TIDMSWP
RNS Number : 6580F
SWP Group PLC
13 November 2015
SWP Group Plc
("SWP" or the "Group")
Final Results for the year ended 30 June 2015
SWP (AIM: SWP), the industrial engineering group, is pleased to
announce its final results for the year ended 30 June 2015.
Financial Highlights
n Turnover reduced by 15.2% to GBP13.189M (2014:
GBP15.548M).
n Elimination of loss making businesses at Fullflow in France
and Crescent with write off of GBP2.083M (2014: GBPNIL).
n Operating profits of continuing businesses reduced by 2.3% to
GBP1.508M (2014: GBP1.544M).
n Profit after tax for continuing businesses increased by 44.7%
to GBP1.680M (2014: GBP1.161M).
n Earnings per share for continuing businesses increased by
45.8% to 0.86p (2014: 0.59p).
n Bank borrowings reduced by 15.1% to GBP0.737M (2014:
GBP0.868M) resulting in bank gearing reducing to 5.1% (2014: 5.8%)
of shareholders' funds. Hire purchase obligations reduced by 13.8%
to GBP1.000M (2014: GBP1.160M).
n Capital expenditure in the year of GBP0.974M, primarily at
ULVA.
n Recommended dividend reduction to GBPNIL pending the
successful launch of ULVAGRP and the elimination of external bank
borrowings.
n Reduction of 3.8% in shareholders' funds to GBP14.312M (2014:
GBP14.877M) notwithstanding one time write-off and losses of
GBP2.083M (2014: GBPNIL) in respect of Fullflow in France and
Crescent.
Operational Highlights
n Further improved trading performance from Fullflow Group
including Plasflow in the UK market and internationally.
n Margins in continuing businesses at both ULVA and Fullflow
holding up well in competitive markets.
n Excellent performance of process line installed in Telford to
manufacture ULVAShield. High levels of efficiency, quality and
customer service.
n Elimination of loss making businesses at Fullflow in France
and Crescent which have been time consuming to senior
management.
n Significant progress in targeted research & development in
both ULVA and Fullflow. Fusion Butt Welder machines now fully
operational on Fullflow sites.
n Greater emphasis on health & safety throughout all
operating entities in the Group. Training at all levels within the
Group improved.
n Preparation for the introduction of ULVAGRP at an advanced
stage in terms of tooling, process for mouldings and fittings,
trimming and finishing jigs all in readiness for the arrival of a
process line to produce sheet of merchantable quality. This is the
subject of unforeseen delay.
n Strengthening of the sales department within Fullflow with an
increased emphasis on technical selling.
n Continued tight financial controls and effective management of
working capital and inventories.
n Greater emphasis on "risk management" at all levels within the
business.
Alan Walker, Executive Chairman, commented:
"This has been a very challenging year but one during which we
have taken decisive action in order to focus management's full
attention on the two principal brands and products ULVA and
Fullflow. The actions taken will stand the Group in good stead in
the short to medium term and will underscore profitability going
forward. The frustrations from the delay in bringing ULVAGRP to the
market have been immense but a course of action has been put in
place to bring this new business to market as soon as practicable.
Our brands have worldwide appeal."
For further information please visit www.swpgroupplc.com or
contact:
Enquiries:
J.A.F. Walker D.J. Pett
Chairman Finance Director
SWP Group Plc SWP Group Plc
Tel office: 01353 723270 Tel office: 01353 723270
Mobile: 07800 951151 Mobile: 07940 523135
Tim Feather/Liam Gribben Ranald McGregor-Smith
Nominated Adviser and Broker Corporate Finance Advisors
WH Ireland Limited Whitman Howard Limited
Tel office: 0113 394 6600 Tel office: 020 7659 1234
Chairman's Statement
Corporate & Business Review
The financial year to 30 June 2015 has been both engaging and
challenging whilst resulting in structural change which we believe
will provide the Group with a more robust business model going
forward.
At the interim stage to 31 December 2014 we reported modest
operating profits consistent with the project-led nature of our
principal activities at ULVA and Fullflow but indicated that the
second half of the year would show improvement. That in fact is how
the trading year unfolded with both ULVA and Fullflow operating by
and large to expectation. This provided the SWP Board with the
confidence to "bite the bullet" in respect of the peripheral
staircase business at Crescent which has been loss making in three
of the last four years and into curtailing and closing Fullflow's
French business which has been traditionally loss making in favour
of an international business model which has been tried and tested
over the last two to three years and which has delivered good
returns with a much more attractive risk profile. Whilst it was an
option to persist with the staircase business in Crescent and in
the French market in the hope that both would stage a recovery,
both businesses were closed down in the second half of the year
giving rise to one-time closure and impairment write downs as
detailed in Note 3 to the Financial Statements and classified as
discontinued operations. In both cases any improvement in
performance was far from certain and would have required
substantial input in terms of senior management time and working
capital.
The restructured Group now operates through two distinct
business areas encompassing on the one hand the "ULVA" brand and on
the other the "Fullflow" brand together with its affiliate
"Plasflow".
