TIDMSFR
RNS Number : 2388G
Severfield PLC
24 November 2020
24 November 2020
Interim results for the period ended 30 September 2020
UK and Europe order book of GBP287m, good cash generation and
strong balance sheet, resilience provided by market sector,
geographical and client diversity
Severfield plc, the market leading structural steel group,
announces its results for the six-month period ended 30 September
2020.
GBPm 6 months to 6 months to
30 September 30 September
2020 2019
(unaudited) (unaudited)
---- --------------
Revenue 186.0 131.7
Underlying* operating profit
(before JVs and associates) 9.5 7.0
Operating profit (before JVs and
associates) 8.1 7.0
Underlying* profit before tax 8.4 8.2
Profit before tax 6.6 8.2
Underlying* basic earnings per
share 2.2p 2.3p
Basic earnings per share 1.7p 2.3p
Interim dividend per share 1.1p 1.1p
---------------------------------------- -------------- --------------
* Underlying results are stated before non-underlying items of
GBP1.8m (H1 2019: GBPnil) consisting of the amortisation of
acquired intangible assets of GBP1.4m and acquisition-related
expenses of GBP0.4m
** The Group excludes IFRS 16 lease liabilities from its measure
of net funds / debt as they are excluded from the definition of net
debt as set out in the Group's borrowing facilities
Highlights
-- Revenue up 40% to GBP186.0m (H1 2019: GBP131.7m)
-- Underlying* profit before tax up 3% to GBP8.4m (H1 2019:
GBP8.2m), despite the impact of COVID-19
-- Good cash generation resulting in period -end net funds
(excluding IFRS 16 lease liabilities**) of GBP19.5m (31 March 2020:
GBP16.4m), including the outstanding acquisition loan of GBP10.5m
for Harry Peers
-- Interim dividend of 1.1p per share (H1 2019: 1.1p per share)
, reflects our confidence in the outlook and our strong balance
sheet and cash position
-- Over 80 projects undertaken during the period in the UK,
Ireland and continental Europe in diverse market sectors including
industrial and distribution, data centres, nuclear and commercial
offices
-- UK and Europe order book of GBP287m at 1 November 2020 (1
June 2020: GBP271m), includes new nuclear orders secured by Harry
Peers
-- Share of loss from Indian joint venture ('JSSL') of GBP0.7m
(H1 2019: profit of GBP1.3m), reflecting the impact of COVID-19
-- India order book of GBP98m at 1 November 2020 (1 June 2020:
GBP110m)
COVID-19
-- UK and Europe - factories are fully operational, all
construction sites are open, underlying operations are performing
well
-- Tendering and pipeline activity remain very encouraging
despite more competitive pricing and some client investment
decisions taking longer than normal
-- Additional resilience provided by our market sector,
geographical and client diversity
-- India - opening up of the economy from lockdown is
progressing slowly, well placed to win more work once improved
market clarity returns
-- Strong balance sheet and cash position, sufficient committed
funding in place until 2023 and cash generative business model
-- Improved visibility of second half and full year outturn -
any disruption related to the new UK lockdown restrictions is not
expected to be material to FY21 profitability
-- Optimistic in our outlook beyond FY21 - based on order book
strength, encouraging pipeline, strong balance sheet position,
expertise in managing complex projects and long-standing client
relationships
Alan Dunsmore, Chief Executive Officer commented:
'The resilience provided by our market sector, geographical and
client diversity, together with the actions that we have taken to
date have enabled us to navigate well through the challenging
conditions of COVID-19. This has resulted in a strong operational
performance in the first half of the year.
We have a strong balance sheet, good visibility of future
earnings from our order books and pipelines, and a strong
reputation for delivery of complex projects for our long-standing
clients.
There is now greater clarity of the extent of the impact of
COVID-19 on the current year's performance and, on the assumption
of no further significant business interruptions arising from any
widespread and prolonged secondary lockdown, we expect to improve
upon our first half profitability in the second half of the
financial year.'
For further information, please contact:
Alan Dunsmore
Severfield 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 five sites,
c.1,400 employees and expertise in large, complex projects across a
broad range of sectors. The Group also has an established presence
in the expanding Indian market through its joint venture
partnership with JSW Steel (India's largest steel producer).
INTERIM STATEMENT 2020
Introduction
The first half of the financial year has undoubtedly been a
challenging period due to the impact of COVID-19 but it has also
highlighted the many strengths of the Group including the benefit
of the strategic and operational progress made in recent years, the
a dditional resilience provided by our market sector, geographical
and client diversity, the skill and adaptability of our workforce
and our strong balance sheet position.
Despite the headwinds of COVID-19, the Group has performed
strongly in the period. This is reflected in an increased UK and
Europe order book, increased revenues and good cash generation,
which has enabled us to pay a final dividend for the 2020 financial
year, a decision which was deferred at the time of the 2020
year-end results, pending greater visibility of the impact of
COVID-19.
As expected, in the UK and Europe, the disruption experienced by
the Group as a result of COVID-19, both on its sites and within its
factories impacted profitability, particularly in the first quarter
of the financial year. Notwithstanding this, overall activity
levels have increased since the beginning of the first lockdown in
March and our operations are currently performing well, with
activity levels having returned to pre-lockdown levels in the
second quarter of the 2021 financial year. In India, the disruptive
effects of COVID-19 have been greater, with the prolonged effect of
the nationwide lockdown and the developing impact of the pandemic
on the Indian economy resulting in JSSL recording a loss in the
first half of the financial year. Despite these issues in the UK
and in India, the half year results show an increase in Group
profit before tax compared to the prior period, mainly due to the
relatively low, contract timing-related, profit in the first half
of the previous year.
