Final Results

Severfield-Rowen PLC
9 April 2002

9 April 2002



                             Severfield-Rowen Plc

                            2001 Full Year Results


Severfield-Rowen Plc, the market leading structural steel group, announces its
full year results to 31 December 2001.



Financial Headlines



  • Turnover up 13.1% to £145.8m (2000: £128.9m)
  • Operating profit of £6.5m (2000: £10.6m)
  • Basic earnings per share 22.42p  (2000: 32.32p)
  • Final dividend maintained at 14.0p per share
  • Strong gross cash balance at year end of £13.4m (2000: £5.6m)
  • Nil gearing



Operational Headlines



  • Excellent order book in excess of £77m
  • Plate production line contributing to profit
  • Sale and leaseback of Dalton site completed releasing net proceeds of
    £13.2m
  • Key acquisition of Watson Steel
  • Acquisition of Tubemasters in early 2002 to complement the business of
    Watson Steel



Commenting on the results, Peter Levine, Chairman, said:



'In the face of very difficult market conditions Severfield-Rowen has produced a
very resilient set of results, which are particularly pleasing when placed in
the context of the sector as a whole.



'The Watson Steel and Tubemasters acquisitions are in the process of being
integrated into the Group and it is already clear that these purchases, which
were financed out of existing resources were both good value and timely.



'I am pleased to report that the plate production and intumescent paint lines at
Dalton, commissioned in the summer of 2001, are proving a significant success
and are performing well ahead of forecast for both production and profitability.




'The year has started soundly, in line with forecasts, and whilst the Group is
not immune to industry price pressures, the Board looks forward to a successful
and industry beating year.'





Enquiries


Severfield-Rowen Plc                             020 7269 7291 - 9 April 2002

Peter Levine, Chairman                           Thereafter:  01132 469 993
Peter Davison, Finance Director                  Thereafter:  01845 577 896

Financial Dynamics

Peter Otero                                      020 7269 7291







CHAIRMAN'S STATEMENT



Introduction



The Group's results for 2001 reflect a resilient performance achieved in very
difficult market conditions.  These were particularly creditable results when
viewed against the backdrop of the sector as a whole and its constituent
members.  These results should also be viewed in the context of the significant
steps forward taken during the year, including the commissioning of the new
plate and intumescent paint line and the acquisition of Watson Steel.  These
events will impact favourably on the future prospects of the Group.



Overview



The Group generated operating profits of £6.5m (2000: £10.6m), on turnover of
£145.8m (2000: £128.9m), Profit before tax was £6.5m (2000: £10.3m) giving
earnings per share of 22.4p (2000: 32.3p).



The Group ended the year in its strongest ever financial position.  Net assets
increased to £34.8m (2000: £33.1m), gearing was nil and the Group had a gross
cash balance of £13.4m.  This was after taking into account cash outflows of
£11m comprising capital expenditure of £8.4m (2000: £5.6m) and £2.6m for the
purchase of Watson Steel and its associated costs, and cash inflows of £13.2m
being the net proceeds from the sale and leaseback of the Dalton site.



The effective tax charge for the year was 31.8% compared with 37.7% in the
previous year.



The results for the year were impacted by a combination of factors including the
unusually varied and complicated mix of work at the beginning of 2001 combined
with a difficult and complicated contract and the carrying over of significant
work into the current year.  These all contributed to the results not being in
accordance with our earlier forecasts.



Although the challenging market conditions in the structural steel sector
continued through the year, the Group's industry leadership and reputation was
enhanced.  The 'state of the art' and innovative plate line, together with a new
intumescent paint facility, came on stream during the course of the year and
early results are encouraging.



On 30 November 2001 we announced the acquisition of Watson Steel for a price of
£2.6m including costs.  This significant purchase was widely welcomed by our
clients and brought a further industry renowned and respected brand name within
the Group's ownership.  The purchase of Tubemasters in early 2002 is also a
welcome addition to the Group.  The Group now has three distinct subsidiaries:
Severfield-Reeve Structures based at Dalton, North Yorkshire, Rowen Structures
based in Nottingham and Watson Steel Structures based in Bolton, Lancashire.



