25th Nov 2008 07:00
|
For Immediate Release |
25 November 2008 |
Superglass Holdings PLC
Preliminary Results for the year ended 31 August 2008
Superglass Holdings PLC ("Superglass" or the "Group"), one of the UK's leading manufacturers of glass mineral fibre insulation products is pleased to announce its preliminary results for the year ended 31 August 2008.
Financial Highlights
Performance in line with revised expectations..
Turnover £41.1m (2007: £44.0m).
EBITA before non recurring costs : £9.5m (2007: £11.2m).
P.B.T. £3.0m (2007: £1.6m)
Business strongly cash generative.
Borrowings reduced by £3.2m.
Fully diluted eps adjusted for amortisation of intangibles and exceptional items 11.8p (2007: 11.5p).
Final dividend of 1.7p per share, giving a total of 3.4p for the year.
Operational Highlights
Increased C.E.R.T demand in years 2 and 3.
Tight cost control and improved efficiency.
Chairman, Tim Ross commented: "We are now confident that CERT activity, which has been low during the first year of the programme, will increase in the second and third years. We have ensured that capacity is available for Superglass to benefit from this increase especially in the light of the significant boost given in September with the Government announcement of a £1bn fuel poverty package setting out increased funding - over 50% of this spend is expected to be committed to CERT."
For further information, please contact:
|
Superglass Holdings PLC |
|
|
John Smellie, Managing Director Tony Kirkbright, Finance Director |
01786 451 170 |
|
Buchanan Communications |
|
|
Tim Anderson/Isabel Podda |
0207 466 5000 |
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Brewin Dolphin Investment Banking |
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|
Andrew Kitchingman |
0113 241 0130 |
Chairman's Statement
During its second year as a listed company Superglass has continued to be highly profitable and cash generative. Superglass has faced increasingly challenging market conditions as the worsening global economy continues to have a significant impact on our marketplace both in terms of the higher cost of raw materials and the decline of the new build market which has led to increased competition in our core activity of retrofit.
However I am pleased to report that pricing has remained robust and we have taken action, which on a year to year basis will lead to lower costs mitigating other issues. Superglass remains a highly profitable company. For the year ended 31 August 2008 Group turnover was £41.1m (2007: £44.0m) and EBITA before non-recurring costs was £9.5m (2007 : £11.2m).
Dividend
In light of the strong cash generation the Board is pleased to propose a final dividend of 1.7 pence per share payable on 11 February 2009 to shareholders on the register at close of business on 16 January 2009. An interim dividend of 1.7 pence was paid resulting in a total proposed dividend for the year of 3.4 pence per share.
Review of the year
The benefits of CERT, the government's energy efficiency programme, are yet to be seen as the first year of this programme has been far slower than originally anticipated. Whilst we expect to see demand gearing up during the second and third year we have also continued to develop additional markets in Europe.
As stated at the time of our IMS in July our focus throughout the year has been to ensure that our costs are kept as low as possible. The rise in energy costs continues to be a concern, however, it will also increase the immediate demand for high levels of insulation. We have established a partial hedge against the increase in domestic energy prices and also introduced a cost reduction programme consisting of reduced labour, improved operational efficiencies, reduced stock levels and reduced energy usage. We will continue to manage our cost base actively.
Staff
I would like to thank all our staff at Superglass for their exceptional dedication and hard work throughout the year.
Outlook
Clearly the global economy continues to present significant challenges for Superglass. It is difficult to predict any immediate recovery although high energy prices and government commitment can only continue to drive demand for our products. We have ensured that capacity is available for Superglass to benefit from this increase especially in the light of the significant boost given in September with the Government announcement of a £1bn fuel poverty package setting out increased funding - over 50% of this spend is expected to be committed to CERT.
The Board believes that Superglass is well positioned to take full advantage of a recovering market.
Tim Ross
Chairman
25th November 2008
Chief Executive's review
I am pleased to report that the results for the year met the Board's expectations, as revised in July, despite being affected by the deep downturn in the UK new build housing market. The revision to our expectations followed the realisation by the Board that the expected demand generated by the Carbon Emissions Reduction Target "CERT" programme, would not meet original expectations as explained below. Superglass was one of the first companies to recognise this position and to explain it to its shareholders. It is our intention to continue to provide as accurate and timely assessments of the influence the CERT programme has on Superglass' performance as is possible.
Strategy
Our strategic aim for the year was to continue growing the business in the U.K., aided by CERT, and to take a modest share in the export market.
Again the slowdown in new house build activity and the slow start to CERT has impacted this and potential sales into export markets have been similarly affected.
