Interim Results

Severfield-Rowen PLC 25 September 2001 25 September 2001 SEVERFIELD-ROWEN PLC 2001 Half Year Results Severfield-Rowen plc, the structural steel group, announces its half year results to 30 June 2001. Overview * Turnover £59.3m (2000: £61.6m) * Operating Group margins of 6.7% * Group profit before tax of £4.0m (2000: £4.2m) * Basic earnings per share 13.98p (2000: 14.58p) * Interim dividend held at 5.25p, reflecting Board's confidence in current trading * Positive cash balance of £3.31m as at 30 June 2001 * Order book level maintained * Plate Line at Dalton now operating * Joint venture with Corus, W J Leigh and Atlas Ward announced May 2001 Commenting on the results, Peter Levine, Chairman, said: 'This result confirms our market leadership position, we have produced a highly commendable performance against the background of very challenging market conditions. Our previous investments, notably in the sixth line, have proved highly successful. The Group strategy, in the UK and overseas, is focused on the medium to long term, with the prudent and optimum utilisation of our significant financial resources underpinning our strategy. Whilst our Group is not isolated from any further deterioration in general economic conditions, our core business is currently fabricating steelwork at record levels and enquiry levels for significant projects extend into 2002. In this regard the Directors consider the Group has very good future prospects. ' Enquiries Severfield-Rowen plc 020 7269 7291 - 25 September 2001 Peter Levine, Chairman Thereafter: 01132 469 993 Peter Davison, Finance Director Thereafter: 01845 577 896 Financial Dynamics Richard Mountain 020 7269 7291 INTERIM STATEMENT 2001 INTRODUCTION The Group has produced a satisfactory performance for the first half of 2001. Whilst the impact of the general economic environment is impossible to ignore, the Group's present projections show a result for the year broadly in line with budget. During the first six months the Group continued to demonstrate its increasing market leadership and reputation. The completion of the sale and leaseback of our Dalton site has reinforced our already strong financial position. This has given us unsurpassed financial credibility and flexibility within our industry which is particularly useful in times of a general economic slowdown. Margins for the full year are expected to be in line with budget, but in the first six months they were adversely affected by us fabricating a more varied and complicated mix of work than we would normally expect. Order levels remain robust and continue at very good levels despite challenging market conditions. Our output remains principally directed at the UK market, although during the period work continued on three power stations for Bechtel in Turkey, as well as commencing work on a financial centre in Dominica. During the first half of the year we completed our new plate line at Dalton, Line 6. This produces beams and other products out of plate using the very latest technology. The demand for the plated products produced through this line is very encouraging. In connection with this, in May 2001 we entered into a joint venture with Corus, W J Leigh, a leading fire retardant paint supplier and Atlas Ward, another steel fabricator, under which an established and proven cellular beam equivalent, made out of plate and marketed under the Fabsec trademark, was acquired for use by the Group. Manufacturing of the Fabsec beam through the new line has already commenced. We are now able to produce our own cellular beams out of plate in a much more cost efficient, flexible and significantly faster way than any other UK or world-wide source. Demand from our clients for this product is extremely encouraging. Further details of the new line are below. Another new innovation is the development of our patent protected fire retardant beam, conceived by ourselves, which is also now included within the joint venture. Testing of this fire beam is going very well and production is expected to commence next year. Finance Turnover in the period was £59.34 million (2000: £61.63 million) producing an operating profit of £4.0 million (2000: £4.41 million). Despite the continued pressure on prices, Group margins at the operating level only reduced to 6.7%, compared to 7.1% for the first half of 2000. Profit before tax was £4.08 million (2000: £4.21 million) after net interest receivable of £8,000 (2000: interest payable £197,000). Assuming a tax charge of 31 % (2000: 30.75%) basic earnings per share were 13.98 pence (2000: 14.58 pence). During the first six months of the year capital expenditure amounted to £5 million, primarily for the building of the new plate line at Dalton. Despite this capital expenditure and a significant amount of cash being tied up in certain large contracts at 30 June 2001 we had a positive cash balance of £3.31 million. Borrowings primarily representing amounts due on hire