Final Results

Severfield-Rowen PLC 05 April 2005 5 April 2005 2004 Full Year Results RECORD PROFITS, OUTSTANDING ORDER BOOK Severfield-Rowen Plc, the market leading structural steel group, announces its full year results to 31 December 2004. £m 2004 2003 Change Turnover 204.3 170.2 +20% Operating profit 12.3 9.3 +32% Profit before tax 12.2 9.1 +34% Basic earnings per share 41.44p 30.48p +36% Dividend per share 23.0p 17.0p +35% Headlines • Group operating margins continue to improve - 6.01% (2003: 5.48%) • All core businesses performing profitably • Terminal 5 and Arsenal Stadium contracts continue to progress well • Dividend increased 64.3% over last two years • Strong financial position at year end with gross cash balances of £17.8m (2003: £17.2m) Outlook • Year commenced ahead of Board's expectations • Outstanding order book of £165 m of which 76% is non-Terminal 5 work (2003: 39%) • Group now houses four major industry brands with broad range of expertise and services • Atlas Ward acquisition a positive benefit to the Group • Buoyant demand for structural steelwork projects • Robust enquiry level going forward • Board confident of further significant progress in 2005 Commenting on the results, Peter Levine, Chairman said: 'Severfield-Rowen has had a record year with results ahead of market expectations. 'We currently expect a year of continued significant progress underpinned by the strong order book of £165m of which only 24% represents the major Terminal 5 project, down from 61% last year. 'As the Terminal 5 contract unwinds, the work going forward and the margins at which such work has been achieved point to much greater success. Indeed 2005 has begun very well and is already ahead of initial expectations. 'The Board is confident that further material progress will be achieved in 2005.' Enquiries Severfield-Rowen Plc Peter Levine, Chairman 020 7493 7888 Peter Davison, Finance Director 01845 577 896 Financial Dynamics Richard Mountain 020 7269 7121 CHAIRMAN'S STATEMENT Introduction The Group had a record year in 2004 with the results ahead of expectations. Progress was achieved throughout the core businesses with all performing profitably and producing margin improvement for the Group. The Group's unmatched reputation, enhanced by the recent acquisition of Atlas Ward, reinforces its place as the market leader and the benchmark for the entire industry. This is complemented by the excellent financial position of the Group. With the acquisition of Atlas Ward now completed Nigel Pickard, its MD, will join the Main Board. The current year has started well and is already ahead of our budget. The Directors are very optimistic that further significant progress can be achieved. Overview In 2004 the Group improved its profit before tax by 34% to £12.2m (2003: £9.1m) on an increased turnover of £204.3m (2002: £170.2m), with operating profit at £12.3m (2003: £9.3m) producing, after the tax charge of £3.8m (2003 £3.0 m), increased earnings per share of 41.4p (2003: 30.5p). The Group's strong financial position reflects the record results. Net assets increased to £44.4m (2003: £40.7 m) and, despite capital expenditure out of cash flow of £5.9m (2003: £6.5m), the Group ended the year with a gross cash balance of £17.8 m (2003: £17.2m). Whilst the major projects at Heathrow Terminal 5 and the new Arsenal Stadium are progressing well, other major work has continued in parallel and with further successful contract awards arising from demand for the Group's unmatched range of services, it has allowed the Group to concentrate on greater value added and higher margin work thereby giving a most positive post-Terminal 5 outlook. The results are set against a buoyant industry background with the increase in demand for structural steelwork forecast to continue. Each one of the Group's core subsidiaries contributed positively to the Group results, these being Severfield-Reeve Structures based in Dalton, North Yorkshire, Watson Steel Structures based near Bolton, Lancashire and Rowen Structures based near Nottingham. Severfield-Reeve Structures delivered yet another set of excellent figures further underlining its reputation as the most efficient and profitable structural steel fabrication plant in the UK. The plate line and the intumescent paint lines once again contributed to value added performance. Watson Steel Structures' progress continued under the stewardship of Peter Emerson, with a very good set of figures, demonstrating the continued success of the Group's capital expenditure programme. Rowen Structures successfully contributed to the Group's results in its first full year of trading after its 2003 re-organisation. Dividend As a result of the record results and reflecting the Board's confidence in the future prospects of the Group together with its strong cash position, the Board intends to increase the full year dividend by 35% to 23.0p per share, which is covered 1.8 times by earnings. The final dividend of 14.25p per share (2003: 10.75p) is payable on 15 June 2005 to shareholders on the register on 13 May 2005. Over the last two years the full year dividend has been increased by 64.3% (9.0p per share increase). Atlas Ward The Group completed the