TIDMSFR
RNS Number : 1932T
Severfield PLC
23 November 2021
23 November 2021
Interim results for the period ended 30 September 2021
UK and Europe order book of GBP393m, India order book of
GBP140m, continued operational and strategic progress, good
visibility of earnings through FY23
Severfield plc, the market leading structural steel group,
announces its results for the six-month period ended 30 September
2021.
GBPm 6 months to 6 months to
30 September 30 September
2021 2020
(unaudited) (unaudited)
---- --------------
Revenue 195.9 186.0
Underlying(1) operating profit
(before JVs and associates) 10.2 9.5
Operating profit (before JVs and
associates) 8.2 8.1
Underlying(1) profit before tax 10.3 8.4
Profit before tax 7.9 6.6
Underlying(1) basic earnings per
share 2.7p 2.2p
Basic earnings per share 1.7p 1.7p
Interim dividend per share 1.2p 1.1p
---------------------------------------- -------------- --------------
Headlines
-- Revenue up 5% to GBP195.9m (H1 2020: GBP186.0m)
-- Underlying(1) profit before tax up 23% to GBP10.3m (H1 2020:
GBP8.4m)
-- Period -end net debt (excluding IFRS 16 lease liabilities(2)
) of GBP6.7m (31 March 2021: net funds of GBP4.4m), including
acquisition loans of GBP17.8m (31 March 2021: GBP20.7m), reflects
unwinding of unusually low March 2021 working capital position
-- Record UK and Europe order book of GBP393m at 1 November 2021
(1 June 2021: GBP301m), includes new industrial and distribution
and bridge orders and the new stadium for Everton F.C.
-- Share of profit from JSSL of GBP0.3m (H1 2020: loss of
GBP0.7m), return to profitability reflects an Indian market which
is now showing clear signs of recovery from second wave of
COVID-19
-- India order book of GBP140m at 1 November 2021 (1 June 2021:
GBP140m)
-- Interim dividend increased by 9% to 1.2p per share (H1 2020:
1.1p per share)
ESG
-- Certified by the Carbon Trust as carbon neutral for
manufacturing and construction operations
-- Net Zero carbon target established for 2040, Group signed up
to the UN 'Race to Zero' campaign
Outlook
-- UK and Europe - tendering and pipeline activity remain very
encouraging - including opportunities in the industrial and
distribution, transport infrastructure, nuclear and data centre
sectors
-- India - strong and growing underlying demand for structural
steel - JSSL is very well-positioned to take advantage of an
improving economy
-- Expectations are unchanged despite ongoing supply chain and
inflationary pressures for us and our clients
-- Record UK and Europe order book gives us good profit
visibility through FY23
Alan Dunsmore, Chief Executive Officer commented:
'The operational and strategic progress we have made over recent
years has underpinned our first half performance. Tendering
activity in UK and Europe remains very encouraging and our pipeline
of opportunities spans a wide range of sectors demonstrating the
benefits of both the strategic acquisitions and the organic
investments we have made in recent years.
We are making strong progress in our Indian business and are
well-placed to capitalise on this exciting market opportunity as
the economy recovers from the pandemic and construction continues
to transition from concrete to steel.
Our people and communities remain a priority as we further our
'Smarter, Safer, more Sustainable' programme, as well as advancing
our sustainability agenda, playing our part in the shift to a
decarbonised economy.
While the inflationary outlook and labour market and supply
chain pressures present challenges, our strong order book position
and operational experience give us confidence for the rest of this
year and provide good visibility through FY23.'
For further information, please contact:
Alan Dunsmore
Severfield Chief Executive Officer 01845 577 896
Adam Semple
Group Finance Director 01845 577 896
Jefferies International Simon Hardy 020 7029 8000
Will Soutar 020 7029 8000
Camarco Ginny Pulbrook 020 3757 4980
Tom Huddart 020 3757 4980
Notes to financials:
(1) stated before non-underlying items of GBP2.4m (H1 2020:
GBP1.8m) consisting of the amortisation of acquired intangible
assets of GBP2.0m (H1 2020: GBP1.4m) and acquisition-related
expenses of GBP0.4m (H1 2020: GBP0.4m). Non-underlying items have
been separately identified as a result of their magnitude,
incidence or unpredictable nature. Their separate identification
results in a calculation of an underlying profit measure in the
same way as it is presented and reviewed by management (see note 7
to the interim financial statements)
(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 13 to the interim financial statements)
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.165,000 tonnes of steel per annum. The Group has six sites,
c.1,500 employees and expertise in large, complex projects across a
broad range of sectors. The Group also has an established presence
in the expanding Indian market through its joint venture
partnership with JSW Steel (India's largest steel producer).
INTERIM STATEMENT 2021
Introduction
The Group has continued to perform well in the first half,
building on the positive momentum coming into the financial year,
following our successful response to the challenges of COVID-19.
This, together with the benefits of further operational and
strategic progress, is reflected in our record UK and Europe order
book of GBP393m, increased revenues, improved profitability, and a
significantly improved performance from JSSL, our Indian joint
venture.
The Group's first half profit performance is slightly ahead of
the previously anticipated profit weighting for H1 / H2 of
approximately one third / two thirds. Notwithstanding this, profits
for the 2022 financial year are still expected to have a
second-half bias reflecting the phasing of ongoing contract works
in our record UK and Europe order book. This order book provides us
with good visibility over the next 18 months and gives us
confidence of a strong future performance by the Group.
Furthermore, we continue to be very encouraged by the current level
of tendering and pipeline activity across the Group. We remain
well-positioned to take advantage of some significant
opportunities, including in the industrial and distribution,
transport infrastructure, nuclear and data centre sectors,
providing us with greater resilience and the ability to drive
future profitable growth.
JSSL has continued to recover well from the effects of the
second wave of COVID-19. The factory in Bellary and all the
business's construction sites are currently operational. After a
difficult start to the first half, when output was disrupted, the
company has reported a slightly above break-even profit position in
H1, reflecting an improving Indian market picture. Despite the
recent COVID-19 challenges, JSSL has continued to win new work,
resulting in a strong order book of GBP140m. This, together with
JSSL's ever-improving pipeline of potential orders, reflects a
continuing strong underlying demand for structural steel in India,
leaving the business very well-positioned to take advantage of an
improving economy.
Financials
Revenue of GBP195.9m (2020: GBP186.0m) represents an increase of
GBP9.9m compared to the prior period. This predominately reflects
six months of additional revenue for DAM Structures, which was
acquired in February 2021.
