Final Results - Year Ended 31 December 1999
Severfield-Rowen PLC
29 March 2000
Severfield-Rowen Plc
1999 Preliminary Results
Strong result in challenging conditions
Severfield-Rowen Plc, the structural steel group, today announces its
preliminary results for the year ended 31 December 1999.
Overview
* Turnover £112.0m (1998: £129.8m)
* Pre-tax profit of core business £9.8m (1998: £11.6m), significantly
exceeding expectations, despite challenging conditions
* Group pre-tax profit, before exceptional losses, £8.8m (1998: £10.2m)
* Increase in group trading operating margin to 8.1%
(1998: 7.9%),
* Exceptional loss before tax of £2.9m on sale of principal Manabo business
* Total dividend maintained at 12.0p
* Nil gearing with strong year end cash balance of £4.9m
* Record order book in excess of £70m at year end
* Building of fifth production line commenced at Dalton
* Market leadership position to be maintained
Commenting on the results, Peter Levine, Chairman, said:
'In what was a difficult year for the structural steel sector, the 1999
results of Severfield-Rowen reflect a most creditable performance and
demonstrate the sound progress of the Group's core business. During the
year Severfield-Rowen consolidated its leading position in the UK
structural steel market and ended the year on a high note with a record
order book of £70 million, a strong cash balance and an expansion of its
production capabilities.'
'We expect the strength of the Group to grow in its respective markets and
2000 to be a year of solid progress in the context of challenging market
conditions.'
For further information:
Severfield-Rowen Plc 020 7831 3113 - 29 March 2000
Peter Levine, Chairman Thereafter 01132 469 993
Peter Davison, Finance Director Thereafter 01845 577 896
Financial Dynamics
Sarah Marsland/Richard Mountain 020 7831 3113
PRELIMINARY STATEMENT
The Group's results for the year ended 31 December 1999 were most creditable
against a background of challenging market conditions in the structural steel
industry. Returns in the core business of design, fabrication and erection of
structural steelwork significantly exceeded expectations.
In March 2000 the principal business and assets of the loss making subsidiary
Manabo were sold, with the resulting loss on sale being provided for in full
in 1999.
Financial Results
Group turnover fell by 13.7% to £112.0m (1998: £129.8m) and operating profit,
before exceptional losses, was £9.1m (1998: £10.2m). The loss on sale of
Manabo was £2.9m.
The Group's operating profit reduced by 11.2%, prior to any write-off due to
the sale of the assets of Manabo. However, the overall Group operating margin
increased from 7.9% in 1998 to 8.1% in 1999 with the operating margins in
structural steelwork increasing from 8.7% to 9.0% respectively.
The effective tax charge for the year was 30.8% compared with 26.7% in the
previous year. The low rate in 1998 was the result of the rollover of
goodwill on the sale of the business and assets of Structural Metal Decks Ltd.
Basic earnings per share were 20.5p (1998: 43.9p). This calculation is based
on the profit after taxation of £4,103,000 and 20,013,133 ordinary shares,
which is the weighted average number of shares in issue during the year. This
calculation however reflects the effect of the write-off of £2.85m of fixed
assets and stock as a result of the sale of the business of Manabo, which
accounts for 10.3p per share.
Adjusted earnings per share for the year ended 31 December 1999 were 30.8p
(1998: 35.9p). This is based on the profit after taxation, excluding the
exceptional loss, of £6,169,000 (1998: £7,116,000) and 20,013,133 (1998:
19,842,464) ordinary shares.
The year ended with nil gearing and a cash balance of £4.9m. Net assets,
representing shareholders funds, increased by 7.8% to £30.2m. This equates to
a value per share at 31 December 1999 of 150.6p, compared with 140.7p at the
end of 1998.
Dividend
Despite a reduction in operating profit the Board has maintained the total
dividend at 12.0p. This move reflects the Directors' continued confidence in
the Group's core business. Dividend cover remains at a most satisfactory
level of 2.57 times adjusted earnings. The final dividend is payable on 1
June 2000 to shareholders on the register on 8 May 2000.
Share Buy Back
At the Annual General Meeting on 26 May 2000 the Company will ask shareholders
to renew the authorisation of the Board to purchase for cancellation up to 10%
of the issued share capital of the Company. This authority will be exercised
only when market conditions are appropriate. To date no purchases have been
made.