Fullflow, based in Sheffield, remains a leading supplier of
rainwater management systems across a number of sectors including
industrial factories, motor car plants, leisure facilities and
stadia, energy for waste, distribution warehouses, schools,
hospitals, airports, railway stations, retail shopping centres and
even listed buildings. The systems are based on syphonic technology
which facilitates the evacuation of water from large roof areas at
far greater speed than by simple gravity and in line with rainfall
intensity. In the UK Fullflow strengthened its market position
during the second half of the financial year through increased
levels of productivity and improved execution of contracts. The
sales team has been strengthened with an increased customer focus
on value engineering and technical innovation in an attempt to
deliver good value and service on a timely basis in line with
customer expectation.
Fullflow International has become a successful entity providing
design and specification services, material supply and project
management within our specialist areas of expertise, far beyond our
traditional French and Spanish markets into the likes of Brazil,
Mexico and Chile. Our business model, unlike in the UK, is
restricted to the supply of goods and services to agreed
specification whilst our locally based partners are charged with
the responsibility of installation and commissioning on their own
account.
Plasflow provides a full scale fabrication service to Fullflow
as well as servicing the third party specialist construction and
nuclear sectors with high density polyethylene pipe spools of all
shapes, sizes and dimensions and enjoyed a strong trading
performance in the year under review. This business, based in
Rotherham, is also project-led, the timing of which is not within
Plasflow's control, but it has a diverse range of discerning and
supportive third party customers, works closely with Fullflow and
has strong technical and commercial links to the nuclear sector led
by EDF and their nominated contractors. Plasflow has developed into
a provider of technically innovative solutions and has been closely
involved with all of the nuclear plants in the UK at various stages
of their development, remediation and routine repair and
maintenance. This industry is destined for UK Government and
foreign investment support on a grand scale in the next decade and
Plasflow is well positioned to benefit from this in the years to
come.
ULVA, based in Telford, continues to be our leading
manufacturing business as a provider of non-metallic cladding
systems which reduce Corrosion Under Insulation ("CUI") to the oil,
gas and petrochemical sectors. This niche business has for years
been our principal profit earner delivering significant levels of
cash which has allowed the Group to reduce bank borrowings to
nominal proportions. The improvement in the results for the second
half of the year has delivered profits for the financial year as a
whole in line with expectation. The new process line which was
installed in Telford last year has fully lived up to expectations
in terms of operating efficiency, available capacity and return on
investment.
Following on from this successful capital expenditure programme,
our management team at ULVA has attempted to replicate the
procedure by commissioning the manufacture of a bespoke process
line in Germany in order to facilitate ULVA's focused entry into
the glass reinforced plastic ("GRP") market. ULVAGRP is designed to
be a complementary brand to our existing ULVAShield brand so as to
broaden the base of the business and provide customers with greater
choice determined by specification preferences. Regrettably the
specialised OEM supplier in Germany failed to deliver the machine
to specification and at the stage of wet pre-acceptance trials the
machine turned out to be unfit for purpose.
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2015 05:53 ET (10:53 GMT)
This was a big disappointment not only to our team who have
worked so tirelessly on the project but also to our customers who
have been eagerly awaiting the arrival of ULVAGRP to a market which
is poorly served at this time. The natural consequence of the
machine supplier's failure to deliver to contractual terms is one
of delay to the launch of ULVAGRP which could be up to one year
later than anticipated. In all other respects the ULVA business
remains in rude health with increased levels of market penetration
backed by a demonstrable record of successful installation
internationally.
There has been much media speculation about the difficulties
currently faced by the oil and gas industry with oil prices
depressed to levels that make exploration uneconomic in certain
circumstances. Postponement and cancellation of capital investment
programmes is an inevitable consequence of such a dramatic fall in
the price of oil at a time when fracking, particularly in the
United States, has risen to an all-time high. To this end we are
monitoring our portfolio of projects going forward with our key
customers whilst remaining vigilant and conscious that the essence
of the product we provide is to offer long term protection to the
assets of the oil and gas majors they are not only investing in but
also those currently operating all over the world. There remains a
very sizeable market for ULVA to explore and cultivate.
Results
2015 2014
GBP'000 GBP'000
Turnover 13,189 15,548
Operating profit (after exceptional
expenses) 1,508 1,544
Profit before tax from continuing
operations 1,290 1,366
Earnings per share from continuing
operations 0.86p 0.59p
========= =========
The above results reflect the improved trading performance in
the second half of the year. Direct comparison with FY2014 is
difficult due to the elimination of the turnover and asset write
down for those businesses classified as discontinued. In accordance
with IFRS accounting rules the figures are stated after adjustments
relating to the amortisation of intangible assets GBP165K (2014:
GBP165K) and non-cash share options GBP80K (2014: GBP80K). After
bank and hire purchase interest and related derivative charges for
Letters of Credit and Performance Bonds of GBP218K (2014: GBP178K)
pre-tax profits for continuing businesses fell to GBP1,290K (2014:
GBP1,366K). The write-off in respect of discontinued operations as
per Note 3 of the Financial Statements results in a loss for the
year of GBP403K (2014: profit of GBP1,176K).
Earnings per share from continuing businesses rose strongly to
0.86p (2014: 0.59p) due to the elimination once and for all of
these losses incurred in both Fullflow France and Crescent.
