Interim Results
01 April 2003 - 3:20AM
UK Regulatory
RNS Number:4428J
SWP Group PLC
31 March 2003
SWP Group PLC
Interim Report for the six months
ended 31 December 2002
Chairman's Statement
Results In the six months to 31 December 2002 your Company recorded
a net loss of #60,000 (2001: profit #104,000) on turnover of
#9,333,000 (2001: #8,174,000). The net loss equates to 0.02p
(2001: earnings 0.03p) per ordinary share.
Review of
Operations Against a backdrop of increased sales this performance has
to be viewed as disappointing albeit that the actual result
does not reflect what has been achieved during the period in
question.
Fullflow As has been the case for several years Fullflow was the
mainstay of the Group's operations, accounting by itself for
virtually all of the sales growth referred to above.
Progress was made on each of the four fronts which make up
Fullflow's business. In the UK Fullflow's syphonic operation
achieved record sales and continued to dominate the market.
In France, sales of syphonic systems moved ahead strongly
and there now exists a solid platform on which to build
further growth throughout the country. The Paris assembly
operation is now providing strong and effective support to
the business with the result that operating margins showed a
sharp increase. There is every reason to believe that
further improvements in efficiency levels will be
forthcoming and the local management team is confident in
their ability to drive the business forward in terms of both
turnover and profitability.
In Spain, attention was focused mainly on the Madrid Airport
project and thus far Fullflow has done everything that has
been asked of it. Overall project delays have had a negative
effect on cash flow but apart from that all is progressing
well. However, Fullflow's ambitions in Spain extend far
beyond this one project and work was also completed on two
large projects in the Barcelona area. Other significant
contracts are currently under negotiation.
In terms of reported sales and operating profit the Plasflow
UK pipe fabrication business failed by some distance to
reach its targets. However, much was done in the period to
construct the foundations of what is effectively a new
business. Renovation work on the Rotherham factory was
completed and an extensive range of sophisticated cutting,
welding and measuring equipment installed and commissioned.
Plasflow now has a facility which must rank as one of the
finest in the country and whilst initial sales have been
disappointing there is a real expectation that they will
pick up strongly in the months ahead.
As it continues to expand, one of Fullflow's principal
challenges is to achieve the right balance between sales and
overheads. In a service-oriented business it is not always
easy to achieve what might be regarded as the optimum
balance and during the period under review Fullflow's desire
to support its sales ambitions with the best possible
technical and operational infrastructure meant that its
overhead cost base increased at an even faster rate than
sales with the result that operating profit was lower than
in the same period last year. However, if the Company had
erred in the other direction it is quite possible that
service and operational performance levels would have
suffered and at a time when Fullflow is still earning its
spurs in new or relatively new markets this would have been
potentially an even less welcome result.
We firmly believe that it is in the Group's medium and
long-term interests for our most dynamic and profitable
subsidiary to build its business on the back of the best
possible standards of quality and service and we are
prepared to accept the short-term impact of pursuing such a
policy.
Crescent Having entered the new financial year with a record order
book of more than #2 million, Crescent produced a very
disappointing performance for the six months under review.
In the event the large order book proved to be something of a
double-edged sword, in that it placed additional pressures on
the operations team at a time when they were heavily involved
in commissioning the new plasma cutter and press brake
machines which had been ordered some months previously.
The result was that mistakes were made and in some cases
these proved expensive to remedy. In addition Crescent found
itself having to work in what can euphemistically be
described as a very demanding environment on one large
project and the high costs of complying with the working
practices required by the client meant that margins were
significantly eroded. To make matters worse the Company
incurred a significant bad debt and the overall result was
that operating profit fell to little more than a quarter of
the previous year's figure.
Whilst the underlying quality of the business remains very
firmly in place it is essential that the shortcomings of
recent months are properly addressed and a full review of the
Company's operations is presently under way.
DRC After an encouraging start to the period sales at DRC ended
up at a similar level to those for the same period last year.
Sales of the Company's traditional roofing products recovered
some of the ground which had been lost in recent years but in
other areas, such as the automotive sector, they fell well
short of target.
In the private label sector, which has been targeted as the
principal driver of future sales growth, the pattern was
mixed with some products ahead of budget and some behind.
Generally DRC is not in a position to exert much influence on
sales to distributor partners and although we are certain
that it is this area which offers DRC the best chance of
future success it would be true to say that the route to
profitability has been somewhat longer and more frustrating
than we had anticipated. Sales of certain products have been
slower than expected but that is not to say that their
long-term prospects are in any way diminished.
As has been the case for some time considerable efforts have
been expended in an attempt to open up new opportunities in
this area, particularly in the context of niche products
where DRC's technical expertise and flexibility provide it
with a competitive advantage. It is therefore pleasing to
report that in recent months one such opportunity has been
identified which, based on a reasonable assessment of its
market potential, could have a major impact on DRC's business
levels going forward.
The product is a 1.2mm sheet, manufactured from a highly
sophisticated mix of ingredients, which manages to provide a
surprisingly high degree of sound reduction. Historically,
significant levels of sound reduction have only been
achievable through the use of much thicker materials and it
is believed that there exists a very considerable latent
demand for a thinner substitute. Tests to confirm the
performance levels of the material are currently under way
and as soon as these are available a major marketing campaign
will be launched by the UK national distributor. Substantial
sales volumes are being predicted and while it is too early
for us to quantify these with any level of accuracy the scale
of the potential is clear. Protective patents are in place
and should offer DRC and its partners every chance of
achieving a significant position in this large and growing
market.
