Interim Results

RNS Number:1789Y
SWP Group PLC
30 April 2004


                                  SWP GROUP PLC

              Interim report for six months ended 31 December 2003

Chairman's Statement

Results
In our 2003 Annual Report we informed shareholders that trading at the start of
the new financial year had been below expectation.

Unfortunately, for reasons which we expand upon below, the situation proved to
be more serious than we appreciated at the time and our results for the six
months to 31 December 2003 make grim reading. Turnover for the period, at
#7,843,000 was 16 per cent. lower than in the corresponding period the previous
year (#9,333,000) and we recorded an operating loss before exceptional items of
#871,000 (2002: #199,000 profit). After taking account of non-operating costs of
#234,000 (2002: nil) and net interest costs of #290,000 (2002: #259,000) the
loss before taxes amounted to #1,395,000 (2002: #60,000 loss).

Fundraising
We announced today a Placing and Open Offer which will recapitalise the
Company's balance sheet. This fundraising has been partially underwritten and
will result in minimum net proceeds of #3,038,645 being received by the Company.
Further details of the Placing and Open Offer will be contained in the
prospectus and application form that will be sent out to SWP shareholders today.

Review of Operations
Clearly losses on this scale are both unacceptable and unsustainable and we have
moved decisively to address the relevant issues and implement corrective action.

Fullflow Group
Somewhat surprisingly the major source of the problems was Fullflow Group, for
so long the mainstay of the Group. In recent years Fullflow has both expanded
the geographical coverage of its rainwater drainage business into France and
Spain and also set up a new state-of-the-art fabrication facility at Rotherham
under the umbrella of its Plasflow operation. Such moves are not without risk
and whilst Fullflow's own management team and we at Group level have endeavoured
to manage the various areas of risk to best effect, the fact is that Fullflow's
senior management team became overstretched and unable to deal with the demands
generated by the new businesses.

Coincidentally the company suffered a significant fall in sales revenue, partly
due to delays to a number of large projects in the UK, partly to some downward
price pressure in the market and partly to shortcomings in the UK project sales
operation. By the time the full impact of this sales shortfall percolated
through the underperforming management information systems the losses had
already escalated to a significant level.

At that point a full review of Fullflow's operations was instigated. This
resulted in a number of key actions: firstly a substantial redundancy programme
was implemented: secondly a new Finance Director was recruited; and thirdly a
fundamental restructuring of the Company was put into effect, the aim of which
is to reduce the extent to which Fullflow's UK management becomes involved in
the European operations whilst at the same time increasing the degree to which
the Company's site operations are undertaken by subcontractors rather than
Fullflow's own employees. The last change has been implemented through a new
arrangement whereby individuals previously employed by the Company now operate
as 'affiliates' - independent sub-contractors who undertake work for Fullflow.
We are confident that this new way of working will give rise to improved
operational efficiency in what is an important facet of the business as well as
minimizing Fullflow's exposure to sudden reductions in sales levels. Just as
importantly the high standards required of the 'affiliates' will maintain
Fullflow's reputation for high quality installation and customer service.

Much discussion has taken place about the problems encountered by Fullflow and
we are confident that the relevant lessons have been learned. In addition the
levels of reporting between Fullflow and the Group have been strengthened and
enhanced.

The market also appears to be showing signs of improvement with some of the
delayed projects moving towards a start date on site. In the UK there is a
renewed focus on projects at the quality end of the market where Fullflow's
design expertise and service levels are most highly valued.

In France progress continues to be made in driving operational efficiencies
towards UK levels. In Spain the large Madrid Airport project is drawing to a
conclusion and order levels are now picking up which should underwrite
satisfactory sales levels in the months ahead. While sales at Plasflow continue
to disappoint, it is expected that the recent shortage of available business
from the utilities sector should reverse in due course.

All in all Fullflow Group remains a quality business with considerable potential
for international expansion and shareholders can take some comfort from the fact
that the Company's management team is fully committed to restoring the fortunes
of the business to where they belong.

Crescent of Cambridge
Crescent's sales for the period under review were ahead of plan but pressure on
margins meant that operating profits failed to reach budget.

Generally the market for steel staircases in the UK is highly competitive, its
main feature being the proliferation of small fabricators operating out of
low-cost premises in parts of the country where labour is readily available and
wage rates are lower than the national average. Whilst this type of company is
unlikely to be successful in larger and more technically challenging projects
they can and do exert a considerable influence at the bread and butter end of
the market and the challenge for Crescent is to sharpen its competitive edge to
increase its share of this fragmented market. The substantial investment which
we have made in new manufacturing plant has had a marked effect on productivity
and this ought to enhance Crescent's ability to secure extra sales in this area.
Another area that has been targeted for growth is the architectural end of the
market where enquiry levels have shown a marked increase in recent months which
we are hopeful will be a prelude to additional sales.

DRC Polymer Products
The frustrations to which we have referred on many previous occasions continued
to affect DRC during the period under review.

