Hightex Group Regulatory News (HTIG)

28 September 2011

Hightex Group plc

 ("Hightex" or "the Group")

Unaudited Results for the Six Months Ended 30 June 2011

Hightex Group plc (AIM: HTIG), a leading systems engineering company, designing, fabricating and installing large area, light weight membrane roofs and façades worldwide, announces its unaudited results for the six months ended 30 June 2011.

Financial Overview:

·; Turnover up 24% to €17.1 million (H1 2010: €13.8 million)

·; Gross profit down 65% to €0.8 million (H1 2010: €2.3 million)

·; Pre-tax loss of €1.3 million (H1 2010: profit of €636,000)

·; Result per share - loss of 0.71c (2010: earnings of 0.24c)

·; Net cash balances were €1.7 million (2010: €4.5 million)

Operational Highlights:

·; Cable net and main membrane installed on the roof of the Olympic Stadium in Kiev, main membrane and retractable membrane of the National Stadium Warsaw installed and BC Place Stadium entire retractable roof and ETFE façade installed

·; The three major projects contributed a turnover of €14.9 million. These came from the Olympic Stadium in Kiev (€5.6 million), the National Stadium Warsaw (€3.7 million) and the BC Place Stadium in Vancouver (€5.6 million)

·; Challenging environment, with no significant new contract awards announced in any of Hightex's strategic target markets

·; Company has pipeline of active construction projects which have not yet reached the stage of awarding the membrane sub-contracts

Charles DesForges, Executive Chairman, commented:

"The first half of 2011 has been a frustrating period for Hightex and its shareholders. Although we significantly increased revenues, margins were impacted as a result of cost over-runs due to complex technical challenges and to an unforeseen market situation on the equipment supply side, which arose because of a delay in Hightex gaining admission to the site for its installation process. Whilst in 2011, no significant new contract awards have been announced so far this year to any company operating in Hightex's strategic target market, the Company has a pipeline of active construction projects, of which some are expected to reach the stage of awarding the membrane sub-contracts in the next few months. The Directors continue to be optimistic about the short to medium term potential for revenue and margin growth, but timing remains difficult to predict."

For further information: 

Media enquiries

Chairman's statement

Introduction

Hightex continues to develop as a global, innovative leader in construction systems, which engineers, designs, fabricates and installs large area, light weight membrane roofs and façades worldwide. Its Directors are determined to grow the business profitably and maintain its leading position.

During the first six months of 2011 and in the following months, Hightex worked on and will complete its work on the retractable roof above the National Stadium in Warsaw, Poland, and the roof over the Olympic Stadium, Kiev, Ukraine (Stadia of the opening and final game of the UEFA EURO 2012, to be hosted by Poland and Ukraine) and the retractable roof and fixed façade on the BC Place Stadium, Vancouver, Canada.

With the execution of the Olympic Stadium in Kiev, Hightex demonstrated its ability to engineer, fabricate and place in position the cable net structure of the roof on which the membrane structure is installed. This was the first time that Hightex fulfilled this responsibility without being a member of a joint venture or consortium. The feedback from the structural engineering company that partnered Hightex on this performance has been positive and reinforces Hightex's ability to differentiate itself further from its competition.

A different technical innovation by Hightex took place at the BC Place Stadium, where Hightex installed the first cable-supported retractable cushion roof in the world. The new roof is more energy-efficient than the roof it replaces, and is estimated to save around 25% on energy costs. The main technical challenge was the design and execution of the retractable cushions which not only allows the use of the stadium during the whole year but also reduces the energy costs by using the air as insulation for this part of the roof.

Commentary on 2011 interim results

It is pleasing to report that in the first six months of 2011, Hightex increased its revenues by 24% from €13.8 millionto €17.1 million. These revenues were generated mainly from work on the roofs of stadia in Kiev and Warsaw and the roof and façade on the BC Place Stadium in Vancouver. In the first six months of 2011, the revenue earned by Hightex from these three contracts was approximately €14.9 million. Revenues from other contracts booked in the period amounted to €2.2 million. This included €0.1 million from the new inspection and maintenance business for membrane roofs and façades.

Gross profit fell by 64% from €2.3 millionin the first half of 2010 to €0.8 million in the first half of 2011. This unwelcome decrease was caused in part by cost over-runs, due to complex technical challenges, and higher freight costs. Some of these were avoidable and the Company has responded by implementing procedures to ensure that such an overrun is unrepeatable. By contrast, some of the erosion of gross profit arose because of unforeseen market conditions on the equipment supply side. Delays in Hightex being allowed on site for its installation process led to a longer than expected rental period of lifting equipment. The Company has likewise changed its project estimation and planning processes to minimise the risk of such a repeat experience.

In this context, the Company strove to control its operating expenditure, which amounted to €2.0 million. This represented an increase of €0.6 million compared with the first half of 2010 (€1.4 million), but it also represented a successful decrease of approximately €0.2 million below budget. The €0.6 million increase (compared with the first half of 2010) arose mainly from the employment of additional engineers, supervisors and salesmen. 

