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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Swp Grp. | LSE:SWP | London | Ordinary Share | GB00B010NX28 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 8.75 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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SWP Group PLC
18 December 2007
SWP Plc
Preliminary results for the year ended 30 June 2007
Chairman's Statement
Corporate Review
When we last reported our interim results to shareholders on 29th March 2007 we
expressed disappointment at having to report a small loss for the six months to
31st December 2006. This was due almost entirely to the absence of revenue
streams at our DRC subsidiary whose relationship with its single biggest
customer had broken down requiring resolution before the Law Courts.
In a year which has seen record performances from both the Fullflow Group and
Crescent of Cambridge, the DRC litigation has dominated the commercial calendar
for a significant period of time. Considerable management resource has been
devoted to this important case. We are therefore delighted to report to
shareholders that the outcome of this litigation, and the events which followed,
have resulted in the most positive outcome imaginable both for DRC and the Group
as a whole. Following a trial of the issue, the High Courts of Justice found in
favour of DRC and on 20th July 2007 awarded DRC "substantial damages" to be
assessed by experts and ratified by the Court by way of secondary trial. Before
the quantum of damages could be finally determined by the Court and pursuant to
breaches of the Companies Act by the directors of the defendant counterparty the
opportunity to acquire the business assets including the intellectual property
rights as well as negotiating the level of agreed damages at £800,000 was seized
upon by SWP's directors.
On 29th November 2007 SWP and its subsidiary DRC became the proprietors of the
ULVA brand and all other relevant assets which support Ulva's global reach as
one of the world's leading specialist suppliers of non-metallic insulation
cladding used predominantly by the oil, gas and petrochemical industries in
providing thermal insulation to any pipe or vessel configuration. In this regard
shareholders are encouraged to interrogate Ulva's website on www.ulva.co.uk to
gain a fuller understanding of the anticipated systems which we are now in a
position to manufacture and distribute to customers located in all corners of
the world. This acquisition for nominal consideration, particularly when viewed
against our damages claim which has been agreed in the amount of £800,000 is
likely to produce a significant transformation in the financial prospects of DRC
from the beginning of 2008 onwards. We look forward to updating shareholders as
to the significant returns which DRC is expected to make now that the Ulva brand
features so prominently in its product portfolio and where our production
facilities are in the process of being integrated with the advantages of brand
leadership.
Results
Overall sales for the year to 30th June 2007 increased by 12.5% to £20,844,000
(2006:£18,521,000) whilst operating profits advanced 43% to £1,068,000 (2006:
£748,000). Profits on ordinary activities before taxation increased to £472,000
(2006:£232,000). These results in themselves demonstrate improvement but are
underscored by losses at that time at DRC as explained above. The scale of
improvement at both Fullflow and Crescent to which reference is made below
speaks volumes for the high level of competence displayed by the management
teams at both these growing businesses which continue to operate in a highly
competitive environment where market conditions remain extremely demanding. Your
directors are keen to exploit the opportunity created by the purchase of Ulva
and the future delivery of significant profit streams at DRC which for so many
years has had an enduring negative impact on the results of the Group as a
whole. The prospect of all three operating subsidiaries growing profitably in
specialist supply niches and generating high levels of cash is something for all
shareholders to savour and to look forward to.
Interest and Finance Charges at £597,000 (2006:£518,000) reflect the increased
cost of borrowing imposed by the Bank of England since August 2006 and the need
for greater levels of working capital required to fund Fullflow's rate of growth
particularly at Plasflow, France and Spain. Here again from January 2008 onwards
it is envisaged that the Group will have the capacity to generate much greater
levels of cash and it will be one of our foremost objectives to reduce our
levels of indebtedness as rapidly as possible going forward.
Review of Operations
Fullflow Group
Following two years of significantly improved performance, Fullflow continued
its progress during the year under review. Total third party sales increased by
27% to £14,837,000 (2006: £11,652,000) and this excellent level of further
revenue growth delivered an operating profit of £969,000 (2006: £719,000)
Generally the market sectors in which Fullflow operates continued to exhibit
some considerable strength during the year as the demand for larger and larger
distribution warehouses continued. Our sustained presence in this sector has
been underpinned by a number of key customers and it is the maintenance of these
business relationships which will be critical to future success in the UK.
