TIDMSFR
RNS Number : 5452I
Severfield PLC
27 November 2018
27 November 2018
Interim results for the period ended 30 September 2018
Continued operational and strategic progress, UK order book of
GBP230m, India expansion underway, full year results in line with
expectations
Severfield plc, the market leading structural steel group,
announces its results for the six month period ended 30 September
2018.
Highlights
-- Revenue up 9% to GBP149.1m (H1 2017: GBP137.1m)
-- Underlying* profit before tax up 2% to GBP13.1m against a
particularly strong H1 2017 profit of GBP12.9m which included
higher than normal profits from certain project completions
-- Interim dividend increased by 11% to 1.0p per share (H1 2017:
0.9p per share)
-- Continued cash generation, resulting in period-end net funds
of GBP25.3m (31 March 2018: GBP33.0m) after the payment of 2018
final and special dividends (GBP10.3m)
-- Over 70 projects undertaken during the period in key market
sectors including the new stadium for Tottenham Hotspur FC, the
retractable roof for Wimbledon No. 1 Court and a new commercial
tower in London at 22 Bishopsgate
-- UK order book of GBP230m at 1 November 2018 (1 June 2018:
GBP237m) comprising more small, lower risk projects
-- Continued good performance from Indian joint venture - share
of profit of GBP0.4m (H1 2017: GBP0.1m)
-- Improving Indian market position reflected in order book of
GBP124m at 1 November 2018 (1 June 2018: GBP106m), expansion of
Bellary facility now underway
GBPm 6 months to 6 months to
30 September 30 September
2018 2017
(unaudited) (unaudited)
Revenue 149.1 137.1
Underlying* operating profit
(before JVs and associates) 12.5 12.7
Underlying* operating margin
(before JVs and associates) 8.4% 9.3%
Operating profit (before JVs and
associates) 12.5 11.4
Underlying* profit before tax 13.1 12.9
Profit before tax 13.1 11.5
Underlying* basic earnings per
share 3.54p 3.50p
Basic earnings per share 3.54p 3.14p
* Underlying results are stated before non-underlying items of
GBPnil (H1 2017: GBP1.3m):
- Amortisation of acquired intangible assets - GBPnil (H1 2017: GBP1.3m)
- The associated tax impact of the above - GBPnil (H1 2017: GBP0.3m)
Alan Dunsmore, Chief Executive Officer commented:
"Our continued operational and strategic progress has resulted
in another period of growth for the Group. In addition to a high
quality and stable UK order book, we continue to see good progress
in India and have established exciting new organic opportunities
for growth.
With our market-leading position, we are well placed to deliver
on our strategic objectives and generate enhanced value for our
shareholders."
For further information, please contact:
Alan Dunsmore
Severfield plc Chief Executive Officer 01845 577 896
Adam Semple
Group Finance Director 01845 577 896
Jefferies International Simon Hardy 020 7029 8000
Will Soutar 020 7029 8000
Camarco Ginny Pulbrook 020 3757 4980
Tom Huddart 020 3757 4980
Notes to editors:
Severfield is the UK's market leader in the design, fabrication
and construction of structural steel, with a total capacity of
c.150,000 tonnes of steel per annum. The Group has four sites,
c.1,300 employees and expertise in large, complex projects across a
broad range of sectors. The Group also has an established foothold
in the developing Indian market through its joint venture
partnership with JSW Steel (India's largest steel producer).
Interim statement 2018
Introduction
The first six months of the year have seen good progress across
the whole Group. We have delivered further revenue growth,
continued to improve our underlying operating margin from the 2018
full year position and reported another period of cash generation.
The half year results also show an increase in profit before tax
but this was against a particularly strong first half profit
performance in the prior period, which included higher than normal
profits from certain project completions. Our UK order book and
pipeline of potential future orders has remained stable with a good
balance of work across all key market sectors. Both the quality of
the order book and the strength of the UK pipeline are consistent
with our continued progress towards our strategic targets.
The market position of our Indian joint venture ('JSSL'),
continues to improve. This is reflected in JSSL's order book, which
has increased again to GBP124m, and a growing pipeline of
commercial opportunities, which positions the business well for the
future. JSSL has continued to perform well and the results for the
first six months of the year have benefited from revenue growth,
good operational performance and lower financing costs following
the repayment of the term debt in June 2017.
Financials
Revenue of GBP149.1m (2017: GBP137.1m) represents an increase of
GBP12.0m (9 per cent) compared with the prior period, predominantly
reflecting an increase in order flow and production activity during
the period.
Underlying operating profit (before JVs and associates) of
GBP12.5m (2017: GBP12.7m) represents a small decrease of GBP0.2m (2
per cent) over the prior period. This mainly reflects a lower
underlying operating margin (before JVs and associates) of 8.4 per
cent (2017: 9.3 per cent) which is predominantly due to the prior
year benefitting from higher than normal profits from certain
project completions. Notwithstanding this, the margin for the first
six months of the year compares favourably to the 2018 full year
underlying operating margin (before JVs and associates) of 8.3 per
cent, demonstrating further margin progression and improvements to
our operational execution.
