Sun shines on profits at solar panel manufacturer

Dec 13 2007 by Andrew Mernin, The Journal

Chairman John Kennair's statement

The year to 30 September 2007 has again seen excellent progress in the development of the business, in particular with regard to sales of the group’s PowerGlaz products into the solar industry.

Results

Sales in the year to 30 September 2007 grew by 6% to £17.4m (2006: £16.4m). Gross profit margins improved to 34% (2006: 31%) enabling pre-tax profits to increase by 44% to £2.76m (2006: £1.92m). This in turn has contributed to an increase in earnings per share of 52% to 4.7p per share (2006: 3.1p per share).

Earnings per share also benefited from a lower than normal tax charge of 21% (2006: 29%). This occurred due to one-off benefits arising from the recent changes in legislation regarding industrial buildings allowances and the future rate of corporation tax. The tax rate is expected to return to more normal levels from next year.

PowerGlaz

It is the growth in sales of PowerGlaz that has dominated the group’s trading profile in 2007. A number of contracts have been won in the European market, including the five-year, €80m contract in Spain announced with the interim results. A second production line was installed and this came into production in July 2007. This has enabled PowerGlaz sales growth of 40% over 2006, achieved largely in the last quarter. PowerGlaz sales were more than 40% of the group’s total business in 2007.

In order to ensure that the group is able to meet its sales targets for PowerGlaz, the company entered into a ten-year photovoltaic cell supply agreement with Q-Cells, as announced in February 2007. Since the year end, the directors have entered into a further cell supply agreement with Gintech Energy Corporation which is in addition to the supply arrangements currently in place with both E-Ton Solar and BP Solar.

The company has reached agreement with BP Solar to extend the Global Alliance Agreement for a further two years. Having secured cell supplies and with the growth of orders and enquiries for PowerGlaz, the directors have ordered two new production lines for PowerGlaz products, which are expected to come on stream in the summer of 2008.

Investment

Investment in tangible fixed assets in the course of the financial year of £6.9m included installation of the second PowerGlaz production line, building works and associated equipment deposits for two further PowerGlaz production lines which will come on stream in the summer of 2008. Intangible assets have increased as a result of a payment to acquire a long-term cell supply contract.

Whilst adequate banking facilities were available to cover the capital investment programme, the directors, having regard to the pending uncertainties in the financial markets, arranged a share placing in July 2007 to raise a net £7.3m, further strengthening both the balance sheet and the shareholder base.

Dividend

The directors recommend a final dividend of 0.75p per share payable on 29 February 2008 to shareholders on the register of members at 15 February 2008 which, following the dividend of 0.4p per share paid on 22 June 2007, will bring the total dividend for the year to 1.15p per share, representing a 15% increase over 2006.

Outlook

The growth in demand for renewable power supplies is evidenced daily through the national and international news media and it is apparent that solar energy is becoming a significant force in this field which, in turn, is providing a substantial and growing number of opportunities for Romag’s PowerGlaz products, particularly in the European market. The traditional security, transport and architectural products which are now focused on the higher margin areas, continue to play an important role in the development of the business, however, the directors now expect the major growth to flow from the group’s PowerGlaz range of products over the coming years.