Watson Steel Structures



At the time of the sale and leaseback of Dalton Airfield, we stated that the
Board was committed to investing the Group's financial resources to develop the
Group and therefore work harder for our shareholders.  The strong financial
position of the Group has enabled us to acquire, at very short notice, the
business and assets of Watson Steel.  On 30 November 2001 the Group announced
the completion of this purchase for a total cash consideration of £2.6m
including costs.



Watson Steel itself is one of the UK's largest construction engineering
businesses which registered a turnover of around £29m for the year ended 31
December 2001.  The purchase is another key milestone in the Group's progress
and strategy for the future.  It is not only an internationally respected brand
but also has specialist skills in relation to steelwork including bridges,
infrastructure works, tubular frame structures, plate work and pipe work, which
is highly complementary to Severfield-Rowen's businesses.  It will also play a
significant role in the Group's forthcoming work at Heathrow's Terminal 5 where
the Group is BAA's structural steelwork partner.



Tubemasters and its management team will enhance the business of Watson Steel.
The integration of both Watson and Tubemasters into the Group is continuing
successfully and we have embarked upon an investment strategy to upgrade
Watson's facilities, for which £4m has been budgeted for in 2002 and will be
satisfied by the Group's existing financial resources.



Dividend



Reflecting the directors' confidence in the future the Board has recommended a
maintained dividend of 14.0p per share, covered by earnings 1.6 times.  The
final dividend is payable on 17 June 2002 to shareholders on the register on 17
May 2002.



Board Appointments



On 7 February 2002 Tom Haughey was appointed to the Board as Commercial
Director.  Mr Haughey joins the Group from Corus where he was Commercial
Director of the division which supplied the Group with core steel supplies.  A
well known and highly respected man in our industry, Tom is already making a
significant contribution to the Group.  At the same time our Board colleague,
Peter Emerson took up the key role of Managing Director, Watson Steel
Structures.



Outlook



The outlook for the first half of the year is considered by the Board to be
generally in line with our expectations.  However, the Board is mindful that
both general and industry specific economic factors can affect results going
forward.  We do, however, have a strong forward order book in excess of £77m
with a continued significant proportion arising from negotiated contracts (this
figure does not include the major Heathrow Terminal 5 Project).  Current
industry prices, whilst starting to recover at the beginning of 2002, may be
softening but at this stage it is too early to say how this will impact on the
current year.



The Group benefits from its market leading position and is, by some way, the
most significant player in the market.  Along with our strong finances this
places the Group in an ideal position to exploit further opportunities, both in
the UK and abroad as and when they occur.



Constant monitoring and upgrading of internal information systems are being made
to ensure we have tight control over costs, especially with the Group expanding
so rapidly.  As our reputation and strength grow so does our ability to attract
talented people to the workforce at all levels.  The Group is lucky to have a
highly motivated, loyal and widely respected workforce and the Board recognises
that they, combined with a coherent and planned recruitment strategy, are the
lifeblood of the future.  We extend our sincere gratitude to all our employees
for their outstanding contribution.



To summarise, whilst it is hard to form an opinion regarding the second half of
the year, we feel that the business is well balanced, structured and in an ideal
position to take advantage of future opportunities.  We therefore look forward
to 2002 with optimism.







Peter Levine

Chairman







OPERATIONAL REVIEW



Core Business Overview



The core businesses of the Group in 2001, Severfield-Reeve Structures and Rowen
Structures, produced solid returns, although these were impacted by a
combination of factors. The results were nevertheless particularly satisfactory
when compared with the industry as a whole.



The factors which combined to depress profits below the Board's expectations at
the start of the year included an unusually varied and complicated mix of work,
a difficult project conducted for Rowen and the major £20m Bull Ring contract in
Birmingham carrying over into the present year.