Fullflow UK continues to enjoy the confidence of the country's leading
architects, consultants and contractors. Passengers at the recently opened
Eurostar terminal at St Pancras International Train Station will be protected by
a Fullflow rainwater management system as will shoppers at the Athlone Town
Centre development which opened its doors to the public in November. These
projects demonstrate our ability and continued expertise to leave us well placed
to further enhance our position generally and acquire work in other specialist
sectors. At a time when competitive pressures in the market are intensifying,
Fullflow's ability to achieve the highest possible standards of customer service
has never been so important and achieving this should ensure our customers will
find it very hard to contemplate going elsewhere as a partnership relationship
is built on trust and cooperation.
Recent economic trends might suggest less merger and acquisitions activity and a
drop in overall confidence levels. Should this occur there will almost certainly
be a fall in investment resulting in fewer new factories, offices and warehouses
being built. Clearly this trend will have a direct impact on the construction
industry and whilst there is still a reasonable degree of momentum in the market
at the moment Fullflow must be prepared for this possibility.
In France the year under review proved to be difficult. A significant number of
projects were delayed due to a variety of client related reasons. Whilst this is
normal in construction the sheer number of delays proved to be highly
problematic. However, during this period order levels remained high leaving
Fullflow with a record order book at the beginning of the current financial
year. Order levels have increased even further since the year end and Fullflow
can look forward with great confidence to the future.
The client base continues to increase with a number of new clients and the
sectors in which Fullflow operate have diversified to include Isseane, the
largest European recycling centre on the outskirts of Paris, together with the
Laser MegaJoule, a nuclear testing plant project near Bordeaux. Margin levels
have remained comparatively stable in France which, coupled with the expected
increase in turnover, are expected to return France back into profit.
In Spain gross margins increased significantly across a very solid and
broadening portfolio of customers leading them to return an healthy profit after
some years of losses. This increase is underpinned by a high proportion of
logistic projects returning better margins through improved efficiencies on site
and better working practices imposed by local management. Future growth is
expected to be achieved by increasing our market penetration through exploiting
the geographical advantages of localised selling teams across the Iberian
Peninsula.
Despite these positive trends, syphonic rainwater system awareness is still
relatively low in Spain, however, the publicity generated by projects such as
Expo Zaragoza 2008, Airbus Seville and the IKEA logistics centre in Tarragona
will significantly raise the profile of Fullflow. The Construmat exhibition in
Barcelona proved successful in reinforcing existing customer relationships and
introduced the system to a great number of potential future clients, including
architects, engineers and consultants. Confidence in the future is highlighted
by the recent 50% increase in premises space in Madrid.
Progress at Plasflow over the financial year significantly exceeded sales and
profit expectations. Plasflow are working to develop their niche in the market
of polyethylene fabrications for complex civil engineering contracts. With a
facility having the capabilities to cut and weld up to 1200mm diameter pipe,
quality assurance to ISO 9001:2000 and a team of experienced welders capable of
welding plastics to international standards they are able to undertake projects
for the most demanding client applications.
Very significant contracts have been received for bespoke fabrications delivered
to tight timescales for the British Nuclear industry, the successful completion
of which has led to enquiries from the conventional power generation sector
where companies are looking to move away from coated steel pipework to
polyethylene to take advantage of lower 'Whole Life' costs. More than 25 large
diameter specialist fabrications were made in Rotherham for the Jumeirah Palm
project in Dubai.
It is significant that a very low proportion of Plasflow\'s third party sales
depend on private sector investment and there is every reason to believe that
Plasflow can achieve further meaningful growth in the niche markets which it has
identified. As ever Plasflow continues to supply Fullflow's pipe fitting
requirements.
We will continue to invest in our most important asset, our employees. Through
constant review and challenging our policies at every level, we intend to
reinforce Fullflow's long established market leading position and to ensure that
our quality, strength and experience are maintained and prevail over short-term
price considerations. To do this we must remain vigilant and responsive to
changes in the industry and deliver a focused, professional, high quality
service which will attempt to exceed the expectations of our customers.
The other element of our strategy is to roll out the Fullflow brand across the
globe through selected strategic alliances and licences. We are exploring a
number of possible openings at present and will be extremely disappointed if at
least some of these do not come to fruition in the next twelve months. In
previous reports we highlighted that we had begun to forge links in both India
and the Middle East. Progress in both of these markets has proved slower than
anticipated but we still believe that these markets offer strong potential for
Fullflow rainwater systems in the future.
