During the year to 31 August Superglass faced a combination of exceptionally challenging market and operational conditions. Against this backdrop, the Group is today reporting trading in line with recent market expectations. Revenue was up 3% to £32.4 million despite the continued shortfall in the Carbon Emissions Reduction Target Scheme (CERT). Profitability was significantly affected by lower selling prices, higher energy costs and the impact of the repairs and pre-emptive maintenance works to the fabric of our two furnaces in the first half of the year, reducing our production capacity and resulting in a loss before tax, amortisation of intangibles and exceptional items of £0.6 million (PBTAE 2010: £3.7 million).

The management team has taken positive action to confront these challenges and as a result has delivered:

• a comprehensive recapitalisation of the balance sheet since the year end;
• the continued broadening of Superglass' routes to market and its customer base;
• an increase in volumes during the second half of the year;
• some efficiency improvements within the constraints of the current operating infrastructure; and
• a blueprint for a capital expenditure programme to deliver significant reduction in annual operating costs.

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I am delighted that with support from equity investors, Clydesdale Bank and Scottish Enterprise, subsequent to the year end, we have been able to transform Superglass' capital base, not only enabling us to implement a capital investment programme which will commence in March 2012, but also providing us with the working capital we need to stabilise and grow our business. The investment will substantially improve the operating efficiency of our manufacturing plant to reduce our cost base by more than 15%, to improve product quality and to provide an additional 10% of production capacity.

Highlights of the recapitalisation are as follows:

• equity fundraising of £8.0 million net of expenses;
• Regional Selective Assistance award of up to £2.0 million;
• bank term loan reduced by £12.15 million to £5.1 million through a conversion of debt into convertible shares, these being exercisable into ordinary shares after two years:
• equity conversion terms: 12% at post share reorganisation trigger price of 70 pence and 11% at post share reorganisation trigger price of 90 pence;
• new bank facility terms agreed:
• repayment holiday on residual core debt of two years, thereafter repayable in quarterly instalments;
• no covenant tests for two years, rolling twelve month cash flow and interest cover covenants tested quarterly thereafter; and
• committed Revolving Credit Facility until November 2016.

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In March 2011, the Group instructed the consultancy firm CM Projects, which specialises in projects for the glass processing industry, to undertake a high level benchmarking study of its production facilities and processes. In its report to Superglass, CM Projects highlighted several areas of the Group's manufacturing and product handling processes which could be improved significantly.

The actions identified comprise seven discrete process areas requiring phased upgrades and modifications to existing machinery which, once fully implemented, have the potential to deliver aggregate annual operating cost savings of up to £3.6 million for an aggregate capital outlay, including a provision for fees and other contingencies, of approximately £6.5 million. Furthermore, this expenditure is also likely to result in improved product quality, increased production capacity and increased product compression leading to reduced transport costs.

The Board has now approved a detailed implementation plan, with the first phase of seven discrete project areas scheduled to commence in March 2012. Cost savings are expected to start to flow through from the 2012/2013 financial year onwards.

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The financial year was a year of significant transition in operations. It began with the recovery from the furnace failure at the end of the previous financial year. Our second furnace was refurbished in December 2010 and as a result we anticipate an extended working life for both furnaces until post 2015.

Despite limited availability of capital spending our operations team was able to deliver significant improvement in operating efficiency levels.

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Overall sales volumes were 13% ahead of prior year. This was due, in particular, to the growth we achieved in sales to specialist distributors where volumes were approximately 25% ahead of last year's equivalent period. We also grew our volumes with builders merchants, which showed a 21% increase.

CERT activity throughout the year was below expectations. Increased installations have resulted in some modest improvement in volumes since the year end. Recent Government statements reminding energy suppliers of their obligations to meet CERT targets by December 2012 are welcome.

Pricing came under pressure for much of the financial year due to the continued lack of expected CERT activity. At a time of substantially increased energy costs, selling prices fell by more than 5%. However, with increasing demand since the year end and given that our plant is operating at close to full production capacity for cured products, the prospects for price recovery are more encouraging.

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Dividend payments have been suspended during 2011, largely as a result of the trading and financial position of the Company. The Board has agreed not to resume dividend payments during the next two financial years. In determining the level of future dividend payments thereafter, the Directors will take account of the profitability, cash generation and underlying growth of the business while seeking to maintain an appropriate level of dividend cover.

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Recent market research indicates that the UK building insulation market will experience a trend rate of compound annual growth in excess of 5% between now and the end of 2015, much of which will be driven by Government legislation and the tightening regulatory environment and energy efficiency standards affecting residential, commercial and industrial property construction. Structural drivers of market demand are expected to include the mandatory Government targets imposed under CERT for the period ending December 2012; the Green Deal initiative, which is intended to realise a further reduction in domestic energy consumption following the expiry of the CERT obligations; the progressive impact of planned changes to building regulations governing both the residential and commercial sectors; and the impact of rising energy costs.

Our strategy is to position Superglass to maximise its share of the potential benefits from the structural growth drivers identified above, through the following initiatives:

• the successfully completed recapitalisation of the business;
• the delivery of a material improvement in the Group's competitive market position through the lower delivered cost initiative that underpins the Group's capital expenditure plans; and
• continued diversification and strengthening of the Group's market position by broadening its customer base, its penetration of new market channels and the introduction of new value-added products.

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Superglass sales volumes continue to be ahead of prior year in cured products compensating for continuing underperformance in CERT-related blowing wool product lines. As a result output in non-CERT-dependent product lines is running at close to full capacity. The Board expects product mix, market weakness and cost pressures to continue to affect margins throughout the first half of the current financial year.

Looking forward, and as noted in previous statements, a substantial increase in energy suppliers activity is now required to achieve the Governments mandatory CERT targets before the expiry of CERT in December 2012. This provides some grounds for optimism in the short term. However, the current level of activity within the residential housebuilding market in the UK, together with the well-documented pressures on the consumer, provide ample grounds for caution as to the likelihood of any significant uplift in overall market demand in 2012.

The key operating assumptions upon which the debt reduction and restructuring and the capital expenditure programme have been based are intended to ensure that the Group's financial position remains secure even in the absence of a sustained recovery in market conditions.

In any event, 2012 will be a year of transition for Superglass with underlying trading performance likely to be impacted by the capital expenditure programme which is planned to commence in March 2012 and continue throughout the remainder of the calendar year. The payback from this programme will be reflected within the Group's financial results in future trading periods and its fundamental purpose is to restore the Group's competitive market position. This is expected, in turn, to provide the platform for a recovery in underlying trading performance in the medium term, whether or not there is any sustained upturn in overall market demand.

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