Severfield Regulatory News (SFR)

10 Apr 2006 07:01

Severfield-Rowen PLC10 April 2006 10 April 2006 2005 Full Year Results RECORD PROFITS, OUTSTANDING ORDER BOOK, EXCELLENT PROSPECTS Severfield-Rowen Plc, the market leading structural steel group, announces itsfull year results to 31 December 2005. £m 2005 2004 Change Revenue 236.7 204.3 15.9%Operating profit 19.3 12.1 59.4%Profit before tax 19.7 12.2 60.8%Basic earnings per share 66.39p 41.44p 60.2%Dividend per share 37.0 p 23.0p 60.9% Highlights • Record pre-tax profits increased 61% • Group operating margins significantly improved to 8.15% (2004: 5.93%) • Dividend increased by 61% • Gross cash balances of £30.1m up 69% • All core businesses performed strongly • 2006 commenced ahead of Board's expectations • Record order book of £210m • Board confident of further success in 2006 Commenting on the results, Peter Levine, Chairman said: "Severfield-Rowen has had a stunning year with results significantly ahead ofmarket expectations." "We now have four major industry brands, providing a broad range of expertiseand services. Our markets are buoyant and demand for structural steelworkprojects continues to grow. We have a record order book of £210m and theindustry is experiencing robust enquiry levels. "2006 has started strongly, continuing the forward moving momentum, and theBoard is confident of further success in 2006." Enquiries Severfield-Rowen Plc Peter Levine, Chairman 07802 312249Peter Davison, Finance Director 01845 577 896 Financial Dynamics Richard Mountain/Susanne Walker 020 7831 3113 CHAIRMAN'S STATEMENT Introduction The Group had a stunning year in 2005 with the results significantly ahead ofinitial expectations. Success was achieved throughout the core businesses, withall performing profitably and contributing to a significant margin improvementfor the Group. The Group's reputation as the market leader is undisputed. This is complementedby the financial position of the Group with strong cash balances. Overview In 2005 profit before tax increased by 60.8% to £19.7m (2004: £12.2m) onincreased turnover of £236.7m (2004: £204.3m). Operating profit was £19.3m(2004: £12.1m) producing, after the tax charge of £6.1m (2004 £3.8m), increasedearnings per share of 66.4p (2004: 41.4p). The Group's strong financial position is a reflection of the record results.Net assets increased to £55.2m (2004: £47.3m) and despite capital expenditureout of cash flow of £4.2m (2004: £5.9m) the Group ended the year with a grosscash balance of £30.1m (2004: £17.8m). During the year the Group was engaged in many major projects and continued itssuccess with further contract awards arising from demand for the Group'sunmatched range of services. The Group is successfully achieving its aims ofincreasing its margins and enlarging the contribution of value added work. TheHeathrow Terminal 5 contract has largely been completed. The results are set against a continued robust industry background with thegrowth in demand for structural steelwork forecast to continue. Each one of the Group's core subsidiaries made significant contributions to theGroup results, these being: Severfield-Reeve Structures based in Dalton, NorthYorkshire, Watson Steel Structures based near Bolton, Lancashire, RowenStructures based near Nottingham and Atlas Ward Structures based in Sherburn,North Yorkshire. Severfield-Reeve Structures, which has the most efficient and profitablestructural steel fabrication plant in the UK, produced another excellentperformance. The plate line and the intumescent paint lines once againcontributed to this strong performance. Watson Steel Structures also made very good progress and reinforced itsimportant role to the Group. Rowen Structures demonstrated its continued value to the Group's capability toprovide a broad range of services with particular reference to the importantairport sector. Atlas Ward Structures, acquired for £1.2m cash on 31 March 2005, deliveredprofits significantly ahead of our original budget. The ongoing capitalinvestment plan will further increase its efficiency and productivity. Steel UK Limited On 3 February 2006 it was announced that Severfield-Reeve Structures Limited andMurray Metals Group Limited had created a new joint venture through which theywill jointly conduct their steel buying activities. This significant development is expected to show material benefits from thelatter part of 2006 onwards. Board Changes On 4 November 2005 it was announced that Tom Haughey the Group's