25th Aug 2009 07:00
25 August 2009
Half Year Results
for 6 Months ended 30 June 2009
STRONG 6 MONTHS - ROBUST BALANCE SHEET - UK STEELWORK DECLINE
Severfield-Rowen Plc, the market leading structural steel group, announces its half year results to 30 June 2009.
|
2009 |
2008 |
Change |
|
|
Revenue |
£200.0m |
£173.3m |
+15.4% |
|
Underlying* Group Operating Profit |
£25.4m |
£26.9m |
-5.8% |
|
Underlying Operating Margin |
12.7% |
15.6% |
|
|
Underlying Profit before Tax |
£24.6m |
£25.3m |
-2.9% |
|
Underlying Net Margin |
12.3% |
14.6% |
|
|
Retained Profit after Tax |
£17.4m |
£13.9m |
+25.3% |
|
Underlying Basic EPS |
19.51p |
20.04p |
-2.6% |
|
Dividend per Share |
10.00p |
10.00p |
- |
|
Net Debt |
£12.0m |
£35.9m |
|
|
Order Book |
£256m |
£431m |
Highlights
Underlying Profit before Tax strong at £24.6m
Underlying net margin decrease to 12.3% (14.6%)
Net borrowings reduced to £12.01m
£256m order book as at 21 August 2009
Interim dividend of 10.00p per share
* Underlying is before the amortisation of acquired intangible assets of £3.17m (2008: £4.57m) and movements in gains/(losses) on derivative financial instruments of £3.34m (2008: £(0.79m)).
Commenting, Tom Haughey, Chief Executive Officer, said:
"The Company is pleased to have delivered good profits in the first half of this year against a very difficult industry background. The trading performance in the second half of 2009 is now forecast to be ahead of the Board's expectations primarily as a result of project timing towards the end of the year and better than anticipated financial performance.
For some time, we have expressed concerns about the UK market which have materialised, and accordingly we expect UK steel demand and prices to be at significantly reduced levels throughout 2010, which will translate into reduced margins.
The Company is currently gaining domestic market share and has strengthened its efforts in the sectors in which activity is positive, eg Power and Education. The current mix of UK work therefore differs significantly compared to recent years.
Internationally, the Company's objectives for its Joint Venture in India are on plan and within budget.
Our sales efforts in targeted export markets are on course but a more competitive cost base in the UK is required to support and sustain these developments.
Against the backdrop of challenging UK market conditions and the requirement for competitiveness in export markets, we are concluding a major review of costs and capacity deployment and will be making an announcement, in due course, following the conclusion of the consultation process currently being conducted with our staff and workforce.
The Company's finances are robust and debt levels are on target to be at minimal levels by the end of 2009, which will enable it to engage the forecast difficult trading year from a position of relative strength and to maintain its strategic investments overseas."
Enquiries
|
Severfield-Rowen Plc |
Toby Hayward |
01845 577896 |
|
Chairman |
||
|
Tom Haughey |
01845 577896 |
|
|
Chief Executive Officer |
||
|
Peter Davison |
01845 577896 |
|
|
Finance Director |
||
|
RBS Hoare Govett Ltd |
John MacGowan |
020 7678 8000 |
|
Stephen Bowler |
020 7678 8000 |
|
|
Pelham PR |
Alex Walters |
020 7337 1500 |
|
Francesca Tuckett |
020 7337 1500 |
INTERIM STATEMENT 2009
INTRODUCTION
A strong first six months in 2009 was supported by the engagement and successful execution of many prime projects. The trading performance in second half of 2009 is expected to be ahead of the Board's expectations primarily as a result of project timing towards the end of the year and better than anticipated financial performance.
The Company's UK market prospects have continued to reduce, particularly in the Commercial Office, Warehousing and Retail sectors. However, the Company's success in the Power, Education and Health sectors is encouraging and some good prospects remain in Transport and Infrastructure.
The significant decline in UK demand has resulted in a reduction in capacity across the industry, but it is currently insufficient to offset a general decline in prices and margins. Any recovery in prices and margins is unlikely before 2011.
