SPGH.L Regulatory News (SPGH)

Superglass Holdings PLC

("Superglass" or the "Company or the "Group")

Preliminary Results for the Year Ended 31 August 2014

Superglass Holdings PLC, the UK's leading independent manufacturer of glass fibre insulation solutions today announces its preliminary results for the year ended 31 August 2014.

Financial highlights

Trading Performance

· Revenue down 3.6% at £23.5m (2013: £24.4m) reflecting the continuing challenging trading environment since the collapse of the Government initiated ECO and Green Deal schemes.

· First half revenue at £11.4m, 6.5% ahead of second half of 2012/13 and second half revenue at £12.1m, 13.9% ahead of the equivalent period last year

· Second half loss before interest, taxation, depreciation, amortisation and exceptional items of £0.9m compared with £2.3m in the first half of the year

Operational highlights

John Colley, Executive Chairman of Superglass commented:

"Superglass has continued to operate in very challenging markets, but has made good progress in delivering promised cost savings and continued the repositioning in new markets. We also concluded a successful refinance in October which strengthens the capital structure of the Group and provides financing for investment which will yield further cost savings and efficiency improvements. Our strategy for the current financial year is to continue to reposition the business through product and service innovation, delivering enhanced product quality and outstanding customer service."

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Chairman's Statement

I am pleased to report the successful completion of the £6.25m placing and details of the Company's new banking facilities with Close Brothers. We are delighted with the ongoing support from existing investors, as well as support from new investors including Bronsstädet AB, which now has a meaningful stake in the Company. The placing provides Superglass with a considerably strengthened and sustainable long-term capital structure. The Company continues to be well placed to benefit from any resurgence in market volumes and the efficiencies from its ongoing capital investment programme.

The results for the year reflect the continuing difficult trading conditions and planned production outages for Project Phoenix works. Loss before interest, taxation, depreciation, amortisation and exceptional items was £3.2m, in line with expectations, reflecting the collapse in retrofit demand following the introduction of the Government's flagship energy schemes, Green Deal and the Energy Company Obligation ("ECO"). It is encouraging to see that through the repositioning of the business to focus on growing construction markets and aggressive targeting of the cost base, the level of LBITDAE has reduced to £0.9m in the second half compared to £2.3m in the second half of the previous year. As reported within the announcement dated 9 September 2014, the Company achieved positive EBITDAE in both July and August but is not yet generating net cash on a monthly basis.

The continued weakness of the Government schemes, Green Deal and ECO, has had a significant impact on the market and our results. Despite the fact that there remain a large number of under-insulated residential buildings in the UK, and that loft and cavity wall insulation is one of the most cost-effective ways of improving energy efficiency and reducing carbon emissions, the structure of the current schemes has resulted in substantially reduced demand. Our view is that there is not likely to be any meaningful change to Government policy on energy efficiency until after the next election and, in common with other businesses in the sector, we will continue to drive down costs and align our capacity to the market circumstances.

By contrast, demand from construction markets is showing good growth fuelled by new build housing activity and commercial construction. Responding to this ongoing trend, the Company has been repositioned to focus on construction markets, with sales to that sector now accounting for 80% of UK revenues compared to 30% four years ago.

I am pleased to report that Superglass made good progress during the year whilst operating in very challenging markets. Planned cost savings arising from the investment programme, Project Phoenix, have been delivered and further cost saving- initiatives have been identified.

Despite the challenging trading conditions, through strong working capital management, the cash balance at 31 August 2014 was £3.0m and the net debt balance at the end of the year was £0.4m (2013: net cash of £4.3m). The Board concluded that an equity raise and introduction of additional banking facilities was appropriate to secure the investment necessary in the Company, having regard to its financial and trading position, and in the face of continuing volatility in trading conditions.

Our strategy for the current financial year is to continue to reposition the business through product and service innovation, delivering enhanced product quality and outstanding customer service. We also plan to make further improvements in efficiency during the year including energy, waste and overhead savings.