As mentioned in earlier reports, based on an Asset Sale
Agreement entered into with the liquidator of Ulva Ltd when SWP
purchased the business on 28 November 2007, SWP remains entitled to
any excess funds arising from the liquidation beyond 100p/GBP. All
creditors have now been paid out the requisite 100p/GBP and the
liquidator has acknowledged the efficacy of his legal obligations
(with the assistance of the Court). The liquidator has stated that
he is continuing to collect the proceeds of asset realisations
which we are monitoring. The exact timing and quantum of any
receipt remains uncertain but appears to be advancing towards a
conclusion. This will be accounted for as and when payment is
virtually certain as per IAS37.
Borrowings
Shareholders are fully aware that a major plank in the Group's
strategy has been to achieve a debt free banking status whilst also
promoting the focussed capital investment programme at ULVA which
has run to almost GBP3M at the ULVAShield and ULVAGRP factories.
The impact of the closures at Fullflow in France and at Crescent
has necessitated the use of cash resources albeit to a limited
extent as mitigated by asset sales. At the same time capital
expenditure in the business (mainly ULVA) has amounted to GBP974K
all of which has been funded from cash generated by the businesses
and through efficient and effective working capital management.
Overall therefore Group bank debt at 30 June 2015 has fallen by
15.1% to GBP737K (2014: GBP868K). At the same time lease purchase
arrangements secured solely on the assets over which they are
financing have fallen by 13.8% to GBP1,000K (2014: GBP1,160K).
The Board will continue to push for a bank debt free status in
the near term.
Real Estate
A positive consequence of the restructuring and rationalisation
which has taken place in the recent past has been to free up
freehold property assets that are no longer required by the
operating companies. I refer to the factory in Soham,
Cambridgeshire no longer occupied by DRC Polymer Products Ltd whose
business relocated to Telford at the time of the process line
purchase from Italy and to the factory originally occupied by
Crescent of Cambridge Ltd in St Ives in Cambridgeshire. These
valuable freehold assets now form part of the Group's property
portfolio over which we have a number of strategic options to rent,
sell for cash and/or redevelop pursuant to a planning permission
which has already been secured in the case of the St Ives
property.
It is the Board's intention to make these assets provide the
Group with either a lucrative yield or capital receipts that
eliminate all or any debt at a stroke.
Consolidated Statement of Financial Position
As at 30 June 2015 the balance sheet of the Group has a robust
feel notwithstanding the write-off and impairment arising out of
the elimination of the French and Crescent businesses. In
particular the capital expenditure programme to which we remain
committed at ULVA has reached an advanced stage whilst the working
capital model and long term liabilities continue to reduce. The
real estate assets to which I refer above are in effect surplus to
our continuing business requirements and will over time assist
greatly in the continuous improvement of the Group's financial
standing.
Dividend
As a result of the restructuring and the unforeseen failure of
the German supplier to deliver a machine to specification, we face
a significant delay to the launch of the new ULVAGRP product line
into the oil and gas market. As a result and after much discussion
the Board has decided not to recommend the payment of a dividend in
favour of using cash to exploit considerable opportunities and
invest in the future of our two flagship businesses. It is of prime
importance that we are in a position to manufacture ULVAGRP to the
highest possible standard and in compliance with all current
regulations and certifications.
In the natural course of events, with a more structured core
business based on two principal brands namely ULVA and Fullflow,
the Group should be in a position to move to a progressive dividend
policy in the near term just as soon as ULVAGRP has been
successfully introduced to a receptive marketplace. The continuing
businesses operate in global markets and will benefit from the
absence of the drag effect of loss making subsidiaries.
Taxation
Shareholders' attention is directed to Note 8 of the Annual
Report which summarises the Group's current tax position. There are
a number of factors which come into play in reducing the Group's
corporation tax liability to GBPNIL for the year to 30 June
2015.
(1) The profits recorded by the Group have been offset by the
significant losses and impairment write offs arising from the
discontinued trades at Crescent and in France.
(2) The Group has benefitted from new reliefs introduced by the
Government in respect of research and development tax incentives
available for qualifying research and development expenditure. Both
Fullflow and ULVA in their respective fields of expertise are in
the forefront of R&D and have a number of innovative projects
which fit neatly into this beneficial tax regime.
(3) The continuing policy of Government is to reduce corporation
tax on a sliding scale which has a positive effect on the Group's
overall tax position including, inter alia, deferred tax.
The Group's tax plan means that the annual tax charge for the
year to 30 June 2015 is a credit of GBP390K (2014: charge GBP205K)
and takes into account the accelerated Investment Allowances which
arise from ULVA's capital expenditure programme. Whereas those
allowances were to fall from GBP500,000 annually to GBP25,000 by 31
December 2015 the latest budget by the Chancellor of the Exchequer
has revised the annual Investment Allowances up to a maximum of
GBP200,000 notwithstanding the need for deferred tax provisions
arising out of implicit timing differences.
Research and Development
Both ULVA and Fullflow are technically driven businesses. As
leaders in their respective fields of expertise, it is incumbent on
both to innovate and to share the benefits which accrue from new
techniques and methods with customers who use and rely on both
brands. The Government has recognised the need to encourage
investment in capital expenditure and has in effect sponsored
companies such as ULVA and Fullflow to invest in R&D in an
effort to stimulate the British economy. There is a continuous
stream of projects at both businesses which are designed to
ameliorate performance, efficiency and effectiveness in the field
and provide a competitive edge which differentiates our brands from
our competitors. Where appropriate patent applications will provide
valuable protection with positive taxation advantages accruing in
future years.
