Severfield Regulatory News (SFR)

26 Sep 2005 07:00

Severfield-Rowen PLC26 September 2005 26 September 2005 SEVERFIELD-ROWEN DELIVERS RECORD RESULTS 2005 Half Year Results Severfield-Rowen Plc, the market leading structural steel group, announces itshalf-year results to 30 June 2005. 2005 2004 Change Half year Half year Revenue £112.03m £95.66m +17%Profit from operations £7.20m £5.21m +38%Profit before tax £7.34m £5.25m +40%Basic earnings per share 24.9p 17.8p +40%Dividend per share 12.5p 8.75p +43% Highlights • Operating margin increased to 6.4% (2004: 5.5%) • All core businesses performing ahead of expectations • Strong order book totalling £158m • Atlas Ward already demonstrating profit growth substantially ahead of initial projections • Cash balance of £15.28m (2004: £12.66m) with nil gearing Commenting, Peter Levine, Chairman, said: "Severfield-Rowen has delivered record half year results with profits, earningsper share and dividends all increasing significantly. We are also particularlypleased with the strength of our cash performance. "The Group continues to make significant progress and as stated in our AGMstatement in June trading is in advance of its original expectations for thefull year. Demand for our products is encouraging, margins are improving andthe growth prospects for the Group give the Directors every confidence in itsfuture prospects." Enquiries Severfield-Rowen PlcPeter Levine, Chairman 0113 246 9993Peter Davison, Finance Director 01845 577 896 Financial DynamicsRichard Mountain 020 7269 7291 INTERIM STATEMENT 2005 INTRODUCTION The Group produced a record performance in the first half of 2005 resulting inan increase over the same period in 2004 of 40% in pre tax profits, to over£7.3m, on revenue up 17% at £112m. Earnings per share increased by 40% to 24.9pand the Group's cash balance increased to over £15m, with nil gearing. TheGroup's operating margins also increased to 6.4%. The purchase of Atlas Ward is proving very successful and this business iscontributing to the Group ahead of our projections. The results for the Group as a whole are in advance of our expectations at thebeginning of the year and reflect the strengthening position of our corebusinesses in a growing market place. The Group's current order book of £158m, of which now only £10m representsHeathrow Terminal 5, provides a sound foundation for the rest of the year andinto 2006. FINANCIALS Revenue in the period was £112.03m (2004: £95.66m) and operating profit was£7.20m (2004: £5.21m) which produced an increased operating margin of 6.42%(2004: 5.45%). Profit before tax increased 39.9% to £7.34m (2004: £5.25m) and profit after taxwas £5.06m (2004: £3.60m), after a tax charge of £2.27m (2004: 1.65m). Basic earnings per share were 24.92p (2004: 17.76p). During the first six months of the year capital expenditure amounted toapproximately £2.1m (2004: £1.4m). The period ended with the Group having a positive cash balance of £15.28m (2004:£12.66m). Cash inflow from operating activities improved to £13.03m (2004:outflow £0.71m). Significant cash outflows in the period included dividendspaid of £2.91m, corporation tax paid of £3.32m and the purchase of fixed assets,net of sale proceeds received, of £2.04m. Also during the period short-termborrowings of £2.45m were repaid. The acquisition of Atlas Ward cost the Group, including expenses, £1.40m in cashas well as the overdraft taken on of £3.59m. Consequently the overall effect onthe Group's cash movement due to the acquisition amounted to £4.99m. Borrowings, representing amounts due on hire purchase contracts, amounted to£0.68m, leaving the Group with a net funds surplus of £14.60m and therefore nogearing. As now required, these results are reported under International FinancialReporting Standards (IFRS) and the 2004 comparatives have been restatedaccordingly. This restatement had no impact on profits and increased thereported net assets of the Group as at 31 December 2004 by £2.89m as dividendsare not recognised until declared or paid under IAS 10. Further details are setout in our announcement on IFRS restatement dated 23 September 2005, a copy ofwhich is posted on the Group's web-site: www.sfrplc.com. Share Buy Back Whilst the Group has the power to buy back its own shares, none were purchasedin the reporting period. The Directors continue to monitor this issue closely and will