term capital structure to support the continued transformation of the Company.

The results for the year reflect the continuing difficult trading conditions and planned production outages for Project Phoenix works. Loss before interest, taxation, depreciation, amortisation and exceptional items was £2.5m, in line with expectations, resulting from poor second half volumes which reflected the collapse in retrofit demand following the introduction of the Government's flagship energy schemes, Green Deal and ECO. Strong working capital management contributed to better than expected end of year net funds of £4.6m at 31 August 2013.

For all the excellent progress made in the year, the transition from CERT to Green Deal and ECO has had a significant impact on the market and our results. Despite the fact that there remain a large number of lofts and cavity walls uninsulated, the current schemes have resulted in substantially reduced demand for retrofitting insulation in domestic properties. Whilst there was an expectation that the transition to Green Deal would not be entirely smooth, our view now is that these schemes are unlikely to be materially improved until after the next election in 2015. This is in spite of current and anticipated levels of loft and cavity insulation falling well short of Government environmental targets.

Our strategy for the current financial year is to open up further opportunities for Superglass. Our focus will be to continue to reposition the business through product and service innovation, delivering enhanced product quality and outstanding customer service. We also plan to make further improvements in efficiency during the year including potential additional gains in logistics cost reduction.

During the year both the Board and the Senior Management team have been further strengthened. Declan Billington was appointed as a Non-executive Director. I have also agreed to spend more time with the business and move to Executive Chairman with immediate effect, working closely with Alex Mcleod, the CEO, and his senior team. The marketing and operations teams have also been strengthened. The Board recently announced the resignation, for personal reasons, of our Finance Director Allan Clow. I would like to thank Allan for his contribution over the last year and I am pleased to announce the appointment of Chris Lea as his successor with effect from 2 December 2013.

John Colley

Chairman

19 November 2013

Chief Executive's Review

Superglass has succeeded, during the financial year ended 31st August 2013, in creating a platform for growth despite extremely challenging trading conditions. Significant progress has been made towards achieving the strategic objective of migrating Superglass to a lower cost, higher quality producer of glass fibre insulation with an emphasis on selling products through broader routes to market and an enlarged customer base with a more comprehensive range of solutions.

Project Phoenix, our ambitious manufacturing investment programme, was delivered on time and meaningful cost savings have already been achieved. This was the most complex project the business has ever undertaken and I am very proud of the entire Superglass team who made this possible. A refinancing was successfully completed in June raising gross funds of £12.9m, by way of a placing of shares and transfer to the AIM market, as well as the conversion of £5.725m of debt into equity. This provides the Company with a strengthened and sustainable long term capital structure.

The transition from CERT to ECO/Green Deal has caused a major gap in activity within the retrofit market for both loft and cavity insulation. Combined with abnormally low levels of house-building activity in the UK by historical standards of new unit construction, despite recent early signs of recovery, the net effect has been a surplus of UK-based insulation manufacturing capacity and highly competitive market conditions.

The results for the year reflect the continuing difficult trading conditions and planned production outages for Project Phoenix works. Revenue for the period was £24.4m, 25% down on last year. Loss before interest, taxation, depreciation, amortisation and exceptional items was £2.5m, in line with expectations, due to the decline in volume and the impact of 2 plant shutdowns required to implement new technology. Strong working capital management contributed to better than expected end of year net funds of £4.6m.

In summary, the operations and financial structures are now vastly improved. Our focus for the year ahead is ensuring we leverage the commercial benefits that this new platform provides.

Phoenix Investment

The implementation of new technology as part of Project Phoenix was exceptionally well executed by the operations team. This was the largest project undertaken at Superglass since it was established in 1987 and both phases were delivered on time, with the cost savings we expected coming through in the latter part of the financial year.

The plant now has best in class fiberising technology providing reductions in energy, waste and material usage and an ability to compress our products further, increasing payloads and reducing transport costs by an estimated 5-10%. The project has already delivered substantial cost savings in reduced energy consumption and waste totalling an annual run rate of £2.8m by the end of the financial year ended 31st August 2013.