Corporate Governance
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2015 05:53 ET (10:53 GMT)
The Group remains highly committed to the principles set out in
the UK Corporate Governance Code. Whenever relevant and to the
extent that these extend to a business of our size we at attempt to
comply. The Remuneration and Audit Committees meet and/or discuss
twice per annum whilst monthly management meetings take place at
the principal subsidiary companies supported by Group Board
Meetings held on a quarterly basis or as required.
Strategy
Following a short period of restructuring the Group's activities
have now been simplified as a result of the elimination of the loss
making businesses and the focus of attention is geared totally
towards the growth of both the ULVA and Fullflow brands including
its subsidiary Plasflow. The strategic focus can be summarised as
follows:-
- Continue the development and market penetration of ULVAShield
in global markets across a wide range of projects and repeat
business with discerning loyal customers.
- Prepare for the launch of ULVAGRP notwithstanding the delay
which has occurred arising out of the failure of the German
supplier to deliver a machine that was fit for purpose. There is a
growing market eager to embrace ULVAGRP's product offering.
- Develop the Fullflow brand both in the United Kingdom and
internationally with business models that are tailored to the
market profiles in which we operate. Continue to innovate and be at
the forefront of technical development in the syphonic
industry.
- Encourage Plasflow to follow its strategic path by supporting
Fullflow with fabrications whilst continuing to expand its third
party customer base and expertise in the nuclear sector as an
innovator and provider of technical solutions as a partner of
choice.
- Strengthen the Group's financial standing through the
elimination of bank debt and the maximisation of the returns from
the Group's real estate portfolio of freehold assets that are
considered to be surplus to operating requirements.
People
The Group is smaller and more concentrated on its profitable
brands than at any time in the past. It is a feature of our
continuing businesses that senior managers have grown into their
roles and assumed greater levels of responsibility than in the
past. Our team benefits from having many years of experience and
this has helped as we grow from a solid base and recruit
particularly when expanding our sales team.
On behalf of the Board and our shareholders I wish to express my
gratitude to all of our hard working employees for their energy and
enthusiasm as well as professionalism and commitment as we shape
the Group's strategic focus of our leading brands going
forward.
Prospects
It is never easy to commit to a fundamental restructuring but in
this case the Board considers that the decisive actions taken to
eliminate loss making businesses whilst at the same time improving
the risk profile of the continuing businesses in both the short to
medium term in the best interests of the Group as a whole. The
Group is meaner and leaner and ready for profitable growth.
The current year has started slowly at ULVA as it did last year
but momentum is building in Q2 as projects go live and order flow
through to 30 June 2016 looks encouraging. ULVA will continue to
prepare for the launch of ULVAGRP next year when we hope successful
entry into that segment of the market will complement the strong
profits achieved by ULVAShield in the past.
Fullflow has started the current financial year positively with
profits up significantly on the previous year and order books both
in the UK and internationally looking healthy and stronger than
they have been in recent years. Plasflow will not repeat the level
of success that it achieved in the nuclear field last year, but is
performing well whilst supporting its third party customer base and
the growth in fabrications as Fullflow in the UK continues to
increase market share.
Much will depend on the timing of the launch of the ULVAGRP
business which is unlikely to have much impact on the numbers for
the financial year to 30 June 2016. As all other areas of the Group
are trading profitably and generating cash this eagerly anticipated
launch is likely to permit a stronger period of growth.
Alan Walker
Chairman
Operational Review
Operating Review
The regrettable but very necessary restructuring of the Group
has brought focus to the operating units that generate the profit
and the cash whilst eliminating the "problem" business units which
inevitably consumed management time and Group resource with little
or no return or benefit.
The leaner and fitter Group is focussed on profitable and cash
generative business units, under the ULVA, Fullflow and Plasflow
brands, with reduced levels of risk and enhanced overall leadership
and management.
The issue of "people" has received much attention across the
Group. It has been pleasing and rewarding to observe the growth and
development of many individuals within the operating units. These
talented people are stepping forward in their own personal
development as well as the development of the business and the
objective is to grow a talent pool with succession planning across
the business units thereby reducing the dependency on external
recruitment. That being said, there have been a number of
successful appointments from external sources that are already
having a positive and beneficial impact upon the business.
The remaining "people" gap is in the leadership of Fullflow,
where the track record of those attempting it in recent years has
been poor. For the interim, the Chairman is acting as Managing
Director of Fullflow, with support from the Group Managing Director
in developing the selling capabilities of the business. Results are
much improved and the Board is impressed by the upbeat and
confident attitude of the employee teams. For the longer term, a
dedicated leader is needed for the business but the process of
finding such an individual of the right calibre is not proving to
be a straightforward task.
ULVA Insulation Systems
ULVA manufactures non-metallic cladding systems which
substantially reduce CUI in the oil, gas and petrochemical sectors.
Adopters of the system benefit from lower operating costs as a
result of reduced maintenance, higher plant up-time and extended
plant life.
