Interim Results
Severfield-Rowen PLC
26 September 2000
SEVERFIELD-ROWEN PLC
Strong first half and exciting new developments
Unaudited Interim Results to 30 June 2000
Severfield-Rowen Plc, the structural steel group, today announces its interim
results for the six months to 30 June 2000.
Overview
* Turnover ahead 18% to £61.63 million (1999: £52.32 million)
* Profit before tax of £4.21 million (1999: £3.97 million)
* Basic EPS increased to 14.58p (1999: 13.69p)
* Interim dividend increased to 5.25p (1999: 5.00p), reflecting strong
current trading and the Board's confidence in the future
* Sale and lease back planned for Dalton
* New £5 million plate line to be built at Dalton
* Principal business and assets of Manabo sold on 3 March 2000
* Order book in excess of £65m at the half year
* Market leadership position maintained
Commenting on the results, Peter Levine, Chairman, said:
'Severfield-Rowen has produced another creditable result in the face of
challenging market conditions. We have invested intelligently over the
past years and we remain the UK's market leader in structural steel.
Further investment will be made at Dalton, with a new line 6 being added
for fabrication of plated products. Significantly we are also in advanced
negotiations regarding a sale and lease back of our Dalton site which,
should it proceed, will release significant money for strategic deployment
in our business.'
'We continue to focus on enhancing shareholder value, as demonstrated by
the share buy back programme, and the exciting developments announced
today, and we look forward to a strong performance from the Group at the
full year stage.'
For further information:
Severfield-Rowen Plc 020 7269 7249 - 26 September 2000
Peter Levine, Chairman Thereafter 01132 469 993
Peter Davison, Finance Director Thereafter 01845 577 896
Financial Dynamics
Richard Mountain 020 7269 7249
INTERIM RESULTS FOR THE SIX MONTHS ENDED JUNE 2000
Introduction
The first six months of 2000 have seen a very creditable performance from the
Group, with trading currently in line with budget for the full year.
As I stated in our 1999 Annual Report, we completed the sale of the principal
business and assets of Manabo on 3 March 2000. This enabled us to concentrate
on the two major subsidiaries of the Group, Severfield-Reeve Structures in
Dalton and Rowen Structures in Nottingham, both of which are involved in the
design, manufacture and erection of structural steelwork.
The Group's position as clear market leader and its reputation as the most
efficient and profitable within the UK Structural Steelwork market has been
enhanced during the reporting period.
The first six months met the Board's expectations, with margin pressure, as
anticipated, continuing from the previous year. There was evidence towards
the end of the period that margins may be stabilising, with demand and
capacity for steelwork coming more into balance. Encouragingly, the first
tentative signs of upward movement in prices are currently being seen although
it is too early to identify this as a trend.
It is pleasing to report that order levels and enquiries are very good, with
the present order book at £65 million, with some orders extending into 2001.
The majority of our contracts are in the UK market, although we have recently
been awarded our first, albeit small, order for the United States and are
currently working for Bechtel on three power stations in Turkey consisting of
over 10,000 tonnes of structural steel.
The Group's financial position gets stronger each year. Despite heavy capital
expenditure in the period, gearing was minimal at 30 June 2000 and cash
continues to be generated at a commendable rate.
Later in my statement I refer to two exciting new developments for the Group,
firstly a new plate line which will give the Group added value and higher
margins on plated products and secondly a projected sale and leaseback of our
Dalton facility which, should it proceed, will release significant money for
strategic deployment in our business.
Finance
Turnover in the period increased by 18% to £61.63 million (1999: £52.32
million) producing an increased operating profit of £4.41 million (1999: £4.05
million).
Despite the continued pressure on prices, Group margins at the operating level
only reduced to 7.1% compared to 7.7% in the corresponding period last year.
We are currently projecting that these margin levels will be at least
maintained during the second half of the year.
Profit before tax was £4.21 million (1999: £3.97 million) after an interest
charge of £197,000 (1999: £78,000). Assuming a tax charge of 30.75% (1999:
31%) basic earnings per share were 14.58 pence (1999: 13.69pence).
