Final Results

Severfield-Rowen PLC
31 March 2004



31 March 2004


                             2003 Full Year Results



Severfield-Rowen Plc, the market leading structural steel group, announces its
full year results to 31 December 2003.


Financial Headlines


  • Turnover up 8.1% to £170.2m   (2002: £157.4m)

  • Group operating profit up 21.2% to £9.3m  (2002: £7.7m)

  • Group operating margins improved to 5.48% (2002: 4.89%)

  • Basic earnings per share up 21.5% to 30.48p  (2002: 25.08p)

  • Dividend increased 21.4% to 17.0p per share (2002:14.0p)

  • Strong financial position at year end with nil gearing and gross cash
    balances of £17.2m  (2002: £11.4m)


Operational Headlines


  • All core businesses performing profitably

  • Rowen rationalisation and re-focusing completed successfully

  • Significant Heathrow, Terminal 5 contract progressing well

  • Success of plate and paint lines continues with new second paint line
    built and operational during year.


Outlook


  • Heathrow, Terminal 5 project continues through to 2006 giving a bedrock of
    work for the Group

  • Excellent order book of £180 million including the recent significant
    contract award for the Arsenal Football Stadium.


Commenting on the results, Peter Levine, Chairman said:


'The Group's results for 2003, which are slightly ahead of the Board's
expectations, demonstrate a significantly improved profitability over the
previous year, all the more notable taking into account the 2003 downturn in the
London commercial property market and overall uncertain economic environment.

The year has begun in line with our expectations and, whilst the industry
remains very competitive, the Board is looking forward to the remainder of the
year with confidence'.


Enquiries

Severfield-Rowen plc

Peter Levine, Chairman                           01132 469 993 and 07802 312249
Peter Davison, Finance Director                  01845 577 896


Financial Dynamics

Peter Otero                                      020 7831 3113




CHAIRMAN'S STATEMENT


Introduction

The Group's results for 2003, which are slightly ahead of expectations,
demonstrate a significantly improved profitability over the previous year and
emphasise its market leading position.

The Group's figures are all the more notable taking into account the downturn in
the London commercial property market and the uncertain economic environment of
2003.  The already strong financial position of the Group, further enhanced by
these results, places the Group at a demonstrable advantage over its peers in
its market place.  This is reflected in the recent award of the major structural
steel package for the new Arsenal Football Stadium.

All core businesses of the Group performed profitably with the rationalisation
and re-focusing of Rowen early in the year being completed smoothly.  The
results include £640,000 of redundancy costs at Rowen.

Though the industry remains competitive, the Directors view 2004 with
confidence.


Overview

In 2003 the Group improved operating profits to £9.3m (2002: £7.7m) on an
increased turnover of £170.2m (2002: £157.4m).  Profit before tax, after
associated company losses, was £9.1m (2002: £7.5m) producing, after the tax
charge of £3.0m (2002 £2.5m), increased earnings per share of  30.5p (2002:
25.1p).

The Group's financial position goes from strength to strength.  Net assets
increased to £40.7m (2002: £37.7m).  With strong year end cash balances of
£17.2m, despite capital expenditure out of cash flow of £6.5m (2002: £8.9m), the
Group has no gearing.

The major contract at Heathrow, Terminal 5 played a material role in providing a
bedrock of work for the Group, allowing the Group to concentrate on greater
value added and higher margin work.

For the industry as a whole, 2003 was a year of continued challenges and margin
pressure.  This was highlighted by the downturn in the London commercial
property market, traditionally a significant market for the sector.  It is,
however, a reflection of the Group's leading market and financial position that
real progress has been made over 2002.

Once again each one of our core subsidiaries contributed positively to the Group
results, these being Severfield-Reeve Structures based in Dalton, North
Yorkshire, Rowen Structures based near Nottingham and Watson Steel Structures
based near Bolton, Lancashire.

Severfield-Reeve Structures continued to perform very well, further underlining
its deserved reputation as the premier fabricator in the UK where its Dalton
site sets the standards for the industry as a whole.  The Fabsec plate line and
the intumescent paint line, now supplemented by a new second paint line, give
range and depth to the Group's products and contributed significantly to value
added performance.

