TIDMSFR
RNS Number : 0188C
Severfield PLC
16 June 2021
16 June 2021
Results for the year ended 31 March 2021
Resilient performance despite COVID-19, good cash generation and
strong balance sheet, UK and Europe order book of GBP301m, India
order book of GBP140m
Severfield plc, the market leading structural steel group,
announces its results for the 12-month period ended 31 March
2021.
GBPm 12 months to 12 months to
31 March 2021 31 March 2020
---------------
Revenue 363.3 327.4
Underlying* operating profit
(before JVs and associates) 25.5 27.0
Underlying* operating margin
(before JVs and associates) 7.0% 8.2%
Operating profit (before JVs and
associates) 22.7 24.7
Underlying* profit before tax 24.3 28.6
Profit before tax 21.1 25.8
Underlying* basic earnings per
share 6.4p 7.7p
Basic earnings per share 5.6p 6.7p
Return on capital employed ('ROCE') 13.6% 17.2%
-------------------------------------- --------------- ---------------
* Underlying results are stated before non-underlying items of
GBP3.2m (2020: GBP2.8m) consisting of the amortisation of acquired
intangible assets of GBP2.8m (2020: GBP1.4m) and
acquisition-related expenses of GBP0.4m (2020: GBP1.4m)
** The Group excludes IFRS 16 lease liabilities from its measure
of net funds / debt as they are excluded from the definition of net
debt as set out in the Group's borrowing facilities
Highlights
-- Revenue up 11% to GBP363.3m (2020: GBP327.4m)
-- Underlying* profit before tax of GBP24.3m (2020: GBP28.6m), demonstrates resilience of the Group against COVID-19
backdrop
-- Underlying* basic earnings per share of 6.4p (2020: 7.7p)
-- Total dividend of 2.9p per share (2020: 2.9p per share), includes proposed final dividend of 1.8p per share
(2020: 1.8p per share)
-- A cquisition of DAM Structures, an innovative steel fabrication company, giving the Group immediate access to
attractive, complementary market sectors with strong growth potential including the propping, railway and steel
piling markets
-- Good cash generation resulting in y ear-end cash balances of GBP25.0m. Net funds (pre-IFRS 16 basis**) were
GBP4.4m (2020: GBP16.4m), including acquisition loans of GBP20.7m (2020: GBP13.1m)
-- No claims made under COVID-related government schemes, all tax deferrals now fully up to date
-- Over 100 projects undertaken during the year in the UK, Ireland and continental Europe in diverse market sectors
including industrial and distribution, data centres, nuclear and commercial offices
-- UK and Europe order book of GBP301m at 1 June 2021 (1 November 2020: GBP287m), including GBP18m for DAM
Structures, of which GBP241m is for delivery over the next twelve months
-- Share of loss from Indian joint venture ('JSSL') of GBP0.7m (2020: profit of GBP2.2m), reflecting the COVID-19
impacted loss in H1 and break-even profit position in H2
-- India order book of GBP140m at 1 June 2021 (1 November 2020: GBP98m), a record high for the company, reflects
strong underlying demand for structural steel in India
FY22 and outlook
-- High quality UK and Europe order book supports continued growth throughout the 2022 financial year and beyond
-- Tendering and pipeline activity in the UK and Europe remains very encouraging, albeit at tighter prices given
current market conditions
-- Steel price increases and supply chain pressures continue to be effectively managed
-- India - output currently being disrupted by ongoing second wave of COVID-19, step up in order book, strong
pipeline and existing client relationships leave JSSL very well positioned once current COVID-19 issues subside
-- New Group sustainability strategy with target to be operationally carbon neutral in the 2021 calendar year, the
Group signed up to the SteelZero initiative in April 2021
-- S trategy remains unchanged, based on growth, both organic and through selective acquisitions, operational
improvements and creating further value in India
-- Positive momentum is evident across the Group which, in combination with our cash generative nature and market
sector, geographical and client diversity , provides the platform for further operational and strategic progress
in the 2022 financial year
Alan Dunsmore, Chief Executive Officer commented:
' The Group's strategy to build a balanced business, with
geographic, sector and client diversity, has facilitated not only
revenue growth of around 30 per cent over the last three years but
has also provided us with resilience during the pandemic. Our
strong balance sheet and ability to generate cash has enabled us to
continue to invest in our operations and in strategic acquisitions,
such as DAM Structures. We have an established platform for further
operational and strategic progress in the year ahead and with the
current order book levels and pipeline activity, have the capacity
to deliver enhanced shareholder returns in the future.'
For further information, please contact:
Alan Dunsmore
Severfield Chief Executive Officer 01845 577 896
Adam Semple
Group Finance Director 01845 577 896
Jefferies International Simon Hardy 020 7029 8000
Will Soutar 020 7029 8000
Camarco Ginny Pulbrook 020 3757 4980
Tom Huddart 020 3757 4980
Notes to editors:
Severfield is the UK's market leader in the design, fabrication
and construction of structural steel, with a total capacity of
c.165,000 tonnes of steel per annum. The Group has six sites,
c.1,500 colleagues 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).
OPERATING REVIEW
Group overview
Whilst the year has been dominated by the COVID-19 pandemic, the
2021 results demonstrate the resilience of the Group and serve to
highlight its many strengths including the benefit of the strategic
and operational progress made in recent years, the a dditional
resilience provided by our market sector, geographical and client
diversity, the skill and adaptability of our workforce and our
strong financial position.
The Group has coped well with the challenges presented by
COVID-19. This is reflected in an increased UK and Europe order
book of GBP301m, increased revenues and good cash generation in
2021, which has enabled us to continue to pay dividends and support
ongoing investment in the business, both organically and by
acquisition.
In 2021, we increased our revenue by 11 per cent to GBP363.3m
(2020: GBP327.4m) and are pleased with our profit performance and
an underlying profit before tax of GBP24.3m (2020: GBP28.6m), which
was achieved despite the COVID-19 related disruption that
particularly impacted profitability through the under-recovery of
overheads in Q1. The Group's factories and sites in the UK and
Europe are all fully operational, and we have been trading at
normal (pre-pandemic) levels, in line with government and industry
guidelines, since June 2020.
The 2021 results include the acquisition of DAM Structures, an
innovative steel fabrication company, giving the Group immediate
access to attractive, complementary market sectors with strong
growth potential including the propping, railway and steel piling
markets. DAM is integrating well into the Group's existing
operations and has contributed revenue of GBP3.9m and a nominal
profit for the one month of trading since its date of
acquisition.
We have maintained a strong financial position throughout the
year, allowing us to make the right decisions and take the right
actions for the long-term benefit of the Group. Year-end net funds
(on a pre-IFRS 16 basis) were GBP4.4m (2020: GBP16.4m), which
includes the outstanding term loans of GBP20.7m (2020: GBP13.1m)
for the DAM Structures and Harry Peers acquisitions.
The Indian joint venture ('JSSL') has continued its recovery
from the disruptive effects of COVID-19. After a difficult first
half, the company maintained a largely break-even profit position
in H2 of 2021. The return to more normal trading conditions in
India is being considerably disrupted by the ongoing second wave of
COVID-19 which is currently impacting output in H1 of 2022.
Notwithstanding this, JSSL's order book at 1 June 2021 has
increased to a record level of GBP140m (1 November 2020: GBP98m),
which together with a strong pipeline of potential orders, is
reflective of the strong underlying demand for structural steel in
India.
Strategy
The Group's strategy is focused on its core strengths of
engineering and construction in the UK, Republic of Ireland and
continental Europe. This well-established strategy is unchanged,
focused on growth, both organic and through selective acquisitions,
operational improvements and creating further value in JSSL.
In recent years, the evolution of this strategy has been
particularly evident in our significant market sector, geographical
and client diversification, which has enabled us to successfully
navigate periods of market softness in certain of our main sectors
in the UK, notably commercial offices. This has resulted in a more
balanced business and a resilience which has seen us successfully
negotiate the headwinds of Brexit and the COVID-19 pandemic,
facilitated revenue growth of c.30 per cent over the last three
years and reinforced the Group's strong balance sheet and ability
to generate cash which have allowed us to continue to invest in our
operations and in acquisitions through Harry Peers and DAM
Structures.