acquisition of Atlas Ward on 31 March 2005 for a cash consideration of £1.21m on the basis set out in our previous announcements on the subject. The acquisition brings into the Group another well known brand in the industry, with an experienced workforce and a complementary end-market and client base. This acquisition is a positive step and work has already begun planning the integration of Atlas Ward into the Group, including the implementation of a focused programme of capital expenditure. Board changes We welcome Nigel Pickard on to our Board. Nigel is MD of Atlas Ward and prior to the acquisition he demonstrated great ability in turning round a then ailing business in a short period of time and creating a company with future potential which the Group is committed to develop and take on to the next stage. Outlook The Group's current expectations are for a year of continued progress underpinned by an outstanding order book of £165m of which £125m (76%) is non-Terminal 5 related which compares very favourably to £70m (39%) in 2003. Indeed, as the major Terminal 5 contract unwinds in its significance, the work going forward and the margins at which such work has been achieved point to much greater success. The Board will continue its focused capital investment programme with a particular emphasis on the integration of Atlas Ward and new value added areas of the business to enhance Group margins. The Group's management and workforce are the cornerstone of the Group's success. The Board is greatly indebted to them and expresses to them its deep appreciation and gratitude. Without them the Group could not achieve the Board's aim of maintaining the reputation of Severfield-Rowen as a centre of all round excellence for the industry. 2005 has begun well and is already above our initial expectations. The Board is confident that further material progress will be achieved. Peter Levine Chairman OPERATIONAL REVIEW Core Business Overview In 2004 the core businesses of the Group, being Severfield-Reeve Structures, Watson Steel Structures, and Rowen Structures turned in very profitable returns in excess of our expectations at the start of that year. They were ably supported by our erection company, Steelcraft Erection Services. The Group has once again produced figures which set new standards in our industry. However constant review of systems and performance takes place to maintain our position as market leader and give enhanced services to our new clients with the increasing broad range of work the Group performs. Severfield-Reeve Structures The capital investment undertaken over the past two years on the upgrading of plant and machinery has led to increased levels of efficiency with more tonnage now being produced by fewer employees. The business continued to go from strength to strength working on a wide variety of projects including: • Twelve-storey commercial development on the old Spitalfields market site, London • New Withington Diagnostic and Treatment Centre Hospital, for the NHS, South Manchester • Six-storey retail development and transport interchange in Doncaster city centre, South Yorkshire • Specialist development of oil pipeline carrying racks on Sakhalin Island, Russian Federation • New Hospital development at Blackburn Hospital, Lancashire • Redevelopment of the Oval cricket ground's Vauxhall End stand, South London • Three-storey retail development in the centre of Hemel Hempstead Whilst the large Terminal 5 project progresses to its conclusion in 2006, we have been able to smoothly and efficiently dovetail production with other notable contracts including: • Two office developments for international law firms over-looking Tower Bridge and City Hall in the award-winning More London development • Warehouse and distribution centre on the Pioneer Business Park, Ellesmere Port, near Chester • Retail and leisure development on the old Flowers Brewery site in Cheltenham • New Tesco distribution centre in Peterborough • New research centre for Rutherford Appleton Laboratories in Chilton near Oxford • Retail development opposite BBC Television Centre, White City, London • Additional manufacturing facilities for the new Mini made by BMW at Cowley near Oxford • Redevelopment of office blocks at Aldermanbury Square, London • Development of several schools for North Lanarkshire PFI projects • Development of offices for Scottish Television in Glasgow • Development of 'Knowledge Dock' and 'Learning Resource Centre' buildings for the University of East London • Extension to the Antonine shopping centre, Cumbernauld, Glasgow • New B&Q superstore in Luton Watson Steel Structures Watson's excellent results demonstrate the commendable returns for the Group's policy of carefully managed strategic investment and Group integration. Contracts performed in 2004 included: • Channel Tunnel rail link works at St. Pancras Station, London • Arsenal Football Club Stadium and link bridges • BAE fuel test facility at Filton, Bristol • Gatwick Airport, Pier 6 connector; the world's longest over airport pedestrian bridge • Stratford and Ebbsfleet railway stations, London - for the Channel Tunnel rail link • Ongoing works at Heathrow Airport, Terminal 5 for BAA plc