Watson Steel Structures contributed to profitability ahead of expectations
following the successful completion of its modernisation and upgrading
programme.

Rowen Structures returned profits for the year despite the rationalisation and
re-focusing at the beginning of 2003 which saw redundancy costs of £640,000.
It has now been successfully re-engineered as a specialist steel contractor and
is performing a good service in that regard including fabrication of steel
staircases for Heathrow, Terminal 5.


Dividend

Reflecting the Board's confidence in the future of the Group and its strong
financial position, the Board is pleased to increase the full year dividend to
17.0 p per share, which is covered 1.8 times by earnings.  The final dividend of
10.75p per share (2002: 8.75p) is payable on 8 June 2004 to shareholders on the
register on 14 May 2004.

Directors Remuneration, Proposed new Share Strategy Plan and Annual Bonus Scheme

Following a thorough review of remuneration for the Executive Directors
undertaken with the benefit of independent expert advice, the Remuneration
Committee has concluded that a Share Matching Plan combined with a new Annual
Bonus Scheme should replace the existing Scheme.

The new proposals will be put forward for approval by the Shareholders at the
forthcoming Annual General Meeting to be held on 4 June 2004 and whilst fuller
details will be set out in the Remuneration Report in the  Annual Report, the
proposals are in line with best practice and, in particular, the Combined Code
requirements as well as the guidelines set out by the Association of British
Insurers.


Nomination Committee

To complement the  existing Audit and Remuneration Committees of the Group, the
Company has constituted a Nomination Committee, the majority of whose members
are independent non-executive directors.

The principal task of the Committee will be to deal with key appointments and
related employment issues.


Outlook

The Group's current expectations are for a year of continual progress
underpinned by the outstanding  order book of £180 million.

The Board is resolved to continue its policy of carefully managed growth and
prudent use of resources combined with focused capital investment with a
particular emphasis on new value added areas of the business to enhance Group
margins.

It is particularly gratifying to recognise the strength, expertise and loyalty
of the Group's management and workforce.  Without them the Group could not
achieve the Board's aim of maintaining the reputation of Severfield-Rowen as a
centre of excellence for the industry.

The year has begun in line with our expectations and whilst the industry remains
very competitive, the Board is looking forward to the remainder of the year with
confidence.


Peter Levine

Chairman




OPERATIONAL REVIEW


Core Business Overview

The core businesses of the Group in 2003, Severfield-Reeve Structures, Watson
Steel Structures and Rowen Structures, continued to trade profitably despite the
challenging market conditions.  When viewed in the context of the industry as a
whole, and the downturn in the London commercial property market, the results
are particularly noteworthy.


Severfield-Reeve Structures

The business continued to enhance its reputation with a number of contracts
undertaken in a wide variety of areas and on a number of projects, including:

  • Rolls-Royce building in Glasgow for the manufacture of turbine blades

  • Two large office developments in Manchester - Hardman Boulevard and
    Spinningfields

  • Power station in Spalding, Lincolnshire

  • Office development in Belgravia

  • New waste treatment facility at Arsenal, North London

  • State-of -the-art music, performing arts and media centre at Newcastle
    College

  • New Sainsbury in Belfast, Northern Ireland

  • New warehouse for Pirelli tyres, Carlisle

  • Multi storey car park at the world famous Addenbrookes Hospital, Cambridge

  • Two storey office development for the Inland Revenue at Longbenton,
    Newcastle

  • Retail and car park development at Fremlin Walk, Maidstone


The current year has commenced in line with expectations.

Apart from the Heathrow, Terminal 5 project for BAA where the work is divided as
appropriate between our Group companies, new contracts for Severfield-Reeve
Structures include:


  • Twelve storey commercial development on the old Spitalfields  market site,
    London

  • Three super hangars for the Integrated Aircraft Maintenance Facility  at
    RAF St. Athan, Vale of Glamorgan near Cardiff

  • 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


During the year a second intumescent paint line was constructed and contributed
to profitability.  Focused capital investment and constant monitoring of
overheads continue to be made to ensure that our market leadership and
production efficiencies are maintained and that the business is kept cost
efficient and competitive.

Yet again the plate and intumescent paint lines continued to exceed the Board's
expectations and are representative of the Group's market innovation.  The fire
engineered beam is continuing to be developed.


