Interim Results

Severfield-Rowen PLC 20 September 2002 20 September 2002 SEVERFIELD-ROWEN PLC 2002 Half Year Results Severfield-Rowen Plc, the market leading structural steel group, announces its half year results to 30 June 2002. Overview • Turnover up 36% to £80m (2001: £59m) • Operating profit up 30% to £5.2m (2001: £4m) • Profit before tax up 27% to £5.1m (2001: £4.1m) • Basic earnings per share up 27% to 17.78p (2001: 13.98p) • Cash balance of £9.23m - no gearing • Dividend maintained at 5.25p, covered 3.38 times by earnings • Margins remain above average for UK steel fabrication industry • Increase demand for plate-line Fabsec beams • Successful integration of Watson Steel Structures continues Commenting on the results, Peter Levine, Chairman, said: 'Though it is disappointing that due to market factors our current margins have not shown the extent of improvement we had previously expected, our production facilities and policy of continual investment in the latest technology will keep us at the forefront of our industry and place us in the best possible position to exploit the benefits of any increase in future prices. The Group is therefore focused on increasing returns and shareholder value in the years ahead. 'The Directors are confidently looking forward to a year of notably improved profitability over the previous year and the continued enhancement of the Group's premier position in the industry.' Enquiries Severfield-Rowen plc Peter Levine, Chairman 01132 469 993 Peter Davison, Finance Director 01845 577 896 Financial Dynamics Peter Otero 020 7269 7291 INTERIM STATEMENT 2002 INTRODUCTION The Group has produced another resilient performance for the first half of 2002, resulting in an improvement of 27% in pre-tax profits over the corresponding period last year. This is all the more commendable in a period of tough and very competitive trading conditions which has recently resulted in the demise of Wescol Group plc, one of the Group's major competitors and the only other UK quoted steel fabricator. Due to the economic climate within our industry we are taking a more cautious view of the prospects for the full year and have modified our internal projections accordingly. I said in my statement in last year's Annual Report, published in May, that it was then too early to state what impact softening of prices would have on the year as a whole. Prices significantly worsened towards the end of the first six months as our competitors reduced selling prices to win work. This will impact on the second six months. Whilst we therefore are expecting a profit materially below current market expectations for the full year, we are nevertheless looking forward to another industry beating performance and profits well ahead of those achieved in 2001. The robust results for the half year continue to demonstrate our increasing market leadership, reputation and financial strength within our industry. The six months ended with a cash balance of £9.23m with no gearing. The unrivalled financial credibility we enjoy within our sector is of particular importance and the administrative receivership at Wescol has only served to enhance this. Integration of Watson Steel Structures continues and satisfactory progress is being achieved. During the first six months its production facilities at Bolton were improved significantly. Our two other core businesses of Severfield-Reeve Structures and Rowen Structures produced very good performances in these very challenging times. The softening of prices will affect margins for the full year which are not now expected to be a material improvement upon those achieved in 2001. Order levels however remain strong with the majority of work being within the UK market. Finance Turnover in the period was £79.59m (2001: £59.34m) producing an operating profit of £5.18m (2001: £4.0m). Reflecting continued pressure on prices Group margins at the operating level reduced to 6.5 % compared to 6.7% for the first half of 2001. Profit before tax was £5.09m (2001: £4.08m) after net interest payable of £93,000 (2001: interest receivable £8,000). Assuming a tax charge of 30.5% (2001: 31%) basic earnings per share were 17.78p (2001: 13.98p). During the first six months of the year capital expenditure amounted to £2m. In addition a further £3m was expended improving the production facility at Watsons. As the work was not totally finished at 30 June this expenditure is included within work in progress with the total cost of the project to be capitalised in the second half of the year. Despite this capital expenditure, we ended the period with a positive cash balance of £9.23m. Borrowings, representing amounts due on hire purchase contracts, amounted to £2.41m leaving the Group with a net fund surplus of £6.82m and, therefore, no gearing. Share Buy-Back