Our clients have continued to regularly place orders, resulting
in a UK and Europe order book of GBP287m (1 June 2020: GBP271m),
providing the Group with a strong future workload. We remain very
encouraged by the current level of tendering and pipeline activity
across the Group despite evidence of some investment decisions
taking longer than normal. We continue to see a good number of
opportunities, albeit at competitive prices, in our key market
sectors, including in the industrial and distribution, nuclear,
data centre, infrastructure and stadia and leisure sectors.
In India, the opening up of the economy is progressing slowly
and disruption to JSSL's operations is likely to continue over a
period of several months with a corresponding impact on trading and
profitability. JSSL's order book has held up well at GBP98m (1 June
2020: GBP110m), and this contains a good mix of higher margin
commercial work. JSSL's pipeline of potential orders continues to
include several commercial projects for key developers and clients
with whom it has established strong relationships.
The impacts of COVID-19 are unavoidable, but they are also
likely to be short-lived, and we remain optimistic in our outlook.
We continue to be well-placed to win work in the diverse range of
market sectors and geographies in which we operate and across a
wide client base, providing us with extra resilience and the
ability to increase our market share, in line with our strategic
ambitions.
COVID-19
The Group responded quickly and decisively to the COVID-19
pandemic and has, to date, coped well with the challenges presented
by COVID-19. The Group's factories are fully operational, and we
are working on site across all our operations in the UK and Europe.
Despite the further national lockdown restrictions in England,
announced in early November, we are encouraged by the government's
stated approach that construction activity should continue during
this period and, accordingly, any disruption related to these new
restrictions is not expected to be material to the Group's current
year performance.
In managing our response to COVID-19, the primary focus has been
on the health, safety and wellbeing of all employees, clients and
the wider public, together with protecting the financial strength
of the Group. All our factories and sites have implemented new
operating procedures, in accordance with national government,
devolved administration and industry guidance, including changes to
working practices, enhanced levels of cleaning, additional hygiene
facilities and social distancing.
The Group's balance sheet and cash position remains strong.
Since 31 March 2020, the Group has continued to operate in a net
funds position, maintaining significant amounts of cash headroom in
banking facilities, which mature in October 2023.
Cash management remains a priority and our strong financial
position has been carefully managed during the current uncertain
period whilst ensuring that we continue to support our supply chain
partners. All PAYE liabilities and other discretionary tax
deferrals are now fully up to date, except for VAT payments of
GBP3m which have been deferred by HMRC until the 2022 financial
year. Our strong financial position also means that, whilst we
furloughed some of our workforce in the first quarter of the 2021
financial year, all of whom have since returned to work, we have
not and will not be claiming for support under any employee-related
government support packages including the Coronavirus Job Retention
Scheme. In addition, borrowings of GBP15m, originally drawn down in
late March under the Group's revolving credit facility ('RCF') as a
precautionary measure in response to the COVID-19 outbreak, have
now been repaid.
Financials
Revenue of GBP186.0m (2019: GBP131.7m) represents an increase of
GBP54.3m compared to the prior period. This predominately reflects
the relative increase in order flow and production activity during
the period, together with the additional revenue for Harry Peers,
which was acquired in October 2019. This increase in activity
commenced in the second half of the previous year, based on the
step change in the size of the order book at that time (1 November
2019: GBP323m).
Underlying operating profit (before JVs and associates) was
GBP9.5m (2019: GBP7.0m) and includes the disruptive effects of
COVID-19, which particularly impacted the Group in the first
quarter of the year. This profit represents an increase of GBP2.5m
over the prior period mainly due to the relatively low, contract
timing-related, profit in the first half of the previous year. The
results for 2020 were unusually less first half weighted, with
several large contracts delivering stronger profits during the
second half of the previous year.
The share of results of JVs and associates in the first half of
the year was a loss of GBP0.6m (2019: profit of GBP1.5m). This
includes a share of loss from the Indian joint venture of GBP0.7m
(2019: GBP1.3m), reflecting the impact of COVID-19 on JSSL's
trading and profitability. The share of results of JVs and
associates also includes those of Construction Metal Forming
('CMF') Limited which has contributed a share of profit for the
Group of GBP0.1m (2019: GBP0.2m).
The Group's underlying profit before tax was GBP8.4m (2019:
GBP8.2m), an increase of 3 per cent compared to the previous
period. The statutory profit before tax, which includes both
underlying and non-underlying items, was GBP6.6m (2019:
GBP8.2m).
Non-underlying items for the period of GBP1.8m (2019: GBPnil)
consisted of the amortisation of acquired intangible assets of
GBP1.4m (2019: GBPnil) and acquisition-related expenses of GBP0.4m
(2019: GBPnil). The amortisation of acquired intangible assets
represents the amortisation of customer relationships, order books
and brand name, which were identified on the acquisition of Harry
Peers. These assets are being amortised over a period of 18 months
to five years.
An underlying tax charge of GBP1.7m is shown for the period
(2019: GBP1.3m). 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.
Underlying basic earnings per share is 2.2p (2019: 2.3p). This
calculation is based on the underlying profit after tax of GBP6.7m
(2019: GBP6.9m) and 306,860,362 shares (2019: 304,920,295 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 1.7p (2019: 2.3p). 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 (excluding IFRS 16 lease liabilities) at 30 September
2020 were GBP19.5m (31 March 2020: GBP16.4m) following the payment
of the final dividend (GBP5.5m). This represents cash of GBP29.8m
offset by the outstanding term loan of GBP10.5m for the Harry Peers
acquisition. Operating cash flow for the period before working
capital movements was GBP11.8m (2019: GBP8.3m). Net working capital
decreased by GBP3.1m (GBP0.1m excluding the deferred VAT payments
of GBP3m) in the period and, excluding advance payments, period-end
net working capital represented approximately two per cent of
revenue (31 March 2020: three per cent), which is better than our
well-established target range of four to six per cent.