During the first six months of the year capital expenditure amounted to £3.26
million, primarily for the building of the 5th Production Line at Dalton.
As always we continue to manage carefully the Group's cash and at 30 June 2000
we had a positive balance of £2.54 million. Although this balance is reduced
from that of £4.94 million at 31 December 1999, it reflects the high level of
capital expenditure during the period.
Borrowings, primarily representing amounts due on hire-purchase contracts,
amounted to £3.52 million leaving the Group with net debt of £985,000 and a
gearing level of only 3%.
Share Buy Back Programme
During the course of the first 6 months the Company purchased for cancellation
a total of 63,510 ordinary shares at an average price of £2.19. Since 30 June
2000 these purchases have continued with a further 185,000 shares being
purchased for cancellation at an average price of £1.88.
Your Directors envisage that this programme will continue and that purchases
will be made by the Company when it is deemed appropriate and shares become
available.
Dividend
The strength of our current trading and the Directors' confidence in the
future have led the Board to increase the interim dividend to 5.25pence per
share (1999: 5pence per share) which is covered 2.78 times by earnings. The
interim dividend will be paid on 27 October 2000 to shareholders on the
register on 6 October 2000.
Structural Steel
The principal business of the Group is carried out by Severfield-Reeve
Structures and Rowen Structures.
It is generally acknowledged in our industry that we are the market leaders,
not only in terms of capability but also production and efficiency. Margins
remain significantly above the average for the UK steelwork sector.
The newly built production line 5 at Dalton became operational in May 2000.
Currently production at the Dalton site, believed to be the single largest
steelwork production facility in Europe, is averaging over 1,500 tonnes per
week of structural steel. Rowen Structures continues to contribute
significantly to Group results.
Projects carried out in the first 6 months included:
* Extension to town centre shopping complex in Basingstoke.
* A production facility for Caterpillar in Leicester.
* Two office blocks in the City, at Northcliffe House and Bishopsgate.
* Retail development at Ocean Terminal, Leith Docks, Edinburgh.
* Lowry Galleria entertainment centre in Manchester.
* Power stations in Egypt and Great Yarmouth for Bechtel.
* Leisure and residential development at Broadway, Birmingham.
* Terminal extension for BAA at Stansted.
* Distribution centre for J Sainsbury in Haydock.
* Distribution warehouse for Federal Express at Stansted.
Enquiry levels for projects both in the UK and world-wide, extending into
2001, are very encouraging. Many are for work of a substantial size for which
the Group is ideally suited in relation to both complexity and need for fast
track fabrication and erection on site within rigorous timescales. It is here
that the increasing reputation of our Group as the leading brand within the
steelwork industry places us at a significant advantage.
Plate Line
One of the key features behind the maintenance of our predominant position in
the UK structural steel industry has been the significant capital investment
we have made over the years.
To ensure the continuation of this position the Board has decided to commence
building a new plate line at the Dalton site. This will effectively be line 6
and will fabricate plated products for use in the core business.
Once completed, this facility will be the only purpose built plant in the UK
designed wholly around manufacturing plate. Using state of the art
technology, the plant will be cost effective with plate being fabricated at a
low average man hours per tonne. We expect to produce in excess of 15,000
tonnes of plated product per annum from this plant, which should have a
positive effect on our overall margin.
The total cost of the plate line is projected to be £5 million. The land has
been acquired and machinery ordered and it is anticipated that the line should
be in production by the middle of 2001.
Sale and Leaseback
I have previously referred to Dalton's land and buildings being an important
factor in its growth. However, these are fixed non income generating assets
and it is your Directors' responsibility to ensure that all assets of the
Group are used in the most efficient way to provide the maximum amount of
return.
Your Board is recommending that it would be in the best interests of the Group
to unlock the capital value in our freehold Dalton site by entering into a
sale and leaseback agreement with a third party investor.
Negotiations are at an advanced stage in relation to such a transaction which,
in any event, will be subject to shareholders consent. Should those
negotiations reach a satisfactory conclusion an announcement will be made at
the appropriate time and full details will be provided in a separate circular
to shareholders.