The share of results of JVs and associates in the first half of
the year was a profit of GBP0.7m (2017: GBP0.3m). This includes a
share of profit from the Indian joint venture of GBP0.4m (2017:
GBP0.1m), reflecting revenue growth, good operational performance
and lower financing costs. The share of results of JVs and
associates also includes those of Composite Metal Flooring ('CMF')
Limited which has contributed a share of profit for the Group of
GBP0.3m (2017: GBP0.2m).
The Group's underlying operating profit was GBP13.2m (2017:
GBP13.0m) and underlying profit before tax was GBP13.1m (2017:
GBP12.9m), an increase of 2 per cent compared to the previous
period.
There were no non-underlying items in the period. Non-underlying
items in the prior period included the amortisation of acquired
intangible assets of GBP1.3m, identified on the acquisition of
Fisher Engineering in 2007, which are now fully amortised.
Non-underlying items are classified as such as they do not form
part of the profit monitored in the ongoing management of the
Group.
An underlying tax charge of GBP2.4m is shown for the period
(2017: GBP2.4m). This tax charge is recognised based upon the best
estimate of the average effective income tax rate on profit before
tax for the full financial year and equates to the UK statutory
rate of 19 per cent. The statutory profit before tax, which
includes both underlying and non-underlying items, is GBP13.1m
(2017: GBP11.5m). The statutory profit after tax is GBP10.8m (2017:
GBP9.4m) and has been transferred to reserves.
Underlying basic earnings per share is 3.54p (2017: 3.50p). This
calculation is based on the underlying profit after tax of GBP10.8m
(2017: GBP10.5m) and 303,951,597 shares (2017: 299,555,911 shares),
being the weighted average number of shares in issue during the
period. Basic earnings per share, which is based on the statutory
profit after tax, is 3.54p (2017: 3.14p). There are no contingent
shares outstanding under share-based payment schemes and,
accordingly, there is no difference between basic and diluted
earnings per share.
Net funds at 30 September 2018 were GBP25.3m (31 March 2018:
GBP33.0m) following the payment of the 2018 final dividend
(GBP5.2m) and special dividend (GBP5.2m). Operating cash flow for
the period before working capital movements was GBP13.9m (2017:
GBP14.1m). Net working capital increased by GBP9.7m during the
period reflecting the timing of ongoing contract works and the
unwinding of advance payments from customers. Excluding advance
payments, year-end net working capital represented approximately
five per cent of revenue, which is within the four to six per cent
range which we have been targeting over recent years.
Capital expenditure of GBP2.4m (2017: GBP3.3m) represents the
continuation of the Group's capital investment programme. This
predominantly included continued investment in new equipment for
our fabrication lines and site infrastructure improvements.
Depreciation in the period was GBP1.9m (2017: GBP1.8m).
The Group's defined benefit pension liability at 30 September
2018 was GBP16.7m, a decrease of GBP0.5m from the year-end position
of GBP17.2m. The decrease in the liability is primarily the result
of an increase in the assumption for corporate bond yields (used as
the discount rate in the calculation of scheme liabilities) and
ongoing deficit contributions made by the Group during the period.
The triennial funding valuation of the scheme was carried out in
2018 with a valuation date of 5 April 2017.
On 31 October 2018, the Group refinanced its existing borrowing
facilities of GBP25m with HSBC Bank plc and Yorkshire Bank. This
new facility, also a GBP25m revolving credit facility ('RCF'),
matures in October 2023. The facility continues to include an
accordion facility of GBP20m, which allows the Group to increase
the aggregate available borrowings to GBP45m at the Group's
request. The facility is subject to two financial covenants namely
the cover of interest costs and the ratio of net debt to
EBITDA.
Dividend
As part of the Group's commitment to a progressive dividend
policy, the board has decided to increase the interim dividend by
11 per cent to 1.0p per share (2017: 0.9p per share). The dividend
will be paid on 11 January 2019 to shareholders on the register on
14 December 2018.
UK review
The Group's main activities continue to be the design,
fabrication and construction of structural steel for construction
projects and more than 70 live projects were worked on during the
period. These cover a wide range of sectors that the Group can
service including commercial offices, industrial and distribution,
data centres, transport and retail. During the period, we continued
to work on three large projects in London, each of which have
project revenues in excess of GBP20m. These comprise a new
commercial tower at 22 Bishopsgate, where work remains ongoing, and
two projects where work is substantially complete, namely the new
stadium for Tottenham Hotspur FC and the retractable roof for
Wimbledon No. 1 Court. A fourth large project, for a major new
commercial head office building in London, was substantially
completed in the previous financial year.
Other significant projects worked on in the period included
commercial office developments in London and outside (including
North Wharf Road, St. Giles Circus, One Crown Place, Birmingham
Snowhill and Cardiff Central Square), two large data centres in
Belgium and the Republic of Ireland, two large industrial and
distribution projects for Amazon, and the Engineering Campus
Development at Manchester University.