Management is reviewing all of its operations to ensure that the Company's cost competitiveness will enable it to sustain domestic market share growth and to compete in international tenders from the UK. We will be making an announcement in due course, following the conclusion of our consultation process currently being conducted with our staff and workforce.
Whilst demand in the UK is depressed, the Company will continue to maintain its focus on client performance, reliability, service and value.
The Company's order book, at £256 million remains relatively robust despite the declining market conditions. Accordingly, exporting from the UK to overseas export markets remains a priority objective for 2010, with some positive progress being made in target sectors.
The Joint Venture in India is proceeding on time, with facilities due to become operational in mid 2010, and is within its financial budgets. The market opportunity remains robust in India and the development and success of the Joint Venture is an exciting prospect.
The Company's financial strength, with minimal debt, is welcome as it enters a difficult period of trading. Management is confident that the company will further consolidate its position as market leader when the UK market recovers.
FINANCIALS
In the present economic climate the Group has had a successful first six months of the year with underlying profit before tax of £24.61 million (2008: £25.34 million), a reduction of only 2.9% over the corresponding period in 2008. This is before the amortisation of acquired intangible assets of £3.17 million (2008: £4.57 million) and a gain in the movement of the valuation of derivative financial instruments of £3.34 million (2008: loss of £0.79 million).
This was achieved on revenue in the period of £200.03 million, an increase of 15.4% over the £173.32 million in the first half of 2008.
The Group's underlying operating profit reduced by 5.8% to £25.38 million (2008: £26.95 million).
As a result the Group's margins have reduced from those achieved in the first half of 2008: to 12.69% at the underlying operating profit level and to 12.30% at the underlying profit before tax level (2008: 15.55% and 14.62% respectively).
These figures continue to incorporate the results of the Group's two associated companies, Kennedy Watts Partnership Ltd and Fabsec Ltd of which the Group owns 25.1% and 25% respectively. The Group's operating profit for the period includes its share of these two companies' results which amounted to a net profit of £55,000 (2008: £46,000). For the first time the Group's operating profit also includes its share of the result of the Indian Joint Venture company of which the Group owns 50%. This share amounted to a loss in the period, mainly attributable to pre-operative expenses, of £262,000.
Non-underlying items are included in the 'other items' column of the Income Statement and amount to a net gain of £0.17 million (2008: net loss of £5.36 million) which relates to:
a) Amortisation of acquired intangible assets - £3.17 million (2008: £4.57 million).
b) Movement in the valuation of derivative financial instruments - gain £3.34 million (2008: loss £0.79 million).
The tax charge of £7.37 million represents an effective tax rate of 29.73%, compared with 30.47% in the previous year.
Underlying basic earnings per share is 19.51p (2008: 20.04p). This calculation is based on the underlying profit after tax of £17.29 million and 88,607,876 shares, being the weighted average number of shares in issue during the period. Basic earnings per share, based on profit after tax after non-underlying items is 19.65p (2008: 15.68p).
Underlying diluted earnings per share is 19.49p (2008: 19.96p). This calculation is based on the underlying profit after tax of £17.29 million and 88,718,080 shares, being the weighted average number of shares in issue during the period, allowing for contingent shares under a share based payment scheme.
Retained profit after tax of £17.41 million (2008: £13.89 million) has been transferred to reserves.
During the first six months of the year capital expenditure amounted to £0.69 million (2008: £2.36 million).
It is particularly pleasing that the Group's net borrowings continued to decrease, ending the period at £12.01 million, a reduction from the net borrowings of £15.76 million as at 31 December 2008 (June 2008: £35.86 million).
The Group has a revolving credit facility of £70 million with RBS and National Australia Bank as joint lenders until August 2010.
During the period £17.21 million was generated from operations (2008: £35.64 million). Significant cash outflows in the period included dividends paid of £8.86 million and corporation tax of £3.98 million.
DIVIDEND
In November 2008, at the time of the Company's interim management statement, the Board stated its intent to follow a prudent and more sustainable dividend policy.