Underlying operating profit (before JVs and associates) of
GBP10.2m (2020: GBP9.5m) represents an increase of GBP0.7m over the
prior period which included the disruptive effects of COVID-19,
particularly in the first quarter of the previous year. As
anticipated, the results for the 2022 financial year are expected
to be considerably weighted to the second half, with several
contracts in the order book expected to deliver higher profits
during this period.
The share of results of JVs and associates in the first half of
the year was a profit of GBP0.6m (2020: loss of GBP0.6m). This
includes a share of profit from the Indian joint venture of GBP0.3m
(2020: loss of GBP0.7m), reflecting revenue growth and margin
improvement as the business continues its recovery from the effects
of the second wave of COVID-19. The share of results of JVs and
associates also includes those of Construction Metal Forming
('CMF') Limited which has contributed a share of profit for the
Group of GBP0.3m (2020: GBP0.1m), the prior period for CMF also
having been impacted by COVID-19.
The Group's underlying profit before tax was GBP10.3m (2020:
GBP8.4m), an increase of 23 per cent compared to the previous
period. The statutory profit before tax, which includes both
underlying and non-underlying items, was GBP7.9m (2020: GBP6.6m),
an increase of 20 per cent.
Non-underlying items for the period of GBP2.4m (2020: GBP1.8m)
consisted of the amortisation of acquired intangible assets of
GBP2.0m (2020: GBP1.4m) and acquisition-related expenses of GBP0.4m
(2020: GBP0.4m). The amortisation of acquired intangible assets
represents the amortisation of customer relationships, order books
and brand name, which were identified on the acquisitions of Harry
Peers and DAM Structures. These assets are being amortised over a
period of 18 months to five years.
An underlying tax charge of GBP1.9m is shown for the period
(2020: GBP1.7m). This tax charge is recognised based upon the best
estimate of the average effective income tax rate on profit before
tax for the full financial year and equates to the UK statutory
rate of 19 per cent. A non-underlying tax charge of GBP0.8m has
been recognised, comprising a tax credit on non-underlying items of
GBP0.5m, offset by a charge of GBP1.3m relating to the increase in
future tax rates from 19 per cent to 25 per cent.
Underlying basic earnings per share is 2.7p (2020: 2.2p). This
calculation is based on the underlying profit after tax of GBP8.3m
(2020: GBP6.7m) and 308,287,952 shares (2020: 306,860,362 shares)
being the weighted average number of shares in issue during the
period. Basic earnings per share, which is based on the statutory
profit after tax, is 1.7p (2020: 1.7p). Diluted earnings per share,
which includes the effect of the Group's performance share plan, is
1.7p (2020: 1.7p).
Net debt (pre-IFRS 16 basis) at 30 September 2021 was GBP6.7m
(31 March 2021: net funds of GBP4.4m) following the payment of the
2021 final dividend (GBP5.5m). This represents cash of GBP11.1m
offset by the outstanding term loans of GBP17.8m for the Harry
Peers and DAM Structures acquisitions. Operating cash flow for the
period before working capital movements was GBP13.3m (2020:
GBP11.8m). Net working capital increased by GBP11.8m in the period
reflecting the impact of recent steel and other input price rises,
together with the expected unwinding of the unusually low (two per
cent of revenue) working capital position at 31 March 2021.
Excluding advance payments, period-end net working capital was
slightly below six per cent of revenue, which is within our
well-established target range of four to six per cent.
Capital expenditure of GBP3.5m (2020: GBP1.8m) represents the
continuation of the Group's capital investment programme. This
predominantly consisted of site improvements at Ballinamallard and
the purchase of additional land at Dalton to future-proof the site.
There remain some significant capital projects planned for the
second half of the year, including new and upgraded equipment for
our fabrication lines, and we continue to expect 2022 capital
expenditure levels to be higher than our recent run rate of GBP6m
to GBP8m per annum. Depreciation in the period was GBP3.3m (2020:
GBP3.0m), of which GBP0.8m (2020: GBP0.8m) relates to right-of-use
assets under IFRS 16.
The Group's net defined benefit pension liability at 30
September 2021 was GBP20.4m, a decrease of GBP2.0m from the
year-end position of GBP22.4m. The deficit has decreased largely
because of higher-than-expected returns on the scheme's assets and
ongoing deficit contributions.
The Group has a GBP25m revolving credit facility ('RCF') with
HSBC Bank and Virgin Money (formerly Yorkshire Bank), which matures
in October 2023. The RCF, of which GBP10m is available as an
overdraft facility, continues to include an additional accordion
facility of GBP20m, which allows the Group to increase the
aggregate available borrowings to GBP45m. As part of the Harry
Peers and DAM Structures acquisitions, new amortising term loans of
GBP14m and GBP12m, respectively were established as amendments to
the existing RCF. At 30 September 2021, of these original loans of
GBP26m, GBP17.8m remained outstanding.
Dividend
The board considers the dividend to be a very important
component of shareholder returns. Accordingly, based on its current
assessment of the performance of the business, the outlook for the
year and our strong balance sheet and cash position, the board has
decided to increase the interim dividend by 9 per cent to 1.2p per
share (2020: 1.1p per share).
UK and Europe
The Group's main activities continue to be the design,
fabrication and construction of structural steel for construction
projects in the UK, Republic of Ireland and Europe. During the
period, we continued to work on a large industrial facility, which
includes a bespoke paint package, in the Republic of Ireland,
several large distribution facilities in the UK and our first HS2
bridge package, Water Orton Viaducts in the Midlands. We have also
continued our work on the new Google Headquarters at King's Cross,
together with a number of mid-sized office developments, both in
London and the UK regions (including Argyle Street in Glasgow, Sky
Studios in Elstree, and Sherwood Street and 30 South Colonnade,
both in London).
The UK and Europe order book at 1 November includes a
significant amount of new work which we have secured over recent
months and now stands at a record level of GBP393m (1 June 2021:
GBP301m), of which GBP318m is planned for delivery over the next 12
months. This leaves the Group very well-positioned with a strong
future workload for the remainder of the 2022 financial year and
beyond. The growth in the order book has been driven by several
significant project awards. These include the new stadium for
Everton F.C., two large and various smaller distribution facilities
in the UK, reflecting a sector which continues to remain buoyant, a
waste-to-energy facility, new HS2 bridge packages and other bridge
awards reflecting investment in infrastructure by Highways England
and Network Rail. The order book remains well-balanced, showcasing
the benefits of our strategic diversification over recent years,
and contains a healthy mix of projects across the Group's key
market sectors.