Capital expenditure of GBP1.8m (2019: GBP2.8m) represents the
continuation of the Group's capital investment programme. This
predominantly consisted of ongoing expansion to our Dalton
production facility, including new equipment for our fabrication
lines, and improvements to our site and office facilities.
Depreciation in the period was GBP3.0m (2019: GBP2.6m), of which
GBP0.8m (2019: GBP0.8m) relates to right-of-use assets under IFRS
16.
The Group's net defined benefit pension liability at 30
September 2020 was GBP23.0m, an increase of GBP4.3m from the
year-end position of GBP18.7m. The deficit has increased largely
because of a reduction in the discount rate which reflects the
significant fall in bond yields over the past six months, together
with higher long-term inflation assumptions. This has been
partially offset by higher than expected returns on the scheme's
assets and by ongoing deficit contributions. The triennial funding
valuation of the scheme is in progress, with a valuation date of 31
March 2020.
The Group has a GBP25m revolving credit facility ('RCF') with
HSBC Bank and Yorkshire Bank, which matures in October 2023. The
RCF, of which GBP10m is available as an overdraft facility,
continues to include an additional accordion facility of GBP20m,
which allows the Group to increase the aggregate available
borrowings to GBP45m. In light of the COVID-19 pandemic and the
impact on the Group's performance in the half year, the directors
have reconsidered the Group's medium term cash forecasts and
conducted stress-test analysis on these projections in order to
assess the Group's ability to continue as a going concern. Having
also made appropriate enquiries, the directors consider it
reasonable to assume that the Group has adequate resources to
continue for the foreseeable future and, for this reason, have
continued to adopt the going concern basis in preparing the interim
financial statements.
Dividend
The board considers the dividend to be a very important
component of shareholder returns. Accordingly, based on its current
assessment of the performance of the business, the outlook for the
year and our strong balance sheet and cash position, the board has
decided to maintain the interim dividend at 1.1p per share (2019:
1.1p per share).
Board change
As announced with our full year results on 19 June 2020, John
Dodds, Non-Executive Chairman, retired from the board at the
conclusion of the AGM in September, having served for ten years,
including nine years as chairman. Kevin Whiteman, who has been on
the board since 2014, succeeded John as Non-Executive Chairman.
UK and Europe review
The Group's main activities continue to be the design,
fabrication and construction of structural steel for construction
projects and more than 80 live projects were worked on during the
period. Major projects include a large industrial facility, which
includes a bespoke paint package, and a large data centre, both in
the Republic of Ireland, a large data centre in Finland, large
distribution facilities in the UK and Germany, the new stadium
works at Fulham F.C. and the redevelopment of Lord's Cricket Ground
(Compton and Edrich stands). We have also continued our work on the
new Google Headquarters at King's Cross, together with a number of
mid-sized office developments, both in London and the UK regions
(including another project at Kings Cross, Bankside Yards and the
Assembly Buildings in Bristol).
The future success of the Group is also determined by the
quality of the secured workload and our discipline to maintain
contract selectivity irrespective of economic conditions. Despite
the challenges associated with COVID-19, we have secured a
significant value of new work and variations to existing contracts
over the past six months resulting in a UK and Europe order book at
1 November 2020 which stands at GBP287m (1 June 2020: GBP271m), of
which GBP245m is for delivery over the next 12 months. This
provides the Group with a strong future workload well into the 2022
financial year.
The order book contains a healthy mix of projects across a
diverse range of sectors including industrial and distribution,
nuclear, data centres, transport infrastructure and commercial
offices. Significant awards include new nuclear orders secured by
Harry Peers, a number of large distribution facilities in the UK,
several mid-sized office developments, including one in Glasgow and
our first HS2 bridge package, following the HS2 Notice to Proceed
issued by the UK Government in April. Our European business has
also secured a distribution facility in the Netherlands, along with
proving its continued benefit to our UK operations when tendering
for and executing projects in Europe. In terms of geographical
spread, of the order book of GBP287m, 68 per cent represents
projects in the UK, with the remaining 32 per cent representing
projects for delivery in Europe and the Republic of Ireland (1
June: 54 per cent in the UK, 46 per cent in Europe and the Republic
of Ireland).
We recognise that certain investment decisions may continue to
be delayed in some of our sectors as clients and developers address
the ongoing effects of COVID-19. In the short term, whilst this has
the potential to impact the timing of construction programmes and
contract awards, it also creates opportunities for us to help
clients deliver changes to these programmes more quickly and
efficiently. Despite the challenges of COVID-19, we are very
encouraged by the current level of tendering and pipeline activity
across the Group and the quality of the enquiries received remains
good. We continue to see a good number of opportunities, albeit at
more competitive prices given the current market conditions, in our
key market sectors, including in the industrial and distribution,
data centres, nuclear, transport infrastructure and stadia and
leisure sectors. Opportunities exist in these sectors both in the
UK and in Europe, where we have demonstrated our ability to win
more work, supported by our European business. We remain
well-placed to win work in the diverse range of market sectors and
geographies in which we operate and across a wide client base,
providing us with extra resilience and the ability to increase our
market share.
