Interim Results

RNS Number:3003K
SWP Group PLC
30 March 2005


                                 SWP Group PLC

                              Interim Report 2004

                            for the six months ended

                                31 December 2004


Chairman's Statement

Results

Following the tribulations experienced in the year to June 2004, the first half
of the new financial year was essentially a period of consolidation.

On slightly lower sales of #7,748,000 (2003: #7,843,000) we incurred an
operating loss before exceptional items of #335,000 (2003: #871,000) offset by
exceptional income of #420,000 (2003: #234,000 costs) resulting in an operating
profit of #85,000 (2003: loss #1,105,000). The exceptional income relates to the
net proceeds of the litigation referred to in the 2004 Annual Report and
Accounts and represents a one-off benefit to the Group. Net interest costs of
#273,000 (2003: #290,000) give rise to a net loss attributable to shareholders
of #188,000 (2003: loss #1,395,000) which means that no dividend can be declared
at this time.

Review of Operations

Despite reporting further losses at the operating level we believe that we have
achieved some significant progress during the period under review. As the
detailed commentaries which follow demonstrate we have done much to position
both Fullflow Group and DRC Polymer Products for growth both in the short term
and beyond and at Crescent there is major effort under way to find a way of
increasing the return on capital we derive from a business which is perhaps
unlikely to deliver significant top line growth in the near future.

Fullflow Group

Following the various upheavals which occurred during the previous financial
year the major focus at Fullflow has been geared towards increasing sales and
improving customer satisfaction levels.

In the UK the strategy of targeting medium to large projects is starting to
produce the desired results in terms of both order intake levels and operational
efficiency. For most of the period to December the performance of the business
was still being adversely affected by an excess of small projects spread around
the country, which led to inefficient working, poor customer satisfaction levels
and a whole raft of extra costs. However in recent months the average order
value has increased by around 60% and although the number of orders received by
the company has actually declined, total order intake levels have increased
sharply: and while order margins on the larger projects inevitably tend to be
lower it is much more likely that those margins can be achieved in practice and
perhaps even improved upon.

With overall demand for syphonic roof drainage continuing to grow, Fullflow's UK
operation is well placed to capitalise on its position as market leader. Recent
order intake levels have been very encouraging and, with a number of major
orders in the pipeline, turnover is set to rise significantly. Just as
importantly, service levels are being restored to their previous highs and this
can only serve to bolster customer confidence and lead to follow-on business.

In France order intake during the review period was weak, affected both by
sluggish market conditions and also the emergence of an aggressive new
competitor. The shortage of new orders inevitably fed through to reduced sales
levels and for the period as a whole a loss was registered, the first for some
while.

However in recent weeks the sales outlook has improved considerably. The market
has strengthened, the competitive pressures referred to above have eased and we
have helped ourselves by putting in place extra resources to support our sales
and marketing effort. Order intake levels have improved significantly and
although the business is currently suffering from widespread site delays, none
of which are attributable to any failings at our end, prospects overall look
much better.

In Spain the newly constituted management team is continuing with its endeavours
to create a platform for growth by broadening its customer base and extending
its geographical reach. Some successes have been achieved in the Basque country
following the appointment of a sales agent and we are attempting to replicate
this arrangement elsewhere. In recent months order intake has been patchy but
there is no doubt that an increasing number of Architects, developers and
contractors in Spain appreciate the advantages which they can derive by using
Fullflow's drainage systems and there is a real expectation that enquiry and
order levels will exhibit a steady rise going forward. Meanwhile, as with any
embryonic business, we have to be prepared to support the business until it
reaches breakeven point.

At Plasflow, third party sales continued to disappoint. Although the company
provides an important manufacturing service to the three other businesses within
Fullflow Group, the major capital investment programme implemented at the new
Rotherham facility was very much targeted at what was considered to be a major
business opportunity outside the Group and recent sales levels have failed by
some distance to achieve the benchmarks required to generate economic returns.

However during the period much effort was expended to re-establish Plasflow as a
professional and reliable presence in the marketplace and we are finally
starting to see the benefits of this input. Those customers who have placed
business with us have been impressed by the quality and speed of our response
and we are confident that if we can source a regular flow of new business we
should be able to build a loyal customer base.