The Company today declares a dividend of 10.0 pence per share at this interim stage, reflecting the strong results of the first half of this year.
As stated above, trading conditions in the Company's core UK market have continued to deteriorate. Accordingly, the Directors believe that it is prudent to reconsider the level of the dividend payable through the downturn in order to retain maximum flexibility for the Group during this period. Therefore, the Directors expect to recommend a final dividend for the year ending 31 December 2009 of 5.0 pence per share making a total dividend of 15.0p per share for the year as a whole. Thereafter the Directors expect, in the absence of an even greater decline in prospects, to be able to maintain a prudent and sustainable dividend payment of 10.0 pence per share per annum until market conditions improve.
The interim dividend will be paid on 23 October 2009 to shareholders on the register on 2 October 2009.
BOARD AND EMPLOYEES
Peter Davison, the Company's Finance Director, has advised of his intention to retire from his position in March 2010, after serving 22 years in the role. The Board and all of Peter's colleagues and friends express their appreciation and gratitude for his contributions over the past 22 years, during which time Peter was a key board member in growing the business from modest beginnings to its present market leading position. It is the Board's intention that Peter will continue in the role of Company Secretary beyond March 2010.
The Company will seek to appoint a new finance director before the end of 2009.
As trading conditions worsen and the business outlook deteriorates, the Board and the Executive Management Committee agreed that following a freeze in 2009, they will also reduce their basic salaries by 20% with effect from 1 January 2010.
All of the Group companies' management and workforce have endured difficult business conditions in 2009, set against an environment of cost reduction initiatives. Notwithstanding this, they have been the strongest aspect in delivering our successful results and will continue to be its most important asset in taking the Company through difficult times to the recovery.
OPERATIONS
Group Overview
The principal business of the Group in the UK is carried out by its five main operating companies: Severfield-Reeve Structures, Watson Steel Structures, Atlas Ward Structures, Fisher Engineering and Rowen Structures.
The Group is the clear market leader in its sector and its production facilities, technology and broad range of structural steel services are unparalleled in the industry.
Sustained investment preserves the Group's advantage in the industry. Margins remain in the forefront of our attention and have shown an anticipated decline in the first six months of 2009. Domestic margins are under pressure and will reflect in future performance for the second half of 2009 and in 2010 until an industry recovery emerges.
The core businesses of the Group have performed profitably and slightly in advance of management's expectations. They continue to be well placed to supply a balanced and comprehensive range of services, products and value to meet the needs of the structural steel markets:
UK
Severfield-Reeve Structures, the single largest production unit in the UK in terms of capacity and an industry leader in productivity and value-added technology;
Watson Steel Structures, a world leader in specialist steel work used in Stadiums, Airports, Bridges and Infrastructure;
Atlas Ward Structures, a market leader in design and build and multi-sector engagements;
Fisher Engineering is the largest fabricator in Ireland, and has now integrated into the operations of the Group while maintaining its own strong identity and customer focused service provision;
Rowen Structures provides management, technical and project management support to the Group while retaining its own strong brand and customer relationships.
Each of the companies above is supported by Steelcraft Erection Services, a wholly owned subsidiary of Severfield-Rowen, which is responsible for the on-site erection of the fabricated steel.
Overseas
JSW Severfield Structures is the Company's Joint Venture operation in India. Commercial and operational progress is good with commissioning of plant on schedule for Spring/Summer 2010.
Severfield-Reeve International - our bespoke sales office opened in Abu Dhabi in January of this year to add resource and focus to our export sales efforts from the UK businesses. Good progress is being made with further resource being added in Abu Dhabi in September 2009.
The broad range of capabilities outlined above, together with the Group's financial strength and excellence of its workforce, enable Severfield-Rowen to benefit from, and be resilient to, the ever changing market place.