Revenue has increased by nine per cent from the prior period
predominately reflecting an increase in order flow and production
activity during the period. The UK order book of GBP230m at 1
November 2018 continues to include a high proportion of smaller
projects, particularly in the industrial and distribution sector,
which typically have shorter lead times than, for example, the
large London projects (discussed above) which are either complete
or nearing completion. The order book, of which GBP183m is for
delivery over the next 12 months, remains in line with our normal
order book levels, which typically equate to eight to ten months of
annualised revenue. This provides us with good visibility of
earnings and supports continued progress towards our strategic
targets.
Significant new orders secured in the period include several
commercial office developments in London and in Manchester, a
significant number of industrial and distribution projects for a
variety of clients, a large project at Heathrow airport and a car
park development at Manchester airport. Furthermore, the new Google
Headquarters, for which an order of GBP50m was secured in December
2017, will require us to provide over 15,000 tonnes of structural
steelwork for an eleven storey head office building at Kings Cross
in London. Work on this project is scheduled to commence in the
second half of the current financial year.
Overall, the UK market continues to appear stable, with modest
economic growth forecast, in tandem with our pipeline of potential
future orders which also remains stable. We continue to see good
opportunities across the commercial office, industrial and
distribution, data centre and infrastructure sectors, together with
those in Europe and the Republic of Ireland. Whilst we are
currently seeing some lower tender margins on projects that we are
bidding we have been able to offset these with efficiency
improvements and other contract execution gains.
Looking further ahead, we continue to pursue a number of
significant infrastructure opportunities, particularly in the
transport sector, which are being driven by the UK government's
investment in infrastructure commitment which is targeted to
increase over the next few years. This will include projects such
as HS2 (both stations and bridges) and the expansion of Heathrow
airport. In addition, we also see good opportunities from the
government's ongoing Network Rail and Highways England investment
programmes. The combination of the Group's historical track record
in transport infrastructure, together with our in-house bridge
operations, leaves us well positioned to win work from such
projects, all of which have significant steelwork content.
The Group is working with industry bodies to identify and manage
any challenges caused by the UK's exit from the European Union. At
this stage, we have seen no material impact from Brexit, however
with continued uncertainty, we are scenario-planning and working
with our clients and others in the industry to ensure we are able
to respond to any future changes in market conditions.
The underlying operating margin (before JVs and associates) was
8.4 per cent (2017: 9.3 per cent) resulting in an underlying
operating profit (before JVs and associates) of GBP12.5m (2017:
GBP12.7m). Although underlying operating profit is broadly
unchanged, it was against a strong comparator in the prior period,
which included higher than normal profits from certain project
completions. Notwithstanding this, we are pleased that the first
half underlying operating margin has continued to improve from the
2018 full year position of 8.3 per cent, and remains firmly within
the margin range of 8 to 10 per cent required to achieve our
strategic profit target of doubling 2016 underlying profit before
tax to GBP26m by 2020.
The margin performance continues to reflect improvements in our
operational execution. This includes the benefits from our
programme of projects categorised under the banner of 'Smarter,
Safer, more Sustainable' which provides a framework for the ongoing
improvements to our business and factory processes, use of
technology and operating efficiencies. Our new dedicated 'SSS' team
is working on improving many aspects of our internal operations,
including the application of Lean manufacturing techniques,
together with our engineering forum which is looking at new and
innovative ways of working.
During the period, we have continued to invest in research and
development into advanced technologies to further improve
efficiencies and client service. We have also now fully rolled out
our new Group-wide production management system which will help
drive ongoing value through increased productivity coupled with
greater transparency and assurance.
In January 2018, we reorganised our factory operations in North
Yorkshire to drive further operational improvements, resulting in
the consolidation of steel fabrication at Dalton and Sherburn into
the Dalton facility. This combined facility is now operating at
scale and the reorganisation of our operational footprint has
contributed to increased operational efficiencies which are
benefitting operating margins. Furthermore, in February 2018, in
response to changes in the current work mix which has changed the
requirement for steel fabrication at our Lostock and Dalton
facilities, we transitioned a number of job roles from Lostock to
Dalton. This process has also been concluded successfully with both
facilities now operating with workforce capacities which are more
closely aligned with current and expected orders.
Our specialist cold rolled steel joint venture business, CMF,
has continued to grow and has performed well during the period. We
are the only fabricator in the UK to have both a hot and cold
rolled manufacturing capability. We continue to look at ways to
improve factory efficiencies at CMF and to expand the product
range, which now includes a growing purlin business, allowing the
Group to continue integrating elements of its supply chain.
The remedial bolt replacement works at Leadenhall were completed
during the prior year with the total expenditure being in line with
the non-underlying charge made back in 2015. Discussions remain
ongoing with all stakeholders to determine where the financial
liability for the remedial costs should rest.
India
The Indian joint venture has continued to grow and recorded a
profit in the period, of which the Group's after tax share was
GBP0.4m (2017: GBP0.1m). The higher profitability in the period
reflects both a good operating performance, together with lower
financing costs following the repayment of the term debt in June
2017. JSSL's revenue has increased to GBP32m compared with GBP22m
in the previous period, assisted by the higher order book coming
into the financial year. The impact of this has been offset by a
reduction in the operating margin to 7.0 per cent compared to 9.3
per cent in the previous period. The lower margin is consistent
with the ongoing fluctuations in the timing and mix of industrial
and commercial work in a growing order book.