Severfield-Reeve Structures



Once again the business achieved outstanding production efficiencies and
contracts were undertaken in a wide variety of areas and projects, including:



  • New Bull Ring development in Birmingham
  • Office block for Standard Life in London
  • Distribution warehouse for L M Solutions in Hatfield
  • High rise office / residential block in Cardiff
  • Mixed development in Edinburgh for Pillar Properties
  • New process facility for Huntsman Tioxide on Teesside
  • Distribution depots for Sainsbury
  • Distribution depots for Costco
  • Multi-storey car park in East Kilbride



The current year has commenced in line with our expectations.  The order book is
strong and whilst there are definite signs of increased downward price pressure
in the market place towards the middle and latter half of this year, there is
room for optimism for 2002.



New contracts include:



  • Office block in Cambridge for the Department of Farming and Rural Affairs
    and Inland Revenue
  • Factory extension in Edinburgh for British Aerospace
  • Multi-functional retail / leisure complex in Croydon
  • Residential building in Gateshead
  • A major new development at Paternoster Square in London, including the new
    home for The Stock Exchange
  • Several major office block developments in London



At the end of the year the Dalton site, including plate line six, was processing
some 2,000 tonnes of steel work per week, which is not only a record performance
for the Group but, we believe, an unmatched performance for the industry as a
whole.  Output is continuing at around these levels.



Severfield-Reeve Structures and the Dalton site in particular remain a model
example in the industry.  However, capital investment is being continued to
ensure that our leadership and efficiencies are maintained and that the business
is kept lean. Information systems have also been upgraded to ensure constant
monitoring of costs from production through to erection and completion of work.
We are placing increasing emphasis on encouraging and developing a strong middle
and senior management team.



The efficiencies and productivity of both the new plate and intumescent paint
lines have exceeded the Board's expectations and the Group looks forward to a
significant contribution from both of these facilities in the future.  Research
and development of the Group's fire beam continues.



The plate and intumescent lines are representative of the Group's market leading
innovation.  The fire engineered beam has already produced significant interest
from clients and, like the plated products already being produced in line six,
has significant potential to impact favourably on profits over the coming years.



Rowen Structures



Rowen Structures had another good year in 2001.



Rowen fully justifies its place alongside Severfield-Reeve Structures within our
Group of companies and the contribution by our workforce in Nottingham is much
appreciated.



A number of major contracts were performed by Rowen in 2001.  These included:



  • Office development in Central London
  • Refurbishment of Hampstead Theatre
  • New car park facility at Southampton Airport for BAA
  • Purpose built maintenance hanger for servicing Virgin International's new
    wide bodied aircraft at Heathrow
  • New Headquarters for the General Council, Cheltenham
  • Conversion of Royal Mail sorting office into a high class retail
    development in Central Birmingham



Contracts for 2002 include:



  • Development of the New Scottish Parliament building on the Royal Mile,
    Edinburgh
  • Multi-storey office building in Abingdon, Oxfordshire for Sophos
  • Multi-storey office building in Central London
  • Office, retail and leisure facility for Paddington Corporation
  • New headquarters for Marks and Spencer, Paddington
  • New passenger facility at Terminal 1, Heathrow
  • Development of residential flats in Leeds



Expectations for 2002 are that Rowen will make a further positive contribution
to the success of the Group.



Steelcraft Erection Services



During 2001 Steelcraft continued to provide sterling support to the Group and
remains an integral part of the Group's success.  Whilst principally providing
services to the Group, Steelcraft is believed to be the largest structural steel
erection business in the UK.



Severfield-Reeve Projects



2001 proved to be yet another successful year for this business.  Not only did
it service the constant needs of the Group, the company also worked on a number
of other significant third party contracts including the relocation of Dowding &
Mills Engineering Services from its old established premises in the centre of
York to a purpose built multi-million pound facility on the outskirts of the
City.  Severfield-Reeve Projects was responsible for providing the complete
operational factory premises and also the relocation, installation and
commissioning of all the existing engineering plant and machinery and fixtures
and fittings.



Current projections for 2002 demonstrate that the current year will be another
one of success and profitability for this business.



Watson Steel Structures



The major acquisition of Watson Steel was only completed at the end of November
2001.