Full year benefits of the cost saving programme plus other initiatives will reach at least £5.0m per annum by the end of the financial year ending 31st August 2014, through delivery of further efficiency savings.

Refinancing

With support from investors and Clydesdale Bank we have further strengthened the capital base during the year, providing resilience to continue the transformation of the business in more challenging market circumstances. Highlights of the refinancing were as follows:

Market

The transition from CERT to the Government's flagship energy efficiency schemes of Green Deal and the energy supplier obligation (the Energy Company Obligation, ("ECO")) has resulted in a collapse in demand for loft and cavity wall insulation. It is now widely accepted that 2013 activity levels are around 90% down on 2012 levels. There are an estimated 7.1 million lofts and 5.3 million cavities remaining under-insulated. To put this in context, under the last scheme, CERT, 3.9 million lofts and 2.6 million cavities were insulated over the lifetime of the scheme (2008 - 2012).The remaining work outstanding therefore equates to double the work delivered through CERT, however, with current levels of activity it will take more than 50 years to complete all outstanding work without a fundamental re-think of current schemes, which are failing to deliver at the required level necessary to achieve Government targets by 2020.

An agreement has been reached with InstaGroup to exit the current solus supply arrangement which will enable Superglass to offer cavity wall solutions to the wider market, which until now we have been excluded from under the terms of this agreement. Products have been developed and we will shortly attain the necessary approvals to enable Superglass to provide a range of solutions under the ECO in non-traditional measures (Hard To Treat), which is the one Government scheme generating at least some activity. The transition has, however, resulted in a collapse in demand for traditional cavity wall measures and has led the Board to decide to discontinue a by-product cavity wall solution of which we have a surplus stock. The costs to convert the finished product to enable it to be sold in non-traditional applications is prohibitive. The Board intend to write down these surplus stocks with a book value of £0.5m in the 2013/14 accounts. Overall this development is positive as it allows Superglass to access the wider (albeit substantially smaller) Green Deal/ECO market channel and, through the prompt disposal of the by-product cavity wall solution, a reduction in storage costs during the current financial year will impact positively on cash flow.

We have begun to leverage the benefits generated from the new platform that our improved production facility and stronger balance sheet have provided. Mineral wool insulation of lofts and cavities remains one of the lowest cost means of saving carbon. We have continued to develop our key strengths of flexibility, product quality and service. With the new technology in place we will also strengthen our capability to develop end user relationships and innovation. In new build construction we will continue developing new specifications with an emphasis on new product innovation. For example, work continues with one of the UK's major house builders on implementing our unique acoustic solution. Further innovative solutions are planned to address this market which the industry expects to show very strong growth as a result of the Funding for Lending and Help to Buy schemes introduced by the Government to stimulate the housing market.

Builders merchants are an important route to market for Superglass and an area of growth for us. I am therefore delighted to report that during the summer we began trading with Jewson, one of the top 3 builders merchants in the UK.

The investment in new technology provides Superglass with the opportunity to develop a product range suitable for export markets helped by reduced transport costs as a result of our higher compression levels.

The reduction in overall market demand has seen competition intensify in other market channels resulting in pressure on pricing levels. However, with demand beginning to increase through an improving construction market, we would expect to see prices stabilise and begin to recover during this financial year.

Operations

The focus for the year has been on the successful upgrading of both production lines. Cost savings were delivered in the year and the focus will continue on delivering further cost savings throughout the current financial year. We expect to deliver annual run rate savings of at least £5m per annum by August 2014.

A comprehensive review of our inventory and logistics costs is being undertaken and we expect to be able to generate further cost reductions in addition to those savings previously identified.

Board

In September 2013, Declan Billington joined the Board. Declan brings a wealth of operational and financial experience to the Board. He is CEO of John Thompson and Sons Ltd, a leading retailer and manufacturer of animal feeds based in Northern Ireland and is also a director of W. & R. Barnett Limited, the Company's largest shareholder.