The market for structural steel in India continued to improve
and we are seeing clear signs of the conversion of the market from
concrete to steel, which is vital to the success and long term
value of the business. This position is evident in an order book at
1 November 2018 of GBP124m (1 June 2018: GBP106m) which includes a
large commercial order (Sattva) in the state of Hyderabad, along
with a growing large number of potential higher margin commercial
projects in the pipeline. In addition, we also have visibility of
an increased pipeline of industrial work, including for our joint
venture partner, JSW Steel ('JSW'), which is currently increasing
its domestic steel output, a process which is expected to continue
in the short to medium term.
As a result of these continued market improvements, we have
agreed with JSW to increase factory capacity at the Bellary
facility from c.60,000 tonnes to c.90,000 tonnes. This project will
be financed by a combination of equity of c.GBP8m, provided in
equal cash amounts of c.GBP4m by the Group and JSW, and debt of
c.GBP8m, provided directly to JSSL by Indian lenders. Significant
work on this expansion will commence in the second half of the year
and will take around 12 to 18 months to complete. This will provide
the business with the springboard to deliver future profitable
growth, and its value will continue to build as it continues to
expand and develop.
Strategy
In addition to making good progress towards our 2020 strategic
profit target, we continue to pursue our three new areas of organic
growth - Severfield (Products & Processing) ('SPP'), Europe and
medium to high rise residential construction.
SPP, our new business venture at the Sherburn facility,
commenced trading in April 2018. This business is allowing us to
address smaller scale projects, a segment of the market that we
have not historically focused on, and provides a one-stop shop for
smaller fabricators to source high quality processed steel and
ancillary products. The business is developing in line with
expectations and has secured and delivered a number of orders to a
variety of new customers in the first six months of the year.
During this time, we have also gained more market intelligence on
both our customers and competitors and are developing our customer
relationships and pipeline of potential future orders.
We have continued to develop our European business venture,
which is based in the Netherlands, aided by a small locally-based
team which includes our business development director. During the
period, we have submitted a number of tenders for work in
continental Europe and there is now a growing pipeline of
opportunities which includes many potentially interesting and high
quality projects, certain of which are with clients with whom we
are used to working with in the UK. The European team's market
knowledge and experience has also been invaluable to our UK
business when tendering for and delivering European work, providing
us with a competitive advantage and the ability to deliver
excellent client service.
We have also maintained our focus on the market for medium to
high rise residential construction where we have developed a steel
solution. We continue to see plenty of potential opportunities and
discussions with a number of interested parties remain ongoing. We
remain highly focused on this area of potential growth and are
pushing hard to secure our first order which we believe will be an
important step in establishing a track record in the sector.
Safety
The Group strategy continues to support health and safety as
being at the forefront of everything we do.
There are now more than 150 behavioural safety coaches across
the Group, encouraging ownership of safety across all levels of the
business. The coaching programme has been extremely successful in
engaging employees in our 'Six Life Saving Rules' and 'SLAM'
messaging campaigns. This has positively contributed to the overall
safety culture, encouraging and empowering employees to raise their
concerns and highlight any best practise to coaches who can respond
to queries giving more direct and personal feedback.
The number of visits to site by board members continues to grow
year-on-year, and more emphasis is being given on employee
engagement, enabling the Group to gain vital feedback and
suggestions for improvement around safety. Work has finished on a
new in-house audit system allowing better analysis of site visits,
meaning prevention campaigns are better targeted to high potential
for harm incidents and minor injuries. By identifying key areas
within our working environment, we have been able to set out a
programme of senior management led quarterly presentations, to
deliver key messages across our employee network in our commitment
to a 'safety first' culture.
We recognise that mental health is a major concern in our
industry. In raising awareness of mental health, we have developed
an internal campaign ('Head's Up') to communicate a 'door is always
open' policy. We now have a growing community of over 25 mental
health first aiders, and have signed up to the Build UK Charter to
improve and promote positive mental health in construction.
Alongside our occupational health we have introduced an employee
helpline that gives those working with us and their families access
to qualified councillors for anything they require help with.
Sustainability remains a key part of this strategy, with work
being undertaken to develop a new all-encompassing policy which
cascades from board level. Smarter, Safer, more Sustainable stays
at the forefront of all new projects, with our dedicated team of
in-house experts ensuring that we always put safety at the core of
every decision whilst developing smarter ways of working.
Summary and outlook
The strong recent performance of the Group has continued in the
first six months of the current financial year. The Group has
delivered further revenue growth, a strong underlying profit
performance and continued cash generation and we continue to see
tangible benefits coming from our business improvement
initiatives.
In India, with the expansion of the operations in Bellary now
underway, an order book of GBP124m and a growing level of new
opportunities, which includes a number of higher margin commercial
projects, our joint venture business remains well positioned to
take advantage of a market for structural steel which continues to
improve.
With a quality order book and a stable pipeline of UK
opportunities, the outlook for the Group remains good. As a result,
we expect further progress during the second half of the financial
year and remain confident that the Group's full year results will
be in line with expectations.
