Interim Results

Severfield-Rowen PLC 21 September 2004 21 September 2004 2004 Half Year Results Severfield-Rowen Plc, the market leading structural steel group, announces its half-year results to 30 June 2004. Financial Highlights • Pre-tax profit increased by 40% to £5.25m (2003: £3.75m) on turnover increased by 26.6% to £95.66m (2003: £75.57m) • Earnings per share increased by 38% to 17.8p (2003: 12.9p) • Operating margin increased to 5.52% (2003: 5.08%) • Interim dividend increased by 40% to 8.75p, covered 2.03 times by earnings • Cash balances of £12.66m (2003: £3.30m) with nil gearing Operational Highlights • Continuing strong order book totalling £137m of which £70m comprises the Heathrow Terminal 5 contract for BAA. • Work on Heathrow Terminal 5 project progressing well. • General enquiry levels buoyant against a background of an improving UK steel fabrication sector. • All core companies of Group performing well ahead of expectations. • Directors confident of the Company's future prospects. Commenting on the results, Peter Levine, Chairman, said: 'The Board is greatly encouraged with the results for the first half of 2004 and the Group continues to trade in advance of its expectations for the full year. The demand for its products is increasing and the structural steel sector as a whole is showing positive signs of recovery with the Group well placed to capitalise on what, on initial evidence, indicates the start of an upward industry cycle.' Enquiries Severfield-Rowen Plc Peter Levine, Chairman 07802 312249 and 0113 246 9993 Peter Davison, Finance Director 01845 577 896 Financial Dynamics Peter Otero 020 7269 7121 INTERIM STATEMENT 2004 INTRODUCTION The Group has delivered an excellent performance in the first half of 2004 resulting in an increase of 40% in pre-tax profits to £5.25m on turnover up 26.6% at £95.66m compared to the same period in 2003. Earnings per share increased by almost 38% to 17.8p and cash balances remained healthy at £12.66m with nil gearing. Group operating margins likewise increased to 5.52%. The results are ahead of our expectations and reflect the strengthening demand in the Group's core businesses against a background of noticeably more buoyant market conditions. The Group's current order book of £137m underpins the extremely healthy prospects for the Group. £70m of this order book represents the residual work at Terminal 5, Heathrow which extends until 2006. FINANCIALS Turnover in the period was £95.66m (2003: £75.57 m) producing a Group operating profit of £5.28m (2003: £3.84m). Group margins at the operating level were 5.52% (2003: 5.08%). Profit before tax increased 40% to £5.25m (2003: £3.75 m) after taking into account a small loss of £65,000 (2003: £56,000) in relation to the combined results in the period of the Company's non-core associated companies, Kennedy Watts Partnership Limited and Fabsec Limited. Profit after tax amounted to £3.6m (2003: £2.6m) after a tax charge of £1.65m (2003: £1.14m), producing a basic earnings per share figure of 17.76p (2003: 12.89p) During the first 6 months of the year capital expenditure amounted to approximately £1.4m (2003: £1m). Despite having an additional amount of cash of £7m tied up in working capital the period ended with the Group having a positive cash balance of £12.66m. This figure is after payments in the period of almost £4.2m for taxation and dividends and a £0.9m cash contribution towards capital expenditure. During the period, Severfield-Reeve Projects Limited took out a short-term bank loan to fund the undertaking of two large contracts. This amounted to £1.4m at the period end. This loan is repayable towards the end of the year when the total amounts due under these contracts are receivable. Borrowings, represented by amounts due on hire purchase contracts of £1.5m and the loan outstanding of £1.4m, amounted to £2.9m leaving the Group with a net fund surplus of almost £9.8m 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 cash position of the Company and the Directors' view of the medium to long-term prospects of the Group. Dividend As a result of the Group's excellent performance in the first part of the year, the strong financial position and the Directors' growing confidence over the future prospects for the Group, the Board is pleased to increase significantly the interim dividend by 40% to 8.75p per share (2003: 