Watson Steel was a very significant purchase for us, being the Group's largest
acquisition since that of Rowen Structures in 1996.  A world famous brand,
originally established in 1933, it is already working on significant projects.
Contracts for 2002 include:



  • Welsh Millennium Centre in Cardiff
  • English Institute of Sport building in Sheffield
  • Three bridges for the Channel Tunnel Rail Link
  • Naval shipyard maintenance facility in Portsmouth



Integration of Watson Steel within the Group is progressing well and the first
part of a projected two year capital expenditure programme of £6m is underway.



Current expectations are that Watson Steel will at least break-even in 2002 with
profitable results starting to come through in the following years, after the
completion of the capital expenditure programme.



Conclusion



The Group now has, within its portfolio, three great and renowned companies in
the industry, each a significant player in their own right but also possessing
complementary skills.  This, combined with the value added specialist plate and
paint lines - the former with its leading edge technology - provides a
springboard for continued prosperity of the Group in the medium to long term.



Our efforts for 2002 are focused on ensuring the best return from our newly
enlarged Group.  This includes ensuring effective management control and
efficiencies to deliver our investors the maximum possible shareholder value
against the background of what is still, as far as our industry is concerned,
challenging times.







John Severs

Managing Director









FINANCIAL REVIEW



Overview



The Group's results for the year ended 31 December 2001 show a profit before tax
of £6.5m on turnover of £145.8m.  Whilst profit before tax is lower than that
achieved in 2000 it is broadly in line with expectations and continues to be a
very good result in the difficult market conditions which continue to prevail in
the structural steel industry.  In fact this result is unmatched both within our
peer group and our industry as a whole, where the Group remains the market
leader in terms of financial efficiency and productivity performance.



The basic earnings per share are 22.4p and the total dividend for the year is
recommended to be maintained at 14.0p per share, reflecting the Board's
confidence in the future, and giving a level of dividend cover reduced to 1.6
times.  The year ended with a significantly increased gross cash balance of
£13.4m with no gearing.  Net assets increased by 5.2% to £34.8m.



Operating Profit



The Group's operating profit decreased to £6.5m with operating margins
decreasing to 4.5%.  Although less than anticipated at the beginning of the
year, these results are robust both in comparison with other companies in the
structural steel industry and when set against the very difficult trading
conditions which continue to beset the industry.



Taxation



The effective tax charge for the year is 31.8% compared with 37.7% in the
previous year.  The high rate in 2000 resulted from the claw-back of industrial
buildings allowances by the Inland Revenue of approximately £670,000 due to the
sale and leaseback of the Dalton site transaction.  Although the sale did not
take place until 2001, this liability was provided for last year through
increasing the deferred tax provision.



Earnings Per Share



Basic earnings per share is 22.4p.  This calculation is based on the profit
after taxation of £4,437,000 and 19,792,739 ordinary shares, which is the
weighted average of the number of shares in issue during the year.



Dividend



The Board is recommending a final dividend of 8.75p per share (2000: 8.75p),
bringing the total dividend for the year to 14.0p per share.  Despite the
reduction in operating profit and, hence, earnings per share, the board has
decided to maintain the dividend at 14.0p per share.  This total dividend is now
covered 1.6 times by earnings which, whilst lower than historical dividend
cover, reflects the directors' confidence for the future.



The final dividend is payable on 17 June 2002 to shareholders on the register on
17 May 2002.  The ex-dividend date will be 15 May 2002.



Balance Sheet



The balance sheet continues to strengthen with shareholders' funds increasing in
the year by £1.7m to £34.8m, which equates to a value per share at 31 December
2001 of 175.7p, compared with 167.3p at the end of 2000.



Capital expenditure during the year amounted to £8.4m, the majority of this
being attributable to the upgrade of the main fabrication plants at Dalton.
This involved the building and equipping of production line six (the plate
line).  This produces beams and other products out of plate using the very
latest technology.  Additional land was also acquired during the year at Dalton
which will facilitate further expansion plans and will provide further storage
areas for fabricated steel.



Sale and Leaseback



During the year the majority of the site at Dalton was subject to a sale and
leaseback transaction where it was sold for a cash consideration of £14m and
then leased back to the Company at an initial rent of £1.36m.  The land and
buildings comprising line six were not subject to this transaction.