During the second half of our financial year, as events in the financial markets unfolded and insulation demand declined, we have had to rebase our expectations, aiming to minimise production inefficiencies caused by reduced volumes, whilst seeking to maximise cash generation.
Results
Results were on target, however the negative impact of the significant reduction in new build housing and the slow start to CERT has resulted in disappointing year end numbers.
Sales numbers fell by 6.6 % to £41.1 million (2007: £44.0 million) and EBITA before non recurring costs fell by 15.2 % to £9.5 million (2007: £11.2 million)
Insulation Market
The downturn in new build construction has reduced overall demand for insulation products, this in turn has resulted in increased competition amongst contractors and manufacturers for supplies into existing housing stock, where Superglass has historically sold the majority of its product.
On 1 April 2008 the CERT programme was launched and is projected to be twice the size of its predecessor EEC2. However, as indicated in previous Superglass statements, it has had a slower than expected start due largely to the over achievement of EEC2 targets and the right to offset this excess against CERT targets. The Office of Gas and Electricity Markets "OFGEM" reported in August 2008 that this carryover was of the order of 25% of the CERT target.
The CERT scheme had a recent boost from the Government when the Prime Minister announced a 20% increase in the target over the next three years. Whilst the programme has suffered from a slow take up and is clearly more vulnerable to consumer uncertainty than was anticipated, it is expected that over the next two years the structure of the programme will show itself to be a more robust and positive driver for our business.
Manufacturing Modification and Improvements
Capital Expenditure of £10 million, now completed, has enabled an increase in capacity and the installation of new packaging and environmental equipment.
This was completed in early 2008 ensuring capacity is available to match market requirements.
We have in place a modest capital expenditure programme to modify and improve the plant on a continuing basis.
Environmental Considerations
Superglass is regulated by both the Scottish Environmental Protection Agency ("SEPA") and Stirling Council. The Group has continually placed emphasis on environmental issues which has resulted in the following environment 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 environmental impact of its plant.
The environmental initiatives also result in cost savings, for example through reduced requirements for water, and through lower raw material requirements as a result of reduced wastage.
Outlook
There has been a significant increase in energy costs and raw material costs over the current financial year, which on a positive note should increase demand for higher levels of insulation. The raw material cost increases stem in part from the increased energy costs but have also been affected to a degree by demand from countries such as India and China.
Our strategy continues to be flexible using the production capacity to meet the - all be it delayed - increase in the UK market as a result of the CERT programme, and to increase the Group's market share as a consequence. The Group also intends to continue with diversification of its operations both geographically and into complementary energy efficient markets in order to leverage its reputation for technical excellence and customer service.
In the short term, the slow adoption of the CERT programme has combined with the collapse of the new build market to adversely affect the expected growth in our activity.
Over the medium term we expect that CERT and energy saving and efficiency measures will prove to be strong and defensive drivers for our business and we are confident that the Group is well placed to deliver significant value to its shareholders.
John Smellie
Chief Executive
Financial Review
Results
Sales
Total sales in the year fell by 6.6% to £41.1million, UK sales in the second half were affected by the construction slowdown and fell 3.7%. One off sales opportunities in export markets during the previous financial year were not repeated resulting in the balance of the reduction.
Operating profit
EBITA before non recurring items fell from £11.2 million in the period ended 31 August 2007 to £9.5 million, operating profit margins before non-recurring items and intangible amortisation reduced from 25.4% to 23%. Despite continued production efficiency measures, increased energy costs and operational gearing resulted in increased unit costs.
Taxation
The effective tax charge for the group is 16% (2007: 60%, underlying rate excluding non recurring flotation costs:29%) reflecting a reduction from the previous year when the majority of the non recurring floatation costs were not allowable deductions for corporation tax purposes, and the effect of adjustments in respect of prior periods and changes in tax rates. The current effective tax charge for the year is 30%.
Dividends
The first interim dividend of 1.7p per Ordinary shares was paid in June 2008. In determining the level of final 2008 and future dividend payments the directors have and will take account of the profitability and underlying growth, while seeking to maintain an appropriate level of dividend cover.
Earnings per share
Basic earning per share amounted to 4.2p (2007: 1.1p). Adjusted earnings per share (excluding non-recurring costs and amortisation of intangible assets) were 11.8p (2007: 11.5p).
Cash & Borrowings
The Groups cash and cash equivalents was broadly in line with that of the previous year, reflecting strong cash inflows from Operating activities of £6.9 million (2007: £5.5 million), with cash outflows of £3.3 million on term loan repayment and £2.3 million on capital expenditure, focused on improvements to environmental emission equipment and preparation for increased output expected under the CERT scheme. Net borrowings at 31 August 2008 were £24.1m (2007: £27.3m).
