TIDMSFR
RNS Number : 7610P
Severfield PLC
22 November 2016
22 November 2016
Results for the period ended 30 September 2016
69% increase in underlying profit before tax, 40% dividend
increase and
highest order book for over six years
Severfield plc, the market leading structural steel group,
announces its results for the six month period ended 30 September
2016.
Highlights
-- Revenue marginally up at GBP118.2m (H1 2015: GBP117.1m)
-- Underlying* profit before tax up 69% to GBP8.1m (H1 2015:
GBP4.8m)
-- Continued strong cash performance, with period-end net funds
of GBP24.4m (31 March 2016: GBP18.7m)
-- Continued benefit from operational improvement programme,
reflected in increased profitability
-- Over 90 projects undertaken during the period in key market
sectors including commercial office developments,
industrial and distribution facilities, stadia and transport
-- Share of losses from Indian joint venture of GBP0.2m (H1
2015: loss of GBP0.1m) reflecting stable production volumes
and operating margins
-- UK order book of GBP315m at 1 November 2016 (1 June 2016:
GBP270m)
-- India order book of GBP35m at 1 November 2016 (1 June 2016:
GBP33m)
-- Interim dividend increased by 40% to 0.7p per share (H1 2015:
0.5p per share)
-- Profit growth for the full year to be comfortably ahead of
expectations
GBPm 6 months 6 months
to to
30 September 30 September
2016 2015
(unaudited) (unaudited)
Revenue 118.2 117.1
Underlying* operating profit
(before JVs and associates) 8.2 5.0
Underlying* operating margin
(before JVs and associates) 7.0% 4.3%
Operating profit (before
JVs and associates) 7.6 3.4
Underlying* profit before
tax 8.1 4.8
Profit after tax 6.2 2.6
Underlying* basic earnings
per share 2.25p 1.32p
Basic earnings per share 2.07p 0.89p
* Underlying results are stated before non-underlying items of
GBP0.7m (H1 2015: GBP1.6m):
- Amortisation of acquired intangible assets - GBP1.3m (H1 2015: GBP1.3m)
- Movement in fair value of derivative financial instruments -
gain of GBP0.6m (H1 2015: loss of GBP0.3m)
- The associated tax impact of the above - GBP0.1m (H1 2015: GBP0.3m)
Ian Lawson, Chief Executive Officer commented:
"I am delighted with our strong performance in the first half,
which has continued since the period end. Margins are significantly
up, our order book has continued to rise to a six year high whilst
our pipeline remains steady. In combination with the strong cash
generation in the first half, this has given us the confidence to
increase the interim dividend by 40% and we expect profit growth
for the full year to be comfortably ahead of expectations. We have
a strong platform from which to implement our strategy, which
targets to double our underlying profit before tax over the next
four years, and continue to create value for our shareholders."
For further information, please contact:
Ian Lawson
Chief Executive 01845 577
Severfield plc Officer 896
Alan Dunsmore
Group Finance 01845 577
Director 896
Jefferies International 020 7029
Limited Simon Hardy 8000
020 7029
Harry Nicholas 8000
020 3772
Bell Pottinger Nick Lambert 2558
020 3772
Dan de Belder 2561
020 3772
Zara de Belder 2512
Interim statement 2016
Introduction
The first six months of the year have seen a strong improvement
in operating profit and a small increase in revenue over the prior
year along with continued good cash generation. The revenue
increase was against a strong first half in the prior year but the
current strength of the Group's order book will support improved
revenue growth in the second half of 2016/17 and into the next
financial year.
The Indian joint venture continues to perform steadily with a
consistent order book and good levels of production through the
factory. The Indian market is showing signs of improvement and
there is a good level of opportunities in the pipeline to enable
the business to maintain its steady development.
Financials
The Group's financial performance for the first six months of
the financial year reflects continuing operating margin improvement
on a year-on-year basis, resulting from the Group's operational
improvement programme, and stable year-on-year performance from the
Indian joint venture.
Revenue of GBP118.2m (2015: GBP117.1m) represents a modest
increase from the prior year, reflecting similar levels of
production over the same period. The order book has continued to
grow during the first half of 2016/17, resulting in an order book
at 1 November of GBP315m which is expected to result in increased
production volumes and revenue in the second half of the financial
year. Underlying operating profit before results of JVs and
associates of GBP8.2m (2015: GBP5.0m) represents a margin of 7.0%
(2015: 4.3%) which continues to benefit from the embedding of
operational efficiencies across the Group through better contract
execution and improved flow of fabrication processes in our
factories.
