Half Yearly Report

RNS Number : 4122K

Severfield-Rowen PLC

21 August 2012

 



Half Year Results

for 6 Months ended 30 June 2012

CLEAR UK LEADER - MORE CHALLENGING MARKET - INDIAN EXPANSION APPROVED

Severfield-Rowen Plc, the market leading structural steel group, announces its half year results to 30 June 2012.

Financial Summary

	2012	2011
Revenue	£135.9m	£122.0m
Underlying* Group Operating Profit	£2.3m	£4.0m
Underlying Operating Margin (before results of Associates)	1.8%	4.7%
Underlying Profit before Tax	£1.5m	£3.4m
Retained Profit after Tax (including non-underlying items)	£0.2m	£1.1m
Underlying Basic EPS	1.23p	2.29p
Dividend per Share	1.50p	1.50p

Highlights

·      Underlying Profit before Tax of £1.5m (2011: £3.4m) in line with management's expectations of June 2012

·      Share of losses from Indian joint venture ('JSSL') of £0.1m (2011: £1.6m)

·      Net borrowings at period end of £28.3m (December 2011: £31.3m)

·      £5.3m working capital improvement in first 6 months

·      Sustained UK order book at 1 August: £218m (May 2012: £216m)

·      Proposed reorganisation of UK businesses

·      JSSL now trading profitably with prospects pipeline growth from £80m to £147m

·      JSSL India order book at  £31m

·      JSSL expansion approved to increase capacity by 50%

·      Basic earnings per share of 0.18p (2011: 1.18p)

·      Interim dividend of 1.50p per share (2011: 1.50p)

* Underlying is before the amortisation of acquired intangible assets of £1.4m (2011: £1.4m), favourable movements in the valuation of derivatives of £0.1m (2011: nil) and the associated tax effect of these items.

A copy of the Statement is available on the Company's website:  www.sfrplc.com

Commenting, Tom Haughey, Chief Executive Officer, said:

The Group has continued to encounter challenges in the UK business with diminishing overall UK construction demand, the re-emergence of pricing pressure and the protraction of contractual settlements.  Despite the backdrop, the UK order book remains stable at £218 million, which maintains full activity at all UK plants into 2013 and suggests further growth in market share.  UK margins are nonetheless coming under pressure again as clients and the supply chain push much harder to compete in a shrinking market.

Competitors in our sector remain under significant pressure, reflected in many cases by loss-making financial returns which are not sustainable and further rationalisation is expected in the industry.

The demand outlook for the UK, with the current exceptions of London commercial, industrial, warehousing and some energy sectors, continues to be stagnant at best.  Political policy direction on UK energy would be a helpful stimulus to UK construction but the potential projects pipeline of £465 million in the UK remains sufficient for our needs in 2013.    

In response to these conditions and to allow it to achieve improved efficiency, cost base and performance benefits, the Group is proposing to merge three of its UK businesses, namely Severfield-Rowen Structures, Watson Steel Structures and Steelcraft Erection Services, which it hopes to complete before the end of 2012.

In India, JSW Severfield Structures Ltd, our joint venture Company, is now operating profitably and will contribute positively to the second half of this year.  The Group and its partner JSW Steel have agreed to a £7 million investment to increase the product range and increase capacity levels by some 50% at its facility in Vidyanagar.  The new investment will be commissioned by the middle of 2013.  Further investment in JSSL is being contemplated for 2013 at a second location in India.    

Whilst we are pleased by the stability in the order book and our market position, with uncertain demand levels and a difficult pricing environment in the UK having an impact on our margins, we envisage a challenging six months ahead and are taking actions in response to this.  Looking further out, we remain determined to grow the business at home and in India, despite the economic backdrop and are confident that our strategy leaves the Group well positioned to take advantage of opportunities both in India and in the UK.                                            

For further information, please contact:

Severfield-Rowen Plc	John Dodds Chairman	01845 577896
	Tom Haughey Chief Executive Officer	01845 577896
	Alan Dunsmore Finance Director	01845 577896
Jefferies Hoare Govett	Simon Hardy	020 7029 8000
	Harry Nicholas	020 7029 8000
Pelham Bell Pottinger	Archie Berens	020 7861 3112
	Guy Scarborough	020 7861 3870

INTERIM STATEMENT 2012

INTRODUCTION

UK conditions have been increasingly challenging as demand softens further in some areas and confidence remains low, with the prospect of economic recovery some way off.