Alan Dunsmore
Chief Executive Officer
Condensed consolidated interim financial information
Consolidated income statement
Six months ended Six months ended Year ended
30 September 2018 (unaudited) 30 September 2017 (unaudited) 31 March 2018 (audited)
Non- Non-underlying Non-underlying
Underlying underlying Total Underlying GBP000 Total Underlying GBP000 Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 149,089 - 149,089 137,107 - 137,107 274,203 - 274,203
Operating
costs (136,610) - (136,610) (124,414) (1,333) (125,747) (251,337) (1,333) (252,670)
------------ ---------- ------------ ----------- -------------- --------- -------------- --------------- --------------
Operating
profit
before
share of
results of
JVs
and
associates 12,479 - 12,479 12,693 (1,333) 11,360 22,866 (1,333) 21,533
Share of
results of
JVs
and
associates 738 - 738 283 - 283 882 - 882
Operating
profit 13,217 - 13,217 12,976 (1,333) 11,643 23,748 (1,333) 22,415
Finance
expense (109) - (109) (119) - (119) (236) - (236)
------------ ---------- ------------ ----------- -------------- --------- -------------- --------------- --------------
Profit
before tax 13,108 - 13,108 12,857 (1,333) 11,524 23,512 (1,333) 22,179
Taxation (2,351) - (2,351) (2,386) 253 (2,133) (4,385) 352 (4,033)
------------ ---------- ------------ ----------- -------------- --------- -------------- --------------- --------------
Profit for
the period 10,757 - 10,757 10,471 (1,080) 9,391 19,127 (981) 18,146
============ ========== ============ =========== ============== ========= ============== =============== ==============
Earnings
per share:
Basic 3.54p - 3.54p 3.50p (0.36p) 3.14p 6.38p (0.33p) 6.05p
Diluted 3.54p - 3.54p 3.50p (0.36p) 3.14p 6.29p (0.32p) 5.97p
Further details of non-underlying items are disclosed in note 7
to the condensed consolidated interim financial information.
Consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Actuarial gain on defined benefit
pension scheme* 113 940 3,606
(Losses)/profits taken to equity
on cash flow hedges (265) 253 435
Reclassification adjustments on
cash flow hedges 176 (420) (346)
Tax relating to components of other
comprehensive income* (19) (160) (700)
Other comprehensive income
for the period 5 613 2,995
Profit for the period from continuing
operations 10,757 9,391 18,146
------------- ------------- ----------
Total comprehensive income for
the period attributable to equity
shareholders of the parent 10,762 10,004 21,141
============= ============= ==========
* These items will not be subsequently reclassified to the
consolidated income statement.
Consolidated balance sheet
At At At
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
ASSETS
Non-current assets
Goodwill 54,712 54,712 54,712
Other intangible assets 34 172 103
Property, plant and equipment 81,553 80,172 81,239
Interests in JVs and associates 19,194 17,857 18,456
Deferred tax asset - 513 -
------------- ------------- --------------------
155,493 153,426 154,510
------------- ------------- --------------------
Current assets
Inventories 8,122 6,368 9,646
Trade and other receivables 64,389 52,439 56,270
Derivative financial instruments 12 - 167
Cash and cash equivalents 25,409 31,602 33,114
------------- ------------- --------------------
97,932 90,409 99,197
------------- ------------- --------------------
Total assets 253,425 243,835 253,707
============= ============= ====================
LIABILITIES
Current liabilities
Trade and other payables (61,096) (59,980) (64,225)
Financial liabilities - finance
leases (139) (180) (180)
Financial liabilities - derivative - (33) -
financial instruments
Current tax liabilities (2,981) (2,635) (1,645)
(64,216) (62,828) (66,050)
------------- ------------- --------------------
Non-current liabilities
Retirement benefit obligations (16,692) (20,167) (17,248)
Financial liabilities - finance
leases - (139) (49)
Deferred tax liabilities (1,381) (790) (1,363)
(18,073) (21,096) (18,660)
------------- ------------- --------------------
Total liabilities (82,289) (83,924) (84,710)
------------- ------------- --------------------
NET ASSETS 171,136 159,911 168,997
============= ============= ====================
EQUITY
Share capital 7,599 7,488 7,492
Share premium 87,254 85,702 85,702
Other reserves 3,162 3,873 4,749
Retained earnings 73,121 62,848 71,054
------------- ------------- --------------------
TOTAL EQUITY 171,136 159,911 168,997
============= ============= ====================
Consolidated statement of changes in equity
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2018 7,492 85,702 4,749 71,054 168,997
Total comprehensive income
for the period - - (89) 10,851 10,762
Ordinary shares issued* 107 1,552 - - 1,659
Equity settled share-based
payments - - (1,498) 1,533 35
Dividends paid - - - (10,317) (10,317)
At 30 September 2018 (unaudited) 7,599 87,254 3,162 73,121 171,136
=============== =============== =============== =============== =============
*The issue of shares represents shares allotted to satisfy the
2015 Performance Share Plan award, which vested in June 2018, and
shares allotted under the Group's 2015 Save As You Earn share
option plan which became exercisable in the period.