The share of results of JVs and associates was a nominal loss in
the first half of the year (2015: loss of GBP0.1m). This consists
of a share of losses from the Indian joint venture of GBP0.2m
(2015: loss of GBP0.1m), reflecting steady production levels and
stable operating margins of 7.6% (2015: 7.4%), together with a
share of profits of GBP0.1m (2015: GBPnil) from Composite Metal
Flooring ("CMF") Limited following the Group's investment in the
company in the second half of 2015/16.
The Group's underlying operating profit after share of results
of JVs and associates is GBP8.2m (2015: GBP4.9m) and underlying
profit before tax is GBP8.1m (2015: GBP4.8m).
Non-underlying items in the period include the amortisation of
acquired intangible assets of GBP1.3m (2015: GBP1.3m) and non-cash
gains of GBP0.6m (2015: losses of GBP0.3m) in relation to the
movement in the fair values of derivative financial instruments.
These are both classified as non-underlying as they do not form
part of the profit monitored in the ongoing management of the
Group.
The underlying tax rate for the first half of the year of 17.0%
(2015: 17.0%) is the estimated effective tax rate for the year
ending 31 March 2017.
The statutory profit before tax, which includes both underlying
and non-underlying items, is GBP7.4m (2015: GBP3.2m). The statutory
profit after tax is GBP6.2m (2015: GBP2.6m) and has been
transferred to reserves.
Underlying basic earnings per share is 2.25p (2015: 1.32p). This
calculation is based on the underlying profit after tax of GBP6.7m
(2015: GBP3.9m) and 298,497,784 shares (2015: 297,503,587 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 2.07p (2015: 0.89p). 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 2016 were GBP24.4m, which is an
improvement of GBP5.7m from the year-end position of GBP18.7m. Net
cash flow from operating activities in the period was GBP11.4m
(2015: GBP10.9m) which included a working capital improvement of
GBP1.6m (2015: improvement of GBP4.2m) mainly reflecting an
increase in advance payments offset by a slight reversal of the
favourable year-end receivables position.
Capital expenditure of GBP2.6m (2015: GBP3.1m) represents the
continuation of the Group's capital investment programme. This
included further production related equipment for our fabrication
lines in Dalton, additional mobile equipment for use on our
construction sites and continued investment in a range of health
and safety and environmental efficiency related improvements.
Depreciation in the period was GBP1.8m (2015: GBP1.9m).
The Group's defined benefit pension liability at 30 September
2016 was GBP22.6m, an increase of GBP8.0m from the year-end
position of GBP14.6m. The increase in the liability is primarily
the result of a reduction in the AA bond yield following the
referendum vote to leave the European Union, as this is used as the
discount rate in the calculation of scheme liabilities. The
triennial funding valuation of the scheme will be carried out in
the next financial year, with a valuation date of 31 March
2017.
The Group has a GBP25m borrowing facility with Yorkshire Bank
and HSBC, with an accordion facility of a further GBP20m available
at the Group's request, and is available until July 2019. There are
two key financial covenants which are tested quarterly, with net
debt: EBITDA of < 2.5x, and interest cover of > 4x.
Dividend
As part of the Group's commitment to a progressive dividend
policy, the board has decided to increase the interim dividend by
40% to 0.7p per share (2015: 0.5p per share). The dividend will be
paid on 13 January 2017 to shareholders on the register on 16
December 2016.
UK
The Group's main activities continue to be the design,
fabrication and construction of structural steel for construction
projects and more than 90 projects were worked on during the
period. These cover a wide range of sectors that the Group can
service including commercial office developments, stadia,
factories, warehouses, distribution centres, railway stations and
bridges. Major projects included the retractable roof for Wimbledon
No. 1 court, an assembly hall for BAE Systems at Barrow-in-Furness,
the Ordsall Chord rail bridges in Manchester, Covanta waste to
energy facility in Dublin and Bracknell Shopping Centre.
Although revenue growth was relatively modest, it was against a
strong comparator in the prior year (which itself had shown 20%
year-on-year growth). However, the order book at 1 November of
GBP315m reflects a further increase from the level of six months
ago and will generate higher production and therefore revenue both
in the second half of the year and into the next financial year.