Acquisition
In January 1999, Severfield-Rowen Plc purchased a 25.1% strategic stake in
Kennedy Watts Partnership Ltd, a CAD/CAM steelwork design company. The total
consideration, including costs, was £464,000 of which £408,000 was paid by the
issue of £136,912 10p ordinary shares of Severfield-Rowen Plc and the balance
in cash.
Disposals
The comparative figures for 1998 reflect the sale of the business and assets
of Structural Metal Decks Ltd in July of that year. The consideration was
£1.80m and resulted in a profit on sale of £1.68m which was included in the
accounts as an exceptional item.
Review of Operations
Core Business Overview
In the face of challenging conditions the returns in the core business of our
Group, comprising primarily Severfield-Reeve Structures and Rowen Structures,
significantly exceeded expectations. Key features of the core business in
1999 were:
* operating margin increased to 9.0% (1998: 8.7%);
* pre-tax profit of £9.8m (1998: £11.6m);
* a record £70m order book at the close of the year; and
* commencement of the building of a fifth production line at our Dalton site.
Pressure on margins was evident throughout the year and a calculated decision
was taken not to buy turnover. This together with efficiencies and a greater
emphasis towards negotiated contracts helped mitigate external market effects.
As a result operating margins increased in 1999.
The year ended well and in January 2000 the Group had a record order book of
£70m.
Reflecting the increase in demand, building of the fifth production line at
Dalton commenced in December 1999. When operative this line will increase
average weekly production from 1,100 tonnes to 1,400 tonnes. This underpins
our view of Dalton as the single largest and most efficient site for
structural steel production in Europe.
Severfield-Reeve Structures
Production efficiency continued at an outstanding level during 1999. The
operating efficiencies achieved by the Company are already unsurpassed within
the industry and the addition of line 5 is expected to consolidate this
position.
Contracts were undertaken in a wide variety of sectors during the year
including the first stage of the Paternoster Square redevelopment at Christ
Church Court in London, hospitals in Glasgow, Edinburgh and Durham, a number
of new power generation projects and the new exhibition centre, Excel, in
Docklands, London. International work continued with contracts including a
hotel in St Lucia, a power station in Egypt and further oil and gas work in
Kazakhstan, the latter both for Bechtel.
The year 2000 has started very satisfactorily for Severfield-Reeve Structures.
While general market conditions are still challenging, the order book remains
at a record level.
New contracts include:
* A major retail development at Ocean Terminal, Leith
Docks, Edinburgh;
* The Lowry Galleria entertainment centre project
Manchester;
* Extension to town centre shopping complex in Basingstoke
; Caterpillar Production Facility in Leicester; and
* Office blocks at Bishopsgate and Northcliffe House in the
City.
Relative to the prevailing market conditions in our industry Severfield-Reeve
Structures produced a strong performance in 1999. Although there is some
evidence of renewed pressure on margins, taking into account the strength of
our order book and the operating efficiencies of our Dalton Site, Severfield-
Reeve Structures is well positioned for 2000.
Rowen Structures
Rowen Structures performed satisfactorily in 1999. Some of the fabrication
work previously sub-contracted by Rowen is now being brought in-house to be
fabricated at either Nottingham or Dalton. The beneficial effect of this
continues to be felt in 2000.
A range of major contracts were performed by Rowen in 1999. These included a
prestigious office development at Woolgate Exchange in London, the Terminal 3
expansion at Heathrow, a pharmaceutical facility for Pfizer in Sandwich, the
ongoing Brindley Place office development in Birmingham and the South Terminal
extension at Gatwick.
Contracts for 2000 include:
* Stansted Terminal Extension for BAA;
* North Terminal Extension at Gatwick for BAA;
* A large leisure and residential development in
Birmingham;
* A large distribution depot for Sainsbury in Haydock; and
* A theatre complex in Durham.
The current year is expected to show that Rowen will continue to make a
positive contribution to the success of the Group.
Steelcraft Erection Services
During 1999 the continuing importance and value of Steelcraft as the in-house
erection service for the Group was demonstrated. Despite only erecting
structures for the Group it is now believed to be the largest and most
efficient erection company in the UK, judged in terms of number of employees
and tonnage erected.
An example of the performance of Steelcraft in 1999 was in the erection of
9,000 tonnes of steelwork at Excel, the Exhibition Centre for London, in what
is believed to be a record erection programme for the capital of 16 weeks.
Severfield-Reeve Projects
Severfield-Reeve Projects continued to perform satisfactorily in 1999 with
turnover and profit before tax ahead of budget.
