19 June 2024
Results for the year ended
30 March 2024
Profits ahead of
expectations, strong order books, further strategic progress in
Europe
Severfield plc, the market leading
structural steel group, announces its results for the year ended 30
March 2024.
£m
|
Year
ended3
30 March
2024
|
Year
ended3
25 March
2023
|
Change
|
Revenue
|
463.5
|
491.8
|
-6%
|
Underlying1 operating
profit
(before JVs and
associates)
|
37.7
|
33.1
|
+14%
|
Underlying1 operating
margin
(before JVs and
associates)
|
8.1%
|
6.7%
|
+140
bps
|
Operating profit
|
26.4
|
30.2
|
-12%
|
Operating margin
|
5.7%
|
6.1%
|
-40
bps
|
Underlying1 profit
before tax
|
36.5
|
32.5
|
+13%
|
Profit before tax
|
23.0
|
27.1
|
-15%
|
Underlying1 basic
earnings per share
|
8.9p
|
8.5p
|
+5%
|
Basic earnings per
share
|
5.2p
|
7.0p
|
-26%
|
Underlying1 return on
capital employed ('ROCE')
|
17.5%
|
15.8%
|
+170
bps
|
Headlines
§ Revenue of £463.5m (2023: £491.8m)
reflects the impact of softer market conditions in 2024
§ Underlying1 profit before tax up 13% to £36.5m
(2023: £32.5m), ahead of expectations due to strong operational
delivery
§ Underlying1 basic earnings per share up 5% at 8.9p
(2023: 8.5p)
§ Total dividend increased by 9% to 3.7p per share (2023: 3.4p
per share), includes proposed final dividend of 2.3p per share
(2023: 2.1p per share) - ten consecutive
years of progressive dividends
§ Year-end net debt (on a pre-IFRS-16 basis2) of
£9.4m (2023: net funds of £2.7m), includes Voortman acquisition
loan of £15.2m, and reflects an operating
cash conversion4 of 110% (2023: 145%).
§ High-quality, diversified UK and Europe order book of £478m
at 1 June 2024 (1 November 2023: £482m), includes higher proportion
of European orders
§ Momentum and value is building in JSSL - increased share of
profit of £1.9m (2023: £1.3m), record
EBITDA of £13m and output of over 100,000 tonnes, Gujarat expansion
expected to commence in H2
§ Record India order book of £181m at 1 June 2024 (1 November
2023: £165m)
§ £10m share buyback programme launched in April 2024 to return
surplus capital to shareholders
Outlook
§ UK and Europe:
-
Market conditions are showing signs of
improvement
- Voortman is
integrating well into the Group's operations and helping to
strengthen our market position in
Europe
-
Medium-term strategic growth targets are
reaffirmed
§ India: well-positioned to take advantage of significant
growth opportunities, new markets being targeted, very encouraging
outlook and strong underlying demand for structural
steel
§ Our businesses remain well-positioned to win work in markets
with positive long-term growth trends including those which are
driving the green energy transition
§ On track to deliver a result for 2025 which is in line with
our expectations
Alan Dunsmore, Chief Executive Officer
commented:
"We are delighted to be reporting
another strong performance by the Group, with our profits ahead of
expectations. This is the result of an excellent operational
performance and the success of our strategy to diversify the
sectors and geographies we serve. This has enabled us to deliver
enhanced returns for shareholders through our recent share buyback
scheme, building on our ten consecutive years of progressive
dividends.
Looking ahead, we have strong
order books in the UK, Europe and India which are providing us with good earnings visibility through 2025 and
beyond. With market conditions showing signs of improvement and
with our businesses well-placed in markets that are expected
to benefit from positive long term growth trends, which are
unlikely to be impacted by the result of the upcoming UK general
election, we are confident in the outlook
for the business."
For further information, please
contact:
Severfield
|
Alan Dunsmore
Chief Executive Officer
|
01845 577 896
|
|
Adam Semple
Chief Financial Officer
|
01845 577 896
|
|
|
|
Camarco
|
severfield@camarco.co.uk
|
|
|
Ginny Pulbrook
|
07961 315 138
|
|
Tom Huddart
|
07967 521 573
|
Jefferies International
|
Will Soutar
|
020 7029 8000
|
Liberum Capital
|
Nicholas How
|
020 3100 2000
|
Notes to financials:
1 stated before non-underlying items of £13.5m (2023: £5.4m)
representing the amortisation of acquired intangible assets of
£5.4m (2023: £3.4m), asset impairment charges of £4.5m (2023: £nil)
and a legacy employment tax charge of £4.4m (2023: £nil), offset by
a net acquisition-related credit of £0.8m (2023: charge of £2.0m).
Non-underlying items have been separately identified by virtue of
their magnitude or nature to enable a full understanding of the
Group's financial performance and to make year-on-year comparisons.
They are excluded by management for planning, budgeting and
reporting purposes and for the internal assessment of operating
performance across the Group and are normally excluded by
investors, analysts and brokers when making investment and other
decisions (see note 3).
2 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 (see note
7).
3 except as otherwise stated '2023' and '2024' refers to the
52-week period ended 25 March 2023 and the 53-week period ended 30
March 2024 and '2025' refers to the 52-week period ending 29 March
2025. The Group's accounts are made up to an appropriate weekend
date around 31 March each year.
4 a reconciliation of the Group's underlying results to its
statutory results is provided in the Alternative Performance
Measures ('APMs') section (see note 9).
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 seven sites, c.1,900 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).
INTRODUCTION
The Group has had another
successful year in 2024. We have reported underlying1
profits of more than £36m, delivered strong operating cash
generation, made further strategic progress in Europe on the back
of the Voortman ('VSCH') acquisition, and have secured a
significant amount of new work across all areas of the business.
This strong performance is reflected in our high-quality order
books of £478m in the UK and Europe and £181m in India, providing
us with good earnings visibility for the remainder of the 2025
financial year and beyond.
The Group delivered further
underlying profit growth in 2024 against a backdrop of some
challenging market conditions, particularly in the UK. The
combination of our significant market sector, geographical and
client diversification, the strength of our operations and
management teams, our expert capabilities in engineering and
construction and our strong financial position, underpin the
performance and resilience of the Group. In 2024, we increased our
underlying profit before tax by 13 per cent to £36.5m (2023:
£32.5m), a result which includes the acquisition of VSCH which is
providing us with greater access to growing European market sectors
and strengthening our market position in Europe. VSCH, which has
recently been combined with our existing European business, is
integrating well into the Group's operations and has now adopted
the Severfield brand, increasing our visual identity in
Europe.
We have maintained a strong
financial position throughout the year, enabling us to continue to
support ongoing investment in the business, grow the dividend again
and provide us with the platform to launch a share buyback
programme to further increase returns to our shareholders. The
Group continues to be highly cash generative, with operating cash
conversion4 in the year of 110 per cent (2023: 145 per
cent). This resulted in net debt (on a
pre-IFRS-16 basis2) at the
year-end of £9.4m (2023: net funds of £2.7m), including the
outstanding VSCH acquisition loan of £15.2m (2023: £nil). Our
strong balance sheet and consistent cash generation provides the
Group with the flexibility to continue to invest in both organic
and inorganic growth opportunities.
In 2024, our Indian joint venture
('JSSL') recorded output of more than 100,000 tonnes, including
sub-contracted work, for the second year running. This high level
of activity, an improved mix of work and good contract execution is
evident in the Group's higher after-tax share of profit of £1.9m
(2023: £1.3m), which reflects a record EBITDA of £13.2m. With the
land in Gujarat now acquired, we expect to start work on a new
manufacturing facility in the second half of the year, leaving the
business well positioned to take advantage of a very encouraging
outlook in India. We remain very positive about the long-term
trajectory of the market and of the value creation potential of
JSSL.
The board considers the dividend
to be a significant component of shareholder returns and we have
either increased or maintained dividends every year since the
dividend was reintroduced in 2015. Based on the Group's continued
progress, our strong cash position and confidence in the future
prospects of the business, the board is once again recommending an
increase in the final dividend to 2.3p per share, resulting in a
total dividend for the year of 3.7p per share (2023: 3.4p per
share), an increase of 9 per cent on the prior year.
STRATEGY
The Group's well-established
strategy is unchanged, focused on growth and diversification (both
organic and through selective acquisitions), operational
improvements and building further value in JSSL which, in
combination, will deliver strong EPS growth. Our clear focus on
balance sheet strength and cash generation enables us to continue
making the right decisions for the long-term, to maximise our
competitive advantage and to best position us in our chosen markets
for continued sustainable, long-term growth.
The Group delivers steel
superstructures through its Core
Construction Operations, separated operationally into a
Commercial and Industrial
division (bringing together the Group's strong capabilities in the
industrial and distribution, commercial offices, stadia and
leisure, data centres, retail, and health and education market
sectors), which now includes VSCH, and a Nuclear and Infrastructure division
(encompassing the Group's market-leading positions in the nuclear,
power and energy, transport (road and rail) and process industries
sectors). The Group's Modular
Solutions division consists of the growing product ranges of
Severfield Modular Solutions ('SMS') (previously Severfield
(Products and Processing)) and of Construction Metal Forming
('CMF'), our specialist cold rolled steel joint venture
business.
OUTLOOK
The Group is performing well and
our businesses are well-positioned to win work in markets with
positive long-term growth trends, providing us with a strong
platform to fulfil our strategic growth aspirations. Whilst there
remains some uncertainty in the wider economy, we are seeing an
improvement in market conditions. All this, together with our
high-quality order books, diversified activities and operational
delivery capabilities, mean that we are well-placed for the future
and on track to deliver a result for 2025
which is in line with our expectations.
RESULTS OVERVIEW
2024 (£m)
|
Revenue
|
UOP*
|
UPBT*
|
Core Construction
Operations
|
449.2
|
37.4
|
37.4
|
Modular Solutions
|
21.5
|
0.3
|
0.3
|
India
|
-
|
-
|
1.9
|
Central items /
eliminations
|
(7.2)
|
-
|
(3.1)
|
Group
|
463.5
|
37.7
|
36.5
|
Underlying operating margin
|
-
|
8.1%
|
-
|
2023 (£m)
|
Revenue
|
UOP*
|
UPBT*
|
Core Construction
Operations
|
476.8
|
33.7
|
33.7
|
Modular Solutions
|
22.8
|
(0.6)
|
(0.1)
|
India
|
-
|
-
|
1.3
|
Central items /
eliminations
|
(7.8)
|
-
|
(2.4)
|
Group
|
491.8
|
33.1
|
32.5
|
Underlying operating margin
|
-
|
6.7%
|
-
|
*The references to underlying
operating profit (before JVs and associates) and underlying profit
before tax are set out on page 2. A reconciliation of the Group's
underlying results to its statutory results is provided in the
Alternative Performance Measures ('APMs') section (see note
9).
Revenue of £463.5m (2023: £491.8m)
represents a decrease of £28.3m (6 per cent) compared to the prior
year. This reflects a decrease in revenue from our Core
Construction Operations, mainly representing a reduction in steel
prices and lower production activity, offset by new revenue from
VSCH, in the first year of its acquisition.