The Board also announced the resignation, for personal reasons, of Allan Clow as Finance Director. I would like to thank Allan for his valuable contribution to the business and, in particular, his support in completing the successful capital restructuring earlier this year and I wish him well for the future.

Organisation

To deliver from the platform created will require Superglass to further develop and renew the team and culture. In 2012/13 significant strengthening of line management was completed in the operations team which was a major factor in the successful implementation of Project Phoenix. Further strengthening of the management team at all levels will continue in 2013/14 with a strong emphasis on improving our sales and innovation capability.

Outlook

It is difficult to envisage that activity levels in Green Deal and ECO can fall any further and with recent evidence of strong growth in housing activity, it is likely that demand will begin to recover, albeit from a very low base. However, we had previously anticipated better, albeit slow recovery in demand under ECO/Green Deal. Revenues in this area in 2014 will therefore be lower than management had originally expected.

The combination of a successful refinancing and the introduction of best in class technology will enable Superglass to focus on an improved commercial offering in its chosen markets whilst delivering further cost savings. Emphasis will continue to be placed on margin recovery through a constant focus on cost savings. We also expect pricing levels to begin to recover as demand increases.

During 2013/14 Superglass will aim to provide an enhanced offering through a growth in sales specification activity combined with the introduction of new products and services. I am confident that further cost savings will be achieved in production and logistics costs.

Alex McLeod

Chief Executive Officer

19 November 2013

Financial Review

Revenue

Sales revenues reduced by 25% from the prior year at £24.4m (2012: £32.4m). Overall volumes were down 22.5% which was predominately driven by the collapse in activity as the government initiated CERT scheme was replaced by the ECO/Green Deal schemes. Sales during the second half reduced from first half levels as a result of the impact of the CERT scheme transition which commenced in January 2013. Sales prices continued to be under pressure throughout the year.

Operating loss

Loss before interest, taxation, depreciation, amortisation and exceptional items was £2.5m, down from a profit of £0.4m for the same period last year. During the period, production costs were impacted by two line shutdowns as part of the Project Phoenix implementation and fixed cost under absorption through the reduction in demand.

Underlying administrative expenses fell by £0.7m despite increased depreciation charges of £0.5m. This reflected tight cost control with reductions in headcount, insurance costs and share option charges.

The loss before taxation and exceptional items was £5.0m (2012: £1.7m), reflecting the underlying trading conditions.

The loss before taxation after exceptional items was £7.0m (2012: profit £6.8m) which includes the significant exceptional one-off credits relating to debt for equity swaps of £4.7m (2012: £10.3m) plus a £5.0m goodwill impairment charge in the current year.

Cash and borrowings

Despite the challenging trading conditions net cash balances at 31 August 2013 were £4.3m (2012: borrowings of £3.5m). The strong cash position reflects the refinancing that completed in June 2013.

Finance costs

Finance charges (excluding exceptional items) amounted to £0.5m (2012: £0.5m). These charges will reduce going forward, reflecting the reduction in debt following the successful refinancing.

Dividends

Whilst the Board intends to pay dividends when the Company's profitability, cash generation and underlying growth of the business justifies, it does not currently expect the Company to pay a dividend for the foreseeable future.

Exceptional costs

The results for the period include significant exceptional items arising in connection with the June 2013 refinancing and Project Phoenix implementation. These consist of an exceptional credit of £4.7m arising on the exchange of circa £5.725m of bank debt for the convertible shares now owned by Clydesdale Bank plc. This credit is partially offset by exceptional costs including those incurred in the write-down of the remaining book value of certain tangible and intangible fixed assets that are no longer believed to have any value to Superglass as a result of Project Phoenix and costs incurred in completing the refinancing which include professional fees and a small amount charged for restructuring costs. There has also been an exceptional impairment charge of £5.0m in the year in relation to goodwill recognised in 2005 when Superglass Holdings PLC acquired Superglass Insulation Ltd (via an intermediate holding company) reflecting the continuing uncertainty over government retrofit schemes and the expected impact on future cash flows. Further details of the exceptional items are set out in note 5.