Further afield Fullflow continues to seek out international growth
opportunities. Our preferred strategy for exploiting such opportunities is
either to develop partnerships or create franchises and we are hopeful that in
the coming months at least two new arrangements of this nature will be put in
place. These should help the company establish its name as a genuinely global
brand and also to sell its products and expertise in countries or regions which
it would be uneconomic to target directly.

Crescent of Cambridge

Sales at Crescent were slightly lower than for the corresponding period last
year but an overall improvement in gross margins produced a slightly higher
operating profit.

In previous reports we have highlighted the need for Crescent to develop a new
pathway to growth but despite favourable market conditions this challenge is
proving to be a difficult one.

As a business Crescent enjoys many characteristics which should work in its
favour: the experience of its management team, the strong skillbase of its
employees and the new CNC machines which it is now using ought to provide the
basis of strong competitive advantage and we continue to work with the company
to find ways of improving the returns which the business is currently
generating.

DRC Polymer Products

In line with the more upbeat commentary included in the 2004 Annual Report and
Accounts DRC delivered a much improved performance, with sales for the period
more than 20% ahead of last year. While this was not quite enough to push the
business into the black we are in no doubt that the positive sales trend is
sustainable and that the prospects for the business are better than ever.

Probably of most significance in this context is the special new waterproofing
material which DRC has developed over the last year or so and which features a
built-in leak-detection capability. This product, which we refer to as the
"Intelligent Membrane", allows the user/owner of the installation to pinpoint
any leaks to within one square metre and given that the cost of installing it is
lower than the liquid coatings with which it competes it has been
enthusiastically embraced by those from within the water industry who have
witnessed the demonstrations which we have laid on. One pilot project has
already been completed and we are hopeful of securing a much larger project in
the coming weeks. If all the current indications are correct this product has
huge potential, not only in the UK but further afield, and we are taking the
appropriate steps to protect the intellectual property vested in it.

Progress has also been made in a number of other product areas and although one
or two of these are still in the development phase it does appear that they have
considerable potential. As with Fullflow, therefore, DRC is poised deliver the
sort of results which we have always believed it is capable of achieving.

Current Trading

Trading in the third quarter of the financial year has been mixed. The weather
has hampered progress on a number of Fullflow's sites in the UK and France with
delays of up to a month being experienced in some instances. It is inevitably
difficult to replace turnover which is lost in such circumstances and it is for
such reasons that Fullflow's business tends to follow a seasonal pattern.

Crescent has a strong order book going forward which includes, inter alia,
significant orders from the Ministry of Defence and other Government Agencies.

DRC is benefiting from the success not only of its strategic partnerships but
also through the evolution of proprietorial products within the water industry
which have enormous potential for the future profitable growth of the company.

Future Prospects

There is now strong evidence to suggest that the Group should make good progress
in the months ahead. Across the board enquiry and order levels are healthy and
we expect these to feed through to higher levels of turnover going forward.

In particular both Fullflow and DRC are well positioned in their respective
markets with resources being targeted at those sectors which appear to offer the
best prospects of profitable growth.

Each of the businesses ought to be capable of handling a significant amount of
extra demand without the need to incur additional overhead costs and this should
mean that any sales growth which is achieved should produce improvements in
divisional profitability.

The efforts of our management teams are very clearly focused on what is required
to deliver the results we believe they are capable of achieving and we look to
the future with cautious optimism.


R M Muddimer
Chairman


Enquiries To:

          Oliver Scott KBC Peel Hunt Ltd           020 7418 8900
          Alan Walker SWP Group Plc                020 7379 7181
          (Group Financial Director)


Consolidated Profit and Loss Account
Six months ended 31 Dec 2004                                                       

                                                Six months         Six months    
                                                     ended              ended    Year ended
                                                  31.12.04           31.12.03      30.06.04
                                                     #'000              #'000         #'000

Turnover                                             7,748              7,843        15,006
                                                  ---------         ---------      ---------

Operating loss before exceptional items               (335)              (871)       (1,816)

Net operating income/(expenses) - exceptional items    420               (234)         (292)
                                                  ---------         ---------      ---------
Operating profit/(loss)                                 85             (1,105)       (2,108
Net interest payable and similar charges              (273)              (290)         (609)
                                                  ---------         ---------      ---------
Loss on ordinary activities before taxation           (188)            (1,395)       (2,717)
Taxation                                                 -                  -             -
                                                  ---------         ---------      ---------
Retained loss                                         (188)            (1,395)       (2,717)
                                                  ---------         ---------      ---------
Loss per share
      -  basic                                       (1.19)p            (0.41)p       (0.70)p
                                                  ---------         ---------      ---------
     -  diluted                                      (1.19)p            (0.41)p       (0.70)p
                                                  ---------         ---------      ---------
               