Significant new orders reflected in this increased order book
include the new commercial tower at 22 Bishopsgate, new
distribution centres including one for an on-line major retailer, a
retail centre expansion and the Graphene Innovation Centre in
Manchester. Whilst a significant value of new orders have been
secured in recent months, the pipeline for potential future orders
also continues to remain steady and our production levels will
remain strong for the foreseeable future. In addition, large
infrastructure projects such as HS2, Hinckley Point Nuclear Power
Station and the new runway at Heathrow, all of which will have
significant steel content, as well as the ongoing Network Rail and
Highways England investment programmes, all represent opportunities
for the Group in the medium term. Overall, this reflects a good
level of activity in the UK market which the Group's breadth of
capability and continuing service levels to clients is enabling it
to benefit well from.
The main profit driver in the period has been the Group's
continuing operational improvement programme. Operating margins
have improved to 7.0% from 4.3% in the same period last year and
there were three main drivers of this. Firstly, some changes were
made to production flows through the factories which made greater
use of new and more efficient equipment, and increased throughput
in certain areas as well. These are part of an ongoing programme of
improvements which will continue to yield further benefits in the
future. Secondly, improvements we have been making to our contract
management processes over the past two years focusing on contract
execution, the documentation of project progress and changes, and
crucially, communication with clients throughout projects. Often
the benefits of these combined activities only become apparent
towards the end of a contract and the results for the period
reflect some encouraging progress here. Finally, the integration of
our new joint venture, CMF Limited, into the supply chain for the
first full six month reporting period, has had a beneficial impact
on operating margins as well as the share of results from JVs and
associates. The CMF operation is performing well and there are
further developments in the pipeline which will expand the value
offering and profit contribution from this business.
We have continued to develop our bridge infrastructure business
(transport sector) in the first half of the year and our capital
investment plans include a further GBP2m to enhance our bridge
fabrication capabilities. Progress remains in line with
expectations and the pipeline of opportunities is very encouraging
with some significant contract awards expected in the second half
of the year.
Overall, we are pleased with the profit progress the business
has made in the period and continue to see opportunities to build
on this in the future. This profit and margin improvement will also
help increase the Group's return on capital employed from the level
of 9.7% in the last financial year to above our stated target of
10% by the end of 2016/17.
Health and safety remains central to all of the Group's
activities and our extensive programme of activities and
improvements continued in the period. We have continued to build on
the initial success of the behavioural safety programme and are now
well placed to further develop the safety cultural change
programme.
A clear strategy is being developed to drive and support Safety,
Health and Environmental forward through the Group to reflect the
current business and ensure development into the future. We
continue to grow our occupational health scheme to further raise
awareness of hazards in the workplace including implementing the
drugs and alcohol policy and random testing regime. Sustainability
remains a key part of the Group's strategy, aiming to create
visible leadership and objectives at all levels and to all
stakeholders.
We have completed our traffic management upgrades which have
resulted in safer movement around the factories, our lighting
upgrades have shown clear improvements which have benefited both
safety and energy costs. Further staff engagement with all levels
of the business continues, and adapts to ensure our safety culture
becomes world class.
India
The Indian joint venture continued to perform steadily in the
period and production volumes of 21,000 tonnes were similar to
prior year once mix factors are taken into account. The operating
margin of 7.6% is very similar to the level of 7.4% achieved last
year and reflects a similar mix of higher margin commercial and
lower margin industrial work. The order book also remains steady at
GBP35m and the business continues to generate repeat business from
existing clients as well as develop a pipeline of work from new
clients. The business continued to repay its term loan during the
period but financing costs are still at a level which turn a good
operating profit into a small share of after tax loss for the
Group. The continued debt repayment however does provide more
confidence in the path towards profit and therefore the value of
the Group's investment in the business.
Outlook
With the strongest order book for over six years and steady
pipeline, the outlook is very good. Revenue growth coupled with the
continuing operational improvements provide confidence in the
Group's ability to deliver profit growth in the current year
comfortably ahead of expectations.
The Indian joint venture continues to perform steadily and
improving market sentiment coupled with some reduction in debt
within the business provides more confidence that the business can
deliver a break-even result in the current year and move into
profit thereafter.
I would like to take this opportunity to thank everyone in our
business for their hard work, support and continued commitment over
the past six months.
We have a strong platform from which to implement our strategy,
which targets to double our underlying profit before tax over the
four years following the year ended 31 March 2016, and continue to
create value for our shareholders.
