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Each month we trawl through hundreds of RNS statements from AIM companies. In this column we will highlight an exceptional item from an AIM company, particularly where we feel the market may not have priced in recent news.

This month our Snippet company is SWP Group. Our choice was determined by some extremely positive results announced on 18 November. The chart (below) is also interesting with the price approaching long-term resistance at £1.00. A break through this level would be a very positive sign.

SWP Group has three main divisions: – rainwater management, metal staircases and polymer membranes. Click here to read about these businesses on SWP’s web site.

The results to 30 June 2009 showed that turnover was down 1% on the previous year while pre-tax profit was up 15% at £1.63 million. Earnings per share came in at 9.0 pence. The intriguing thing is that these results were achieved in most difficult circumstances at a time when two of the Group’s three divisions (Fulflow and Crescent) were experiencing exceptionally difficult trading conditions.

Fulflow Group, SWP’s largest subsidiary, specialises in drainage systems for particularly large buildings. Fulflow were hit by the downturn in the construction industry and reported conditions to be the worst in the Group’s history. SWP reported that Fulflow was forced to implement a redundancy programme. Similarly, Crescent of Cambridge, the Metal Staircases division were ‘significantly impacted by the collapse of the market sectors which it serves’. Indeed Crescent record an operating loss of £350,000 which was their first loss in over ten years.

Ulva

The key to SWP’s improving results was the Group’s polymer membrane division and, in particular, the recently acquired Ulva brand. Ulva (previously a supplier to SWP) was acquired in November 2007 following a series of litigation cases.

In the Group’s 2008 Interim results Chairman, Alan Walker, described Ulva as offering ‘growth possibilities of transformational proportions’. It would seem that Mr Walker’s prediction is coming true. Ulva sells specialised polymer membranes to the oil, gas and petrochemical majors around the world to provide pipework protection systems designed to reduce corrosion.

Sales in the Ulva division rose by 44% in the 2009 Financial Year and in the Outlook statement the Chairman included the following comment on the Ulva division: ‘Order levels are highly encouraging and this business remains the principal driver in terms of generating increased profit levels and positive cash flows for the Group’.

2010 Prospects

The future thus looks promising for Ulva. But, it is not only Ulva.  Prospects are also improving for both of the other divisions. Order levels for Fulflow have picked up overseas and the Group are predicting better things for Crescent. The results state: ‘Crescent of Cambridge the reshaped business has achieved some notable project wins in its traditional markets and higher revenues should restore the company once again to the route of profitable growth.’

The purpose of this Snippet column is to introduce a Share to readers. As always we recommend further research. With SWP we suggest first reading the recent final results. Note also that SWP raised £675,000 in a placing announced the day after the results. The Group explained the purpose of the placing thus: ‘The proceeds from the Placing will be used to improve liquidity in the Company's shares, assist with a particular capital expenditure project and accelerate the debt reduction programme’.

'growth possibilities

of transformational proportions'

Written by Michael Crockett

Copyright Aimzine Ltd

RETURN TO AIMZINE FRONT PAGE | December 2009

The Author of this Article owns shares in SWP Group.

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