In March, the UK government announced its five-year plan, which
will provide funding of GBP640 billion for UK infrastructure
projects including future work for HS2 and investment programmes
for Highways England. The National Infrastructure and Construction
Procurement Pipeline, published in June, clarified how projects
worth up to GBP37 billion would be brought to market over the next
twelve months, with the remaining details expected to be released
later this year as part of the National Infrastructure Strategy.
The UK government has stated that the infrastructure and
construction sectors are vital to the recovery of the economy from
the impact of COVID-19, and part of its New Deal plan, is
accelerating spending on GBP5 billion of infrastructure projects.
We continue to make good progress with several of these significant
infrastructure opportunities, particularly in the transport sector
with HS2, and remain well positioned to win work in this sector
given the Group's historical track record in transport
infrastructure and our in-house bridge capability.
Although the UK has now ceased to be a member of the EU and is
in a transition period, the nature of its future trading
relationship with the EU remains uncertain. We continue to monitor
developments in this area and we have plans in place to mitigate,
where possible, the impact of leaving the EU on the fulfilment of
orders in the Republic of Ireland and continental Europe and on our
supply chain.
The sale of British Steel to Jingye Group ('Jingye'), China's
third largest privately owned steel producer, in March 2020, has
helped to provide much needed stability to the steel supply market
in the UK. We remain encouraged by Jingye's stated intention to
invest over GBP1 billion in British Steel over the next decade
which includes several furnace upgrades (including the development
of an electric arc furnace in Teesside). Notwithstanding this, we
continue to regularly review our steel supply arrangements and
already have strong ongoing relationships with several other supply
chain partners, including those in continental Europe and local
stockholders in the UK.
The UK margin performance continues to reflect improvements to
our operational execution. This includes the benefits from our
programme of projects categorised under the banner of 'Smarter,
Safer, more Sustainable' ('SSS'). These initiatives continue to
focus on improving many aspects of our internal operations,
including the application of Lean manufacturing techniques,
optimisation of factory processes and production flows, quality
control and cost reduction programmes.
During the period, we have continued the rollout of new software
systems including data analytics, dashboards, workflow management
and project-specific commercial and operational tools to better
inform decision-making and improve efficiencies both in our
factories and on our construction sites. This includes the use of
these systems on mobile devices to capture information at the point
of use and to provide live information to operatives. We have also
taken further steps to improve the integration of key systems,
better automate work flows and have implemented a new coatings
management system at Dalton covering improvements to the
specification, management and application of paint systems, which
can be both complex and bespoke.
We continue to devote skilled resource to reviewing and
responding to developing technologies (including virtual reality
and digital technologies). As part of our digital transformation
initiative, we are making good progress with the automation of
repetitive tasks, including in our approach to design, and in
reducing our reliance on paper-based information. COVID-19 has
tested our ability to respond quickly to an ever changing situation
and we will look to harness the speed at which we have adapted to
new ways of working including the adoption of Microsoft Teams in a
short space of time at the start of the pandemic.
We continue to invest in and streamline our factories,
particularly at our main production centre in Dalton, where we are
continuing to upgrade and expand our fabrication capability to
improve the output and efficiency of these operations. We are also
investing over GBP1m in the current financial year on weld fume
management systems to ensure that our employees continue to work in
a safe factory environment. These improvements form part of the
Group's ongoing capital investment programme, taking our capital
investment in the Group to over GBP40m over a six-year period.
Harry Peers
Harry Peers is integrating well into our core operations and we
are seeing good opportunities to grow the business as we expand and
extend the Group's current capabilities into attractive
complementary market sectors. The business continues to secure high
quality orders and we have good visibility of a strong order
pipeline including in the growing nuclear sector, in which Peers
commands a niche, well-established and trusted position with a high
calibre customer base. The business has also demonstrated
capability in modular structural steel offerings, which we will
look to develop across its wider product range. As part of the SSS
programme, we are also focussing on certain operational initiatives
including investment in technology-driven enhancements to make the
business more competitive and efficient and to support the
development of our client service offering.
In addition to the initial consideration of GBP18.9m, a further
performance-based consideration of up to GBP7m is payable
contingent upon certain financial and operational targets for the
period ended 31 August 2020. We are in the process of finalising
this completion exercise and expect to settle this obligation early
in the 2021 calendar year.
Severfield (Products & Processing)
Notwithstanding the disruption caused by COVID-19, Severfield
(Products & Processing) ('SPP'), has continued to secure and
successfully deliver a number of orders to its expanding customer
base, together with providing subcontract fabrication packages
(including general fabrication, trusses, bracing and stairs) to
assist other Group companies in the delivery of larger projects.
During the period, we have continued to grow and invest in the
business and have maintained our focus on business development.
This includes our new 'Severstor' and 'Seversilo' modular product
ranges which we are developing organically. We have now already
secured several 'Severstor' orders which we are in the process of
delivering to a new, expanding customer base. We also see
opportunities to further develop the product range of the business,
playing to our strengths in general fabrication and our previous
record in modular construction.
Medium to high-rise residential construction
In recent periods, we have also been targeting potential organic
opportunities in medium to high-rise residential construction,
where we have developed a steel solution in what has traditionally
been a concrete-dominated sector. Despite this being more of a
'slow burn' than originally anticipated due to longer than expected
client gestation periods, exacerbated by the COVID-19 situation,
discussions with a number of interested parties remain ongoing and
this opportunity continues to be progressed in the background.