Underlying operating profit
(before JVs and associates) of £37.7m (2023: £33.1m) represents an
increase of £4.6m (14 per cent) over the prior year. This reflects
an increase in profit from our Core Construction Operations of
£3.7m, which includes new profit from VSCH and continued contract
execution improvements which have helped offset the impact of lower
revenue in the year. The higher profits also include improved
profitability of £0.9m from SMS, within Modular Solutions,
reflecting the first time that this business has reported a profit
for the full year. Statutory operating profit was £26.4m (2023:
£30.2m), which includes non-underlying items of £13.5m (2023:
£5.4m) representing the amortisation of acquired intangible assets,
asset impairment charges and a legacy employment tax charge offset
by a net acquisition-related credit.
The share of profit from the
Indian joint venture in the year was £1.9m (2023: £1.3m),
reflecting an improved work mix and good contract execution. Within
Modular Solutions, CMF contributed a share of profit of £0.1m
(2023: £0.5m), the reduction in profitability reflecting the softer
market conditions in the distribution sector during the year and
some under-recovery of overheads as the business ramps up its
recently expanded production operations in Wales.
The Group's underlying profit
before tax was £36.5m (2023: £32.5m), an increase of 13 per cent
compared to the previous year. The statutory profit before tax was
£23.0m (2023: £27.1m).
OPERATIONAL REVIEW
UK AND EUROPE
The Group's established approach
to strong risk management, commercial discipline and careful
contract selection has been particularly important to enable the
business to navigate the challenges of the last financial year.
These included softer market conditions in the distribution and
infrastructure sectors, and the cancellation of the Sunset Studios
project. This approach is reflected in our high-quality UK and
Europe order book of £478m at 1 June (1 November: £482m), of which
£384m is for delivery over the next 12 months, providing us with
good earnings visibility for the remainder of the 2025 financial
year and beyond. The order book remains well-diversified and
contains a good mix of projects across the Group's key market
sectors. The composition of the order book reflects the continued
strengthening of our market position in Europe, supported by the
acquisition of VSCH, which has recently been combined with our
existing European business. 32 per cent of the order book now
represents projects in continental Europe and Ireland (1 November
2023: 13 per cent).
In the second half of the year, we
have continued to secure a significant value of new work (c.£280m).
We are also continuing to see good project opportunities in the UK,
as well as in Ireland and continental Europe, where we are making
good progress with our European growth strategy. In the
distribution and infrastructure sectors, we are seeing an increase
in tendering activity although pricing in these sectors remains
competitive for some projects.
Looking further ahead, many of our
chosen markets continue to have a favourable outlook - the Group
has a prominent position in market sectors with strong growth
potential and is well-positioned to win projects in support of a
low-carbon economy and to deliver energy security. These include
opportunities in both Commercial and Industrial and Nuclear and
Infrastructure, such as battery plants, energy efficient buildings,
manufacturing facilities for renewable energy and offshore wind
projects together with work in the transport, nuclear and power and
energy sectors given our capability to deliver major infrastructure
projects.
Project
Horizon
Last year, the Group launched
Project Horizon, our digital transformation project. The overall
project is a long-term initiative that we believe will shape our
future as we enhance our systems and leverage digital solutions to
ensure we remain at the forefront of technology and innovation as
market leaders in the industry. The objective is to maximise the
automation of our estimating, design, production, and contract
delivery processes to improve client service and deliver efficiency
and capacity benefits. Workflows comprise over 100 short, medium,
and long-term individual projects and initiatives designed to
modernise and further standardise processes and systems across the
Group.
As part of Project Horizon, we
continue to make good progress with drawing and design automation
which includes automated connection design and planning tools.
Other projects either being worked on or completed in the last year
include an automated quality assurance reporting system which
improves tracking and client reporting, new systems for purchase
order approvals, the use of barcoding for steel to improve
traceability, the integration of pricing, design and production
databases to drive production and planning processes, construction
site asset and construction resource tracking tools, together with
ongoing work on artificial intelligence to improve administrative
processing times.
To date, based on the original
plan, we have successfully completed 22 projects, and a further 22
of the 54 projects that we have classified as short to medium term
are currently on-going. Three additional projects have been added
to the plan, increasing the number of short to medium term projects
to 57. Our dedicated project team is currently self-funded through
annual savings, with further benefits being tracked as more of the
identified projects and initiatives are implemented.
Clients
We continue to invest to meet the
needs of our clients, building our capabilities, developing new
technologies and driving efficiency across our production
facilities, to ensure our growth ambitions are fully supported. We
remain focused on measures that matter most to our clients,
providing value added results whilst balancing time and cost
objectives, with an emphasis on building strong and long-standing
client partnerships.
Our unique capability to deliver
complex design and engineering solutions, our capacity and speed of
fabrication and our management of the integrated construction
process is vital for our clients and a key differentiator for the
Group. This is fundamental to our success and has been critical to
securing new work, developing our client base and growing our
revenues over recent years. This year we have delivered challenging
programmes for clients, reduced costs and minimised waste through
both our pre-tender value engineering and also post-award
engineering solutions and developed innovative building solutions
for reuseable temporary works and pre-assembled sections to work in
live operating environments. In addition, when market pressures
stretched existing budgets or caused delays, or when we were asked
to accelerate existing construction programmes, our operational
delivery capabilities allowed us to help clients deliver changes to
these programmes quickly and efficiently, to provide them with
problem-solving solutions and to ensure that programme milestones
were achieved.
Core Construction
Operations
£m
|
2024
|
2023
|
Change
|
Revenue
|
449.2
|
476.8
|
-6%
|
Underlying operating profit
(before JVs and associates)
|
37.4
|
33.7
|
+11%
|
Underlying profit before
tax
|
37.4
|
33.7
|
+11%
|
|
|
|
|
Revenue:
|
|
|
|
Commercial and
Industrial
|
361.8
|
382.1
|
-5%
|
Nuclear and
Infrastructure
|
87.4
|
94.7
|
-8%
|
Revenue of £449.2m (2023: £476.8m)
represents a decrease of £27.6m (6 per cent) compared to the prior
year. This reflects a reduction in steel prices and lower activity
levels of £87.1m offset by revenue from VSCH of £59.5m. Underlying
operating profit of £37.4m was up 11 per cent on the prior year
(2023: £33.7m), which mainly represents profit from VSCH. Excluding
VSCH, underlying profitability has remained broadly unchanged from
the prior year as continued contract execution improvements have
helped offset the impact of lower revenue in the year.
Commercial and Industrial
Revenue has decreased by 5 per
cent to £361.8m (2023: £382.1m), predominantly due to the impact of
the cancellation of the Sunset Studios project and softer market
conditions in the distribution sector, which affected the number of
projects coming to market during the year. This was partly offset
by revenue from VSCH. The removal of Sunset Studios (c.£50m) from
the order book was the result of a client-driven decision to pause
construction on this planned new contract in July 2023.
During the year, work progressed
on the new stadium for Everton F.C., the Envision Battery Plant in
Sunderland, a manufacturing facility for BAE in Scotland, the LHR
11 data centre, a commercial office at 81 Newgate and the Excel
Arena, all in London. We also continued our work on the SeAH Wind
monopile manufacturing facility, which forms part of the UK's
fast-growing alternative energy sector, a focus of the latest
Government Energy Strategy. The 800-metre-long building at the
Teesworks site will be the world's largest monopile facility when
complete and is the first of its kind in the UK, with annual
production of up to 200 monopiles, which form the foundations of
offshore wind turbines.
The Commercial and Industrial
order book at 1 June of £312m (1 November: £326m) includes a
significant amount of new work which we have secured over recent
months, particularly in Europe. This includes a package of data
centres in Sweden, two new data centres for Google in Belgium and
the Netherlands, a petrochemical project for Ineos in Belgium, and
a logistics project for DHL in Lyon. In the UK, project wins
included two commercial offices, including the Edge Building at
London Bridge, which is set to be London's most sustainable office
tower, and several distribution centres, reflecting a market which
is showing signs of recovery. We have also successfully secured
additional work at SeAH Wind and at Envision. Almost all of our
work continues to be derived through either negotiated, framework
or two-stage bidding procurement processes, in line with our
established approach to strong risk management, commercial
discipline and careful contract selection.
We continue to see some large
opportunities including projects in markets which are driving the
green energy transition such as energy efficient buildings,
manufacturing facilities for renewable energy and offshore wind
projects, together with stadia and leisure projects, TV and film
studios and commercial offices in London and the regions. We are
also seeing opportunities for new battery gigafactories to support
domestic zero carbon vehicle production in the UK and EU, including
the new Jaguar Land Rover facility in Somerset, the Northvolt
facility in Sweden and a further gigafactory in Sunderland for
Nissan.
Demand for data centres in the UK
and EU is also expected to continue, fuelled by cloud computing, 5G
and the recent advancement of Artificial Intelligence ('AI')
applications which are driving even greater dependence on data
centre infrastructure. The Group's manufacturing scale, speed of
construction and on-time delivery capabilities, leaves us
well-positioned to win work from such projects, the majority of
which are likely to be designed in steel.
Strategic targets: we are
targeting future revenue growth in line with GDP, enhanced by the
acquisition of VSCH, with margins of 8-10 per cent (6-8 per cent
based on recent high steel prices).
Nuclear and Infrastructure
Revenue has decreased by 8 per
cent to £87.4m (2023: £94.7m) This reflects some softer market
conditions in the infrastructure business during the year offset by
the normal revenue timing differences inherent within our nuclear
operations. During the period, we continued to work on several HS2
bridge packages for the Balfour Beatty Vinci ('BBV') and Effage
Kier ('EKFB') consortia, road and rail bridges and some large
propping packages for Silvertown Tunnel and at Old Oak Common for
HS2. From a nuclear perspective, ongoing contracts include work at
Hinkley Point and some large projects at Sellafield and in
Berkshire for AWE.
The N&I order book at 1 June
was £160m (1 November: £152m) of which 54 per cent represents
transport infrastructure (1 November: 54 per cent) and 42 per cent
represents nuclear projects (1 November: 41 per cent). Notable
recent awards include the Black Cat to Caxton Gibbet road
improvement scheme for National Highways, some bridge projects for
the York Central infrastructure scheme, secondary steelwork
packages at Hinkley Point and a growing scope of work at Sellafield
where we are one of two 'key delivery partners' to deliver
structural steelwork with an estimated value of c.£250m as part of
the long-term Programme and Project Partners ('PPP')
framework.
The markets in which we operate
are showing signs of continued growth backed by government
supported spending that prioritises modern and reliable
infrastructure to support economic growth and help tackle climate
change. In the UK, with an election announced for 4 July, the
requirement for clean and domestically generated energy and
improved transport infrastructure is a stated priority for both the
Conservative party and the Labour party. Investment in transport
and energy are both key components of the green energy transition
and of the government's £775 billion National Infrastructure and
Construction Pipeline, published in February 2024. The Group is
well-placed to meet this demand for ongoing state-backed
investment, which includes a significant increase in the volume of
power transmission and distribution projects being brought to
market, with an acceleration of work to strengthen and stabilise
the power networks, together with areas such as offshore wind,
carbon capture, nuclear (including small modular reactors and
Sizewell C) and hydrogen production. We remain well-positioned to
win work from these structural opportunities given our in-house
expertise and unmatched scale and capability to deliver major
infrastructure projects, together with the high barriers to entry
for competitors.
