Interim Results

Severfield-Rowen PLC 26 September 2003 26 September 2003 SEVERFIELD-ROWEN PLC 2003 Half Year Results Severfield-Rowen Plc, the market leading structural steel group, announces its half-year results to 30 June 2003. Overview â€¢ Group performing ahead of budget for the full year. â€¢ Dividend increased to 6.25p covered 2.06 times by earnings. â€¢ Strong order book totalling Â£205m of which Â£140m comprises the three year Heathrow Terminal 5 contract for BAA, the largest in the Group's history. â€¢ Capacity to service our existing and new clients not affected by the large order book and the securing of Heathrow Terminal 5 contract. â€¢ Work on Heathrow Terminal 5 project has commenced and is progressing well. â€¢ Turnover resilient at Â£75.57m (2002 : Â£79.59m). â€¢ Operating profit (after rationalisation costs of Â£640,000) at Â£3.84m up 53% on the Â£2.51m achieved in the second half of 2002 (2002 : first half Â£5.18m). â€¢ Profit before tax up 54% on second half of 2002 at Â£3.75m (2002 : first half Â£5.09m - second half Â£2.43m). â€¢ Operating margin up 57% at 5.08% compared with 3.23% achieved in the second half of 2002. â€¢ No gearing with cash balances of Â£3.30m. â€¢ Re-focusing of Rowen Structures successfully completed. â€¢ Plate and intumescent paint lines continue to demonstrate good profitability. Second paint line currently under construction. â€¢ All core companies of Group returning profits. â€¢ Directors confident in the Company's future prospects. Commenting on the results, Peter Levine, Chairman, said: 'Whilst lower than the comparable period for last year the half year results demonstrate a material improvement in operating profit and operating margin over those achieved during the second half of 2002. 'All core companies are trading profitably and the Group is performing ahead of our budgets for the full year. This is particularly satisfying in the present challenging conditions which affect our sector. The re-focusing of Rowen Structures has been successfully completed on time and on budget. 'Work has commenced at Heathrow Terminal 5 and is progressing well. This contract is the largest single project in the Group's history involving over 65,000 tonnes of steelwork and is the most significant steel construction project carried out in the UK in recent times. 'The remarkable record order book totalling Â£205m in aggregate (including the Heathrow Terminal 5 Project comprising Â£140m) gives the Group a solid bedrock of work through to 2006 and strengthens the Group's financial prospects and security. 'The Directors look forward to a year of sustained progress and continued enhancement of the Group's market leading position in the industry which will, it is believed, provide a springboard for material growth in the following years.' Enquiries Severfield-Rowen Plc Peter Levine, Chairman 0113 246 9993 Peter Davison, Finance Director 01845 577 896 Financial Dynamics Peter Otero 020 7269 7291 INTERIM STATEMENT 2003 INTRODUCTION The Group has turned in a significantly improved performance over that achieved in the second half of 2002 resulting in an increase of 53% in operating profit and 57% in operating margin in comparison to that period. This is despite the difficult trading conditions affecting the Group's sector and the one off costs of re-focusing Rowen Structures, including rationalisation costs of approximately Â£640,000. Whilst the results are lower than in the comparable period last year most importantly the Group is performing ahead of our budgets for the full year. A significant indicator of the future financial prosperity and security of the Group is the remarkable strength of our order book which currently totals Â£205m. As I stated in last year's Annual Report we have been awarded the main steelwork contract for the new Terminal 5 at Heathrow for BAA. This is the largest single contract award in the Group's history representing, on current estimations, in excess of 65,000 tonnes of steelwork with a remaining contract value of Â£140 m, running through to 2006. It is the most significant steel construction project to be carried out in the UK in recent times. However, as this project will extend over the next three years and provide an excellent base load for the Group during that period, the resources and flexibility of the Group are such that there is still sufficient capacity available within its three production facilities to enable it to continue to service fully the demands of its existing and new clients. The Group's improving results underpin and reinforce its market leadership within the industry. With the Group's broad range of services and products, combined with its financial strength, Severfield-Rowen is in a position of great advantage in its market place, particularly in dealing with large and complex contracts. The re-focusing of Rowen Structures has been successfully completed and the Company, in its restructured form, is in line to produce a very good performance this year. The two other core businesses of the Group, Severfield-Reeve Structures and Watson Steel Structures, as expected, also produced very good performances. The plate and intumescent paint lines at Dalton maintained their profitable progress and, due to the orders already secured for 2004, a second paint line is currently under construction at Dalton and is due for completion later