As a result, our capabilities are applicable to many market
sectors which are expected to see increasing opportunities in the
medium to long term. The Group is well positioned to meet the
demand for ongoing investment in the UK's infrastructure, while our
diverse construction activities remain focused on key areas such as
industrial and distribution, data centres, stadia and leisure,
nuclear and commercial offices. In India, despite the current
challenges of COVID-19, we remain positive about the long-term
trajectory of the market and of the value creation potential of
JSSL, especially considering the structural changes in the economy
over recent years, the government's ongoing focus on simplifying
regulations and the 'ease of doing business', and the significant
expansion of the business already evidenced to date which has
resulted in a business capable of producing over 100,000 tonnes of
steelwork from one site in Bellary.
This platform provides Severfield with the capacity to deliver
enhanced shareholder returns in the future and to fulfil our
strategic growth aspirations.
Board change
In 2021, as part of our board succession planning process, we
commenced a selection process for an additional non-executive
director. This has resulted in Rosie Toogood being appointed to the
board with effect from 16 June 2021. Rosie brings a wealth of
manufacturing and engineering experience within the modular homes,
aerospace and nuclear sectors to the board. She is currently CEO of
L&G's modular homes business having previously had a successful
25-year career at Rolls-Royce, progressing from a finance executive
into procurement and technology positions followed by a general
management role where she was Executive Vice President for the
Compressors division.
Specific actions in response to COVID-19
In managing our response to the pandemic, the primary focus has
been on the health, safety and wellbeing of all colleagues, clients
and the wider public, together with protecting the financial
strength of the Group. During the year all our factories and sites
implemented new operating procedures, in accordance with national
government, devolved administration and industry guidance,
including changes to working practices, enhanced levels of
cleaning, additional hygiene facilities and social distancing.
The Group's strong cash position has been carefully managed
during the pandemic whilst ensuring that we continue to support our
supply chain partners. Since 31 March 2020, the Group has continued
to operate in a net funds position, maintaining significant amounts
of cash headroom in banking facilities, which mature in October
2023.
Our strong financial position has also meant that, whilst we
furloughed some of our workforce in Q1, all of whom have long since
returned to work, we did not claim for support under any
employee-related government support packages including the
Coronavirus Job Retention Scheme.
During the year, the Group took advantage of certain permissions
to defer VAT, PAYE and other tax payments. At the year end, all
these deferred amounts had been repaid and were fully up to date.
In addition, borrowings of GBP15m, originally drawn down in late
March 2020 under the Group's revolving credit facility ('RCF') as a
precautionary measure in response to the COVID-19 outbreak, were
repaid in June 2020.
UK and Europe
Revenue was up 11 per cent over the prior year mainly reflecting
an increase in order flow and the full year revenue effect of Harry
Peers which was acquired in October 2019. During the year, we
continued to work on a large industrial facility, which includes a
bespoke paint package, and a large data centre, both in the
Republic of Ireland, a large data centre in Finland, several large
distribution facilities in the UK and one in Germany, the new
stadium works at Fulham F.C. and the redevelopment of Lord's
Cricket Ground (Compton and Edrich stands). We have also continued
our work on the new Google Headquarters at King's Cross, together
with several mid-sized office developments, both in London and the
UK regions (including another project at Kings Cross, Bankside
Yards, the Assembly Buildings in Bristol, and Sky Studios in
Elstree).
As expected, the disruption experienced by the Group due to
COVID-19, both on its sites and within its factories, impacted 2021
profitability, particularly in Q1. Notwithstanding this, overall
activity levels increased from the beginning of the first lockdown
in March and returned to normal (pre-pandemic) levels from Q2
onwards. The subsequent regional and further national lockdown
restrictions imposed in the second half of the year did not result
in any further significant disruption or have a material impact on
the Group's profitability.
The underlying operating margin (before JVs and associates) was
7.0 per cent (2020: 8.2 per cent), resulting in an underlying
operating profit (before JVs and associates) of GBP25.5m (2020:
GBP27.0m), which includes a one-off profit (the associated revenue
is included in Group revenue) on the bespoke paint package on the
large industrial facility in the Republic of Ireland (referred to
above). Unsurprisingly, the disruptive effects of COVID-19 have
resulted in the 2021 operating margin of 7.0 per cent falling below
that achieved in the previous year, however the margin in H2
recovered well and, looking forward, we expect the 2022 operating
margin to be approaching to our normal range of 8 to 10 per cent,
which was established pre-pandemic.
Smarter, Safer, more Sustainable
The UK margin performance continues to reflect improvements to
our operational execution. This includes the benefits from our
programme of projects categorised under the banner of 'Smarter,
Safer, more Sustainable' ('SSS'). These initiatives continue to
focus on manufacturing efficiency and improving many aspects of our
internal operations, including the application of Lean
manufacturing techniques, optimisation of factory processes and
production flows, quality control and cost reduction programmes,
all of which have served the Group well during the pandemic.
During the year, we have continued the rollout of new software
systems including dashboards, workflow management and
project-specific commercial and operational tools to better inform
decision-making and improve efficiencies both in our factories and
on our construction sites. This includes the use of these systems
on mobile devices to capture information at the point of use and to
provide live information to operatives. As part of our digital
transformation initiative, we are devoting skilled resource to
reviewing and responding to developing technologies (including
virtual reality) and are making good progress with the automation
of repetitive tasks. COVID-19 has also allowed us to adapt to new
ways of working including the adoption and widespread use of
Microsoft Teams.
Engineering solutions are vital to our success, and our ability
to deliver for our clients is dependent on us driving excellence
throughout our engineering teams. In 2021, we have invested in this
capability and have established a central engineering team, under
the leadership of our new Group engineering director. This team is
focusing on engineering efficiency, including looking at new and
innovative ways of working, our approach to drawing and design, and
the optimisation of engineering software, building on the previous
work of our engineering forum.
We continue to invest in and streamline our factories,
particularly at our main production centre in Dalton, where we are
continuing to upgrade and expand our fabrication capability to
improve the output and efficiency of these operations. During the
year, we implemented a new coatings management system at Dalton
covering improvements to the specification, management and
application of paint systems, which are becoming ever more complex
and bespoke. These improvements form part of the Group's ongoing
capital investment programme, taking our capital investment in the
Group to close to GBP50m over the last seven years.
Continued stability in our management teams remains a key
strength of the business. During the year, we updated our
succession plan which identifies and develops future senior leaders
from within the business. We believe that being able to promote
from within is critical so that we can retain specialist skills and
experience, especially given the capabilities and expertise that we
provide to our clients. We continue to promote our graduate and
apprenticeship schemes, which are particularly focused on welders
and technical staff, including our metal fabricator apprenticeship
programme, which we developed in conjunction with the Institute of
Apprenticeships.
Our new intranet, SeverfieldConnect, which was launched in 2021,
has allowed us to keep colleagues up to date on the strategy,
performance and progress of the organisation, general company news
and health and wellbeing issues. In response to COVID-19,
SeverfieldConnect was also used to provide additional regular
updates to colleagues and to provide practical advice and support
during the pandemic, through a dedicated intranet page, Coronavirus
Hub. We also regularly use social network sites and emails to
deliver key messages to colleagues and to encourage the use of our
new communications platforms for colleague engagement.
Order book, pipeline and market conditions
The future success of the Group is determined, amongst other
things, by the quality of the secured workload and our discipline
to maintain contract selectivity irrespective of economic
conditions. Despite the challenges associated with COVID-19, we
have secured a significant value of new work over the past twelve
months. This has resulted in a UK and Europe order book at 1 June
2021 of GBP301m (1 November 2020: GBP287m), of which GBP241m is for
delivery over the next 12 months. This leaves the Group
well-positioned with a strong future workload for the 2022
financial year and beyond.
Our balanced order book contains a healthy mix of projects
across a diverse range of sectors including industrial and
distribution, stadia and leisure, nuclear, transport infrastructure
and commercial offices. Significant awards include several large
distribution facilities in the UK, reflecting a sector which
continues to remain buoyant, the Co-op Live Arena in Manchester,
new nuclear orders secured by Harry Peers, and mid-sized office
developments, both in London and outside, including one in Glasgow.