In the UK transport sector, the
government's decision to cancel the northern section of HS2
connecting Birmingham and Manchester has not impacted our order
book nor our outlook for the business, and we continue to make good
progress with several HS2 station opportunities in the pipeline
including at Old Oak Common and Birmingham Interchange. We also
welcome the UK Government's reaffirmed commitment to HS2 at Euston
and to deliver Northern Powerhouse rail, all of which is likely to
have a significant steelwork content. Aligned to the cancellation
of the northern section of HS2, the government recently announced
Network North, a £36 billion plan to improve roads, buses and
railways in the north of England, which could also introduce new
opportunities for the Group.
Strategic targets: our medium-term
target is to grow revenues to over £125m, representing a doubling
of 2022 revenues, with margins of 8-10 per cent (6-8 per cent based
on recent high steel prices).
Modular
Solutions
£m
|
2024
|
2023
|
Change
|
Revenue
|
21.5
|
22.8
|
-6%
|
Underlying operating profit
(before JVs and associates)
|
0.3
|
(0.6)
|
+0.9
|
Share of results of
CMF*
|
0.1
|
0.5
|
-0.4
|
Underlying profit before
tax
|
0.3
|
(0.1)
|
+0.4
|
*In 2024, CMF reported revenue of
£29.1m (2023: £40.6m) and a profit before tax of £0.2m (2023:
£1.0m).
Modular Solutions consists of the
growing modular product ranges of SMS and CMF. With CMF, we
continue to be the only hot rolled steel fabricator in the UK to
have a cold rolled manufacturing capability. The division has been
awarded 'Fit for Nuclear' and certain Network Rail accreditations
which, together with an expanding client base and our previous
record in modular construction, we believe will help us to achieve
our future organic growth aspirations. The division consists of
three main business areas:
§ Severstor - specialist equipment housings for critical
electrical equipment and switchgear,
§ Supply chain (steel components for modular homes and
buildings) - raw material fabrication and modular systems including
steel cassettes and framing, and
§ Bulk handling solutions - a high performance silo discharge
system for the bulk handling of materials such as paints and other
dispersible solids (of which Rotoflo is the premium
product).
Although revenue of £21.5m (2023:
£22.8m) represents a slight decrease compared to the prior year,
for the first time, Modular Solutions has reported an underlying
operating profit for the full year (2023: loss of £0.6m),
reflecting an improved mix of higher-margin Severstor products.
Divisional underlying PBT of £0.3m (2023: loss of £0.1m) also
includes the post-tax share of profit of CMF of £0.1m (2023:
£0.5m). The reduction in profitability at CMF reflected the softer
market conditions in the distribution sector, and some
under-recovery of overheads as the business continues the ramp up
of its recently expanded production operations in Wales.
We have continued to make
significant progress in growing our Severstor revenues and client
base, including in the power, rail and oil and gas sectors. This is
reflected in the expansion of our pipeline of opportunities within
growth markets including renewables and data centres, aided by new
product development including the development of steel framing
solutions for modular building manufacturers.
CMF's growing product range
includes load bearing frame and deck profiles, purlins and side
rail systems, mezzanine floors and bespoke modular solutions
supported by the recent expansion which has increased its cold
rolled manufacturing capacity from c.10,000 tonnes to c.30,000
tonnes. During the year, CMF has continued to invest in new product
development, its salesforce, and in new factory machinery to grow
its client base and to expand into new segments including nuclear
and transport infrastructure. As the modular market matures,
clients are seeking greater scale, reliability and quality in the
supply chain, all of which we can offer, to ensure that we continue
to increase our share of a growing market.
For bulk handling solutions, we
have an established foothold in the UK water treatment sector and
in the expanding Indian paint manufacturing sector. We continue to
introduce new products and services as we target growth in the food
processing, water treatment and paint sectors in the UK, India and
through our network of agents in the USA.
Strategic targets: our medium-term
target is to grow combined SPP and CMF revenues to between £75m and
£100m, with margins of greater than 10 per cent. In 2024, the
Modular Solutions division delivered total revenue of £50.6m (SMS:
£21.5m and CMF: £29.1m).
INDIA
£m
|
2024
|
2023
|
Change
|
Revenue
|
130.8
|
137.7
|
-5%
|
EBITDA
|
13.2
|
11.5
|
+15%
|
Operating profit
|
10.5
|
8.9
|
+18%
|
Operating margin
|
8.0%
|
6.5%
|
+150
bps
|
Finance expense
|
(5.5)
|
(5.5)
|
-
|
Profit before tax
|
5.0
|
3.4
|
+47%
|
Tax
|
(1.2)
|
(0.8)
|
-£0.4m
|
Profit after tax
|
3.8
|
2.6
|
+46%
|
Group share of profit after tax
(50%)
|
1.9
|
1.3
|
+46%
|
In 2024, JSSL recorded an output
of more than 100,000 tonnes, including sub-contracted work, for the
second year running. JSSL has also delivered another step up in
profitability in 2024 which is evident in a record EBITDA of £13.2m
(2023: £11.5m) and the Group's after-tax share of profit of £1.9m
(2023: £1.3m), an increase of 46 per cent over the prior year. This
performance mainly reflects an improved mix of work and good
contract execution resulting in an operating margin of 8.0 per cent
(2023: 6.5 per cent). Financing expenses of £5.5m (2023: £5.5m) are
unchanged from the previous year, as a result of a continued high
level of borrowings, partly driven by the impact of inflation on
working capital, and in the cost of letters of credit which are
linked to higher steel prices. These financing costs result in
JSSL's operating profit of £10.5m (2023: £8.9m) reducing to a
profit before tax of £5.0m (2023: £3.4m).
India's construction sector, and
the use of steel within construction, continues to grow rapidly,
driven by factors such as an increasing population, urbanisation,
and a growing economy. The government is also investing heavily in
infrastructure development, which is further driving demand for
construction services. This position is evident in a record order
book at 1 June of £181m (1 November: £165m), which now contains a
mix of higher margin commercial work of 71 per cent (1 November: 64
per cent), including a large commercial project in Delhi. The
expanding market picture is also reflected in an improving pipeline
of potential orders and in numerous identified growth opportunities
in target markets, including commercial real estate, data centres,
warehouses, infrastructure and in manufacturing sectors such as
steel, cement and speciality chemicals. As part of its growth
strategy, JSSL is also targeting new sectors and geographies
including potential opportunities in near markets such as Saudi
Arabia, building on JSSL's brand and reputation for delivering
high-quality steel solutions.
In 2024, JSSL acquired a plot of
land in Gujarat, in the west of India, to develop a new
manufacturing facility and to expand the geographical footprint of
the business. Initial work on this expansion is expected to
commence in the second half of the year and capacity will be added
incrementally to support the expected future market growth. JSSL is
also strengthening its sales and estimating teams, bringing people
with new skills into the business and enhancing its supply chain
partnerships to support this expansion and to provide the business
with the springboard to deliver future profitable
growth.
In summary, momentum is building
in JSSL and with the land in Gujarat now acquired, the business is
well positioned to take advantage of a very encouraging outlook in
India and a strong underlying demand for structural steel in
construction. We remain very positive about the long-term
trajectory of the market and of the value creation potential of
JSSL.
ESG
ESG remains an important part of
our strategic decision making. As a result of decisions made in
recent years, the Group remains in a prominent market position in
the high-growth markets of the future and is well-positioned to
assist in accelerating the journey to Net Zero in its core sectors.
To ensure we continue to support the most relevant ESG issues, the
Group undergoes periodic materiality assessments and the outcomes
of its 2024 assessment reaffirmed the issues that we had previously
identified as important to our stakeholders - health and safety,
the life cycle of our products, climate change and carbon
emissions, talent management, sustainability governance and waste
management.
Safety
The Group's top priority remains
the health, safety and wellbeing of all our stakeholders. Our
safety statistics continue to be industry-leading whilst we remain
focused on continually improving our SHE culture including through
the ongoing roll out of our Safer@Severfield behavioural safety
programme.
In 2024, we have seen a further
reduction in our injury rates, resulting in an injury frequency
rate ('IFR') of 1.23, compared to 1.61 in 2023, and an accident
frequency rate ('AFR'), which is based solely on the level of
RIDDORS (reportable accidents), of 0.12, compared to 0.14 in 2023.
Notwithstanding this, we continue to evaluate new solutions,
including the use of technology, to further improve our safety
performance, and are in the process of adopting positive leading
indicators to drive preventative behaviours in our
workforce.
Sustainability
In 2024, the Group was awarded
'AAA' under MSCI's ESG ratings for a third consecutive year and
achieved an 'A' score for leadership on climate change mitigation
from CDP. We have again achieved a CDP score for supply chain
engagement of 'A-' as well as our 'very good' BES 6001 responsible
sourcing accreditation, highlighting our continued supply chain
engagement to promote sustainability. Other
highlights in 2024 include:
§ Being third party verified and accredited as carbon neutral
for the fourth year running for scope 1, 2 and operational scope 3
GHG emissions for our manufacturing, office and construction
operations.
§ Received validation from the SBTi (Science Based Targets
initiative) of our Net Zero targets, one of the few companies in
the UK construction and engineering sector to have achieved this
validation.
§ Being included in the Financial Times (FT) listing of
Europe's climate leaders for the fourth year running which
showcases corporate progress in fighting climate change.
§ Procuring 100 per cent of our energy from renewable sources at
all UK owned facilities.
We have continued to maintain our
focus on social value, including adopting defined social value
objectives for the Group, and having established our baseline, we
continue to monitor how much value we deliver annually in line with
the National TOMs methodology framework. During the year, social
value was delivered by a wide range of activities including
supporting local supply chain partners, fundraising and
volunteering schemes, through paying our colleagues at or above the
real living wage and 'earning and learning' through our gold
membership of 'The 5% Club', including increasing our intake of
annual apprentices.
As a SteelZero signatory, we have
committed to procure 100 per cent low carbon steel by 2050, with
interim carbon reduction targets in place for 2030. We continue to
work with the Climate Group and other SteelZero members as the
industry continues its transition to low carbon steel production
and, in 2024, we have started to disclose our progress against
certain low carbon steel procurement targets to the Climate
Group.
Culture and
values
We have recently launched 'The
Severfield Way', a framework designed to harness the skills and
expertise of our people and promote the positive culture and ways
of working that everyone at Severfield strives for. The framework
is made up of our new company values and behaviours, as well as our
long standing purpose - creating better ways to build, for a world
of changing demands. Our four new core values - we set the bar
high, we are in it together, we find better ways and we do the
right thing - are the fundamental beliefs that underpin everything
we do and will serve the business well as we continue to implement
our successful growth strategy.
BOARD CHANGES
In April 2024, the Group announced
the appointment of Charlie Cornish as non-executive Chair and
director of the Company. Charlie will take over as Chair after the
AGM on 30 July 2024 when Kevin Whiteman steps down from the board,
having reached the end of his tenure. Charlie is currently
non-executive Chair of Manchester Airports Group ('MAG'), Core
Highways Group and Ipsum Group and was previously CEO of MAG for 13
years. He also previously served on the board of United Utilities
Group plc for 7 years. He has substantial experience of developing
strategy and leading large complex businesses across a number of
relevant sectors, all of which will be highly
beneficial to the Group as it continues to grow and develop.