Consolidated Balance Sheet
As at 31 Dec 2004 
 
                                                            As at             As at             As at 
                                                         31.12.04          31.12.03          30.06.04
                                                            #'000             #'000             #'000

Fixed assets

Intangible assets                                              25                35                27
Tangible assets                                             3,739             4,217             3,906 
                                                         ---------         ---------         ---------                  
                                                             3,764             4,252             3,933
                                                         ---------         ---------         ---------                  
Current assets

Stocks                                                      2,668             2,693             2,731
Debtors                                                     5,348             4,315             5,015
                                                         ---------         ---------         ---------                  
                                                            8,016             7,008             7,746

Creditors: amounts falling due within one year             (8,259)           (8,807)           (7,888)
                                                         ---------         ---------         ---------                  
Net current liabilities                                      (243)           (1,799)             (142)
                                                         ---------         ---------         ---------                  
     
Total assets less current liabilities                       3,521             2,453             3,791
                                                         ---------         ---------         ---------                  
Creditors: amounts falling due after more than one year     3,152             3,665             3,234
                                                         ---------         ---------         ---------                  
Capital and reserves

Called up share capital                                        79             6,827                79
Share premium account                                      11,134             1,295            11,134
Capital reserve                                                41                41                41
Revaluation reserve                                           671               691               671
Profit and loss account                                   (11,556)          (10,066)          (11,368)
                                                         ---------         ---------         ---------                  
                                                              369            (1,212)              557
                                                         ---------         ---------         ---------                  
                                                             3,521             2,453             3,791
                                                         ---------         ---------         ---------                  
Consolidated Cash Flow Statement
Six months ended 31 Dec 2004

                                                        Six months        Six months       
                                                             ended             ended       Year ended
                                                          31.12.04          31.12.03         30.06.04
                                                             #'000             #'000            #'000

Net cash (outflow)/inflow from operating activities          (503)              365             (224)
                                                         ---------         ---------         ---------                  
Returns on investments and servicing of finance
Net interest paid                                            (249)             (234)            (484)
Hire purchase interest                                        (36)              (56)             (51)
                                                         ---------         ---------         ---------                  
                                                             (285)             (290)            (535)                   
                                                        ---------         ---------         ---------                   
Investing activities

Payments to acquire fixed assets                              (51)              (99)            (192)
Receipts from sales of tangible fixed assets                    -                 4              144
                                                         ---------         ---------         ---------                  
                                                              (51)              (95)             (48)
                                                         ---------         ---------         ---------                  
Financing

Issue of ordinary share capital net of expenses                 -                 -            3,091
Bank loans received                                             -                 -              129
Bank loan repayments                                          (27)             (250)            (250)
Other loan repayments                                           -                 -           (1,046)
Capital element of finance leases and purchase payments      (118)             (194)            (327)
                                                         ---------         ---------         ---------                  
                                                            (145)             (444)            1,597
Net (decrease)/increase in cash                              (984)             (464)             790
                                                         ---------         ---------         ---------                  
Notes to the Interim Report
          
1    Financial Information   

     The interim results are unaudited and do not constitute statutory accounts. 
     The comparative information contained in this report for the year ended 
     30th June 2004 does not constitute the statutory accounts for that 
     financial year. Those accounts have been reported on by the Group's auditor 
     and delivered to the Registrar of Companies. The report of the Auditor was 
     unqualified and did not contain a statement under Section 237(2) or (3) of 
     the Companies Act.

2    Taxation    

     There is no charge in the profit and loss account for taxation due to the 
     fact that the Group has sustained losses during the period under review.

3    Loss per share

     Loss per share is calculated on the basis of shares 15,770,000 2003: 
     341,319,198), which is the weighted average of the number of shares in 
     issue during the period.

     The Company's share options are not dilutive for loss per share 
     calculations because the share options' exercise prices are greater than 
     the current market price.

4    Dividends   

     The Directors are not recommending the payment of an interim dividend.

5    Copies of interim report
  
     Copies of the interim report are being circulated to shareholders.
     Further copies are available from the Company's registered office at SWP 
     Group plc, 4th Floor, Bedford House, 3 Bedford Street, London WC2E 9HD.


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