Board Appointment
On 11 July 2000, Brian Hick was appointed to the Board as an Executive
Director, responsible for our international operations. Brian is Managing
Director of our International subsidiary and is also a Director of Severfield-
Reeve Structures. He has been with the Group for 11 years and we look forward
to him playing a significant role in the future.
Outlook
Our core business is currently fabricating steelwork at record levels with
excellent order books and enquiry levels extending into 2001. With trading
currently in line with budget for the year, the Directors view the future with
confidence.
Whilst industry margins remain relatively depressed compared to those in the
past, the production efficiency of the Group ensures significantly above
industry average returns. Accordingly the Group is well placed to benefit
substantially from any potential future increase in margins/prices.
I referred above to the two developments of a new line 6 and the proposed sale
and leaseback of our Dalton facility. These should greatly assist the
continuing progress of the Group and enhance the very exciting prospects for
our business in the medium to long term.
Peter Levine
Chairman
Severfield-Rowen Plc
Consolidated Profit and Loss Account
Six Months Six Months Year
to to to
30 June 30 June 31 Dec
2000 1999 1999
Unaudited Unaudited Audited
£000 £000 £000
Turnover 61,633 52,320 111,994
-------- -------- --------
Operating profit 4,406 4,046 7,192
Loss on disposal of
assets in discontinued
business - - (980)
-------- -------- --------
4,406 4,046 6,212
Net interest payable
and similar charges (197) (78) (287)
-------- -------- --------
Profit on ordinary
activities before
taxation 4,209 3,968 5,925
Taxation on profit
on ordinary activities (1,294) (1,230) (1,822)
-------- -------- --------
Profit on ordinary
ctivities after
taxation for the period 2,915 2,738 4,103
Dividends payable
to equity shareholders (1,048) (1,001) (2,414)
-------- -------- --------
Profit retained,
transferred to reserves 1,867 1,737 1,689
-------- -------- --------
Basic earnings per share 14.58p 13.69p 20.50p
Loss on disposal
of assets adjustment - - 10.32p
-------- -------- --------
Adjusted earnings per share 14.58p 13.69p 30.82p
-------- -------- --------
Diluted earnings per share 14.52p 13.54p 20.32p
-------- -------- --------
Dividends per share 5.25p 5.00p 12.00p
Severfield-Rowen Plc
Consolidated Balance Sheet
At 30 June At 30 June At 31 Dec
2000 1999 1999
Unaudited Unaudited Audited
£000 £000 £000
Fixed Assets:
Intangible assets - 396 -
Tangible assets 25,460 24,431 24,558
Investment properties 330 233 330
Investments 464 450 464
-------- -------- --------
26,254 25,510 25,352
-------- -------- --------
Current Assets:
Stocks 4,442 5,837 5,236
Debtors 32,832 26,927 25,312
Cash at bank and in hand 2,537 4,349 4,938
-------- -------- --------
39,811 37,113 35,486
Current Liabilities:
Creditors due
within one year (31,844) (28,299) (27,404)
-------- -------- --------
Net current assets 7,967 8,814 8,082
-------- -------- --------
Total assets less
current liabilities 34,221 34,324 33,434
Creditors due after
more than one year (944) (2,639) (1,885)
Provision for
liabilities and charges (1,399) (1,572) (1,399)
-------- -------- --------
31,878 30,113 30,150
-------- -------- --------
Capital and Reserves:
Called up share capital 1,996 2,002 2,002
Share premium account 8,393 8,526 8,526
Revaluation reserve 1,609 1,536 1,609
Merger reserve 114 114 114
Profit and loss account 19,766 17,935 17,899
-------- -------- --------
31,878 30,113 30,150
-------- -------- --------
Severfield-Rowen Plc
Consolidated Cash Flow Statement
Six Months Six Months Year
to to to
30 June 2000 30 June 31 Dec
Unaudited 1999 1999
£000 Unaudited Audited
£000 £000
Net cash flow from
operating activities 911 (159) 6,387
Returns on investments
and servicing of finance (183) (28) (197)
Taxation (722) (248) (2,944)
Capital expenditure
and financial
investment (3,197) (560) (2,269)