During the year there were several other changes to the board. Tony
Osbaldiston retired, having completed his nine year tenure, and the
Group also saw the departures of Rosie Toogood, who took up a
senior executive role at Wates, a major customer, and Ian Cochrane,
previously the Chief Operating Officer, who left to pursue other
interests.
FINANCIAL REVIEW
£m
|
2024
|
2023
|
Change
|
Revenue
|
463.5
|
491.8
|
-6%
|
Underlying* operating profit
(before JVs and associates)
|
37.7
|
33.1
|
+14%
|
Underlying* operating margin
(before JVs and associates)
|
8.1%
|
6.7%
|
+140
bps
|
Underlying* profit before
tax
|
36.5
|
32.5
|
+13%
|
Underlying* basic earnings per
share
|
8.9p
|
8.5p
|
+5%
|
Operating profit
|
26.4
|
30.2
|
-13%
|
Operating margin
|
5.7%
|
6.1%
|
-40
bps
|
Profit before tax
|
23.0
|
27.1
|
-15%
|
Basic earnings per
share
|
5.2p
|
7.0p
|
-26%
|
Underlying return on capital
employed ('ROCE')
|
17.5%
|
15.8%
|
+170
bps
|
* The
basis for stating results on an underlying basis is set out on page
2. A reconciliation of the Group's
underlying results to its statutory results is provided in the
Alternative Performance Measures ('APMs') section (see note
9).
Revenue of £463.5m (2023: £491.8m)
was 6 per cent lower than the prior year, as a result of a
reduction in steel prices and lower production activity, offset by
new revenue from VSCH, in the first year of its acquisition.
Underlying operating profit (before JVs and associates) of £37.7m
was 14 per cent higher than the prior year, mainly due to new
profit from VSCH, continued contract execution improvements which
have helped offset the impact of lower revenue in the year, and
higher profit from SMS, within Modular Solutions. Statutory
operating profit, which includes non-underlying items, was £26.4m
(2023: £30.2m).
Underlying profit before tax,
which is management's primary measure of Group profitability, was
£36.5m (2023: £32.5m), 13 per cent higher than the prior year. The
statutory profit before tax was £23.0m (2023: £27.1m). The
underlying tax charge for the year was £9.1m (2023: £6.2m). which
represents an effective tax rate of 26.2 per cent (2023: 20.4 per
cent). This broadly equates to the statutory rate in the UK and the
Netherlands of between 25 and 26 per cent (2023: statutory rate in
the UK of 19 per cent). The total tax charge of £7.1m (2023: £5.5m)
includes a non-underlying tax credit of £2.0m (2023:
£0.7m).
Underlying basic earnings per
share increased by 5 per cent to 8.9p (2023: 8.5p) based on the
weighted average number of shares in issue of 307.1m (2023:
309.5m). Basic earnings per share was 5.2p (2023: 7.0p), reflecting
the higher underlying profit after tax offset by an increase in
non-underlying items. Diluted earnings per share, which includes
the effect of the performance share plan, was 5.1p (2023:
6.9p).
Non-underlying
items
Non-underlying items for the year
of £13.5m (2023: £5.4m) consisted of the following:
£m
|
2024
|
2023
|
Amortisation of acquired
intangible assets
|
5.4
|
3.4
|
Asset impairment
charges
|
4.5
|
-
|
Legacy employment tax
charge
|
4.4
|
-
|
Acquisition-related credits /
charges
|
(0.8)
|
2.0
|
Non-underlying items
|
13.5
|
5.4
|
The asset impairment charges
relate to our leasehold facility at Sherburn, currently being
operated by SMS. During the year, we were advised of the landlord's
intention to terminate the factory lease. As a result, an
impairment review of property, plant and equipment was performed,
resulting in a non-cash charge of £4.5m. Given our growth
aspirations for SMS, and the Modular Solutions division as a whole,
we have factored this development into our wider footprint review
which was already underway prior to the decision to terminate the
lease, and we expect to relocate to a new facility in the 2026
financial year.
The legacy employment tax charge
relates to an assessment raised by HMRC for historical income tax
and national insurance ('NIC') liabilities which are disputed by
the Group. In common with many other construction companies, the
Group pays its site-based colleagues an income tax and NIC free
allowance to cover the costs of accommodation and subsistence that
they incur whilst working away from home on construction sites.
HMRC is asserting that, as a result of some procedural matters,
largely associated with a change in tax legislation in 2016,
certain of these payments are subject to income tax and NIC. The
Group disagrees with the assessment raised and discussions are
ongoing with HMRC to bring this matter to a conclusion.
Notwithstanding this, since HMRC has issued formal determinations
for the amounts it considers are due, a charge of £4.4m has been
recognised, including interest of £0.4m.
The amortisation of acquired
intangible assets of £5.4m represents the non-cash amortisation of
customer relationships, order books and brand names. These assets
are being amortised over a period of 12 months to five years.
Acquisition-related credits of £0.8m represent the unwinding of the
discount on and movements in the contingent consideration for DAM
Structures which is payable over a five-year period. In the prior
year, acquisition-related charges of £2.0m included acquisition and
similar transaction costs associated with the VSCH
acquisition.
Cash flow and
financing
£m
|
2024
|
2023
|
Operating cash flow (before
working capital movements)
|
41.4
|
40.1
|
Cash generated from / (used in)
operations
|
52.4
|
53.8
|
Capital expenditure
|
(11.3)
|
(6.5)
|
Operating cash
conversion
|
110%
|
145%
|
Net cash balances
|
10.4
|
11.3
|
Net (debt) / funds (pre-IFRS-16
basis)**
|
(9.4)
|
2.7
|
Net (debt) / funds
|
(28.4)
|
(10.7)
|
** 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. A
reconciliation of the Group's underlying results to its statutory
results is provided in the APMs section (see note 9).
The Group's business model
generates surplus cash flows and we have always placed a high
priority on cash generation and working capital management.
Net debt (pre-IFRS 16 basis) at the year-end was
£9.4m (2023: net funds of £2.7m). This included net cash of £10.4m
(2023: £11.3m) and term loans of £20.0m (2023: £8.9m) which
included the outstanding acquisition loan for VSCH of £15.2m (2023:
£nil).
Operating cash flow before working
capital movements was £41.4m (2023: £40.1m). Net working capital
has improved by £11.0m during the year.
Excluding advance payments, year-end working capital represented
approximately 4 per cent of revenue (2023: 5 per cent), which is
within our normal range of 4 to 6 per cent. Capital expenditure of
£11.3m (2023: £6.5m) represents the continuation of the Group's
capital investment programme (and compares to depreciation in the
year of £9.2m (2023: £7.2m), of which £2.7m (2023: £1.8m) relates
to right-of-use assets under IFRS 16). This predominantly consisted
of new and upgraded equipment for our fabrication lines, an
extension of the Dalton factory and general infrastructure
improvements. Operating cash conversion (defined in the APMs
section - note 9) for 2024 was 110 per cent (2023: 145 per cent),
significantly above our KPI target of 85 per cent.
In April 2023, the Group completed
the acquisition of VSCH for a net cash consideration of €25.7m
(£22.6m), on a cash free basis. The total cash consideration was
€29.5m (£26.3m) including VSCH's cash and cash equivalents of €4.3m
(£3.8m), which was funded by a combination of Group cash reserves
of £3.6m and a term loan of £19.0m, repayable over a five-year
period. In addition, contingent consideration of £1.2m was paid in
relation to the acquisition of DAM Structures, taking the total
contingent consideration paid to date to £2.7m. The maximum
contingent consideration is £8.0m, payable if certain work-winning
targets in the railway and steel piling sectors are achieved over a
five-year period, ending in April 2026.
The Group has a £60m revolving
credit facility ('RCF') with HSBC Bank and Virgin Money, which
matures in December 2026. This provides the Group with long-term
financing to help support its growth strategy. The RCF is subject
to three financial covenants, namely interest cover, net debt to
EBITDA and debt service (cash flow) cover. In addition to the RCF,
which was undrawn at 30 March 2024, amortising term loans have been
used to fund previous acquisitions, of which £20m remained
outstanding at 30 March 2024.
Pensions
The Group's net defined benefit
pension liability at 30 March 2024 was £11.5m (scheme liabilities
of £34.0m offset by scheme assets of £22.5m), a decrease of £1.4m
from the 2023 liability of £12.9m. The deficit has reduced as a
result of a higher discount rate, reflecting a rise in bond yields,
and employer deficit contributions, offset by higher than expected
inflation. All other pension arrangements in the Group are of a
defined contribution nature.
Dividends and capital
allocation
Funding flexibility is maintained
to ensure there are sufficient cash resources to fund the Group's
requirements. In this context, the board has established the
following disciplined capital allocation policy:
§ To
support the Group's ongoing operational requirements, and to fund
profitable organic growth opportunities where these meet the
Group's investment criteria,
§ To
support steady growth in the core dividend as the Group's profits
increase,
§ To
finance strategic opportunities that meet the Group's investment
criteria, and
§ To
return excess cash to shareholders in the most appropriate way,
whilst maintaining a strong balance sheet position.
In line with the Group's
progressive dividend policy, the board is recommending an increased
final dividend of 2.3p per share (2023: 2.1p), payable on 11
October to shareholders on the register at the close of business on
6 September. This together with the interim dividend of 1.4p per
share (2023: 1.3p), will result in a total dividend of 3.7p per
share (2023: 3.4p). Looking ahead, as in previous years, the board
expects the interim dividend to be approximately one third of the
prior year's full dividend.
Consistent with the framework set
out above, in April 2024 the Group announced a share buyback
programme to repurchase up to £10m of ordinary shares, subject to
market conditions. The board is satisfied with the progress of this
buyback programme, with a total of 1,370,344 shares purchased and
cancelled during the post balance sheet period, at a cost of
£1.0m.
Return on capital
employed
The Group adopts underlying ROCE
as a KPI to help ensure that its strategy and associated investment
decisions recognise the underlying cost of capital of the business.
The Group's underlying ROCE is defined in the APMs section (see
note 9). For 2024, underlying ROCE was 17.5 per cent (2023: 15.8
per cent), which exceeds the Group's minimum threshold of 10 per
cent through the economic cycle.
Alan
Dunsmore
Adam Semple
Chief Executive
Officer
Chief Financial Officer
19 June 2024
Consolidated income statement
For the year ended 30 March 2024
|
2023
|
00
|
3
|
2022
|
|
|
|
Year ended 30 March
2024
|
Year
ended 25 March 2023
|
|
Underlying
2024
£000
|
Non-underlying
2024
£000
|
Total
2024
£000
|
Underlying
2023
£000
|
Non-underlying
2023
£000
|
Total
2023
£000
|
Revenue
|
463,465
|
-
|
463,465
|
491,753
|
-
|
491,753
|
Operating costs
|
(425,775)
|
(13,225)
|
(439,000)
|
(458,686)
|
(4,811)
|
(463,497)
|
Operating profit before share of results of JVs and
associates
|
37,690
|
(13,225)
|
24,465
|
33,067
|
(4,811)
|
28,256
|
Share of results of JVs and
associates
|
1,950
|
-
|
1,950
|
1,898
|
-
|
1,898
|
Operating profit
|
39,640
|
(13,225)
|
26,415
|
34,965
|
(4,811)
|
30,154
|
|
|
|
|
|
|
|
Net finance expense
|
(3,095)
|
(300)
|
(3,395)
|
(2,489)
|
(558)
|
(3,047)
|
Profit before
tax
|
36,545
|
(13,525)
|
23,020
|
32,476
|
(5,369)
|
27,107
|
|
|
|
|
|
|
|
Tax
|
(9,076)
|
1,957
|
(7,119)
|
(6,238)
|
697
|
(5,541)
|
Profit for the year attributable to the equity holders of the
parent
|
27,469
|
(11,568)
|
15,901
|
26,238
|
(4,672)
|
21,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
Basic
|
8.94p
|
(3.76)p
|
5.18p
|
8.48p
|
(1.51)p
|
6.97p
|
Diluted
|
8.85p
|
(3.72)p
|
5.13p
|
8.39p
|
(1.49)p
|
6.90p
|
Further details of 2024
non-underlying items are disclosed in note 3. A reconciliation of
the Group's underlying results to its statutory results is
disclosed in note 9.