this year. Finance Turnover in the period was Â£75.57m (2002 : Â£79.59m) producing an operating profit of Â£3.84m (2002 : Â£5.18m). Group margins at the operating level were 5.08%. Profit before tax was Â£3.75m (2002 : Â£5.09m) after net interest payable of Â£36,000 (2002 : interest payable of Â£93,000). Assuming a tax charge of 30.5% (2002 : 30.5%) basic earnings per share were 12.89p (2002 : 17.78 p) During the first 6 months of the year capital expenditure amounted to approximately Â£1m. Although trading in the first six months of the year resulted in an increase in the amount of cash tied up in working capital of almost Â£7.5m the period ended with the Group having a positive cash balance of Â£3.30m. This figure is also after having paid out almost Â£4m in taxation and dividends, together with the aforementioned Â£1m of capital expenditure. Borrowings, represented primarily by amounts due on hire purchase contracts, amounted to Â£1.79m leaving the group with a net fund surplus of Â£1.51m 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 strong order book, and the Directors' view as to its future prospects and strong financial position, the Board is pleased to increase the interim dividend to 6.25p per share (2002 : 5.25p) which is covered 2.06 times by earnings (2002 : 3.38 times). The interim dividend will be paid on 24 October 2003 to shareholders on the register on 10 October 2003. Operations The principal business of the Group is carried out by Severfield-Reeve Structures, Watson Steel Structures and Rowen Structures. Throughout the trading period the Group's market leading position has been enhanced and its production facilities, technology and broad range of structural steel services remain unparalleled in the industry. Carefully planned investment, which has always been the cornerstone of Severfield-Rowen's success, continues. Margins remain significantly above what is generally considered to be average in the continued depressed UK steel fabrication sector. Each of the core businesses of the Group are trading profitably. It is particularly pleasing to note that the re-focusing of Rowen Structures has taken place successfully, on budget and on time. It is still expected to make a positive contribution to the Group this year. The change in Watson Steel Structures since we acquired this business has been dramatic. It has world class expertise in specialist steel work projects and, with its radically upgraded production facility, is a very important and profitable member of the Group. Severfield-Reeve Structures, the company around which the Group has been forged, 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 to the extent that a further welding machine has been added to cope with orders. The intumescent paint line has also proved a success and demand, extending through 2004 and beyond, has led to the construction of a second paint line at Dalton due to be completed in the second half of the year. Projects carried out in the first six months include: â€¢ Rolls-Royce building in Glasgow for the manufacture of turbine blades â€¢ Marks and Spencer retail outlet in Gateshead â€¢ Two large office developments in Manchester - Hardman Boulevard and Spinningfields â€¢ Tattersalls building at Cheltenham racecourse â€¢ New Sainsbury's store in Belfast, Northern Ireland â€¢ Extension to St Pancras station roof - for the Channel Tunnel Rail Link â€¢ Office development in Belgravia â€¢ Second phase of the multi-functional retail/leisure complex in Croydon â€¢ New warehouse for Pirelli Tyres, Carlisle â€¢ New waste treatment facility at Arsenal, North London â€¢ Residential flats development in Sweet Street, Leeds â€¢ Overbridge at Kings Cross Station for the Channel Tunnel Rail Link â€¢ Elevated access roadway at the Port of Dover â€¢ Pedestrian bridge link to Selfridges at the Bull Ring, Birmingham General market prices remain sensitive but, nevertheless, the Group's strong financial position means that it is increasingly in demand to undertake the larger and more complicated projects in which it excels in terms of costs, efficiency and expertise. The Board continues to monitor overheads and expenses and is dedicated to improving margins further in the future. Senior Independent Non-Executive Director In anticipation of the implementation of the new Combined Code which will come into effect shortly, it is announced that Keith Elliott, a non-executive Director since October 1988 has been appointed as the Senior Independent Non-Executive Director of the Group in place of John Featherstone who remains an important and valued member of the Board. Outlook The Group has successfully progressed from the reduced level of operating profit and operating margins achieved during the second half of 2002 and trading for 2003 is ahead of our budgets for the full year. The morale of our workforce is excellent. The credibility and status of our Group is unchallenged in our market place and the remarkable order book extending through 2006 speaks for itself as a tribute to our workforce and the profile of Severfield-Rowen in the market place it serves. The Directors look forward to a year of sustained progress and continued enhancement of the Group's market leading position in the industry which will, it is believed, provide a springboard for material growth in the following years. PETER LEVINE CHAIRMAN 26 September 