Taxation

The underlying effective current tax charge (excluding adjustments in respect of prior years, exceptional items and the deferred tax adjustments in respect of the substantively enacted tax rate reduction) for the Group is 23% (2012: 25%).

(Loss)/earnings per share

Adjusted loss per share (excluding amortisation of intangible assets and exceptional items) was 43.3p (2012: adjusted loss per share 99.0p). The basic loss per share amounted to 67.0p (2012: earnings per share 496.6p after an exceptional credit).

The comparative figures have been restated to take into account the effects of the equity issue in the year.

Pension scheme

The Group continues to operate a defined contribution Group personal pension plan which is administered by a major specialist pension provider and therefore has no unforeseen present or future pension liabilities.

Net assets

The equity issue and debt conversion during the year significantly strengthened the Group's balance sheet. Net assets as at 31 August 2013 were £23.6m compared to a comparable figure of £16.3m at 31 August 2012 with net funds of £4.3m versus net debt of £3.5m in the prior year.

Treasury and financial risk management

Superglass aims to reduce financial risks wherever possible and ensure that it has sufficient liquidity to meet all foreseeable needs.

Separate bank accounts are held for all currencies in which trade is conducted, in order to facilitate the collection of debts and the management of currency positions.

The Group normally enters long-term flexible energy supply contracts, which allow it to forward purchase a variable proportion of its power requirements for up to 36 months. The electricity and gas supply contracts were both renewed last year although these are not reflected on the balance sheet as they are covered by own use exemptions under accounting standards.

Proven credit control procedures have been developed which, together with cover provided by its credit insurer, minimise the credit risk to the Group. For the year ended 31 August 2012 the bad debt expense amounted to 0.01% of sales (2012: 0.01%).

Share capital

Following the recapitalisation during the year, the Company has three classes of share capital which consist of ordinary shares, deferred shares and convertible shares.

Ordinary shares

The ordinary shares carry no right to fixed income but holders are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets and there are no restrictions on the transfer of the Company's shares. During the period the Company complied fully with the requirements that apply to its shares as a consequence of these shares being listed on the AIM market of the London Stock Exchange.

Deferred shares

The deferred shares do not entitle holders to receive any dividend or other distribution or to receive notice or speak or vote at general meetings of the company. Holders also have no rights to participate in a return of assets on a winding up. Deferred shares are not freely transferable and the creation and issue of further shares will rank equally or in priority to the deferred shares. The company has the right to buy back any deferred shares at any time for a nominal amount.

Convertible shares

The convertible shares, which are owned by Clydesdale Bank, have rights of conversion into ordinary shares in the capital of the Company. The convertible shares will be convertible during the period beginning on the second anniversary of the date of the issue of the convertible shares and ending on 30 April 2023, or, if on or before 30 April 2023, on repayment in full of all amounts outstanding under the Revised Committed Facilities. If all the convertible shares were to be converted the resulting interest in ordinary shares held by Clydesdale Bank would be 2,800,757 ordinary shares (equivalent to 10% of the newly enlarged issued share capital at admission, subject to any adjustments required to take account of share consolidations, subdivisions or bonus issues of new Ordinary shares in the capital of the company following the issue of convertible shares).

The holders of convertible shares will be entitled to participate in a return of capital and, following an entitlement to convert into ordinary shares arising, the appropriate number of holders of convertible shares will be entitled to participate in dividends and other distributions of profits pari passu with the ordinary shares in issue. The holders of convertible shares will be entitled to participate in a future fundraising of the Company but will have no voting rights, save in limited circumstances.

The convertible shares will not be listed on the Official List of the London Stock Exchange nor will they be admitted to trading on an investment exchange.

The previous convertible shares owned by Clydesdale Bank were converted into deferred shares as part of the June 2013 refinancing.

* Underlying results exclude exceptional items of £3.1m (2012: £8.6m). The term underlying is not defined in IFRS and therefore may not be comparable with similarly titled measures reported by other companies. Underlying measures are not intended as a substitute for, or superior measure to, IFRS measures.