Ian Lawson
Chief Executive Officer
Condensed consolidated interim financial information
Consolidated income statement
Six months ended Six months ended Year ended
30 September 2016 30 September 2015 31 March 2016 (audited)
(unaudited) (unaudited)
Before Before Before
other Other other Other other Other
items items(1) Total items items(1) Total items items(1) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 118,153 - 118,153 117,061 - 117,061 239,360 - 239,360
Operating
costs (109,920) (673) (110,593) (112,016) (1,604) (113,620) (225,674) (3,568) (229,242)
--------- --------- --------- --------- --------- --------- ---------- ------------ ----------
Operating
profit
before
share of
results of
JVs and
associates 8,233 (673) 7,560 5,045 (1,604) 3,441 13,686 (3,568) 10,118
Share of
results
of JVs and
associates (37) - (37) (149) - (149) (230) - (230)
Operating
profit 8,196 (673) 7,523 4,896 (1,604) 3,292 13,456 (3,568) 9,888
Finance
expense (105) - (105) (139) - (139) (245) - (245)
--------- --------- --------- --------- --------- --------- ---------- ------------ ----------
Profit
before tax 8,091 (673) 7,418 4,757 (1,604) 3,153 13,211 (3,568) 9,643
Tax (1,381) 135 (1,246) (834) 321 (513) (2,280) 1,237 (1,043)
--------- --------- --------- --------- --------- --------- ---------- ------------ ----------
Profit for
the period 6,710 (538) 6,172 3,923 (1,283) 2,640 10,931 (2,331) 8,600
========= ========= ========= ========= ========= ========= ========== ============ ==========
Earnings
per share:
Basic 2.25p (0.18p) 2.07p 1.32p (0.43p) 0.89p 3.67p (0.78p) 2.89p
Diluted 2.25p (0.18p) 2.07p 1.32p (0.43p) 0.89p 3.65p (0.78p) 2.87p
(1) Further details of other 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 2016
2016 2015
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Actuarial (loss)/gain on defined
benefit pension scheme* (8,289) 1,674 1,300
Tax relating to components
of other comprehensive income* 1,575 (335) (353)
Other comprehensive income
for the period (6,714) 1,339 947
Profit for the period from
continuing operations 6,172 2,640 8,600
------------- ------------- --------------
Total comprehensive income
for the period attributable
to equity shareholders of the
parent (542) 3,979 9,547
============= ============= ==============
* These items will not be subsequently reclassified to the
consolidated income statement.
Consolidated balance sheet
At At At
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
ASSETS
Non-current assets
Goodwill 54,712 54,712 54,712
Other intangible assets 2,989 5,709 4,480
Property, plant and equipment 77,788 77,608 77,362
Interests in JVs and associates 11,573 4,653 11,611
Deferred tax asset 559 1,090 1,100
------------- ------------- -------------------
147,621 143,772 149,265
------------- ------------- -------------------
Current assets
Inventories 6,979 4,782 5,294
Trade and other receivables 57,776 56,975 50,742
Cash and cash equivalents 24,677 13,555 19,033
------------- ------------- -------------------
89,432 75,312 75,069
------------- ------------- -------------------
Total assets 237,053 219,084 224,334
============= ============= ===================
LIABILITIES
Current liabilities
Trade and other payables (65,286) (55,341) (55,311)
Financial liabilities -
finance leases (180) (180) (180)
Financial liabilities -
derivative financial instruments (193) (176) (830)
Current tax liabilities (2,509) (1,536) (1,911)
(68,168) (57,233) (58,232)
------------- ------------- -------------------
Non-current liabilities
Retirement benefit obligations (22,596) (14,526) (14,602)
Financial liabilities -
finance leases (319) (499) (409)
Deferred tax liabilities (507) (3,225) (2,885)
(23,422) (18,250) (17,896)
------------- ------------- -------------------
Total liabilities (91,590) (75,483) (76,128)
------------- ------------- -------------------
NET ASSETS 145,463 143,601 148,206
============= ============= ===================
EQUITY
Share capital 7,461 7,437 7,437
Share premium 85,702 85,702 85,702
Other reserves 3,060 1,775 2,300
Retained earnings 49,240 48,687 52,767
------------- ------------- -------------------
TOTAL EQUITY 145,463 143,601 148,206
============= ============= ===================
Consolidated statement of changes in equity
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2016 7,437 85,702 2,300 52,767 148,206
Total comprehensive
income for the period - - - (542) (542)
Ordinary shares issued 24 - - - 24
Equity settled share-based
payments - - 760 - 760
Dividends paid - - - (2,985) (2,985)