6.25p) which is covered 2.03 times by earnings (2003: 2.06 times). The interim dividend will be paid on 22 October 2004 to shareholders on the register on 8 October 2004. OPERATIONS The principal business of the Group is carried out by Severfield-Reeve Structures, Watson Steel Structures and Rowen Structures. The Group is the acknowledged market leader in its sector and its production facilities, technology and broad range of structural steel services remain unrivalled in the industry. Carefully planned investment preserves the Group's advantage in the sector. Margins remain a particular focus of attention and have shown solid improvement in the first six months of 2004 against a background of an improving UK steel fabrication sector. Each of the core businesses of the Group are trading both profitably and ahead of expectations. Rowen, once again, is contributing well to the Group having been re-engineered last year. Watson Steel Structures has world-class expertise in specialist steel work projects and is a very successful member of the Group. Severfield-Reeve Structures, the company around which the Group is centred, remains in the forefront of the industry in terms of capacity, efficiencies and use of technology. The Fabsec beams manufactured in the plate line are increasingly in demand. The two intumescent paint lines continue to be successful. Projects carried out in the first six months include: • Twelve-storey commercial development on the old Spitalfields market site, London • New Withington Diagnostic and Treatment Centre Hospital, for the NHS, South Manchester • Six-storey retail development and transport interchange in Doncaster city centre, South Yorkshire • Specialist development of oil pipeline carrying racks on Sakhalin Island, Russian Federation • New Hospital development at Blackburn Hospital, Lancashire • Redevelopment of the Oval cricket ground's Vauxhall End stand, South London • Three-storey retail development in the centre of Hemel Hempstead • 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 General market prices are showing clear signs of recovery from the recent challenging times. The Group's already strong trading and financial position, achieved in difficult market conditions has placed the Group in an extremely strong position to take full advantage of the current market upturn. As our shareholders have come to expect, the Board continues to monitor overheads and expenses and is dedicated to improving margins in the future. Outlook The Board is greatly encouraged with the results for the first half of 2004 and the Group continues to trade in advance of its expectations for the full year. The demand for its products is increasing and the structural steel sector as a whole is showing positive signs of recovery with the Group well placed to capitalise on what, on initial evidence, indicates the start of an upward industry cycle with increased order books and more robust pricing. The credibility and status of our Group within our industry remain unrivalled in our market place and the order book, which extends through 2006, is a tribute to our workforce and the profile of Severfield-Rowen in the market place it serves. The results for the first six months of 2004, strong forward order book and the positive outlook for the next six months give the Directors confidence that 2004 should be a very successful year for the Group and look forward to a year of significant progress. PETER LEVINE CHAIRMAN 21 September 2004 Severfield-Rowen Plc Consolidated Profit and Loss Account Six Months to Six Months to Year to 30 June 2004 30 June 2003 31 December 2003 Unaudited Unaudited Audited £000 £000 £000 Turnover 95,659 75,573 170,152 ---------- ---------- ----------- Group operating profit 5,279 3,837 9,319 Share of associates' operating loss (65) (56) (142) ---------- ---------- ----------- 5,214 3,781 9,177 Net interest 31 (36) (56) ---------- ---------- ----------- Profit on ordinary activities before taxation 5,245 3,745 9,121 Taxation on profit on ordinary activities (1,646) (1,142) (2,960) ---------- ---------- ----------- Profit on ordinary activities after taxation for the period 3,599 2,603 6,161 Dividends payable to equity shareholders (1,764) (1,252) (3,429) ---------- ---------- ---------- Profit retained, transferred to reserves 1,835 1,351 2,732 ---------- ---------- ----------- Basic earnings per