SPGH.L Regulatory News (SPGH)

Superglass Holdings PLC

("Superglass" or the "Group")

Trading and Financing Update

Superglass, the UK's leading independent insulation manufacturer, provides an update both in respect of trading for the financial year ended 31 August 2014 and the proposed new debt facilities, referred to in the Group's announcement of 30 April 2014. The Board also outlines plans to obtain additional financing to support the continued turnaround of the Group, including further cost saving and efficiency initiatives.

Trading conditions in the UK insulation market have continued to be difficult, with excess manufacturing capacity, a highly competitive environment and continued pricing pressure. Demand from Government energy efficiency schemes has remained at negligible levels and no near term pick up is anticipated. By contrast, demand from construction markets is showing good growth fuelled by new build housing activity and commercial construction. Responding to this on-going trend the Group 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. 

Against this backdrop, the Board is pleased to report that whilst revenues for the financial year ended 31 August 2014 were 5% behind the prior period, revenues in the second half of the year were 10% ahead of the equivalent prior period. Overall trading for the full year was slightly behind management expectations and order patterns remain volatile with order visibility expected to continue to remain low for the foreseeable future. The Group achieved positive EBITDA in both July and August but is not yet generating positive net cash on a monthly basis. The Group's net debt was £0.4m at 31 August.

The recent upturn in trading has been driven by a step change in sales volume in recent weeks and is a clear reflection of the progress that has been achieved. As well as recent increases in volumes, there have been improvements in product mix, with growing sales of higher margin products. The Board intends to continue to focus the Group's commercial strategy towards higher value added and higher margin products.

The Group has made significant operational progress in the period, driving down costs and improving manufacturing efficiencies. The Board is pleased to report that the business has delivered the planned annual cost savings originally targeted and has drawn up plans to make further cost savings totalling £1.9m on an annualised basis. Some of the savings in the manufacturing process would require fixed and working capital investment of £1.1m and would involve the reduction of manufacturing capacity over the medium term from the second half of the current financial year. Additional capital is required to implement these measures, invest in the infrastructure of the operations, further develop an R&D capability, and to provide greater flexibility and headroom in the event of any further volatility in trading.

New banking facilities of up to £4.8m are expected to be in place before the end of September with the level of draw down largely determined by the quantum of trade debtors. These will replace the existing arrangements with Clydesdale Bank, which will be repaid on the drawdown of this facility. The new facility will provide the headroom required to meet our foreseeable trading needs, but will not be adequate to fund the additional cost saving initiatives described above.

The Board also confirms that it has received unsolicited approaches to acquire the Group's principal trading subsidiary and, in response, appointed advisors to approach a restricted number of other potential buyers to gauge their interest. For the avoidance of doubt, the sale process did not envisage an offer for the shares of Superglass Holdings PLC and the Board has not received any approach nor is it engaged in any discussions which may lead to an offer for the shares of Superglass Holdings PLC.

In the opinion of the Board the offers received do not currently reflect the value inherent in the business, the invested capital, nor its future potential and, as such, would provide unacceptable returns for shareholders.

As part of the sale process, a proposal to underwrite a discounted equity issue of not less than £5m was received. This proposal has the support, in principle, of certain significant shareholders and, it is envisaged, would allow for some element of participation by existing shareholders. Although by its nature highly dilutive for the current equity, in the Board's opinion, the implementation of this proposal would enable the latest cost saving plan to be implemented and address any foreseeable funding requirement of the Group and is therefore under active consideration.

Outlook

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. As a result, it is the Board's view that the scale and pace of revenue and earnings growth is now expected to be more modest than previously anticipated.

Against this backdrop the Board believes that it is right to continue to maximise operational efficiency, reduce costs and take steps towards securing the additional capital required to support its competitive position.

A further announcement will be made when appropriate.

For further information, please contact:

Superglass Holdings Plc

Alex McLeod, Chief Executive Officer 01786 451170

Chris Lea, Finance Director

N+1 Singer

Nick Owen (Head of Corporate Broking) 0207 496 3000

Richard Lindley / James White