CommercialDirector was appointed Joint Group Managing Director. Tom plays an importantrole within the Group, particularly in the key areas of procurement andstrategy. Employees The Group's management and workforce are the fulcrum around which the Group'ssuccess is achieved. The Board continues to be in their debt and expresses tothem its appreciation and gratitude. They have achieved the Board's aim ofmaintaining the reputation and leadership of Severfield-Rowen in the industryand it is a tribute to their skill and hard work that recently Severfield-Rowenwas voted Financial Times mid cap PLC Company of the Year for 2005. Dividend The Board's confidence in the Group's future prospects, combined with excellentcash balances lead the Board to recommend an increase in the full year dividendby 61% to 37.0 p per share, which is covered 1.8 times by earnings. The finaldividend of 24.5 p per share (2004: 14.25p) is payable on 19 June 2006 toshareholders on the register on 12 May 2006. It is worthy of note that over the last two years the full year dividend hasincreased by 118% (20.0p per share increase). Outlook The Board considers there to be outstanding potential for future growth inprofitability, underpinned by the record order book. Margins continue toimprove with demand for the Group's services increasing. The present year has started where 2005 left off and performance is alreadyahead of our initial expectations. The Board is confident of further success. Peter LevineChairman OPERATIONAL REVIEW Core Business Overview In 2005 the core businesses of the Group, Severfield-Reeve Structures, WatsonSteel Structures, Rowen Structures and Atlas Ward Structures each producedexcellent returns, materially ahead of our initial expectations. They were wellsupported by our erection company, Steelcraft Erection Services. The Group has once again delivered results which set new precedents in ourindustry. We constantly review systems and performance in order to maintain ourposition as market leader so that we can provide enhanced services to ourclients with the increasing broad range of work the Group performs. Severfield - Reeve Structures The capital investment which is continually carried out on the upgrading ofplant and machinery ensures high levels of efficiency and productivity. Thebusiness continued to go from strength to strength working on a wide variety ofprojects including: • Warehouse and distribution centre on the Pioneer Business Park, Ellesmere Port near Chester • New Tesco distribution centre in Peterborough • Additional manufacturing facilities for the new Mini made by BMW at Cowley near Oxford • Ongoing retail development opposite BBC Television Centre, White City, London • Development of "Knowledge Dock" and "Learning Resource Centre" buildings for the University of East London • Redevelopment of office blocks at Aldermanbury Square, London • Two office developments for international law firms over-looking Tower Bridge and City Hall in the award winning More London development • Office Headquarters for Arsenal Football Club opposite the new Emirates Stadium • New B&Q superstore in Luton • Office development at 77 Grosvenor Street, London • New car park for Whiston Hospital, Liverpool • New beef processing and packaging plant for Scotbeef in Glasgow In 2006 significant contracts include: • Office development at No.1 Coleman Street, London • Redevelopment and enlargement of the Pollok retail centre in Glasgow • Retail and residential development in the Princesshay area of Exeter • Retail development at the Grand Arcade, Wigan • Creation of an international centre for book conservation at the British Library, London • New 1200 bed hospital development at Queen Elizabeth Medical Centre, Edgbaston, Birmingham • Development of a new plaster calcination and milling facility for British Gypsum at East Leake, Leicestershire • Retail development at the Broadmead shopping complex in Bristol Watson Steel Structures Watson's results demonstrate its valuable contribution to the Group. It has anexcellent reputation in the industry for specialist steel work. Contractsperformed in 2005 included: • Ongoing works at Heathrow Airport Terminal 5 for BAA plc • Steelwork to New Grandstand, Ascot Racecourse • O2 Arena • Phase 2 of St Pancras Station redevelopment • Multi-Storey Car Park - Heathrow Airport for BAA plc • Emirates Stadium the new home for Arsenal Football Club New contracts for 2006 include: • Arena and Conference Centre, Kings Waterfront, Liverpool • Redevelopment of Centre Court, Wimbledon • Link bridge Terminal 3, Heathrow Airport for BAA plc • South East Pier, Edinburgh Airport for BAA plc • Second phase of the Darwin Centre at the Natural History Museum • Two grandstands, Aintree Racecourse • Steelwork for Waterfront at O2 Arena • Finnieston Bridge arching the River Clyde, Glasgow Rowen Structures Rowen's core expertise in the airport sector continues to play an important rolewithin the Group. The contracts undertaken by Rowen in 2005, as well as airport work for BAA,included a new car park at Queen Elizabeth Medical Centre, Edgbaston, Birmingham A major new contract for 2006 is a retail and leisure development at the EagleCentre, Derby which will continue alongside servicing of the airport sector. Atlas Ward Structures Atlas Ward offers a particular expertise in the distribution warehouse market, ahighly skilled work force and a complementary client base. The Group hassuccessfully integrated Atlas Ward which performed well ahead of our initialexpectations in 2005. A £3m capital investment programme to upgrade productionfacilities and improve efficiency is now nearly complete. Contracts for 2005 included: • New warehouse facility on the outskirts of Hemel Hempstead for Astral Developments • Three storey office development for the new Aylesbury College campus • New storage and distribution facility for Kimberley Clark • Second phase food distribution warehouse near Bridgwater, Somerset • Distribution centre in Newark for Dixons New contracts for 2006 include: • New IKEA store at Ashton-under-Lyne near Manchester • Tesco distribution centre in Dublin • Rebuilding of the Monkhill Confectionery Popcorn Factory in Pontefract • Addition of two Airbus assembly facilities at Filton near Bristol and Broughton in North Wales Steelcraft Erection Services The year 2005 saw Steelcraft, our dedicated service provider once againsupplying the Group with invaluable support. Yet again it produced very goodresults, testament to its effective management, control and close workingrelationship with other members of the Group. Severfield-Reeve Projects In 2005 Severfield-Reeve Projects saw a return to profitability. In additionsignificant changes were made to the senior management team. During the yearmanagement has worked to secure for the company a very satisfactory forwardworkload. The benefits of this good order book and the new management arecoming to fruition in 2006. The directors of Severfield-Reeve Projects arevery optimistic about the coming year and remain confident that the company willcontinue to provide the Group with an ongoing profitable and reliable service. Steel UK Limited This joint venture, announced after the year end, is expected, to be ofsignificant assistance in the sourcing of steel during the latter part of 2006. Conclusion The Group has had a record-breaking year with the results substantially ahead ofexpectations. The Group is well set for another year of significant progressunderpinned by the outstanding record order book of £210m. Enquiry levelsremain robust throughout the Group against a background of buoyant industrydemand. John SeversManaging Director Financial Review Once again I am pleased to report that the Group's results for the year ended 31 December 2005 show another significant improvement in its financial performancewith revenue, profit before tax, earnings per share, dividends per share and theyear end gross cash position all reaching record levels for the secondsuccessive year. Profit before tax of £19.65 million and revenue of £236.72 million haveincreased 60.8% and 15.9% respectively over the figures achieved in 2004. Theprofit before tax is an excellent result, well ahead of market expectationswhich had already been upgraded a number of times during the year. The basic earnings per share of 66.39p is an increase of 60.2% over 2004.Consequently, it is recommended that the total dividend for the year isincreased by 60.9% to 37p per share, giving a dividend cover of 1.8 times. It is particularly pleasing that the year ended with the Group having anexceptional gross cash balance of £30.13 million and net funds of £29.70million. Net assets increased by 16.7% to £55.20 million. International Financial Reporting Standards The accounts to 31 December 2005 are the first to be prepared on the basis ofInternational Financial Reporting Standards (IFRS). Severfield-Rowen hasamended its accounting policies to comply with standards issued by theInternational