1999 also saw the conclusion of lengthy negotiations with a major client which
in itself will provide a significant contribution to the Company's performance
in 2000. The Company also gained valuable contracts from a number of new
clients which have helped to establish a solid foundation for the future.
Manabo
On 3 March 2000 the sale of the principal business and assets of Manabo was
completed. The initial sale proceeds received were £2.1 million with a
further £600,000 payable in two equal instalments over the next 2 years. In
addition there is a variable royalty payment over a five year period, up to a
maximum of £475,000. The effect of the sale on the Group results for 1999 was
a £2.9 million write down of assets.
The remaining parts of the Manabo business relate to the manufacture and sale
of cleaning and knife sharpening machines which are non-trading. The Manabo
losses incorporated in the 1999 accounts include a write-down to net
realisable value of all its assets. As such no material adverse consequences
will affect the current year. At the time of writing this statement
discussions are continuing with a number of parties to dispose of the
remainder of Manabo.
Outlook
The Group is rightly proud of its achievements. It is the unsurpassed leader
in its UK market place, at the leading edge of technology and efficiency,
achieving unmatched margins through genuine innovation and good business
practice, and making credible profits, with cash generation and with solid and
valuable assets.
The year 2000 will see Severfield-Rowen returning to concentrating on its core
business. The Board is looking forward to facing the challenges which are
still being confronted in the structural steel industry and is confident that
the Group will continue to maintain its market leadership. It is also
intending to develop the business through either organic or acquisitive
growth, as and where circumstances permit.
We expect the strength of the Group to grow and 2000 to be a year of solid
progress in the context of a challenging market.
Severfield-Rowen Plc
Consolidated Profit and Loss Account for the year ended 31 December 1999
Continuing Discontinued Operations 1999
Operations
Normal Exceptional TOTAL TOTAL
Items
£000 £000 £000 £000 £000
Turnover 111,155 839 - 839 111,994
Cost of Sales (99,018) (1,002) (1,872) (2,874) (101,892)
------- ------ ------ ------ ------
Gross profit 12,137 (163) (1,872) (2,035) 10,102
Distribution
costs (361) (457) - (457) (818)
Administration
expenses (1,868) (315) - (315) (2,183)
------- ------ ------ ------ ------
9,908 (935) (1,872) (2,807) 7,101
Other
operating
income 59 32 - 32 91
------ ------ ------ ------ ------
Operating
profit 9,967 (903) (1,872) (2,775) 7,192
Loss on
disposal of
assets in
discontinued
business - - (980) (980) (980)
------ ------ ------ ------ ------
9,967 (903) (2,852) (3,755) 6,212
Interest
payable and
similar
charges (192) (95) - (95) (287)
------- ------ ------ ------ ------
Profit on
ordinary
activities
before tax 9,775 (998) (2,852) (3,850) 5,925
Tax on profit
on ordinary
activities (2,908) 300 786 1,086 (1,822)
------ ------ ------ ------ ------
Profit on
ordinary
activities
after tax for
the financial
year 6,867 (698) (2,066) (2,764) 4,103
Dividends
payable to
equity
shareholders (2,414) - - - (2,414)
------ ------ ------ ------ ------
Profit
retained,
transferred to
reserves 4,453 (698) (2,066) (2,764) 1,689
Basic earnings
per share 20.50p
Adjustment for
exceptional
items 10.32p
------
Adjusted
earnings per
share
excluding 30.82p
exceptional
item
======
Diluted
earnings per 20.32p
share
-------
Dividends per
share
Interim
dividend paid 5.00p
Final
dividend 7.00p
proposed
------
Total 12.00p
------
Consolidated Profit and Loss Account for the year ended 31 December 1998
1998 Continuing
Operations
TOTAL
£000
Turnover 129,805
Cost of Sales (116,258)
------
Gross profit 13,547
Distribution costs (952)
Administration expenses (2,452)
------
10,143
Other operating income 67
------
Operating profit 10,210
Loss on disposal of assets
in discontinued business 1,676
------
11,886
Interest payable and
similar charges (4)
------
Profit on ordinary
activities before tax 11,882
Tax on profit on ordinary
activities (3,175)
------
Profit on ordinary
activities after tax for
the financial year 8,707
Dividends payable to
equity shareholders (2,384)