Rowen Structures

The year saw Rowen re-engineered and re-focused as a specialist steelworker
capable of manufacturing value added products for the Group.  However,
importantly for the Group, the valuable expertise that Rowen's employees have
developed in key areas such as airport work has been retained and this
specialist expertise is vital to the Heathrow, Terminal 5 contract and other
work for BAA.

The contracts  undertaken by Rowen in 2003 included:

  • Redevelopment of the old Westminster Hospital into luxury flats

  • Heathrow Terminal 1 eastern extension baggage hall

  • Heathrow Terminal 3 Pier 5 segregation

  • Gatwick Pier 2 South Terminal segregation

  • Gatwick pier connector between Pier 3 and existing terminal


Contracts ongoing for 2004 include several projects for BAA at various UK
airports.


Watson Steel Structures

During 2003 a further £900,000 was invested in buildings and plant and machinery
to improve the production process.  Results for the second full year of
ownership of Watson were excellent in the context that the business, together
with its valuable freehold land and buildings, had been purchased for a total of
£2.5 million in late 2001.

The expertise of its workforce is renowned in the industry and Watson is
invariably in contention  where complex and heavily engineered structures are
required.

Contracts performed in 2003 included:

  • Extension to St. Pancras station roof - for the Channel Tunnel Rail Link

  • Elevated roadway - new access roadway for Dover docks

  • Cheltenham Racecourse - multi-functional arena building

  • Gogaburn Bridge, Edinburgh - access to new Royal Bank of Scotland HQ



New contracts for 2004 include:

  • 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.


With a full workload for 2004  Watson is on course for another successful year.


Steelcraft Erection Services

During 2003 Steelcraft continued to provide invaluable support to the Group and
remains an integral part of the Group's success.  Whilst dedicated to providing
services only to the Group, Steelcraft is believed to be the largest single
structural steel erection business in the UK.


Severfield-Reeve Projects

Although the results in 2003 for this non-core subsidiary, by its previous high
standards, proved slightly disappointing principally due to the volume of work
actually performed, indications are that work already secured for 2004 will
enable it to have a substantially better year.

Organisational changes have recently been made to give added responsibility to
the company's senior management with the intention of increasing motivation,
personal performance and profitability.

The directors of Severfield-Rowen Projects are optimistic about the coming year
and are confident that the company will continue to provide the Group with an
ongoing profitable and reliable service.


Severfield-Reeve International

Our International subsidiary, which also looks after our Power and Petrochemical
projects, both at home and overseas, continues to progress.  We have
successfully completed two projects in the year, these being a Power Plant in
Spalding and a Chemical Process Plant in Hull.

We were also awarded a significant Oil and Gas project for Sakhalin Island, the
Russian Federation, which will be completed in the coming year.

Whilst the international market remains difficult given the continued strength
of sterling, we are confident that further opportunities will arise in the near
future.


Conclusion

The Group remains the clear market leader, with each of our three core
subsidiaries and their range of expertise and production being highly regarded
within the industry.  The Group has put in place a solid platform for success in
the medium to long term and this is demonstrated by these results.

The excellent order book of the Group, including the ongoing Heathrow, Terminal
5 contract, reinforces its unrivalled position in an industry which overall is
expected to continue to face competitive pressures over the short to medium
term.

As ever, our efforts for 2004 remain focused on providing the best returns for
our shareholders.  This includes continuing with our efforts to ensure effective
management control and efficiencies within our Group, whilst delivering to our
customers the level of quality, service and commitment which they expect from
the industry's market leader.



John Severs

Managing Director



Financial Review


Overview


The Group's results for the year ended 31 December 2003 show a profit before tax
of £9.12 million on turnover of £170.15 million, increases of 21.3% and 8.1%
respectively over that achieved in the previous year.  This is an exceptional
result in view of the uncertain conditions affecting our market place and is
slightly ahead of market and management expectations.  The Group has continued
to strengthen its position as the market leader in terms of financial efficiency
and productivity performance.

The basic earnings per share are 30.48p, an increase of 21.5% over 2002.
Consequently, it is recommended that the total dividend for the year be
increased by 21.4% to 17.0p per share, giving a dividend cover of 1.8 times.