Projects
Projects worked upon by the Group in the first six months included:
Stratford City Shopping Centre, London
2012 Olympic Stadium
Glasgow Riverside Museum
Staythorpe Power Station
Heron Tower Commercial Office, London
ExCeL Exhibition Centre Extension, London
One New Change Commercial Office, London
Victoria Hospital, Kirkcaldy
Bartholomew Lane Commercial Office, London
West Burton Power Station
Dublin Airport
National Conference Centre, Dublin
Riverbank House Commercial Office, London
Anniesland College, Glasgow
Phase 2 Antelope Park, Southampton, Mixed Use Development
Data Centre in North of England
St Botolphs House Commercial Office, London
Asda Distribution Centre, Didcot, Oxfordshire
Airbus Factory, Broughton, North Wales
Rokeby School, London
Cannon Place Commercial Office, London
OUTLOOK
Early in 2008, the Company predicted a fall in UK domestic steel market demand. This has now materialised, albeit to a greater extent than had previously been anticipated, with the overall demand outlook for structural steelwork in 2010 declining to around 55% of the levels prevailing in 2008.
In spite of a substantial growth in domestic market share and the implementation of a vigorous export campaign, the Company continues to evaluate the deployment of its UK based capacities against demand and prevailing returns and will be making an announcement in due course, following the conclusion of its consultation process with employees.
The Board's expectations for 2009 are now forecast to be exceeded. However, conditions will be very difficult in the UK throughout 2010 with the order book going into next year consisting of a greater number of smaller projects. This will only be partially offset by market share growth, export sales and the commencement of our JV operations in India in mid 2010.
The Company's management of costs and capacities, together with its strong commercial policies, will ensure a good performance relative to the industry. Its leading position, financial strength and competitive advantages will sustain the Company and enable it to take advantage of demand when the recovery arrives.
TOM HAUGHEY
CHIEF EXECUTIVE OFFICER
25 August 2009
Condensed Consolidated Income Statement
|
|
Six months ended
30 June 2009 (unaudited)
|
|
Six months ended
30 June 2008 (unaudited)
|
|
Year ended
31 December 2008 (audited)
|
||||||
|
|
Before
Other
Items
£000
|
Other
Items1
£000
|
Total
£000
|
|
Before
Other
Items
£000
|
Other
Items1
£000
|
Total
£000
|
|
Before
Other
Items
£000
|
Other
Items1
£000
|
Total
£000
|
|
Revenue
|
200,033
|
-
|
200,033
|
|
173,324
|
-
|
173,324
|
|
394,325
|
-
|
394,325
|
|
Cost of sales
|
(172,123)
|
-
|
(172,123)
|
|
(143,055)
|
-
|
(143,055)
|
|
(331,216)
|
-
|
(331,216)
|
|
Gross profit
|
27,910
|
-
|
27,910
|
|
30,269
|
-
|
30,269
|
|
63,109
|
-
|
63,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income
|
94
|
-
|
94
|
|
46
|
-
|
46
|
|
563
|
-
|
563
|
|
Distribution costs
|
(633)
|
-
|
(633)
|
|
(682)
|
-
|
(682)
|
|
(2,993)
|
-
|
(2,993)
|
|
Administrative expenses
|
(1,784)
|
(3,172)
|
(4,956)
|
|
(2,731)
|
(4,574)
|
(7,305)
|
|
(5,700)
|
(9,148)
|
(14,848)
|
|
Share of results of associates
|
(207)
|
-
|
(207)
|
|
46
|
-
|
46
|
|
128
|
-
|
128
|
|
Unrealised gains/(losses) on derivative financial contracts
|
-
|
3,338
|
3,338
|
|
- |
(789)
|
(789)
|
|
-
|
(737)
|
(737)
|
|
Operating profit
|
25,380
|
166
|
25,546
|
|
26,948
|
(5,363)
|
21,585
|
|
55,107
|
(9,885)
|
45,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment revenue - interest
|
70
|
-
|
70
|
|
662
|
-
|
662
|
|
1,265
|
-
|
1,265
|
|
Finance costs - interest
|
(836)
|
-
|
(836)
|
|
(2,268)
|
-
|
(2,268)
|
|
(3,893)
|
-
|
(3,893)
|
|
Profit before tax
|
24,614
|
166
|
24,780
|
|
25,342
|
(5,363)
|
19,979
|
|
52,479
|
(9,885)
|
42,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
|
(7,322)
|
(46)
|
(7,368)
|
|
(7,589)
|
1,501
|
(6,088)
|
|
(15,085)
|
(3,533)
|
(18,618)
|
|
Profit for the period
|
17,292
|
(120)
|
17,412
|
|
17,753
|
(3,862)
|
13,891
|
|
37,394
|
(13,418)
|
23,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
19.51p
|
(0.14p)
|
19.65p
|
|
20.04p
|
(4.36p)
|
15.68p
|
|
42.20p
|
(15.14p)
|
27.06p
|
|
Diluted
|
19.49p
|
(0.14p)
|
19.63p
|
|
19.96p
|
(4.34p)
|
15.62p
|
|
42.15p
|
(15.13p)
|
27.02p
|
1 Other items relate to the amortisation of acquired intangibles, movements in gains/(losses) on derivative financial instruments, the associated tax impact of these items and for the year ended 31 December 2008 the tax costs from the phasing out of Industrial Buildings Allowances. Other items have been disclosed separately in order to give an indication of the underlying earnings of the Group.