In terms of geographical spread, of the order book of GBP393m,
95 per cent represents projects in the UK, with the remaining 5 per
cent representing projects for delivery in Europe and the Republic
of Ireland (1 June 2021: 84 per cent in the UK, 16 per cent in
Europe and the Republic of Ireland). The more UK-centric nature of
the current order book is driven by the inclusion of DAM
Structures' UK order book, following its acquisition in the
previous year, together with a lower proportion of work in the
Republic of Ireland, as several projects, including the large
industrial facility, draw to completion. Furthermore, whilst the
order book is currently at record levels, only 17 per cent of this
represents commercial offices, compared to the more normal previous
range of 30 to 35 per cent and a peak of c.60 per cent around four
years ago, highlighting the success of our strategic
diversification.
We remain very encouraged by the current level of tendering and
pipeline activity across the Group and are well-positioned to take
advantage of some significant opportunities in the industrial and
distribution (battery plants and distribution centres), transport
infrastructure, nuclear and data centre sectors. We are also seeing
new opportunities in the commercial office market, including in
London, a trend which we expect to increase over the coming years,
given that some of the challenges recently experienced by this
sector are now alleviating. With the return to more normal trading
conditions and with the most significant effects of COVID-19 behind
us, we remain well-placed to win work across a wide client base and
in a diverse range of market sectors and geographies, including in
Europe, supported by our European business. This diversity provides
us with greater resilience and the ability to drive future
profitable growth.
As a key component of economic growth, the construction industry
will be central to a sustainable recovery from the effects of
COVID-19. New, low carbon infrastructure (including HS2, wind
power, new nuclear, rail electrification, energy efficient
buildings) will play a leading role in stimulating sustainable
growth. In November 2020, the UK Government released details of its
five-year plan, the National Infrastructure Strategy ('NIS') to
invest in digital, transport and energy to drive economic recovery,
levelling up and meeting the UK's net zero emissions target by
2050. This plan announced funding of GBP640 billion, an increase of
GBP100 billion from the previous plan, for developments in roads,
railways, power networks, telecommunications and other UK
infrastructure projects. We have already secured some significant
road bridge awards and orders for HS2 from a variety of consortia,
and we continue to make good progress with several other similar
opportunities, including rail electrification work. We remain
well-positioned to win work in the transport sector given the
Group's historical track record and our in-house bridge capability,
together with the in-depth expertise of DAM Structures.
Smarter, Safer, more Sustainable
The Group's 'Smarter, Safer, more Sustainable' ('SSS')
operational improvement programme has engendered a self-help
culture within the organisation. This programme has served us well
in maintaining efficient operations during the pandemic and in
helping us to offset many of the supply chain and cost pressures
currently being experienced by the Group (see below).
During the period, we have continued our drive to reduce costs
and increase and upgrade our fabrication capacity and efficiency.
This includes the continued roll out of our new coatings management
system at Dalton covering the reduction of paint waste and
improvements to the specification, management and application of
factory paint systems, together with initiatives to improve overall
quality including the targeted reduction of factory NCRs (rework
items). Having rolled out a new Group wide production management
system (StruMIS) in 2019, we are currently in the process of
further streamlining production flows and improving real-time
factory information at our main centre in Dalton, including the use
of mobile devices to capture information at the point of use to
provide live information to both operatives and management. This
will help drive quality, reduce bottlenecks, and improve the
reliability and speed of our operations. As part of our ongoing
capital investment programme, we have also continued to expand our
fabrication capability at Dalton and invested in new and more
efficient production machinery to improve the throughput and
efficiency of these operations.
Our digital transformation initiative is targeting a connected
organisation which eliminates waste and increases automation. As
part of this process, we are devoting skilled resource to reviewing
and responding to developing technologies and continue to make good
progress with the automation of repetitive tasks. This includes our
innovative approach to drawing and design, and the optimisation of
engineering software under the leadership of our Group engineering
director.
Supply chain
We continue to be mindful of industry-wide supply chain
pressures for both us and our clients which are, in some instances,
impacting material costs and availability. This includes certain
steel products, in part reflecting a price of steel which, although
stabilising recently, has nearly doubled over the past year.
Notwithstanding this, steel remains largely a pass-through cost for
the Group, albeit the recent steel price increases are having an
impact on working capital in the short term. For steel, we benefit
from relationships with several partners in the UK and continental
Europe, reducing the risk of interruptions to the Group's steel
supply.
During the first half, the Group has also experienced some
increases in lead times and supply restrictions for a limited
number of other products, together with upward pressures on costs
due to tighter labour markets and more general inflationary
pressures for certain products and services. Whilst not immune to
this, the impact has been managed without any significant
disruption to operations, and the Group is managing these pressures
through contractual protection, operating efficiencies and by
forward purchasing as appropriate, leveraging the Group's scale and
supply chain and sub-contract management strengths.
Overall, it is expected that these pressures will normalise and
that any disruption can be minimised by the focused sourcing of
materials through the supply chain and our ongoing SSS operational
improvement programme.
DAM Structures
DAM Structures is integrating well into our core operations and
we are seeing significant opportunities for growth in the UK from
Network Rail electrification programmes including piling, overhead
line equipment and general rail works, and temporary and permanent
tunnel work for HS2. This will complement the Group's existing
expertise in the transport sector. We also see ongoing
opportunities for growth in DAM's propping business which provides
bespoke fabricated propping systems to demolition and groundwork
contractors.
In addition to the initial consideration of GBP12.0m which was
paid in February 2021, a further deferred consideration of GBP7.0m
is payable in cash in April 2022. An additional performance-based
contingent consideration of up to GBP8.0m is also in place, payable
if certain work-winning targets in the railway and steel piling
sectors are achieved over a five-year period, ending in April
2026.
Modular construction
Our modular (off-site) construction offering continues to
include the growing product ranges of Severfield (Products &
Processing) ('SPP') based in Sherburn and of CMF, our cold rolled
steel joint venture business based in Wales. We continue to be the
only hot rolled steel fabricator in the UK to have a cold rolled
manufacturing capability.
SPP
SPP was originally established in 2019 to allow us to address
smaller scale projects and provide a one-stop shop for smaller
fabricators to source high-quality processed steel and ancillary
products, at lower margins. We have continued to grow and invest in
the business, including strengthening the factory management,
engineering and commercial functions, to maintain our focus on
growing our 'Severstor' modular product range and 'Rotoflo'
products, both of which attract higher margins. For Severstor, we
are already making significant progress in growing our client base
and have secured repeat orders from several blue-chip clients. The
Rotoflo team has also recently appointed a new sales manager in
India as we look to develop the overseas footprint of the business.