It is particularly pleasing that the year ended with the Group having a gross
cash balance of almost £17.2 million and with no gearing.  Net assets increased
by 7.7% to £40.7 million.


Operating Profit

The Group's operating profit increased by 21.2% to £9.32 million with operating
margins increasing to 5.48% from the 4.89% achieved in 2002.  In 2002 the
Group's results first incorporated those of its two associated companies,
Kennedy Watts Partnership Limited and Fabsec Limited, of which the Group owns
25.1% and 25% respectively.  In 2003 the Group's share of these two companies'
results amounted to a net operating loss of £142,000 thereby reducing the total
profit before tax of the Group, after a net interest charge for the Group of
£56,000, to £9.12 million, an increase of 21.3% over the previous year.

These results are also affected by a one-off charge in the first half of the
year of £640,000 in relation to redundancy costs at Rowen Structures Limited as
a consequence of its rationalisation and re-focusing at that time.


Taxation

The tax charge of £2.96 million represents an effective tax rate of 32.45% on
pre-tax profits for the year compared with 33.20% in the previous year.  These
effective rates are higher than the prevailing rate of 30% due to the
adjustments made in respect of disallowable  expenditure incurred during the
year.  In addition, no tax relief has been recognised in respect of the
continuing losses incurred by Fabsec Limited.


Earnings Per Share

Basic earnings per share is 30.48p, an increase of 21.5% over the previous year.
This calculation is based on the profit after taxation of £6,161,000 and
20,210,711 ordinary shares, being  the weighted average of the number of shares
in issue during the year.

The diluted earnings per share figure of 30.47p is not materially different from
the basic calculation.  This is calculated using the same profit figure and
20,219,657 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 10.75p per share (2002: 8.75p)
bringing the total dividend for the year to 17.0p per share.  This total
dividend represents a 21.4% increase over the dividend of 14.0p per share paid
for 2002.  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 8 June 2004 to shareholders on the register on
14 May 2004.  The ex-dividend date will be 12 May 2004.


Balance Sheet

The Group's balance sheet continues to strengthen with shareholders' funds
increasing by £2.9 million to £40.7 million.  This equates to a net asset value
per share at 31 December 2003 of 200.6p, compared with 186.9p at the end of
2002.

The Group's balance sheet now has fixed assets totalling almost £32 million.
Depreciation charged in the year amounted to over £2 million.

As in previous years we have continued to invest in our business.  Whilst lower
than the level of recent years, capital expenditure during 2003 still amounted
to almost £6.5 million.  This included the building of a second intumescent
paint line at Severfield-Reeve Structures Limited's production facility at
Dalton at a cost of £1.2 million.

A valuation of the Group's land and buildings has recently been carried out, the
result of which was materially in line with the carrying value of the assets in
the balance sheet.


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 by way of further loans to that
company in 2003.  The total investment by the Group as at 31 December 2003
amounted to £491,000.  At the moment, Fabsec is heavily involved in technical
and market development and, therefore, the results for the year to 31 December
2003 show a loss for the period.  The Group's 25% share of this loss amounted to
£150,000.

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
associated companies to £142,000.


Cash Flow

Management of the Group's cash continues to be of prime importance and is
tightly controlled.  It is therefore particularly pleasing  to report that the
Group ended the year with a record positive cash balance of £17.18 million.

During the year £17.64 million was generated from operating activities.
Outflows of cash during the year included dividends paid of £3.01 million,
corporation tax paid of £2.20 million and the purchase of fixed assets, net of
sale proceeds received, of £5.79million.  As a result the cash balance increased
from the end of 2002 by £5.77 million.

Borrowings, represented primarily by amounts due on hire-purchase contracts,
amounted to £1.42 million.

Consequently, the Group had net funds available at the year end of £15.77
million, an increase of £6.61 million from the end of 2002.


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  treasury policies.