The Group has enjoyed the success of the London Olympics and its own part in the construction of so many of its venues.  The Group has also replenished its order books, notably from the Commercial Office, Industrial and Power sectors, such that the order book remains stable at £218 million.  Margins in the first half of 2012 reflect the lower demand levels, the increased intensity of the competitive environment and the need to improve some aspects of our operational performance. In response to these conditions, the Group is proposing to integrate three of its UK businesses, which operate with shared clients and generally in the same sub-sectors of the market.  The proposed reorganisation of the UK businesses is to principally target improvements in efficiencies and performance, but the action will also have associated cost base benefits.

In India, our joint venture operation is making very good progress, as expected, with strong sales, market penetration and production outputs.  In the calendar year 2012, JSSL will contribute profitably to our results.  We have agreed with JSW Steel, our joint venture partner, to invest in the expansion of JSSL, following this good progress.

FINANCIALS

The Group's financial performance in the first six months of the year reflects the continuing challenging trading environment in the UK, but a much improved performance from the Indian joint venture.

Revenue of £135.9 million (2011: £122.0 million) reflects slightly higher volumes than the same period last year.  Underlying Operating Profit before results of Associates, of £2.4 million (2011: £5.7 million), representing margins of 1.8% and 4.7% respectively, reflects the impact of the cost overruns on two complex projects identified in June, along with slightly less favourable contract phasing compared with the prior period.  The share of results of Associates of a loss of £0.1 million (2011: £1.6 million loss) represents a significant improvement in the performance of the Indian joint venture.  Production has continued to increase over the last six months and the business is now profitable.

The Group Underlying Operating Profit after share of results of Associates is £2.3 million (2011: £4.0 million), a 42% reduction on the previous year.  Underlying Profit before Tax for the period is £1.5 million (2011: £3.4 million).

Underlying profit is before the amortisation of acquired intangible assets of £1.4 million (2011: £1.4 million) and favourable movements in the valuation of derivatives of £0.1 million (2011: £Nil).  The underlying tax charge of £0.4 million represents an effective tax rate of 25.9% on the applicable profit, which excludes the share of results of Associates (2011: 27.0%).

Underlying basic earnings per share is 1.23p (2011: 2.29p).  This calculation is based on the underlying profit after tax of £1.1 million and 89,251,076 shares, being the weighted average number of shares in issue during the period.  Basic earnings per share, based on profit after tax after non-underlying items, is 0.18p (2011: 1.18p).

There are no contingent shares outstanding under share based payment schemes and accordingly there is no difference between basic and diluted earnings per share.

Retained profit after tax of £0.2 million (2011: £1.1 million) has been transferred to reserves.

During the first six months of the year capital expenditure amounted to £0.5 million (2011: £0.6 million).

There was a net cash inflow from operating activities in the first six months of £7.4 million (2011: outflow of £4.5 million).  This reflects the expected improvement in working capital of £5.3 million, coming primarily from a reduction in receivables.

Net debt of £28.3 million represents an improvement of £3.0 million on the year end position of £31.3 million.  This reflects the cash inflow from operating activities, along with capital expenditure, interest and dividend payments.

The Group has a revolving credit facility of £50.0 million with RBS and National Australia Bank as joint lenders, maturing in November 2016.

DIVIDEND

An interim dividend of 1.50p per share is declared today and will be paid on 26 October 2012 to shareholders on the register on 3 October 2012.

UK

In response to falls in construction demand in the UK, the Group yesterday announced internally its proposal to merge and integrate its two largest businesses into a single trading entity later this year.  A new company "Severfield-Watson Structures Ltd" will incorporate the assets and resources of Severfield-Rowen Structures, Watson Steel Structures and those of our site erection company, Steelcraft Erection Services.

The single company will continue to manufacture at its two existing plants at Dalton in North Yorkshire and Bolton in Lancashire, which will deliver improved operational performance from 2013 and will yield incremental margin improvement.  The operations at Fisher Engineering and Atlas Ward Structures will continue largely as at present.

Severfield-Watson Structures Ltd will be the largest and most comprehensive structural steelwork company in Europe, providing a fully integrated design through fabrication and site erection service to clients.

INDIA

Progress in India is very good with target output volumes being consistently achieved in recent months and projected productivity milestones being reached.

The financial outturn in the first half of 2012 has greatly improved as expected and JSSL will make a contribution to profits over the full year.