John Colley

Chairman

19 November 2014

Chief Executive's Review

Trading conditions in the UK insulation market have continued to be difficult, with a significant decline in demand for loft and cavity wall insulation resulting in excess manufacturing capacity, a highly competitive environment and continued pricing pressure. Demand from Government energy efficiency schemes, Green Deal and Energy Company Obligation, has remained at negligible levels and no near-term pickup is anticipated. By contrast, demand from construction markets is showing good growth fuelled by new build housing activity and commercial construction. Responding to this ongoing trend, the Company has been repositioned to focus on construction markets, with sales to that sector now accounting for 80% of UK revenues compared to 30% four years ago.

There was nonetheless an upturn in trading during the final quarter of the financial year ended 31 August 2014, driven by a step change in sales volume, and this is a clear reflection of the progress that has been achieved. There have been improvements in product mix, with growing sales of higher margin products. We intend to continue to focus the Company's commercial strategy towards higher value-added and higher margin products.

During the year new product certification was secured for our white blowing wool product, following the exit of a solus supply agreement. This important development will enable the Company to develop new routes to market for the product during the current financial year.

The Company has made significant operational progress in the period, driving down costs and improving manufacturing efficiencies. I am pleased to report that the business has delivered the planned annual cost savings. However, in response to market conditions and continued oversupply in the market, which is expected to persist for some time, our strategic focus is to further reduce operating costs. Potential incremental annual cost savings of approximately £1.9m have been identified, which would require capital investment of approximately £1.0m to implement and would include a significant reduction in manufacturing capacity.

With support from investors, we have further strengthened the capital base by means of a placing and by securing new banking facilities which will provide greater resilience to continue the transformation of the business in challenging market circumstances. The net proceeds of the Placing of £5.7m are expected to be used to meet the capital costs associated with implementing the strategy to further reduce operating costs; to finance projected working capital outflows and trading losses during the current financial year; and to strengthen the Company's balance sheet in order to provide greater flexibility and headroom in view of the continued volatility in trading.

The Clydesdale Bank debt has been refinanced by the arrangement of new banking facilities of up to £4.8m with Close Brothers.

Results and markets

Progress has been made in growing revenues through 2013/14 from the low point of the second half of the previous financial year. Overall revenues in the first half of 2013/14 increased 6.5% (to £11.4m) on the second half of 2012/13 and second half revenues grew a further 6.9% (to £12.1m), reflecting the continued repositioning to focus on growing construction markets. Full year revenues, however, were down 3.6% (to £23.5m) compared to the previous year due to the collapse in Government scheme-related demand over the past 18 months. This has reduced the level of LBITDAE to £0.9m in the second half compared to £2.3m recorded in both the first half of 2013/14 and in the second half of the previous year. As reported within the announcement dated 9 September 2014, the Company achieved positive EBITDAE in both July and August but is not yet generating net cash on a monthly basis. Order patterns remain volatile and order visibility is expected to remain low for the foreseeable future. September order intake and sales volumes were slightly below overall FY14 run rates. The Company has also seen a marked improvement in loss before taxation in the second half of 2013/14, reducing from £4.3m in the first half of 2013/14 to £2.5m in the second half of the financial year. Full year loss before taxation was £6.8m compared to £7.0m in the previous financial year.

New build housing completions in 2014 are estimated to be more than 15% ahead of last year. Further strong growth in this market channel is expected to continue, driven by Government support for the housing market. The extension of the Help to Buy scheme to 2020, combined with changes to Building Regulations in England and Wales in 2013, are expected to be strong drivers of growth in future for the Company. Repair, maintenance and improvement (RMI) activity is similarly driven by housing transactions which are believed to have shown strong growth on last year. The Company has been repositioned to focus on these growth market channels and sales growth in these channels has been strong, with volumes up 15% on the previous year.

The uptake in insulation measures by households under the Green Deal and ECO remains very low. This has been further compounded by the Government's announcement in the 2013 Autumn Statement of reduced ECO funding. This change has created an even greater slowdown in activity in this channel. The consequence of this is a further significant contraction of the supply chain. The Company previously announced that it has been able to exit a restrictive distribution agreement on cavity wall insulation and this creates some opportunity to broaden the customer base in this channel.