Accounting Standards Board (IASB) and interpretations of theInternational Financial Reporting Interpretations Committee (IFRIC) that havebeen issued and are effective (or available for early adoption) at 31 December2005. The comparative figures for the year ended 31 December 2004 have been restatedto comply with adopted IFRS. They were previously prepared under UK GenerallyAccepted Accounting Practice (GAAP). There was no impact on the Income Statement other than changes of presentationas a result of the implementation of IFRS. The only change in policy which hasa significant effect on the restated balance sheet as at 31 December 2004 wasthat relating to dividends not being recognised until they are declared or paidas under IAS 10. The impact of this was to increase the Company's net assets by£2.889 million to £47.295 million. All the comparative figures referred to relate to the restated figures for theyear ended 31 December 2004. Revenue Group revenue has increased by 15.9% to a record level of £236.72 million,driven by the addition of nine months of the revenue of Atlas Ward, followingits acquisition on 31 March 2005. Operating Profit The Group's operating profit increased by 59.4% to £19.30 million with operatingmargins, expressed as a percentage of revenue, continuing to increase to 8.15%from the 5.93% achieved in 2004. These figures continue to incorporate those of the Group's two associatedcompanies, Kennedy Watts Partnership Limited and Fabsec Limited, of which theGroup owns 25.1% and 25% respectively. The Group's operating profit for theyear includes its share of these two companies' results which amounted to a netloss of £1,000 (2004: loss £179,000). Net interest receivable for the Group amounted to £349,000 (2004: £110,000),producing a profit before tax of £19.65 million, an increase of 60.8% over theprevious year. Taxation The tax charge of £6.14 million represents an effective tax rate of 31.23% onpre-tax profits compared with 31.25% in the previous year. These effectiverates are higher than the prevailing rate of 30% due to the adjustments made inrespect of disallowable expenditure incurred during the year. Earnings per Share Basic earnings per share is at a record level of 66.39p, an increase of 60.2%over the previous year. This calculation is based on the profit after tax of£13,515,000 and 20,358,229 shares, being the weighted average number of sharesin issue during the year. As there were no share options outstanding at the year end the diluted earningsper share is the same as the basic calculation. Dividend The Board will be recommending a final dividend of 24.5p per share (2004:14.25p) at the Company's Annual General Meeting on 15 June 2006 bringing thetotal dividend for the year to 37.0p per share. This total dividend representsa 60.9% increase over the dividend of 23.0p per share paid for 2004. This is inline with the basic earnings per share increase and maintains the total dividendcover at 1.8 times earnings, a level at which the Board remains comfortable andat which it remains confident of maintaining in the future. The final dividend will be paid on 19 June 2006 to shareholders on the registeron 12 May 2006. The ex-dividend date will be 10 May 2006. Balance Sheet The Group's balance sheet continues to strengthen with shareholders' fundsincreasing by £7.91 million to £55.20 million. This equates to a net assetvalue per share at 31 December 2005 of 270.6p, compared with the adjusted valuedue to the implementation of IFRS of 233.3p at the end of 2004. The Group's balance sheet now has fixed assets totalling £36.78 million.Depreciation charged in the year amounted to £2.72 million. We have continued to invest in our business with capital expenditure in the yearof £4.22 million. Although somewhat lower than the amount expended in previousyears the level of expenditure will increase in 2006 with almost £10 millionbudgeted. Acquisition The income statement incorporates the result for the nine month period of AtlasWard Holdings Limited, a company acquired on 31 March 2005 for a cashconsideration of £1.42 million including costs. Goodwill arising on the acquisition amounted to £6.57 million and has beenincluded in the consolidated balance sheet as an intangible fixed asset and willbe subject to an annual impairment review under IFRS 3. Atlas Ward has been integrated into the Group most satisfactorily and theresults for the nine month period of its ownership are both very good andencouraging for the future. Unlike