Consolidated statement of comprehensive
income
For the year ended 30 March 2024
|
Year ended
30 March
2024
£000
|
Year
ended
25 March
2023
£000
|
Items that will not be reclassified to profit and
loss:
|
|
|
Actuarial loss on defined
benefit
pension scheme
|
(745)
|
(701)
|
Share of other comprehensive
income of JVs and associates accounted for using the equity
method
|
869
|
-
|
Tax relating to components that
will not be reclassified
|
186
|
175
|
|
310
|
(526)
|
Items that may be reclassified to profit and
loss:
|
|
|
Gains/(losses) taken to equity on
cash flow hedges
|
1,239
|
(1,147)
|
Reclassification adjustments on
cash flow hedges
|
(314)
|
243
|
Exchange difference on foreign
operations
|
(264)
|
(86)
|
Tax relating to components that
may be reclassified
|
(398)
|
153
|
|
263
|
(837)
|
Other comprehensive income for the year
|
573
|
(1,363)
|
Profit for the year from
continuing operations
|
15,901
|
21,566
|
Total comprehensive income for the
year attributable to equity holders of the
parent
|
16,474
|
20,203
|
Consolidated balance sheet
As at 30 March 2024
|
|
|
|
As at
30 March
2024
£000
|
As at
25
March
2023
£000
|
ASSETS
|
|
|
Non-current assets
|
|
|
Goodwill
|
98,469
|
82,188
|
Other
intangible assets
|
5,508
|
7,095
|
Property,
plant and equipment
|
96,434
|
92,067
|
Right-of-use assets
|
18,651
|
13,018
|
Interests
in JVs and associates
|
37,364
|
31,784
|
Deferred
tax assets
|
1,828
|
-
|
Contract
assets, trade and other receivables
|
1,050
|
2,245
|
|
259,304
|
228,397
|
Current assets
|
|
|
Inventories
|
11,648
|
13,231
|
Contract
assets, trade and other receivables
|
88,334
|
109,721
|
Derivative financial instruments
|
675
|
25
|
Current
tax assets
|
4,646
|
2,278
|
Cash and
cash equivalents
|
13,803
|
11,338
|
|
119,106
|
136,593
|
Total assets
|
378,410
|
364,990
|
|
|
|
LIABILITIES
|
|
|
Current liabilities
|
|
|
Bank
overdrafts
|
(3,409)
|
-
|
Trade and
other payables
|
(78,934)
|
(102,699)
|
Provisions
|
(11,819)
|
-
|
Financial
liabilities - borrowings
|
(6,200)
|
(4,150)
|
Financial
liabilities - leases
|
(2,931)
|
(2,172)
|
|
(103,293)
|
(109,021)
|
Non-current liabilities
|
|
|
Trade and other
payables
|
(1,095)
|
(2,377)
|
Retirement benefit obligations
|
(11,464)
|
(12,871)
|
Financial
liabilities - borrowings
|
(13,800)
|
(4,800)
|
Financial
liabilities - leases
|
(16,142)
|
(11,224)
|
Deferred
tax liabilities
|
(11,865)
|
(6,979)
|
|
(54,366)
|
(38,251)
|
Total liabilities
|
(157,659)
|
(147,272)
|
|
|
|
NET ASSETS
|
220,751
|
217,718
|
|
|
|
EQUITY
|
|
|
Share capital
|
7,739
|
7,739
|
Share premium
|
88,522
|
88,522
|
Other reserves
|
4,728
|
5,959
|
Retained earnings
|
119,762
|
115,498
|
TOTAL EQUITY
|
220,751
|
217,718
|
Consolidated statement of changes in equity
For the year ended 30 March 2024
|
|
|
|
|
|
|
Share
capital
£000
|
Share
premium
£000
|
Other
reserves
£000
|
Retained
earnings
£000
|
Total
equity
£000
|
|
|
|
|
|
|
At 26 March 2023
|
7,739
|
88,522
|
5,959
|
115,498
|
217,718
|
Total comprehensive income for the
year
|
-
|
-
|
1,530
|
14,944
|
16,474
|
Equity settled share-based
payments
|
-
|
-
|
(1,234)
|
3,007
|
1,773
|
Purchase of owned
shares
|
-
|
-
|
(4,500)
|
-
|
(4,500)
|
Allocation of owned
shares
|
-
|
-
|
2,973
|
(2,973)
|
-
|
Dividend paid
|
-
|
-
|
-
|
(10,714)
|
(10,714)
|
At 30 March 2024
|
7,739
|
88,522
|
4,728
|
119,762
|
220,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
£000
|
Share
premium
£000
|
Other
reserves
£000
|
Retained
earnings
£000
|
Total
equity
£000
|
|
|
|
|
|
|
At 27 March 2022
|
7,738
|
88,511
|
4,485
|
103,226
|
203,960
|
Total comprehensive income for the
year
|
-
|
-
|
(991)
|
21,194
|
20,203
|
Ordinary shares issued
*
|
1
|
11
|
-
|
-
|
12
|
Equity settled share-based
payments
|
-
|
-
|
2,465
|
955
|
3,420
|
Dividend paid
|
-
|
-
|
-
|
(9,877)
|
(9,877)
|
At 25 March 2023
|
7,739
|
88,522
|
5,959
|
115,498
|
217,718
|
|
|
|
|
|
|
* The
issue of shares represents shares allotted to satisfy the 2018,
2020 and 2021 Sharesave scheme.
Consolidated cash flow statement
For the year ended 30 March 2024
|
Year ended
30 March
2024
£000
|
Year
ended
25 March
2023
£000
|
Net cash flow from operating activities
|
45,136
|
50,292
|
|
|
|
Cash flows from investing activities
|
|
|
Proceeds on disposal of other
property, plant and equipment
|
408
|
317
|
Purchases of land and
buildings
|
(410)
|
(635)
|
Purchase of intangible
assets
|
-
|
(168)
|
Purchases of other property, plant
and equipment
|
(10,911)
|
(5,668)
|
Acquisition of subsidiary, net of
cash acquired
|
(22,551)
|
-
|
Investment in JVs and
associates
|
(2,801)
|
-
|
Payment of deferred and contingent
consideration
|
(1,183)
|
(8,534)
|
Net cash used in investing activities
|
(37,448)
|
(14,688)
|
|
|
|
Cash flows from financing activities
|
|
|
Interest paid
|
(3,220)
|
(2,495)
|
Dividends paid
|
(10,714)
|
(9,877)
|
Proceeds from shares
issued
|
-
|
12
|
Purchase of owned shares (net of
SAYE cash received)
|
(3,120)
|
-
|
Proceeds from borrowing
|
19,000
|
-
|
Repayment of borrowings
|
(7,950)
|
(5,900)
|
Repayment of obligations under
finance leases
|
(2,628)
|
(2,032)
|
Net cash used in financing activities
|
(8,632)
|
(20,292)
|
|
|
|
Net (decrease)/increase in cash and cash
equivalents
|
(944)
|
15,312
|
Cash and cash equivalents at
beginning of year
|
11,338
|
(3,974)
|
Cash and cash equivalents at end of year
|
10,394
|
11,338
|
|
|
|
1)
Basis of
preparation
The preliminary announcement has
been prepared on the basis of accounting policies as set out in the
statutory accounts for the year ended 30 March 2024. The
consolidated financial statements have been prepared on the
historical cost convention, except for the revaluation of financial
instruments. The financial statements are prepared in accordance
with UK-adopted International Accounting Standards and in
conformity with the Companies Act 2006.
The preliminary announcement is
made up to an appropriate Saturday around 31 March each year. For
2024, trading is shown for the 53-week period ended on 30 March
2024 (2023: 52-week period ended on 25 March 2023).
The financial statements of the
Group's joint venture, JSSL, are made up to the year ended 31 March
2024 (2023: year ended 31 March 2023).
The preliminary announcement does
not constitute the statutory financial statements of the Group
within the meaning of Section 434 of the Companies Act 2006. The
statutory financial statements for the year ended 30 March 2023
have been filed with the Registrar of Companies. The auditor has
reported on those financial statements and on the statutory
financial statements for the year ended 30 March 2024, which will
be filed with the Registrar of Companies following the annual
general meeting. Both the audit reports were unqualified, did not
draw attention to any emphasis of matter, without qualifying their
report, and did not contain any statements under Section 498(2) or
(3) of the Companies Act 2006.
The preliminary announcement has
been agreed with the Company's auditor for release.
2)
Segment
reporting
In line with the requirements of
IFRS 8, operating segments are identified on the basis of the
information that is regularly reported and reviewed by the chief
operating decision maker ('CODM'). The Group's CODM is deemed to be
the Executive Committee, who are primarily responsible for the
allocation of resources and the assessment of performance of the
segments. Consistent with previous periods, management continues to
identify multiple operating segments, primarily at an individual
statutory entity level, which are reported and reviewed by the
CODM. For the purpose of presentation under IFRS 8, the individual
operating segments meet the aggregation criteria that allows them
to be aggregated and presented as one reportable segment for the
Group. However, in the current year, management consider it
appropriate to disclose two operating segments as described
below.
§ Core Construction
Operations - comprising the
combined results of the Commercial and Industrial ('C&I') and
Nuclear and Infrastructure ('N&I') divisions, including the
results of Voortman Steel Construction Holding ('VSCH').
§ Modular
Solutions - comprising Severfield
Modular Solutions ('SMS') and the Group's share of profit (50 per
cent) from the joint venture company, Construction Metal Forming
Limited ('CMF').
The separate presentation of the
modular businesses, as 'Modular Solutions', aligns with the
maturity of the SMS business, which was established in 2018. In the
current year it has reduced the levels of intercompany fabrication
work as it grows external revenues from its core
products.
The constituent operating segments
that make up 'Core Construction Operations' have been aggregated
because the nature of the products across the businesses, whilst
serving different market sectors, are consistent in that they
relate to the design, fabrication and erection of steel products.
They have similar production processes and facilities, types of
customers, methods of distribution, regulatory environments and
economic characteristics. This is reinforced through the use of
shared production facilities across the Group.
The C&I and N&I divisions
presented in the operational review of the preliminary announcement
were established in April 2022 to provide better client service and
increased organisational clarity, both internally and externally.
These still meet the aggregation criteria to be presented as one
reportable segment under IFRS 8 and are therefore presented as such
within Core Construction Operations.