India
The COVID-19 pandemic continues to impact the Indian joint
venture, where the effects of the virus have been more significant
than in the UK and Europe. In light of the prolonged effect of the
nationwide lockdown and the developing impact of COVID-19 on the
Indian economy, JSSL's operations were severely disrupted in first
half of the financial year. This is evident in the Group's
after-tax share of loss of GBP0.7m (2019: share of profit of
GBP1.3m). The loss reflects a reduction in JSSL's revenue to
GBP23.1m, compared to GBP56.3m in the previous period, and a
break-even operating margin, compared with 8.5 per cent in the
previous period. Financing expenses of GBP1.6m (2019: GBP1.3m) turn
JSSL's operating result into a loss before tax for the period of
GBP1.6m (2019: profit before tax of GBP3.5m).
The opening up of the economy from lockdown is progressing
slowly and disruption to JSSL's operations is likely to continue
over a period of several months, although we expect the impact of
this disruption on trading and profitability in H2 to be less than
that evidenced in H1. Despite COVID-19, JSSL's order book has held
up well at GBP98m (1 June 2020: GBP110m), and this contains a good
mix of higher margin commercial work. JSSL's pipeline of potential
orders continues to include several commercial projects for key
developers and clients with whom it has established strong
relationships. JSSL is also in the process of developing formal
strategic alliances with certain key clients, mainly for
commercial, data centre and healthcare projects, leaving the
business well placed to win more work once improved market clarity
returns to India.
Despite the current period of uncertainty, we remain positive
about the long-term development of the Indian market and of the
value creation potential of JSSL, especially considering the
political, commercial, social and technological changes made in
India over recent years, the government's ongoing focus on
simplifying regulations and the 'ease of doing business', and the
significant expansion of the business already evidenced to
date.
Safety, health and the environment ('SHE')
During this challenging period, we have continued to run our
operations safely, in line with national and local government and
Construction Leadership Council guidelines, ensuring that we remain
focused on 'safety first', a core value for the Group. This is
vital to our continued success and a key differentiator in the
market, both to our clients and to our employees. Mental health has
also been at the forefront of our approach throughout this time,
recognising the impact that COVID-19 is having on all our
employees.
A new platform for reporting SHE incidents and completing
inspections is in final development, aiming to build on existing
reporting processes and further improving data analysis. Our SHE
management system continues to be developed to drive a Group
approach. We have maintained our ISO 45001 and 14001
certifications, along with additional client and sector specific
certifications.
Following the success of our inaugural event in November 2019,
we launched our second safety awards in August 2020 and have seem
an increase in nominations which will be judged in November with
the winners being announced in December. How we celebrate these
achievements will be decided in the new year in line with the
COVID-19 guidelines at that time.
Our behavioural safety programme continues with tangible
improvements evidenced in both attitudes to safety and safety
culture across all areas of the business. We will continue to
strive for an exemplar safety culture through engagement,
communication, support and clear objectives.
Our sustainability committee is developing a wider governance
and strategy framework that will cover all areas of our
sustainability policy, encompassing health and safety, people and
communities, environment and economic delivery. The framework will
also establish how we monitor and manage risks and opportunities,
and the metrics and targets we plan to report against, ultimately
aligning ourselves with the Task Force on Climate Related Financial
Disclosure (TCFD) guidance.
All construction materials have some environmental impact and
when assessing sustainability, it is important to measure all of
steel's impacts, including the atmosphere, the environment, means
of disposal, and durability. Steel manufacturing continues to
improve its energy use and levels of greenhouse gas emissions and
steel products exhibit a decisive life cycle advantage versus many
other construction materials (including concrete) since they can
continually be recycled. Our structures can last for many years,
making them cost-effective as well as sustainable and since steel
is often fabricated off-site, it can reduce on-site labour, cycle
time and construction waste. From a sustainability perspective, we
believe that steel offers a durable, cost-effective and sustainable
choice for construction, and our 'Smarter, Safer, more Sustainable'
('SSS') initiatives continue to focus on our environmental impact
through our Lean manufacturing techniques and cost and waste
reduction programmes.
Summary and outlook
The Group responded quickly and decisively to the COVID-19
pandemic and has, to date, coped well with the challenges presented
by COVID-19, performing strongly in the period. This is reflected
in an increased UK and Europe order book, increased revenues and
good cash generation, which has enabled us to pay a final dividend
in September and declare an unchanged interim dividend. Our
strategy remains unchanged, based on growth, both organic and
through selective acquisitions, operational improvements and
creating value in our Indian joint venture, JSSL.
Despite COVID-19, we remain optimistic about the future. We have
a strong order book, which supports trading throughout much of H2
and into FY22, an encouraging pipeline of opportunities, a strong
balance sheet position, expertise in managing complex projects and
good long-standing client relationships. This leaves us well-placed
to win work in the diverse range of market sectors and geographies
in which we operate and across a wide client base, providing us
with extra resilience and the ability to increase our market
share.
There is now greater clarity of the extent of the impact of
COVID-19 on the current year's performance and, on the assumption
of no further significant business interruptions arising from any
widespread and prolonged secondary lockdown, we expect to improve
upon our first half profitability in the second half of the
financial year.
Finally, I would like to pay tribute to our people for their
continued support and for keeping our business operating so well
during a very challenging period. As always, their health and
wellbeing remains our number one priority.