Summary

The Group has had a very successful year with significant increases in turnover,
profit before tax and the year end cash balance.  It continues to improve its
very 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 2003


                                                                    2003                     2002
                                                                   Total                    Total
                                                                    £000                     £000

Turnover - continuing operations                                 170,152                  157,418


Cost of sales                                                  (157,353)                (146,030)

Gross profit                                                      12,799                   11,388



Distribution costs                                                 (610)                    (580)
Administration expenses                                          (2,948)                  (3,196)

                                                                   9,241                    7,612


Other operating income                                                78                       78

Group operating profit - continuing operations                     9,319                    7,690



Share of associates'
operating loss                                                     (142)                    (164)

                                                                   9,177                    7,526


Interest payable and similar charges                                (56)                      (7)

Profit on ordinary
activities before tax                                              9,121                    7,519


Tax on profit on ordinary activities                             (2,960)                  (2,496)

Profit on ordinary activities
after tax for the financial year                                   6,161                    5,023


Dividends payable to
equity shareholders                                              (3,429)                  (2,817)

Profit retained,
transferred to reserves                                            2,732                    2,206


Earnings per share
            Basic                                                30.48p                   25.08p
            Diluted                                              30.47p                   25.05p

Dividends per share
            Paid                                                  6.25p                    5.25p
            Proposed                                             10.75p                    8.75p

Total                                                            17.00p                   14.00p



Consolidated Balance Sheet
31 December 2003

                                                             2003                            2002
                                                             £000                            £000
Fixed assets

Intangible assets                                             170                             180
Tangible assets                                            31,148                          28,069
Investments                                                   636                             629

                                                           31,954                          28,878


Current assets

Stocks                                                      3,316                           5,742
Debtors                                                    35,223                          32,571
Cash at bank and in hand                                   17,184                          11,417

                                                           55,723                          49,730


Creditors - amounts falling due
within one year                                          (44,120)                        (37,613)


Net current assets                                         11,603                          12,117

Total assets less current                                  43,557                          40,995
liabilities



Creditors - amounts falling due
after more than one year                                    (623)                         (1,240)


Provisions for liabilities and
charges                                                   (2,279)                         (2,021)
                                                          
                                                           40,655                          37,734


Capital and reserves

Called up share capital                                     2,027                           2,018
Share premium account                                       9,411                           9,231
Merger reserve                                                114                             114
Capital redemption reserve                                     25                              25
Profit and loss account                                    29,078                          26,346

Equity and total shareholders'
funds                                                      40,655                          37,734
                                                           


Consolidated Cash Flow Statement
For the year ended 31 December 2003

                                                                 2003                        2002
                                                                 £000                        £000

Net cash inflow from operating activities                      17,635                      16,304
Returns on investments and servicing of finance                  (70)                           6
Taxation                                                      (2,196)                     (2,467)

Capital expenditure and financial investment                  (5,785)                     (8,141)
Acquisitions and disposals                                      (157)                       (647)
Equity dividends paid                                         (3,007)                     (2,784)

Cash inflow before use of liquid
resources and financing                                         6,420                       2,271
Financing                                                       (653)                     (4,272)
                                                                
Increase/(decrease) in cash in the year                         5,767                     (2,001)




Reconciliation of net cash flow to movement in net funds

                                                                 2003                        2002
                                                                 £000                        £000

Increase/(decrease) in cash in the year                         5,767                     (2,001)
Cash flow from movement in loans and hire-purchase                
contracts                                                         842                       4,994

Change in net funds from cash flows                             6,609                       2,993
Loan acquired with subsidiary                                       -                       (107)
New borrowings                                                      -                       (288)
New hire-purchase contracts                                         -                       (313)

Movement in net funds in the year                               6,609                       2,285
Net funds at 1 January                                          9,159                       6,874

Net funds at 31 December                                       15,768                       9,159




Supplementary Statements
For the year ended 31 December 2003


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
                                                                   2003                        2002
                                                                   £000                        £000

Profit for the financial year                                     6,161                       5,023
Dividends                                                       (3,429)                     (2,817)
Issues of shares                                                    189                         722

Net addition to shareholders' funds                               2,921                       2,928
Opening shareholders' funds                                      37,734                      34,806

Closing shareholders' funds                                      40,655                      37,734


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 2003 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 12 May 2004.  A copy of the statutory accounts 
     for the year ended 31 December 2002 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 2003
     is based on the profit after taxation of £6,161,000 (2002: £5,023,000) and
     20,210,711 (2002: 20,024,284) 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 £6,161,000 (2002: £5,023,000) and 20,219,657 (2002: 20,050,587) 
     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 2002 Annual Report.



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