Order levels are satisfactory at £31 million and importantly, cover a range of sectors.  Recent orders include work for Proctor and Gamble in India and a 30 storey commercial office in Bangalore, incorporating Indisec bespoke sections and as mentioned, there is a strong pipeline of opportunities which continues to develop; currently £147 million (March 2012: £80 million).

We have agreed with JSW Steel to invest in the development of capacity of JSSL's existing plant by some 50%, rising from 35,000 tonnes per annum to 55,000 tonnes, which will also support the expansion of the product range.  The investment of approximately £7 million in total, funded equally by JSW Steel and Severfield-Rowen, will commence in October 2012 and the new facilities will be operational by the middle of 2013.  Further investment in JSSL is being contemplated for 2013 at a second location in India.

OPERATIONS

Group Review

The main business of the Group is the design, fabrication and erection of structural steelwork for construction projects of varying types, including warehouses, commercial offices, industrial buildings and power stations.

UK

All of the Group's UK plants are fully loaded throughout 2012 and we continue to see prospective opportunities in 2013.

All of the Group companies have contributed positively to the results.  During the first half of 2012 the companies were engaged in the successful supply of services to a large number of projects, including:

BMW Manufacturing Facility, Oxford	Morrison Retail Store, Eastbourne
Asda Stores, Grangemouth & Rochdale	Jaguar Land Rover Industrial Buildings, Midlands
Gatwick Pier 5	Cleveland Energy from Waste, Billingham
London Cable Car	Heathrow Terminals
Tate Modern, London	Leadenhall Street Commercial Office, London
60 Holborn Commercial Office, London	London Bridge Place Commercial Office
Thermal Power Station, Runcorn	Arla Foods Processing Plant, Aylesbury
Leeds Arena

India

JSSL has undertaken work in airports, power, commercial, industrial and retail sectors throughout India, these include:

Prestige Shantiniketan Commercial Office, Bangalore	Siemens (Unosugen) CC Power Plant, Surat
Siemens (Dgen) CC Power Plant, Surat	JSW Cold Rolling Mill, Bellary
Indiabulls Commercial Office Tower, Mumbai	Samak Shoot Resorts Hotel, Gurgaon
Air Traffic Control Tower, Mumbai International Airport	Essar Coal Handling Plant, Jharkhand

OUTLOOK

Despite the poor economic environment, the Group has continued to strengthen its market leading position in the UK, which will be further enhanced following the reorganisation proposed for its UK companies. 

Prospects in India for this year and beyond remain very positive as we seek a small share of a market full of opportunity.

Whilst we are pleased by the stability in the order book and our market position, with uncertain demand levels and a difficult pricing environment in the UK having an impact on our margins, we envisage a challenging six months ahead and are taking actions in response to this.  Looking further out, we remain determined to grow the business at home and in India, despite the economic backdrop, and are confident that our strategy leaves the Group well positioned to take advantage of opportunities both in India and in the UK.

TOM HAUGHEY

CHIEF EXECUTIVE OFFICER

20 August 2012

Condensed Consolidated Income Statement

	Six months ended 30 June 2012 (unaudited)				Six months ended 30 June 2011 (unaudited)				Year ended 31 December 2011 (audited)
	Before Other Items £000	Other Items1 £000	Total £000		Before Other Items £000	Other Items1 £000	Total £000		Before Other Items £000	Other Items1 £000	Total £000
Revenue	135,941	-	135,941		122,041	-	122,041		267,778	-	267,778
Cost of sales	(130,976)	-	(130,976)		(114,094)	-	(114,094)		(246,889)	(590)	(247,479)
Gross profit	4,965	-	4,965		7,947	-	7,947		20,889	(590)	20,299
Other operating income	328	-	328		164	-	164		508	-	508
Distribution costs	(968)	-	(968)		(978)	-	(978)		(2,756)	-	(2,756)
Administrative expenses	(1,889)	(1,374)	(3,263)		(1,479)	(1,374)	(2,853)		(4,448)	(2,749)	(7,197)
Movements in the valuation of derivative financial instruments	-	104	104		-	18	18		-	4	4
Operating profit before share of results of associates	2,436	(1,270)	1,166		5,654	(1,356)	4,298		14,193	(3,335)	10,858
Share of results of Associates	(122)	-	(122)		(1,632)	-	(1,632)		(2,522)	-	(2,522)
Operating profit after share of results of Associates	2,314	(1,270)	1,044		4,022	(1,356)	2,666		11,671	(3,335)	8,336
Investment income	5	-	5		42	-	42		27	-	27
Finance charges	(797)	-	(797)		(656)	-	(656)		(1,581)	-	(1,581)
Profit before tax	1,522	(1,270)	252		3,408	(1,356)	2,052		10,117	(3,335)	6,782
Tax	(425)	330	(95)		(1,361)	366	(995)		(2,929)	1,969	(960)
Profit for the period	1,097	(940)	157		2,047	(990)	1,057		7,188	(1,366)	5,822
Earnings per share:
Basic	1.23p	(1.05p)	0.18p		2.29p	(1.11p)	1.18p		8.05p	(1.53p)	6.52p
Diluted	1.23p	(1.05p)	0.18p		2.29p	(1.11p)	1.18p		8.05p	(1.53p)	6.52p