purchase contracts amounted to £2.10 million leaving the Group with a net funds surplus of £1.21 million and, therefore, no gearing. Share Buy Back Whilst the Company has the power to buy back its own shares, none were purchased in the reporting period. The Directors continue to monitor the situation and will exercise such power as and when it is appropriate. Dividend In spite of the uncertainty surrounding the general economic outlook, the Board is confident with the Company's current positive trading position and therefore maintains the interim dividend at 5.25 pence per share (2000: 5.25 pence) which is covered 2.66 times by earnings. The interim dividend will be paid on 26 October 2001 to shareholders on the register on 12 October 2001. Structural Steel The principal business of the Group is carried out by Severfield-Reeve Structures and Rowen Structures. The Group remains the market leader in the industry with unsurpassed facilities and efficiency. Whilst margins reduced in the first period principally due to a more varied mix of work, they remain significantly above average for the UK steelwork industry. As referred to above, the plate line at Dalton was completed and began operation in May 2001. This was complemented at the same time by the aforementioned joint venture with Corus, W S Leigh and Atlas Ward. This line significantly extends the Group's range of products and services it can supply to clients. Through the joint venture the Group has access to innovative, user-friendly software which enables consulting engineers and architects to design the Fabsec beam into their projects in a significantly more effective way. With some justification the Directors look forward with confidence to a good contribution to profit in 2002 from this new area of our business. Projects carried out in the first six months demonstrate the diversity of our product and client base. These included: - Tower Place office development in the City of London - Refurbishment of HM Treasury in Whitehall - New Process facility for Huntsman Tioxide on Teesside - Major new retail outlet for Ikea in Glasgow - High rise office/residential block in Cardiff - Distribution depots for Sainsbury - New car park for BAA at Southampton Airport - Leisure and residential development at Broadway Plaza, Birmingham - New stadium for Darlington Football Club - Distribution warehouse for LM Solutions in Hatfield - Mixed development in Edinburgh for Pillar Properties - Several projects for BAA at Heathrow and Gatwick Enquiry levels, extending to the end of the year and beyond, are encouraging. The Group continues to be engaged in contracts of substantial size and complexity, where the need for fast-track fabrication and erection on-site is very important. Our own erection company, Steelcraft Erection Services Ltd continues to play an important role in this regard. Outlook I am pleased to report that for yet another year our core business is currently fabricating steelwork at record levels. Order books are strong and enquiry levels for significant projects extend into 2002. However our Group will not be isolated from a downturn in general economic conditions. Margin levels remain at a commendable level compared to the rest of our industry and, with the development of the new plate line, the Group remains at the forefront of efficiency and technological innovation in it's industry. The Group's strategy, both in the UK and overseas, is focused on the medium to long term, with the prudent and optimum utilisation of our significant financial resources underpinning our strategy. In this regard the Directors consider the Group has very good future prospects. The Directors look forward to another year of sustained profitability and progress. PETER LEVINE Chairman 25 September 2001 Consolidated Profit and Loss Account Six Months Six Months Year to to to 31 December 30 June 2001 30 June 2000 2000 Unaudited Unaudited Audited £000 £000 £000 Turnover 59,337 61,633 128,930 -------- -------- -------- Operating profit 4,000 4,406 10,565 Net interest 8 (197) (241) -------- -------- -------- Profit on ordinary activities before taxation 4,008 4,209 10,324 Taxation on profit on ordinary (1,242) (1,294) (3,895) activities -------- -------- -------- Profit on ordinary activities after taxation for the period 2,766 2,915 6,429 Dividends payable to equity (1,036) (1,048) (2,748) shareholders -------- -------- -------- Profit retained, transferred to 1,730 1,867 3,681 reserves -------- -------- -------- Basic earnings per share 13.98p 14.58p 32.32p Adjustment for exceptional items - - 3.37p -------- -------- -------- Adjusted earnings per share 13.98p 14.58p 35.69p -------- -------- -------- Diluted earnings per share 13.89p 14.52p 32.22p -------- -------- -------- Dividends per share 5.25p 5.25p 14.00p Consolidated Balance Sheet At 30 June At 30 June At 31 December 2001 2000 2000 Unaudited Unaudited Audited £000 £000 £000 Fixed Assets: Tangible assets 