In the previous year, SPP was 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 growth aspirations for
the business.
As well as servicing its growing external client base, SPP has
also continued to provide high-quality sub-contract fabrication
packages for other Group companies to assist in the delivery of our
record UK and Europe order book, thus ensuring a greater proportion
of project work remains in-house and subject to Severfield quality
standards.
CMF
CMF has continued to develop its product range which now
includes load bearing frame and deck profiles, purlins and side
rail systems to service a cold formed steel market which has grown
significantly in recent years through the increased use of steel in
off-site and modular construction. As a result of these market
developments and with the agreement of our joint venture partner,
an expansion of the business is currently underway. The expansion,
which involves the development of a new, separate manufacturing
facility in South Wales, is required as the existing CMF facility
in Pontypool is operating at close to full capacity and cannot be
developed any further due to space constraints. This will allow CMF
to serve an external client base and ensure that its market share
is maintained and increased in line with market growth.
Significant work on this expansion commenced earlier in the
financial year and the facility is expected to be operational in
the next 12 months. The overall cost of construction for CMF is
c.GBP10m, including land of GBP3m, which is being financed by a
combination of equity of c.GBP5m, provided in equal amounts by the
joint venture partners in the previous year, and debt of
c.GBP5m.
India
After a difficult start to the first half, when output was
disrupted, JSSL has continued its recovery from the effects of the
second wave of COVID-19. This is evident in the Group's after-tax
share of profit of GBP0.3m (2020: share of loss of GBP0.7m),
reflecting an Indian market which is now showing clear signs of
improvement. This return to profitability reflects an increase in
JSSL's revenue to GBP41.2m, compared to GBP23.1m in the previous
period, and an operating margin of 5.6 per cent, compared to a
break-even operating margin in the previous period. Financing
expenses of GBP1.6m (2020: GBP1.6m) turn JSSL's operating profit of
GBP2.3m (2020: GBPnil) into a profit before tax of GBP0.7m (2020:
loss before tax of GBP1.6m).
Despite the recent COVID-19 challenges, JSSL's clients have
continued to place orders, resulting in a strong order book of
GBP140m (1 June 2021: GBP140m). In terms of mix, 62 per cent of the
order book represents higher margin commercial work, with the
remaining 38 per cent representing industrial projects, mainly for
JSW (1 June 2021: commercial work of 68 per cent, industrial work
of 32 per cent).
JSSL's pipeline of potential orders continues to include several
commercial projects for key developers and clients with whom it has
established strong relationships, including in the commercial
office, data centre and healthcare sectors. This, together with
JSSL's healthy order book, reflects a strong and growing underlying
demand for structural steel in India, leaving the business very
well-positioned as the market continues to recover well from the
second wave of COVID-19.
In response to this underlying demand, which is supported by
strong long-term growth projections for India and the continued
conversion of the market from concrete to steel, in tandem with our
joint venture partner, we are currently evaluating several
locations in which to purchase land to facilitate further expansion
of the business in the future. Whilst Bellary continues to ramp up
towards its maximum capacity of c,100,000 tonnes, this proposed
land purchase will allow the business to expand its geographical
footprint in India whilst providing it with the platform to build
quickly and incrementally add the necessary volume when future
market conditions are suitable.
Safety, health and the environment ('SHE')
Our updated SHE strategy is based around three key areas:
people, communication and engagement, and systems and processes.
The strategy will serve to further enhance and progress our SHE
culture and values as we strive to be industry-leading in our
approach.
In the previous year, we rolled out a new platform for reporting
SHE incidents and completing inspections to identify trends and
root causes in safety performance to enable targeted improvements.
Following the reduction in the Group's injury frequency rate
('IFR') in the previous year, we have made further improvements in
2022, and our leading safety indicators continue to trend in a
positive direction.
Our annual safety awards, now in their third successful year,
saw a marked increase in nominations. These were held in November
and it was a pleasure to recognise all the great work our people do
by celebrating the event together.
Sustainability
As part of our ambitious sustainability strategy, the Group has
committed to reduce our scope 1 and 2 greenhouse gas ('GHG')
emissions by 25 per cent by 2025 against a 2018 baseline. These
targets are based on the 2015 International Treaty on Climate
Change (the Paris Agreement), which seeks to limit global warming
to below 1.5 degrees Celsius, compared to pre-industrial levels. We
have also committed to reach Net Zero for our scope 1 and 2 carbon
emissions by 2040.
Having reduced our scope 1 and 2 GHG emissions intensity by more
than 60 per cent since 2015, the Group was recently included on the
Financial Times inaugural listing of Europe's climate leaders (May
2021) that details corporate progress in fighting climate change
and lists the 300 companies which achieved the greatest reduction
in their GHG emissions between 2014 and 2019. One of the key
metrics for ESG is reducing CO2 emissions, with the Group producing
figures that are audited by the Carbon Trust on an annual
basis.
Ahead of COP26 in October, the Group signed up to the United
Nations 'Race to Zero' campaign, in conjunction with the Science
Based Targets Initiative, to build momentum around the shift to a
decarbonised economy. This requires the Group to set a net zero
target in line with a 1.5-degree world to hold off some of the
worst climate impacts. We are also involved with a supply chain
project with Balfour Beatty, showcasing how we are engaged in their
ambition to ' Green The Chain ', together with our existing
SteelZero commitments which demonstrate how important the
transition to low embodied carbon steel production is to the
construction sector.
In line with our sustainability strategy, in August 2021, we
achieved our current year target to be accredited as carbon neutral
for our manufacturing and construction operations by the Carbon
Trust, in accordance with PAS 2060, the only recognised
international standard for carbon neutrality. This is an important
milestone in our journey towards Net Zero. Carbon neutral in this
context means that we use carbon offsetting to eliminate our
combined scope 1, scope 2 and operational scope 3 (business travel,
transport and distribution, employee commuting, and waste)
greenhouse gas emissions.
Summary and outlook
The Group has performed well during the first six months of the
year, reflecting the benefit of the strategic and operational
progress made over recent years. Our balance sheet remains strong,
we have increased revenues and profits, including a return to
profitability for JSSL, and we have continued to drive efficiencies
through our SSS programme. Our strategy remains unchanged, focused
on growth, both organic and through selective acquisitions,
operational improvements and creating further value in JSSL.