At 30 September 2016
(unaudited) 7,461 85,702 3,060 49,240 145,463
=============== =============== =============== =============== ==============
The issue of shares represents shares allotted to satisfy the
2013 Performance Share Plan award which vested in June 2016.
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2015 7,437 85,702 1,250 46,195 140,584
Total comprehensive
income for the period - - - 3,979 3,979
Equity settled share-based
payments - - 525 - 525
Dividends paid - - - (1,487) (1,487)
At 30 September 2015
(unaudited) 7,437 85,702 1,775 48,687 143,601
=============== =============== =============== =============== =============
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2015 7,437 85,702 1,250 46,195 140,584
Total comprehensive
income for the period - - - 9,547 9,547
Equity settled share-based
payments - - 1,050 - 1,050
Dividends paid - - - (2,975) (2,975)
At 31 March 2016
(audited) 7,437 85,702 2,300 52,767 148,206
=============== =============== =============== =============== =============
Consolidated cash flow statement
Six months Six months Year
ended ended
30 September 30 September ended
2016 2015
(unaudited) (unaudited) 31 March
GBP000 GBP000 2016
(audited)
GBP000
Net cash flow from operating
activities 11,352 10,924 23,888
Cash flows from investing
activities
Proceeds on disposal of
property, plant and equipment 403 505 668
Purchases of property,
plant and equipment (2,559) (3,078) (4,798)
Purchases of intangible
fixed assets - - (150)
Investment in JVs and associates (413) - (4,113)
----------------------- ----------------------- --------------------
Net cash used in investing
activities (2,569) (2,573) (8,393)
----------------------- ----------------------- --------------------
Cash flows from financing
activities
Interest paid (64) (78) (166)
Dividends paid (2,985) (1,487) (2,975)
Repayment of obligations
under finance leases (90) (115) (205)
Net cash used in financing
activities (3,139) (1,680) (3,346)
----------------------- ----------------------- --------------------
Net increase in cash and
cash equivalents 5,644 6,671 12,149
Cash and cash equivalents
at beginning
of period 19,033 6,884 6,884
----------------------- ----------------------- --------------------
Cash and cash equivalents
at end of period 24,677 13,555 19,033
======================= ======================= ====================
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 2016
were approved by the board of directors on 15 June 2016 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 2016 has been reviewed, not audited,
and was approved for issue by the board of directors on 21 November
2016.
2) Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 September 2016 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 2016 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 2016.
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 2016 which have a
material impact on the Group.
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 2017 have not changed
significantly from those disclosed on pages 52 to 55 of the
strategic report included in the annual report for the year ended
31 March 2016 which is available on the Company's website
www.severfield.com. These risks and uncertainties include, but are
not limited to:
-- The commercial and market environment within which the Group
operates.
-- Tendering and project execution.
-- Health and safety.
-- Supply chain.
-- The Indian joint venture.
-- Information technology resilience.
-- People.
-- Industrial relations.
5) Segmental analysis
Following the adoption of 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 segments 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 both years 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) Other items
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Amortisation of acquired
intangible assets (1,310) (1,310) (2,620)
Movement in fair value
of derivative financial
instruments 637 (294) (948)
Other items before
tax (673) (1,604) (3,568)
Tax on other items 135 321 1,237
-------------------- -------------------- ----------
Other items after tax (538) (1,283) (2,331)
==================== ==================== ==========
Amortisation of acquired intangible assets represents the
amortisation of customer relationships which were identified on the
acquisition of Fisher Engineering in 2007. These relationships will
be fully amortised within the next two years.
A non-cash gain on derivative financial instruments of
GBP637,000 (2015: loss of GBP294,000) was recognised in relation to
the movement in the fair value of foreign exchange contracts which
will reverse when the underlying contracts mature in the next 12
months. The fair value of these derivatives is primarily a function
of exchange rate fluctuations between sterling and the euro.
8) Taxation
The income tax expense reflects the estimated underlying
effective tax rate of 17.0% (2015: 17.0%) on profit before taxation
for the Group for the year ending 31 March 2017.