exercise suchpower as and when it is appropriate, taking into account the cash position ofthe Group and the Directors' view of its medium to long-term prospects. Atlas Ward As reported in the 2004 Annual Report, on 31 March 2005 the Group completed thepurchase of Atlas Ward for £1.21m cash, excluding expenses. Atlas Ward is already proving to be a valuable addition to the Group and iscontributing ahead of our projections made at the time of acquisition. Board Changes Peter Emerson has been appointed as the Deputy Managing Director of the Groupsucceeding Peter Ellison who, as Managing Director of our in-house steelerection company, Steelcraft Erection Services, has taken on additional workloadsince the acquisition in March of Atlas Ward. Peter Ellison will alsocontinue his role as Deputy Managing Director of Severfield-Reeve Structures. As well as taking on the responsibility of Group Deputy Managing Director, PeterEmerson will continue in his key role as Managing Director of Watson SteelStructures. Dividend As a result of the Group's performance in the first half, its strong financialposition and the Directors' confidence over the future prospects for the Group,the Board is pleased to significantly increase the interim dividend by 42.9% to12.5p per share (2004: 8.75p), which is covered 1.99 times by earnings (2004:2.03 times). The interim dividend will be paid on 28 October 2005 toshareholders on the register on 7 October 2005. OPERATIONS Group overview The principal business of the Group is carried out by its four main operatingcompanies: Severfield-Reeve Structures, Watson Steel Structures, RowenStructures and Atlas Ward Structures. The Group is the acknowledged market leader in its sector and its productionfacilities, technology and broad range of structural steel services areunrivalled in the industry. Carefully planned investment preserves the Group'sadvantage in the sector. Margins remain a particular focus of attention andhave shown further improvement in the first six months of 2005. The core businesses of the Group, each trading profitably and ahead ofexpectations, reflect a balanced and comprehensive approach to the varieddemands of the structural steel market: • Severfield-Reeve Structures, the single largest production unit in the UK in terms of capacity and an industry leader in efficiency and use of technology; • Watson Steel Structures, a world leader in specialist steel work such as stadia and bridges; • Rowen Structures, an expert in complex projects such as airports and office blocks and • Atlas Ward Structures, reinvigorated through membership of the Group since its acquisition and assuming once again its leadership of the shed and portal frame market. The broad range of capabilities reflected in this portfolio, together with theGroup's financial strength and excellence of its workforce, enableSeverfield-Rowen to benefit from, and be resilient to, the ever changing andevolving market place. Contracts Projects carried out by the Group in the first six months of the year include: • Emirates Stadium the new home for Arsenal Football Club • Steelwork to New Grandstand, Ascot Racecourse • Phase 2 of St Pancras Station Redevelopment • O2 (formerly Millennium Dome) Arena • Ongoing works at Heathrow Airport Terminal 5 for BAA plc • Multi-Storey Car Park - Heathrow Airport • Warehouse and distribution centre on the Pioneer Business Park, Ellesmere Port near Chester • Retail and leisure development on the old Flowers Brewery site in Cheltenham • New Tesco distribution centre in Peterborough • Additional manufacturing facilities for the new Mini made by BMW at Cowley near Oxford • Development of schools for North Lanarkshire PFI projects • Development of offices for Scottish Television in Glasgow • Development of "Knowledge Dock" and "Learning Resource Centre" buildings for the University of East London • New Car Park at Queen Elizabeth Hospital, Edgbaston, Birmingham • 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 The Group is very well positioned moving into the second half of 2005 and into2006 with the strength of its order book pointing to further success. The Boardcontinues to monitor overheads and expenses and is dedicated to increasingmargins further in the future. Outlook The Group continues to make significant progress and as stated in our AGMstatement in June trading is in advance of its