Crescent of Cambridge
Crescent continues to be the leading producer and installer of steel fabricated
spiral and straight staircases in the United Kingdom. The year under review to
30th June 2006 has produced a record performance that has exceeded our
expectations. Sales increased by more than 18% to £4,749,000 (2006:£4,020,000)
with operating profits reaching £605,000 (2006:£379,000) an increase of 59% on
the previous year. The reasons for the improved operating results can be
explained through a combination of the introduction of new management with
modern production and management control techniques allied to greater capacity
utilisation of existing facilities in market conditions which although demanding
were ideally suited to Crescent's reputation for design innovation, flexibility
and quality. Margins have been improved by greater levels of efficiency whilst
overheads and costs have been tightly controlled. A programme of management
succession has been underway for sometime and much remains to be done to
optimise Crescent's undoubted potential for future growth. As a market leader
which commands respect from architects, specifiers, designers and large scale
contractors scope remains for further improvement in management systems,
computer aided design techniques and the ability to produce "right first time"
to a discerning and demanding customer base who place an increasing burden of
reliance on Crescent to design, produce, deliver and install in accordance with
the customer's timetable. A number of key initiatives are likely to be
introduced at Crescent in early 2008 with a view to maintaining performance
levels which had not been previously available to Crescent but which we now
expect management adhere to. In this regard it is envisaged that Crescent will
become IS09001 accredited.
DRC Polymer Products
Over the past two or three years DRC has approached a break-even status without
actually turning a profit. The main driver behind this was the exclusive supply
agreement entered into back in 2003 to supply Ulva with its hypalon based
membrane for onward delivery to the oil, gas and petrochemical customers around
the globe. The ownership of the Ulva brand did not vest in DRC who were one step
removed from the sharp end of the market place as all sales and marketing was
carried out by the owners of Ulva whilst DRC was contacted to produce and
deliver the base membrane material. In reality breaches of contract occurred
from October 2005 and throughout 2006 thereby denying DRC the ability to sell
product which it was contractually entitled to do under this exclusive supply
agreement. The Court's confirmation of these breaches has now resulted in DRC's
entitlement to an agreed quantum of damages in the amount of £800,000 inclusive
of legal costs and expenses (of this amount £500,000 has been credited to
operating profit being the Directors estimate of the damages as at 30 June
2007). Pursuant to the breakdown of the supplier relationship action was taken
to restructure DRC in any event so that it could achieve profitability on its
own merits without having to place reliance on producing material for Ulva. This
was a difficult, painful and time consuming exercise (giving rise to costs of
£47,000) involving as in the case of Crescent the need to introduce new
leadership as well as modern management techniques so that greater levels of
efficiency could be delivered in the areas of production, technical and
administration with improved service levels to customers. In addition to this
the replacement of senior management allowed the introduction of improved sales
and marketing initiatives designed to achieve greater market awareness and
penetration as well as a pragmatic assessment of what DRC could realistically
achieve in its particular field of expertise. It is pleasing to note that
currently the new DRC business model has reached a better than break-even
position for the past 3 month before taking cognisance of the newly acquired
Ulva business which is likely to transform the results of DRC going forward.
This business now comprises three principal business areas:-
* Modular build - traditional products mainly supplied into the roofing
and structural waterproofing industries based on long standing hypalon based
technology.
* Leak detection
Hylan IQ - new sophisticated system for the accurate detection of leaks to
reservoir roofs to enable the major water utility companies greater security and
protection from unidentified leaks. Orders are now flowing on a project by
project basis with Hylan IQ specified by three utility companies this year up
from one major utility company last year.
* Non-metallic insulation
Cladding - the manufacture of hypalon based membrane used for weather and fire
protection over thermal insulation to any pipe or vessel used in the oil gas and
petroleum industries. Conversion of sheeting into component profiles designed to
bespoke customer requirements to cover bends, elbows and sleeves using advanced
vacuum forming techniques.
These three distinct business areas should allow DRC to drive its turnover
levels far beyond anything that we have been able to achieve to date. The
improvement to the core DRC business in its slimmed down format allied to the
recent acquisition of Ulva means that higher levels of efficiency and capacity
utilisation can be anticipated in the months to come. As in the case of
Crescent, management changes have proved necessary at DRC and we are confident
that we have in place strong and effective management capable of driving this
business to new levels as well as providing assistance to the existing
management acquired as part of the Ulva acquisition to achieve growth in new and
existing markets including Europe, Asia, Middle East and North America.
Finance
In general terms our balance sheet remains in good order although gearing levels
as at 30th June 2007 remain high. We intend to focus a great deal of attention
to this important aspect of our stewardship through the anticipated reduction in
borrowings going forward into 2008.