¹    Other items relate to the amortisation of acquired intangibles and movements in the valuation of derivative financial instruments and the associated tax effect of these items.

Condensed Consolidated Statement of Comprehensive Income

	Six months ended 30 June 2012 (unaudited) £000	Six months ended 30 June 2011 (unaudited) £000	Year ended 31 December 2011 (audited) £000
Actuarial loss on defined benefit pension scheme	-	-	(1,369)
Tax relating to components of other comprehensive income	-	-	172
Other comprehensive income for the period	-	-	(1,196)
Profit for the period from continuing operations	157	1,057	5,822
Total comprehensive income for the period attributable to equity shareholders	157	1,057	4,625

Condensed Consolidated Statement of Changes in Equity

	Share Capital £000	Share Premium £000	Other Reserves £000	Retained Earnings £000	Total Equity £000
At 1 January 2012	2,231	46,152	469	83,446	132,298
Profit for the period (attributable to equity holders of the parent)	-	-	-	157	157
Dividends paid	-	-	-	(3,124)	(3,124)
Equity settled share based payments	-	-	7	-	7
At 30 June 2012 (unaudited)	2,231	46,152	476	80,479	129,338

	Share Capital £000	Share Premium £000	Other Reserves £000	Retained Earnings £000	Total Equity £000
At 1 January 2011	2,231	46,152	169	82,391	130,943
Profit for the period (attributable to equity holders of the parent)	-	-	-	5,822	5,822
Dividends paid	-	-	-	(3,570)	(3,570)
Share based payments	-	-	300	-	300
Actuarial loss on defined benefit pension scheme	-	-	-	(1,369)	(1,369)
Deferred income taxes on defined pension benefit scheme	-	-	-	172	172
At 31 December 2011 (audited)	2,231	46,152	469	83,446	132,298

	Share Capital £000	Share Premium £000	Other Reserves £000	Retained Earnings £000	Total Equity £000
At 1 January 2011	2,231	46,152	169	82,391	130,943
Profit for the period (attributable to equity holders of the parent)	-	-	-	1,057	1,057
Dividends paid	-	-	-	(2,231)	(2,231)
Equity settled share-based payments	-	-	187	-	187
At 30 June 2011 (unaudited)	2,231	46,152	356	81,217	129,956

Condensed Consolidated Balance Sheet

	At 30 June 2012 (unaudited) £000	At 30 June 2011 (unaudited) £000	At 31 December 2011 (audited) £000
ASSETS
Non-current assets
Goodwill	54,712	54,712	54,712
Other intangible assets	16,915	19,121	18,227
Property, plant and equipment	78,196	81,403	79,594
Investment property	3,940	3,980	3,960
Interests in Associates	392	1,225	447
	154,155	160,441	156,940
Current assets
Inventories	9,073	11,202	9,085
Trade and other receivables	84,542	68,773	89,161
Cash and cash equivalents	3,781	10,136	2,264
	97,396	90,111	100,510
Total assets	251,551	250,552	257,450
LIABILITIES
Current liabilities
Trade and other payables	(67,320)	(62,984)	(66,322)
Financial liabilities - borrowings	(31,520)	(32,894)	(33,159)
Financial liabilities - finance leases	(192)	(101)	(101)
Financial liabilities - derivative financial instruments	-	(90)	(104)
Tax liabilities	(2,056)	(2,258)	(3,883)
	(101,088)	(98,327)	(103,569)
Non-current liabilities
Retirement benefit obligations	(9,552)	(8,532)	(9,552)
Financial liabilities - finance leases	(351)	(304)	(254)
Deferred tax liabilities	(10,847)	(12,833)	(11,177)
Provisions	(375)	(600)	(600)
	(21,125)	(22,269)	(21,583)
Total liabilities	(122,213)	(120,596)	(125,152)
NET ASSETS	129,338	129,956	132,298
EQUITY
Share capital	2,231	2,231	2,231
Share premium	46,152	46,152	46,152
Other reserves	476	356	469
Retained earnings	80,479	81,217	83,446
TOTAL EQUITY	129,338	129,956	132,298