Acquisitions and disposals 2,161 (42) 344
Equity dividends paid (1,397) (1,402) (2,403)
-------- -------- --------
Cash outflow before use
of liquid resources and
financing (2,427) (2,439) (1,082)
Financing 26 (704) (1,472)
-------- -------- --------
Decrease in cash
in the period (2,401) (3,143) (2,554)
-------- -------- --------
Reconciliation of net cash flow to movement in net funds
Six Months Six Months Year to
to to 31
30 June 2000 30 June December
Unaudited 1999 1999
£000 Unaudited Audited
£000 £000
Decrease in cash
in the period (2,401) (3,143) (2,554)
Cash flow from movement
in loans and
hire-purchase contracts 1,357 716 1,484
-------- -------- --------
Change in net funds
from cash flows (1,044) (2,427) (1,070)
New loan (1,522) - -
-------- -------- --------
Movement in net funds
in the period (2,566) (2,427) (1,070)
Net funds at beginning
of period 1,581 2,651 2,651
-------- -------- --------
Net (debt)/funds at
end of period (985) 224 1,581
-------- -------- --------
Notes:
1. The interim financial statements, which are neither audited nor reviewed
by the auditors, have been prepared on the basis of the accounting policies
set out in the company's 1999 statutory accounts. The Group has adopted
FRS15. In accordance with its transitional rules the option allowing for
annual revaluations of the and buildings is being adopted.
2. The results for the year to 31 December 1999 include those of the
discontinued business, Manabo. Manabo made a trading loss before taxation of
£998,000 during the year. In addition, there was an exceptional loss of
£1,872,000 as a result of the write down of stock, plus a £980,000 loss on the
disposal of fixed assets, the latter of which is shown on the face of this
interim profit and loss account.
3. Taxation for the six months to 30 June 2000 has been shown at the rate
estimated to be applicable for the full year.
4. The interim dividend of 5.25p per share (1999: 5.00p) will be paid on 27
October 2000 to shareholders on the register on 6 October 2000. The ex-
dividend date will be 2 October 2000.
5. The basic earnings per share figure for the six months ended 30 June 2000
is based on the profit after taxation of £2,915,000 (1999: £2,738,000) and
19,992,562 (1999: 20,003,124) ordinary shares, being the weighted average of
the number of shares in issue during the period.
The calculation of adjusted earnings per share for the year to 31 December
1999 is based on the profit after taxation, excluding the exceptional loss
made on the disposal of assets in a discontinued business. This figure
provides a more meaningful comparison.
The calculation of diluted earnings per share is based on the profit after
taxation of £2,915,000 (1999: £2,738,000) and 20,072,692 (1999: 20,224,867)
ordinary shares, being the weighted average of the number of shares in issue
during the year, allowing for the dilutive effect of share options.
6. The results for the year to 31 December 1999 are an abridged version of
the company's full accounts which carry an unqualified auditors' report and
have been filed with the Registrar of Companies.
7. The interim report will be posted to shareholders. Copies are available
from the Secretary, Severfield-Rowen Plc, Dalton Airfield Industrial Estate,
Dalton, Thirsk, North Yorkshire YO7 3JN.
8. Reconciliation of movement of shareholders' funds
£000
At January 2000 30,150
Retained profit for the period 1,867
Redemption of share capital (139)
--------
At 30 June 2000 31,878
--------
9. Reconciliation of operating profit to operating cash flow
Six Months Six Months Year to
to to 31
30 June 30 June December
2000 1999 1999
£000 £000 £000
Operating profit 4,406 4,046 7,192
Depreciation,
amortisation
and profit/loss
on disposal
of assets 732 749 1,715
Working capital increase (4,227) (4,954) (2,520)
-------- -------- --------
Net cash flow from
operating activities 911 (159) 6,387
-------- -------- --------
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