In India, we remain enthused about the long-term development
potential of the business, which is very well-positioned to take
advantage of a market which continues to show clear signs of
recovery from the second wave of COVID-19.
Whilst we retain an element of caution given the ongoing supply
chain and inflationary pressures which are impacting both us and
our clients, our expectations remain unchanged. With a record UK
and Europe order book, which provides good visibility of earnings
through FY23, a very encouraging pipeline of opportunities, and a
well-positioned business in India, the outlook for the Group
remains good.
Alan Dunsmore
Chief Executive Officer
23 November 2021
Condensed consolidated interim financial information
Consolidated income statement
Six months ended Six months ended Year ended
30 September 2021 (unaudited) 30 September 2020 (unaudited) 31 March 2021 (audited)
Non-underlying Non-underlying Non-underlying
Underlying GBP000 Total Underlying GBP000 Total UnderlyingGBP000 GBP000 Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 195,890 - 195,890 186,031 - 186,031 363,254 - 363,254
Operating
costs (185,710) (2,025) (187,735) (176,539) (1,421) (177,960) (337,784) (2,795) (340,579)
----------- -------------- --------- ----------- -------------- --------- ----------------- --------------- --------------
Operating
profit
before
share of
results of
JVs
and
associates 10,180 (2,025) 8,155 9,492 (1,421) 8,071 25,470 (2,795) 22,675
Share of
results of
JVs
and
associates 581 - 581 (623) - (623) (344) - (344)
Operating
profit 10,761 (2,025) 8,736 8,869 (1,421) 7,448 25,126 (2,795) 22,331
Net finance
expense (479) (338) (817) (447) (429) (876) (795) (429) (1,224)
----------- -------------- --------- ----------- -------------- --------- ----------------- --------------- --------------
Profit
before tax 10,282 (2,363) 7,919 8,422 (1,850) 6,572 24,331 (3,224) 21,107
Taxation (1,939) (809) (2,748) (1,719) 352 (1,367) (4,574) 771 (3,803)
----------- -------------- --------- ----------- -------------- --------- ----------------- --------------- --------------
Profit for
the period 8,343 (3,172) 5,171 6,703 (1,498) 5,205 19,757 (2,453) 17,304
=========== ============== ========= =========== ============== ========= ================= =============== ==============
Earnings
per share:
Basic 2.71p (1.03)p 1.68p 2.18p (0.48)p 1.70p 6.43p (0.80)p 5.63p
Diluted 2.69p (1.02)p 1.67p 2.18p (0.48)p 1.70p 6.43p (0.80)p 5.63p
Consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
30 September 30 September 31 March 2021
2021 2020
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Actuarial gain/(loss)
on defined benefit pension
scheme* 1,030 (4,957) (4,906)
(Losses)/gains taken to
equity on cash flow hedges (177) (916) 1,699
Reclassification adjustments
on cash flow hedges 14 455 251
Exchange difference on
foreign operations 1 (26) 34
Tax relating to components
of other comprehensive
income* (258) 942 734
Other comprehensive income
for the period 610 (4,502) (2,188)
Profit for the period
from continuing operations 5,171 5,205 17,304
-------------- --------------- -------------------------
Total comprehensive income
for the period attributable
to equity shareholders
of the parent 5,781 703 15,116
============== =============== =========================
* These items will not be subsequently reclassified to the
consolidated income statement.
Consolidated balance sheet
At At At
30 September 30 September 31 March
2021 2020
(unaudited) (unaudited) 2021
GBP000 GBP000 (audited)
GBP000
ASSETS
Non-current assets
Goodwill 85,390 70,714 85,782
Other intangible assets 7,610 6,230 9,630
Property, plant and equipment 92,401 88,160 91,698
Right-of-use asset 9,994 9,494 9,808
Interests in JVs and associates 29,371 26,066 28,790
Contract assets, trade and other
receivables 4,282 - 4,368
229,048 200,664 230,076
------------- ------------- ----------------------
Current assets
Inventories 9,102 6,119 10,231
Contract assets, trade and other
receivables 88,112 68,345 67,847
Derivative financial instruments 679 - 1,049
Current tax asset 177 1,963 3,584
Cash and cash equivalents 11,045 29,802 24,983
109,115 106,229 107,694
------------- ------------- ----------------------
Total assets 338,163 306,893 337,770
============= ============= ======================
LIABILITIES
Current liabilities
Trade and other payables (87,413) (79,531) (77,803)
Financial liabilities - borrowings (5,900) (3,500) (5,900)
Financial liabilities - leases (1,531) (1,086) (1,744)
Derivative financial instruments - (1,612) -
(94,844) (85,729) (85,447)
------------- ------------- ----------------------
Non-current liabilities
Trade and other payables (4,009) - (10,639)
Retirement benefit obligations (20,366) (23,022) (22,379)
Financial liabilities - borrowings (11,900) (7,000) (14,850)
Financial liabilities - leases (9,321) (9,513) (9,365)
Deferred tax liabilities (5,225) (2,795) (4,161)
(50,821) (42,330) (61,394)
------------- ------------- ----------------------
Total liabilities (145,665) (128,059) (146,841)
------------- ------------- ----------------------
NET ASSETS 192,498 178,834 190,929
============= ============= ======================
EQUITY
Share capital 7,725 7,689 7,706
Share premium 88,167 87,292 87,658
Other reserves 4,090 281 3,464
Retained earnings 92,516 83,572 92,101
------------- ------------- ----------------------
TOTAL EQUITY 192,498 178,834 190,929
============= ============= ======================
Consolidated statement of changes in equity
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2021 7,706 87,658 3,464 92,101 190,929
Total comprehensive income
for the period - - (163) 5,944 5,781
Ordinary shares issued* 19 509 - - 528
Equity settled share-based
payments - - 789 - 789
Dividends paid - - - (5,529) (5,529)
At 30 September 2021 (unaudited) 7,725 88,167 4,090 92,516 192,498
=============== =============== =============== =============== =============
*The issue of shares represents shares allotted for the 2018 and
2020 Sharesave schemes.
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2020 7,648 87,292 1,402 87,333 183,675
Total comprehensive income
for the period - - (487) 1,190 703
Ordinary shares issued* 41 - - - 41
Equity settled share-based
payments - - (634) 572 (62)
Dividends paid - - - (5,523) (5,523)
At 30 September 2020 (unaudited) 7,689 87,292 281 83,572 178,834
=============== =============== =============== =============== ==============
*The issue of shares represents shares allotted to satisfy the
2017 Performance Share Plan award, which vested in June 2020.
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2020 7,648 87,292 1,402 87,333 183,675
Total comprehensive income
for the year - - 1,984 13,132 15,116
Ordinary shares issued* 58 366 - - 424
Equity settled share-based
payments - - 78 531 609
Dividends paid - - - (8,895) (8,895)
At 31 March 2021 (audited) 7,706 87,658 3,464 92,101 190,929
=============== =============== =============== =============== =============
*The issue of shares represents shares allotted to satisfy the
2017 Performance Share Plan award, which vested in June 2020 and
the 2017 Sharesave scheme.