Overall, turnover was lower than in the corresponding period last year with
sales into the company's traditional markets, such as portable buildings and the
water industry, showing a marked drop.

Sales of the new acoustic sheet also fell well short of planned levels. However
the UK (and European) distributor has been engaged in a marketing exercise aimed
at architects, consultants, house builders and Building Control inspectors and
we understand that the material has been specified on several sizeable projects.
We remain confident in the long term potential of this product.

More encouragingly sales of the material used for fireproofing pipelines in
petrochemical installations exhibited a sharp increase and we have been advised
that demand will be maintained at this level for the foreseeable future.

In addition a partnership agreement is in the process of being signed with a
Dutch owned distributor of a specialist waterproofing product and it is expected
that this arrangement should provide DRC with a useful overall profit
contribution.

Current Trading
Trading in the third quarter of the year has continued to be difficult. Crescent
continues to be profitable but at Fullflow and DRC further losses have been
incurred.

Future Prospects
Whilst we cannot pretend that our results for the first six months are anything
other than extremely poor, we believe that the worst is well behind us.

The various changes which have been implemented at Fullflow have already had a
beneficial effect not only in relation to the size of the overhead but also in
terms of management focus. In April alone order intake is expected to be
approximately #1.8 million and we are confident that progress is being made.
Sales are expected to increase sharply in the summer months and the slimmed down
cost structure should mean that, at the very least, Fullflow makes a very
positive contribution to Group profits.

At Crescent an order book which amounts to more than five months sales should
produce healthy sales levels in the months ahead and we expect DRC to post an
operating profit in the fourth quarter and to make significant progress
thereafter.

Overall therefore we believe that the current year should be viewed as something
of a watershed in the Group's development. Lessons have been learned and across
the Group there is a greater determination than ever before to produce the sort
of results to which we aspire and believe we are capable of achieving.

Finance
The losses which we have sustained during the period under review have had the
inevitable impact on the Group's cash flow and there is now an urgent need for
the Group to raise additional equity. Full details of the Placing and Open Offer
will be contained in a prospectus and application form that will be sent out to
shareholders today.

R M Muddimer
Chairman

Enquiries

Alan Walker    SWP Group Plc                                       020 7379 7181
               (Group Financial Director)



Consolidated Profit and Loss Account

                                        Six months     Six months        Year ended
                                    ended 31.12.03 ended 31.12.02          30.06.03
                                             #'000          #'000             #'000

Turnover                                     7,843          9,333            18,359

Operating (loss)/profit before                (871)           199                52
exceptional items

Net operating expenses - exceptional          (234)             -              (225)
items
Operating loss                              (1,105)           199              (173)

Net interest payable and similar              (290)          (259)             (541)
charges

Loss on ordinary activities before          (1,395)           (60)             (714)
taxation
Taxation                                         -              -                 -

Retained loss                               (1,395)           (60)             (714)
Loss per share-basic                         (0.41)p        (0.02)p          (0.21)p
-diluted                                     (0.41)p        (0.02)p          (0.21)p



Consolidated Balance Sheet

                                    As at          As at            As at 
                                 31.12.03       31.12.02         30.06.03
                                    #'000          #'000            #'000

Fixed assets
Intangible assets                      35             34               29
Tangible assets                     4,217          4,009            4,412
                                    4,252          4,043            4,441

Current assets
Stocks                              2,693          2,818            2,644
Debtors                             4,315          5,209            5,677
                                    7,008          8,027            8,321

Creditors: amounts falling due     (9,307)        (6,892)          (9,653)
within one year
Net current (liabilities)/assets   (2,299)         1,135           (1,332)
Total assets less current           1,953          5,178            3,109
liabilities

Creditors: amounts falling due      3,165          4,528            2,926
after more than one year

Capital and reserves

Called up share capital             6,827          6,827            6,827
Share premium account               1,295          1,295            1,295
Capital reserve                        41             41               41
Revaluation reserve                   691            521              691
Profit and loss account           (10,066)        (8,034)          (8,671)
                                   (1,212)           650              183

                                    1,953          5,178            3,109



Consolidated Cash Flow Statement


                                       Six months     Six months   Year ended
                                   ended 31.12.03 ended 31.12.02     30.06.03
                                            #'000          #'000        #'000

Net cash flow from operating activities       365            494          503

Returns on investments and servicing of
finance
Net interest paid                            (234)          (196)        (430)
Hire purchase interest                        (56)           (24)         (72)
                                             (290)          (220)        (502)

Investing activities
Payments to acquire fixed assets              (99)           (214)       (351)
Receipts from sales of tangible fixed           4              21          14
assets
                                              (95)           (193)       (337)

Financing
Bank loan repayments                         (250)              -        (500)
Capital element of finance leases and        (194)           (122)       (350)
purchase payments
                                             (444)           (122)       (850)
Net decrease in cash                         (464)            (41)     (1,186)



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 30 June 2003
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 change 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 341,319,198 (2002:
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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