the rest of the Group, Atlas Ward has a defined benefit pension schemewhich, although now closed to new members, had a book value deficit of £4.72million as at 31 March 2005. Post acquisition a fair value exercise of thepension scheme was undertaken, including reviews of the underlying data,resulting in the deficit being increased to £6.01 million as at 31 March 2005.This value has been included in the calculation of the goodwill figure. At 31 December 2005, as a result of changes made to the assumptions used incalculating pension scheme assets and liabilities, in particular a reduction inthe discount rate used, the deficit has increased slightly to £6.38 million andis shown as a liability in the Group balance sheet. Associated Companies During 2001 the Company acquired a 25% shareholding in Fabsec Limited, a companyinvolved in the development of a bespoke and fire engineered beam made out ofplate. This company holds the master intellectual property rights for these andthe other Fabsec family of beams the world over. It also carries out marketingpromotion and provides technical support. The Group benefits from thesefunctions whilst contributing 25% towards overheads. Fabsec Limited is not tobe confused with the Group's successful and profitable plate and intumescentpaint lines at Dalton which produce the Fabsec and fire engineered beams under aperpetual no royalty licence from Fabsec Limited. Investment in Fabsec Limited has continued in 2005 by way of licence fees paidof £275,000. Loans outstanding to the Group by Fabsec as at 31 December 2005amounted to £614,000 (2004: £614,000). However, the Board is of the opinionthat there may be an element of doubt over the collection of this loan in theshort to medium term future. Consequently, a review has been carried out and aprovision of £543,000 has been made against the debt. Fabsec continues to be involved in technical and market development and theresults for the year to 31 December 2005 show a small loss. The Group's 25%share of this loss amounted to £6,000 (2004: £179,000). The Group also owns a 25.1% shareholding in Kennedy Watts Partnership Ltd, acompany involved in CAD/CAM steelwork design. The Group's share of the profitof Kennedy Watts for the year amounted to £5,000 (2004: £Nil) resulting in a netloss arising from the associated companies of £1,000 (2004: £179,000). Cash Flow Management of the Group's cash has always been of prime importance to the Boardand this remains the case with cash being tightly controlled. It isparticularly pleasing, therefore, to report that the Group ended the year with arecord positive cash balance of £30.13 million (2004: £17.85 million). During the year £35.54 million was generated from operating activities. Outflows of cash during the year included dividends paid of £5.46 million,corporation tax paid of £5.82 million and the purchase of fixed assets, net ofsale proceeds, of £3.57 million. Also during the year short term borrowings of£2.45 million were repaid. The acquisition of Atlas Ward cost the Group £1.42 million in cash, includingexpenses. In addition at 31 March 2005 Atlas Ward had a bank overdraft of £3.59million. Consequently, the overall effect on the Group's cash movement due tothe acquisition amounted to £5.01 million. Borrowings, representing amounts due on hire purchase contracts, amounted to£0.43 million, leaving the Group with a net funds surplus of £29.70 million and,therefore, no gearing. Treasury Group treasury activities are managed and controlled centrally. Risks to assetsand potential liabilities to customers, employees and the public continue to beinsured. The Group maintains its low risk financial management policy byinsuring all significant trade debtors. The treasury function seeks to reduce the Group's exposure to any interest rate,foreign exchange and other financial risks, to ensure that adequate and costeffective funding arrangements are maintained to finance current and plannedfuture activities and to invest cash assets safely and profitably. The Group remains committed to strong financial controls, cash management andappropriate accounting and treasury policies. Summary The Group has had a very successful year with revenue, profit before tax,earnings per share and dividends per share once again reaching record levels. Cash generation continues to be very strong where, in spite of significantoutgoings on tax, dividends, capital expenditure and loan repayments totalling£17.95 million and the effect on cash of the