Allan Clow

Finance Director

19 November 2013

Principal Risks and Uncertainties

Future market conditions may be less favourable than the Directors expect

The Directors expect that Government-led initiatives aimed at improving the energy efficiency of residential, commercial and industrial buildings, together with changes to UK building regulations, will be of continuing importance in underpinning the Group's markets in the future. In the event that these initiatives do not proceed in the form anticipated by the Directors, the Group's sales volumes and trading prospects may be adversely affected. The Directors believe that the delivery of new products, increased quality, increased specification activity and the ability to sell cavity wall insulation to a wider customer base will help mitigate this risk.

There may be excess glasswool manufacturing capacity in the UK in the future, resulting in more competitive market conditions

In the event that future market demand does not grow in accordance with the Directors' expectations or available UK glasswool manufacturing capacity increases more rapidly than they currently anticipate due, for example, to new market entrants, there may be an excess supply of product in the domestic market. Such a situation could create downward pressure on selling prices. The Directors are confident that the additional cost benefits identified through the implementation stage of Project Phoneix will ensure Superglass can establish a competitive and sustainable cost position in the market and that this will mitigate the effect of continuing price pressures.

The Group derives a significant proportion of its sales from a small number of key customers

In the financial year ended 31 August 2013, approximately 68% of the Group's total turnover was derived from seven major customers. In the event that orders placed by these key customers fall below the Directors' expectations in the future or that the Group's relevant contracts with these key customers are renewed on less favourable terms or terminated, the Group's prospects and financial performance may be adversely affected. The risk of material loss of sales volume is mitigated by the decentralised nature of the Group's key trading relationships and related purchasing decision making and the Group's continued push into new markets.

The Group derives all its sales from one type of product

Unfavourable publicity or other adverse reputational factors concerning the Group and its products, as well as a reduction in demand for this type of product or new products entering the market, could damage customer goodwill and the Group's market position. The Group continues to develop new product applications and works to expand routes to market to help mitigate this risk.

The Group operates from a single manufacturing site

The Group produces glasswool insulation at a single manufacturing site in Stirling, Scotland. In the event of a prolonged interruption to production at this site, Superglass would not have the ability to transfer its manufacturing activities to other facilities and may not be able to meet the demand for its products from customers and prospective customers, potentially eroding its market position. Appropriate insurance cover is in place.

Infrastructure limitations

The Group relies on the uninterrupted operation of its IT, manufacturing and other systems for the proper running of its commercial operations. Any significant breakdown of, or disruption to, these systems could have an adverse effect on production or the effective control of its commercial operations and risks. This could have a material adverse effect on the Group's business, financial performance and prospects. This risk is mitigated by the Group entering into support contracts with key suppliers where appropriate and also by the Group's own internal engineering team.

The Group's operations expose it to the risk of health and safety and environmental liabilities

We have no higher priority than ensuring the health and safety of our employees and those who come into contact with our processes and products. It is the policy of the Group to ensure that its employees work in as safe an environment as possible and that the risk and incidence of industrial accident or injury is minimised. Nevertheless, there are certain hazards associated with its manufacturing activities. The Group has actively promoted health and safety in the workplace in recent years and seeks to actively comply with its health and safety regulations. However, future occurrences could result in financial liabilities or penalties or a prolonged suspension of production.

The Group strives to comply with current environmental legislation. Future changes to environmental law may require the Group to adopt alternative and less efficient or more costly production processes and were the Group to infringe environmental legislation that could result in prolonged suspension of manufacturing operations and possible financial liabilities or penalties.

The Group mitigates these risks by performing internal safety audits on a weekly basis and also performing routine emissions testing outwith the mandatory test periods.

The supply of energy may be subject to disruption or price fluctuation

Gas and electricity supplies are required for the operation of the Group's plant and production processes. Whilst the Group has entered into purchasing agreements that provide non-interruptible energy supplies and an element of price stability in the short term, increasing energy costs in particular may impact on trading margins if they cannot be passed on to customers. However, the Group aims to mitigate short-term fluctuations in energy prices through an appropriate hedging policy.

