Hightex Group Regulatory News (HTIG)

Hightex Group plc

 ("Hightex" or "the Group")

Unaudited Results for the Six Months Ended 30 June 2014

Hightex Group plc (AIM: HTIG), a leading systems engineering company, which designs, fabricates and installs large area, cable supported lightweight membrane roofs and façades worldwide, announces its unaudited results for the six months ended 30 June 2014.

Financial Overview:

· Turnover of €0.1 million (H1 2013: €3.2million)

· Gross profit down to a loss of €0.1million (H1 2013: €0.4million)

· Overheads (actual) down 43% to €0.9 million (H1 2013: €1.4 million)

· EBITDA - loss of €1.0 million (H1 2013: loss of €0.9 million)

· Goodwill write-off of €4.0million

· Pre-tax loss of €5.5million (H1 2013: loss of €1.4 million)

· Result per share - loss of 1.90 c (H1 2013: loss of 0.53 c)

· Net cash balances of €0.7million (H1 2013: €0.8million)

Operational Highlights:

· The installation of the roof of the Estadio Beira-Rio in Porto Alegre, Brazil was completed on time and to plan. The stadia where Hightex was involved were used for the 2014 FIFA World Cup competition with the final being played at the Maracana stadium.

· Hightex initiated a new area of activity in the design of structures destined for cargo handling where membranes can be used for the rapid construction of facades.

· Hightex continues to pursue other potential significant contracts, in the United Kingdom, Europe and the Middle East with a special focus on stadia projects for the World Cup 2018 to be held in Russia. The projects successfully completed in Brazil further enhanced the Company's reputation as one of the major players in this area of large scale civil engineering.

· A loan facility with TCA Global Credit Master Fund, LP for up to USD 10,000,000 was agreed and signed in March 2014.

· Due to the issue for shares for cash in SolarNext AG the Hightex Group plc shareholding in SolarNext AG has decreased, with a current holding of 26.06%.

Post Balance Sheet Event and Prospects:

· In order to pursue the funds owed from the Brazilian JV to Hightex an insurance claim has been started. Hightex believes that a partial payment may be received before the end of 2014.

Legal action in Brazil to seek full settlement of the Company's claim has been approved by the Board.

· Further membrane projects of significant value, which have been the subject of detailed offers by Hightex, are still being pursued but the current military tensions in the Middle East and the political difficulties between Russia and the Ukraine, with the related economic sanctions currently in force, have led to delays in the signing of contracts. The Company is in regular contact with the relevant general contractors.

· Hightex has also responded to tender requests for projects, where polymeric membrane is an essential part of the total structure, but the end use lies outside the sports/events stadia category. These include commercial buildings, air cargo storage facilities, educational establishments and transport infrastructure. The Directors believe that new membrane contracts will be won in the next 6 to 12 months.

· Whilst the Company still has the option to draw down further funds through the TCA facility, it is the Directors' opinion that by identifying an industrial or financial partner with the requisite financial strength arising from its own balance sheet or with established credit lines the engineering expertise and reputation of Hightex could be better exploited. Such a development would enhance the intrinsic value of the Group and be of benefit to both shareholders and a potential partner.

For further information: 

Chairman's statement re 2014 interim results

Introduction

The half year to June 30th 2014 saw the completion of the remaining stadium contract in Brazil on time and to plan. The Beira Rio Stadium therefore was subsequently used for the preliminary stages of the 2014 FIFA World Cup competition. The Maracana stadium in Rio, the contract for which was completed earlier in 2013, was used for the final game and was seen by a global TV audience in excess of 1billion, The Beira-Rio stadium in Porto Alegre received singular praise from the international media as well as the architectural community for its elegant appearance and innovative design and use of membrane materials. Of particular note in this contract was the very close collaboration between Hightex and the general contractor against the background of the financial problems of the joint venture company.

The financial problems relating to the Brazilian joint venture have still not been resolved and, following independent advice, the Board has agreed to undertake legal action so as to recover the related monies. The Company has been further advised that this is likely to be a protracted business.