16,321 25,460 26,432 Investment properties 88 330 88 Investments 464 464 464 -------- -------- -------- 16,873 26,254 26,984 -------- -------- -------- Current Assets: Stocks 6,392 4,442 4,670 Debtors 43,576 32,832 28,739 Cash at bank and in hand 3,306 2,537 5,618 -------- -------- -------- 53,274 39,811 39,027 Current Liabilities: Creditors due within one year (32,528) (31,844) (29,177) -------- -------- -------- Net current assets 20,746 7,967 9,850 -------- -------- -------- Total assets less current liabilities 37,619 34,221 36,834 Creditors due after more than one year (1,198) (944) (1,554) Provision for liabilities and charges (2,185) (1,399) (2,185) -------- -------- -------- 34,236 31,878 33,095 -------- -------- -------- Capital and Reserves: Called up share capital 1,979 1,996 1,978 Share premium account 8,537 8,393 8,527 Other reserves 874 1,723 1,474 Profit and loss account 22,846 19,766 21,116 -------- -------- -------- 34,236 31,878 33,095 -------- -------- -------- Consolidated Cash Flow Statement Six Months to Six Months to Year to 30 June 2001 30 June 2000 31 December 2000 Unaudited Unaudited Audited £000 £000 £000 Net cash flow from operating activities (6,846) 911 8,657 Returns on investments and servicing of finance 6 (183) (276) Taxation (1,971) (722) (1,477) Capital expenditure and financial investment 8,713 (3,197) (3,735) Acquisitions and disposals 86 2,161 2,490 Equity dividends paid (1,732) (1,397) (2,430) -------- -------- -------- Cash (outflow)/inflow before use of liquid resources and financing (1,744) (2,427) 3,229 Financing (568) 26 (2,549) -------- -------- -------- (Decrease)/increase in cash in the (2,312) (2,401) 680 period -------- -------- -------- Reconciliation of net cash flow to movement in net funds Six Months Six Months Year to to to 31 December 30 June 2001 30 June 2000 2000 Unaudited Unaudited Audited £000 £000 £000 (Decrease)/increase in cash in the (2,312) (2,401) 680 period Cash flow from movement in loans and hire-purchase contracts 579 1,357 2,064 -------- -------- -------- Change in net funds from cash flows (1,733) (1,044) 2,744 New loan - (1,522) - New hire-purchase contracts - - (1,385) -------- -------- -------- Movement in net funds in the period (1,733) (2,566) 1,359 Net funds at beginning of period 2,940 1,581 1,581 -------- -------- -------- Net funds/(debt) at end of period 1,207 (985) 2,940 -------- -------- -------- Notes: 1) The interim financial statements, which are neither audited nor reviewed by the auditors, have been prepared on the basis of the accounting policies set out in the company's 2000 statutory accounts. 2) Taxation for the six months to 30 June 2001 has been shown at the rate estimated to be applicable for the full year. 3) The interim dividend of 5.25p per share (2000: 5.25p) will be paid on 26 October 2001 to shareholders on the register on 12 October 2001. The ex-dividend date will be 10 October 2001. 4) The basic earnings per share figure for the six months ended 30 June 2001 is based on the profit after taxation of £2,766,000 (2000: £2,915,000) and 19,784,811 (2000: 19,992,562) ordinary shares, being the weighted average of the number of shares in issue during the period. The calculation of adjusted earnings per share for the year to 31 December 2000 is based on the profit after taxation, excluding the exceptional tax charge caused by the clawback of industrial buildings allowances by the Inland Revenue as a result of the sale and leaseback of the Dalton facility. This figure provides a more meaningful comparison. The calculation of diluted earnings per share is based on the profit after taxation of £2,766,000 (2000: £2,915,000) and 19,916,978 (2000: 20,072,692) ordinary shares, being the weighted average of the number of shares in issue during the year, allowing for the dilutive effect of share options. 5) The results for the year to 31 December 2000 are an abridged version of the company's full accounts which carry an unqualified auditors' report and have been filed with the Registrar of Companies. 6) The interim report will be posted to shareholders. Copies are available from the Secretary, Severfield-Rowen Plc, Dalton Airfield Industrial Estate, Dalton, Thirsk, North Yorkshire YO7 3JN. 7) Reconciliation of movement of shareholders' funds £000 At January 2001 33,095 Retained profit for the period 1,730 Issue of share capital under share option scheme 11 Movement on revaluation reserve (600) -------- At 30 June 2001 34,236 -------- 8) Reconciliation of operating profit to operating cash flow Six Months to Six Months to Year to 30 June 2001 30 June 2000 31 December 2000 £000 £000 £000 Operating profit 4,000 4,406 10,565 Depreciation, amortisation and profit/loss on disposal of assets 798 732 1,659 Working capital increase (11,644) (4,227) (3,567) -------- -------- -------- Net cash flow from operating activities (6,846) 911 8,657 -------- -------- --------

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