We have also secured several HS2 bridge packages, following the HS2
Notice to Proceed issued by the UK Government in April. Largely
unhindered by Brexit, our European business has also secured
several smaller orders, along with proving its continued benefit to
our UK operations when tendering for and executing projects in
Europe. In terms of geographical spread, of the order book of
GBP301m, 84 per cent represents projects in the UK, with the
remaining 16 per cent representing projects for delivery in Europe
and the Republic of Ireland (1 November 2020: 68 per cent in the
UK, 32 per cent in Europe and the Republic of Ireland). The more
UK-centric nature of the current order book is driven by the
acquisition of DAM Structures' UK order book, 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 around GBP300m,
only c.25 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, showcasing the benefits of
our strategic diversification.
We remain very encouraged by the current level of tendering and
pipeline activity across the Group. We continue to see a good
number of opportunities, albeit some at tighter prices given the
current market conditions, in our key market sectors, including in
the industrial and distribution, transport infrastructure, stadia
and leisure, nuclear and data centre sectors. Opportunities exist
in these sectors both in the UK and in Europe, where we have
demonstrated our ability to win more work, supported by our
European business. Looking slightly further ahead, although we are
now much less reliant on this sector, we are now starting to see
more bidding activity in the commercial office market, including in
London, a trend which we expect to increase over the next few
years, given that some of the challenges recently experienced by
this sector are now starting to abate. We remain well-placed to win
work in the diverse range of market sectors and geographies in
which we operate and across a wide client base, especially with the
return of more normal trading conditions, following the disruption
of COVID-19 in the early part of the year. This diversity provides
us with extra resilience and the ability to increase our market
share in the future.
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 growth. In
November, the UK Government released details of its five-year plan,
the National Infrastructure Strategy ('NIS'), which sets out its
plans to transform infrastructure to drive economic recovery,
levelling up and meeting the UK's net zero emissions target by
2050. This plan will provide increased funding of GBP640 billion
for UK infrastructure projects including future work for HS2 and
investment programmes for Highways England. At Network Rail, in
addition to HS2, the total CP6 budget of GBP53 billion (2019-2024),
which includes a significant amount of rail electrification work,
is substantially higher than the previous CP5 budget of GBP38
billion (2014-2019) and at Highways England, the second Road
Investment Strategy ('RIS2') has been increased by a further GBP2
billion. We continue to make good progress with several of these
significant infrastructure opportunities, particularly with HS2,
road bridges and rail electrification programmes and 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 the recently acquired DAM
Structures (see below).
The Brexit transition period between the EU and UK came to an
end on 31 December 2020 and the Trade and Co-operation Agreement,
which governs significant aspects of the trading relationship
between the UK and EU, is now in force. Whilst, to date, these new
trading arrangements have not had a significant impact on the
Group's operations, we continue to monitor developments in this
area, particularly in relation to the flow of goods and people
across borders. Specific risks and mitigations continue to be
monitored at a project level and controlled by individual business
units.
Supply chain
We are mindful of industry-wide supply chain pressures which
are, in some instances, impacting material costs and availability,
over and above that seen in the second half of 2021. This includes
certain steel products, in part reflecting the price of iron ore
which has nearly doubled over the past nine months. Notwithstanding
this, steel remains largely a pass-through cost for the Group,
albeit the recent steel price increases are likely to impact
working capital in the short term. In response to the current
market conditions and the associated supply chain pressures, we
remain in regular contact with our customers and our major supply
chain partners and, for steel, we benefit from relationships with a
number of partners in the UK and continental Europe, reducing the
risk of interruptions to the Group's steel supply. We have also
experienced some challenges with the restricted supply of cold
rolled steel over the past 12 months, which we continue to manage
by forward purchasing as appropriate.
Severfield (Products & Processing)
Severfield (Products & Processing) ('SPP'), which is based
at our Sherburn facility, allows us to address smaller scale
projects and provides a one-stop shop for smaller fabricators to
source high quality processed steel and ancillary products, albeit
at lower margins. Encouragingly, despite trading through a
pandemic, SPP has continued to secure and successfully deliver
orders to its expanding customer base. The business has also
provided high-quality subcontract fabrication packages (including
general fabrication, secondary beams, trusses, bracing and stairs)
to assist other Group companies in the delivery of larger projects,
thus ensuring a greater proportion of project work remains
in-house. During 2021, we have continued to grow and invest in the
business, both in the factory and in our people, including
strengthening the engineering and commercial functions, to maintain
our focus on business development and developing the modular
product range of the business. This includes the 'Severstor' and
'Rotoflo' product ranges which we are continuing to develop
organically, resulting in 2021 revenue of c.GBP2m and a growing
number of orders for delivery to an expanding customer base. During
the year, SPP has also been awarded 'Fit for Nuclear' and certain
Network Rail accreditations which, together with the encouraging
progress to date and our previous record in modular construction,
we believe will help us to achieve our future growth aspirations
for the business.
Harry Peers
Harry Peers continues to secure high quality orders and we have
good visibility of a strong order pipeline including in the growing
nuclear and power (waste-to-energy) sectors. As part of the 'SSS'
programme, we are also focusing on certain operational initiatives
including investment in technology-driven enhancements to make the
business more competitive and efficient and to support the
development of our client service offering.
As expected, in addition to the initial consideration of
GBP18.9m which was paid in 2019, a further performance-based
consideration of GBP6.0m was paid in December 2020, as the business
achieved certain financial and operational targets for the period
ended 31 August 2020.
DAM Structures
On 26 February 2021, the Group completed the acquisition of DAM
Structures, an innovative steel fabrication company, giving the
Group immediate access to attractive, complementary market sectors
with strong growth potential including the propping, railway and
steel piling markets. The initial consideration was GBP12.0m and 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.
DAM Structures is integrating well into the Group's operations.
In addition to its core steel fabrication markets, 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 elements of the HS2 project
that we were not previously addressing, such as temporary and
permanent tunnel work. This will complement the Group's existing
expertise in bridges and stations. We also see opportunities for
growth in DAM's propping business which provides bespoke fabricated
propping systems to demolition and groundwork contractors.
DAM's core business involves on-site work with main contractors
and ground and demolition contractors, often prior to the stage of
project construction at which the Group in the past would typically
have become involved. The acquisition is allowing us to establish
relationships and contracts at an earlier stage in site development
with both existing and new customers and is another step in the
implementation of the Group's strategy, enhancing our position as
the UK's broadest structural steel services group.
Clients
Our proven ability to work collaboratively and innovatively with
clients is fundamental to our success and is critical to securing
new work. This involves early contract engagement with clients,
anticipating the issues they face and providing problem-solving
solutions to ensure greater clarity around scope, construction
programmes and cost which, in combination, reduces delivery risk
for all parties.
Our unique capability to deliver complex design solutions, our
capacity and speed of fabrication, the expert capabilities of the
Group and its colleagues and our management and integration of the
construction process is important to our clients and a key
differentiator for the Group. During the pandemic, when certain
construction programmes were delayed and disrupted, these
capabilities allowed us to help clients deliver changes to these
programmes more quickly and efficiently.
We have again achieved national recognition for our projects
including an award at the 2020 Structural Steel Design Awards (for
the Brunel Building) and we have been shortlisted for awards (for
the new Tottenham Hotspur F.C. stadium and the Brunel Building) at
the prestigious 2020 Royal Institute of British Architects ('RIBA')
Awards, which have been postponed until 2021 due to COVID-19.
The Group worked on over 100 projects with our clients during
the year including:
Major projects - over GBP20 Google King's Cross, London
million Large industrial facility, Republic
of Ireland
Large data centres, Republic
of Ireland and Finland
Large distribution centres,
Littlebrook and Swindon
Commercial offices - London King's Cross P2, London
and regional Bankside Yards, London
150 Holborn, London
One Sherwood Street, London
Argyle Street, Glasgow
-------------------------------------
Industrial and distribution Distribution centres, East Midlands,
Germany, Republic of Ireland
Jaguar Land Rover, Logistics
Operations Centre ('LOC') and
car park
-------------------------------------
Transport infrastructure M8 Footbridge, Glasgow
Barking Riverside Bridge, London
Luton Airport DART Parkway Station
HS2 bridges, West Midlands
-------------------------------------
Data centres and other projects Data centres, Republic of Ireland
Sky Studios, Elstree
-------------------------------------
Stadia and leisure Lord's Cricket Ground redevelopment
(Compton and Edrich stands)
Fulham FC, London
-------------------------------------
India
The Indian joint venture ('JSSL') has continued its recovery
from the disruptive effects of COVID-19. After a difficult first
half, the company maintained a largely break-even profit position
in H2 of 2021. The impact of COVID-19 is evident in the Group's
after-tax share of loss of GBP0.7m (2020: share of profit of
GBP2.2m). The loss reflects a reduction in JSSL's revenue to
GBP48.0m, compared to GBP109.3m in the previous year, and an
operating margin of 3.3 per cent, compared with 8.5 per cent in the
previous year. Financing expenses of GBP3.4m (2020: GBP2.9m) turn
JSSL's much reduced operating profit into a loss before tax for the
year of GBP1.8m (2020: profit before tax of GBP6.4m).
