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Wescol Group PLC (WCL)

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Monday 06 November, 2000

Wescol Group PLC

Final Results

Wescol Group PLC
6 November 2000

                      Wescol Group plc
Preliminary Results for the twelve months ended 31 July 2000


Richard Hill, Chief Executive      01422 319500
Wescol Group plc

Mark Way/ Oliver Jones             020 7353 9203
Bell Pottinger Financial


Wescol Group is now emerging from what has been a most
difficult and disappointing year. The domestic market for
the structural steel industry has been through a challenging
period, principally due to strong pricing pressures and
unfavourable exchange rates.

Richard Hill was appointed as Group Chief Executive on 6
July 2000 to implement Wescol's recovery strategy, detailed
below, which is already proving successful.

In the current period, Wescol has experienced a significant
improvement in contract wins and margins. Since our year end
the size of our current forward order book is reassuring
with significantly higher margin contracts being won
including the prestigious Greater London Assembly Building.

Essential to the recovery strategy is the reorganisation and
strengthening of both the executive board and the
management. With the new team now in place, Wescol is
already in a better position to capitalise on the increased
use of steel in the construction industry.

Financial summary
               12 months ended          12 months ended
               31 July 2000             31 July 1999

Turnover:      £83.48 million           £72.1 million

(Loss) / profit
  before tax: (7.51) million           £4.6million
(Loss) / profit
  after tax:  £(5.93) million          £3.16million

Your Board, having considered the outcome for the full year,
decided that the most appropriate way forward was to
reorganise both the executive and management teams.

Management reorganisation

Alan Walker, the Group Managing Director, resigned on 30
July 2000.  Stephen Brown, the Group Finance Director, has
resigned with effect from today, 6 November 2000.

Following the appointment of Richard Hill as Chief
Executive, Mike Newton was appointed Managing Director of
Wescol Glosford and Executive Director of the Group Board,
from 1 August 2000. He was previously Managing Director of
Watson Steel Limited, a subsidiary of AMEC plc. Mike has
over 30 years extensive experience in the structural steel
industry and much of the success in gaining our vastly
improved order book is due to his commercial awareness.

Stephen Rudman, who joined Wescol Glosford in September
2000, has been appointed Finance Director of the Group from
today, 6 November 2000. Stephen, a qualified accountant, was
previously Finance Director of Watson Steel Ltd. He will
have overall responsibility for ensuring the profitable
management of all further contracts through our new project
evaluation process.

The existing Non Executive Directors, Dr. Heinz Jorg
Fuhrmann and Christopher Bagnall who were nominated by our
major shareholder Salzgitter AG will remain on the Board.

The Board is further strengthened at Non Executive level
from today, by the appointment of Geoffrey Adams, who was
recently a Senior Partner with KPMG in Leeds.

The new Board confirms the strategy recently implemented
(detailed below) to improve the competitive position of the
Group, strengthen its balance sheet and return it to long
term secure growth and profitability.

The recovery strategy and other measures being taken to
return the Group to profitability have the full support of
the Group's largest shareholder, Salzgitter AG (Germany's
second largest steel manufacturer with net assets exceeding
£1.0 billion).

Review of the period

Recovery Strategy

Richard Hill was appointed as Group Chief Executive on 6
July 2000 and immediately initiated the implementation of a
review and recovery strategy.  He has extensive executive
management experience both in the UK and overseas.

At the time of Richard's appointment, Wescol's major
subsidiary Wescol Glosford was suffering from a combination
of unprecedented competition and operational difficulties,
which are set out in the divisional breakdown below.  The
smaller subsidiaries, Westok and Marbank, were also trading
through difficult periods which resulted in reduced
profitability. This will be returned to later in this

The key elements of the recovery strategy are:

- A review of the Wescol Glosford management team. This has
lead to the appointment of a Managing Director dedicated to
the Wescol Glosford subsidiary, to direct the turnaround in
both that company's trading and performance.