Employees
The Group is heavily dependent upon its employees to deliver the growth
strategies and objectives which we have set. We are greatly indebted to our
employees who have delivered record performances in a number of key areas this
past year within Fullflow, Plasflow and Crescent. We do not expect markets to be
any less competitive in 2008 and we hope that our many valued employees are up
for the challenges which are out there as we continue in our quest for organic
growth.
Litigation
We are pleased to advise that currently there is no litigation outstanding.
Future Prospects
We recognise that the economic climate is fairly uncertain at this time amid
scenes of market volatility of an unprecedented nature. This past year has seen
notable success and growth within Fullflow, Plasflow and Crescent all of which
is viewed as highly commendable and we trust sustainable but the single most
important achievement for the Group in the recent past is not just the award of
damages to DRC but the potential consequential effects of acquiring the Ulva
brand to fit with our manufacturing competence which allows us to move forward
with three profitable operations. As a consequence your directors are confident
that shareholder value will be enhanced in the months ahead.
We hope that shareholders will take the opportunity to look at the Group's
various websites where you will be able to appreciate the specialist nature of
some of our activities. These are listed in the Annual Report.
JAF Walker
Chairman
17 December 2007
Consolidated Profit and Loss Account
Year ended 30 June 2007 2007 2006
Notes £'000 £'000
Turnover 2 20,844 18,521
Cost of sales (14,065) (12,071)
-------- --------
Gross profit 6,779 6,450
Administrative expenses (5,711) (5,702)
-------- --------
Total operating profit 1,068 748
Interest receivable 1 2
Interest payable and similar charges (597) (518)
-------- --------
Profit on ordinary activities before taxation 2 472 232
Taxation on profit on ordinary activities (44) -
-------- --------
Profit for the financial year 428 232
======== ========
Basic profit per share (pence) 3 2.51p 1.43p
======== ========
Diluted profit per share (pence) 3 2.51p 1.43p
======== ========
The results are wholly derived from continuing operations in both years.
Statement of Total Recognised Gains and Losses
Year ended 30 June 2007
The Group
2007 2006
£'000 £'000
Profit for the financial year 428 232
Revaluation of fixed assets 229 -
-------- --------
Total profit recognised since last annual report 657 232
-------- --------
Note of Historical Cost Profit and Losses
------------------------------- -------- --------
Year ended 30 June 2007 2007 2006
The Group
£'000 £'000
Profit on ordinary activities before taxation 472 232
-------- --------
Difference between a historical cost depreciation charge and
the actual depreciation charge of the year calculated on the
revalued amount 19
20
-------- --------
Historical cost profit on ordinary activities before
taxation 491 252
======== ========
Historical cost profit for the financial year 491 252
======== ========
Reconciliation of Movements in Shareholders' Funds
Year ended 30 June 2007
The Group
2007 2006
£'000 £'000
Profit for the financial year 428 232
Revaluation of fixed assets 229 -
New share capital subscribed, net of expenses - 750
-------- --------
Net increase to shareholders' funds 657 982
Opening shareholders' funds 1,846 864
-------- --------
Closing shareholders' funds 2,503 1,846
-------- --------
Consolidated Balance Sheet
At 30 June 2007 2007 2006
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 29 42
Tangible assets 4,697 4,411
-------- --------
4,726 4,453
Current assets
Stocks 3,176 2,969
------------------------- -------- -------- -------- --------
Debtors falling due within one year 6,399 5,795
Debtors falling due after more than one
year 543 755
------------------------- -------- -------- -------- --------
Total debtors 6,942 6,550
-------- --------
10,118 9,519
Creditors: amounts falling due within
one year (9,063) (8,984)
-------- --------
Net current assets 1,055 535
-------- --------
Total assets less current liabilities 5,781 4,988
======== ========
Financed by: 3,481 3,345
Creditors: amounts falling due after
more than one year
Provision for liabilities and charges (203) (203)
Capital and reserves
Called up share capital 85 85
Share premium account 11,878 11,878
Capital reserve 41 41
Revaluation reserve 1,669 1,459
Profit and loss account (11,170) (11,617)
-------- --------
Equity shareholders' funds 2,503 1,846
-------- --------
5,781 4,988
======== ========
The financial statements were approved by the Board of Directors on 18 December
2007 and were signed on its behalf by
D.J. Pett
Director of Finance
Consolidated Cash Flow Statement
Year ended 30 June 2007
2007 2006
Notes £'000 £'000 £'000 £'000
Net cash inflow from 4(a) 1,346 378
operating activities
Returns on investments and servicing
of finance
Interest received 1 2
Bank and loan interest paid (512) (498)
Hire purchase interest (21) (18)
------- -------
(532) (514)
Capital expenditure and financial
investment
Payments to acquire tangible fixed
assets (332) (152)
Payments to acquire intangible fixed
assets (2) (45)
Receipts from sales of tangible fixed
assets 75 32
------- -------
(259) (165)
------- -------
Net cash inflow/(outflow) before
financing 555 (301)
Financing
Issue of ordinary share capital net of
expenses - 750
Other loan repayments - (95)
Capital element of finance lease and
hire purchase payments 47 (268)
------- -------
47 387
------- -------
Increase in cash after financing 4(b) 602 86
======= =======
Notes to the Financial Statements
1. ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the group's financial
statements.
