26th Nov 2013 12:29
LONDON (Alliance News) - Severfield-Rowen PLC said Tuesday it swung back to a pretax profit in the half-year after restructuring programme implemented to saves firm GBP4 million annually.
The structural steel firm said it had significantly reduced its pretax loss, reporting a final GBP2.7 million loss, including underlying and non-underlying items, down from GBP23.5 million in 2012. Underlying profit before tax came in at GBP1.4 million, in comparison to the GBP21.1 million loss recorded last year.
In its interim results for the six months to September 30 2013, the group records revenue of GBP117.1 million, marginally down from GBP120.7 million last year. The firm attributes this to a modest reduction in volumes during the period, as the capacity restructuring programme of the firm's largest division, Severfield-Watson Structures, began to take shape.
The company-directed 10% capacity reduction in the Severfield-Watson Structures division was the second phase of restructuring and resulted in a charge of GBP2.6 million and the loss of 84 jobs. The programme is now complete and, "the resultant savings are being delivered as expected," said the firm, which will now see annual savings of GBP4 million following the division slimming.
While embarking on the capacity reduction directive, the firm also implemented an operational programme to improve risk assessment, estimating control and discipline, improved cross-functional communication and greater standardisation and formalisation of process, combined with improved contract management processes. These improvements are on-going, said the company, but are already delivering greater stability and control of new projects being secured by the Group.
Underlying operating profit before results of joint ventures and associates, of GBP3.0 million from a GBP20.6 million loss in 2012, represents a margin of 2.5% (2012:-17.1%), reflecting a good start in building margin as the Group recovers from the challenges of the last financial period, the company said in a statement. Severfield said that new contracts secured are currently performing in line with expectations and the small number of large legacy contracts are, in aggregate, broadly in line with expectations although individual variations in the performance of these contracts have presented some challenges in the period.
The Group's underlying operating profit after share of results of its joint ventures and associates was GBP1.6 million, up from a GBP20.3 million loss last year. Underlying profit before tax for the period was GBP1.4 million from a GBP21.1 million loss in 2012.
The company also reports a tough half-year for its joint venture in India, with production unable to be maintained at a high enough level to break-even as the firm records a slight drop in its order book to GBP34 million from GBP35 million. Severfield-Rowen said, "We have experienced a much higher level of variability of contract timing than expected, even when they are securely in the order book, in addition to operating in a generally challenging economic environment. In response to this, some lower margin work is being secured to keep the plant as fully loaded as possible but this means that losses will continue into the second half of the year."
Chairman John Dodds, said, "The Indian joint venture has its challenges and the Indian economy is also going through a period of uncertainty. The priorities are to continue developing the commercial side of the business and control costs tightly, while the market continues its conversion from concrete to steel over the medium term."
Looking ahead, Dodds said, "The UK market remains challenging, although there are some signs of it improving into 2014. In the meantime, the restructuring is now complete and the operational improvement programme remains on track; even without any upturn in the UK market, we anticipate continuing margin development. Overall, with a strong balance sheet, improving operational and contracting procedures and a full strength management team once again, the Group is well placed to continue building a solid platform for profitable growth."
Shares in the steel group were down 6.13%, trading at 60.31 pence per share early Tuesday afternoon.
By Alice Attwood; [email protected]; @AliceAtAlliance
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