Further opportunities are being explored in a number of areas
and there is every reason to believe that at least some of
these will come to fruition.
Current
Trading Trading in the first few weeks of the second half of the
financial year has been mixed. On a positive note, sales at
Fullflow have continued to run well ahead of last year's
levels and this pattern augurs well for the important fourth
quarter.
More disappointingly, however, Crescent's underperformance
has not yet been reversed and sales at DRC have fallen some
way short of budget.
Future
Prospects Nevertheless, despite the fact that we are reporting a loss
for the first half of the year and an uneven start to the
second half, we view the future with considerable optimism.
Although the general economic outlook is less healthy than it
was this time last year, each of our companies is well
positioned in its chosen markets and ought to be capable of
achieving good levels of profit unless the overall situation
deteriorates more than we envisage.
Fullflow in particular is a high-quality business and should
deliver strong sales growth for many years to come, based on
a strategy of steady expansion throughout Europe and possibly
beyond. Indeed there is a real possibility that within the
next five years Fullflow will have become Europe's leading
rainwater management specialist.
DRC's prospects appear better than at any time since it was
acquired more than five years ago and there is every reason
to believe that by the fourth quarter it will have achieved
its long awaited breakthrough to sustained profitability;
and if as we expect sales in the following financial year
exhibit a rapid uplift the high level of operational gearing
enjoyed by the Company should mean that profits increase at a
healthy rate.
Whilst Crescent has experienced a short-term setback there is
no reason why it should not return to its previous levels of
profitability, particularly in light of the benefits afforded
by the new machines which it has acquired.
Finance With a view both to reducing the Group's borrowings
and providing working capital to finance future expansion it
remains our intention to raise additional equity as soon as
market conditions permit and shareholders should expect to
hear from us in this regard before we report the final
results for the year.
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 Six
months months Year
ended ended ended
31.12.02 31.12.01 30.06.02
#'000 #'000 #'000
Turnover 9,333 8,174 16,347
----- ----- ------
Operating profit before exceptional items 199 374 586
Net operating expenses - exceptional items - - (770)
----- ----- ------
199 374 (184)
Operating profit/(loss)
Net interest payable and similar charges (259) (227) (456)
----- ----- ------
(Loss)/profit on ordinary activities before taxation (60) 147 (640)
Taxation - (43) -
----- ----- ------
Retained (loss)/profit (60) 104 (640)
----- ----- ------
(Loss)/earnings per share-basic (0.02)p 0.03p (0.20)p
----- ----- ------
-diluted (0.02)p 0.03p (0.20)p
----- ----- ------
Consolidated Balance Sheet
As at As at As at
31.12.02 31.12.01 30.06.02
#'000 #'000 #'000
Fixed assets
Intangible assets 34 2 42
Tangible assets 4,009 2,977 3,709
----- ----- -----
4,043 2,979 3,751
----- ----- -----
Current assets
Stocks 2,818 1,855 2,658
Debtors 5,006 4,495 4,602
----- ----- -----
7,824 6,350 7,260
Creditors: amounts falling due within one year (6,892) (5,059) (6,824)
----- ----- -----
Net current assets 932 1,291 436
----- ----- -----
Total assets less current liabilities 4,975 4,270 4,187
----- ----- -----
Creditors: amounts falling due after more than one year 4,325 3,424 3,474
----- ----- -----
Capital and reserves
Called up share capital 6,827 6,352 6,827
Share premium account 1,295 1,215 1,295
Capital reserve 41 41 41
Revaluation reserve 521 535 524
Profit and loss account (8,034) (7,297) (7,974)
----- ----- -----
650 846 713
----- ----- -----
4,975 4,270 4,187
----- ----- -----
Consolidated Cash Flow Statement
Six Six
months months Year
ended ended ended
31.12.02 31.12.01 30.06.02
#'000 #'000 #'000
Net cash flow from operating activities 494 529 (273)
------- ------- -------
Returns on investments and servicing of finance
Net interest paid (196) (151) (318)
Hire purchase interest (24) (28) (45)
------- ------- -------
(220) (179) (363)
------- ------- -------
Investing activities
Payments to acquire tangible fixed assets (214) (267) (407)
Receipts from sales of tangible fixed assets 21 37 21
------- ------- -------
(193) (230) (386)
------- ------- -------
Acquisitions and disposals
Purchase of minority interest - - (55)
------- ------- -------
- - (55)
------- ------- -------
Financing
Issue of ordinary share capital - - 8
Bank loans received - - 3,500
Bank loan repayments - - (1,844)
Capital element of finance leases and purchase payments (122) (51) (42)
------- ------- -------
(122) (51) 1,622
------- ------- -------
Net (decrease)/increase in cash (41) 69 545
------- ------- -------
Notes to the Interim Report
1 Financial The interim results are unaudited and do not constitute
Information statutory accounts. The comparative information contained in
this report for the year ended 30th June 2002 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 Earnings Earnings per share is calculated on the basis of 341,319,198
per share shares (2001: 317,590,628), which is the weighted average of
the number of shares in issue during the period.
The Company's share options are not dilutive for earnings 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 Copies of the interim report are being circulated to
interim shareholders. Further copies are available from the Company's
report registered office at SWP Group plc, 4th Floor, Bedford House,
3 Bedford Street, London WC2E 9HD.
This information is provided by RNS
The company news service from the London Stock Exchange
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