Part of the sale proceeds have been used to fund the ongoing capital expenditure
of the Group and for the purchase of the business and assets of Watson Steel
towards the end of the year.  Revaluations of the Dalton site over a number of
years had led to a revaluation reserve in the balance sheet of £1.34m.  As the
property to which the revaluation reserve related was sold during the year this
reserve has been realised and transferred to the retained profit and loss
account balance.



Acquisitions



On 30 November 2001 the Group acquired the structural steelwork business and
assets of Watson Steel Limited from the AMEC Group for a cash consideration of
£2.5m plus costs.  The assets comprised the freehold land and buildings of its
fabrication site at Bolton, together with plant and machinery and fixtures and
fittings.



Goodwill arising of £112,000 has been included in the consolidated balance sheet
as an intangible fixed asset and will be amortised on a straight line basis over
20 years.



Trading results since acquisition are not material.



During the year we entered into a joint venture with three other participants
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.  The cost of this venture was £221,000 and has been included in the
balance sheet under Investments.



On 31 January 2002 the Company acquired the entire issued share capital of
Tubemasters Limited for a total consideration of £330,000.



Cash Flow



Management of the Group's cash continues to be of prime importance and is
tightly controlled.  During the year £6.1m was generated from operating
activities.  In addition £14m was generated from the sale and leaseback of the
Dalton production facility.



Outflows of cash during the year included dividends paid of £2.8m, corporation
tax of £3.0m and the purchase of fixed assets, net of sale proceeds and new
hire-purchase contracts, of £6.8m.



The acquisition of Watson Steel and the investment in Fabsec accounted for £2.8m
and the repayment of financing a further £1.2m.



During the year Severfield-Reeve Projects Limited took out a short term bank
loan to fund the undertaking of a particularly large contract.  This amounted to
£3.9m at the year end.  This loan is repayable in May 2002 when the total amount
due on this contract is receivable.



Consequently, the year brought an overall increase in cash of £7.8m, with the
Group ending the year with a positive cash balance of £13.4m.



Borrowings, represented by amounts due on hire-purchase contracts of £2.6m and
the loan outstanding of £3.9m, amounted to £6.5m.



As a result, the Group had net funds available at the year end of £6.9m and,
therefore, no gearing.



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 with reputable insurers.  The Group maintains its low risk financial
management policy by insuring all significant trade debtors.



The Group is committed to strong financial controls, cash management and prudent
accounting and treasury policies.



Summary



In relative terms, the Group has had a successful year and continues to improve
its healthy financial position.  The generation of profits and cash continues to
be very good.  The proceeds from the sale and leaseback have placed the Group in
a stronger position, enabling it to exploit further opportunities for growth,
such as the acquisition of Watson Steel and the building of line six.  It is now
in a position of unsurpassed financial strength within the structural steelwork
market.







Peter Davison

Finance Director











Consolidated Profit and Loss Account
For the year ended 31 December 2001


                                                                                  2001                       2000
                                                                                  £000                       £000

Turnover - continuing operations                                               145,786                    128,930

Cost of sales                                                                (136,722)                  (114,948)
Gross profit                                                                     9,064                     13,982
Distribution costs                                                               (392)                      (500)
Administration costs                                                           (2,254)                    (2,992)
                                                                                 6,418                     10,490

Other operating income                                                              94                         75
Operating profit                                                                6,512                      10,565

Interest payable and similar charges                                               (5)                      (241)
Profit on ordinary activities before tax                                         6,507                     10,324


Tax on profit on ordinary activities                                           (2,070)                    (3,895)
Profit on ordinary activities after tax for the financial year                   4,437                      6,429

Dividends payable to equity shareholders                                       (2,748)                    (2,748)
Profit retained, transferred to reserves                                         1,689                      3,681


Basic earnings per share                                                        22.42p                     32.32p

Adjustment for exceptional items                                                  -                         3.37p

Adjusted earnings per share, excluding exceptional items                        22.42p                     35.69p