We have continued to leverage the benefits generated from the new platform that our improved production facility has provided through further development of our key strengths: of flexibility, product quality and service. We have also strengthened our capability to develop end-user relationships and innovation. In new build construction we have continued developing new specifications with an emphasis on new product innovation, particularly in acoustic solutions. Further innovative solutions are planned to address this market, which the industry expects to show very strong growth as a result of schemes introduced by the Government to stimulate the housing market.

The Company has begun actively developing routes to Eastern European markets which, while less profitable than UK sales due to high transport costs, generate a positive contribution. Overall exports accounted for 10.0% of total volumes in 2013/14 compared to 4.8% in the financial year 2012/13.

With rising demand in construction channels there has been some modest recovery in pricing levels during the financial year. This trend is expected to continue as demand increases and industry capacity utilisation continues to improve.

Operations

The Company has made significant operational progress in the period, driving down costs and improving manufacturing efficiencies. I am pleased to report that the business has delivered the planned annual cost savings originally targeted. However, in response to market conditions and continued oversupply in the market, which is expected to persist for some time, our strategy is to further reduce operating costs. Further potential incremental annual cost savings of approximately £1.9m have been identified, which would require capital investment of approximately £1.0m to implement and would include a significant reduction in manufacturing capacity.

The Company's waste glass supplier, Viridor, has announced investment in a state-of-the-art waste glass processing facility. The new plant, which is expected to come onstream early 2015, is located in the central belt of Scotland and will provide Superglass with access to the highest quality waste glass, enabling a further step change in operational performance.

Board and Executive

The Board recently announced the appointment of Lars Rutegård as Non-executive Director. Lars was appointed to the Board on 30 October 2014. He studied at the Royal Institute of Technology in Stockholm and has a background in the industrial and manufacturing sectors. Lars is currently the managing director of International Fibres Group AB, and a non-executive director of Johnson & Starley Ltd and Direktlaminat AB.

Previous announcements of Board and Executive appointments included the appointment of John Colley as Executive Chairman, Chris Lea to the Board as Finance Director, the appointment to the Executive of Mark Atherton as Operations Director and Ken Munro as Sales Director.

The Company also announced that Allan Clow, Finance Director, resigned from the Board on 29 November 2013 and Declan Billington, Non-executive Director, resigned from the Board on 31 July 2014. The Board would like to thank Allan and Declan for their substantial contribution to the Company.

Strategy & outlook

The recently announced Placing and arrangement of new banking facilities togetherenable the Company to continue the cost reduction strategy and align capacity to the existing market circumstance in the light of continued weakness in Government schemes. In this more constrained environment the focus will continue on improving sales mix through growth in both existing and new value-added products, primarily in construction markets but also in adjacent markets.

Whilst there are increasing signs of recovery and growth in construction markets, the poor uptake of Government energy efficiency schemes is expected to persist through the coming financial year and beyond. We will carefully monitor market conditions as they evolve and will refine our operating strategy in the light of any material changes.

Alex McLeod

Chief Executive Officer

19 November 2014

Consolidated income statement

For the year ended 31 August 2014

Consolidated statement of comprehensive income and expense

for the year ended 31 August 2014

Consolidated balance sheet

At 31 August 2014

Consolidated cash flow statement

For the year ended 31 August 2014

Consolidated statement of changes in equity

For the year ended 31 August 2014

Notes forming part of the financial statements

For the year ended 31 August 2014

1 Accounting policies

Superglass Holdings PLC is a company domiciled and incorporated in the United Kingdom. The financial statements were approved by the Board on 19 November 2014.

Statement of compliance

The consolidated financial statements have been prepared in accordance with IFRS (including International Financial Reporting Interpretations Committee (IFRIC) interpretations) as adopted by the EU (adopted IFRS).

Basis of preparation

The financial statements are prepared on the historical cost basis. The consolidated financial statements are presented in Pounds Sterling, which is the Company's presentational and functional currency. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years unless otherwise stated. The financial statements have been prepared on the going concern basis.