Alan Dunsmore
Chief Executive Officer
24 November 2020
Condensed consolidated interim financial information
Consolidated income statement
Six months ended Six months ended Year ended
30 September 2020 (unaudited) 30 September 2019 (unaudited) 31 March 2020 (audited)
Non- Non-underlying Non-underlying
Underlying underlying Total Underlying GBP000 Total Underlying GBP000 Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 186,031 - 186,031 131,749 - 131,749 327,364 - 327,364
Operating
costs (176,539) (1,421) (177,960) (124,747) - (124,747) (300,386) (2,294) (302,680)
----------- ---------- --------- -------------- -------------- ------------ -------------- --------------- -------------
Operating
profit
before
share of
results of
JVs
and
associates 9,492 (1,421) 8,071 7,002 - 7,002 26,978 (2,294) 24,684
Share of
results of
JVs
and
associates (623) - (623) 1,466 - 1,466 2,355 - 2,355
Operating
profit 8,869 (1,421) 7,448 8,468 - 8,468 29,333 (2,294) 27,039
Net finance
expense (447) (429) (876) (278) - (278) (712) (514) (1,226)
----------- ---------- --------- -------------- -------------- ------------ -------------- --------------- -------------
Profit
before tax 8,422 (1,850) 6,572 8,190 - 8,190 28,621 (2,808) 25,813
Taxation (1,719) 352 (1,367) (1,278) - (1,278) (4,959) (439) (5,398)
----------- ---------- --------- -------------- -------------- ------------ -------------- --------------- -------------
Profit for
the period 6,703 (1,498) 5,205 6,912 - 6,912 23,662 (3,247) 20,415
=========== ========== ========= ============== ============== ============ ============== =============== =============
Earnings
per share:
Basic 2.18p (0.48)p 1.70p 2.27p - 2.27p 7.74p (1.06)p 6.68p
Diluted 2.18p (0.48)p 1.70p 2.27p - 2.27p 7.70p (1.06)p 6.64p
Consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
30 September 30 September 31 March 2020
2020 2019
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Actuarial (loss)/gain
on defined benefit pension
scheme* (4,957) (4,958) 255
(Losses) taken to equity
on cash flow hedges (916) (1,446) (1,403)
Reclassification adjustments
on cash flow hedges 455 206 (410)
Exchange difference on
foreign operations (26) (22) (34)
Tax relating to components
of other comprehensive
income* 942 843 (184)
Other comprehensive income
for the period (4,502) (5,377) (1,776)
Profit for the period
from continuing operations 5,205 6,912 20,415
-------------- -------------- --------------------------
Total comprehensive income
for the period attributable
to equity shareholders
of the parent 703 1,535 18,639
============== ============== ==========================
* These items will not be subsequently reclassified to the
consolidated income statement.
Consolidated balance sheet
At At At
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
ASSETS
Non-current assets
Goodwill 70,714 54,712 70,714
Other intangible assets 6,230 - 7,375
Property, plant and equipment 88,160 84,821 88,864
Right-of-use asset 9,494 10,781 10,140
Interests in JVs and associates 26,066 25,800 26,690
200,664 176,114 203,783
------------- ------------- --------------------
Current assets
Inventories 6,119 8,108 6,856
Contract assets, trade and other
receivables 68,345 55,853 74,612
Current tax asset 1,963 891 1,640
Cash and cash equivalents 29,802 22,327 44,338
106,229 87,179 127,446
------------- ------------- --------------------
Total assets 306,893 263,293 331,229
============= ============= ====================
LIABILITIES
Current liabilities
Trade and other payables (79,531) (57,256) (84,366)
Financial liabilities - borrowings (3,500) - (19,375)
Financial liabilities - leases (1,086) (1,838) (1,502)
Derivative financial instruments (1,612) (282) (1,135)
(85,729) (59,376) (106,378)
------------- ------------- --------------------
Non-current liabilities
Retirement benefit obligations (23,022) (24,420) (18,688)
Financial liabilities - borrowings (7,000) - (8,750)
Financial liabilities - leases (9,513) (10,016) (9,729)
Deferred tax liabilities (2,795) (344) (4,009)
(42,330) (34,780) (41,176)
------------- ------------- --------------------
Total liabilities (128,059) (94,156) (147,554)
------------- ------------- --------------------
NET ASSETS 178,834 169,137 183,675
============= ============= ====================
EQUITY
Share capital 7,689 7,648 7,648
Share premium 87,292 87,254 87,292
Other reserves 281 1,448 1,402
Retained earnings 83,572 72,787 87,333
------------- ------------- --------------------
TOTAL EQUITY 178,834 169,137 183,675
============= ============= ====================
Consolidated statement of changes in equity
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2020 7,648 87,292 1,402 87,333 183,675
Total comprehensive income
for the period - - (487) 1,190 703
Ordinary shares issued* 41 - - - 41
Equity settled share-based
payments - - (634) 572 (62)
Dividends paid - - - (5,523) (5,523)
At 30 September 2020 (unaudited) 7,689 87,292 281 83,572 178,834
=============== =============== =============== =============== ==============
*The issue of shares represents shares allotted to satisfy the
2017 Performance Share Plan award, which vested in June 2020.
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2019 7,600 87,254 3,819 76,334 175,007
Changes in accounting
policy - - - (1,110) (1,110)
--------------- --------------- --------------- --------------- --------------
Restated total equity
at 1 April 2019 7,600 87,254 3,819 75,224 173,897
Total comprehensive income
for the period - - (1,262) 2,797 1,535
Ordinary shares issued* 48 - - - 48
Equity settled share-based
payments - - (1,109) 259 (850)
Dividends paid - - - (5,493) (5,493)
At 30 September 2019 (unaudited) 7,648 87,254 1,448 72,787 169,137
=============== =============== =============== =============== ==============
*The issue of shares represents shares allotted to satisfy the
2016 Performance Share Plan award, which vested in June 2019.
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2019 7,600 87,254 3,819 76,334 175,007
Changes in accounting
policy - - - (895) (895)
--------------- --------------- --------------- --------------- --------------
Restated total equity
at 1 April 2019 7,600 87,254 3,819 75,439 174,112
Total comprehensive income
for the year - - (1,847) 20,486 18,639
Ordinary shares issued* 48 38 - - 86
Equity settled share-based
payments - - (570) 259 (311)
Dividends paid - - - (8,851) (8,851)
At 31 March 2020 (audited) 7,648 87,292 1,402 87,333 183,675
=============== =============== =============== =============== ==============
*The issue of shares represents shares allotted to satisfy the
2016 Performance Share Plan award, which vested in June 2019 and
the 2017 and 2018 Sharesave schemes.
