Severfield Regulatory News (SFR)

25 Sep 2007 07:00

Severfield-Rowen PLC25 September 2007 25 September 2007 SEVERFIELD-ROWEN Plc 2007 Half Year Results RECORD HALF YEAR RESULTS Severfield-Rowen Plc, the market leading structural steel group, announces itshalf year results to 30 June 2007. 2007 2006 Half year Half year ChangeRevenue £137.56m £130.77m +5%Profit from operations £15.16m £ 11.39m +33%Profit before tax £15.88m £11.81m +34%Basic earnings per share 53.74p 39.95p +35%Dividend per share 27.00p 20.00p +35% Highlights • Operating margin increased to 11.0% (2006: 8.7%) • Cash balance of £28.8m (2006: £27.10m) • Proposed acquisition of Fisher Engineering announced post period end for a consideration of £90m • Record order book totalling in excess of £300m, including Fisher Engineering. (2006: £218m) • All core businesses currently performing in line with management's expectations Commenting, Peter Levine, Chairman, said: "Severfield-Rowen continues to make significant and sustained progress anddelivered yet another set of record half year results. Profits, earnings pershare, cash balances and dividends all increased significantly and we areparticularly pleased with achieving a double digit operating margin. "This progress is reflected in current trading being in line with management'sexpectations. Our record order book gives us excellent visibility and wecontinue to operate in buoyant markets which are experiencing high demand forlarge scale projects. The integration of Fisher Engineering into the Group willenhance our geographical exposure, giving us a substantial foothold in the Irishmarket. "With robust demand for the Group's products and services continuing we areconfident in the Group's prospects for the second half and beyond." Enquiries Severfield-Rowen PlcPeter Levine, Chairman +44 (0) 7802 312249Tom Haughey, CEO +44 (0)1845 577 896Peter Davison, Finance Director +44 (0)1845 577 896 Financial DynamicsSusanne Yule/Richard Mountain +44 (0) 20 7269 7121 INTERIM STATEMENT 2007 INTRODUCTION Severfield-Rowen continues to make significant and sustained progress anddelivered yet another set of record half year results. Revenue increased 5%,and profit before tax grew 34%. Earnings per share increased 35% to 53.74p andthe Group's cash balance remained significant at £28.8m at the period end. The operating margin continued to progress, rising from 8.7% in 2006 to 11.0%and the net margin was also substantially ahead at 11.6% (2006: 9.0%). With every Severfield-Rowen company contributing to profits and producingresults ahead of our expectations at the start of the year, the strong financialand market leading position of the Group was maintained through the first half. Severfield-Rowen is an outstanding performer in the world structural steelconstruction industry and the proposed acquisition of Fisher Engineering, withits strong client base, robust order book and focus on high quality business,will enhance further the Group's position. FINANCIALS Revenue in the period was £137.56m (2006: £130.77m) and operating profit was£15.16m (2006: £11.39m), producing an increased operating margin of 11% (2006:8.7%). Profit before tax increased 34% to £15.88m (2006: £11.85m) producing a netmargin of 11.6% (2006: 9.0%). After a tax charge of £4.92m (2006: £3.66m)profit after tax increased 35% to £10.97m (2006: £8.15m). Basic earnings per share increased 35% to 53.74p (2006: 39.95p). During the first six months of the year capital expenditure amounted toapproximately £3.3m (2006: £4.6m). The period ended with the Group having a cash balance of £28.8m (2006: £27.1m)and with no borrowings this represented a net funds surplus. Cash inflow fromoperating activities was £4.78m (2006: inflow £8.73m). Significant cashoutflows in the period included dividends paid of £7.55m, corporation tax paidof £4.63m and net expenditure on assets of £2.56m. Dividend Reflecting the Group's performance in the first half, its strong financialposition and the Directors' confidence in the future prospects for the Group,the Board is pleased to recommend a significant increase in the interim dividendof 35% to a record 27.0p per share (2006: 20.0p). This maintains the Board'spolicy of having the dividend covered approximately 2.0 times by earnings at theinterim stage (2006: 2.0 times). The interim dividend will be paid on 26October 2007 to shareholders on the register on 5 October 2007. BOARD CHANGES & EMPLOYEES The first half saw the departure of John Severs, the former Group ManagingDirector and one of its founders. John left a strong management team behindhim, led by Tom Haughey, our new Chief Executive, ably supported by PeterEmerson, Chief Operations Officer, and the other members of the Executive Board. The Group continues to take considerable strides forward and credit for this isdown to our tremendous workforce of whom the directors are very proud. 