The preparation of financial statements in conformity with EU adopted IFRS requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. The estimates and judgements are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

Going concern

In determining whether the Group's 2014 financial statements can be prepared on a going concern basis, the Directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowings facility and the risks and uncertainties relating to the business activities in the current economic climate.

The key factors considered by the directors were;

· the rate of growth in demand across construction markets and the impact of changes in government led demand generating initiatives such as ECO/Green Deal

· movements in input prices and the availability of credit from suppliers

· the ability of the Group to maintain its frequency of receipt of trade receivables and the credit risk associated with these balances

· the competitive environment in which the Group operates

· the potential actions that could be taken in the event that revenues are lower than expected in order to protect cash flows and operating profit

· the finance facilities available to the Group, including the availability of any short-term funding required

The Group prepares regular forecasts and projections of revenues, profits and cash flows that are essential for identifying areas on which management can focus to improve performance and mitigate possible adverse impact of a deteriorating economic outlook. They also provide projections of working capital requirements and adherence to banking covenants.

The Directors have reviewed the trading and cash flow forecasts as part of their going concern assessment, including downside sensitivities, which take into account the uncertainties in the current operating environment.

In particular, the Directors have also considered the adequacy of the funding and banking facilities available to the Group. In considering that, the Directors have had particular regard to the fact that subsequent to the year end the Group has undertaken a £6.25m placing, issuing 125m new shares at 5p each and the refinancing of the bank debt owed to Clydesdale Bank plc. New banking facilities of up to £4.8m were secured from Close Brothers plc through a combination of term loans, leasing, invoice discounting and revolving credit facilities.

Having considered all the factors impacting the Group's business, including the refinancing completed after the year end and having prepared relevant financial projections and sensitivities including financial projections which allow for reasonably possible downsides to the Group's base case projections, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the Group's 2014 financial statements.

2 Exceptional items

Items of exceptional income and expenditure in the year ended 31 August 2014 include write off of yellow wool stock and the associated storage and disposal costs. Reorganisation costs relate to redundancy costs and professional fees related to the aborted sale process.

Items of exceptional income and expenditure in the year ended 31 August 2013 included an accounting credit in respect of the debt for equity swap that the Group entered into and professional fees incurred in relation to the capital restructuring. Other exceptional items related to the impairment of goodwill and a disposal charge recognised in respect of certain tangible fixed assets identified as being obsolete and disposed of as a result of the significant capital investment programme undertaken by the Group. Following the capital investment programme undertaken in 2013, the licence held within tangible fixed assets in relation to the use of certain technology was no longer required and was written off.

3 Dividends

No dividend has been paid or proposed in either of the financial years presented.

4 Inventories

5 Trade and other receivables

The prior year trade receivables balance has been restated to incorporate a more consistent basis that is in line with the current year disclosure.

6 Trade and other payables

The prior year trade payables balance has been restated to incorporate a more consistent basis that is in line with the current year disclosure.

7 Share capital

Disclosed as:

8 Loss per share

The calculation of basic loss per share and adjusted profit per share is based on the loss attributable to ordinary shareholders as follows:

9 Post-balance sheet event

Subsequent to the year end the Group concluded a capital reorganisation, an issue of equity share capital and the refinancing of bank debt that was approved by shareholders at an Extraordinary General Meeting on 30 October 2014 and has the following impact.

The existing 25.0p ordinary shares at 1 September 2013 were sub-divided into one ordinary share of 1.0p (Post-capital Reorganisation Shares) and one deferred share of 24.0p.

Following the capital reorganisation the equity share issue of 125,000,000 ordinary shares with a par value of 1.0p at an issue price of 5.0p proceeded, increasing the equity share capital of the Company by £6,250,000. Issue costs of approximately £550,000 will be recognised directly in equity.

In addition to the issue of ordinary share capital the Group also secured new banking facilities of up to £4,800,000 through a combination of term loans, invoice discounting, leasing and revolving credit facilities.

Following the refinance the Group settled the secured bank loan of £2,500,000 at a discount of £375,000. One of the consequences of the refinance was to permit the conversion of the 2,800,757 convertible shares owned by the Group's bankers into ordinary shares in accordance with their terms.