The return to normal trading conditions in India is being
considerably disrupted by the ongoing second wave of COVID-19 which
is currently impacting output in H1 of 2022. Despite the ongoing
COVID-19 challenges, JSSL's clients have continued to place orders,
resulting in an order book which has increased to a record level of
GBP140m (1 November 2020: GBP98m). This reflects the strong
underlying demand for structural steel in India and includes
several recent commercial awards (a large data centre in Chennai
and commercial offices in Bangalore, Hyderabad and Navi Mumbai) and
some large industrial projects for JSW. In terms of mix, 68 per
cent of the order book represents higher margin commercial work,
with the remaining 32 per cent representing industrial projects,
mainly for JSW.
JSSL's pipeline of potential orders continues to include several
commercial projects for key developers and clients with whom it has
established strong relationships. JSSL is also developing formal
strategic alliances with certain key clients, mainly for
commercial, data centre and healthcare projects. This, together
with the step up in the order book, leaves the business very well
positioned in the market once the current COVID-19 wave subsides.
Overall, we remain positive about the long-term development of the
Indian market and of the value creation potential of JSSL,
especially considering the significant structural changes made in
India over recent years, the government's ongoing focus on the
'ease of doing business' and the significant production capability
of the business following the Bellary expansion in 2020.
Safety, health and the environment
Throughout COVID-19, we have maintained our 'safety first' core
value across the Group and this assumed an even greater emphasis in
2021 as we developed new operating procedures to support safe
working to government guidelines. Significant changes were made in
adapting our operations to maintain social distancing, facilitate
home working by office staff where appropriate and to provide a
safe working environment in both our factories and on our
sites.
We have also continued our focus on mental health, which we
recognise has been impacted nationally by COVID-19, including
issuing regular communications through our new Coronavirus Hub on
how to cope with certain issues arising from the pandemic itself,
assisted by our team of 60 mental health first aiders. In 2021, we
rolled out our enhanced Employees Assistance Programme, which
includes the launch of a new app (My Healthy Advantage), to provide
support and advice to colleagues on physical and mental wellbeing
issues.
In 2021, a new platform for reporting SHE incidents and
completing inspections was implemented which has been designed to
clearly identify trends to enable targeted improvements through
enhanced reporting, root cause and data analysis. We have
maintained our ISO 45001 and 14001 certifications, along with
additional client and sector specific certifications. During the
year, we continued to focus on the Group's injury frequency rate
('IFR') and high potential near misses (HiPos). Despite the
challenges of adapting operations to maintain social distancing, we
have seen a positive and significant reduction in injury rates,
resulting in an IFR (including JSSL) of 1.48, compared to 1.81 in
2020, improving upon our Group targets in the process. The Group's
accident frequency rate ('AFR') (including JSSL) for the year,
which is based solely on the level of RIDDORS (reportable
accidents) was 0.18, which continues to outperform the industry
average. This represents a slight increase from the prior year AFR
of 0.15 but this was not wholly unexpected given the significant
improvement in the AFR over recent years.
ESG
Following the launch of our new sustainability policy in 2020,
we established an executive working group to focus on the evolution
of our sustainability strategy and to develop a more sustainable
business, taking into account certain Environmental, Social and
Governance ('ESG') reporting frameworks, current and future
legislation, and climate science. Aligning ourselves to the UN
Sustainable Development Goals and building on the requirements of
the Task Force on Climate Related Financial Disclosure ('TCFD'),
the Group has developed targets and KPIs to monitor progress
against our ESG objectives.
A key element of our sustainability strategy is our target to
become an operationally carbon neutral organisation in the 2021
calendar year. Carbon neutral in this context means that we will
use carbon offsetting to eliminate the combined scope 1, scope 2
and operational scope 3 greenhouse gas ('GHG') emissions generated
from our manufacturing facilities and construction sites. Projects
set to benefit from our carbon offsetting include solar power
projects in India, the manufacture of efficient cookstoves in
Ghana, and the regeneration of degraded lands in Chile.
The Group has improved upon previous climate-related targets and
in 2021, we saw a reduction of eight per cent in our scope 1 and 2
GHG emissions to 27.5 CO2e/GBPm revenue compared to 29.8 in 2020
and a reduction of 53 per cent compared to 58.9 in 2015. Using a
market-based approach, which includes the positive impact of
switching to green energy (see below), our 2021 scope 1 and 2 GHG
emissions reduced further to 21.0 CO2e/GBPm revenue, 21 per cent
and 64 per cent lower than 2020 and 2015, respectively. This
progress has been recognised by our inclusion in the Financial
Times inaugural listing of Europe's climate leaders (May 2021)
which highlights the 300 companies that have achieved the greatest
reduction in their GHG emissions between 2014 and 2019. We have
also established new targets to reduce scope 1 and 2 GHG emissions
by 25 per cent by 2025 against a 2018 baseline. These targets based
on the 2015 International Treaty on Climate Change, also known as
the Paris Agreement, which seeks to limit global warming to below
1.5 degrees Celsius, compared to pre-industrial levels.
Following our earlier switch to green electricity at our two
largest facilities, we have now committed to switch to 100 per cent
green electricity across all the Group's directly controlled
facilities and we have achieved the level of 73 per cent during the
year. In 2021, we maintained our 'B' rating in the CDP index and
were awarded an 'A' in the CDP Supplier Engagement Rating,
improving on our 'A minus' from the previous year.
SteelZero - building a sustainable future
The Group has strengthened its commitment to reducing carbon
emissions by signing up to SteelZero, a global initiative to speed
up the transition to a net zero steel industry. SteelZero is led by
the international non-profit organisations, the Climate Group and
ResponsibleSteel. Targeting net zero steel from the demand-side of
the supply chain makes this the first initiative of its kind, with
the potential for it to have significant impact on investment,
policy, manufacturing, and production in the construction sector.
The initiative is being signed up to by an increasing number of
steel buyers, both in the UK and internationally. By signing up, we
are making a public commitment to transition to procuring,
specifying, or stocking 100 per cent net zero steel by 2050, with
certain interim targets to be achieved by 2030.
Summary and outlook
The Group has coped well with the challenges presented by the
COVID-19 pandemic and has delivered a resilient set of results for
2021, reflecting the benefit of the strategic and operational
progress made over recent years. This resilience is reflected in a
UK and Europe order book of GBP301m, a record Indian order book of
GBP140m, increased Group revenues and a strong cash position, which
has enabled us to continue to pay dividends, support our supply
chain and continue with our investment plans, including the
acquisition of DAM Structures. Our strategy remains unchanged,
focused on growth, both organic and through selective acquisitions,
operational improvements and creating further value in our Indian
joint venture, JSSL.
Whilst we continue to be mindful of the COVID-19 backdrop,
particularly in India, there is now considerable positive momentum
across the Group, and we remain optimistic about the future. We
continue to regularly win high-quality work resulting in a strong
order book, which supports trading throughout the 2022 financial
year and beyond. We have an encouraging pipeline of opportunities
in the UK, Europe and India, expertise in managing complex projects
and good long-standing client relationships. This, together with
the construction industry's obvious role in the recovery of the UK
economy, leaves us well-placed to win work in the diverse range of
market sectors and geographies in which we operate and across a
wide client base, providing us with extra resilience and the
ability to increase our market share and to drive future profitable
growth.
Throughout the year, the business has had to adapt quickly and
decisively to a continually changing market backdrop. I would like
to thank all our colleagues for their commitment and dedication
throughout these challenging times.