Consolidated cash flow statement
Six months Six months Year
ended ended
30 September 30 September ended
2021 2020
(unaudited) (unaudited) 31 March
GBP000 GBP000 2021
(audited)
GBP000
Net cash flow from operating activities (367) 12,506 25,349
Cash flows from investing activities
Proceeds on disposal of property,
plant and equipment 185 90 104
Purchases of land and buildings (2,098) - (247)
Purchases of other property, plant
and equipment (1,310) (1,553) (6,097)
Purchases of intangible assets (125) (276) (276)
Investment in JVs and associates - - (2,444)
Investment in subsidiary entity,
net of cash acquired (526) - (17,489)
Net cash used in investing activities (3,874) (1,739) (26,449)
----------------------- ----------------------- ----------------------
Cash flows from financing activities
Interest paid (537) (477) (699)
Dividends paid (5,529) (5,523) (8,895)
Proceeds from shares issued 528 41 424
Proceeds from borrowings - - 12,000
Repayment of borrowings (2,950) (17,625) (19,375)
Repayment of lease liabilities (1,209) (775) (1,710)
Loans issued to JVs and associates - (944) -
Net cash used in financing activities (9,697) (25,303) (18,255)
----------------------- ----------------------- ----------------------
Net decrease in cash and cash
equivalents (13,938) (14,536) (19,355)
Cash and cash equivalents at beginning
of period 24,983 44,338 44,338
----------------------- ----------------------- ----------------------
Cash and cash equivalents at end
of period 11,045 29,802 24,983
======================= ======================= ======================
Notes to the condensed consolidated interim financial
information
1) General information
Severfield plc ('the Company') is a company incorporated and
domiciled in the UK. The address of its registered office is Severs
House, Dalton Airfield Industrial Estate, Dalton, Thirsk, North
Yorkshire, YO7 3JN. The Company is listed on the London Stock
Exchange.
The condensed consolidated interim financial information does
not constitute the statutory financial statements of the Group
within the meaning of section 435 of the Companies Act 2006. The
statutory financial statements for the year ended 31 March 2021
were approved by the board of directors on 16 June 2021 and have
been delivered to the registrar of companies. The report of the
auditors on those financial statements was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain any statement under section 498 of the Companies Act
2006.
The condensed consolidated interim financial information for the
six months ended 30 September 2021 has been reviewed, not audited,
and was approved for issue by the board of directors on 22 November
2021.
2) Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 September 2021 has been prepared in accordance
with IAS 34 'Interim Financial Reporting' as adopted for use in the
UK. As required by the Disclosure Guidance and Transparency Rules
of the Financial Conduct Authority, the condensed consolidated
interim financial information has been prepared applying the
accounting policies and presentation that were applied in the
preparation of the statutory financial statements for year ended 31
March 2021, which were prepared in accordance with International
Financial Reporting Standards ('IFRS') adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
Going concern
Net debt (pre-IFRS 16 basis) at 30 September 2021 was GBP6.7m,
representing cash of GBP11.1m offset by term loans of GBP17.8m. The
Group has a GBP25m revolving credit facility ('RCF') with HSBC and
Virgin Money that matures in October 2023. The RCF, of which GBP10m
is available as an overdraft facility, includes an additional
accordion facility of GBP20m, which allows the Group to increase
the aggregate available borrowings to GBP45m. Throughout the
year-to-date, the Group has maintained significant amounts of
headroom in its financing facilities and associated covenants.
In the previous year, the Group continued to trade safely and
profitably with positive operating cash flows whilst operating
under various COVID-19 restrictions. Whilst there continues to be
some uncertainty associated with COVID-19, the directors expect the
Group to remain similarly resilient over the forecast period whilst
it continues to operate under any further potential restrictions
until the end of the pandemic. The directors have reviewed the
Group's forecasts and projections for the remainder of the 2022
financial year and up to 12 months from the date of approval of the
interim financial statements, including sensitivity analysis to
assess the Group's resilience to potential adverse outcomes
including a highly pessimistic 'worst case' scenario. This 'worst
case' is based on the combined impact of securing no further orders
and further significant disruption for the entirety of the going
concern period. Given the strong previous performance of the Group,
this scenario is only being modelled to stress test our strong
financial position and demonstrate the existence of considerable
headroom in the Group's covenants and borrowing facilities.
Having also made appropriate enquiries, the directors consider
it reasonable to assume that the Group has adequate resources to be
able to operate within the terms and conditions of its financing
facilities for at least 12 months from the approval of the
condensed Group financial statements. For this reason, the
directors continue to adopt the going concern basis in preparing
the condensed consolidated interim financial information.
3) Accounting policies
Except as described below, the accounting policies applied in
preparing the condensed consolidated interim financial information
are consistent with those used in preparing the statutory financial
statements for the year ended 31 March 2021.
Taxes on profits in interim periods are accrued using the tax
rate that will be applicable to expected total annual profits.
New and amended standards and interpretations need to be adopted
in the first interim financial statements issued after their
effective date (or date of early adoption).
There are no new IFRSs and IFRICs that are effective for the
first time for the six months ended 30 September 2021 which have a
material impact on the Group.
4) Risks and uncertainties
The principal risks and uncertainties which could have a
material impact upon the Group's performance over the remaining six
months of the year ending 31 March 2022, other than as disclosed
below, have not changed significantly from those disclosed on pages
80 to 86 of the strategic report included in the annual report for
the year ended 31 March 2021. The annual report is available on the
Company's website www.severfield.com. These risks and uncertainties
include, but are not limited to:
-- Health and safety
-- Supply chain
-- Commercial and market environment
-- COVID-19
-- Cyber security
-- Failure to mitigate onerous contract terms
-- Indian joint venture
-- People
The preparation of the condensed consolidated interim financial
information under IFRS requires management to make judgements,
assumptions and estimates that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expense. Assumptions and estimates are reviewed on an ongoing
basis and any revisions to them are recognised in the period in
which they are revised. The Group's critical accounting judgements
and estimates have not changed significantly from those disclosed
on page 167 of the annual report for the year ended 31 March
2021.