Condensed Consolidated Cash Flow Statement

	Six months ended 30 June 2012 (unaudited) £000	Six months ended 30 June 2011 (unaudited) £000	Year ended 31 December 2011 (audited) £000
Net cash from operating activities	7,362	(4,521)	(8,968)
Investing activities
Interest received	5	44	28
Proceeds on disposal of property, plant and equipment	133	224	624
Purchases of property, plant and equipment	(555)	(632)	(1,658)
Purchases of intangible fixed assets	(62)	-	(481)
Purchases of shares of Associates	(66)	-	(113)
Net cash (used in) investing activities	(545)	(364)	(1,600)
Financing activities
Interest paid	(648)	(551)	(2,072)
Dividends paid	(3,124)	(2,231)	(3,570)
Repayment of obligations under finance leases	(87)	(51)	(102)
Borrowings taken out	-	14,265	14,530
Borrowings repaid	(1,716)	-	-
Finance leases taken out	275	-	457
Net cash (used in)/ from financing activities	(5,300)	11,432	9,243
Net increase/(decrease) in cash and cash equivalents	1,517	6,547	(1,325)
Cash and cash equivalents at beginning of period	2,264	3,589	3,589
Cash and cash equivalents at end of period	3,781	10,136	2,264

Notes to the Condensed Consolidated Financial Statements

1)         General information

The information for the year ended 31 December 2011 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006, but is derived from the statutory accounts for that financial year. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by the way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The interim results to 30 June 2011 were neither audited nor reviewed. The interim results to 30 June 2012 have been subject to an Interim Review by the Company's Auditor.

2)         Basis of preparation

The condensed interim financial information has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted for use in the European Union and in accordance with the accounting policies included in the Company's Annual Report for the year ended 31 December 2011 which have been applied consistently throughout the current and preceding period.

Adoption of new and revised accounting standards

In 2011, a number of new standards and interpretations became effective as noted in the 2011 Annual Report and Accounts (page 68). The adoption of these standards and interpretations has not had a material impact on the condensed interim financial statements of the Group. Since the Annual Report and Accounts was published no significant new standards and interpretations have been issued, or become effective.

3)         Going concern

The Group has access to a £50 million revolving credit facility to meet day-to-day working capital requirements.  As at 30 June 2012 the Group had sufficient headroom on this facility and was compliant with the financial covenants and this position is forecast to continue for the foreseeable future.  The bank facility is available to November 2016. 

Through its various business activities the Group is exposed to a number of risks and uncertainties (see Note 4), which could affect the Group's ability to meet these forecasts and hence its ability to meet its banking covenants.  As part of the review of forecasts noted above the Directors have considered its order book, the challenging economic environment, the commercial environment, and its supplier and customer base, together with the potential mitigating actions that can be taken to protect operating profits and cash flows.  The Directors believe the Group is well placed to manage these business risks despite the current uncertain economic environment. 

Accordingly after making enquiries, the Directors have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report. For this reason, the going concern basis has been adopted in preparing this Interim Report.

4)         Risks and uncertainties

The principal risks and uncertainties which could have a material impact upon the Group's performance over the remaining six months of the 2012 financial year have not changed significantly from those noted or referenced on pages 36-37 of the Directors' Report and pages 24-26 of the Financial Review included in the Annual Report 2011. These risks and uncertainties include, but are not limited to:

·      The commercial and market environment within which the Group operates

·      Possible steel price movements

·      Reliance on key skills and personnel within our workforce

·      Health and safety

·      Credit, interest rate and foreign exchange risks

5)         Segmental analysis

Revenue, profit before tax, and net assets all relate to the design, fabrication, and erection of structural steelwork and related activities.  All of the Group's subsidiary businesses have similar products and services, production processes, types of customer, methods of distribution, regulatory environments, and economic characteristics.