Alan Dunsmore
Chief Executive Officer
16 June 2021
FINANCIAL REVIEW
GBPm 2021 2020
------
Revenue 363.3 327.4
Underlying* operating profit (before JVs
and associates) 25.5 27.0
Underlying* operating margin (before JVs
and associates) 7.0% 8.2%
Underlying* profit before tax 24.3 28.6
Underlying* basic earnings per share 6.4p 7.7p
Operating profit (before JVs and associates) 22.7 24.7
Profit before tax 21.1 25.8
Basic earnings per share 5.6p 6.7p
Return on capital employed ('ROCE') 13.6% 17.2%
---------------------------------------------- ------ ------
* The basis for stating results on an underlying basis is set
out on the highlights page. The board believes that non-underlying
items should be separately identified on the face of the income
statement to assist in understanding the underlying performance of
the Group. Accordingly, certain Alternative Performance Measures
('APMs') have been used throughout this report to supplement,
rather than replace the measures provided under IFRS.
Trading performance
Revenue for the year of GBP363.3m represents an increase of
GBP35.9m (11 per cent) compared with the previous year, reflecting
an increase in order flow (GBP20.0m), together with the full year
effect of the Harry Peers acquisition (GBP12.0m), which was
acquired in October 2019, and one month's trading from the recently
acquired DAM Structures (GBP3.9m).
Underlying operating profit (before JVs and associates) of
GBP25.5m (2020: GBP27.0m), which includes a one-off profit (the
associated revenue is included in Group revenue) on a bespoke paint
package on the large industrial facility in the Republic of Ireland
that the Group is currently working on, was GBP1.5m lower than in
the previous year reflecting the disruptive effects of COVID-19.
This has also resulted in the 2021 operating margin of 7.0 per cent
falling below that achieved in the previous year, however the
margin in H2 recovered well and, looking forward, we expect the
2022 operating margin to be approaching our normal range of 8 to 10
per cent, which was established pre-pandemic. The statutory
operating profit (before JVs and associates), which includes the
Group's non-underlying items, was GBP22.7m (2020: GBP24.7m).
The share of results of JVs and associates was a loss of GBP0.3m
(2020: profit of GBP2.4m), mainly reflecting a difficult year for
our Indian joint venture ('JSSL'). Net finance costs were GBP0.8m
(2020: GBP0.7m).
Underlying profit before tax, which is management's primary
measure of Group profitability, was GBP24.3m (2020: GBP28.6m). The
statutory profit before tax, reflecting both underlying and
non-underlying items, was GBP21.1m (2020: GBP25.8m).
Acquisition of DAM Structures
On 26 February 2021, the Group completed the acquisition of 100
per cent of the share capital of DAM Structures Limited for an
initial net cash consideration of GBP12.0m on a cash free, debt
free basis assuming a normalised level of working capital on
completion. The total initial consideration was GBP17.0m, including
cash and cash equivalents of GBP5.0m, which was funded by a
combination of Group cash reserves of GBP5.0m and a new term loan
of GBP12.0m. A further deferred consideration of GBP7.0m is payable
in 2022, together with a performance-based contingent consideration
of up to GBP8.0m, which would be payable over a five-year period.
Based on provisional fair values, the acquired assets included
intangible assets of GBP4.8m, which were attributed to customer
relationships and order books and residual goodwill of GBP15.1m.
The business contributed revenue of GBP3.9m and a nominal operating
profit in the year.
Share of results of JVs and associates
The share of results from JSSL was a loss of GBP0.7m (2020:
profit of GBP2.2m), reflecting the impact of COVID-19 on JSSL's
trading and profitability. Our specialist cold rolled steel
business, Construction Metal Forming ('CMF'), contributed a share
of profit of GBP0.4m (2020: GBP0.2m). The business is currently in
the process of expanding its production operations in Wales and has
continued to develop its product range, including modular steel
products, to drive organic revenue growth. We continue to be the
only hot rolled steel fabricator in the UK to have a cold rolled
manufacturing capability.
Non-underlying items
Non-underlying items are classified as such as they do not form
part of the profit monitored in the ongoing management of the
Group. Non-underlying items for the year of GBP3.2m (2020: GBP2.8m)
consisted of the amortisation of acquired intangible assets of
GBP2.8m (2020: GBP1.4m) and other acquisition-related expenses of
GBP0.4m (2020: GBP1.4m).
The amortisation of acquired intangible assets represents the
amortisation of customer relationships, order books and brand name,
which were identified on the acquisition of Harry Peers. These
assets are being amortised over a period of 18 months to five
years. No amortisation has been recorded for the intangible assets
which were provisionally identified on the acquisition of DAM
Structures on grounds of materiality and as these fair values are
currently provisional. Acquisition-related expenses include certain
non-recurring legal and consultancy costs associated with the DAM
Structures acquisition and movements in the valuation of the
contingent consideration for the Harry Peers acquisition which was
paid in December 2020.
Taxation
The Group's underlying taxable profits of GBP24.7m (2020:
GBP26.3m) resulted in an underlying tax charge of GBP4.6m (2020:
GBP5.0m), which represents an effective tax rate of 18.5 per cent
(2020: 19.0 per cent). The total tax charge of GBP3.8m (2020:
GBP5.4m) also includes adjustments relating to prior years which
are categorised as non-underlying and included in non-underlying
items.
Earnings per share
Underlying basic earnings per share decreased by 17 per cent to
6.4p (2020: 7.7p) based on the underlying profit after tax of
GBP19.8m (2020: GBP23.7m) and the weighted average number of shares
in issue of 307.3m (2020: 305.4m). Basic earnings per share, which
is based on the statutory profit after tax, was 5.6p (2020: 6.7p),
reflecting the decreased underlying profit after tax offset by a
decrease in non-underlying items. Diluted earnings per share, which
includes the effect of the Group's performance share plan, was 5.6p
(2020: 6.6p).
Dividend and capital structure
The Group has a progressive dividend policy. 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 clear priorities for the use of cash:
-- 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 good underlying net funds
position.
The board considers the dividend to be a very important
component of shareholder returns. Accordingly, based on the outlook
for the year ahead and our strong financial position, and despite
the significant impact of COVID-19 on the 2021 results, the board
is recommending a final dividend of 1.8p per share (2020: 1.8p),
payable on 4 September to shareholders on the register at the close
of business on 12 August. This together with the interim dividend
of 1.1p per share (2020: 1.1p), will result in a total dividend of
2.9p per share (2020: 2.9p), unchanged from the previous year.
Goodwill and intangible assets
Goodwill was GBP85.8m at 31 March 2021 (2020: GBP70.7m), the
increase reflecting the provisional goodwill arising on the DAM
Structures acquisition. In accordance with IFRS, an annual
impairment review has been performed. No impairment was required
either during the year ended 31 March 2021 or the year ended 31
March 2020. Other intangible assets are recorded at GBP9.6m (2020:
GBP7.4m). This largely represents the net book value of the
intangible assets (customer relationships, order books and brand
name) identified on the acquisitions of Harry Peers and DAM
Structures, with the value of the DAM Structures intangibles
remaining provisional at 31 March 2021.
Property, plant and equipment
The Group has property, plant and equipment of GBP91.7m (2020:
GBP88.9m). Capital expenditure of GBP6.6m (2020: GBP6.5m)
represents the continuation of the Group's capital investment
programme. This predominantly consisted of ongoing expansion to our
Dalton production facility, including new equipment for our
fabrication lines, and improvements to our site and office
facilities. Depreciation in the period was GBP6.0m (2020: GBP5.5m),
of which GBP1.6m (2020: GBP1.6m) relates to right-of-use assets
under IFRS 16.
Joint ventures
The carrying value of our investment in joint ventures and
associates was GBP28.8m (2020: GBP26.7m), which consists of the
investment in India of GBP17.6m (2020: GBP18.3m) and in CMF of
GBP11.2m (2020: GBP8.5m).
Pensions
The Group's defined benefit pension liability at 31 March 2021
was GBP22.4m, an increase of GBP3.7m from the 2020 position of
GBP18.7m. The deficit has increased largely because of a reduction
in the discount rate which reflects the significant fall in bond
yields over the past year, together with higher long-term inflation
assumptions. This has been partially offset by higher returns on
the scheme's assets and by ongoing deficit contributions. The
triennial funding valuation of the scheme is in progress, with a
valuation date of 31 March 2020. All other pension arrangements in
the Group are of a defined contribution nature.