Consolidated income statement

For the year ended 31 August 2013

Consolidated statement of comprehensive income and expense

for the year ended 31 August 2013

Consolidated balance sheet

At 31 August 2013

These financial statements were approved by the Board of Directors on 19 November 2013 and were signed on its behalf by:

Consolidated cash flow statement

For the year ended 31 August 2013

Consolidated statement of changes in equity

For the year ended 31 August 2013

Notes forming part of the financial statements

For the year ended 31 August 2013

1 Accounting policies

Superglass Holdings Plc is a company domiciled and incorporated in the United Kingdom. The financial statements were approved by the Board on 19 November 2013.

Statement of compliance

The consolidated financial statements have been prepared in accordance with IFRS (including International Financial Reporting Interpretations Committee (IFRIC) interpretations) as adopted by the EU (adopted IFRS). The Company has elected to prepare its parent company financial statements in accordance with UK GAAP.

Basis of preparation

The financial statements are prepared on the historical cost basis. The consolidated financial statements are presented in Pounds Sterling, which is the Company's presentational and functional currency. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years unless otherwise stated. The financial statements have been prepared on the going concern basis.

The preparation of financial statements in conformity with EU adopted IFRS requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. The estimates and judgement's are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

2 Exceptional items

Items of exceptional income and expenditure in the year to 31 August 2013 include an accounting credit in respect of the debt for equity swap that the Group has entered into and professional fees incurred in relation to the capital restructuring (see note 20).

Other exceptional items relate to the impairment of goodwill (see note 10), a disposal charge recognised in respect of certain tangible fixed assets identified as being obsolete and disposed of as a result of the significant capital investment programme undertaken by the Group. Following the capital investment programme undertaken in the year the licence held within tangible fixed assets in relation to the use of certain technology is also no longer required and has been written off. In addition further costs in respect of reorganisation of the Group have been incurred during the year ended 31 August 2013.

3 Taxation

Recognised in the income statement

Reconciliation of effective tax rate

The Emergency Budget on 22 June 2010 announced that the UK corporation tax rate would reduce from 28% to 24% over a period of four years from 2011.

A reduction in the tax rate from 26% to 25% (effective from 1 April 2012) was substantively enacted on 5 July 2011. A further reduction to 24% (effective from 1 April 2012) was substantively enacted on 26 March 2012 following the March 2012 Budget which also announced that the UK corporation tax will reduce to 22% by 2014. Substantive enactment of the 23% rate with effect from 1 April 2013 took place in July 2012. The Finance Bill 2013 was substantively enacted on 2 July 2013 and included further reductions in the corporation tax rate effective to 21% from 1 April 2014 and 20% from 1 April 2015.

As a result of these tax rate changes, the current tax rate in force during the year was 24% from 1 September 2012 to 31 March 2013 and 23% thereafter.

The substantively enacted tax rate at the year end, for deferred tax purposes, was 20% (2012: 23%) and this has resulted in a reduction in the deferred tax liability recognised during the year by £141,000. The 2% rate reduction will further reduce the Group's future current tax charge. The unrecognised deferred tax asset in relation to tax losses at the year end was £621,000 (2012: £541,000).

4 Share capital

Disclosed as:

At the end of the year the Group held 790 own shares (2012: 19,750). The market value of the shares at 31 August 2013 was £326 (2012: £1,063).

In the year to 31 August 2013 the Company concluded a capital reorganisation, a share consolidation and an issue of equity share capital that was approved by shareholders at a General Meeting on 20 May 2013 and has had the following impact on share capital.

The existing 20.0p ordinary shares at 1 September 2012 were sub-divided into one ordinary share of 1.0p (Post Capital Reorganisation Shares) and one deferred share of 19.0p.

The Post Capital Reorganisation Shares were consolidated such that every 25 shares will be consolidated into one New Ordinary Share. Following the share consolidation and prior to the issue of placing shares the Company's issued ordinary share capital comprised 2,007,577 Ordinary Shares of 25.0p each.