Revenue, which relates wholly to construction contracts and related assets in both years originated from the United Kingdom.

There has been no change in the basis of segmentation or in the basis of measurement of segment profit or loss in the period.

6)         Seasonality

There are no particular seasonal variations which impact the split of turnover between the first and second half of the financial year.  Underlying movements in contract timing and phasing, which are an on-going feature of the business, will continue to drive moderate fluctuations in half yearly revenues.

7)         Taxation

The income tax expense reflects the estimated effective rate on profit before taxation for the Group for the year ending 31 December 2012.

8)         Dividends payable to equity shareholders

	Six months ended 30 June 2012 £000	Six months ended 30 June 2011 £000	Year ended 31 December 2011 £000
Ordinary dividend paid	3,124 ______	2,231 ______	3,570 ______

9)         Earnings per share

Earnings per share is calculated as follows:

	Six months ended 30 June 2012 £000	Six months ended 30 June 2011 £000	Year ended 31 December 2011 £000
Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent company	157 ______	1,057 ______	5,822 ______
Earnings for the purposes of underlying basic earnings per share being underlying net profit attributable to equity holders of the parent company	1,097 ______	2,047 ______	7,188 ______
Number of shares	Number	Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	89,251,076	89,251,076	89,251,076
Effect of dilutive potential ordinary shares and under share plans	-	-	-
	_________	_________	_________
Weighted average number of ordinary shares for the purposes of diluted earnings per share	89,251,076	89,251,076	89,251,076
	_________	_________	_________
Basic earnings per share	0.18p	1.18p	6.52p
Underlying basic earnings per share	1.23p	2.29p	8.05p
Diluted earnings per share	0.18p	1.18p	6.52p
Underlying diluted earnings per share	1.23p	2.29p	8.05p

10)        Property, plant and equipment

During the period fixed asset additions totalled £555,000.  The Group also disposed of certain fixed assets with carrying amounts of £126,000 for proceeds of £133,000.

11)        Net debt

The Group's net debt is as follows:

	Six months ended 30 June 2012 £000	Six months ended 30 June 2011 £000	Year ended 31 December 2011 £000
Cash and cash equivalents	3,781	10,136	2,264
Financial liabilities - borrowings	(31,520)	(32,894)	(33,159)
Financial liabilities - finance leases	(543)	(405)	(355)
Net debt	(28,282)	(23,163)	(31,250)

12)        Reconciliation of Group profit from operations to cash generated from operations

	Six months ended 30 June 2012 (unaudited) £000	Six months ended 30 June 2011 (unaudited) £000	Year ended 31 December 2011 (audited) £000
Operating profit for the period	1,044	2,666	8,336
Adjustments for:
Provision utilisation	(225)	-	-
Share of results of Associates	122	1,632	2,522
Depreciation of property, plant and equipment	2,046	2,245	4,504
Amortisation of intangible assets	1,409	1,374	2,749
(Gain)/loss on disposal of property, plant and equipment	(7)	(24)	(20)
Share based payment expense	7	187	300
Movements in pension scheme	-	-	(349)
Unrealised gains on derivative financial instruments	(104)	(18)	(4)
Operating cash flows before movement in working capital	4,292	8,062	18,038
Movements in working capital
(Increase)/decrease in inventories	12	1,431	3,548
(Increase)/decrease in receivables	4,390	2,200	(17,301)
Increase/(decrease) in payables	921	(12,780)	(9,592)
Cash generated from operations	9,615	(1,087)	(5,307)
Tax paid	(2,253)	(3,434)	(3,661)
Net cash from operating activities	7,362	(4,521)	(8,968)

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

13)        Related party transactions

Certain Related Party Transactions, as described in Note 31 on page 97 of the 2011 Annual Report, continued in the current period.  None of these transactions materially affected the financial position or performance of the Group during the period.

14)        Cautionary statement

The Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

            The IMR contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

15)        Responsibility statement

We confirm that to the best of our knowledge:

(a)        the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

(b)        the Interim Management Report includes a fair review of the information required by DTR4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c)        the Interim Management Report includes a fair review of the information required by DTR 4.2.8R (disclosure of the related party transactions and changes therein).

By order of the Board

Tom Haughey	Alan Dunsmore
Director	Director
20 August 2012	20 August 2012

Independent review report to Severfield-Rowen Plc

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Cash Flow Statement and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Leeds, UK

20 August 2012

 

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