Return on capital employed
The Group adopts 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 ROCE is defined as
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. For 2021, ROCE
was 13.6 per cent (2020: 17.2 per cent), which exceeds the Group's
target of 10 per cent through the economic cycle.
Cash flow
GBPm 2021 2020
-----------
Operating cash flow (before working capital
movements) 30.2 30.2
Cash generated from operations 30.0 28.0
Operating cash conversion 93% 81%
Cash balances 25.0 29.5
Net funds** 4.4 16.4
--------------------------------------------- ----------- -----------
** 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.
The Group's business model has been established to generate
surplus cash flows and we have always placed a high priority on
cash generation and the active management of working capital. The
Group ended the financial year with net funds of GBP4.4m (2020:
GBP16.4m). Net funds at 31 March 2021 consisted of cash of GBP25.0m
offset by the outstanding term loans of GBP20.7m for the Harry
Peers and DAM Structures acquisitions.
Operating cash flow for the year before working capital
movements was GBP30.2m (2020: GBP30.2m). Net working capital was
broadly stable over the course of the year, increasing by GBP0.2m.
Excluding advance payments, year-end net working capital
represented approximately two per cent of revenue (2020: three per
cent). This is slightly below our well-established target range of
four to six per cent, reflecting our continued focus on working
capital management.
Our cash generation KPI shows the conversion of 93 per cent
(2020: 81 per cent) of underlying operating profit (before JVs and
associates) into operating cash (cash generated from operations
less net capital expenditure), ahead of our target of 85 per
cent.
Prompt Payment Code
We believe in treating our suppliers and subcontractors fairly
and with respect. Our three main businesses are all signatories of
the Prompt Payment Code ('PPC'). Our relationships with our supply
chain partners are of strategic importance and key to the Group's
success, and payment practices remained a major area of focus
throughout the year and even more so against the backdrop of
COVID-19. For the PPC reporting period of 1 October 2020 to 31
March 2021, all the Group's businesses that are signatories of the
PPC, reported that at least 95 per cent of invoices were paid
within 60 days.
Whilst we remain very focused on continuing to improve our
payment performance, the Group operates in a sector where supply
chains and contractual terms are complex, and prompt payment can
often be significantly impacted by resolution of disputes and
alignment to agreed contractual processes. On 1 March 2021, the
UK's new VAT Domestic Reverse Charge regulations for construction
services came into force, further increasing existing cash flow
pressures on many businesses in our sector and which also may
impact the ability of certain supply chain partners to accurately
invoice the Group.
Bank facilities committed until 2023
The Group has a GBP25m revolving credit facility ('RCF') with
HSBC Bank and Yorkshire Bank, which matures in October 2023. The
RCF, of which GBP10m is available as an overdraft facility,
continues to include an additional accordion facility of GBP20m,
which allows the Group to increase the aggregate available
borrowings to GBP45m. 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.
These loans, for which GBP20.7m remained outstanding at 31 March
2021, also mature in October 2023. The RCF remains subject to three
financial covenants, interest cover (>4x) and net debt to EBITDA
(<2.5x) and cash flow cover (<1x). The Group operated well
within these covenant limits throughout the year ended 31 March
2021.
Going concern
In determining whether the Group's annual consolidated financial
statements can be prepared on the going concern basis, the
directors considered all factors likely to affect its future
development, performance and its financial position, including cash
flows, liquidity position and borrowing facilities and the risks
and uncertainties relating to its business activities.
The following factors were considered as relevant:
-- The current market conditions and the impact of these (including the potential future impact of COVID-19 and
similar other significant downside risks linked to our principal risks) on the Group's profits and cash flows,
-- The UK and Europe order book and the pipeline of potential future orders,
-- The Group's 'SSS' business improvement programme, which has delivered tangible benefits in 2021 and is expected
to continue doing so in the 2022 financial year and for the period under forecast, and
-- The Group's net funds position and its bank finance facilities, which are committed until October 2023, including
both the level of those facilities and the three financial covenants (see above) attached to them.
The Group has continued to trade safely and profitably with
positive operating cash flows for the year ended 31 March 2021
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 2022 financial year and up to 12 months from
the date of approval of the financial statements, including
sensitivity analysis to assess the Group's resilience to potential
adverse outcomes arising out of COVID-19 (or other similar
significant disruptions) including a highly pessimistic 'worst
case' scenario. This 'worst case' is based on the combined impact
of securing no further orders for the next twelve months and
further significant COVID-19 (or similar other) disruption for the
entirety of the going concern period. Given the strong previous
performance of the Group, despite three separate COVID-19
lockdowns, 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.
The directors also considered sensitivities in respect of other
potential downside scenarios and the mitigating actions available
in concluding that the Group can continue in operation for a period
of at least 12 months from the date of approving the financial
statements. Having also made appropriate enquiries, the directors
are confident that the Group will have sufficient funds to continue
to meet its liabilities as they fall due for at least 12 months
from the date of approval of the financial statements, and, for
this reason, have continued to adopt the going concern basis in
preparing the financial statements.
Adam Semple
Group Finance Director
16 June 2021
Consolidated income statement
For the year ended 31 March 2021
Non-underlying Non-underlying
Underlying 2021 Total Underlying 2020 Total
2021 GBP000 2021 2020 GBP000 2020
GBP000 GBP000 GBP000 GBP000
Revenue 363,254 - 363,254 327,364 - 327,364
Operating costs (337,784) (2,795) (340,579) (300,386) (2,294) (302,680)
------------ ---------------- --------- ------------ ---------------- ---------
Operating profit before
share of results of
JVs and associates 25,470 (2,795) 22,675 26,978 (2,294) 24,684
Share of results of
JVs and associates (344) - (344) 2,355 - 2,355
Operating profit 25,126 (2,795) 22,331 29,333 (2,294) 27,039
Net finance expense (795) (429) (1,224) (712) (514) (1,226)
------------ ---------------- --------- ------------ ---------------- ---------
Profit before tax 24,331 (3,224) 21,107 28,621 (2,808) 25,813
Tax (4,574) 771 (3,803) (4,959) (439) (5,398)
------------ ---------------- --------- ------------ ---------------- ---------
Profit for the year
attributable to the
equity holders of the
parent 19,757 (2,453) 17,304 23,662 (3,247) 20,415
============ ================ ========= ============ ================ =========
Earnings per share:
Basic 6.43p (0.80)p 5.63p 7.74p (1.06)p 6.68p
Diluted 6.43p (0.80)p 5.63p 7.70p (1.06)p 6.64p
All the above activities relate to continuing operations.
Further details of 2021 non-underlying items are disclosed in
note 3.
Consolidated statement of comprehensive income
For the year ended 31 March 2021
2021 2020
Year ended Year ended
31 March 2021 31 March 2020
GBP000 GBP000
Actuarial (loss)/gain on defined
benefit
pension scheme* (4,906) 255
Gains/(losses) taken to equity
on cash flow hedges 1,699 (1,403)
Reclassification adjustments
on cash flow hedges 251 (410)
Exchange difference on foreign
operations 34 (34)
Tax relating to components of
other comprehensive income* 734 (184)
Other comprehensive income for
the year (2,188) (1,776)
Profit for the year from continuing
operations 17,304 20,415
Total comprehensive income for
the
year attributable to equity shareholders 15,116 18,639
============== ===============================
* These items will not be subsequently reclassified to the
consolidated income statement.