Following the share consolidation on 4 June 2013 the equity share issue of 26,000,000 ordinary shares with a par value of 25.0p at an issue price of 50.0p, approved by shareholders at the General Meeting on 20 May 2013, proceeded, increasing the equity share capital of the Company by £6,500,000. Issue costs of £781,000 were recognised directly in equity.

In addition to the issue of ordinary share capital the Group also entered into a debt for equity swap with its bankers and the conversion of the existing convertible shares held by it's bankers into 14,985,748 deferred shares of 20.0p. The Group's bankers converted £5,725,000 of debt existing at 31 August 2012 into 2,800,757 convertible shares with a par value of 25.0p which subject to certain conditions will have the rights to convert into equity shares representing 10 per cent of the entire issued share capital following conversion.

The resulting convertible shares are presented within share capital with a par value of approximately £0.7m and the Group's outstanding long-term borrowings have reduced correspondingly to £2.5m.

The Directors have established a fair value of the convertible shares issued of approximately £1.0m. As required by accounting standards (IFRIC 19) a credit of £4,731,000 was recognised in the income statement as the differences between the carrying value of the borrowings and the fair value of the convertible shares. To comply with the requirements of UK company law a reserves transfer of £4,731,000 in respect of the accounting gain was made between retained earnings and share premium in addition to the transfer of £294,000 which represents the difference between the par value of the shares and their fair value for accounting purposes and as a result the net impact on share premium is £5,025,000.

In the year ended 31 August 2012 the Company concluded an issue of equity share capital that was approved by shareholders at an Extraordinary General Meeting on 30 November 2011 and has had the following impact on share capital:

The existing 1.0p ordinary shares at 1 September 2011 were consolidated into post-consolidation ordinary shares on a 20 for one basis. An equity share issue of 47,272,745 ordinary shares with a par value of 20.0p was approved by shareholders increasing the equity share capital of the Company by £9,454,949. Issue costs of £1,276,000 were recognised directly in equity.

The revised issued and fully paid up ordinary share capital of the Company consists of 50,189,431 ordinary shares with a par value of 20.0p, of which the Company holds 19,750 shares in treasury.

In addition to the issue of ordinary share capital the Group also entered into a debt for equity swap with its bankers. The Group's bankers have converted £12.15m of the borrowing outstanding at 31 August 2011 into 14,985,748 convertible shares, which, subject to certain conditions, will have the rights of conversion into ordinary shares in the capital of the Company representing 23.0% of the entire issued share capital following conversion.

The resulting convertible shares are presented within share capital with a par value of approximately £3.0m and the Group's outstanding long-term borrowings have reduced correspondingly to £5.1m.

The Directors established a fair value of the convertible shares issued in November 2011 of approximately £1.8m. As required by accounting standards (IFRIC 19) a credit of £10,340,000 was recognised in the income statement as the differences between the carrying value of the borrowings and the fair value of the convertible shares. To comply with the requirements of UK company law a reserves transfer of £10,340,000 in respect of the accounting gain was made between retained earnings and share premium in addition to the transfer of £1,187,000 which represents the difference between the par value of the shares and their fair value for accounting purposes and as a result the net impact on share premium is £9,153,000.

5 (Loss)/earnings per share

The figures presented below for the year ended 31 August 2013 reflect the position from the date of ordinary share issue and the figures for the comparative period have been restated to reflect the shares in issue after the share consolidation on the basis approved on equity raise.

The calculation of basic loss per share and underlying profit per share is based on the loss attributable to ordinary shareholders as follows:

6 Post-balance sheet event

Subsequent to the year end the Group has signed a Heads of Agreement with one of its customers InstaGroup which will end the current contractual relationship between the two parties. As a consequence of this agreement the Group will be free to sell cavity wall products to any customer in the UK but will cease to supply a specific cavity wall product which was exclusively supplied to InstaGroup. It is likely that the cessation of supply of this product will incur exceptional stock write-off costs of approximately £550,000 in the financial year ending 31 August 2014.