Segment assets and liabilities are
not presented as these are not reported to the CODM.
|
Core Construction
Operations
|
Modular
Solutions
|
JSSL
|
Central costs/
eliminations
|
Total
|
Year ended 30 March 2024:
|
£000
|
£000
|
£000
|
£000
|
£000
|
Revenue
|
449,168
|
21,489
|
-
|
(7,192)
|
463,465
|
Underlying operating
profit
|
37,430
|
260
|
-
|
-
|
37,690
|
Underlying operating profit margin
|
8.3%
|
1.2%
|
|
|
8.1%
|
|
|
|
|
|
|
Result from joint
ventures
|
|
|
|
|
|
- CMF
|
-
|
92
|
-
|
-
|
92
|
- JSSL
|
-
|
-
|
1,858
|
-
|
1,858
|
Finance costs
|
-
|
-
|
-
|
(3,095)
|
(3,095)
|
|
|
|
|
|
|
Underlying profit before
tax
|
37,430
|
352
|
1,858
|
(3,095)
|
36,545
|
|
|
|
|
|
|
Non-underlying
items (note 3)
|
(14,270)
|
(115)
|
-
|
860
|
(13,525)
|
|
|
|
|
|
|
Profit before tax
|
23,160
|
237
|
1,858
|
(2,235)
|
23,020
|
|
|
|
|
|
|
Other material items of income and expense:
|
|
|
|
|
|
- Depreciation of owned property,
plant and equipment
|
(6,317)
|
(163)
|
-
|
-
|
(6,480)
|
- Depreciation of right-of-use
assets
|
(2,644)
|
(39)
|
-
|
-
|
(2,683)
|
- Other operating
income
|
1,625
|
245
|
-
|
-
|
1,870
|
|
Core Construction
Operations
|
Modular
Solutions
|
JSSL
|
Central costs/
eliminations
|
Total
|
Year ended 25 March 2023*:
|
£000
|
£000
|
£000
|
£000
|
£000
|
Revenue
|
476,815
|
22,820
|
-
|
(7,882)
|
491,753
|
Underlying operating
profit
|
33,705
|
(638)
|
-
|
-
|
33,067
|
Underlying operating profit margin
|
7.1%
|
(2.8%)
|
|
|
6.7%
|
|
|
|
|
|
|
Result from joint
ventures
|
|
|
|
|
|
- CMF
|
-
|
583
|
-
|
-
|
583
|
- JSSL
|
-
|
-
|
1,315
|
-
|
1,315
|
Finance costs
|
-
|
-
|
-
|
(2,489)
|
(2,489)
|
|
|
|
|
|
|
Underlying profit before
tax
|
33,705
|
(55)
|
1,315
|
(2,489)
|
32,476
|
|
|
|
|
|
|
Non-underlying items (note
3)
|
(3,338)
|
-
|
-
|
(2,031)
|
(5,369)
|
|
|
|
|
|
|
Profit before tax
|
30,367
|
(55)
|
1,315
|
(4,520)
|
27,107
|
|
|
|
|
|
|
Other material items of income and expense:
|
|
|
|
|
|
- Depreciation of owned property,
plant and equipment
|
(5,247)
|
(160)
|
-
|
-
|
(5,407)
|
- Depreciation of right-of-use
assets
|
(1,816)
|
(24)
|
-
|
-
|
(1,840)
|
- Other operating
income
|
1,659
|
193
|
-
|
-
|
1,852
|
*Comparative information has been restated to provide
additional segmental disclosures.
Revenue
All revenue is derived from
construction contracts and related assets. Additional disclosures
are made under IFRS 15 to enable users to understand the relative
size of the divisions. An analysis of the Group's revenue is as
follows:
|
2024
|
|
|
2023*
|
|
£000
|
£000
|
Commercial and
Industrial
|
361,734
|
382,055
|
Nuclear and
Infrastructure
|
87,434
|
94,760
|
Core Construction Operations
|
449,168
|
476,815
|
Modular Solutions
|
21,489
|
22,820
|
Elimination of inter-segment
revenue (Modular Solutions)
|
(7,192)
|
(7,882)
|
Total Group revenue
|
463,465
|
491,753
|
*Comparative information has been restated to provide
additional segmental disclosures.
Geographical information
The following table presents
revenue according to the primary geographical markets in which the
Group operates. This disaggregation of revenue is presented for the
Group's two operating segments described above.
|
2024
|
|
|
2023*
|
Core Construction Operations - revenue by
destination
|
£'000
|
£'000
|
United Kingdom
|
367,127
|
437,741
|
Republic of Ireland and continental
Europe
|
82,041
|
39,074
|
|
449,168
|
476,815
|
|
|
|
|
2024
|
|
Modular Solutions - revenue by destination
|
2023*
|
£'000
|
£'000
|
United Kingdom
|
17,486
|
18,195
|
Republic of Ireland and continental
Europe
|
4,003
|
4,625
|
|
21,489
|
22,820
|
Elimination of intercompany revenue
(UK)
|
(7,192)
|
(7,882)
|
|
14,297
|
14,938
|
*Comparative information has been restated to provide
additional segmental disclosures.
All revenue is derived from
construction contracts and related assets. Group revenue includes
revenue of £100,189,000 (2023: £135,318,000), relating to one major
client (2023: two major clients), who individually contributed more
than 10 per cent of Group revenue in the year ended 30 March
2024.
3)
Non-underlying
items
|
2024
£000
|
2023
£000
|
Amortisation of acquired
intangible assets
|
5,399
|
3,338
|
Asset impairment
charges
|
4,543
|
-
|
Legacy employment tax
charge
|
4,413
|
-
|
Acquisition-related (credits) /
charges
|
(830)
|
2,031
|
Non-underlying items before tax
|
13,525
|
5,369
|
Tax on non-underlying
items
|
(1,957)
|
(697)
|
Non-underlying items after tax
|
11,568
|
4,672
|
The amortisation of acquired
intangible assets of £5,399,000 (2023: £3,338,000) represents the
amortisation of customer relationships, order books and brand name,
which were identified on the acquisition of Harry Peers, DAM
Structures and VSCH in 2020, 2021 and 2023,
respectively.
The asset impairment charge of
£4,543,000 relates to the impairment of assets at our leasehold
facility in Sherburn. During the year, we were advised of the
landlord's intention to terminate the factory lease. As a result,
an impairment review of property, plant and equipment was
performed, resulting in a non-cash charge.
The legacy employment tax charge
of £4,413,000 relates to an assessment raised by HMRC for
historical income tax and national insurance ('NIC') liabilities.
The Group disputes the charge and is in ongoing discussions with
HMRC to bring this matter to a conclusion. Notwithstanding this,
since HMRC has issued formal determinations for the amounts it
considers are due, a charge of £4,413,000 has been recognised,
including interest of £428,000.
The net acquisition-related credit
of £830,000 (2023: charge of £2,031,000) includes £nil (2023:
£1,816,000) associated with the acquisition of VSCH, the unwinding
of discount on contingent consideration of £300,000 (2023:
£558,000), other legal fees of £30,000 (2023: £nil) offset by a
fair value adjustment to contingent consideration which resulted in
a credit of £1,160,000 (2023: £343,000).
For tax on non-underlying items in
the year a credit of £1,957,000 has been recognised, comprising a
tax credit on non-underlying items of £2,454,000 offset by a charge
of £497,000 relating to prior year adjustments.
Non-underlying items have been
separately identified by virtue of their magnitude or nature to
enable a full understanding of the Group's financial performance
and to make year-on-year comparisons. They are excluded by
management for planning, budgeting and reporting purposes and for
the internal assessment of operating performance across the Group
and are normally excluded by investors, analysts and brokers when
making investment and other decisions. For an item to be considered
as non-underlying, it must satisfy at least one of the following
criteria:
§ A
significant item, which may span more than one accounting
period.
§ An
item directly incurred as a result of either a business
combination, disposal, or related to a major business change or
restructuring programme, and
§ An
item which is unusual in nature (outside the normal course of
business).
4)
Taxation
The taxation charge
comprises:
|
2024
£000
|
2023
£000
|
Current tax
|
|
|
Corporation tax charge
|
(5,649)
|
(5,460)
|
Foreign tax relief / other
relief
|
70
|
51
|
Foreign tax suffered
|
(70)
|
(51)
|
Adjustments to prior years'
provisions
|
136
|
60
|
|
(5,513)
|
(5,400)
|
|
|
|
Deferred tax
|
|
|
Current year charge
|
(973)
|
(144)
|
Impact of change in future years'
tax rates
|
-
|
(14)
|
Adjustments to prior years'
provisions
|
(633)
|
17
|
|
(1,606)
|
(141)
|
Total tax charge
|
(7,119)
|
(5,541)
|
5)
Dividends
|
2024
£000
|
2023
£000
|
Amounts recognised as
distributions to equity holders in the year:
|
|
|
2023 final - 2.1p per share (2023:
1.9p per share)
|
6,423
|
5,864
|
2024 interim - 1.4p per share
(2023: 1.3p per share)
|
4,291
|
4,013
|
|
10,714
|
9,877
|
The directors are recommending a
final dividend of 2.3p per share (2023: 2.1p), payable on 11
October 2024 to shareholders on the register at the close of
business on 6 September 2024. This together with the interim
dividend of 1.4p per share (2023: 1.3p), will result in a total
dividend of 3.7p per share (2023: 3.4p).
6)
Earnings per
share
Earnings per share is
calculated as follows:
|
2024
£000
|
2023
£000
|
Earnings for the purposes of basic
earnings per share being net profit attributable to equity holders
of the parent company
|
15,901
|
21,566
|
|
|
|
Earnings for the purposes of
underlying basic earnings per share being underlying net profit
attributable to equity holders of the parent company
|
27,469
|
26,238
|
|
|
|
Number of shares
|
Number
|
Number
|
|
|
|
Weighted average number of
ordinary shares for the purposes of basic earnings per
share
|
307,131,912
|
309,533,696
|
Effect of dilutive potential
ordinary shares
|
3,093,177
|
3,239,813
|
|
|
|
Weighted average number of
ordinary shares for the purposes of diluted earnings per
share
|
310,225,089
|
312,773,509
|
|
|
|
Basic earnings per
share
|
5.18p
|
6.97p
|
Underlying basic earnings per
share
|
8.94p
|
8.48p
|
Diluted earnings per
share
|
5.13p
|
6.90p
|
Underlying diluted earnings per
share
|
8.85p
|
8.39p
|
Basic earnings per share is
calculated by dividing the profit after tax attributable to equity
holders of the parent by the weighted average number of ordinary
shares in issue during the year, excluding those shares held in
employee benefit trusts. Shares held in employee benefit trusts are
treated as cancelled because, except for a nominal amount,
dividends have been waived.
For diluted earnings per share,
the weighted average number of ordinary shares in issue is adjusted
to assume conversion of all potentially dilutive ordinary shares
from the vesting of share awards. Underlying earnings per share
calculations are included to give a better indication of the
Group's underlying performance.