9) Dividends
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
2015 final - 0.5p per
share - (1,487) (1,487)
2016 interim - 0.5p
per share - - (1,487)
2016 final - 1.0p per (2,985) - -
share
---------------------- -------------------- ----------
(2,985) (1,487) (2,975)
====================== ==================== ==========
The directors have declared an interim dividend in respect of
the six months ended 30 September 2016 of 0.7p per share (2015:
0.5p per share) which will amount to an estimated dividend payment
of GBP2,092,000 (2015: GBP1,487,000). 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
2016 2015 2016
GBP000 GBP000 GBP000
Earnings for the purposes
of basic earnings per
share being net profit
attributable to equity
holders of the parent
company 6,172 2,640 8,600
-------------- -------------- ------------
Earnings for the purposes
of underlying basic
earnings per share
being underlying net
profit attributable
to equity holders of
the parent company 6,710 3,923 10,931
-------------- -------------- ------------
Number of shares Number Number Number
Weighted average number
of ordinary shares
for the purposes of
basic earnings per
share 298,497,784 297,503,587 297,503,587
Effect of dilutive
potential ordinary
shares and under share
plans - - 1,715,818
Weighted average number
of ordinary shares
for the purposes of
diluted earnings per
share 298,497,784 297,503,587 299,219,405
============== ============== ============
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2016 2015 2016
Basic earnings per
share 2.07p 0.89p 2.89p
Underlying basic earnings
per share 2.25p 1.32p 3.67p
Diluted earnings per
share 2.07p 0.89p 2.87p
Underlying diluted
earnings per share 2.25p 1.32p 3.65p
11) Property, plant and equipment
During the period the Group acquired property, plant and
equipment of GBP2,559,000. The Group also disposed of certain other
assets for GBP403,000 resulting in a profit on disposal of
GBP71,000.
12) Net funds
The Group's net funds are as follows:
At At At
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Cash and cash equivalents 24,677 13,555 19,033
Unamortised debt arrangement
costs 178 242 210
Financial liabilities
- finance leases (499) (679) (589)
------------- ------------------ -------------------
Net funds 24,356 13,118 18,654
============= ================== ===================
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
2016 2015 2016
GBP000 GBP000 GBP000
Liabilities
Foreign exchange contracts (193) (176) (830)
============= ============= =========
14) Net cash flow from operating activities
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Operating profit from
continuing operations 7,523 3,292 9,888
Adjustments:
Depreciation of property,
plant and equipment 1,801 1,878 3,693
Gain on disposal of
property, plant
and equipment (71) (123) (137)
Amortisation of intangible
assets 1,492 1,379 2,758
Movements in pension
scheme liabilities (295) (277) (573)
Share of results of
JVs and associates 37 149 230
Share-based payments 760 525 1,050
Movement in fair value
of derivatives (637) 294 948
-------------- -------------- ---------------------
Operating cash flows
before movements in
working capital 10,610 7,117 17,857
Increase in inventories (1,685) (15) (527)
(Increase)/decrease
in receivables (7,066) 7,524 13,725
Increase/(decrease)
in payables 10,403 (3,279) (6,221)
Cash generated from
operations 12,262 11,347 24,834
Tax paid (910) (423) (946)
-------------- -------------- ---------------------
Net cash flow from
operating activities 11,352 10,924 23,888
============== ============== =====================
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 30 on page 129 of the annual
report for year ended 31 March 2016 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 2016.
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 ('CMF'). The Group's share of the retained
loss in JVs and associates of GBP37,000 for the period reflects a
loss from JSSL of GBP159,000 and a profit from CMF of
GBP122,000.
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.
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 2016 these amounted to
GBP15,000,000 (2015: GBP15,000,000). 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 2016. There have been no changes
in directors during the six months ended 30 September 2016.
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
Ian Lawson Alan Dunsmore
Director Director
21 November 21 November
2016 2016
Independent review report to Severfield plc
We have been engaged by the Company to review the condensed
consolidated interim financial information in the interim report
for the six months ended 30 September 2016 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 notes 1 to 18. We have read the
other information contained in the interim report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed consolidated
interim financial information.
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 Disclosure and Transparency Rules ('the DTR')
of the UK's Financial Conduct Authority ('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.
Directors' responsibilities
The interim report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the interim 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 IFRSs as adopted by the EU.
The condensed consolidated interim financial information included
in this interim report has been prepared in accordance with IAS 34,
Interim Financial Reporting, as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated interim financial information in the
interim report based on our review.
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
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) 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.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated interim
financial information in the interim report for the six months
ended 30 September 2016 is not prepared, in all material respects,
in accordance with IAS 34 as adopted by the EU and the DTR of the
UK FCA.
Adrian Stone
for and on behalf of KPMG LLP
Chartered Accountants
One Sovereign Square
Sovereign Street
Leeds
LS1 4DA
21 November 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
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(END) Dow Jones Newswires
November 22, 2016 02:00 ET (07:00 GMT)