rns5 Nov 2012 14:59
Trading Update and Interim Management Statement
Severfield-Rowen Plc (the "Group"), the market leading structural steel group, issues this Interim Management Statement covering the period from 1 July 2012 to 5 November 2012.
Trading Update
The Group's UK businesses continue to operate in a difficult climate with the previously flagged pricing pressure and protraction of contractual settlements still posing significant challenges as clients and the supply chain compete harder in a shrinking market.
Our UK businesses have experienced mixed performances. Atlas Ward Structures and Fisher Engineering, have performed, and continue to perform, at or above expectations. Our other businesses, Severfield-Rowen Structures, Watson Steel Structures and Steelcraft Erection Services, which we announced in August will be merged into Severfield-Watson Structures at the end of 2012, are delivering below expectations. Their performances have been adversely affected by unfavourable final account settlements and cost overruns on a small number of contracts, as well as the re-phasing of other projects by clients.
As a result, it is the Board's view that the Group's profits before tax in 2012 will now be around £1 million. The Board remains confident that the ongoing business reorganisation and the conclusion of the affected projects will see an improvement in performance from Severfield-Watson Structures in calendar Q1 2013, together with continued strong performance from Atlas Ward Structures and Fisher Engineering.
UK
All four UK factories are producing at planned levels, underpinned by our consistently strong order book (currently £211 million) and market position.
The Group achieved constant levels of revenues in the period. The performance levels at Atlas Ward Structures and Fisher Engineering have been good and these are expected to be sustained in the coming periods.
However, despite maintained revenues, UK profitability in 2012 is now expected to be materially lower, as a result of the performance of Severfield-Rowen Structures, Watson Steel Structures and Steelcraft Erection Services.
The re-organisation of these businesses, announced in August 2012, is proceeding to schedule with the new company, Severfield-Watson Structures, being established from 1 January 2013, supported by a small number of external management appointments. The re-organisation is likely to see a headcount reduction in these businesses of around 50 positions. The resultant changes will deliver overhead savings of greater than £2 million which, combined with improved performance in contract engagement and execution, are expected to return operating margins to between 5% and 6%, over time. One-off costs for the delivery of the new organisation are not expected to exceed £1 million and will be non-underlying.
Demand in the UK remains depressed, however the Group's order book levels continue to be consistently st