7)
Net cash flow
from operating activities
|
2024
£000
|
2023
£000
|
Operating profit from continuing operations
|
26,415
|
30,154
|
Adjustments:
|
|
|
Depreciation - property, plant and
equipment
|
6,480
|
5,407
|
Depreciation - right-of-use
assets
|
2,683
|
1,840
|
Fixed asset impairments
|
4,543
|
-
|
Gain on disposal of other
property, plant and equipment
|
(92)
|
(52)
|
Amortisation of intangible
assets
|
5,489
|
3,416
|
Movements in pension
scheme
|
(2,152)
|
(2,226)
|
Share of results of JVs and
associates
|
(1,950)
|
(1,898)
|
Exchange adjustments
|
(373)
|
-
|
Share-based payments
|
392
|
3,420
|
Operating cash flows before movements
in working capital
|
41,435
|
40,061
|
Decrease in inventories
|
1,729
|
4,774
|
Decrease in receivables
|
31,232
|
10,701
|
Decrease in payables
|
(21,962)
|
(1,724)
|
Movements in working capital
|
10,999
|
13,751
|
Cash generated from operations
|
52,434
|
53,812
|
Tax paid
|
(7,298)
|
(3,520)
|
Net cash flow from operating activities
|
45,136
|
50,292
|
Net (debt)/funds
The
Group's net (debt)/funds are as follows:
|
|
|
|
2024
£000
|
2023
£000
|
Borrowings
|
(20,000)
|
(8,950)
|
Cash and cash
equivalents
|
10,394
|
11,338
|
Unamortised debt arrangement
fees
|
235
|
321
|
Net (debt)/funds (pre-IFRS 16)
|
(9,371)
|
2,709
|
IFRS 16 lease
liabilities
|
(19,073)
|
(13,396)
|
Net debt (post-IFRS 16)
|
(28,444)
|
(10,687)
|
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. A reconciliation of
the Group's underlying results to its statutory results is
disclosed in note 9.
8)
Business
combinations
Summary of acquisition
On 3 April 2023, the Company
acquired 100 per cent of the share capital of VSCH.
VSCH is profitable, cash
generative and provides a manufacturing base in Europe, allowing
Severfield to benefit from VSCH's strong reputation in the
Netherlands and its growing pipeline of opportunities.
The board believes that the
acquisition is enhancing the Group's reputation and presence in the
European market, building on its existing European business, and is
helping to accelerate the Group's European growth
strategy.
The acquisition provides
Severfield with immediate access to new and attractive market
sectors, providing the Group with further market and geographical
diversification outside its core UK operations. VSCH is highly
regarded by its clients and is presenting Severfield with a number
of opportunities for further profitable growth, including access to
a wider European client base and a platform to offer a wider range
of services to its existing clients.
The net consideration of €25.7m
(£22.6m) comprised:
|
|
2024
£000
|
Gross consideration
|
|
26,348
|
Cash acquired (excluding payments
in advance)
|
|
(3,797)
|
Net consideration
|
|
22,551
|
VSCH was acquired for an initial
gross consideration of £26,348,000, including cash and cash
equivalents of £3,797,000, which has been funded by a combination
of Group cash reserves and a new term loan.
The fair value of the assets and
liabilities recognised as a result of the acquisition are as
follows:
|
|
|
£000
|
Non-current assets
|
|
Investment in joint
ventures
|
94
|
Property, plant and
equipment
|
4,578
|
Right of use assets
|
5,041
|
|
9,713
|
Current assets
|
|
Inventories
|
146
|
Contract assets, trade and other
receivables
|
8,367
|
Cash and cash
equivalents
|
3,797
|
|
12,310
|
Total assets
|
22,023
|
Current liabilities
|
|
Trade and other payables
|
(9,577)
|
Lease liabilities
|
(212)
|
|
(9,789)
|
Non-current liabilities
|
|
Lease liabilities
|
(4,829)
|
Deferred tax liability
|
(233)
|
Total liabilities
|
(14,851)
|
|
|
Net assets
|
7,172
|
Net cash acquired
|
(3,797)
|
Net identifiable assets acquired
|
3,375
|
Identified intangible
assets
|
3,902
|
Deferred tax on
intangibles
|
(1,007)
|
Goodwill
|
16,281
|
Net assets acquired
|
22,551
|
Goodwill of £16,281,000 represents
the ability and skill of employees and management, know-how and the
quality of goods and services provided, which do not meet the
recognition criteria to be separately recognised in accordance with
IFRS 3 (Revised) 'Business Combinations'. The goodwill arising from
the acquisition is not deductible for income tax
purposes.
Analysis of amounts disclosed in
the cash flow statement in connection with the
acquisition:
|
|
|
2024
£000
|
Gross initial cash
consideration
|
26,348
|
Net cash acquired (including
payments in advance)
|
(3,797)
|
Total cash outflow - investing activities
|
22,551
|
Acquisition-related costs of
£1,816,000 were fully expensed in the period ended 25 March 2023 as
non-underlying operating costs (see note 3).
The acquired business contributed
revenues of £59,480,000 and profit after
tax of £4,934,000, to the Group, since the
acquisition date.
9)
Alternative
Performance Measures
Our Alternative Performance
Measures ('APMs') present useful information which supplements the
preliminary announcement. These measures are not defined under IFRS
and may not be directly comparable with APMs for other companies.
The APMs represent important measures for how management monitors
the Group and its underlying business performance. In addition,
APMs enhance the comparability of information between reporting
periods by adjusting for non-underlying items. The APMs are not
intended to be a substitute for, or superior to, any IFRS measures
of performance.
In order to facilitate
understanding of the APMs used by the Group, and their relationship
to reported IFRS measures, definitions and numerical
reconciliations are set out below.
|
|
|
Alternative performance measure ('APM')
|
Definition
|
Rationale
|
Underlying operating profit (before JVs and
associates)
|
Operating profit before
non-underlying items and the results of JVs and
associates.
|
Profit measure reflecting
underlying trading performance of wholly owned
subsidiaries.
|
Underlying profit before tax
|
Profit before tax before
non-underlying items.
|
Profit measure widely used by
investors and analysts.
|
Underlying basic earnings per share ('EPS')
|
Underlying profit after tax
divided by the weighted average number of shares in issue during
the year.
|
Underlying EPS reflects the
Group's operational performance per ordinary share
outstanding.
|
Net funds / (debt)
(pre-IFRS 16)
|
Balance drawn down on the Group's
revolving credit facility, with unamortised debt arrangement costs
added back, less cash and cash equivalents (including bank
overdrafts) before IFRS-16 lease liabilities.
|
Measure of the Group's cash
indebtedness before IFRS-16 lease liabilities, which are excluded
from the definition of net funds / (debt) in the Group's borrowing
facilities. This measure supports the assessment of available
liquidity and cash flow generation in the reporting
period.
|
Operating cash conversion
|
Cash generated from operations
after net capital expenditure (before interest and tax) expressed
as a percentage of underlying operating profit (before JVs and
associates).
|
Measure of how successful we are
in converting profit to cash through management of working capital
and capital expenditure. Widely used by investors and
analysts.
|
Underlying return on capital employed
|
Underlying operating profit
divided by the average of opening and closing capital
employed.
Capital employed is defined as
shareholders' equity excluding retirement benefit obligations (net
of tax), acquired intangible assets and net funds.
|
Measures the return generated on
the capital we have invested in the business and reflects our
ability to add shareholder value over the long term. We have an
asset-intensive business model and ROCE reflects how productively
we deploy those capital resources.
|
|
|
|
|
Reconciliations to IFRS measures
|
|
|
|
|
|
2024
|
2023
|
A. Underlying operating
profit (before JVs and associates)
|
Note
|
£000
|
£000
|
|
|
|
|
Underlying operating profit
(before JVs and associates)
|
|
37,690
|
33,067
|
Non-underlying operating
items
|
3
|
(13,225)
|
(4,811)
|
Share of results of JVs and
associates
|
|
1,950
|
1,898
|
Operating profit
|
|
26,415
|
30,154
|
|
|
|
|
|
|
2024
|
2023
|
B. Underlying profit before
tax
|
Note
|
£000
|
£000
|
|
|
|
|
Underlying profit before
tax
|
|
36,545
|
32,476
|
Non-underlying items
|
3
|
(13,525)
|
(5,369)
|
Profit before tax
|
|
23,020
|
27,107
|
|
|
|
|
|
|
2024
|
2023
|
C. Underlying basic
EPS
|
Note
|
£000
|
£000
|
|
|
|
|
|
|
|
|
Underlying net profit attributable
to equity holders of the parent Company
|
|
27,469
|
26,238
|
Non-underlying items after
tax
|
3
|
(11,568)
|
(4,672)
|
Net profit attributable to equity
holders of the parent Company
|
|
15,901
|
21,566
|
Weighted average number of
ordinary shares
|
6
|
307,131,912
|
309,533,696
|
|
|
|
|
Underlying basic earnings per share
|
|
8.94p
|
8.48p
|
Basic earnings per share
|
|
5.18p
|
6.97p
|
|
|
|
|
|
|
2024
|
2023
|
D. Net (debt) / funds
(pre-IFRS 16)
|
Note
|
£000
|
£000
|
|
|
|
|
Borrowings
|
|
(20,000)
|
(8,950)
|
Cash and cash
equivalents
|
|
10,394
|
11,338
|
Unamortised debt arrangement
costs
|
|
235
|
321
|
Net (debt)/funds (pre-IFRS 16)
|
7
|
(9,371)
|
2,709
|
IFRS 16 lease
liabilities
|
|
(19,073)
|
(13,396)
|
Net debt (post-IFRS 16)
|
7
|
(28,444)
|
(10,687)
|
|
|
|
|
|
|
2024
|
2023
|
E. Operating cash
conversion
|
Note
|
£000
|
£000
|
|
|
|
|
|
|
|
|
Cash generated from
operations
|
|
52,434
|
53,812
|
Proceeds on disposal of other
property, plant and equipment
|
|
408
|
317
|
Purchases of land and
buildings
|
|
(410)
|
(635)
|
Purchases of other property, plant
and equipment
|
|
(10,911)
|
(5,668)
|
|
|
41,521
|
47,826
|
Underlying operating profit
(before JVs and associates)
|
|
37,690
|
33,067
|
Operating cash conversion
|
|
110%
|
145%
|
Reconciliations to IFRS measures
|
|
2024
|
2023
|
F. Underlying return on
capital employed
|
Note
|
£000
|
£000
|
|
|
|
|
Underlying operating profit
|
|
|
|
Underlying operating profit
(before JVs and associates)
|
|
37,690
|
33,067
|
Share of results from JVs and
associates
|
|
1,950
|
1,898
|
Underlying operating profit
|
|
39,640
|
34,965
|
|
|
|
|
Capital employed
|
|
|
|
Shareholders' equity
|
|
220,751
|
217,718
|
|
|
|
|
Cash and cash
equivalents
|
|
(10,394)
|
(11,338)
|
Borrowings
|
|
20,000
|
8,950
|
Net (funds)/debt (for ROCE
purposes)
|
|
9,606
|
(2,388)
|
Acquired intangible
assets
|
|
(5,215)
|
(6,712)
|
Retirement benefit
obligation
(net of deferred tax)
|
|
8,599
|
9,654
|
|
|
233,741
|
218,272
|
Average capital
employed
|
|
226,007
|
220,902
|
Underlying return on capital employed
|
|
17.5%
|
15.8%
|
Principal risks and uncertainties
The board has conducted a robust
assessment of the principal risks and uncertainties which have the
potential to impact the Group's profitability and ability to
achieve its strategic objectives. This list is not intended to be
exhaustive. Additional risks and uncertainties not presently known
to management or deemed to be less significant at the date of this
report may also have the potential to have an adverse effect on the
Group. Risk management processes are put in place to assess, manage
and control these on an ongoing basis. Our principal risks are set
out below:
1
Health and safety
|
Movement:
No
change
Scoring: High
|
Description
The Group works on significant,
complex and potentially hazardous projects, which require
continuous monitoring and management of health and safety risks,
ineffective governance over, and management of, these risks could
result in serious injury, death and damage to property or
equipment.