Condensed Consolidated Statement of Recognised Income and Expense
|
|
Six months ended
30 June 2009
(unaudited)
£000
|
Six months ended
30 June 2008
(unaudited)
£000
|
Year ended
31 December 2008
(audited)
£000
|
|
Actuarial loss on defined benefit pension scheme
|
-
|
-
|
(190)
|
|
Tax on items taken directly to equity
|
-
|
-
|
53
|
|
Net expense recognised directly in equity
|
-
|
-
|
(137)
|
|
|
|
|
|
|
Profit for the period from continuing operations
|
17,412
|
13,891
|
23,976
|
|
Total recognised income and expense for the period attributable to equity shareholders
|
17,412
|
13,891
|
23,839
|
|
|
|
|
|
Condensed Consolidated Statement of Changes in Equity
|
Share Capital £000 |
Share Premium £000 |
Other Reserves £000 |
Retained Earnings £000 |
Total Equity £000 |
|
|
At 1 January 2008 |
2,215 |
46,152 |
743 |
67,719 |
116,829 |
|
Profit for the period (attributable to equity holders of the parent) |
- |
- |
- |
13,891 |
13,891 |
|
Dividends paid |
- |
- |
- |
(11,740) |
(11,740) |
|
|
|
|
|
||
|
At 30 June 2008 (unaudited) |
2,215 |
46,152 |
743 |
69,870 |
118,980 |
|
Share Capital £000 |
Share Premium £000 |
Other Reserves £000 |
Retained Earnings £000 |
Total Equity £000 |
|
|
At 1 January 2008 |
2,215 |
46,152 |
743 |
67,719 |
116,829 |
|
Profit for the period (attributable to equity holders of the parent) |
- |
- |
- |
23,976 |
23,976 |
|
Dividends paid |
- |
- |
- |
(20,601) |
(20,601) |
|
Share based payments |
- |
- |
(304) |
- |
(304) |
|
Actuarial loss on defined benefit pension scheme |
- |
- |
- |
(190) |
(190) |
|
Deferred income taxes on defined pension benefit scheme |
- |
- |
- |
53 |
53 |
|
|
|
|
|
||
|
At 31 December 2008 (audited) |
2,215 |
46,152 |
439 |
70,957 |
119,763 |
|
Share Capital £000 |
Share Premium £000 |
Other Reserves £000 |
Retained Earnings £000 |
Total Equity £000 |
|
|
At 1 January 2009 |
2,215 |
46,152 |
439 |
70,957 |
119,763 |
|
Profit for the period (attributable to equity holders of the parent) |
- |
- |
- |
17,412 |
17,412 |
|
Dividends paid |
- |
- |
- |
(8,861) |
(8,861) |
|
|
|
|
|
||
|
At 30 June 2009 (unaudited) |
2,215 |
46,152 |
439 |
79,508 |
128,314 |
Condensed Consolidated Balance Sheet
|
At 30 June 2009 (unaudited) £000 |
At 30 June 2008 (unaudited) £000 |
At 31 December 2008 (audited) £000 |
|
|
ASSETS |
|||
|
Non-current assets |
|||
|
Goodwill |
54,712 |
54,712 |
54,712 |
|
Other intangible assets |
26,961 |
34,556 |
30,133 |
|
Property, plant and equipment |
84,045 |
78,393 |
86,713 |
|
Investment property |
6,197 |
- |
6,197 |
|
Interests in associates |
125 |
150 |
232 |
|
172,040 |
167,811 |
177,987 |
|
|
Current assets |
|||
|
Inventories |
9,414 |
24,427 |
8,327 |
|
Trade and other receivables |
81,844 |
78,749 |
60,958 |
|
Cash and cash equivalents |
7,248 |
16,651 |