Basis of preparation
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules modified to
include the revaluation of certain fixed assets.
2. SEGMENTAL ANALYSIS BY CLASS OF BUSINESS
The analysis by class of business of the Group turnover, result before taxation
and net assets is set out below:
Turn-over 2007 Profit/ Net Turn-over 2006 Net
(loss) before assets Profit/ assets
taxation (loss) before
taxation
£'000 £'000 £'000 £'000 £'000 £'000
Syphonic
drainage 14,691 965 1,916 11,652 719 1,102
Staircases 4,749 605 2,041 4,020 379 1,457
Polymer
sheet
materials 1,404 (277) (623) 2,849 (94) (276)
------- -------- ------- ------- ------- -------
20,844 1,293 3,334 18,521 1,004 2,283
------- -------
Other
charges/
liabil
ities (225) (831) (256) (437)
-------- -------
Profit
before
interest 1,068 748
Net
interest (596) (516)
payable -------- -------
Profit
before
taxation 472 232
-------- ------- ------- -------
Total net
assets 2,503 1,846
======= =======
The Group operates predominantly within the United Kingdom. The geographical
analysis of the Group's turnover by destination is as follows:-
2007 2006
£'000 £'000
United Kingdom 14,130 12,857
Europe 6,714 5,651
Africa and Middle East - 13
---------- ----------
20,844 18,521
---------- ----------
3. PROFIT PER SHARE
The profit per share calculation for the year ended 30 June 2007 is based on the
weighted average of 17,019,546 (2006 16,189,199) ordinary shares in issue during
the year and the profit of £428,000 (2006: profit of £232,000).
The company's share options are not dilutive for loss per share calculations.
4. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of operating profit to net cash inflow/(outflow) from
operating activities
2007 2006
£'000 £'000
Operating profit 1,068 748
Depreciation charges 384 366
Amortisation of trade names and patents 15 22
Profit on sale of tangible fixed assets (22) (5)
Increase in stocks (207) (140)
Increase in debtors (392) (731)
Increase in creditors 500 118
-------- --------
1,346 378
======== ========
(b) Reconciliation of net cash flow to movement in net debt
2007 2006
Increase in cash in period £'000 £'000
602 86
Cash outflow/(inflow) from increase in debt and lease
financing (47) 1,549
------- -------
Change in net debt resulting from cash flows 555 1,635
New finance leases (162) (229)
------- -------
Movement in net debt in period 393 1,406
Net debt at 30 June 2006 (7,112) (8,518)
------- -------
Net debt at 30 June 2007 (6,719) (7,112)
======= =======
(c) Analysis of net debt
At 30 June Cash Non cash At 30 June
2006 Flow changes 2007
£'000 £'000 £'000 £'000
Overdrafts (3,668) 602 - (3,066)
Debt due after one
year (3,250) - - (3,250)
Finance leases and
hire purchase (194) (47) (162) (403)
--------- ------- -------- --------
Total (7,112) 555 (162) (6,719)
========= ======= ======== ========
The 2007 figures have been abridged from the audited statutory accounts for the
year which will be posted to shareholders on 21 December 2007. The figures for
2006 have been abridged from the audited statutory accounts for that year which
have been delivered to the Registrar of Companies. The reports of the auditor on
the statutory accounts were unqualified. Further copies of the accounts are
available from the Company's registered office at SWP Group plc, 4th Floor
Bedford House, 3 Bedford Street, London WC2E 9HD and The Company's website
www.swpgroupplc.com.
For further information or enquiries please contact:
J.A.F Walker D.J. Pett
Chairman Director of Finance
Tel Office: 020 7379 7181 Tel Office: 020 7379 7181
Mobile: 07900 445623 Mobile: 07940 523135
Oliver Scott
KBC Peel Hunt
Nominated Advisor and Broker
Tel Office: 0207 418 8900
This information is provided by RNS
The company news service from the London Stock Exchange
END
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