Diluted earnings per share                                                      22.30p                     32.22p

Dividends per share

            Paid                                                                 5.25p                      5.25p
            Proposed                                                             8.75p                      8.75p
Total                                                                           14.00p                     14.00p







Consolidated Balance Sheet
31 December 2001


                                                                             2001                            2000
                                                                             £000                            £000
Fixed assets

Tangible assets                                                           21,115                          26,432
Investment properties                                                           -                              88
Investments                                                                   685                             464
Intangible assets                                                             112                               -
                                                                           21,912                          26,984

Current assets

Stocks                                                                      1,902                           4,670
Debtors                                                                    42,669                          28,739
Cash at bank and in hand                                                   13,418                           5,618
                                                                           57,989                          39,027

Creditors - amounts falling due within one year                          (41,646)                        (29,177)

Net current assets                                                         16,343                           9,850
Total assets less current liabilities                                      38,255                          36,834

Creditors - amounts falling due after more than                           (1,713)                         (1,554)
one year

Provisions for liabilities and charges                                    (1,736)                         (2,185)
                                                                           34,806                          33,095


Capital and reserves

Called up share capital                                                     1,981                           1,978
Share premium account                                                       8,546                           8,527
Revaluation reserve                                                             -                           1,335
Merger reserve                                                                114                             114
Capital redemption reserve                                                     25                              25
Profit and loss account                                                    24,140                          21,116
Equity and total shareholders' funds                                       34,806                          33,095


Consolidated Cash Flow Statement
For the year ended 31 December 2001
                                                                                  2001                       2000
                                                                                  £000                       £000

Net cash inflow from operating activities                                        6,077                      8,657
Returns on investments and servicing of finance                                   (15)                      (276)
Taxation                                                                       (3,016)                    (1,477)
Capital expenditure and financial investment                                     7,219                    (3,735)
Acquisitions and disposals                                                     (2,526)                      2,490
Equity dividends paid                                                          (2,761)                    (2,430)

Cash inflow before use of liquid
resources and financing                                                          4,978                      3,229

Financing                                                                        2,822                    (2,549)
Increase in cash in the year                                                     7,800                        680



Reconciliation of net cash flow to movement in net funds


                                                                                  2001                       2000
                                                                                  £000                       £000

Increase in cash in the year                                                     7,800                        680
Cash flow from movement in loans and hire-purchase contracts                     1,168                      2,064
Change in net funds from cash flows                                              8,968                      2,744
New borrowings                                                                 (3,968)                          -
New hire-purchase contracts                                                    (1,066)                    (1,385)
Movement in net funds in the year                                                3,934                      1,359
Net funds at 1 January                                                           2,940                      1,581
Net funds at 31 December                                                         6,874                      2,940







Supplementary Statements
For the year ended 31 December 2001


Statement of Total Recognised Gains and Losses
                                                                                  2001                       2000
                                                                                  £000                       £000

Profit attributable to members of the Group                                      4,437                      6,429
Unrealised deficit on revaluation of properties                                      -                      (251)
Total recognised gains and losses for the year                                   4,437                      6,178



Reconciliation of Movements in Shareholders' Funds
                                                                                  2001                       2000
                                                                                  £000                       £000

Profit for the financial year                                                    4,437                      6,429
Dividends                                                                      (2,748)                    (2,748)
Issues of shares - net                                                              22                          2
Purchase of shares                                                                   -                      (487)
Revaluation adjustment                                                               -                      (251)
Net addition to shareholders' funds                                              1,711                      2,945
Opening shareholders' funds                                                     33,095                     30,150
Closing shareholders' funds                                                     34,806                     33,095



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 2001 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 10 May 2002.  A copy of the statutory accounts for
the year ended 31 December 2000 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 2001 is based on the profit after taxation of £4,437,000 (2000:
£6,429,000) and 19,792,739 (2000: 19,890,551) 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 2000 is
based on the profit after tax, excluding the £670,000 additional tax charge
caused by the claw back of industrial buildings allowances, of £7,099,000 and
19,890,551 ordinary shares, being the weighted average of the number of shares
in issue during the period.






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