11,918 |
|
98,506 |
119,827 |
81,203 |
|
|
Total assets |
270,546 |
287,638 |
259,190 |
|
LIABILITIES |
|||
|
Current liabilities |
|||
|
Trade and other payables |
88,499 |
84,027 |
77,322 |
|
Financial liabilities - borrowings |
19,253 |
52,511 |
27,673 |
|
Financial liabilities - derivative financial instruments |
249 |
3,639 |
3,587 |
|
Tax liabilities |
9,316 |
9,147 |
5,976 |
|
117,317 |
149,324 |
114,558 |
|
|
Non-current liabilities |
|||
|
Retirement benefit obligations |
6,651 |
6,745 |
6,651 |
|
Deferred tax liabilities |
15,664 |
9,989 |
15,618 |
|
Provisions |
2,600 |
2,600 |
2,600 |
|
24,915 |
19,334 |
24,869 |
|
|
Total liabilities |
142,232 |
168,658 |
139,427 |
|
NET ASSETS |
128,314 |
118,980 |
119,763 |
|
EQUITY |
|||
|
Share capital |
2,215 |
2,215 |
2,215 |
|
Share premium |
46,152 |
46,152 |
46,152 |
|
Other reserves |
439 |
743 |
439 |
|
Retained earnings |
79,508 |
69,870 |
70,957 |
|
TOTAL EQUITY |
128,314 |
118,980 |
119,763 |
Condensed Consolidated Cash Flow Statement
|
|
Six months ended
30 June 2009
(unaudited)
£000
|
Six months ended
30 June 2008
(unaudited)
£000
|
Year ended
31 December 2008
(audited)
£000
|
|
Cash flows from operating activities
|
|
|
|
|
Cash generated from operations
|
17,207
|
35,642
|
84,503
|
|
Interest paid
|
(729)
|
(1,991)
|
(4,164)
|
|
Tax paid
|
(3,982)
|
(8,836)
|
(18,861)
|
|
Net cash from operating activities
|
12,496
|
24,815
|
61,478
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
Proceeds from sale of property, plant and equipment
|
811
|
868
|
2,730
|
|
Interest received
|
91
|
617
|
1,307
|
|
Purchases of property, plant and equipment
|
(687)
|
(2,271)
|
(12,094)
|
|
Purchases of intangible fixed assets
|
-
|
(90)
|
(516)
|
|
Purchases of shares of associates
|
(100)
|
-
|
-
|
|
Net cash from/(used in) investing activities
|
115
|
(876)
|
(8,573)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Repayment of borrowings
|
(8,420)
|
(993)
|
(25,831)
|
|
Dividends paid
|
(8,861)
|
(11,740)
|
(20,601)
|
|
Net cash used in financing activities
|
(17,281)
|
(12,733)
|
(46,432)
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents
|
(4,670)
|
11,206
|
6,473
|
|
Cash and cash equivalents at beginning of period
|
11,918
|
5,445
|
5,445
|
|
Cash and cash equivalents at end of period
|
7,248
|
16,651
|
11,918
|
|
|
|
|
|
Notes to the Condensed Consolidated Financial Statements
1) Basis of preparation
The interim financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") and in accordance with IAS34 "Interim Financial Reporting" as adopted for use in the European Union and in accordance with the accounting policies included in the Company's Annual Report for the year ended 31 December 2008 which have been applied consistently throughout the current and preceding periods.
