TIDMSWP
RNS Number : 7525J
SWP Group PLC
14 September 2016
SWP Group plc
("SWP", the "Company" or the "Group")
Disposal of Interest in Associate Company and Trading Update
SWP Group plc, the industrial engineering group which operates
in the prevention of corrosion under insulation ("CUI") through
ULVA and syphonic rainwater management systems through Fullflow,
announces the following:
Disposal of Interest in Associate Company
The Group has sold its 40% shareholding in its associate
company, St Cuthberts Holdings Ltd ("SCH") to Fabbrica Italiana
Lapis ed Affini ("F.I.L.A.") based in Milan and listed on the STAR
segment of the Milan Stock Exchange (the "Sale").
With revenues of over EUR275 million, F.I.L.A. has grown
substantially over the past twenty years through acquisition and
operates through 14 production facilities (of which two are in
Italy) and 32 subsidiaries around the world. F.I.L.A. is a leader
of Italian creativity in the fields of art through its colouring,
drawing, modelling, writing and painting tools and owns a series of
brands such as Giotto, Tratto, Das, Dido, Pongo, Lyra, Doomes,
Maimeri and Daler. F.I.L.A. today sells into more than 50 countries
around the world.
SCH operates through its "Mill" production facility in Wells in
Somerset and has had a long tradition of producing some of the
world's finest watercolour, print and digital papers sold
internationally to a wide range of longstanding, loyal customers.
The Mill benefits from an enviable reputation for the quality of
its products and the integrity of its customer service levels.
SWP's sale of this non-core asset follows an approach from
Canson (a world leading French distributor of paper to more than
100 countries) in the first quarter of 2015. F.I.L.A. later entered
into an exclusive agreement to acquire Canson in October 2016 and
the Directors of SWP consider after prolonged negotiations that the
Sale is a logical transfer of ownership into the F.I.L.A. family
where SCH will be allowed to grow and expand its activities in an
environment which, in technological and product terms, is more
suited than as an opportunistic but successful investment within
SWP.
The Directors of SWP view the Sale as being in the best
interests of all parties including the Mill's employees who will
relish the new challenges they face in the future. The sale
proceeds amount to approximately GBP2,000,000 (net of expenses) in
cash, compared to a cost of acquisition of GBP50,000 in November
2010 and a carrying value in SWP's balance sheet of GBP333,000 as
at 31 December 2015 which includes SWP's share of accrued profits.
The Sale offers SWP a very attractive return on its initial
investment as well as full repayment of the outstanding loans,
including interest, advanced to SCH which was originally
GBP400,000. The profit on disposal amounts to approximately
GBP1,667,000.
The cash realised from the Sale will be used to fund the
significant investment in the GRP equipment in which ULVA is
investing. The capital equipment is due for delivery in October
2016 and it is anticipated that the factory based in the West
Midlands will be in a position to enter the market in the first
quarter of 2017.
In addition, a subsidiary of SWP has exchanged contracts to
acquire the Mill and 7.7 acres of surrounding land. The
consideration from the Sale may be used to complete the acquisition
in due course. A lease of 24 years duration with SCH under its new
ownership will commence on or around 31 July 2017 at an initial
upwards only rent of GBP60,000 per annum.
Martin Bell and Alan Walker, both directors of SWP, who
originally acquired a controlling share in SCH before inviting SWP
to take a minority stake in the business, are also selling shares
in SCH to F.I.L.A.
Trading Update
We last reported to shareholders on 23 March 2016 the results
for the six months to 31 December 2015 which were disappointing due
to the project-led nature of ULVA's business which coincided with a
fallow period for major projects on which ULVA's and the Group's
fortunes depend. As predicted the outcome for the second half of
the year to 30 June 2016 has (as in the case of the previous year)
seen improved revenues and a favourable mix of business. The
revenues for the year as a whole are more or less in line with
expectations with sales ahead of 2015 by approximately 5%.
As forecast we are pleased to report that the Group is now
practically debt free having moved into net cash at 30 June 2016.
This excludes the asset-based finance provided to fund the original
capital expenditure programme for ULVAShield and secured
specifically against the machine which has been of considerable
benefit to the quality and efficiency of ULVA's manufacturing
competence.
ULVA
ULVA's project involvement occurs at the tail end of multi-year
construction programmes. As a result, despite the severe
difficulties in the oil and gas sector, for the current FY'17
management can rely upon revenues flowing from projects specified
during the last five years. The cancellation, mothballing and lack
of Final Investment Decisions ("FIDs") for new projects, combined
with the severe curtailing of explorations is of concern for the
medium-term.
Whilst FY'15 and FY'16 were both heavily tail-end loaded, there
are a number of projects that are underway in the current half year
with a downturn in activity expected around April/May 2017. Market
conditions remain challenging notwithstanding the recovery in the
oil price from a low of US$28 to around US$50 per barrel of crude
oil. Market sentiment remains fragile and FIDs that were expected
by the oil and gas majors continue to be deferred or postponed as
companies balance their costs against declining revenue streams and
the requirement for new capacity remains in serious doubt. The
economic outlook remains uncertain.
Fullflow
The six months to 30 June 2016 saw improved revenues at Fullflow
where in the UK we have performed strongly, whereas Fullflow
International has fallen short of expectations. In the UK a radical
restructuring of the technical approach to the sale of our systems
has been rewarded by improved sales in an active market. The team
has worked hard in highly competitive market conditions to win
orders at enhanced margins and execute the delivery of the systems
in a more efficient and cohesive manner. In our international
business we have delivered a high number of smaller systems to the
exclusion of larger scale projects on which our business model is
ideally positioned. The construction industry has remained fairly
buoyant and although we have started 2016/2017 with a measure of
confidence, it is noteworthy that following the Brexit vote on 23
June 2016, the economic pundits have been quick to indicate that
the construction industry in the UK has already entered economic
recession. We remain cautiously optimistic.
Plasflow
Plasflow, as referred to at the half year, had a most difficult
and disappointing financial year to 30 June 2016 as a result of
delay and postponement of nuclear related projects absent from the
trading activities of EDF. The confusion that surrounds Hinkley
Point C and its future prospects is of relatively little
consequence to Plasflow. This would be a massive new build project
with significant cash flow consequences for EDF, whereas Plasflow
thrives on the provision of technical solutions, in addition to the
repair and maintenance profile designed to keep the existing sites
operational in their time of need and through lifetime extensions
into the future.
Management continues to work diligently in competitive markets.
The ULVAGRP project is the next challenge facing our team so that
we can enter into this market segment in early 2017. The success of
this project will have a minor contribution in the current
financial year but will, we believe, play a more important role in
the year to 30 June 2018.
The information communicated in this announcement is inside
information for the purposes of Article 7 of the Market Abuse
Regulation (EU) No. 596/2014.
For further information or enquiries please contact:
J.A.F Walker D.J. Pett
Chairman Finance Director
SWP Group plc SWP Group plc
Tel office: 01353 723270 Tel office: 01353
Mobile: 07800 951151 723270
Mobile: 07940 523135
Ranald McGregor-Smith/ Tim Feather / Liam
Nick Lovering Gribben
Corporate Finance Advisors Nominated Adviser
Whitman Howard & Broker
Tel office: 020 7659 1234 WH Ireland Limited
Tel office: 0113
394 6600
This information is provided by RNS
The company news service from the London Stock Exchange
END
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