original expectations for thefull year. Demand for our products is encouraging, margins are improving andthe growth prospects for the Group give the Directors every confidence that 2005should be a most successful year. The Group is the industry standard by which others are judged. The credibilityand status of Severfield-Rowen remain unrivalled and is a credit to ourworkforce. PETER LEVINECHAIRMAN 26 September 2005 Consolidated Income Statement Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (unaudited) (restated) (restated) £000 £000 £000 Revenue 112,029 95,659 204,277Cost of sales (102,502) (88,530) (188,145) Gross profit 9,527 7,129 16,132 Other operating income 45 27 59Distribution costs (551) (380) (662)Administrative expenses (1,827) (1,497) (3,242)Share of results of associates 3 (65) (179) Profit from operations 7,197 5,214 12,108 Investment income 197 72 256Finance costs (56) (41) (146) Profit before tax 7,338 5,245 12,218 Tax (2,274) (1,646) (3,818) Profit for the period 5,064 3,599 8,400 Earnings per share:Basic 24.92p 17.76p 41.44pDiluted 24.92p 17.73p 41.36p Consolidated Statement of Recognised Income and Expense There are no recognised items of Income and Expense in either period other thanthat disclosed on the Income Statement. Consolidated Balance Sheet At At At 30 June 2005 30 June 2004 31 December 2004 (unaudited) (restated) (restated) £000 £000 £000 ASSETS Non-current assets Goodwill 6,661 170 161 Property, plant and equipment 36,882 31,205 34,131 Interests in associates 583 626 580 44,126 32,001 34,872Current assets Inventories 5,916 2,884 6,678 Trade and other receivables 34,927 51,788 36,833 Cash and cash equivalents 15,278 12,660 17,845 56,121 67,332 61,356 Total assets 100,247 99,333 96,228 LIABILITIES Current liabilities Bank loan - 1,435 2,153 Trade and other payables 41,121 47,410 39,339 Tax liabilities 2,726 2,507 3,776 Obligations under finance leases 455 747 616 44,302 52,099 45,884Non-current liabilities Bank loan - 19 - Retirement benefit obligations 4,721 - - Deferred tax liabilities 1,204 2,279 2,620 Obligations under finance leases 227 683 429 6,152 2,981 3,049 Total liabilities 50,454 55,080 48,933 NET ASSETS 49,793 44,253 47,295 EQUITY Share capital 2,039 2,027 2,027Share premium 9,743 9,412 9,415Other reserves 139 139 139Retained earnings 37,872 32,675 35,714TOTAL EQUITY 49,793 44,253 47,295 Consolidated Cash Flow Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (unaudited) (restated) (restated) £000 £000 £000Cash flows from operating activitiesCash generated from operations 13,032 (712) 10,664Interest paid (56) (41) (146)Tax paid (3,324) (2,025) (2,587) Net cash from operating activities 9,652 (2,778) 7,931 Cash flows from investing activitiesProceeds from sale of property, plant and 93 333 1,153equipmentInterest received 192 95 255Acquisition of subsidiary, including costs (1,396) - -Overdraft acquired with subsidiary (3,592) - -Purchases of property, plant and equipment (2,134) (863) (5,854)Investment in associated company - (55) (123) Net cash used in investing activities (6,837) (490) (4,569) Cash flows from financing activitiesProceeds from the issue of share capital 340 1 4Repayment of borrowings (2,453) - (35)Loan notes repaid - (164) (164)Payment of finance lease liabilities (363) (325) (710)Dividends paid (2,906) (2,168) (3,930)New borrowings - 1,400 2,134 Net cash used in financing activities (5,382) (1,256) (2,701) Net (decrease)/increase in cash and cash (2,567) (4,524) 661equivalentsCash and cash equivalents at beginning of period 17,845 17,184 17,184 Cash and cash equivalents at end of period 15,278 12,660 17,845 Notes to Interim Report 1) Basis of preparation EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the company, for the year ending 31 December 2005, beprepared in accordance with International Financial Reporting Standards (IFRS)adopted for use in the EU ("adopted IFRS").This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRS in issue that either areendorsed by the EU and effective (or available for early adoption) at 31December 2005 or are expected to be endorsed and effective (or available forearly adoption) at 31 December 2005, the Group's first annual reporting date atwhich it is required to use adopted IFRS. Based on these adopted and unadoptedIFRS, the directors have made assumptions about the accounting policies expectedto be applied