- Strengthening of the management teams at both Westok and

- The introduction of project evaluation processes for all
existing and new contracts

- A refocus towards the larger, higher value-added projects
with reasonable lead times.

- The immediate implementation of an overhead reduction
programme aimed at reducing the Group's fixed cost base.

- The rationalising of production facilities and maximising
of performance from the retained facilities.

- A full appraisal of the future positioning of both Westok
and Marbank within the Group.

Divisional breakdown

Wescol Glosford

Wescol Glosford, one of the leading structural steel
fabricators in the UK, is the Group's principal subsidiary
with a turnover of £68 million (1999: £59 million). During
the year under review it undertook approximately 50
contracts, ranging in value from £250,000 to over £10

The largest contract carried out involved the supply of some
8,000 tonnes of steelwork to the new world headquarters of
Glaxo SmithKline Beecham at Brentford in Middlesex.  The
excellent working relationship built up with the
construction managers Mace has now lead to Wescol Glosford
winning the steelwork contract for the prestigious new
Greater London Assembly Building in London.

However, whilst there were significant contract wins,
financially the year has been a major disappointment, with
Wescol Glosford recording a loss of £7.32 million (1999
profit: £3.0 million).  A number of factors contributed to
this very disappointing result:

- Over the last two years significant amounts of working
capital became tied up where Wescol Glosford was struggling
to achieve a satisfactory resolution of its final account
with clients with mixed results. For the year end,
provisions have been made against contract balances to
reflect the current difficult market. Management do not
believe that further provisions will be required and will
still seek to recover the full value of work performed from

- As was forewarned at the Annual General Meeting last
December, Wescol Glosford has incurred additional costs
arising from the implementation of the new steel purchasing
agreement with Salzgitter.  This transition has now been

- Whilst Wescol Glosford started last year with a good order
book, planned capacity increases were not fully achieved
during the year.  As a result, Wescol Glosford incurred
significant additional subcontract fabrication costs.
Whilst output averaged over 1,000 tonnes per week from
November 1999 to March 2000, during the latter part of the
year internal operational difficulties to which I have
referred acted as a bottleneck on Wescol Glosford's in-house
capacity, again increasing its reliance on subcontractors.

- Price competition intensified further from January 2000.
This was brought about by weak market conditions, resulting
in significant reduced trading margins.  This competition
was most intense at the largest end of the contract scale,
indeed for a period Wescol Glosford found it virtually
impossible to win profitable work at the preferred larger
end of the market.  As a result, the total value of orders
won in the year fell to £40.6 million (1999: £69.0 million)
of which only £17.3 million was won in the second half year
(1999: £36 million).  The reduced level of small orders
received effectively shortened contract lead times
significantly, which made the resolution of Wescol
Glosford's operational difficulties more protracted.

Encouragingly, tendering increased significantly to £150
million in the second half year (1999: £150 million),
compared to £113 million in the first half (1999: £203

This increase whilst not early enough to improve second-half
order intake has, alongside other actions taken by the new
Managing Director, Mike Newton, assisted in generating a
greatly improved order intake in the first few months of the
new financial year, with the present position in respect of
new orders either secured or anticipated, in excess of £20

We are pleased to report on the changes, which have already
been implemented by Mike Newton, in the short time since his
appointment as Managing Director of Wescol Glosford on 1
August 2000:

- Revised management structure for Wescol Glosford, with
direction of all areas of the business now totally focused.

- Appointment of a new finance director together with an
appointment to the new role of procurement director.

- Operations directors for Halifax and Hereford now

- Sales activity increased and refocused towards the larger,
higher value-added projects with reasonable lead times,
which are essential for Wescol Glosford to return to
previous levels of operational efficiency and profitability.

- Production capacity is being rationalised, with Wescol
Glosford's Worcester fabrication facility being closed, and
all production being directed through the three remaining
factories at Halifax, Hereford and the recently redeveloped
Brierley Hill.

- The proposed sale of the Worcester factory site.