Consolidated cash flow statement
Six months Six months Year
ended ended
30 September 30 September ended
2020 2019
(unaudited) (unaudited) 31 March
GBP000 GBP000 2020
(audited)
GBP000
Net cash flow from operating activities 12,506 6,626 21,980
Cash flows from investing activities
Proceeds on disposal of property,
plant and equipment 90 128 267
Purchases of land and buildings - - (1,519)
Purchases of other property, plant
and equipment (1,553) (2,796) (4,945)
Purchases of intangible assets (276) - -
Investment in subsidiary entity,
net of cash acquired - - (13,390)
----------------------- ----------------------- ----------------------
Net cash used in investing activities (1,739) (2,668) (19,587)
----------------------- ----------------------- ----------------------
Cash flows from financing activities
Interest paid (477) (251) (598)
Dividends paid (5,523) (5,493) (8,851)
Proceeds from shares issued 41 - 86
Proceeds from borrowings - - 29,000
Repayment of borrowings (17,625) - (875)
Repayment of obligations under - (49) -
finance leases
Repayment of lease liabilities (775) (817) (1,796)
Loans issued to JVs and associates (944) - -
Net cash used in financing activities (25,303) (6,610) 16,966
----------------------- ----------------------- ----------------------
Net (decrease)/increase in cash
and cash equivalents (14,536) (2,652) 19,359
Cash and cash equivalents at beginning
of period 44,338 24,979 24,979
----------------------- ----------------------- ----------------------
Cash and cash equivalents at end
of period 29,802 22,327 44,338
======================= ======================= ======================
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 2020
were approved by the board of directors on 17 June 2020 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 2020 has been reviewed, not audited,
and was approved for issue by the board of directors on 23 November
2020.
2) Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 September 2020 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 2020 which have been
prepared in accordance with International Financial Reporting
Standards ('IFRS') adopted for use in the European Union and
therefore comply with Article 4 of the EU IAS regulation.
At 30 September 2020, the Group's net funds were GBP19.5m,
comprising cash of GBP29.8m offset by the outstanding term loan of
GBP10.5m for the Harry Peers acquisition. The Group has a GBP25m
revolving credit facility ('RCF') with HSBC and Yorkshire Bank that
matures in October 2023. The RCF, of which GBP10m is available as
an overdraft facility, includes an additional accordion facility of
GBP20m, which allows the Group to increase the aggregate available
borrowings to GBP45m. Throughout the year and up to the date of
approval of the interim financial statements, the Group has
operated in a net funds position, maintaining significant amounts
of headroom in its financing facilities and associated
covenants.
In determining whether the Group's condensed consolidated
interim financial information can be prepared on the going concern
basis, the directors considered the 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
for a period of 12 months following the date of approval of the
interim financial statements.
The following factors were considered as relevant and included
in the severe but plausible downside sensitivities:
-- The impact of COVID-19 on the Group's profits and cash
flows;
-- The UK and Europe order book and the pipeline of potential
future orders;
-- The Group's 'Smarter, Safer, more Sustainable' business
improvement programme, which continues to deliver tangible benefits
during the period; and
-- The Group's net funds position and its bank finance
facilities, which are committed until October 2023, including both
the level of those facilities and the covenants attached to
them.
Consequently, 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 its financing facilities for at
least 12 months from the approval of the condensed Group interim
financial statements. For this reason, the directors continue to
adopt the going concern basis in preparing the condensed
consolidated interim financial information.
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 2020.
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 and IFRICs that are effective for the
first time for the six months ended 30 September 2020 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 2021, other than as disclosed
below, have not changed significantly from those disclosed on pages
78 to 86 of the strategic report included in the annual report for
the year ended 31 March 2020. 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
-- The commercial and market environment within which the Group
operates (including Brexit)
-- COVID-19
-- Information technology resilience
-- Mispricing a contract (at tender)
-- Failure to mitigate onerous contract terms
-- Supply chain
-- The Indian joint venture
-- People
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.
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 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
At At At
30 September 30 September 31 March
2020 2019 2020
GBP000 GBP000 GBP000
Operating costs (1,421) - (2,294)
Finance expense (429) - (514)
------------- ------------- ---------
Non-underlying items before
tax (1,850) - (2,808)
------------- ------------- ---------
Tax on non-underlying items 352 - (439)
------------- ------------- ---------
Non-underlying items after
tax (1,498) - (3,247)
------------- ------------- ---------
Non-underlying items consisted of the amortisation of acquired
intangible assets of GBP1,421,000 (2019: GBPnil) identified on the
acquisition of Harry Peers in the period year and the finance
expense associated with the unwinding of the discounted contingent
consideration of GBP429,000 (2019: GBPnil).
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.
8) Taxation
The income tax expense reflects the estimated underlying
effective tax rate of 19 per cent on profit before taxation for the
Group for the year ending 31 March 2021.