Sector activity is oil price dependent and the sustained price
below seventy dollars is having a substantial short to medium-term
impact. A number of medium term projects have been cancelled but
the most significant impact to ULVA has been delays to both
projects already under construction and to the final investment
decisions for future projects. There is little drive to bring oil
out of the ground at prices below fifty dollars when the
alternative is to extract later, at higher prices. Operators have
reduced operating expenditure and are performing only essential
maintenance. For the downstream activities, capital cost is taking
precedent over life cost. This presents a challenging background
against which to deliver growth.
Efforts to develop the U.S. downstream market have yielded
little success, where capital spend is paramount and the ULVAShield
system is considered expensive when compared to the traditionally
applied aluminium cladding. Focus will, therefore, be on the more
receptive upstream, offshore market where CUI is more critical and
ULVAShield's cost is similar to the traditionally applied stainless
steel cladding. ULVA will reduce its U.S. operating costs
accordingly.
ULVAShield
Against the background of these challenging market conditions,
the ULVAShield system continues to deliver proven performance at
reducing CUI and the system has been further enhanced during the
year with additional moulded components designed to make it easier
for the applicator to ensure waterproofing integrity with
longevity. The range of testing and certification has been further
extended with particular focus on liquid natural gas ("LNG")
applications.
A non-destructive system integrity test by thermography, on a
major asset in the Norwegian sector of the North Sea, was
undertaken five years after the application of the ULVAShield
system, which was done partially in Korea and partially in Norway.
In total, 42,000 linear metres of process pipe-work and equipment
were inspected in just three days, identifying only ten anomalies.
This speaks volumes for the robustness of the ULVAShield system
over time and its ease of application on a world-wide basis. The
asset's fabric maintenance contractor was able to rapidly address
the anomalies on a targeted basis following which the operator was
assured of 100% waterproofing integrity with the benefit of the
reduction in CUI that is delivered.
Key project activity in the year included:
-- Talisman's Montrose platform for the North Sea which is under
construction in Heerema's yard in Holland
-- SBM's sister FPSO's Cidade de Marica and Cidade de Saquerame
with topside construction and consolidation in yards close to Rio
de Janeiro, Brazil
-- MODEC's FPSO Cidade de Caraguatatuba topside module construction in China
-- ENI Norge's FPSO Goliat construction in Hyundai Heavy
Industries Korean yard and commissioning and hook-up in the Barents
Sea
-- Inpex's Naoetsu LNG terminal extension, Japan
In addition, specifications were finalised for the FPSO's
Catcher and Kraken, both under construction in Asia, and both
destined for the North Sea. ULVA's supply to these projects
commenced at the end of the financial year with the bulk of supply
to take place in quarter two and three FY2016.
The operational effectiveness of the ULVAShield factory is close
to optimal. The process line which was the subject of a major
investment in the last financial year is operating with high levels
of efficiency and minimal waste, overall quality and customer
service is very good.
ULVASound
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2015 05:53 ET (10:53 GMT)
ULVA's competence and capability in the highly specialised area
of acoustic insulation continues to grow. Competition is
predominantly from the manufacturers of flexible elastomeric foam
("FEF") insulation, which are largely constrained to supply
insulation of their own manufacture. This places them at a
disadvantage when compared to ULVA which is able to select and
combine insulation from differing manufacturers to deliver thinner
and lighter solutions which are beneficial to offshore projects.
During the year under review ULVA further enhanced its offering for
hot acoustic systems and launched complementary solutions for cold
and cryogenic applications.
ULVASound offers considerable advantage over FEF systems in
cryogenic applications where the combination of the thermal
properties of the insulation can be combined with the acoustic
properties much more effectively which reduces cost, weight, space,
complexity and application time. Collaboration with Sheffield
University in this area of innovation has proven to be beneficial
and ULVA has consequently sponsored a PhD student to work on
specific further system developments.
ULVAGRP
The ULVAGRP system is designed to be complementary to the
ULVAShield system affording the opportunity for the business to
more comprehensively satisfy the preferences of individual end user
clients and engineers, which will deliver a stepped increase in
activity levels.
The system has been under development for several years. In July
2014, successful trials for the manufacture of the "wet sheet"
(which is the raw material from which the factory pre-cured pipe
sections and moulded components are made) were held on the pilot
plant of a reputable German manufacturer of the specialised process
line necessary to manufacture the product. Following comprehensive
testing and evaluation of the material form the pilot line, a
lump-sum contract was negotiated for the supply of a full
production scale version with delivery and commissioning scheduled
for early April/May 2015.
All necessary third party independent testing and certification
has been completed and the system is fully compliant and ready for
launch. The system performs well and in some cases substantially
outperforms anything currently available, an example of which is a
jet-fire rating in excess of two hours as a system in combination
with Foamglass(R) and Chartek5(R) intumescent.
In parallel, the process for moulding the many fittings (bends,
elbows, tees and end-caps etc.) has been developed and a
comprehensive manufacturing programme instigated with more than
1,100 moulding tools completed together with the associated
trimming and finishing jigs. The mouldings produced are
substantially better and more consistent than anything currently
available.
A new factory was leased in early 2015 and readied for the
arrival of the process line from Germany. The factory is located in
Birmingham in an area that is well known for its employee base
skilled in working with GRP materials and processes. It was
anticipated that first shipments would take place before the end of
the financial year. However, during the "wet pre-acceptance trials"
for the process line, held in Germany, it was found that the
process line did not produce material of an acceptable quality. A
second attempt at pre-acceptance was aborted when the line was
still found to be defective. The manufacturer of the line has
refused to remedy the defects and the contract has subsequently
been repudiated with an ongoing dispute between the parties.