Treasury and financial risk management
The Group aims to reduce financial risks wherever possible and ensure that it has sufficient liquidity to meet all foreseeable needs. Forward currency contracts in US Dollars are used to hedge foreign currency purchases of manufacturing consumables with the objective of minimising the effect of fluctuations in exchange rates on future transactions and cash flows.
Group income denominated in Euros has been largely offset by one-off expenditure in that currency. It is anticipated that forward contracts in Euros will be used when such transactional matching can no longer be achieved. 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 has entered an interest rate cap with its bankers, Clydesdale Bank fixing the interest costs on borrowings of £12.5 million and £7.5 million at a maximum of 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 purchasing strategy in order to minimise the effect of unprecedented wholesale gas price fluctuations on input cost and provide a stable basis on which to manage future energy costs. Flexible contracts have committed the Group to forward purchases of a major element of its power requirements for up to 12 months ahead.
Share Capital
The Company has only one class of Ordinary shares as capital. 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 year the Company complied fully with the requirements that apply to the Company's shares as a consequence of these shares being listed on The London Stock Exchange.
Financial KPIs
|
2008 |
2007 |
|
|
Organic sales (decline)/growth |
(6.6%) |
1.3% |
|
Operating profit margin (operating profit before non recurring items/ turnover) |
12.3% |
15.4% |
|
Return on capital employed (profit after tax : net assets) |
62.0% |
21.0% |
|
Underlying earnings per share (based on number of shares in issue during 2008 for comparative purposes) |
11.8p |
11.5p |
Non Financial KPIs
|
2008 |
2007 |
||
|
Specific energy consumption |
Mwh per tonne produced |
5.22 |
4.85 |
|
Total waste disposal |
kg per tonne of production |
36.06 |
63 |
|
Total water used |
Tonnes per tonne of production |
4.58 |
3.48 |
|
Carbon dioxide emitted |
kg per tonne of production |
614 |
594 |
OPERATIONAL RISK MANAGEMENT
There are a number of potential risks and uncertainties which could have an impact on the Group's performance, but are beyond the control of Superglass and its Board. The group closely monitor market trends and risks on an ongoing basis and are the focus of monthly management meetings where performance is measured against budget, forecast and prior year.
The key risks are as follows:
Raw material prices and availability
The Group's operating performance is impacted by the pricing of it's main raw materials, which include recycled glass, resin, borax and polythene packaging. The Group looks to minimise the adverse effect of such movements through strong long-term relationships with suppliers, forward purchasing and inventory management. Alternative suppliers and in some cases alternative materials exist and the Group maintains awareness of these, should the financial or operational need arise to make change.
Customer credit risk.
Superglass provides credit to customers as part of its overall service package, as such there is an associated risk that the customer may not be able to pay outstanding balances. The Group has established procedures around managing receivables, central to which is the credit insurance policy. In addition, from time to time the Group holds balances due to customers, in the form of retrospective rebates, which can be offset against any unpaid balances.
CERT Programme and beyond
Approximately 25% of the CERT programme target was achieved prior to its commencement, as a result of accumulated savings in excess of target from previous programmes (EEC1 and EEC2) being carried over. The unexpected magnitude of this carry over has resulted in a much lower level of volume than expected in the first year of CERT. Following governmental initiatives to bolster the programme, demand for insulation in the second and third years is expected to improve. Concern has been expressed at the ability of the contracting industry to satisfy this demand. However, it is hoped that their current investment together with availability of additional resource as a result of the downturn in the new-build sector should enable the industry to cope.
It is reasonable to assume that energy reduction programmes led by the Government are going to continue beyond CERT. The format these unspecified programmes may take are unknown but as insulation is currently the most cost effective means of achieving bulk energy savings in the domestic market; we expect this will continue to be the case for the foreseeable future.
Energy
Energy prices are constantly monitored and requirements bought forward when advantageous. Energy saving, where possible, forms an ongoing part of day to day operations and is supported by suitable capital investment.
Competition
The Company operates within a competitive environment. The Company accepts there is a risk to its results and financial condition caused by the actions of its competitors, including competitors' marketing strategies and product development.
To help identify such risks the competitive environment, specific marketplace and the actions of particular competitors are discussed at Company Board Meetings. In addition, each market is carefully monitored to identify any significant shift in policy by any competitor.