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2017 7,471 85,702 3,710 57,274 154,157
Total comprehensive income
for the period - - (167) 10,171 10,004
Ordinary shares issued* 17 - - - 17
Equity settled share-based
payments - - 330 196 526
Dividends paid - - - (4,793) (4,793)
At 30 September 2017 (unaudited) 7,488 85,702 3,873 62,848 159,911
=============== =============== =============== =============== =============
*The issue of shares represents shares allotted to satisfy the
2014 Performance Share Plan award, which vested in June 2017.
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2017 7,471 85,702 3,710 57,274 154,157
Total comprehensive income
for the year - - 89 21,052 21,141
Ordinary shares issued* 21 - - - 21
Equity settled share-based
payments - - 950 218 1,168
Dividends paid - - - (7,490) (7,490)
At 31 March 2018 (audited) 7,492 85,702 4,749 71,054 168,997
=============== =============== =============== =============== =============
*The issue of shares represents shares allotted to satisfy the
2014 Performance Share Plan award, which vested in June and
November 2017.
Consolidated cash flow statement
Six months Six months Year
ended ended
30 September 30 September ended
2018 2017
(unaudited) (unaudited) 31 March
GBP000 GBP000 2018
(audited)
GBP000
Net cash flow from operating activities 3,198 11,414 19,039
Cash flows from investing activities
Proceeds on disposal of property,
plant and equipment 342 927 1,012
Purchases of land and buildings (82) (137) (412)
Purchases of plant and equipment (2,350) (3,160) (5,996)
Investment in JVs and associates - (5,330) (5,506)
----------------------- ----------------------- ----------------------
Net cash used in investing activities (2,090) (7,700) (10,902)
----------------------- ----------------------- ----------------------
Cash flows from financing activities
Proceeds from shares issued 1,659 - -
Interest paid (65) (78) (202)
Dividends paid (10,317) (4,793) (7,490)
Repayment of obligations under
finance leases (90) (90) (180)
Net cash used in financing activities (8,813) (4,961) (7,872)
----------------------- ----------------------- ----------------------
Net (decrease)/increase in cash
and cash equivalents (7,705) (1,247) 265
Cash and cash equivalents at beginning
of period 33,114 32,849 32,849
----------------------- ----------------------- ----------------------
Cash and cash equivalents at end
of period 25,409 31,602 33,114
======================= ======================= ======================
Notes to the condensed consolidated interim financial
information
1) General information
Severfield plc ('the Company') is a company incorporated and
domiciled in the UK. The address of its registered office is Severs
House, Dalton Airfield Industrial Estate, Dalton, Thirsk, North
Yorkshire, YO7 3JN.
The Company is listed on the London Stock Exchange.
The condensed consolidated interim financial information does
not constitute the statutory financial statements of the Group
within the meaning of section 435 of the Companies Act 2006. The
statutory financial statements for the year ended 31 March 2018
were approved by the board of directors on 20 June 2018 and have
been delivered to the registrar of companies. The report of the
auditors on those financial statements was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain any statement under section 498 of the Companies Act
2006.
The condensed consolidated interim financial information for the
six months ended 30 September 2018 has been reviewed, not audited,
and was approved for issue by the board of directors on 26 November
2018.
2) Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 September 2018 has been prepared in accordance
with IAS 34 'Interim Financial Reporting' as adopted by the
European Union. The condensed consolidated interim financial
information should be read in conjunction with the statutory
financial statements for year ended 31 March 2018 which have been
prepared in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the European Union.
In determining whether the Group's condensed consolidated
interim financial information can be prepared on the going concern
basis, the directors considered all factors likely to affect its
future development, performance and its financial position,
including cash flows, liquidity position and borrowing facilities
and the risks and uncertainties relating to its business
activities.
Having considered all the factors impacting the Group's
business, including certain downside sensitivities, the directors
are satisfied that the Group will be able to operate within the
terms and conditions of the Group financing facilities for the
foreseeable future.
3) Accounting policies
Except as described below, the accounting policies applied in
preparing the condensed consolidated interim financial information
are consistent with those used in preparing the statutory financial
statements for the year ended 31 March 2018.
Taxes on profits in interim periods are accrued using the tax
rate that will be applicable to expected total annual profits.
New and amended standards and interpretations need to be adopted
in the first interim financial statements issued after their
effective date (or date of early adoption).
There are no new IFRSs or IFRICs that are effective for the
first time for the six months ended 30 September 2018 which have a
material impact on the Group.
IFRS 15 - Revenue from contracts with customers
The Group has adopted IFRS 15 from 1 April 2018. The new
standard modifies the determination of how much revenue to
recognise, and when, and introduces a single, principles based
five-step model to be applied to all contracts with customers. IFRS
15 replaces the separate models for goods, services and
construction contracts currently included in IAS 11 'Construction
Contracts' and IAS 18 'Revenue'.