Post year-end, a contract has been entered into with an
alternative process line manufacturer. As with any design/engineer
to order a process line, delivery time is significant.
The attitude and behaviour of this German company (which is in
stark contrast to the professional approach of the Italian supplier
of the Telford based process line for the production of ULVAShield)
has resulted in a launch delay of more than one year which is a
great disappointment to the Group's management, its shareholders
and ULVA's customers. However, ULVA's brand is synonymous with
consistently high quality, which will flow into its ULVAGRP system
without compromise.
Fullflow Group
Rainwater Management
Fullflow's rainwater management business evacuates large roof
areas by means of syphonic drainage. The business was an early
innovator of the technology and to date has an installed base of
over thirty thousand systems world-wide with a correspondingly
strong brand.
Some years ago the business had become fragmented with
replication of operating activities in the UK, France and Spain.
Looking at the longer term picture, neither the Spanish nor the
French activities contributed to profit or cash and it became
evident that the international model that was being operated by
Fullflow was not the most appropriate. The severe recession in
Spain made the operation of a full turnkey operation there
non-viable, with an exit in FY13. Similarly, conditions in France
evolved during the year under review whereby the persistently loss
making business unit "hit the buffers".
In contrast, the UK business, post-recession, and with effective
leadership has begun to deliver more strongly again. The business
offers a full turnkey package including design, manufacture,
installation and warranty and is now more selective on the projects
that it is targeting based upon a clear sector focus. The
ineffective leadership of the business in recent years allowed it
to drift into a reactive mode of blindly pursuing any business that
arrived at its door, whether or not it was a good fit, which
resulted in challenges associated with executing a profile of
business dominated by many small projects. In contrast, Fullflow is
now applying the pedigree of its strong engineering and execution
skills to undertake a fewer number of much larger and more
prestigious projects for more discerning customers.
Projects are being executed well with minimum risk as a result
of effective project management, resulting in profit and cash
generation for the business and satisfied customers. The remodelled
sales team, containing a blend of recent recruits and long serving
employees, and a balance of engineering and selling skills is
beginning to deliver good volume, of the right type of project,
whist focussing on developing meaningful key-account relationships.
There is a level of energy, enthusiasm and optimism in the UK
business that has not been felt for some time and the quality of
projects being undertaken for a series of high profile discerning
customers is impressive.
During the year under review, key projects included:
-- Jaguar Land Rover - Wolverhampton i54
-- Jaguar Land Rover - Halewood LCB2 extension
-- Westfield - Bradford shopping centre
-- Gatwick South Terminal Pier 1
-- Old College, Sandhurst
-- Aero Engines Controls (Rolls Royce) Birmingham
-- 10 Trinity Square, London (listed building refurbishment)
-- Exeter Rugby Club
-- RAF Waddington
-- Project Utopia Warrington
The business has, furthermore, stepped-up its activity in the
area of innovation. Having delivered the patented butt-fusion
welding technology during the last financial year the business has
gone on to target further innovations that will enhance the overall
product offering and technology available to complex and
challenging roof designs whilst also reducing the costs associated
with simple "shed" roofs.
The International business unit performed well in the year, with
a good contribution to profit and cash. Unlike the UK, the
International business unit does not offer full turnkey systems but
rather partners with local companies. Fullflow International offers
design, materials supply (including factory pre-fabrication) and
project management, whilst the local partner performs the
installation. This model has been proven to work well. In the
previous year, activity was dominated by a mega-project for Fiat in
Brazil, whilst in the year under review the profile of business was
characterised by a greater number of projects. Whilst each was
substantial in its own right, they were not of the scale of the
huge Fiat project. Within these projects were a number for Spain,
which were transacted under the International model with good
contributions. By way of contrast with the previous challenges of
operating a full turnkey business in Spain, this has proven to be a
significantly better approach and is likely to be extended to
incorporate France in due course. Activity in the period under
review included:
-- Olympic Training Centre and stadia - Rio de Janeiro 2016
Olympic Games - including the velodrome, aquatic park and tennis
stadia
-- Mercat de San Antoni - Spain (Historical Building 1882) -
integrating state of the art syphonic rainwater management within
some of the most prestigious historic architecture for world
renowned architect Antoni Rovira i Trias
-- Fira Reus - Tarragona Spain - luxury shopping centre and event/meeting point
-- Volkswagen manufacturing plant - Pamplona Spain
-- Hyundai manufacturing plant - México
-- Kia manufacturing plant - México
Plasflow
The Plasflow business is specialised in the fabrication of
polyethylene piping systems up to a diameter of 1200mm and operates
three key areas of business; Fullflow, the nuclear sector and the
specialist contracting sector.
All factory pre-fabrication of Fullflow syphonic systems was
consolidated into Plasflow as a centre of excellence during the
last financial year and tangible progress was made during the year
under review towards a goal of delivering project kits 100%
complete and 100% right first time. Success in this objective
allows the Fullflow installation teams the opportunity to install
systems in line with, or ahead of programme, resulting in high
levels of customer satisfaction and repeat business.
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The UK nuclear sector has now completed a number of
refurbishment projects, replacing corroding ferrous pipe spools
with high density polyethylene spools manufactured by Plasflow.