New contracts for 2005 include: • Footbridge spanning River Irwell, Manchester. • Steelwork to New Grandstand, Ascot Racecourse. • Tubular Arch Bridge in Bolton Town Centre. • Arch Bridge spanning River Clyde, Glasgow. • Two Grandstands, Aintree Racecourse. • Millennium Dome Arena. • Phase 2 of St Pancras Station Redevelopment. • Multi-Storey Car Park - Heathrow Airport. Rowen Structures Rowen played a very important part in the Group during 2004 especially with regard to specialist services relating to airport work. Its core expertise continues to play a crucial role within the Group. The contracts undertaken by Rowen in 2004 principally were for BAA at Gatwick as well as Heathrow. Atlas Ward With a particular expertise in the distribution warehouse market and a highly skilled work-force and complementary client base, the Group intends to integrate Atlas Ward during the course of 2005, apply a controlled capital investment programme and make use of synergies to increase margins and profitability. Contracts for 2005 include: • New warehouse facility on the outskirts of Hemel Hempstead for Astral Developments • Three storey office development for the new Aylesbury College campus • New storage and distribution facility for Kimberley Clark • New warehouse for Prologis near Swindon • Second phase food distribution warehouse near Bridgewater, Somerset Steelcraft Erection Services The year 2004 saw Steelcraft once again providing the Group with invaluable support to whom it is a dedicated service provider. It produced very good results, testament to its effective management, control and close working relationship with other members of the Group. Conclusion The Group has had a record year with the results ahead of expectations. The Group's current expectations are for a year of continued significant progress underpinned by the outstanding order book of £165m. This is a wonderful testament to the status and position which Severfield-Rowen has achieved. Enquiry levels remain robust throughout the Group against a background of buoyant industry demand. As the major Heathrow, Terminal 5 contract unwinds, the work going forward and the margins at which such work has been achieved point to much greater achievements to come. We view this coming year with great confidence. John Severs Managing Director Financial Review Once again it is very pleasing for me to report that the Group's results for the year ended 31 December 2004 show a further improvement in its financial performance with turnover, profit before tax, earnings per share, dividends per share and the year end gross cash position all reaching record levels. Profit before tax of £12.22m and turnover of £204.28m have increased 34.0% and 20.1% respectively over the figures achieved in the previous year. This is an exceptional result in a market which has been largely dominated by significant increases in the cost price of raw steel throughout the year and is well ahead of market expectations. The basic earnings per share of 41.44p is an increase of 36.0% over 2003. Consequently, it is recommended that the total dividend for the year be increased by 35.3% to 23.0p per share, giving a dividend cover of 1.8 times. It is very satisfying that the Group ended the year with an exceptional gross cash balance of £17.8m and net funds of £14.6m. Net assets increased by 9.2% to £44.4m. Turnover Group turnover has increased by 20% to a record level of £204.28m. This increased level of turnover includes a significant value in respect of one-off specialist services procured by the Group in relation to the Heathrow Terminal 5 project. These services included castings, heavy machining and box girders for the main terminal roof and the control tower. The combined value of these services was in the order of £24m. Operating Profit The Group's operating profit increased by 31.8% to £12.29m with operating margins increasing to 6.01% from the 5.48% achieved in 2003. The Group's results continue to incorporate those of its two associated companies, Kennedy Watts Partnership Limited and Fabsec Limited, of which the Group owns 25.1% and 25% respectively. In 2004 the Group's share of these two companies' results amounted to a net operating loss of £178,000 (2003: £142,000), thereby reducing the total profit before tax of the Group, after a net interest receivable figure for the Group of £111,000, to £12.22m, an increase of 34% over the previous year. Taxation The tax charge of £3.82m represents an effective tax rate of 31.26% on pre-tax profits for the year compared with 32.45% in the previous year. This effective rate is higher than the standard corporation tax rate of 30% as a result of adjustments made in respect of expenditure not deductible for corporation tax purposes along with sundry losses not available for surrender for Group relief purposes. Earnings Per Share Basic earnings per share is a record 41.44p, an increase of 36.0% over the previous year. This calculation is based on the profit after taxation of £8,400,000 and 20,269,235 ordinary shares, being the weighted average number of shares in issue during the year. The diluted earnings per share figure of 41.36p is not materially different from the basic