The lack of verifiable information and transparency of the accounts of the Brazilian joint venture led to the postponement of the 2013 interims announcement. This matter was resolved eventually by making a provision for specific debts arising in Brazil and, as stated earlier, advice has been sought as to the appropriate action, which might be required, to resolve this situation for the ultimate benefit of shareholders. Hightex has traded judiciously through the subsequent six months period and is pleased to announce that on 26th March 2014 it entered into a loan facility agreement with TCA Global Credit Master Fund, LP for up to USD 10,000,000. The first USD 1,800,000 has been drawn down so as to provide essential working capital. In the Board's considered opinion and in more normal circumstances credit facilities should have been provided by local financial institutions.

The consequence of the failure of the banking system in several European countries has had a particularly catastrophic impact on small to medium size companies and across a range of industrial sectors.

Hightex has not been insulated from this fall out and the Directors are pleased to have concluded this agreement with TCA. In principle Hightex has access to sufficient working capital for current operations but a more permanent solution may be required if the bonds, which will be needed for the winning and execution of large area, high value contracts, are to be adequately financed.

Financial stability is both essential and particularly relevant to all companies working in the construction industry, where stage payments are made as a function of the percentage of completion. The Directors will be devoting their efforts over the coming months to ensure this stability is obtained. Further working capital has been made available following the strategic decision to focus the Company's commercial efforts on the light weight, structural engineering sector where its expertise and its well established reputation for excellence can be more fully exploited.

SolarNext AG, a wholly-owned subsidiary of the Company for the past five years, has been establishing itself in the clean energy sector as a provider of solutions to the problem of developing more efficient, non-carbon, local energy generation and its utilisation for applications such as air-conditioning.

The basic technologies used in structural engineering and thermal processing are sufficiently different from each other and have very different financial requirements for their respective operations. A strategic review led the Board to conclude that the two business units should go their separate ways and during the period the company has disposed of a majority interest of 50.2% in the shareholding of SolarNext AG to a number of UK investors including management.

The signing of the loan facility agreement, the publication of the delayed interim results and the announcement of the sale of the stake in SolarNext AG led to restoration to trading on AIM with effect from 26 March 2014..

Commentary on 2014 interim results

In the first six months of 2014 Hightex's revenues decreased from €3.3 million to €0.1million. No significant new contracts of high value were won and this has to be placed into context by the fact that there very few new large area membrane projects were started in this period. One pleasing feature has been the renewed interest in the development of façade structures for use in large area storage spaces where the light weight of membrane materials combined with design flexibility and shorter construction times can be exploited to provide maximum economic advantage in the creation of new transportation hubs.

The €3.2 millionfall in revenues resulted in an EBITDA loss of €1.0 million(2013 first half: loss of €0.9 million).

Management have responded to the financial pressures by making further reductions in general expenses, these being mainly achieved in the German operating company. These expenses fell to €0.9 million in the first half of 2014 (2013 first half: €1.4 million).

Due to the significant impact of the "Brazilian issue" and the consequences therefrom for Hightex Group the Board has reviewed the goodwill position. After discussion and detailed impairment reviews the management has decided to write off €4.0 million of the goodwill, which had an extraordinary effect of the same amount on the EBIT.

Due to this extraordinary write off in the amount of €4.0 million the result before tax in the first six months was a loss of €5.5 million compared with the loss of €1.5 million in the first six months of 2013. Expressed in per share terms, the result of the first six months of 2014 amounted to a loss of 1.90 cents, compared with a loss per share of 0.53 cents in the first half of 2013.

Shareholders' funds were €0.7 million, compared with €6.3 million at 31 December 2013 and €6.4 million at 30 June 2013. Cash balances as at 30 June 2014 were €0.7 million, compared with €0.9 million as at 31 December 2013 and €0.8 million as at 30 June 2013.

SolarNext

As stated earlier the decision to dispose of a majority stake in SolarNext AG has enabled the Company to devote all its current resources, both human and financial, to the membrane business. Further sale of the remaining shares is planned in the second half of the year and possibly extended into 2015.