- Changes in supply chain management have been implemented
to streamline operational procedures and increase output at
Wescol Glosford's factories.

The Board is confident that the changes already announced
and in course of implementation will bring about Wescol
Glosford's return to adequate levels of profitability during
the current year.

Wescol Glosford's export markets

Wescol Glosford successfully supplied the structural steel
frame for a specialist road noise enclosure project in Hong
Kong (Wong Chu Road).

All further export projects will be carefully selected and
furthermore will be project managed from the UK, allowing
closure of the small Singapore office from which projects in
the Far East have previously been managed.


At the beginning of the financial year Westok introduced a
revised shift-working pattern to accommodate a planned
expansion of the Cellular Beam into Europe.  The contracts
won as a result of this expansion were at a time when
sterling was strengthening against the Euro, were typically
low margin and did not absorb the higher labour overhead
costs.  As a consequence Westok had to revert to its
previous shift pattern and re-focus its attention on the UK
market.  This action succeeded in returning Westok rapidly
back to profit, though the results for the year are
substantially below the internal budget.

The development of a joint venture with our major
shareholder Salzgitter for the production of Cellular Beams
in Germany has lead to cellular beams being specifically
targeted and sold to the expanding European market.

The management team at Westok has also been strengthened by
the appointment of a Technical Director, with special
responsibility for increasing technical awareness of the
product to potential end specifiers.


Marbank Construction, Wescol's design and build contractor,
performed reasonably well in the difficult market conditions
it operates within. It's overall result was affected by the
delay in the start of a number of contracts and the fact
that the majority of work secured was as a result of highly
competitive tendering.

The current forward order book is now ahead of plan with a
number of large negotiated contracts being recently awarded.

Management of the subsidiary has also been strengthened by
the appointment of a Construction Director with specific
responsibilities for all site activities, together with a
Commercial Manager to head up the commercial activities of


No final dividend payment is proposed in respect of the year
to 31 July 2000, although the Board anticipates that
dividend payment will be resumed for the current year.


With all of the trading companies having started the current
year with vastly improved order books in volume of orders
together with value and mix, the new board is confident that
the year will see a significant recovery in the Group's

This confidence is based upon:

- The strength of the new board.

- The much strengthened subsidiary management teams, working
to clear business plans and focussed to achieve results.

- The full implementation of the recovery strategy.
- The resolution of the operational difficulties which
affected Wescol Glosford so adversely last year.
- The encouraging improvement in Wescol Glosford's order
intake so far this year.

In addition, the demand for steel within the construction
industry remains strong and, with Wescol's unique abilities
to meet technically demanding projects, the Board is totally
committed to translate that confidence into significantly
improved trading results during the current year.

On behalf of the Board we would like to thank all employees
for the dedication and valued contribution they have made
during what has been a most difficult period for the Group.

Peter H Price                                Richard Hill
Chairman                                  Chief Executive

Year ended 31 July 2000

                                Note        2000        1999
                                           £'000       £'000
Group turnover: continuing                                  
  operations                              83,478      72,106
                                      ==========  ==========
Operating (loss)/ profit -                                  
  continuing operations                   (6,922)      4,916
Net interest payable                        (588)      (289)
                                      ==========  ==========
(Loss)/Profit on ordinary                                   
  activities before taxation              (7,510)      4,627
Tax on (loss)/profit on                                      
  ordinary activities            1         1,583      (1,467)
                                      ==========  ==========
(Loss)/Profit on ordinary                                   
  activities after taxation               (5,927)      3,160
Minority interests                           (25)       (80)
                                      ==========  ==========
(Loss)/Profit for the financial                             
  year                                    (5,952)      3,080
Dividends                        2             -      (1,111)
                                      ==========  ==========
Retained (loss)/ profit for the                             
  year                                    (5,952)      1,969
                                      ==========  ==========
(Loss)/Earnings per share        3                          
Basic                                     (10.7p)       5.5p
Diluted                                   (10.7p)       5.5p
                                      ==========  ==========
Dividends per share                            -        2.0p
                                      ==========  ==========