calculation. This is calculated using the same profit after taxation figure and 20,309,730 ordinary shares, being the weighted average of the number of shares in issue during the year, allowing for the full exercise of any outstanding dilutive share options. Dividend The Board is recommending a final dividend of 14.25p per share (2003: 10.75p) bringing the total dividend for the year to 23.0p per share. This total dividend represents a 35.3% increase over the dividend of 17.0p per share paid for 2003. This is in line with the basic earnings per share increase and maintains the total dividend cover at 1.8 times earnings, a level at which the Board remains comfortable and which it is confident of maintaining in the future. The final dividend is payable on 15 June 2005 to shareholders on the register on 13 May 2005. The ex-dividend date will be 11 May 2005. Balance Sheet The Group's balance sheet continues to strengthen with shareholders' funds increasing by £3.75m to £44.4m. This equates to a net asset value per share at 31 December 2004 of 219.1p, compared with 200.6p at the end of 2003. The Group's balance sheet now has fixed assets totalling almost £35m. Depreciation charged in the year amounted to over £2m. We have continued to invest in our business with capital expenditure in the year at a similar level to the previous year at £6.4m. Associated Companies During 2001 the Company acquired a 25% shareholding in Fabsec Limited, a company involved in the development of a bespoke and fire engineered beam made out of plate. This company holds the master intellectual property rights for these and the other Fabsec family of beams the world over. It also carries out marketing and promotion. The Group benefits from these functions whilst only contributing 25% towards overheads. Fabsec Limited is not to be confused with the Group's successful and profitable plate and intumescent paint lines at Dalton which produce the Fabsec and fire engineered beams under a perpetual, no royalty licence from Fabsec Limited. Investment in Fabsec Limited has continued in 2004 by way of further loans to that company. The total investment by the Group as at 31 December 2004 amounted to £614,000. Fabsec continues to be heavily involved in technical and market development and, therefore, the results for the year to 31 December 2004 show a loss for the period. The Group's 25% share of this loss amounted to £179,000. However, it is anticipated that from 2005 the company will agree and maintain significant levels of licence fees and royalty income from both the UK and overseas which will greatly reduce, if not eliminate altogether, the losses currently generated. The Group also owns a 25.1% shareholding in Kennedy Watts Partnership Ltd, a company involved in CAD/CAM steelwork design. The Group's share of the operating profit of Kennedy Watts reduces the net operating loss arising from the associated companies to £178,000. Cash Flow Management of the Group's cash continues to be of prime importance and is tightly controlled. It is particularly pleasing, therefore, to report that the Group ended the year with a record positive cash balance of £17.85m. During the year £10.66m was generated from operating activities. Outflows of cash during the year included dividends paid of £3.93m, corporation tax paid of £2.59m and the purchase of fixed assets, net of sale proceeds received, of £4.70m. As a result the cash balance increased from the end of 2003 by £0.66m. During the year Severfield-Reeve Projects Limited took out a short-term bank loan to fund the undertaking of a specific contract. This amounted to £2.13m at the year end. This loan was re-paid in March 2005 when the total amount due on this contract was received. Total borrowings, made up of the bank loan and amounts due on hire-purchase contracts, amounted to £3.20m. Consequently, the Group had net funds available at the year end of £14.65m. Treasury Group treasury activities are managed and controlled centrally. Risks to assets and potential liabilities to customers, employees and the public continue to be insured. The Group maintains its low risk financial management policy by insuring all significant trade debtors. The treasury function seeks to reduce the Group's exposure to any interest rate, foreign exchange and other financial risks, to ensure that adequate and cost effective funding arrangements are maintained to finance current and planned future activities and to invest cash assets safely and profitably. The Group remains committed to strong financial controls, cash management and prudent accounting and treasury policies. International Financial Reporting Standards Severfield-Rowen Plc will be required to adopt International Financial Reporting Standards (IFRS) for the financial year ending 31 December 2005. The Group is making progress on the conversion project to review all existing IFRS's, is working to ensure that the procedures required to collect the necessary data are in place, and is looking to integrate swiftly the recent acquisition of Atlas Ward into this work. The first results to be prepared under IFRS will be presented in the 2005 Interim Report later this year. Within that Report the Group will also present