Impact
A serious health and safety
incident could lead to the potential for legal proceedings,
regulatory intervention, project delays, potential loss of
reputation and ultimately exclusion from future business. Continued
changes in legislation can result in increased risks to both
individuals and the Group.
Mitigation
•
Established safety systems, site visits, safety audits, monitoring
and reporting, and detailed health and safety policies and
procedures are in place across the Group, all of which focus on
prevention and risk reduction and elimination.
• Thorough
and regular employee training programmes.
•
Director-led safety leadership teams established to bring
innovative solutions and to engage with all stakeholders to deliver
continuous improvement in standards across the business and wider
industry.
• Close
monitoring of subcontractor safety performance.
• Priority
board review of ongoing performance and in-depth review of both
high potential and reportable incidents.
• Regular
reporting of, and investigation and root cause analysis of,
accidents, incidents and high potential near misses.
•
Behavioural safety cultural change programme 'Safer@Severfield' was
launched this year.
•
Occupational health programme, including mental health.
•
Achievement of challenging health and safety performance targets is
a key element of management and staff remuneration.
• Detailed
due diligence on new acquisitions and effective integration of SHE
processes and systems.
|
2
Supply chain
|
Movement:
No
change
Scoring: Medium
|
Description
The Group is reliant on certain key
supply chain partners for the successful operational delivery of
contracts to meet client expectations. The failure of a key
supplier, a breakdown in relationships with a key supplier or the
failure of a key supplier to meet its contractual obligations could
potentially result in some short to medium-term price increases and
other short-term delay and disruption to the Group's projects and
operations. There is also a risk that credit checks undertaken in
the past may no longer be valid.
Impact
Interruption of supply or poor
performance by a supply chain partner could impact the Group's
execution of existing contracts (including the costs of finding
replacement supply),
its ability to bid for future
contracts and its reputation, thereby adversely impacting financial
performance.
Mitigation
• Process in
place to select supply chain partners that match our expectations
in terms of quality, sustainability and commitment to client
service - new sources of supply are quality controlled.
• Ongoing
reassessment of the strategic value of supply relationships and the
potential to use alternative arrangements, including for steel
supply.
• Contingency
plans developed to address supplier and subcontractor issues
(including the failure of a supplier or subcontractor).
• Monthly review
process to facilitate early warning of issues and subsequent
mitigation strategies.
• Strong
relationships maintained with key suppliers, including a programme
of regular meetings and reviews.
• Implementation
of best practice improvement initiatives, including automated
supplier accreditation processes.
• Key supplier
audits are performed within projects to ensure they can deliver
consistently against requirements.
|
3
People
|
Movement:
No
change
Scoring: Medium
|
Description
The ability to identify, attract,
develop and retain talent is crucial to satisfy the current and
future needs of the business. Skills shortages in the construction
industry are likely to remain an issue for the foreseeable future
and it can become increasingly difficult to recruit capable people
and retain key employees, especially those targeted by competitors.
This has been exacerbated in recent years due to macro-economic
factors such as the impact of inflation and shortages of
labour.
Impact
Loss of key people could adversely
impact the Group's existing market position and reputation.
Insufficient growth and development of its people and skill sets
could adversely affect its ability to deliver its strategic
objectives.
A high level of staff turnover or
low employee engagement could result in a decrease of confidence in
the business within the market, client relationships being lost and
an inability to focus on business improvements.
Mitigation
• Training and
development schemes to build skills and experience, such as our
successful graduate, trainee and apprenticeship
programmes.
• Detailed
succession planning for future senior leaders within the
business.
• Attractive
working environments, remuneration packages, technology tools and
wellbeing initiatives to help improve employees' working lives,
recent above average inflation pay increases and a commitment to
pay the real living wage.
• Annual
appraisal process providing two-way feedback on
performance.
• Internal
communications continually improved.
• Interviews with
leavers and joiners to understand the reasons for their
decision.
• Robust people
strategy focused on culture, and continually enhancing all aspects
of our approach to Performance, Development, Careers, Recruitment
and Reward.
• Maintained our
approach to flexible working practices and remote
working.
|
4
Commercial and market environment
|
Movement:
Upward
Scoring: High
|
Description
Changes in government and client
spending or other external factors could lead to programme and
contract delays or cancellations, or changes in market growth.
External factors include national or market trends, political or
regulatory change (including the UK's trading relationship with the
EU) and the impact of geopolitical events.
Lower than anticipated demand could
result in increased competition, tighter margins and the transfer
of commercial, technical and financial risk down the supply chain,
through more demanding contract terms and longer payment
cycles.
Impact
A significant fall in construction
activity and higher costs could adversely impact revenues, profits,
ability to recover overheads and cash generation.
Mitigation
• Regular reviews
of market trends performed (as part of the Group's annual strategic
planning and market review process) to ensure actual and
anticipated impacts from macroeconomic risks are minimised and
managed effectively.
• Regular
monitoring and reporting of financial performance, orders secured,
prospects and the conversion rate of the pipeline of opportunities
and marshalling of market opportunities is undertaken on a
co-ordinated Group-wide basis.
• Selection of
opportunities that will provide sustainable margins and repeat
business.
• Strategic
planning is undertaken to identify and focus on the addressable
market (including new overseas and domestic
opportunities).
• Monitoring our
pipeline of opportunities in continental Europe and in the Republic
of Ireland, supported by our European operations.
• The Group
closely monitors the flows of goods and people across borders for
ongoing work with the EU and specific risks and related mitigations
are kept under review by the executive committee. We have taken
steps to ensure we can continue to deliver on current and future
contractual commitments.
• Maintenance and
establishment of supply chain in mainland Europe.
• Close
management of capital investment and focus on maximising asset
utilisation to ensure alignment of our capacity and volume demand
from clients.
• Close
engagement with both clients and suppliers and monitoring of
payment cycles.
• Ongoing
assessment of financial solvency and strength of counterparties
throughout the life of contracts.
• Continuing use
of credit insurance to minimise impact of client
failure.
• Strong cash
position supports the business through fluctuations in the economic
conditions of the sector.
• Recent
acquisitions have broadened our reach and cross-selling
opportunities, resulting in improved market resilience.
|
5
Mispricing a contract (at tender)
|
Movement:
No
change
Scoring: Medium
|
Description
Failure to accurately estimate and
evaluate the contract risks, costs to complete, contract duration
and the impact of price increases could result in a contract being
mispriced. Execution failure on a high-profile contract could
result in reputational damage.
Impact
If a contract is incorrectly
priced, particularly on complex contracts, this could lead to loss
of profitability, adverse business performance and missed
performance targets.
This could also damage
relationships with clients and the supply chain.
Mitigation
• Improved
contract selectivity (those that are right for the business and
which match our risk appetite) has de-risked the order book and
reduced the probability of poor contract execution.
• Estimating
processes are in place with approvals by appropriate levels of
management.
• Tender
settlement processes are in place to give senior management regular
visibility of major tenders.
• Use of the
tender review process to mitigate the impact of rising supply chain
costs.
• Work performed
under minimum standard terms (to mitigate onerous contract terms)
where possible.
• Use of Group
authorisation policy to ensure appropriate contract tendering and
acceptance.
• Adoption of
Group-wide project risk management framework ('PRMF') brings
greater consistency and embeds good practice in identifying and
managing contract risk.
• Professional
indemnity cover is in place to provide further
safeguards.
• Use of price
indexation clauses in certain contracts.
|
6
Cyber security
|
Movement:
Upward
Scoring: High
|
Description
Cyber-attack could lead to IT
disruption with resultant loss of data, loss of system
functionality and business interruption.
The Group's core IT systems must be
managed effectively, to keep pace with new technologies and respond
to threats to data and security.
Impact
Prolonged or major failure of IT
systems could result in business interruption, financial losses,
loss of confidential data, negative reputational impact and
breaches of regulations.
Mitigation
• IT is the
responsibility of a central function which manages the majority of
the systems across the Group. Other IT systems are managed locally
by experienced IT personnel.
• Significant
investments in IT systems which are subject to board approval,
including anti-virus software, off-site and on-site backups,
storage area networks, software maintenance agreements and
virtualisation of the IT environment.
• Specific
software has been acquired to combat the risk of ransomware
attacks.
• Group IT
committee ensures focused strategic development and resolution of
issues impacting the Group's technology environment.
• Robust business
continuity plans are in place and disaster recovery and penetration
testing are undertaken on a systematic basis. A Group-wide cyber
attack simulation exercise was undertaken this year by the
executive committee.
• Data protection
and information security policies are in place across the
Group.
• Cyber-crimes
and associated IT risks are assessed on a continual basis and
additional technological safeguards introduced. Cyber threats and
how they manifest themselves are communicated regularly to all
employees (including practical guidance on how to respond to
perceived risks).
• ISO 27001
accreditation achieved for the Group's information security
environment and regular employee engagement undertaken to reinforce
key messages.
• Insurance
covers certain losses and is reviewed annually to establish further
opportunities for affordable risk transfer to reduce the financial
impact of this risk.
|
7
Failure to mitigate onerous contract terms
|
Movement:
No
change
Scoring: Medium
|
Description
The Group's revenue is derived from
construction contracts and related assets. Given the highly
competitive environment in which we operate, contract terms need to
reflect the risks arising from the nature or the work to be
performed. Failure to appropriately assess those contractual terms
or the acceptance of a contract with unfavourable terms could,
unless properly mitigated, result in poor contract delivery, poor
understanding of contract risks and legal disputes.
Impact
Loss of profitability on contracts
as costs incurred may not be recovered, and potential reputational
damage for the Group.
Mitigation
• The Group has
identified minimum standard terms which mitigate contract
risk.
• Robust
tendering process with detailed legal and commercial review and
approval of proposed contractual terms at a senior level (including
the risk committee) are required before contract acceptance so that
onerous terms are challenged, removed or mitigated as
appropriate.
• Regular
contract audits are performed to ensure contract acceptance and
approval procedures have been adhered to.
• We continue to
work with the British Constructional Steelwork Association to raise
awareness of onerous terms across the industry.
• Through regular
project reviews we capture early those occasions where onerous
terms could have an adverse impact and are able to implement
appropriate mitigating action at the earliest stage.
|
8.
Industrial relations
|
Movement:
No
change
Scoring: Medium
|
Description
The Group (and the industry in
general) has a significant number of members who are members of
trade unions. Industrial action taken by employees could impact on
the ability of the Group to maintain effective levels of
production.
Impact
Interruption to production by
industrial action could impact both the Group's performance on
existing contracts, its ability to bid for future contracts and its
reputation, thereby adversely impacting its financial
performance.
Mitigation
•
Employee and union engagement
takes place on a regular basis.
•
The Group has seven main
production facilities so interruption at one facility could to some
extent be absorbed by increasing capacity at a sister
facility.
•
Processes are in place to mitigate disruptions as
a result of industrial action.
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