Tony Kirkbright
Finance Director
Consolidated income statement
for the year ended 31 August 2008
|
31 August 2008 |
31 August 2007 |
||
|
£000 |
£000 |
||
|
Revenue |
41,138 |
44,029 |
|
|
Cost of sales |
(24,636) |
(25,577) |
|
|
Gross profit |
16,502 |
18,452 |
|
|
Distribution expenses |
(5,257) |
(5,538) |
|
|
Administrative expenses - normal |
(6,494) |
(6,401) |
|
|
- non recurring relating to flotation of the group |
- |
(1,675) |
|
|
Other operating income |
307 |
272 |
|
|
Operating profit before non recurring costs |
5,058 |
6,785 |
|
|
Non recurring costs |
- |
(1,675) |
|
|
Operating profit |
5,058 |
5,110 |
|
|
Financial income |
- |
345 |
|
|
Financial expenses |
(2,106) |
(3,893) |
|
|
Profit before tax |
2,952 |
1,562 |
|
|
Taxation |
2 |
(473) |
(934) |
|
Profit for the year attributable to equity holders of the parent |
2,479 |
628 |
|
|
Earnings per share |
|||
|
Basic earnings per share |
3 |
4.2p |
1.1p |
|
Diluted earnings per share |
3 |
4.2p |
1.1p |
Consolidated statement of recognised income and expense
for the year ended 31 August 2008
|
31 August 2008 |
31 August 2007 |
||
|
£000 |
£000 |
||
|
Profit for the year |
2,479 |
628 |
|
|
Total recognised income and expense for the year attributable to equity holders of the parent |
2,479 |
628 |
|
Consolidated balance sheet
at 31 August 2008
|
2008 |
2007 |
||||
|
£000 |
£000 |
£000 |
£000 |
||
|
Non-current assets |
|||||
|
Property, plant and equipment |
15,844 |
15,551 |
|||
|
Intangible assets |
22,989 |
27,378 |
|||
|
38,833 |
42,929 |
||||
|
Current assets |
|||||
|
Inventories |
3,293 |
3,088 |
|||
|
Trade and other receivables |
3,490 |
4,114 |
|||
|
Cash and cash equivalents |
- |
134 |
|||
|
Derivative financial instruments |
201 |
395 |
|||
|
6,984 |
7,731 |
||||
|
Total assets |
45,817 |
50,660 |
|||
|
Current liabilities |
|||||
|
Other interest-bearing loans and borrowings |
3,400 |
3,286 |
|||
|
Trade and other payables |
10,087 |
11,617 |
|||
|
Deferred government grants |
193 |
110 |
|||
|
Income tax payable |
1,861 |
1,543 |
|||
|
15,541 |
16,556 |
||||
|
Non-current liabilities |
|||||
|
Other interest-bearing loans and borrowings |
20,730 |
23,988 |
|||
|
Deferred government grants |
339 |
321 |
|||
|
Deferred tax |
5,196 |
6,824 |
|||
|
26,265 |
31,133 |
||||
|
Total liabilities |
41,806 |
47,689 |
|||
|
Net assets |
4,011 |
2,971 |
|||
|
Equity attributable to equity holders of the parent |
|||||
|
Share capital |
583 |
583 |
|||
|
Share premium |
1,108 |
1,108 |
|||
|
Retained earnings |
2,320 |
1,280 |
|||
|
Total equity |
4,011 |
2,971 |
|||
Consolidated cash flow statement
for the year ended 31 August 2008
|
31 August 2008 |
31 August 2007 |
||
|
£000 |
£000 |
||
|
Cash flows from operating activities |
|||
|
Profit for the year |
2,479 |
628 |
|
|
Adjustments for: |
|||
|
Depreciation and amortisation |
6,453 |
6,490 |
|
|
Net financial expense |
2,106 |
3,548 |
|
|
Taxation |
473 |
934 |
|
|
Equity settled share-based payment transactions |
110 |
- |
|
|
Cash from operating activities before changes in working capital and Provisions |
11,621 |
11,600 |
|
|
Increase in inventories |
(205) |
(1,552) |
|
|
Decrease/(increase) in trade and other receivables |
624 |
(1,436) |
|
|
(Decrease)/increase in trade, other payables and deferred government grants |
(1,492) |
1,834 |
|
|
Cash generated from the operations |
10,548 |
10,446 |
|
|
Interest paid |
(1,849) |
(3,020) |
|
|
Tax paid |
(1,783) |
(1,914) |
|
|
Net cash from operating activities |
6,916 |
5,512 |
|
|
Cash flows from investing activities |
|||
|
|
|||
|
Acquisition of property, plant and equipment |
(2,315) |
(2,603) |
|
|
|
|||
|
Net cash used in investing activities |
(2,315) |
(2,603) |
|
|
Cash flows from financing activities |
|||
|
Proceeds from the issue of share capital |
- |
9 |
|
|
Purchase of own shares |
(564) |
(37) |
|
|
Proceeds from new loan |
- |
28,000 |
|
|
Repayment of borrowings |
(3,285) |
(38,338) |
|
|
Payment of finance lease liabilities |
(1) |
(32) |
|
|
Dividends paid |
(985) |
(825) |
|
|
Net cash absorbed by financing activities |
(4,835) |
(11,223) |
|
|
Net decrease in cash and cash equivalents |
(234) |
(8,314) |
|
|
Cash and cash equivalents at beginning of year |
134 |
8,448 |
|
|
Cash and cash equivalents at end of year |
(100) |
134 |
Note
1. Accounting policies
Superglass Holdings plc ("the Company") is a company domiciled and incorporated in the United Kingdom. The accounts were approved by the board on 25 November 2008.