Whilst the Company has the power to buy back its own shares, none were purchased in the reporting period. The Directors continue to monitor the situation and will not hesitate to exercise such power as and when it is appropriate taking into account the strong cash position of the Company and the Directors view of the medium to long term prospects of the Group. Dividend In line with the Group's strong financial position and the Board's confidence as to its medium to long term market and trading position going forward together with the expected outcome for the full year, the Board has decided to maintain the interim dividend at 5.25p per share (2001: 5.25p) which is covered 3.38 times by earnings. The interim dividend will be paid on 25 October 2002 to shareholders on the Register on 11 October 2002. Operations The principal business of the Group is carried out by Severfield-Reeve Structures, Rowen Structures and Watson Steel Structures. The current trading period has continued to enhance the Group's market leading position. Our production facilities, efficiencies and broad range of structural steel services are unmatched in our industry. Despite the expected reduction in margins for the full year they are anticipated to remain significantly above average for the UK steel fabrication industry. The improvements at Watsons have begun to have a beneficial effect and this acquisition is proving to be most successful. With this acquisition the Group's increased range of expertise and service is proving to be of significant benefit to our customers, particularly for the larger projects. The results from our plate-line are most satisfying and it is making a valuable contribution towards Group profitability. Fabsec beams, manufactured in the plate-line, are becoming increasingly popular with our customers and we believe they will make an impact on the structural steel market in the years to come. Projects carried out in the first six months include: • Office block in Cambridge for the Department of Farming and Rural Affairs and Inland Revenue • Major development at Paternoster Square London including the new home for The Stock Exchange • Innovative new Tesco store on stilts, Altrincham • New Ebor stand at York racecourse • Office development near Tower Bridge, London • Development of the New Scottish Parliament buildings on the Royal Mile, Edinburgh • Multi-storey office building in Abingdon, Oxfordshire for Sophos • Office, retail and leisure facility for Paddington Corporation • New passenger facility for BAA at Heathrow Terminal 1 • Multi-storey office block in Central London • Multi purpose football and rugby stadium in Hull • Several projects for BAA at Heathrow The level of orders is excellent and enquiry levels are satisfactory. Prices however have significant room for improvement. Non-Executive Director Appointment Immediately after the Annual General Meeting held in June the appointment of David Ridley was confirmed as an additional non-executive director of the Group. Outlook Whilst we are unable to predict when the current challenging market conditions will ease it is encouraging to note that our order books are strong and enquiry levels for significant projects extend well into 2003. I have in previous statements referred to the fact that we are BAA's structural steelwork partner on the Heathrow Terminal 5 project. This remains the case. Though it is disappointing that due to market factors our current margins have not shown the extent of improvement we had previously expected, our production facilities and policy of continual investment in the latest technology will keep us at the forefront of our industry and place us in the best possible position to exploit the benefits of any increase in future prices. The Group is therefore focused on increasing returns and shareholder value in the years ahead. The Directors are confidently looking forward to a year of notably improved profitability over the previous year and the continued enhancement of the Group's premier position in the industry. PETER LEVINE CHAIRMAN 20 September 2002 Consolidated Profit and Loss Account Six Months to Six Months to Year to 30 June 2002 30 June 2001 31 December 2001 Unaudited Unaudited Audited £000 £000 £000 Turnover 79,594 59,337 145,786 ---------- ---------- ---------- Operating profit 5,181 4,000 6,512 Net interest (93) 8 (5) ---------- ---------- ---------- Profit on ordinary activities before taxation 5,088 4,008 6,507 Taxation on profit on ordinary activities (1,550) (1,242) (2,070) ---------- ---------- ---------- Profit on ordinary activities after taxation for the period 3,538 2,766 4,437 Dividends payable to equity shareholders (1,043) (1,036) (2,748) ---------- ---------- ---------- Profit retained, transferred to reserves 2,495 1,730 1,689 ---------- ---------- ---------- Basic earnings per share 17.78p 13.98p 22.42p ---------- ---------- ---------- Diluted earnings per share 17.71p 13.89p 22.30p ---------- ---------- ---------- Dividends per share 5.25p 5.25p 14.00p Consolidated Balance Sheet At 30 June At 30 June At 31 December 2002 2001 2001 Unaudited Unaudited Audited £000 £000 £000 Fixed Assets: Tangible assets 22,311 16,321 21,115 Investment properties - 88 - Investments 722 464 685 Intangible assets 112 - 112 ---------- ---------- ---------- 23,145 16,873 21,912 ---------- ---------- ---------- Current Assets: Stocks 5,215 6,392 1,902 Debtors 49,344 43,576 42,669 Cash at bank and in hand 9,232 3,306 13,418 ---------- ---------- ---------- 63,791 53,274 57,989 Current Liabilities: Creditors due within one year (45,668) (32,528) (41,646) ---------- ---------- ---------- Net current assets 18,123 20,746 16,343 ---------- ---------- ---------- Total assets less current liabilities 41,268 37,619 38,255 Creditors due after more than one year (1,552) (1,198) (1,713) Provision for liabilities and charges (1,736) (2,185) (1,736) ---------- ---------- ---------- 37,980 34,236 34,806 ---------- ---------- ---------- Capital and Reserves: Called up share capital 2,012 1,979 1,981 Share premium account 9,194 8,537 8,546 Other reserves 139 874 139 Profit and loss account 26,635 22,846 24,140 ---------- ---------- ---------- 37,980 34,236 34,806 ---------- ---------- ---------- Consolidated Cash Flow Statement Six Months to Six Months to Year to 30 June 2002 30 June 2001 31 December 2001 Unaudited Unaudited Audited £000 £000 £000 Net cash flow from operating activities 4,919 (6,846) 6,077 Returns on investments and servicing of finance (87) 6 (15) Taxation (1,927) (1,971) (3,016) Capital expenditure and financial investment (1,833) 8,713 7,219 Acquisitions and disposals 271 86 (2,526) Equity dividends paid (1,760) (1,732) (2,761) ---------- ---------- ---------- Cash (outflow)/inflow before use of liquid resources and financing (417) (1,744) 4,978 Financing (3,769) (568) 2,822 ---------- ---------- ---------- (Decrease)/increase in cash in the period (4,186) (2,312) 7,800 ---------- ---------- ---------- Reconciliation of net cash flow to movement in net funds Six Months to Six Months to Year to 30 June 2002 30 June 2001 31 December 2001 Unaudited Unaudited Audited £000 £000 £000 (Decrease)/increase in cash in the period (4,186) (2,312) 7,800 Cash flow from movement in loans and hire-purchase contracts 4,448 579 1,168 ---------- ---------- ---------- Change in net funds from cash flows 262 (1,733) 8,968 New borrowings - - (3,968) New hire-purchase contracts (313) - (1,066) ---------- ---------- ---------- Movement in net funds in the period (51) (1,733) 3,934 Net funds at beginning of period 6,874 2,940 2,940 ---------- ---------- ---------- Net funds at end of period 6,823 1,207 6,874 ---------- ---------- ---------- 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 2001 statutory accounts. 2) Taxation for the six months to 30 June 2002 has been shown at the rate estimated to be applicable for the full year. 3) The interim dividend of 5.25p per share (2001: 5.25p) will be paid on 25 October 2002 to shareholders on the register on 11 October 2002. The ex-dividend date will be 9 October 2002. 4) The basic earnings per share figure for the six months ended 30 June 2002 is based on the profit after taxation of £3,538,000 (2001: £2,766,000) and 19,897,289 (2001: 19,784,811) ordinary shares, being the weighted average of the number of shares in issue during the period. The calculation of diluted earnings per share is based on the profit after taxation of £3,538,000 (2001: £2,766,000) and 19,977,276 (2001: 19,916,978) ordinary shares, being the weighted average of the number of shares in issue during the year, allowing for the dilutive effect of share options. 5) The results for the year to 31 December 2001 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. 6) 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. 7) Reconciliation of movement of shareholders' funds £000 At January 2002 34,806 Retained profit for the period 2,495 Issue of share capital under share option scheme 679 --------- At 30 June 2002 37,980 --------- 8) Reconciliation of operating profit to operating cash flow Six Months to Six Months to Year to 30 June 2002 30 June 2001 31 December 2001 £000 £000 £000 Operating profit 5,181 4,000 6,512 Depreciation, amortisation and profit/loss on disposal of assets 950 798 1,752 Working capital increase (1,212) (11,644) (2,187) ---------- ---------- ---------- Net cash flow from operating activities 4,919 (6,846) 6,077 ---------- ---------- ---------- This information is provided by RNS The company news service from the London Stock Exchange

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