Consolidated balance sheet
As at 31 March 2021
2021 2020
GBP000 GBP000
ASSETS
Non-current assets
Goodwill 85,782 70,714
Other intangible assets 9,630 7,375
Property, plant and equipment 91,698 88,864
Right-of-use asset 9,808 10,140
Interests in JVs and associates 28,790 26,690
Contract assets, trade and other 4,368 -
receivables
230,076 203,783
------------------------------- --------------------------------
Current assets
Inventories 10,231 6,856
Contract assets, trade and other
receivables 67,847 74,612
Derivative financial instruments 1,049 -
Current tax assets 3,584 1,640
Cash and cash equivalents 24,983 44,338
------------------------------- --------------------------------
107,694 127,446
------------------------------- --------------------------------
Total assets 337,770 331,229
=============================== ================================
LIABILITIES
Current liabilities
Trade and other payables (77,803) (84,366)
Financial liabilities - borrowings (5,900) (19,375)
Financial liabilities - leases (1,744) (1,502)
Derivative financial instruments - (1,135)
(85,447) (106,378)
------------------------------- --------------------------------
Non-current liabilities
Trade and other payables (10,639) -
Retirement benefit obligations (22,379) (18,688)
Financial liabilities - borrowings (14,850) (8,750)
Financial liabilities - leases (9,365) (9,729)
Deferred tax liabilities (4,161) (4,009)
(61,394) (41,176)
------------------------------- --------------------------------
Total liabilities (146,841) (147,554)
=============================== ================================
NET ASSETS 190,929 183,675
=============================== ================================
EQUITY
Share capital 7,706 7,648
Share premium 87,658 87,292
Other reserves 3,464 1,402
Retained earnings 92,101 87,333
------------------------------- --------------------------------
TOTAL EQUITY 190,929 183,675
=============================== ================================
Consolidated statement of changes in equity
For the year ended 31 March 2021
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
Dividend paid - - - (8,895) (8,895)
At 31 March 2021 7,706 87,658 3,464 92,101 190,929
================ =============== ================ =============== ===============
* T he issue of shares represents shares allotted to satisfy the
2017 performance share plan award which vested in June 2020 and the
2017 Sharesave scheme.
Share Share Other Retained Total
capital premium reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2019 7,600 87,254 3,819 76,334 175,007
Changes in accounting
policy - - - (895) (895)
---------------- ----------------- ----------------- --------------- ---------------
Restated total equity
at 1 April 2019 7,600 87,254 3,819 75,439 174,112
Total comprehensive
income for the year - - (1,847) 20,486 18,639
Ordinary shares issued
** 48 38 - - 86
Equity settled share-based
payments - - (570) 259 (311)
Dividend paid - - - (8,851) (8,851)
---------------- ----------------- ----------------- --------------- ---------------
At 31 March 2020 7,648 87,292 1,402 87,333 183,675
================ ================= ================= =============== ===============
** T he issue of shares represents shares allotted to satisfy
the 2016 performance share plan award which vested in June 2019 and
the 2017 and 2018 Sharesave schemes.
Consolidated cash flow statement
For the year ended 31 March 2021
2020 2019
Year ended Year ended
31 March 2021 31 March 2020
GBP000 GBP000
Net cash flow from operating activities 25,349 21,980
Cash flows from investing activities
Proceeds on disposal of other property,
plant and equipment 104 267
Purchases of land and buildings (247) (1,519)
Purchases of other property, plant and
equipment (6,097) (4,945)
Purchase of intangible assets (276) -
Investment in JVs and associates (2,444) -
Investment in subsidiary entities, net
of cash acquired (17,489) (13,390)
Net cash used in investing activities (26,449) (19,587)
--------------------- -------------------------------
Cash flows from financing activities
Interest paid (699) (598)
Dividends paid (8,895) (8,851)
Proceeds from shares issued 424 86
Proceeds from borrowings 12,000 29,000
Repayment of borrowings (19,375) (875)
Repayment of obligations under finance
leases (1,710) (1,796)
Net cash (used in)/generated from financing
activities (18,255) 16,966
--------------------- -------------------------------
Net (decrease)/increase in cash and
cash equivalents (19,355) 19,359
Cash and cash equivalents at beginning
of year 44,338 24,979
--------------------- -------------------------------
Cash and cash equivalents at end of
year 24,983 44,338
===================== ===============================
1) Basis of preparation
The preliminary announcement has been prepared in accordance
with the Listing Rules of the FCA and is based on the 2021
financial statements which have been prepared in accordance with
International Accounting Standards in conformity with the
requirements of the Companies Act 2006 ('the Act') and in
accordance with International Financial Reporting Standards
('IFRS') as adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
The accounting policies applied in preparing the preliminary
announcement are consistent with those used in preparing the
statutory financial statements for the year ended 31 March
2020.
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 31 March 2020 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 31
March 2021, 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
Following the adoption of IFRS 8, 'Operating Segments' 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 similar products and
services, production processes, types of customers, methods of
distribution, regulatory environments and economic characteristics.
All revenue is derived from construction contracts and related
assets. Group revenue includes revenue of GBP108,871,000 (2020:
GBP47,655,000), spread over several contracts, relating to one
major customer, who individually contributed more than 10 per cent
of Group revenue in the year ended 31 March 2021.
3) Non-underlying items
2021 2020
GBP000 GBP000
Operating costs (2,795) (2,294)
Finance expense (429) (514)
Non-underlying items before tax (3,224) (2,808)
Tax on non-underlying items 771 (439)
-------- --------
Non-underlying items after tax (2,453) (3,247)
======== ========
Non-underlying items consisted of the amortisation of acquired
intangible assets of GBP2,842,000 (2020: GBP1,421,000) and
acquisition-related expenses of GBP382,000 (2020:
GBP1,387,000).
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 in the
previous year. No amortisation has been recorded in the year for
the provisional intangible assets identified on the acquisition of
DAM Structures since these fair values were provisional at 31 March
2021 and the applicable amortisation would be immaterial.
Acquisition-related expenses include non-recurring legal and
consultancy costs associated with these acquisitions of GBP689,000
(2020: GBP873,000) and unwinding of the discount on the Harry Peers
contingent consideration of GBP429,000 (2020: GBP514,000) offset by
movements of GBP736,000 (2020: GBPnil) in the valuation of the
Harry Peers contingent consideration, which was paid in December
2020.
Non-underlying items have been separately identified to provide
a better indication of the Group's underlying business performance.
They are not considered to be 'business as usual' items and have a
varying impact on different businesses and reporting years. 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.
4) Taxation
The taxation charge comprises:
2021 2020
GBP000 GBP000
Current tax
UK corporation tax (3,940) (3,945)
Adjustments to prior years' provisions (69) (578)
-------------------------- --------------------------
(4,009) (4,523)
-------------------------- --------------------------
Deferred tax
Current year credit/(charge) 25 (706)
Impact of change in future years'
tax rates - (242)
Adjustments to prior years' provisions 181 73
-------------------------- --------------------------
206 (875)
-------------------------- --------------------------
Total tax charge (3,803) (5,398)
========================== ==========================
5) Dividends
2021 2020
GBP000 GBP000
Amounts recognised as distributions
to equity holders in the year:
2020 final - 1.8p per share (2019:
1.8p per share) (5,523) (5,493)
2021 interim - 1.1p per share (2020:
1.1p per share) (3,372) (3,358)
--------------------------- --------------------------
(8,895) (8,851)
=========================== ==========================
The directors are recommending a final dividend of 1.8p per
share (2020: 1.8p). This together with the interim dividend of 1.1p
per share (2020: 1.1p), will result in a total dividend of 2.9p per
share (2020: 2.9p), unchanged from the previous year.
6) Earnings per share
Earnings per share is calculated as follows:
2021 2020
GBP000 GBP000
Earnings for the purposes of
basic earnings per share being
net profit attributable to equity
holders of the parent company 17,304 20,415
------------ --------------------------
Earnings for the purposes of
underlying basic earnings per
share being underlying net profit
attributable to equity holders
of the parent company 19,757 23,662
------------ --------------------------
Number of shares Number Number
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 307,337,645 305,428,749
Effect of dilutive potential
ordinary shares 112 1,701,466
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 307,337,757 307,130,215
============ ==========================
Basic earnings per share 5.63p 6.68p 6.68p
Underlying basic earnings per
share 6.43p 7.74p 7.74p
Diluted earnings per share 5.63p 6.64p 6.64p
Underlying diluted earnings per
share 6.43p 7.70p 7.70p
7) Business combinations
Summary of acquisition
On 26 February 2021, the Company acquired 100 per cent of the
share capital of DAM Structures Limited ('DAM Structures'), an
innovative steel fabrication company. The board believe that the
acquisition will give the Group immediate access to attractive,
complimentary market sectors with strong growth potential including
the propping, railway and steel piling market sectors.