The implementation of IFRS 15 did not have a material impact on
the timing or amount of revenue recognised by the Group in the
current or comparative period. This is because, under IFRS 15, the
services provided under a typical contract for the Group represent
one performance obligation, providing the customer with an
integrated solution and where the services (and consequently any
variations and claims) are highly interrelated. Furthermore,
revenue on construction contracts meets the criteria for over time
recognition under IFRS 15 and revenue will be recognised with
reference to the measurement of contract progress (costs to
complete). This is similar to that under IAS 11 'Construction
Contracts'.
4) Risks and uncertainties
The principal risks and uncertainties which could have a
material impact upon the Group's performance over the remaining six
months of the year ending 31 March 2019, other than as disclosed
below, have not changed significantly from those disclosed on pages
62 to 68 of the strategic report included in the annual report for
the year ended 31 March 2018. The annual report is available on the
Company's website www.severfield.com. These risks and uncertainties
include, but are not limited to:
-- Health and safety
-- Information technology resilience
-- The commercial and market environment within which the Group
operates
-- Failure to mitigate onerous contract terms
-- Supply chain
-- The Indian joint venture
-- People
-- Brexit (new for 2018/19).
5) Segmental analysis
In accordance with IFRS 8, the Group has identified its
operating segments with reference to the information regularly
reviewed by the executive committee (the chief operating decision
maker ('CODM')) to assess performance and allocate resources. On
this basis the CODM has identified one operating segment
(construction contracts) which in turn is the only reportable
segment of the Group.
The constituent operating businesses have been aggregated as
they have businesses with similar products and services, production
processes, types of customer, methods of distribution, regulatory
environments and economic characteristics. Given that only one
operating and reporting segment exists, the remaining disclosure
requirements of IFRS 8 are provided within the consolidated income
statement and balance sheet.
Revenue, which relates wholly to construction contracts and
related assets, in all periods originated from the United
Kingdom.
There has been no change in the basis of segmentation or in the
basis of measurement of segment profit or loss in the period.
6) Seasonality
There are no particular seasonal variations which impact the
split of revenue between the first and second half of the financial
year. Underlying movements in contract timing and phasing, which
are an ongoing feature of the business, will continue to drive
moderate fluctuations in half yearly revenues.
7) Non-underlying items
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Amortisation of acquired
intangible assets - (1,333) (1,333)
Non-underlying items before
tax - (1,333) (1,333)
Tax on non-underlying items - 253 352
----------------------- -------------------- ---------------------
Non-underlying items after
tax - (1,080) (981)
======================= ==================== =====================
Non-underlying items have been separately identified to provide
a better indication of the Group's underlying business performance.
They have been separately identified as a result of their
magnitude, incidence or unpredictable nature. These items are
presented as a separate column within their consolidated income
statement category. Their separate identification results in a
calculation of an underlying profit measure in the same way as it
is presented and reviewed by management.
A non-underlying loss of GBP1,333,000 was recognised in the
first half of the prior period reflecting the amortisation of
customer relationships, which were identified on the acquisition of
Fisher Engineering in 2007. These relationships are now fully
amortised.
8) Taxation
The income tax expense reflects the estimated underlying
effective tax rate on profit before taxation for the Group for the
year ending 31 March 2019.
9) Dividends
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
2017 final - 1.6p per share - 4,793 4,793
2018 interim - 0.9p per share - - 2,697
2018 final - 1.7p per share 5,158 - -
2018 special - 1.7p per share 5,158 - -
10,317 4,793 7,490
====================== ====================== ======================
The directors have declared an interim dividend in respect of
the six months ended 30 September 2018 of 1.0p per share (2017:
0.9p per share) which will amount to an estimated dividend payment
of GBP3,040,000 (2017: GBP2,697,000). This dividend is not
reflected in the balance sheet as it will be paid after the balance
sheet date.
10) Earnings per share
Earnings per share is calculated as follows:
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Earnings for the purposes
of basic earnings per share
being net profit attributable
to equity holders of the parent
company 10,757 9,391 18,146
-------------------- ------------------- ---------------------
Earnings for the purposes
of underlying basic earnings
per share being underlying
net profit attributable to
equity holders of the parent
company 10,757 10,471 19,127
-------------------- ------------------- ---------------------
Number of shares Number Number Number
Weighted average number of
ordinary shares for the purposes
of basic earnings per share 303,951,597 299,555,911 299,682,810
Effect of dilutive potential
ordinary shares and under
share plans - - 4,520,463
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share 303,951,597 299,555,911 304,203,273
==================== =================== =====================
Basic earnings per share 3.54p 3.14p 6.05p
Underlying basic earnings
per share 3.54p 3.50p 6.38p
Diluted earnings per share 3.54p 3.14p 5.97p
Underlying diluted earnings
per share 3.54p 3.50p 6.29p
11) Property, plant and equipment
During the period, the Group acquired land and buildings of
GBP82,000 (2017: GBP137,000) and other property, plant and
equipment of GBP2,350,000 (2017: GBP3,160,000). The Group also
disposed of other property, plant and equipment for GBP342,000
(2017: GBP927,000) resulting in a profit on disposal of GBP88,000
(2017: GBP664,000).