Prospects

A number of projects where the membrane component is an essential part of the total structure have been identified by the Company. Preliminary design analyses and related cost estimations have been made for some of these projects and offers made to the relevant general contractors.

The Directors believe that although contracts will be awarded, the current political and military tensions in Europe and the Middle East are likely to delay their signing until early 2015. These potential contracts, include both stadia and infrastructure projects in the Middle East, five stadia projects related to the 2018 FIFA World Cup in Russia, as well as other identified projects in Western Europe including France, Spain and the UK.

If successful, such contract wins would increase revenues substantially in 2015/2016 and subsequent years, thus realising prospects for a return of Group profitability.

The Directors continue to believe that finding an industrial or financial partner with the necessary financial resources, either in their balance sheet or as credit lines, would enhance the engineering expertise and excellent marketplace reputation of Hightex. Such a development can only be of benefit to the Group, its shareholders and its employees. The Board will continue to review the possibility of raising further capital from current shareholders.

The Directors and all employees are making every effort in challenging circumstances to win new membrane contracts. 2014 is proving to be a very difficult year but Hightex's excellent reputation for competence in executing projects demanding innovative engineering places the Company in a good position when market confidence returns, a greater degree of political stability is established in sensitive regions of the world and much needed infrastructure investment resumes across the global economy.

Charles DesForges

Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CASH FLOWS

STATEMENT OF CHANGES IN CONSOLIDATED 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 55 Gower St, London WC1E 6HQ. The Company is domiciled in the United Kingdom.

The consolidated financial information is presented in Euros (€).

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 2014.

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 consolidated interim financial information has been prepared assuming that the Group will continue as a going concern. Reference is made to Note 3. "Going Concern" below.

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 2013.

The interim financial information for the six months ended 30 June 2014 was approved by the directors on 26 September 2014.

3. Going concern

The Group has been actively managing the review of the going concern position, including the following material measures:

· Capital increase in SolarNext AG in order to repay loans from SolarNext AG to Hightex Group plc

· signing a loan facility with TCA Global Credit Master Fund, LP for up to USD 10,000,000, of which the first USD 1,800,000 has been drawn down

· negotiation with some creditors regarding the payment terms of proposed settlements

· negotiation on an insurance case claim with a view to receiving a potential part payment with reference to a resolution of the problem of the Brazilian JV 

· contact being made with potential partners in order to assist Hightex on the financial terms for potential new projects.

Based on the financial forecasts for 2014 and 2015 and the Group's economic prospects the directors of Hightex Group have made the assessment, that the above measures provide sufficient working capital in order to cover the period until Hightex Group is able to earn operating positive cash flows from new projects in the last quarter of 2014 and the year 2015. In assessing whether the going concern assumption is appropriate, the directors have taken into account all available information regarding the foreseeable future; in particular for the period covering the twelve months from the date of issue of the interim financial information. This information included the nature of the business in which Hightex operates, outstanding payments from realised projects, expected contract wins in 2014/2015, as well as the aforementioned financing facilities available to the Group.

4. Taxation

5. Earnings per share

6. Goodwill

During the period the Board reviewed the carrying value of Goodwill. As a result of this detailed exercise €4 million has been written off this balance.

7. Dividend

The directors do not propose the payment of an interim dividend (2013: nil).

8. Contingent liabilities

The group had contingent liabilities of €690,000 (31 December 2013: €674,000) under contracted performance and warranty bonds and advance payments.

9. Post balance sheet events

The following material post balance sheet events have incurred to date:

At operational level the contracts in Brazil (Maracana Stadium and Estadio Beira-Rio) have been executed and were used during the FIFA 2014 World Cup in June and July 2014.

Providing working capital from all possible sources in the second half of 2014 included a capital increase (by issuing new shares for cash) at SolarNext AG in order to repay a loan to Hightex Group plc. Another capital increase in SolarNext is in execution and shall be terminated by end of October 2014.

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