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 clear market leader in its sector and its productionfacilities, technology and broad range of structural steel services areunparalleled in the industry. Sustained investment preserves the Group'sadvantage in the industry. Margins remain in the forefront of our attention andhave shown significant improvement in the first six months of 2007. The core businesses of the Group, each trading profitably and in line withmanagement's expectations, reflect a balanced and comprehensive approach to thevaried demands 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 used in stadia and bridges; • Rowen Structures, an expert in complex projects such as airports and office blocks; • Atlas Ward Structures, reinvigorated through membership of the Group has in the short time since its acquisition in 2005 attained leadership of the shed and portal frame market. Each of the four companies above are ably supported by Steelcraft ErectionServices, a wholly owned subsidiary of Severfield-Rowen, which is responsiblefor the on site erection of the fabricated steel. The broad range of capabilities outlined above, together with the Group'sfinancial strength and excellence of its workforce, enable Severfield-Rowen tobenefit from, and be resilient to, the ever changing and evolving market place. Contracts Projects carried out by the Group in the first six months of the year include: • Redevelopment of Wimbledon Centre Court • Terminal extension at Stansted airport • Ongoing retail development opposite BBC Television Centre, White City, London • First ever inner city IKEA store on Queen Victoria Road, Coventry • Extension to the Shires shopping centre in Leicester • Retail, leisure and residential centre Eagles Meadow, Wrexham • Retail development at the Broadmead shopping complex in Bristol • New 1200 bed hospital development at Queen Elizabeth Medical Centre, Edgbaston, Birmingham • Mixed use retail and residential development at Livingston near Edinburgh • Office development in Piccadilly, Manchester • Silken Hotel and apartments at the east end of the Strand, London • Central London office development at Holborn Circus • UBS sponsored academy in Hackney • The regeneration of Paradise Street, Liverpool • Waste to energy plant at Colnbrook near Heathrow • Extension to ship building facility for Vosper Thornicroft in Portsmouth • Tesco distribution centres in Livingston, Edinburgh and Goole, Humberside • Regional distribution centre in Doncaster for Asda • Regional distribution centre in Northampton for Sainsbury's • The third distribution facility in Wellingborough for ProLogis OUTLOOK The Group continues to make significant progress, with current trading in linewith management's expectations. Our record order book gives us excellent visibility and we continue to operatein buoyant markets which are experiencing high demand for large scale projects.The integration of Fisher Engineering into the Group will enhance ourgeographical exposure, giving us a strong foothold in the Irish market. With robust demand for the Group's products and services continuing we areconfident in the Group's prospects for the second half and beyond. PETER LEVINECHAIRMAN25 September 2007 Consolidated Income Statement Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Revenue 137,564 130,766 295,084Cost of sales (120,028) (116,989) (261,148)Gross profit 17,536 13,777 33,936 Other operating income 30 17 79Distribution costs (587) (590) (877)Administrative expenses (1,836) (1,821) (4,030)Share of results of associates 16 5 10Profit from operations 15,159 11,388 29,118 Investment income 724 498 1,250Finance costs - (77) (82)Profit before tax 15,883 11,809 30,286 Tax (4,918) (3,659) (9,365)Profit for the period 10,965 8,150 20,921 Earnings per share:Basic 53.74p 39.95p 102.54pDiluted 53.74p 39.95p 102.54p Consolidated Statement of Recognised Income and Expense Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Actuarial loss on defined benefit pensionscheme - - (1,169) Tax on items taken directly to equity - - 351Net expense recognised directly in equity - - (818) Profit for the period from continuingoperations 10,965 8,150 20,921Total recognised income and expense for theperiod attributable to equity shareholders 10,965 8,150 20,103 Consolidated Balance Sheet At At At 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) £000 £000 £000ASSETS Non-current assets Goodwill 6,732 6,732 6,732 Other intangible assets 1,840 1,308 1,608 Property, plant and equipment 44,567 39,098 43,602 Interests in associates 62 41 46 53,201 47,179 51,988Current assets Inventories 11,481 2,945 3,333 Trade and other receivables 52,070 46,519 46,786 Cash and cash equivalents 28,795 27,100 38,304 92,346 76,564 88,423 Total assets 145,547 123,743 140,411 LIABILITIES Current liabilities Trade and other payables 58,460 53,516 56,966 Tax liabilities 6,417 4,319 6,125 Obligations under finance leases - 228 66 64,877 58,063 63,157Non-current liabilities Retirement benefit obligations 7,287 6,384 7,287 Deferred tax liabilities 742 943 742 Provisions 3,000 - 3,000 11,029 7,327 11,029 Total liabilities 75,906 65,390 74,186 NET ASSETS 69,641 58,353 66,225 EQUITY Share capital 2,040 2,040 2,040Share premium 9,770 9,770 9,770Other reserves 139 139 139Retained earnings 57,692 46,404 54,276TOTAL EQUITY 69,641 58,353 66,225 