As at 31 July 2000

                                             2000        1999
                                            £'000       £'000
Fixed assets                                                 
Intangible assets                              34          36
Tangible assets                            15,389      14,673
                                       ==========  ==========
                                           15,423      14,709
                                       ==========  ==========
Current assets                                               
Stocks                                        244         244
Debtors                                    26,728      23,980
Cash at bank and in hand                      404       1,689
                                       ==========  ==========
                                           27,376      25,913
Creditors: amounts falling due                               
  within one year                        (29,472)    (19,884)
                                       ==========  ==========
Net current                                                  
  (liabilities)/assets                    (2,096)       6,029
                                       ==========  ==========
Total assets less current                                    
  liabilities                              13,327      20,738
Creditors: amounts falling due                               
  after more than one year                (1,681)     (2,484)
Provisions for liabilities and                               
  charges                                    (28)       (750)
                                       ==========  ==========
Net assets                                 11,618      17,504
                                       ==========  ==========
Capital and reserves                       11,416      17,327
Minority interests - equity                   202         177
                                       ==========  ==========
                                           11,618      17,504
                                       ==========  ==========

Year ended 31 July 2000

                                            2000        1999
                                           £'000       £'000
Net cash (outflow)/inflow from                              
  operating activities                    (3,610)      1,293
Returns on investment and                                    
  servicing of finance                      (588)      (319)
Taxation paid                               (299)      (996)
Capital expenditure and                                      
  financial investment                    (1,513)     (1,586)
Acquisitions and disposals                     -        (36)
Equity dividends paid                       (668)    (1,053)
                                      ==========  ==========
Net cash outflow before                                      
  financing                               (6,678)     (2,697)
Financing                                 (1,116)      1,944
                                      ==========  ==========
Decrease in cash                          (7,794)      (753)
                                      ==========  ==========

31 July 2000

                                             2000        1999
                                            £'000       £'000
     United Kingdom Corporation Tax                          
     Current tax on income for the                           
       year                                  (804)      1,349
     Adjustment in respect of prior                          
       years                                  (57)          -
                                       ==========  ==========
                                             (861)      1,349
     Foreign tax                                             
     Current tax on income for the                           
       year                                     -           9
                                       ==========  ==========
     Current taxation                        (861)      1,358
     Deferred taxation                       (722)        109
                                       ==========  ==========
                                           (1,583)      1,467
                                       ==========  ==========

     The tax credit for the year, at 21.1% of the loss
     before taxation, reflects the utilisation of tax losses
     during the year.  The group has tax losses carried
     forward of £4,670,000.

                                             2000        1999
                                            £'000       £'000
     Interim dividend on equity                              
     shares at a rate of  nil pence                          
       (1999: 0.8p) per share                   -         443
     Proposed final dividend on                              
     equity shares at a rate of nil                          
       pence (1999: 1.2p) per share             -         668
                                       ==========  ==========
                                                -       1,111
                                       ==========  ==========


     Basic (loss)/earnings per share are calculated on the
     loss after taxation and minority interests of
     £5,952,000 (1999: £3,080,000 profit), divided by 55.5
     million ordinary shares (1999: 55.5 million ordinary
     shares), being the weighted average number of shares in
     issue during the year.

     Diluted earnings per share are calculated after
     allowing for the dilutive effect of conversion into
     ordinary shares of the weighted average number of share
     options outstanding during the year.  In the year to 31
     July 2000, the options are not dilutive as a result of
     the loss for the year.


     This preliminary statement, which has been agreed with
     the auditors, was approved by the Board on 6 November
     2000.  It is not the company's statutory accounts.  The
     statutory accounts for the year ended 31 July 1999 have
     been delivered to the Registrar of Companies and
     received an audit report which was unqualified and did
     not contain statements under s237(2) or (3) of the
     Companies Act 1985.  The statutory accounts for the
     year ended 31 July 2000 have not yet been approved,
     audited or filed.


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