2003 Severfield-Rowen Plc Consolidated Profit and Loss Account Six Months to Six Months to Year to 30 June 2003 30 June 2002 31 December 2002 Unaudited Unaudited Audited Â£000 Â£000 Â£000 Turnover 75,573 79,594 157,418 ---------- ---------- ---------- Group operating profit 3,837 5,181 7,690 Share of associates' operating loss (56) - (164) ---------- ---------- ---------- 3,781 5,181 7,526 Net interest (36) (93) (7) ---------- ---------- ---------- Profit on ordinary activities before taxation 3,745 5,088 7,519 Taxation on profit on ordinary activities (1,142) (1,550) (2,496) ---------- ---------- ---------- Profit on ordinary activities after taxation for the period 2,603 3,538 5,023 Dividends payable to equity shareholders (1,252) (1,043) (2,817) ---------- ---------- ---------- Profit retained, transferred to reserves 1,351 2,495 2,206 ---------- ---------- ---------- Basic earnings per share 12.89p 17.78p 25.08p ---------- ---------- ---------- Diluted earnings per share 12.88p 17.71p 25.05p ---------- ---------- ---------- Dividends per share 6.25p 5.25p 14.00p Severfield-Rowen Plc Consolidated Balance Sheet At 30 June At 30 June At 31 December 2003 2002 2002 Unaudited Unaudited Audited Â£000 Â£000 Â£000 Fixed Assets: Tangible assets 28,023 22,311 28,069 Investments 648 722 629 Intangible assets 180 112 180 ---------- ---------- ---------- 28,851 23,145 28,878 ---------- ---------- ---------- Current Assets: Stocks 5,412 5,215 5,742 Debtors 33,424 49,344 32,571 Cash at bank and in hand 3,300 9,232 11,417 ---------- ---------- ---------- 42,136 63,791 49,730 Current Liabilities: Creditors due within one year (28,979) (45,668) (37,613) ---------- ---------- ---------- Net current assets 13,157 18,123 12,117 ---------- ---------- ---------- Total assets less current liabilities 42,008 41,268 40,995 Creditors due after more than one year (901) (1,552) (1,240) Provision for liabilities and charges (2,021) (1,736) (2,021) ---------- ---------- ---------- 39,086 37,980 37,734 ---------- ---------- ---------- Capital and Reserves: Called up share capital 2,019 2,012 2,018 Share premium account 9,231 9,194 9,231 Other reserves 139 139 139 Profit and loss account 27,697 26,635 26,346 ---------- ---------- ---------- 39,086 37,980 37,734 ---------- ---------- ---------- Severfield-Rowen Plc Consolidated Cash Flow Statement Six Months to Six Months to Year to 30 June 2003 30 June 2002 31 December 2002 Unaudited Unaudited Audited Â£000 Â£000 Â£000 Net cash flow from operating activities (2,637) 4,919 16,304 Returns on investments and servicing of finance (30) (87) 6 Taxation (2,209) (1,927) (2,467) Capital expenditure and financial investment (929) (1,833) (8,141) Acquisitions and disposals (75) 271 (647) Equity dividends paid (1,774) (1,760) (2,784) ---------- ---------- ---------- Cash (outflow)/inflow before use of liquid resources and financing (7,654) (417) 2,271 Financing (463) (3,769) (4,272) ---------- ---------- ---------- Decrease in cash in the period (8,117) (4,186) (2,001) ---------- ---------- ---------- Reconciliation of net cash flow to movement in net funds Six Months to Six Months to Year to 30 June 2003 30 June 2002 31 December 2002 Unaudited Unaudited Audited Â£000 Â£000 Â£000 Decrease in cash in the period (8,117) (4,186) (2,001) Cash flow from movement in loans and hire-purchase contracts 464 4,448 4,994 ---------- ---------- ---------- Change in net funds from cash flows (7,653) 262 2,993 Loan acquired with subsidiary - - (107) New borrowings - - (288) New hire-purchase contracts - (313) (313) ---------- ---------- ---------- Movement in net funds in the period (7,653) (51) 2,285 Net funds at beginning of period 9,159 6,874 6,874 ---------- ---------- ---------- Net funds at end of period 1,506 6,823 9,159 ---------- ---------- ---------- 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 2002 statutory accounts. 2) Taxation for the six months to 30 June 2003 has been shown at the rate estimated to be applicable for the full year. 3) The interim dividend of 6.25p per share (2002: 5.25p) will be paid on 24 October 2003 to shareholders on the register on 10 October 2003. The ex-dividend date will be 8 October 2003. 4) The basic earnings per share figure for the six months ended 30 June 2003 is based on the profit after taxation of Â£2,603,000 (2002: Â£3,538,000) and 20,186,245 (2002: 19,897,289) 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 Â£2,603,000 (2002: Â£3,538,000) and 20,210,540 (2002: 19,977,276) 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 2002 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 Â£000 At January 2003 37,734 Retained profit for the period 1,351 Issue of share capital under share option scheme 1 --------- At 30 June 2003 39,086 --------- 8) Reconciliation of group operating profit to operating cash flow Six Months to Six Months to Year to 30 June 2003 30 June 2002 31 December 2002 Â£000 Â£000 Â£000 Group operating profit 3,837 5,181 7,690 Depreciation, amortisation and profit/loss on disposal of assets 975 950 2,220 Working capital (increase)/decrease (7,449) (1,212) 6,394 ---------- ---------- ---------- Net cash flow from operating activities (2,637) 4,919 16,304 ---------- ---------- ---------- This information is provided by RNS The company news service from the London Stock Exchange

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