12) Net funds
The Group's net funds are as follows:
At At At
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Cash and cash equivalents 25,409 31,602 33,114
Unamortised debt arrangement
costs 51 114 83
Financial liabilities - finance
leases (139) (319) (229)
------------- ------------------ -------------------
Net funds 25,321 31,397 32,968
============= ================== ===================
13) Fair value disclosures
The Group's financial instruments consist of borrowings, cash,
items that arise directly from its operations and derivative
financial instruments. Cash and cash equivalents, trade and other
receivables and trade and other payables generally have short terms
to maturity. For this reason, their carrying values approximate to
their fair values. The Group's borrowings relate principally to
amounts drawn down against its revolving credit facility, the
carrying amounts of which approximate to their fair values by
virtue of being floating rate instruments.
Derivative financial instruments are the only instruments valued
at fair value through profit or loss, and are valued as such on
initial recognition. These are foreign currency forward contracts
measured using quoted forward exchange rates and yield curves
matching the maturities of the contracts. These derivative
financial instruments are categorised as level 2 financial
instruments.
The fair values of the Group's derivative financial instruments
which are marked-to-market and recorded in the balance sheet were
as follows:
At At At
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Assets/(liabilities)
Foreign exchange contracts 12 (33) 167
============= ============= =========
14) Net cash flow from operating activities
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Operating profit from continuing
operations 13,217 11,643 22,415
Adjustments:
Depreciation of property,
plant and equipment 1,864 1,772 3,656
Gain on disposal of other
property, plant
and equipment (88) (664) (590)
Amortisation of intangible
assets 69 1,402 1,471
Movements in pension scheme
liabilities (443) (307) (560)
Share of results of JVs and
associates (738) (283) (882)
Share-based payments 35 526 1,168
Operating cash flows before
movements in working capital 13,916 14,089 26,678
Decrease/(increase) in inventories 1,524 1,382 (1,896)
(Increase)/decrease in receivables (8,151) 13,927 10,064
Decrease in payables (3,075) (15,884) (11,897)
Cash generated from operations 4,214 13,514 22,949
Tax paid (1,016) (2,100) (3,910)
-------------- -------------- ---------------------
Net cash flow from operating
activities 3,198 11,414 19,039
============== ============== =====================
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less.
15) Related party transactions
There have been no changes in the nature of related party
transactions as described in note 29 on page 162 of the annual
report for year ended 31 March 2018 and there have been no new
related party transactions which have had a material effect on the
financial position or performance of the Group in the six months
ended 30 September 2018.
During the period, the Group provided services in the ordinary
course of business to its Indian joint venture, JSW Severfield
Structures ('JSSL') and in the ordinary course of business
contracted with and purchased services from its UK joint venture,
Composite Metal Flooring Limited ('CMF'). The Group's share of the
retained profit in JVs and associates of GBP738,000 for the period
reflects a profit from JSSL of GBP431,000 and from CMF of
GBP307,000.
In May 2017, the board approved an additional equity investment
of GBP5,330,000 in JSSL, to support repayment of the joint
venture's remaining term debt. This decision was made with the
agreement of our joint venture partner, JSW, who also contributed a
similar investment.
16) Contingent liabilities
Liabilities have been recorded for the directors' best estimate
of uncertain contract positions, known legal claims, investigations
and legal actions in progress. The Group takes legal advice as to
the likelihood of success of claims and actions and no liability is
recorded where the directors consider, based on that advice, that
the action is unlikely to succeed, or that the Group cannot make a
sufficiently reliable estimate of the potential obligation. The
Group also has contingent liabilities in respect of other issues
that may have occurred, but where no claim has been made and it is
not possible to reliably estimate the potential obligation. These
potential liabilities are subject to uncertain future events, may
extend over several years and their timing may differ from current
assumptions. Management applies its judgement in determining
whether or not a liability on the balance sheet should be
recognised or a contingent liability should be disclosed.
The Company and its subsidiaries have provided unlimited
multilateral guarantees to secure any bank overdrafts and loans of
all other Group companies. At 30 September 2018 this amounted to
GBPnil (2017: GBPnil). The Group has also given performance bonds
in the normal course of trade.
17) Cautionary statement
The Interim Management Report ('IMR') has been prepared solely
to provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The IMR should not be relied on by any other party or for
any other purpose.
The IMR contains certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
18) Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the
condensed consolidated interim financial information has been
prepared in accordance with IAS 34 as adopted by the European
Union, and that the interim report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- An indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed consolidated interim financial information, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- Material related party transactions that have occurred in the
first six months of the financial year and any material changes in
the related party transactions described in the last annual report
and financial statements.
The current directors of Severfield plc are listed in the annual
report for the year ended 31 March 2018. During the six months
ended 30 September 2018, Chris Holt resigned as a non-executive
director and stood down at the conclusion of the AGM on 4 September
2018. Except for this, there have been no changes in directors
during the period.
The maintenance and integrity of the Severfield plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
By order of the board
Alan Dunsmore Adam Semple
Chief Executive Group Finance
Officer Director
27 November 2018 27 November 2018
Independent review report to Severfield plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2018 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2018 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
David Morritt
for and on behalf of KPMG LLP
Chartered Accountants
One Sovereign Square
Sovereign Street
Leeds
LS1 4DA
27 November 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FESFWMFASELF
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