acquisition of Atlas Ward amountingto £5.01 million the net funds of the Group increased by £15.05 million to£29.70 million. The acquisition of Atlas Ward is proving to be very successful enabling theGroup to continue to improve its very healthy financial position. The Groupremains well placed for future growth. Peter DavisonFinance Director Consolidated Income StatementFor the year ended 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 £000 £000 Continuing OperationsRevenue 236,722 204,277Cost of sales (212,100) (188,145) Gross profit 24,622 16,132 Other operating income 63 59Distribution costs (784) (662)Administrative expenses (4,597) (3,242)Share of results of associates (1) (179) Operating Profit 19,303 12,108 Investment income - interest 459 256Finance costs - interest (110) (146) Profit before tax 19,652 12,218 Tax (6,137) (3,818) Profit for the period attributable to the equity 13,515 8,400holders of the parent Earnings per share:Basic 66.39p 41.44pDiluted 66.39p 41.36p Consolidated Balance Sheet31 December 2005 At At 31 December 2005 31 December 2004 £000 £000ASSETS Non-current assets Goodwill 6,732 161 Other intangible assets 1,008 - Property, plant and equipment 36,784 34,131 Interests in associates 36 580 44,560 34,872Current assets Inventories 7,318 6,678 Trade and other receivables 32,419 36,833 Cash and cash equivalents 30,132 17,845 69,869 61,356 Total assets 114,429 96,228 LIABILITIES Current liabilities Bank loan - 2,153 Trade and other payables 48,221 39,339 Tax liabilities 3,251 3,776 Obligations under finance leases 363 616 51,835 45,884 Non-current liabilities Retirement benefit obligations 6,384 - Deferred tax liabilities 943 2,620 Obligations under finance leases 66 429 7,393 3,049 Total liabilities 59,228 48,933 NET ASSETS 55,201 47,295 EQUITY Share capital 2,040 2,027Share premium 9,770 9,415Other reserves 139 139Retained earnings 43,252 35,714 TOTAL EQUITY 55,201 47,295 Consolidated Statement of Recognised Income and ExpenseFor the year ended 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 £000 £000 Actuarial loss on defined benefit (745) -pension scheme Tax on items taken directly to equity 224 - Net expense recognised directly (521) -in equity Profit for the year from 13,515 8,400continuing operations Total recognised income and 12,994 8,400expense for the year attributableto equity shareholders Consolidated Cash FlowFor the year ended 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 £000 £000 Cash flows from operating activitiesCash generated from operations 35,543 10,664Interest paid (139) (146)Tax paid (5,824) (2,587) Net cash from operating activities 29,580 7,931 Cash flows from investing activitiesProceeds from sale of property, plant and equipment 648 1,153Interest received 456 255Acquisition of subsidiary, including costs (1,424) -Overdraft acquired with subsidiary (3,592) -Purchases of property, plant and equipment (4,216) (5,854)Purchases of intangible fixed assets (1,008) -Investment in associated company - (123) Net cash used in investing activities (9,136) (4,569) Cash flows from financing activitiesProceeds from the issue of share capital 368 4Repayment of borrowings (2,453) (35)Loan notes repaid - (164)Payment of finance lease liabilities (616) (710)Dividends paid (5,456) (3,930)New borrowings - 2,134 Net cash used in financing activities (8,157) (2,701) Net increase in cash and cash equivalents 12,287 661Cash and cash equivalents at beginning of period 17,845 17,184 Cash and cash equivalents at end of period 30,132 17,845 1) Basis of preparation Severfield-Rowen Plc has previously prepared its financial statements inaccordance with UK generally accepted accounting principles. From 2005, theGroup is required to prepare its consolidated financial statements in accordancewith International Financial Reporting Standards (IFRS) as adopted by theEuropean Union. These results represent the first financial information prepared in accordancewith IFRS. An explanation of how the transition to IFRS has affected thereported financial position, financial performance and cash flows of the Groupfor the year ended 31 December 2004 was set out in our announcement on IFRSrestatement dated 23 September 2005, a copy of which is posted on the Group'sweb-site: www.sfrplc.com. This announcement and web-site information also includes details of theaccounting policies which have been used in the preparation of the financialstatements under IFRS. These accounting policies will be disclosed in full