The result before tax in the first six months was a loss of €1.3 million, compared with a profit of €0.6 million in the first six months of 2010. The loss is wholly explained by the reduction in gross profit. Expressed in per share terms, the result of the first six months of 2011 amounted to a loss of 0.71 cents, compared with earnings per share of 0.24 cents in the first half of 2010.

Shareholders' funds were €10.8 million, compared with €12.2 million at 31 December 2010 and €11.3 million at 30 June 2010. Cash balances as at 30 June 2011 were €1.7 million, compared with €4.0 million as at 31 December 2010 and €4.5 million as at 30 June 2010.

Solar cooling business

SolarNext achieved revenues of €143,000 in the first half year but incurred a loss before tax of €149,000. On the positive side, SolarNext sold eight systems in the half year (compared to only six systems for the whole of 2010). To help to increase revenues, SolarNext hired a salesman and a technician in July and August this year. The sales efforts are concentrated on the industrial sector and on larger heating/cooling installation companies. In addition SolarNext is seeking potential partners in selected countries with economic potential. In the first of these, in South-East Asia, SolarNext is working with a local partner on the first pilot installation for a test on existing school buildings, a project which the Directors consider has potential for growth.

Discussions with potential investors were terminated because satisfactory terms could not be agreed.

Prospects

Hightex has the benefit of a long pipeline of potential projects within its strategic markets and traditional range of capability and focus - sports stadia, shopping malls, airports and other large area structures, where light weight construction technology offers significant advantages both during installation and in subsequent use. In the first six months of 2011, it has devoted energy and resources towards ensuring that its pipeline is converted into actual contract wins.

The pipeline is underpinned by the competitive advantages of membrane, including light weight, energy efficiency, safety and the relatively faster speed of installation. Hightex is increasingly regarded as a partner of choice in a growing sector of the construction industry that has recognised the appeal of innovative membrane technology and the advantages of light weight retractable roofs. This has been possible because the architectural profession is increasingly designing ultra-light weight structures, which demand the use of innovative polymer membranes combined with cable engineering, now offered by Hightex, as part of the overall range of its technical competence and capabilities. The Board strongly believes that this trend will increase as stadium owners and developers, who are conscious that future stadia can and must be multi-purpose in order to capture wider revenue opportunities, chose membrane technology to help to create structures which can be more flexible than those using traditional materials.

Throughout 2011, Hightex has maintained a full time team in Brazil, a country which offers the Company excellent prospects, as it has been chosen as the host country for the FIFA World Cup in June and July 2014, and the Olympic Games in 2016. Accordingly Brazil is planning the construction or upgrading of 12 new stadia, four of which Hightex continues to target, as these projects will require the technical excellence and service for which the Company has become renowned. Hightex has also devoted considerable efforts in Europe, the Middle East and South East Asia. However, the inescapable fact for Hightex, as well as its competitors, is that no significant new contract awards were announced in any of these four areas in the period in question.

Conclusion

The year so far has been disappointing for the Company and shareholders alike, partly through the low margins achieved in the first half and partly through the lack of new signed contracts. Further contracts have been and will continue to be actively pursued. We are confident that the vigorous efforts which have been made in Brazil, Europe, the Middle East and South East Asia will generate significant contracts, some of which will be announced before the end of this year.

The Directors believe that the regular cycle of sporting events, demand for improved transport and wider civil infrastructure, and Hightex's reputation for innovative engineering excellence provide a very firm underpinning of the growth of the Company in the short to medium term and look to the future with confidence.

Charles DesForges

Executive Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued)

CONSOLIDATED STATEMENT OF CASH FLOWS

STATEMENT OF CHANGES IN CONSOLITATED SHAREHOLDERS' EQUITY (Unaudited)

1. General information

Hightex Group Plc was incorporated on 28 June 2006 under the Companies Act 1985. The Company was registered under the number 5860429. The Company's registered office is located at Masters House, 107 Hammersmith Road, London W14 0QH. The Company is domiciled in the United Kingdom.

The consolidated financial information is presented in Euros (€), unless otherwise stated.

2. Basis of preparation

The next annual financial statements of Hightex Group ('the Group') will be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the EU applied in accordance with the provisions of the Companies Act 2006.

Accordingly, the interim financial information in this report has been prepared using accounting policies consistent with IFRS. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) and there is ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the directors expect to be applicable as at 31 December 2011.

The financial information has been prepared under the historical cost convention. The principal accounting policies set out below have been applied to all periods presented.

The same accounting policies, presentation and methods of computation have been followed in these unaudited interim financial statements as those which were applied in the preparation of the Group's annual financial statements for the year ended 31 December 2010.

The Interim financial information for the six months ended 30 June 2011 was approved by the directors on 27 September 2011.

3. Taxation

4. Earnings per share

5. Dividend

The directors do not propose the payment of an interim dividend.

6. Contingent liabilities

The group had contingent liabilities of €1,649,000 (31 December 2010: €2,604,000) under contracted performance and warranty bonds and advance payments.

7. Post balance sheet events

No post balance sheet events have occurred.

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