There is an ongoing programme of planned work as outages occur
which is planned for several years in advance but inevitably
subject to timing. The small number of large projects exposes the
business to peaks and troughs of activity and the year under review
represented a peak, further supported by the delay of a project
from the end of FY14, which helped to deliver an overall strong
performance. Plasflow transacted this business well, translating it
to profit and cash, with a high level of customer satisfaction,
receiving a letter of commendation for a project at EDF
Tourness.
The specialist contracting or third party activity, serving
power generation, water utilities and general contracting, remained
fairly static in terms of overall revenue levels but the mix and
quality of the business was improved with the benefit of stronger
margins.
Colin Stott
Group Managing Director
Consolidated Statement of Comprehensive Income
Year ended 30 June 2015 2015 2014
GBP'000 GBP'000
Continuing operations
Revenue 13,189 15,548
Cost of sales (6,629) 8,958
----------- --------
Gross profit 6,560 6,590
Operating expenses (4,929) (4,792)
----------- --------
1,631 1,798
Profit attributable to associate 144 41
Exceptional operating expenses (22) (50)
Amortisation of intangible
assets acquired through
business combinations net
of deferred tax (165) (165)
Share based payment (80) (80)
----------- --------
Operating profit 1,508 1,544
Financial costs (218) (178)
----------- --------
Profit on ordinary activities
before taxation 1,290 1,366
Income tax credit/(charge) 390 (205)
----------- --------
Profit for the year for
continuing operations 1,680 1,161
Loss for the year from discontinued
operations (2,083) 15
----------- --------
(Loss)/profit for the year (403) 1,176
=========== ========
Earnings per share from
continuing and discontinued
operations attributable
to the equity holders of
the company during the year
Basic earnings per share
0.86
From continuing operations p 0.59p
From discontinued operations (1.07)p 0.01p
----------- --------
(0.21)p 0.60p
=========== ========
Revenue and operating profit all derive from continuing
operations.
There were no recognised gains and losses for 2015 or 2014 other
than those included in the Group Income Statement.
Consolidated Statement of Changes in Equity
Called Other Revaluation Retained Total
up share reserves reserve earnings Equity
capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June
2013 1,016 201 210 12,394 13,821
Result for
the year - - - 1,176 1,176
Revaluation - - (6) - (6)
Dividend - - - (151) (151)
Share based
payment - 80 - - 80
Purchase of
treasury shares - - - (43) (43)
At 30 June
2014 1,016 281 204 13,376 14,877
Result for
the year - - - (403) (403)
Dividend - - - (181) (181)
Share based
payment - 80 - - 80
Purchase of
treasury shares - - - (61) (61)
---------- ---------- ------------ ---------- --------
At 30 June
2015 1,016 361 204 12,731 14,312
========== ========== ============ ========== ========
Consolidated Statement of Financial Position
At 30 June 2015 2015 2014
GBP'000 GBP'000
Non current assets
Intangible assets 7,621 7,860
Property, plant and equipment 7,225 6,579
Trade and other receivables 57 246
Deferred tax assets 110 237
Investment 273 129
-------- --------
15,286 15,051
-------- --------
Current assets
Inventories 1,469 2,382
Trade and other receivables 4,224 5,793
5,693 8,175
-------- --------
Total assets 20,979 23,226
-------- --------
Current liabilities
Trade and other payables (3,415) (4,308)
Current tax liabilities (81) (298)
Obligations under finance
leases (410) (361)
Bank loans and overdrafts (737) (868)
-------- --------
(4,643) (5,835)
-------- --------
Non current liabilities
Bank loans - -
Deferred tax liabilities (1,434) (1,715)
Obligations under finance
leases (590) (799)
-------- --------
(2,024) (2,514)
-------- --------
Total liabilities (6,667) (8,349)
-------- --------
Net assets 14,312 14,877
======== ========
Equity
Called up share capital 1,016 1,016
Other reserves 361 281
Revaluation reserve 204 204
Retained earnings 12,731 13,376
-------- --------
Equity attributable to
shareholders of the parent 14,312 14,877
======== ========
Consolidated Statement of Cash Flows
Year ended 30 June 2015
2015 2014
GBP'000 GBP'000
(Loss)/profit after tax (403) 1,176
Adjustments for:
Net finance costs 218 178
Corporation tax (credit)/charge (176) 303
Depreciation of property,
plant and equipment 294 242
Amortisation of intangible
assets 239 237
Profit on disposal of
plant and equipment 34 5
---------- ---------
Operating cash flows before
movement in working capital 206 2,141
Decrease in inventories 913 857
Decrease/(increase) in
receivables 1,758 (915)
(Decrease)/increase in
payables (1,112) 437
Interest paid (217) (186)
Corporation tax paid (41) (132)
---------- ---------
Net cash inflow from operating
activities 1,507 2,202
---------- ---------
Cash flow from investing
activities
Purchase of property,
plant and equipment (974) (1,721)
Purchase of intangible
assets - (14)
Proceeds from disposals
of property, plant and
equipment - 54
---------- ---------
Net cash outflow from
investing activities (974) (1,681)
---------- ---------
Cash flow from financing
activities
Dividend paid (181) (151)
Bank loans repaid - (1,341)
Purchase of treasury shares (61) (43)
New hire purchase loans - 1,198
Finance lease and hire
purchase repayments, net (160) (59)
---------- ---------
Net cash outflow from
financing
activities (402) (396)
---------- ---------
Net decrease in cash and
bank overdrafts 131 125
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Cash, cash equivalents
and bank overdrafts at
beginning of year (868) (993)
---------- ---------
Cash, cash equivalents
and bank overdrafts at
end of year (737) (868)
========== =========
Notes to the Financial Statements
1. BASIS OF PREPARATION
Whilst the information included in this final results
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards ("IFRSs") as adopted for use in the European Union and as
issued by the International Accounting Standards Board, this
announcement does not itself contain sufficient information to
comply with IFRSs.