9) Dividends
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2020 2019 2020
GBP000 GBP000 GBP000
2019 final - 1.8p per share - 5,493 5,493
2020 interim - 1.1p per share - - 3,358
2020 final - 1.8p per share 5,523 - -
5,523 5,493 8,851
====================== ====================== ======================
The directors have declared an interim dividend in respect of
the six months ended 30 September 2020 of 1.1p per share (2019:
1.1p per share) which will amount to an estimated dividend payment
of GBP3,384,000 (2019: GBP3,358,000). 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
2020 2019 2020
GBP000 GBP000 GBP000
Earnings for the purposes
of basic earnings per share
being net profit attributable
to equity holders of the parent
company 5,205 6,912 20,415
-------------------- ------------------- --------------
Earnings for the purposes
of underlying basic earnings
per share being underlying
net profit attributable to
equity holders of the parent
company 6,703 6,912 23,662
-------------------- ------------------- --------------
Number of shares Number Number Number
Weighted average number of
ordinary shares for the purposes
of basic earnings per share 306,860,362 304,920,295 305,428,749
Effect of dilutive potential
ordinary shares and under
share plans - - 1,701,466
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share 306,860,362 304,920,295 307,130,215
==================== =================== ==============
Basic earnings per share 1.70p 2.27p 6.68p
Underlying basic earnings
per share 2.18p 2.27p 7.74p
Diluted earnings per share 1.70p 2.27p 6.64p
Underlying diluted earnings
per share 2.18p 2.27p 7.70p
11) Property, plant and equipment
During the period, the Group acquired land and buildings of
GBPnil (2019: GBPnil) and other property, plant and equipment of
GBP1,553,000 (2019: GBP2,796,000). The Group also disposed of other
property, plant and equipment for GBP90,000 (2019: GBP128,000)
resulting in a profit on disposal of GBP14,000 (2019:
GBP31,000).
12) Intangible assets
During the period, the Group acquired intangible assets of
GBP276,000 (2019: GBPnil), relating to product licences.
13) Net funds
The Group's net funds are as follows:
At At At
30 September 30 September 31 March
2020 2019 2020
GBP000 GBP000 GBP000
Cash and cash equivalents 29,802 22,327 44,338
Unamortised debt arrangement
costs 152 202 177
Borrowings (10,500) - (28,125)
------------- ------------------ ------------------
Net funds (excluding IFRS
16 lease liabilities) 19,454 22,529 16,390
IFRS 16 lease liabilities (10,599) (11,854) (11,231)
Net funds 8,855 10,675 5,159
============= ================== ==================
The Group excludes IFRS 16 lease liabilities from its measure of
net funds / debt as they are excluded from the definition of net
debt as set out in the Group's borrowing facilities.
14) 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 to amounts drawn
down against its revolving credit facility and amounts outstanding
under the term loan, 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, which are financial assets and liabilities that do not
have regular market pricing, but whose fair value can be determined
based on other data values or market prices.
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
2020 2019 2020
GBP000 GBP000 GBP000
Liabilities
Foreign exchange contracts (1,612) (282) (1,135)
============= ============= =========
15) Net cash flow from operating activities
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2020 2019 2020
GBP000 GBP000 GBP000
Operating profit from continuing
operations 7,448 8,468 27,039
Adjustments:
Depreciation of property, plant
and equipment 2,181 1,864 3,928
Right-of-use asset depreciation 789 762 1,585
Gain on disposal of other property,
plant
and equipment (14) (31) (68)
Amortisation of intangible assets 1,421 - 1,421
Movements in pension scheme
liabilities (623) (510) (1,029)
Share of results of JVs and
associates 623 (1,466) (2,355)
Share-based payments (62) (802) (311)
Operating cash flows before
movements in working capital 11,763 8,285 30,210
Decrease in inventories 737 807 2,059
Decrease/(increase) in receivables 7,186 1,240 (12,174)
(Decrease)/increase in payables (4,816) 119 7,898
Cash generated from operations 14,870 10,451 27,993
Tax paid (2,364) (3,825) (6,013)
-------------- -------------- ---------------------
Net cash flow from operating
activities 12,506 6,626 21,980
============== ============== =====================
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 demand deposits and other short-term highly liquid investments
with a maturity of three months or less.
16) Related party transactions
There have been no changes in the nature of related party
transactions as described in note 31 on page 194 of the annual
report for year ended 31 March 2020 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 2020 except as stated below.
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,
Construction Metal Forming Limited ('CMF'). The Group's share of
the retained loss in JVs and associates of GBP623,000 for the
period reflects a loss from JSSL of GBP718,000 (2019: profit of
GBP1,297,000) and a profit from CMF of GBP95,000 (2019:
GBP169,000).
In June 2020, an initial investment of GBP944,000 was made by
the Group (matched by our JV partner) to fund the initial stages of
the expansion of CMF's operating facilities.
During the period, the Group contracted with and purchased
services from MET Structures, amounting to sales of GBP750,000
(2019: GBPnil) and purchases of GBP572,000 (2019: GBPnil). The
amount due from MET Structures at 30 September 2020 was GBP611,000
(2019: GBPnil). MET Structures shares common directors with the
Group.
17) 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 legal or contractual
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 2020 this amounted to
GBPnil (2019: 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.
During the six months ended 30 September 2020, John Dodds
retired as chairman of the Group. Kevin Whiteman was appointed to
the role of chairman at the conclusion of the AGM on 3 September
2020. There have been no other changes in directors of Severfield
plc as listed in the annual report for the year ended 31 March
2020.
18) Statement of directors' responsibilities (continued)
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
24 November 2020 24 November 2020
Independent review report to Severfield plc
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 2020 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 2020 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
24 November 2020
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