when the first annual IFRS financial statements are prepared forthe year ending 31 December 2005. These accounting policies are set out in theannouncement "Restatement of financial information for 2004 under InternationalFinancial Reporting Standards" dated 23 September 2005, available on the Group'sweb site www.sfrplc.com. In particular, the directors have assumed that the amendment to IAS 19 EmployeeBenefits will be adopted by the EU in sufficient time that it will be availablefor use in the annual IFRS financial statements for the year ending 31 December2005. In addition, the adopted IFRSs that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 31 December2005 may still be subject to change or to additional interpretations andtherefore cannot be determined with certainty. Accordingly, the accountingpolicies for that annual period will only be determined finally when the annualfinancial statements are prepared for the year ending 31 December 2005. The comparative figures for the financial year ended 31 December 2004, and thesix months ended 30 June 2004, have been restated to comply with adopted IFRS.The latest published accounts for the year ended 31 December 2004, which wereprepared under UK Generally Accepted Accounting Practices, have been deliveredto the Registrar of Companies. The report of the auditors on those accounts wasunqualified. The figures for the six months ended 30 June 2005 and 30 June 2004 areunaudited. 2) Taxation Taxation for the six months to 30 June 2005 has been shown at the rate estimatedto be applicable for the full year. 3) Dividends payable to equity shareholders Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Ordinary dividend paid 2,906 2,168 3,930 ______ ______ ______ In addition to the above, an interim dividend of 12.50p per ordinary share(2004: 8.75p) will be paid on 28 October 2005 to shareholders on the register on7 October 2005. The ex-dividend date will be 5 October 2005. 4) Earnings per share Earnings per share is calculated as follows: Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Profit for the period 5,064 3,599 8,400 ______ ______ ______ Weighted average of number of shares 20,317,908 20,266,911 20,269,235in issue Weighted average of number of shares 20,322,872 20,302,801 20,309,730in issue, allowing for dilutiveeffect of share options Basic earnings per share 24.92p 17.76p 41.44p Diluted earnings per share 24.92p 17.73p 41.36p 5) Reconciliation of movement in total equity At At At 30 June 2005 30 June 2004 31 December 2004 £000 (restated) (restated) £000 £000 Opening total equity 47,295 42,821 42,821Profit for the period 5,064 3,599 8,400Dividends paid in period (2,906) (2,168) (3,930)Issue of share capital 340 1 4Closing total equity 49,793 44,253 47,295 6) Analysis of net funds At At At 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Cash in hand 15,278 12,660 17,845Finance leases (682) (1,430) (1,045)Bank loan - (1,454) (2,153)Closing net funds 14,596 9,776 14,647 7) Reconciliations of group profit from operations to cash generated from operations Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Profit from operations 7,197 5,214 12,108 Adjustments for: Amortisation of intangible assets - - 9Depreciation of property, plant and 1,113 1,011 2,063equipmentLoss on disposal of property, plant 37 19 212and equipmentShare of results of associated (3) 65 179companies Operating cash flows before changes 8,344 6,309 14,571in working capital Decrease/(increase) in inventories 7,893 432 (3,362)Decrease/(increase) in receivables 2,849 (16,588) (1,609)(Decrease)/increase in payables (6,054) 9,135 1,064 Cash generated from/(used by) 13,032 (712) 10,664operations 8) 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 the 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 and fair value £000Net assets acquired: Property, plant and equipment 1,860Inventories 7,131Trade and other receivables 938Deferred tax asset 1,416Trade and other payables (7,836)Retirement benefit obligations (4,721)Bank overdraft (3,592)Other loan (300) ______ (5,104) Goodwill 6,500 _____ Total consideration 1,396 _____Satisfied by:Cash 1,210Directly attributable costs 186 _____ 1,396 _____Net cash outflow arising on acquisition Cash consideration 1,396Bank overdraft acquired 3,592 _____ 4,988 _____ This information is provided by RNS The company news service from the London Stock Exchange