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (including International Financial Reporting Interpretational Committee ("IFRIC") interpretations) as adopted by the EU ("adopted IFRSs").
Basis of preparation
The financial statements are prepared on the historical cost basis except for intangible assets acquired in a business combination and derivative financial instruments, which are stated at their fair values. The consolidated financial statements are presented in Pounds Sterling which is the Company's presentational and functional currency.
The preparation of financial statements in conformity with 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 judgements 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.
2. Taxation
Recognised in the income statement
|
2008 |
2007 |
|
|
£000 |
£000 |
|
|
Current tax expense |
||
|
Current year |
2,167 |
2,215 |
|
Adjustments in respect of prior years |
(66) |
(83) |
|
2,101 |
2,132 |
|
|
Deferred tax expense |
||
|
Origination and reversal of temporary differences |
(1,274) |
(1,166) |
|
Adjustment in respect of prior years and change in substantively enacted tax rate |
(354) |
(32) |
|
(1,628) |
(1,198) |
|
|
Total tax in income statement |
473 |
934 |
Reconciliation of effective tax rate
|
2008 |
2007 |
|
|
£000 |
£000 |
|
|
Profit before tax |
2,952 |
1,562 |
|
Tax using the UK corporation tax rate of 28% (2007:30%) |
827 |
468 |
|
Non-deductible expenses |
29 |
581 |
|
Adjustment in respect of prior years and changes in tax rates |
(420) |
(115) |
|
Effect of 30% tax rate for part of year |
37 |
- |
|
Total tax in income statement |
473 |
934 |
3. Earnings per share
The calculation of basic earnings per share and underlying earnings per share is based on the profit attributable to ordinary shareholders as follows:
|
2008 |
2007 |
2008 |
2007 |
|
|
Earnings |
Earnings |
EPS |
EPS |
|
|
£000 |
£000 |
Pence |
Pence* |
|
|
Basic |
2,479 |
628 |
4.2p |
1.1p |
|
Adjusted for: |
||||
|
Non recurring costs |
- |
1,675 |
- |
2.8p |
|
Amortisation of intangibles that attract no tax deduction |
4,393 |
4,393 |
7.6p |
7.6p |
|
Adjusted |
6,872 |
6,696 |
11.8p |
11.5p |
|
Diluted and basic earnings per share |
4.2p |
1.1p |
||
|
Diluted adjusted earnings per share |
11.8p |
11.5p |
* based on the weighted average number of shares in 2008 for comparative purposes
Undiluted earnings per share
The weighted average number of shares used in each calculation is as follows:
|
2008 |
2007 |
|||
|
Number of shares |
||||
|
Issued ordinary shares at beginning of the period |
58,333,333 |
383,333 |
||
|
Effect of shares issued and redeemed in 2007 |
- |
9,366,564 |
||
|
Effect of shares repurchased to treasury in 2008 |
(191,353) |
- |
||
|
Weighted average number of ordinary shares for the year ended 31 August |
58,141,980 |
9,749,897 |
||
Diluted earnings per share
|
2008 |
2007 |
|||
|
Number of shares |
||||
|
Weighted average number of undiluted ordinary shares |
58,141,980 |
9,749,897 |
||
|
Effect of share options in issue |
- |
10,339 |
||
|
Weighted average number of ordinary shares for the year ended 31 August |
58,141,980 |
9,760,236 |
||
The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 August 2008 or 31 August 2007 but is derived from those accounts. Statutory accounts for the year ended 31 August 2007 have been delivered to the Registrar of Companies, and those for the year ended 31 August 2008 will be delivered following the company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985.
These results were approved by the Board of Directors on 25 November 2008.
Related Shares:
SPGH.L