In the current financial year the following standards have become applicable:
IFRS 8 "Operating segments" - effective for accounting periods beginning on or after 1 January 2009
IAS 23 "Borrowing costs" - effective for costs incurred from 1 January 2009
IFRS 2 "Share-based payment" - revision effective for accounting periods beginning on or after 1 January 2009
IAS 1 "Presentation of financial statements" - revision effective for accounting periods beginning on or after 1 January 2009
With the exception of IAS 23 "Borrowing costs", the adoption of these standards in the current or future periods will have no material impact on the results included within the financial statements of the Group. IAS 23 is expected to impact the treatment of any borrowing costs incurred on the construction of any significant new plant, with such costs being capitalised as part of the construction cost.
The Group has adopted IFRS 8 "Operating Segments" for the first time in this Interim Report. This standard requires the Group to disclose segmental information on the basis of internal reports which are regularly reviewed by the Group Board and used to allocate the resources of the business, and supersedes IAS 14 "Segment Reporting".
The Group has also adopted IAS 1 "Presentation of Financial Statements" (revised 2007) for the first time in this Interim Report. The amendments arising from this require the inclusion of the Condensed Consolidated Statement of Changes in Equity as a primary statement in the condensed interim financial information.
The interim financial information does not constitute statutory accounts. The interim results to 30 June 2009 and 2008 are neither audited nor reviewed by the auditors. The financial information of the full preceding year is based on the statutory accounts for the financial year ended 31 December 2008. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.
The Group has access to a £70 million revolving credit facility to meet day-to-day working capital requirements. The Group at 30 June 2009 had significant headroom on this facility and on the bank financial covenants in place and this position is forecast to continue for the foreseeable future. The bank facility is available to August 2010, with a reasonable expectation that sufficient facilities will be made available on renegotiation.
Through its various business activities the Group is exposed to a number of risks and uncertainties (see Note 2), which could affect the Group's ability to meet these forecasts and hence its ability to meet its banking covenants. As part of the review of forecasts noted above the Directors have considered its order book, the challenging economic environment, the increasingly competitive environment, and its supplier and customer base, together with the potential mitigating actions that can be taken to protect operating profits and cash flows. The Directors believe the Group is well placed to manage these business risks despite the current uncertain economic environment.
Accordingly after making enquiries, the Directors have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing this Interim Report.
2) 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 2009 financial year have been summarised in the Chief Executive Officer's Statement and have not changed significantly from those noted or referenced on page 28 of the Directors' Report included in the Annual Report 2008. These risks and uncertainties include, but are not limited to:
| Credit, interest rate, and foreign exchange risks; |
| Competitive risk in the face of ongoing innovation and price pressure; |
| Commercial relationships with customers and suppliers; and |
| Health and Safety. |
3) Segmental analysis
Revenue, profit before tax, and net assets all relate to the design, fabrication, and erection of structural steelwork and related activities. All of the Group's subsidiary businesses have similar products and services, production processes, types of customer, methods of distribution, regulatory environments, and economic characteristics.
Revenue, which relates wholly to construction contracts and related assets in both years originated from the United Kingdom.
4) TaxationThe income tax expense reflects the estimated effective rate on profit before taxation for the Group for the year ending 31 December 2009.
During 2007 proposed amendments to the Industrial Buildings Allowances regime were announced. These amendments were enacted during 2008 resulting in the deferred tax liability held on the Consolidated Balance Sheet as at 31 December 2008 increasing by £6.3 million with a corresponding taxation charge to the Consolidated Income Statement.
5) Dividends payable to equity shareholders
|
Six months ended 30 June 2009 £000 |
Six months ended 30 June 2008 £000 |
Year ended 31 December 2008 £000 |
|
|
Ordinary dividend paid |
8,861 ______ |
11,740 ______ |
20,601 ______ |
In addition to the above, an interim dividend of 10.00p per ordinary share (2008: 10.00p) will be paid on 23 October 2009 to shareholders on the register on 2 October 2009. The ex-dividend date will be 30 September 2009.