share 17.76p 12.89p 30.48p ---------- ---------- ----------- Diluted earnings per share 17.73p 12.88p 30.47p ---------- ---------- ----------- Dividends per share 8.75p 6.25p 17.00p Severfield-Rowen Plc Consolidated Balance Sheet At 30 June At 30 June At 31 December 2004 2003 2003 Unaudited Unaudited Audited £000 £000 £000 Fixed Assets: Tangible assets 31,205 28,023 31,148 Investments 626 648 636 Intangible assets 170 180 170 --------- ---------- --------- 32,001 28,851 31,954 --------- ---------- --------- Current Assets: Stocks 2,884 5,412 3,316 Debtors 51,788 33,424 35,223 Cash at bank and in hand 12,660 3,300 17,184 --------- ---------- --------- 67,332 42,136 55,723 Current Liabilities: Creditors due within one year (53,861) (28,979) (44,120) --------- ---------- --------- Net current assets 13,471 13,157 11,603 --------- ---------- --------- Total assets less current liabilities 45,472 42,008 43,557 Creditors due after more than one year (702) (901) (623) Provision for liabilities and charges (2,279) (2,021) (2,279) --------- ---------- --------- 42,491 39,086 40,655 --------- ---------- --------- Capital and Reserves: Called up share capital 2,027 2,019 2,027 Share premium account 9,412 9,231 9,411 Other reserves 139 139 139 Profit and loss account 30,913 27,697 29,078 --------- ---------- --------- 42,491 39,086 40,655 --------- ---------- --------- Severfield-Rowen Plc Consolidated Cash Flow Statement Six Months to Six Months to Year to 30 June 2004 30 June 2003 31 December 2003 Unaudited Unaudited Audited £000 £000 £000 Net cash flow from operating activities (712) (2,637) 17,635 Returns on investments and servicing of finance 54 (30) (70) Taxation (2,025) (2,209) (2,196) Capital expenditure and financial investment (530) (929) (5,785) Acquisitions and disposals (55) (75) (157) Equity dividends paid (2,168) (1,774) (3,007) --------- ---------- --------- Cash (outflow)/inflow before use of liquid resources and financing (5,436) (7,654) 6,420 Financing 912 (463) (653) --------- ---------- --------- (Decrease)/increase in cash in the period (4,524) (8,117) 5,767 --------- ---------- --------- Reconciliation of net cash flow to movement in net funds Six Months to Six Months to Year to 30 June 2004 30 June 2003 31 December 2003 Unaudited Unaudited Audited £000 £000 £000 (Decrease)/increase in cash in the period (4,524) (8,117) 5,767 Cash flow from movement in loans and hire-purchase contracts 489 464 842 --------- ---------- --------- Change in net funds from cash flows (4,035) (7,653) 6,609 New borrowings (1,400) - - New hire-purchase contracts (557) - - --------- ---------- --------- Movement in net funds in the period (5992) (7,653) 6,609 Net funds at beginning of period 15,768 9,159 9,159 --------- ---------- --------- Net funds at end of period 9,776 1,506 15,768 --------- ---------- --------- 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 2003 statutory accounts. 2) Taxation for the six months to 30 June 2004 has been shown at the rate estimated to be applicable for the full year. 3) The interim dividend of 8.75 p per share (2003: 6.25p) will be paid on 22 October 2004 to shareholders on the register on 8 October 2004. The ex-dividend date will be 6 October 2004. 4) The basic earnings per share figure for the six months ended 30 June 2004 is based on the profit after taxation of £3,599,000 (2003: £2,603,000) and 20,266,911 (2003: 20,186,245) 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 £3,599,000 (2003: £2,603,000) and 20,302,801 (2003: 20,210,540) 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 2003 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 2004 40,655 Retained profit for the period 1,835 Issue of share capital under share option scheme 1 --------- At 30 June 2004 42,491 --------- 8) Reconciliation of group operating profit to operating cash flow Six Months to Six Months to Year to 30 June 2004 30 June 2003 31 December 2003 £000 £000 £000 Group operating profit 5,279 3,837 9,319 Depreciation, amortisation and 1,030 975 2,141 profit/loss on disposal of assets Working capital (increase)/decrease (7,021) (7,449) 6,175 --------- ---------- --------- Net cash flow from operating activities (712) (2,637) (17,635) --------- ---------- --------- This information is provided by RNS The company news service from the London Stock Exchange

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