inthe Group's Consolidated Financial Statements for the year ended 31 December2005. The financial information set out in this preliminary announcement does notamount to full accounts within the meaning of section 240 of the Companies Act1985. Full accounts for the year ended 31 December 2005 have not yet beenaudited or delivered to the Registrar of Companies. The Annual Report is due tobe posted to shareholders on or around 19 May 2006. A copy of the statutoryaccounts for the year ended 31 December 2004 has been delivered to the Registrarof Companies. The Auditor's Report on those accounts was not qualified and didnot contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2) Revenue and segmental analysis Revenue in both years originated from the United Kingdom. Revenue, profitbefore tax and net assets, in both years, related to the design, fabrication anderection of structural steel work and related activities. 3) Taxation The taxation charge comprises: 2005 2004 £000 £000Current tax UK corporation tax 5,303 3,590Adjustments to prior years' tax provision (4) (113) 5,299 3,477 Deferred tax Current year charge 822 341Adjustments to prior years' provision 16 - 838 341 Total tax charge 6,137 3,818 4) Dividends 2005 2004 £000 £000 Final dividend for the year ended 2,906 2,16631 December 2004 of 14.25p(2003: 10.75p) per share Interim dividend for the year ended 2,550 1,76431 December 2005 of 12.50p(2004: 8.75p) per share 5,456 3,930 Proposed final dividend for the year 4,998 2,889ended 31 December 2005 of 24.50p(2004: 14.25p) per share The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financialstatements. The proposed dividend will be paid on 19 June 2006 to shareholderson the register on 12 May 2006. The ex-dividend date is 10 May 2006. 5) Earnings per share There are no discontinued operations in either the current or prior year. The calculation of the basic and diluted earnings per share is based on thefollowing data: 2005 2004 £000 £000Earnings Profit for the year 13,515 8,400 2005 2004 Weighted average of number of shares 20,358,229 20,269,235in issue Weighted average of number of shares 20,358,229 20,309,730in issue, allowing for dilutive effectof share options Basic earnings per share 66.39p 41.44p Diluted earnings per share 66.39p 41.36p 6) Reconciliation of Group operating profit to cash generated from operations 2005 2004 £000 £000 Operating profit 19,303 12,108Adjustments for:Amortisation of intangible assets - 9Depreciation of property, plant and equipment 2,719 2,063Loss on disposal of property, plant and equipment 56 212Provision against loan from associated company 543 -Share of results of associated company 1 179 Operating cash flows before changes 22,622 14,571 in working capitalDecrease/(increase) in inventories 6,491 (3,362)Decrease/(increase) in receivables 5,729 (1,609)Increase in payables 701 1,064 Cash generated from operations 35,543 10,664 7) Reconciliation of movement in total equity At At 31 December 31 December 2005 2004 £000 £000 Opening total equity 47,295 42,821Total recognised income and expense 12,994 8,400Dividends paid in period (5,456) (3,930)Issue of share capital 368 4 Closing total equity 55,201 47,295 8) Analysis of net funds At At 31 December 31 December 2005 2004 £000 £000 Cash in hand 30,132 17,845Finance leases (429) (1,045)Bank loan - (2,153) Closing net funds 29,703 14,647 9) Acquisition of subsidiary On 31 March 2005 the Company acquired 100% of the issued share capital of AtlasWard Holdings Limited for a cash consideration of £1.21 million. Atlas WardHoldings Limited is a parent company of a group of companies involved in thedesign, fabrication and erection of structural steelwork. This transaction hasbeen accounted for by the acquisition method of accounting. The provisional details of the acquisition are as follows: Book Fair Value Fair Value Value Adjustments £000 £000 £000 Net assets acquired:Property, plant and equipment 1,860 - 1,860Inventories 7,131 - 7,131Trade and other receivables 938 374 1,312Deferred tax asset 1,416 875 2,291Trade and other payables (7,836) - (7,836)Retirement benefit obligations (4,721) (1,292) (6,013)Bank overdraft (3,592) - (3,592)Other loan (300) - (300) (5,104) (43) (5,147)Goodwill 6,571 Total consideration 1,424 Satisfied by:Cash 1,210Directly attributable costs 214 1,424 Net cash outflow arising on acquisitionCash consideration 1,424Bank overdraft 3,592 5,016 This information is provided by RNS The company news service from the London Stock Exchange