The final results announcement for the 12 months to 30 June 2015
has been prepared on a consistent basis with the financial
accounting policies set out in the Accounting Policies section of
the SWP Group Plc Annual Report and Financial Statements 2015.
2. SEGMENTAL REPORTING
BUSINESS SEGMENTS
Rainwater Metal Polymer Corporate Total
management staircases membrane year year
year ended year year ended ended
2015 30 June ended ended 30 June 30 June
2015 30 June 30 June 2015 2015
2015 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External revenues 6,806 - 6,383 - 13,189
InterGroup sales 1,737 - - - 1,737
------------ ------------ ---------- ---------- ---------
Total revenues 8,543 - 6,383 - 14,926
Cost of sales (5,646) - (2,720) - (8,366)
------------ ------------ ---------- ---------- ---------
Gross profit 2,897 - 3,663 - 6,560
Operating expenses (2,088) (1,885) (956) (4,929)
------------ ------------ ---------- ---------- ---------
809 - 1,778 (956) 1,631
Profit attributable
to associate - - - 144 144
Exceptional operating
expenses - - - (22) (22)
Amortisation of
intangible assets
acquired through
business combinations
net of deferred
tax - - - (165) (165)
Share based payment - - - (80) (80)
InterGroup royalty
(charge)/income - - (1,274) 1,274 -
InterGroup management
fees - - (228) 228 -
InterGroup rent
(charges)/income - - (72) 72 -
Operating profit 809 - 204 495 1,508
Financial income - - - - -
Financial costs - - (86) (132) (218)
InterGroup financial
charges (27) - - 27 -
------------ ------------ ---------- ---------- ---------
Profit on ordinary
activities before
taxation 782 - 118 390 1,290
Income tax (charge)/credit 54 - 273 63 390
------------ ------------ ---------- ---------- ---------
Profit for the
year attributable
to equity holders
of the Company 836 - 391 453 1,680
============ ============ ========== ========== =========
2015 Rainwater Metal Polymer Corporate IntraGroup Total
management staircases membrane year year year
year ended year year ended ended ended
30 June ended ended 30 June 30 June 30 June
2015 30 June 30 June 2015 2015 2015
2015 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other information
Capital expenditure 58 - 886 30 - 974
Depreciation
and amortisation 38 3 231 261 - 533
Segmental assets 4,713 50 8,010 16,630 (8,424) 20,979
Segmental liabilities (3,152) (733) (5,387) (5,819) 8,424 (6,667)
------------- ------------ ---------- ---------- ----------- ---------
Net assets as
at 30 June 2015 1,561 (683) 2,623 10,811 - 14,312
============= ============ ========== ========== =========== =========
Rainwater Metal Polymer Corporate Total
management staircases membrane year year
year ended year year ended ended
2014 30 June ended ended 30 June 30 June
2014 30 June 30 June 2014 2014
2014 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External revenues 8,095 - 7,453 - 15,548
InterGroup sales 2,517 - 50 - 2,567
------------ ------------ ---------- ---------- ---------
Total revenues 10,612 - 7,503 - 18,115
Cost of sales (8,249) - (3,276) - (11,525)
------------ ------------ ---------- ---------- ---------
Gross profit 2,363 - 4,227 - 6,590
Operating expenses (1,941) - (1,771) (1,080) (4,792)
------------ ------------ ---------- ---------- ---------
422 - 2,456 (1,080) 1,798
Profit attributable
to associate - - - 41 41
Exceptional operating
expenses (36) - - (14) (50)
Amortisation of
intangible assets
acquired through
business combinations
net of deferred
tax - - - (165) (165)
Share based payment - - - (80) (80)
InterGroup royalty
(charge)/income - - (1,482) 1,482 -
InterGroup management
fees - - (203) 203 -
InterGroup rent
(charges)/income - - (72) 72 -
Operating profit 386 - 699 459 1,544
Financial income - - - - -
Financial costs (3) - (6) (169) (178)
InterGroup financial
charges (27) - - 27 -
------------ ------------ ---------- ---------- ---------
Profit on ordinary
activities before
taxation 356 - 693 317 1,366
Income tax (charge)/credit (65) - (170) 30 (205)
------------ ------------ ---------- ---------- ---------
Profit for the
year attributable
to equity holders
of the Company 291 - 523 347 1,161
============ ============ ========== ========== =========
2014 Rainwater Metal Polymer Corporate IntraGroup Total
management staircases membrane year year year
year ended year year ended ended ended
30 June ended ended 30 June 30 June 30 June
2014 30 June 30 June 2014 2014 2014
2014 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other information
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