Revenue and profit recognition
Recognition of revenue and profit is based on judgements made in
respect of the ultimate profitability of a contract. There are
eight contracts that management consider require significant
accounting estimates and the Group had included revenue and profit
in the period relating to these contracts of GBP63,100,000 and
GBP7,100,000, respectively. Management has performed sensitivity
analysis on these contracts and assessed that if the Group's
average contract margin increased or decreased by one per cent, the
impact of this across these projects would result in an increase or
corresponding decrease in profit in the year of c.GBP630,000. At
the balance sheet date, amounts due from construction contract
customers, included in contract assets, trade and other receivables
was GBP38,845,000 (2020: GBP22,764,000).
5) Segmental analysis
In accordance with IFRS 8, the Group has identified its
operating segments with reference to the information regularly
reviewed by the executive committee (the chief operating decision
maker ('CODM')) to assess performance and allocate resources. On
this basis the CODM has identified one operating segment
(construction contracts) which in turn is the only reportable
segment of the Group.
The constituent operating businesses have been aggregated as
they have businesses with similar products and services, production
processes, types of customers, methods of distribution, regulatory
environments, and economic characteristics. Given that only one
operating and reporting segment exists, the remaining disclosure
requirements of IFRS 8 are provided within the consolidated income
statement and balance sheet.
There has been no change in the basis of segmentation or in the
basis of measurement of segment profit or loss in the period.
6) Seasonality
There are no seasonal variations which impact the split of
revenue between the first and second half of the financial year.
Underlying movements in contract timing and phasing, which are an
ongoing feature of the business, will continue to drive moderate
fluctuations in half yearly revenues.
7) Non-underlying items
At At At
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Operating costs (2,025) (1,421) (2,795)
Finance expense (338) (429) (429)
------------- ------------- ---------
Non-underlying items before
tax (2,363) (1,850) (3,224)
------------- ------------- ---------
Tax on non-underlying items (809) 352 771
------------- ------------- ---------
Non-underlying items after
tax (3,172) (1,498) (2,453)
------------- ------------- ---------
At At At
30 September 30 September 31 March
Non-underlying items before 2021 2020 2021
tax consist of: GBP000 GBP000 GBP000
Amortisation of acquired intangible
assets (2,025) (1,421) (2,842)
Unwinding of discount on deferred
and contingent consideration (338) (429) (429)
Acquisition-related expenses - - (689)
Contingent consideration movements - - 736
Non-underlying items before
tax (2,363) (1,850) (3,224)
------------- ------------- ---------
Amortisation of acquired intangible assets represents the
amortisation of customer relationships, order books and brand name,
which were identified on the acquisition of Harry Peers and
provisionally on the acquisition of DAM Structures.
Tax on non-underlying items includes the impact of an increase
in future corporation tax rates from 19 per cent to 25 per cent,
that have been substantively enacted, on the Group's deferred tax
liability. In the period, a charge of GBP809,000 has been
recognised, comprising a tax credit on non-underlying items of
GBP505,000 offset by a charge of GBP1,314,000 relating to the
increase in future corporation tax rates.
In the prior year, the Group incurred acquisition-related
expenses of GBP689,000 representing non-recurring legal and
consultancy costs associated with the DAM Structures
acquisition.
Non-underlying items have been separately identified to provide
a better indication of the Group's underlying business performance.
They have been separately identified as a result of their
magnitude, incidence or unpredictable nature. These items are
presented as a separate column within their consolidated income
statement category. Their separate identification results in a
calculation of an underlying profit measure in the same way as it
is presented and reviewed by management.
8) Taxation
The income tax expense reflects the estimated underlying
effective tax rate of 19 per cent on profit before taxation for the
Group for the year ending 31 March 2022.
9) Dividends
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
2020 final - 1.8p per share - 5,523 5,523
2021 interim - 1.1p per share - - 3,372
2021 final - 1.8p per share 5,529 - -
5,529 5,523 8,895
====================== ====================== ======================
The directors have declared an interim dividend in respect of
the six months ended 30 September 2021 of 1.2p per share (2020:
1.1p per share) which will amount to an estimated dividend payment
of GBP3,710,000 (2020: GBP3,372,000). This dividend is not
reflected in the balance sheet as it was declared and will be paid
after the balance sheet date.
10) Earnings per share
Earnings per share is calculated as follows:
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Earnings for the purposes
of basic earnings per share
being net profit attributable
to equity holders of the parent
company 5,171 5,205 17,304
-------------------- ------------------- --------------
Earnings for the purposes
of underlying basic earnings
per share being underlying
net profit attributable to
equity holders of the parent
company 8,343 6,703 19,757
-------------------- ------------------- --------------
Number of shares Number Number Number
Weighted average number of
ordinary shares for the purposes
of basic earnings per share 308,287,952 306,860,362 307,337,645
Effect of dilutive potential
ordinary shares and under
share plans 2,109,620 - 112
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share 310,397,572 306,860,362 307,337,757
==================== =================== ==============
Basic earnings per share 1.68p 1.70p 5.63p
Underlying basic earnings
per share 2.71p 2.18p 6.43p
Diluted earnings per share 1.67p 1.70p 5.63p
Underlying diluted earnings
per share 2.69p 2.18p 6.43p
11) Property, plant and equipment
During the period, the Group acquired land and buildings of
GBP2,098,000 (2020: GBPnil) and other property, plant and equipment
of GBP1,310,000 (2020: GBP1,553,000). The Group also disposed of
other property, plant and equipment for GBP185,000 (2020:
GBP90,000) resulting in a loss on disposal of GBP2,000 (2020:
profit of GBP14,000).
12) Intangible assets
During the period, the Group capitalised software-related costs
of GBP125,000. In the prior period, the Group acquired intangible
assets of GBP276,000, relating to product licences.
13) Net (debt)/funds
At At At
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Borrowings (17,800) (10,500) (20,750)
Cash and cash equivalents 11,045 29,802 24,983
Unamortised debt arrangement
costs 103 152 128
Net (debt)/funds (pre-IFRS
16) (6,652) 19,454 4,361
------------- ------------------- -------------------
IFRS 16 lease liabilities (10,852) (10,599) (11,109)
------------- ------------------- -------------------
Net (debt)/funds (post-IFRS
16) (17,504) 8,855 (6,748)
============= =================== ===================
The Group excludes IFRS 16 lease liabilities from its measure of
net funds / debt as they are excluded from the definition of net
debt as set out in the Group's borrowing facilities.