6) Earnings per share
Earnings per share is calculated as follows:
|
Six months ended 30 June 2009 £000 |
Six months ended 30 June 2008 £000 |
Year ended 31 December 2008 £000 |
|
|
Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent company |
17,412 ______ |
13,891 ______ |
23,976 ______ |
|
Earnings for the purposes of underlying basic earnings per share being underlying net profit attributable to equity holders of the parent company |
17,292 ______ |
17,753 ______ |
37,394 ______ |
|
Number of shares |
Number |
Number |
Number |
|
Weighted average number of ordinary shares for the purposes of basic earnings per share |
88,607,876 |
88,607,876 |
88,607,876 |
|
Effect of dilutive potential ordinary shares: |
|||
|
Share-based payments scheme |
110,204 |
330,612 |
110,204 |
|
_________ |
_________ |
_________ |
|
|
Weighted average number of ordinary shares for the purposes of diluted earnings per share |
88,718,080 |
88,938,488 |
88,718,080 |
|
_________ |
_________ |
_________ |
|
|
Basic earnings per share |
19.65p |
15.68p |
27.06p |
|
Underlying basic earnings per share |
19.51p |
20.04p |
42.20p |
|
Diluted earnings per share |
19.63p |
15.62p |
27.02p |
|
Underlying diluted earnings per share |
19.49p |
19.96p |
42.15p |
7) Analysis of net debt
|
At 30 June 2009 £000 |
At 30 June 2008 £000 |
At 31 December 2008 £000 |
|
|
Cash in hand |
7,248 |
16,651 |
11,918 |
|
Borrowings |
(19,253) |
(52,511) |
(27,673) |
|
Closing net debt |
(12,005) |
(35,860) |
(15,755) |
8) Reconciliation of group profit from operations to cash generated from operations
|
Six months ended 30 June 2009 £000 |
Six months ended 30 June 2008 £000 |
Year ended 31 December 2008 £000 |
|
|
Operating profit from continuing operations |
25,546 |
21,585 |
45,222 |
|
Adjustments for: |
|||
|
Share of results of associated companies |
207 |
(46) |
(128) |
|
Depreciation of property, plant and equipment |
2,522 |
2,593 |
5,094 |
|
Pension movements |
- |
- |
(284) |
|
Loss/(profit) on disposal of property, plant and equipment |
22 |
(160) |
(763) |
|
Share-based payments |
- |
- |
(304) |
|
Amortisation of acquired intangibles |
3,172 |
4,574 |
9,423 |
|
Unrealised (gains)/losses on derivative financial contracts |
(3,338) |
789 |
737 |
|
Operating cash flows before movements in working capital |
28,131 |
29,335 |
58,997 |
|
Increase in inventories |
(1,087) |
(6,496) |
1,150 |
|
Increase in receivables |
(20,907) |
(13,090) |
4,618 |
|
Increase in payables |
11,070 |
25,893 |
19,738 |
|
Cash generated from operations |
17,207 |
35,642 |
84,503 |
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.
9) Seasonality
The Group's operations, and in particular the strength of its current order book, has now lessened any traditional seasonality variations to provide a more evenly balanced split between first and second half year revenues.
10) Related party transactions
Certain Related Party Transactions, as described in Note 35 on page 85 of the 2008 Annual Report, continued in the current period. None of these transactions materially affected the financial position or performance of the Group during the period.
11) Cautionary statementThe 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.
12) Responsibility statement
We confirm to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";
(b) the interim report includes a fair review of the information required by DTR4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) the interim report includes a fair review of the information required by DTR 4.2.8R (disclosure of the related party transactions and changes therein).
By order of the Board
|
Tom Haughey |
Peter Davison |
|
Director |
Director |
|
25 August 2009 |
25 August 2009 |
Related Shares:
Severfield