a full re-statement of these 2004 UK GAAP figures, together with the reconciliation of the adjustments from UK GAAP to IFRS. Post Balance Sheet Event On 31 March 2005 the Group acquired the entire issued share capital of Atlas Ward Holdings Limited (Atlas) for a consideration of £1.21m in cash. Atlas, based at Sherburn near Scarborough in Yorkshire, designs, fabricates and erects structural steelwork, primarily for the distribution warehouse market. For the year ended 31 December 2004 Atlas had unaudited turnover of approximately £35m, profit before tax of £250,000 and net assets of £1m, excluding a pension scheme deficit initially estimated as at 31 December 2004 at £4.8m . No further benefits are being earned by members in the scheme. Summary The Group has had a most successful year with turnover, profit before tax, earnings per share, dividends per share and the year end gross cash balance all reaching record levels. It continues to improve its healthy financial position and is well placed for future growth and cash generation. Peter Davison Finance Director Consolidated Profit and Loss Account For the year ended 31 December 2004 2004 2003 £000 £000 Turnover - continuing operations 204,277 170,152 Cost of sales (188,145) (157,353) Gross profit 16,132 12,799 Distribution costs (662) (610) Administration expenses (3,242) (2,948) 12,228 9,241 Other operating income 59 78 Group operating profit - continuing operations 12,287 9,319 Share of associates' operating loss (178) (142) 12,109 9,177 Net finance income/(charges) 111 (56) Profit on ordinary activities before tax 12,220 9,121 Tax on profit on ordinary activities (3,820) (2,960) Profit on ordinary activities after tax for the financial year 8,400 6,161 Dividends payable to equity shareholders (4,653) (3,429) Profit retained, transferred to reserves 3,747 2,732 Earnings per share Basic 41.44p 30.48p Diluted 41.36p 30.47p Dividends per share Paid 8.75p 6.25p Proposed 14.25p 10.75p Total 23.00p 17.00p Consolidated Balance Sheet 31 December 2004 2004 2003 £000 £000 Fixed assets Intangible assets 161 170 Tangible assets 34,131 31,148 Investments 580 636 34,872 31,954 Current assets Stocks 6,678 3,316 Debtors 36,833 35,223 Cash at bank and in hand 17,845 17,184 61,356 55,723 Creditors - amounts falling due within one year (48,773) (44,120) Net current assets 12,583 11,603 Total assets less current 47,455 43,557 liabilities Creditors - amounts falling due after more than one year (429) (623) Provisions for liabilities and charges (2,620) (2,279) 44,406 40,655 Capital and reserves Called up share capital 2,027 2,027 Share premium account 9,415 9,411 Merger reserve 114 114 Capital redemption reserve 25 25 Profit and loss account 32,825 29,078 Equity and total shareholders' funds 44,406 40,655 Consolidated Cash Flow Statement For the year ended 31 December 2004 2004 2003 £000 £000 Net cash inflow from operating activities 10,664 17,635 Returns on investments and servicing of finance Taxation 109 (70) Capital expenditure and financial (2,587) (2,196) investment Acquisitions and disposals (4,701) (5,785) Equity dividends paid (123) (157) (3,930) (3,007) Cash (outflow)/inflow before use of liquid resources and financing (568) 6,420 Financing 1,229 (653) Increase in cash in the year 661 5,767 Reconciliation of net cash flow to movement in net funds 2004 2003 £000 £000 Increase in cash in the year 661 5,767 Cash flow from movement in loans and hire-purchase 909 842 contracts Change in net funds from cash flows 1,570 6,609 New borrowings (2,134) - New hire-purchase contracts (557) - Movement in net funds in the year (1,121) 6,609 Net funds at 1 January 15,768 9,159 Net funds at 31 December 14,647 15,768 Supplementary Statements For the year ended 31 December 2004 Statement of Total Recognised Gains and Losses There are no recognised gains or losses in either period other than the profit attributable to members of the Group Reconciliation of Movements in Shareholders' Funds 2004 2003 £000 £000 Profit for the financial year 8,400 6,161 Dividends (4,653) (3,429) Issues of shares 4 189 Net addition to shareholders' funds 3,751 2,921 Opening shareholders' funds 40,655 37,734 Closing shareholders' funds 44,406 40,655 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 2004 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 18 May 2005. A copy of the statutory accounts for the year ended 31 December 2003 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 2004 is based on the profit after taxation of £8,400,000 (2003:£6,161,000) and 20,269,235 (2003: 20,210,711) ordinary shares, being the weighted average of the number of shares in issue during the period. 3) The calculation of diluted earnings per share is based on the profit after taxation of £8,400,000 (2003: £6,161,000) and 20,309,730 (2003:20,219,657) ordinary shares, being the weighted average of the number of shares in issue during the period, allowing for the dilutive effect of share options. 4) The results have been prepared on the basis of the accounting policies set out in the 2003 Annual Report. This information is provided by RNS The company news service from the London Stock Exchange


Severfield (SFR)
UK 100

Latest directors dealings