14) Fair value disclosures
Financial instruments consist of borrowings, cash, items that
arise directly from its operations and derivative financial
instruments. Cash and cash equivalents, trade and other receivables
and trade and other payables generally have short terms to
maturity. For this reason, their carrying values approximate to
their fair values. Borrowings relate to amounts drawn down against
the revolving credit facility and amounts outstanding under the
term loan, the carrying amounts of which approximate to their fair
values by virtue of being floating rate instruments.
Derivative financial instruments are the only instruments valued
at fair value through profit or loss and are valued as such on
initial recognition. These are foreign currency forward contracts
measured using quoted forward exchange rates and yield curves
matching the maturities of the contracts. These derivative
financial instruments are categorised as level 2 financial
instruments, which are financial assets and liabilities that do not
have regular market pricing, but whose fair value can be determined
based on other data values or market prices.
The fair values of the Group's derivative financial instruments
which are marked-to-market and recorded in the balance sheet were
as follows:
At At At
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Assets/(liabilities)
Foreign exchange contracts 679 (1,612) 1,049
============= ============= =========
15) Net cash flow from operating activities
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Operating profit from continuing
operations 8,736 7,448 22,331
Adjustments:
Depreciation of property,
plant and equipment 2,550 2,181 4,434
Right-of-use asset depreciation 765 789 1,569
Loss/(gain) on disposal of
other property, plant
and equipment 2 (14) 40
Amortisation of intangible
assets 2,032 1,421 2,846
Movements in pension scheme
liabilities (983) (623) (1,215)
Share of results of JVs and
associates (581) 623 344
Share-based payments 790 (62) 610
Movement in contingent consideration - - (736)
Operating cash flows before
movements in working capital 13,311 11,763 30,223
Decrease/(increase) in inventories 1,195 737 (1,140)
(Increase)/decrease in receivables (16,864) 7,186 12,551
Increase/(decrease) in payables 3,852 (4,816) (11,645)
Cash generated from operations 1,494 14,870 29,989
Tax paid (1,861) (2,364) (4,640)
-------------- -------------- ---------------------
Net cash flow from operating
activities (367) 12,506 25,349
============== ============== =====================
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and demand deposits and other short-term highly liquid investments
with a maturity of three months or less.
16) Related party transactions
There have been no changes in the nature of related party
transactions as described in note 31 on page 193 of the annual
report for year ended 31 March 2021 and there have been no new
related party transactions which have had a material effect on the
financial position or performance of the Group in the six months
ended 30 September 2021, except as stated below.
During the period, the Group provided services in the ordinary
course of business to its Indian joint venture, JSW Severfield
Structures ('JSSL') and in the ordinary course of business
contracted with and purchased services from its UK joint venture,
Construction Metal Forming Limited ('CMF'). The Group's share of
the retained profit in JVs and associates of GBP581,000 (2020: loss
of GBP623,000) for the period reflects a profit from JSSL of
GBP275,000 (2020: loss of GBP718,000) and a profit from CMF of
GBP306,000 (2020: GBP95,000).
The Group incurred additional operating costs in relation to the
day-to-day running of its Indian joint venture ('JSSL') of
GBP133,000 (2020: GBP237,000). Those costs were recharged to JSSL
during the period and the amount due from JSSL at 30 September 2021
was GBP472,000 (2020: GBP589,000). The amount due to JSSL at 30
September 2021 was GBP360,000.
During the period, the Group has contracted with and purchased
services from CMF amounting to sales of GBP81,000 and purchases of
GBP8,165,000. The amounts due from and to CMF at 30 September 2021
was GBP851,000 and GBP1,918,000 respectively. In July 2021, a
short-term working capital loan of GBP750,000 was made by
Severfield plc to CMF, which was outstanding at 30 September
2021.
During the period, the Group contracted with and purchased
services from MET Structures, amounting to sales of GBP7,570,000
(2020: GBP750,000) and purchases of GBP1,450,000 (2020:
GBP572,000). The amount due from MET Structures at 30 September
2021 was GBP1,169,000 (2020: GBP611,000) and the amount outstanding
to MET Structures was GBP282,000 (2020: GBPnil). MET Structures
shares common directors with the Group.
17) Contingent liabilities
Liabilities have been recorded for the directors' best estimate
of uncertain contract positions, known legal claims, investigations
and legal actions in progress. The Group takes legal advice as to
the likelihood of success of claims and actions and no liability is
recorded where the directors consider, based on that advice, that
the action is unlikely to succeed, or that the Group cannot make a
sufficiently reliable estimate of the potential obligation. The
Group also has contingent liabilities in respect of other issues
that may have occurred, but where no legal or contractual claim has
been made and it is not possible to reliably estimate the potential
obligation.
The Company and its subsidiaries have provided unlimited
multilateral guarantees to secure any bank overdrafts and loans of
all other Group companies. At 30 September 2021 this amounted to
GBPnil (2020: GBPnil). The Group has also given performance bonds
in the normal course of trade.
18) Cautionary statement
The Interim Management Report ('IMR') has been prepared solely
to provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The IMR should not be relied on by any other party or for
any other purpose.
The IMR contains certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
19) Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the
condensed consolidated interim financial information has been
prepared in accordance with IAS 34 as adopted for use in the UK,
and that the interim report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- An indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed consolidated interim financial information, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- Material related party transactions that have occurred in the
first six months of the financial year and any material changes in
the related party transactions described in the last annual report
and financial statements.
The maintenance and integrity of the Severfield plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
By order of the board
Alan Dunsmore Adam Semple
Chief Executive Group Finance
Officer Director
23 November 2021 23 November 2021
Independent review report to Severfield plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2021 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement, and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2021 is not prepared, in all material respects, in
accordance with IAS 34 'Interim Financial Reporting' as adopted for
use in the UK and the Disclosure Guidance and Transparency Rules
('the DTR') of the UK's Financial Conduct Authority ('the UK
FCA').
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The latest annual financial statements of the group were
prepared in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and the next annual financial statements will be
prepared in accordance with UK-adopted international accounting
standards. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted for use in
the UK.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
David Morritt
for and on behalf of KPMG LLP
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
23 November 2021
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END
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November 23, 2021 02:00 ET (07:00 GMT)
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