Consolidated Cash Flow Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Cash flows from operating activitiesCash generated from operations 4,782 8,732 35,488Interest paid - (77) (82)Tax paid (4,626) (2,591) (6,341)Net cash from operating activities 156 6,064 29,065 Cash flows from investing activitiesProceeds from sale of property, plant andequipment 748 563 920Interest received 738 465 1,239Purchases of property, plant and equipment (3,304) (4,625) (13,010)Purchases of intangible fixed assets (232) (300) (600)Net cash used in investing activities (2,050) (3,897) (11,451) Cash flows from financing activitiesPayment of finance lease liabilities (66) (201) (363)Dividends paid (7,549) (4,998) (9,079)Net cash used in financing activities (7,615) (5,199) (9,442) Net (decrease)/increase in cash and cashequivalents (9,509) (3,032) 8,172Cash and cash equivalents at beginning ofperiod 38,304 30,132 30,132Cash and cash equivalents at end of period 28,795 27,100 38,304 Notes to Interim Report 1) Basis of preparation The interim financial information has been prepared in accordance withInternational Financial Reporting Standards ("IFRS") as adopted for use in theEuropean Union and in accordance with the accounting policies included in theCompany's Annual Report for the year ended 31 December 2006, which have beenapplied consistently throughout the current and preceding periods. The interim financial information does not constitute statutory accounts withinthe meaning of Section 240 of the Companies Act 1985. The interim results to 30June 2007 and 2006 are neither audited nor reviewed by the auditors. Thefinancial information of the full preceding year is based on the statutoryaccounts for the financial year ended 31 December 2006. Those accounts, uponwhich the auditors issued an unqualified opinion, have been delivered to theRegistrar of Companies. 2) Taxation The income tax expense reflects the estimated effective rate on profit beforetaxation for the Group for the year ending 31 December 2007. The Finance Act 2007 includes provision for a reduction in the rate of UKcorporation tax from 30% to 28% with effect from 1 April 2008. At 30 June 2007the rate reduction was substantively enacted. The effect of this change on thetax charge for the six months ended 30 June 2007 is not considered to besignificant. Although amendments to the industrial buildings allowance regime were alsoproposed in the 2007 budget announcement, these amendments were notsubstantively enacted at 30 June 2007 and accordingly have not been reflected inthe Group's results for the six months ended 30 June 2007. The directors haveestimated that, had these amendments been reflected in the Group's results forthe six months ended 30 June 2007 in respect of existing industrial buildingsheld by the Group, the effect would be to increase the deferred tax liabilityheld in the balance sheet by approximately £3 million. 3) Dividends payable to equity shareholders Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Ordinary dividend paid 7,549 4,998 9,079 ______ ______ ______ In addition to the above, an interim dividend of 27.00p per ordinary share(2006: 20.00p) will be paid on 26 October 2007 to shareholders on the registeron 5 October 2007. The ex-dividend date will be 3 October 2007. 4) Earnings per share Earnings per share is calculated as follows: Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Profit for the period 10,965 8,150 20,921 ______ ______ ______ Weighted average of number of shares in 20,401,969 20,401,969 20,401,969issue Weighted average of number of shares in 20,401,969 20,401,969 20,401,969issue, allowing for dilutive effect of share options Basic earnings per share 53.74p 39.95p 102.54p Diluted earnings per share 53.74p 39.95p 102.54p 5) Reconciliation of movement in total equity At At At 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Opening total equity 66,225 55,201 55,201Profit for the period 10,965 8,150 20,921Dividends paid in period (7,549) (4,998) (9,079)Actuarial loss on defined benefit pensionscheme - - (1,169)Deferred income taxes on - - 351pension benefitClosing total equity 69,641 58,353 66,225 6) Analysis of net funds At At At 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Cash in hand 28,795 27,100 38,304Finance leases - (228) (66)Closing net funds 28,795 26,872 38,238 7) Reconciliations of group profit from operations to cash generated from operations Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 Profit from operations 15,159 11,388 29,118Adjustments for:Depreciation of property, plant and 1,687 1,668 4,238equipment(Profit)/loss on disposal of property, (96) 80 212plant and equipmentDecrease in pension - - (266)Share of results of associated companies (16) (5) (10)Increase in provisions - - 3,000 Operating cash flows before changes in 16,734 13,131 36,292working capital (Increase)/decrease in inventories (8,148) 4,373 4,807Increase in receivables (5,298) (14,067) (14,356)Increase in payables 1,494 5,295 8,745Cash generated from operations 4,782 8,732 35,488 This information is provided by RNS The company news service from the London Stock Exchange