------
Profit retained,
transferred to reserves 6,323
Basic earnings per share 43.88p
Adjustment for exceptional
items (8.02p)
------
Adjusted earnings per
share excluding
exceptional item 35.86p
=======
Diluted earnings per share
43.28p
-------
Dividends per share
Interim dividend paid
5.00p
Final dividend proposed 7.00p
------
Total 12.00p
------
Severfield Rowen Plc
Consolidated Balance Sheet
As at 31 December 1999
1999 1998
£000 £000
Fixed Assets:
Intangible assets - 396
Tangible assets 24,558 24,620
Investment properties 330 233
Investments 464 -
------ ------
25,352 25,249
------ ------
Current Assets:
Stocks 5,236 4,491
Debtors 25,312 23,881
Cash at bank and in hand 4,938 7,492
------ ------
35,486 35,864
------ ------
Current Liabilities:
Creditors due within one
year (27,404) (28,354)
------ ------
Net current assets 8,082 7,510
------ ------
Total assets less current
liabilities 33,434 32,759
Creditors due after more than
one year
(1,885) (3,370)
Provision for liabilities and
charges (1,399) (1,433)
------ ------
30,150 27,956
------ ------
Capital and Reserves:
Called up share capital 2,002 1,987
Share premium account 8,526 8,121
Revaluation reserve 1,609 1,536
Merger reserve 114 114
Profit and loss account 17,899 16,198
------ ------
Equity and total shareholders'
funds 30,150 27,956
------ ------
Severfield Rowen Plc
Consolidated Cash Flow Statement
For the year ended 31 December 1999
1999 1998
£000 £000
Net cash inflow from operating
activities 6,387 8,362
Return on investments and
servicing of finance (197) 7
Taxation (2,944) (2,802)
Capital expenditure and
financial investment (2,269) (5,137)
Acquisitions and disposals 344 784
Equity dividends paid (2,403) (2,230)
------ ------
Cash outflow before use of
liquid resources and financing (1,082) (1,016)
Financing (1,472) (1,310)
------ ------
Decrease in cash in the year (2,554) (2,326)
------ ------
Reconciliation of net cash flow
to movement in net funds
Decrease in cash in the year (2,554) (2,326)
Cash flow from movement in loans 1,484 1,362
and hire purchase contracts
------ ------
Change in net funds from cash (1,070) (964)
flows
Loan acquired with subsidiary - (188)
New hire-purchase contracts - (1,310)
------ ------
Movements in net funds in the (1,070) (2,462)
year
Net funds at 1 January 1999 2,651 5,113
------ ------
Net funds at 31 December 1999 1,581 2,651
------ ------
Severfield Rowen Plc
Statement of Total Recognised Gains and Losses
1999 1998
£000 £000
Profit attributable to members 4,103 8,707
of the Group
Unrealised surplus on 73 109
revaluation of properties
Foreign currency translation 12 (10)
gain/(loss)
------ -------
Total recognised gains and 4,188 8,806
losses for the year
------ ------
Reconciliation of Movements in
Shareholders' Funds
Profit for the financial year 4,103 8,707
Dividends (2,414) (2,384)
Issue of shares - net 420 52
Revaluation adjustment 73 109
Foreign currency translation 12 (10)
gain/(loss)
------ ------
Net addition to shareholders' 2,194 6,474
funds
Opening shareholders' funds 27,956 21,482
------ ------
Closing shareholders' funds 30,150 27,956
------ ------
Notes:
1. The above financial information does not amount to full accounts within
the meaning of section 240 of the Companies Act 1985. Full accounts for
the year ended 31 December 1999 have not yet been audited or delivered
to the Registrar of Companies. The Annual Report is due to be posted to
shareholders on or around 26 April 2000. A copy of the statutory
accounts for the year ended 31 December 1998 has been delivered to the
Registrar of Companies. The Auditor's Report on those accounts was not
qualified and did not contain a statement under section 237 (2) or (3)
of the Companies Act 1985.
2. The basic earnings per share figure for the year ended 31 December 1999
is based on the profit after taxation of £4,103,000 (1998: £8,707,000)
and 20,013,133 (1998: 19,842,464) ordinary shares, being the weighted
average of the number of shares in issue during the period.
The adjusted earnings per share figure for the year ended 31 December
1999 is based on the profit after taxation, excluding the exceptional
item, of £6,169,000 (1998: £7,116,000) and 20,013,133 (1998: 19,842,464)
ordinary shares, being weighted average of the number of shares in issue
during the period.
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