The provisional net consideration of GBP23.0m comprises:
2021
GBP000
Gross initial cash consideration 16,994
Provisional completion payment 918
Deferred consideration 6,930
Contingent consideration 3,709
Gross consideration 28,551
--------------------------
Net cash acquired (5,505)
--------------------------
Net consideration 23,046
==========================
Acquisition consideration
DAM Structures was acquired for an initial gross consideration
of GBP16,994,000, including cash and cash equivalents of
GBP5,505,000, which has been funded by a combination of Group cash
reserves and a new term loan.
In addition, a maximum deferred consideration of GBP7,000,000 is
payable in cash in April 2022. An additional performance-based
contingent consideration is also in place which could further
increase the purchase price by up to GBP8,000,000, if certain
work-winning targets in the railway and steel piling sectors are
achieved over a five-year period, ending in April 2026.
The contingent consideration has been recorded at its
provisional fair value of GBP3,709,000, which represents
management's current assessment of the amount likely to be paid of
GBP6,000,000 (out of the maximum GBP8,000,000), discounted at DAM
Structures's cost of capital of 18.5 per cent.
The provisional fair value of the assets and liabilities
recognised as a result of the acquisition are as follows:
Non-current assets GBP000
Property, plant and equipment 1,990
Current assets
Inventories 2,235
Contract assets, trade and other receivables 10,141
Cash and cash equivalents 5,521
17,897
-----------------------
Total provisional assets 19,887
=======================
Current liabilities
Trade and other payables (9,989)
Current tax liabilities (86)
(10,075)
Non-current liabilities
Deferred tax liabilities (1,079)
-----------------------
Total provisional liabilities (11,154)
=======================
Provisional net assets, identified intangible assets
and goodwill:
Net assets 8,733
Net cash acquired (5,505)
Net identifiable assets acquired 3,228
Identified intangible assets 4,750
Goodwill 15,068
-----------------------
Provisional net assets acquired 23,046
=======================
Provisional goodwill of GBP15,068,000 represents both existing
and new end user customers (including core fabrication and rail),
which were not recognised separately in accordance with IFRS 3
(Revised) 'Business combinations', the ability and skill of DAM's
employees and management, know-how, and the quality of the services
provided (none of which qualify for recognition as a separate
intangible asset under IFRS 3). The provisional goodwill arising
from the acquisition is not expected to be deductible for income
tax purposes.
Analysis of amounts disclosed in the cash flow statement in
connection with acquisitions:
2021
GBP000
Gross initial cash consideration 16,994
Net cash acquired (5,505)
--------------------------
Total cash outflow - investing
activities 11,489
--------------------------
Contingent consideration - Harry
Peers 6,000
--------------------------
Total cash outflow - investing
activities 17,489
==========================
Acquisition-related costs of GBP689,000 were fully expensed in
the period to 31 March 2021 as non-underlying operating costs (see
note 3).
The acquired business contributed revenues of GBP3,944,000 and
profit after tax of GBP212,000.
8) Net cash flow from operating activities
2021 2020
GBP000 GBP000
Operating profit from continuing
operations 22,331 27,039
Adjustments:
Depreciation - property, plant and
equipment 4,434 3,928
Depreciation - right-of-use assets 1,569 1,585
Loss/(gain) on disposal of other
property, plant and equipment 40 (68)
Movements in contingent consideration (736) -
Amortisation of intangible assets 2,846 1,421
Movements in pension scheme (1,215) (1,029)
Share of results of JVs and associates 344 (2,355)
Share-based payments 610 (311)
Operating cash flows before movements
in working capital 30,223 30,210
(Increase)/decrease in inventories (1,140) 2,059
Decrease/(increase) in receivables 12,551 (12,174)
(Decrease)/increase in payables (11,645) 7,898
Cash generated from operations 29,989 27,993
Tax paid (4,640) (6,013)
-------------------------- --------------------------
Net cash flow from operating activities 25,349 21,980
========================== ==========================
9) Net funds
The Group's net funds are as follows:
2021 2020
GBP000 GBP000
Borrowings (20,750) (28,125)
Cash and cash equivalents 24,983 44,338
Unamortised debt arrangement fees 128 177
-------------------------- ---------------------------
Net funds (pre-IFRS 16) 4,361 16,390
IFRS 16 lease liabilities (11,109) (11,231)
Net (debt)/funds (post-IFRS 16) (6,748) 5,159
========================== ===========================
The Group excludes IFRS 16 lease liabilities from its measure of
net funds / debt as they are excluded from the definition of net
debt as set out in the Group's borrowing facilities.
10) 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 the 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.
Principal risks and uncertainties
The board has carried out 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:
Health and safety
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.
* 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.
Supply chain
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
* Initiatives are 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 utilise
alternative arrangements, including 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.
Commercial and market environment
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 pandemics (including the ongoing COVID-19 pandemic).
The pace of recovery from the impact of the COVID-19 pandemic
is unpredictable and could have a negative impact on future
trading. A sluggish recovery from COVID-19 could adversely
impact investor confidence.
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 business venture.
* 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 customers 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 customer failure.
* Strong cash position supports the business through
fluctuations in the economic conditions of the
sector.
* Acquisition of Harry Peers and DAM Structures has
broadened our outreach and cross selling
opportunities resulting in improved market
resilience.
COVID-19
Description
Future outbreaks of COVID-19 or temporary emergency public
measures such as travel bans, quarantines and public lockdowns
could have a significant and prolonged impact on global economic
conditions, disrupt our clients and suppliers, supply chain,
increase employee absenteeism and adversely impact our operations.
Impact
The effect of the disease itself is on the health and safety
of our people, the financial impact of implementing social
distancing measures across our business and the economic slowdown
that has resulted from the measures taken in the UK and abroad
to combat the virus. A significant fall in demand and higher
costs could adversely impact revenues, profits, ability to
recover overheads and cash generation.
Mitigation
* The safety and wellbeing of our clients and employees
continues to be our overriding priority. Our
executive committee are monitoring events closely
with regular board oversight evaluating the impact
and designing appropriate response strategies.
* The availability of cash resources and committed
facilities together with strong cash flow to support
our strong financial position including the Group's
longer-term viability.
Cyber security
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.
* 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.
Failure to mitigate onerous contract terms
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.
Indian joint venture
Description
The growth, effective management and performance of our Indian
joint venture ('JSSL') is a key element of the Group's overall
strategy. The Indian market has continued to expand rapidly
in recent years and the factory in Bellary has been expanded
to meet current and anticipated future market growth.
The COVID-19 pandemic continues to impact JSSL and recovery
is likely to take several months.
Impact
Failure to effectively manage our operations in India could
lead to financial loss, reputational damage and a drain on
cash resources to fund the operations.
Mitigation
* In line with the response of the Group to COVID-19,
local management in India continue to closely monitor
cash flows and debt repayments, together with
adopting specific actions to minimise the disruption
on the joint venture operations during the Indian
economy's recovery period.
* Restructuring undertaken in 2021 to reduce overheads
without compromising future growth plans.
* Robust joint venture agreement and strong governance
structure is in place.
* Regular schedule of annual visits to India by UK
executive and senior management to review operations
and ensure appropriate oversight (suspended during
the COVID-19 outbreak and conducted by video
conference).
* Two members of the Group's board of directors are
members of the joint venture board.
* Regular formal and informal meetings held with both
joint venture management and joint venture partners.
* Contract risk assessment, engagement and execution
process now embedded in the joint venture.
* Operational improvement programmes remain ongoing.
* Ongoing review of controls environment and risk
management processes undertaken by Group senior
management.
People
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.
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, customer 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 exercise commenced in
2021 to identify and develop future senior leaders
within the business.
* Attractive working environments, remuneration
packages, technology tools and wellbeing initiatives
to help improve employees' working lives.
* 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.
* A new HR structure implemented in 2021 and updated HR
systems rolled out covering payroll and a new
employee portal.
* Three-year goals have been defined around HR
operational efficiency, evolving our approach to
performance, development and careers and creating an
environment where Severfield employees feel listened
to and are fairly recognised and rewarded for their
contribution to the Group.
* A review of the company approach to flexible working
practices has been undertaken in the light of our
experiences of remote working during the COVID 19
pandemic.
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END
FR FFFLLRAIELIL
(END) Dow Jones Newswires
June 16, 2021 02:00 ET (06:00 GMT)
Severfield (LSE:SFR)
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De Mar 2024 a Abr 2024
Severfield (LSE:SFR)
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