26 November 2024
Interim results for the
period ended 28 September 2024
Revenue and underlying
profit growth, diversified order books, challenging market backdrop
but remain well-positioned in markets with positive long-term
growth trends
Severfield plc, the market-leading
structural steel group, announces its results for the six-month
period ended 28 September 2024.
£m
|
H1 2025
(unaudited)
|
H1 2024
(unaudited)
|
Change
|
Revenue
|
252.3
|
215.3
|
+17%
|
Underlying1 operating
profit
(before JVs and
associates)
|
17.2
|
14.8
|
+16%
|
Operating (loss) / profit (before
JVs and associates)
|
(4.6)
|
11.9
|
(16.5)
|
Underlying1 profit
before tax
|
16.1
|
14.2
|
+14%
|
(Loss) / profit before
tax
|
(5.8)
|
11.0
|
(16.8)
|
Underlying1 basic
earnings per share
|
4.0p
|
3.5p
|
+14%
|
Basic (loss) / earnings per
share
|
(1.4p)
|
2.7p
|
(4.1p)
|
Interim dividend per
share
|
1.4p
|
1.4p
|
-
|
Headlines
§ Revenue
up 17% to £252.3m (H1 2024: £215.3m)
§ Underlying1 profit before tax up 14% to £16.1m (H1
2024: £14.2m)
§ Period-end net debt (on a pre-IFRS
16 basis2) of £11.6m (30 March 2024: £9.4m), includes
acquisition loans of £16.9m, and reflects a stable working capital
position
§ Results
include non-underlying cost of £20.4m for bridge remedial works
programme, excludes potential recoveries from third parties,
assessment of any further remedial costs remains ongoing
§ Diversified UK and Europe order book of £410m at 1 November
2024 (1 July 2024: £460m), includes new industrial, data centre,
infrastructure, energy and commercial office orders
§ Continued strategic progress in India - expansion plans have
been accelerated, new production facilities expected to be
operational in FY26
§ Record
India order book of £197m at 1 November 2024 (1 July 2024:
£181m)
§ Interim
dividend of 1.4p per share (H1 2024: 1.4p per share)
§ Additional capital returns through ongoing £10m share buyback
programme
Outlook
§ UK and
Europe:
- wider market
backdrop is challenging
- previously
anticipated recovery in some sectors has been slower than expected
and tighter prices are continuing to impact our profitability in
the short-term
- some large
project opportunities for FY25 and FY26 have been either delayed or
cancelled and increased risk of delay to expected orders in the
short-term
- continued
progress in growing European market sectors
§ India:
well-positioned to take advantage of significant growth
opportunities, new markets being targeted, expansion plans have
been accelerated
§ Underlying profits for FY25 are now expected to be below our
previous expectations
§ Our
businesses remain well-positioned in markets with excellent
longer-term growth opportunities and our medium-term growth targets
remain unchanged
Alan Dunsmore, Chief Executive Officer
commented:
"In the first half of the year, we
have delivered further underlying profit growth and have secured
some attractive projects which are reflected in our diversified
order books. We continue to see some good projects coming to market
however, the predicted recovery in certain sectors has been slower
than previously anticipated, and pricing has remained tighter for
longer than expected. In addition, a number of large project
opportunities for FY25 and FY26 have been either delayed or
cancelled and, given the current market backdrop, we remain
vigilant to the increased risk of delay to expected orders in the
short-term. Although the wider market backdrop continues to be
challenging, our successful track record and diversified activities
give us confidence in delivering the targets we have set for the
medium-term.
Looking further ahead, we welcome
the new government's budget which established a National Wealth
Fund to invest in energy, transport projects and critical national
infrastructure. We have a prominent position in market sectors with
strong growth potential and are well-positioned to win projects in
markets with positive long-term growth trends including in support
of a low-carbon economy and those which are driving the green
energy transition, providing us with a strong platform to fulfil
our strategic growth aspirations."
For further information, please
contact:
Severfield
|
Alan Dunsmore
Chief Executive Officer
|
01845 577 896
|
|
Adam Semple
Chief Financial Officer
|
01845 577 896
|
Camarco
|
severfield@camarco.co.uk
|
|
|
Ginny Pulbrook
|
07961 315 138
|
|
Tom Huddart
|
07967 521 573
|
Jefferies International
|
Will Soutar
|
020 7029 8000
|
Panmure Liberum
|
Nick How
|
020 3100 2000
|
Notes to financials:
1 Stated before non-underlying items of £21.9m (H1 2024: £3.1m)
including bridge testing and remedial costs of £20.4m (H1 2024:
£nil), the amortisation of acquired intangible assets of £1.3m (H1
2024: £2.8m) and other expenses of £0.2m (H1 2024: £0.3m).
Non-underlying items have been separately identified by virtue of
their magnitude or nature to enable a full understanding of the
Group's financial performance and to make year-on-year comparisons.
They are excluded by management for planning, budgeting and
reporting purposes and for the internal assessment of operating
performance across the Group and are normally excluded by
investors, analysts and brokers when making investment and other
decisions (see note 7).
2 The Group excludes IFRS 16 lease liabilities from its measure
of net funds/debt as they are excluded from the definition of net
funds/debt as set out in the Group's borrowing facilities (see note
13).
3 Except as otherwise stated '2023 and FY23' and '2024 and
FY24' refer to the 52-week period ended 25 March 2023 and the
53-week period ended 30 March 2024. '2025 and FY25' and '2026 and
FY26' refer to the 52-week periods ending 29 March 2025 and 28
March 2026. The Group's accounts are made up to an appropriate
weekend date around 31 March each year.
A reconciliation of the Group's
underlying results to its statutory results is provided in the
Alternative Performance Measures ('APMs') section (see note
17).
Notes to editors:
Severfield is the UK's market
leader in the design, fabrication and construction of structural
steel, with a total capacity of c.150,000 tonnes of steel per
annum. The Group has seven sites, c.1,900 employees and expertise
in large, complex projects across a broad range of sectors. The
Group also has an established presence in the expanding Indian
market through its joint venture partnership with JSW Steel
(India's largest steel producer).
Inside information
This announcement contains inside
information as stipulated under the Market Abuse Regulation (EU)
No.596/2014 (as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018) and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations. On the publication of this announcement via a
Regulatory Information Service, such information is now considered
to be in the public domain. The person responsible for arranging
for the release of this announcement on behalf of Severfield is
Adam Semple, Chief Financial Officer.
INTERIM STATEMENT
INTRODUCTION
The Group has reported a good
underlying performance in the first half, with revenue and
underlying profit before tax both showing growth in the period.
We have secured some attractive projects
in the period which are reflected in our diversified order books of
£410m in the UK and Europe and £197m in India, providing us with a
good volume of work for the remainder of FY25 and
beyond.
In the UK and Europe, the current
market backdrop remains challenging. Whilst we continue to see some
good projects coming to market, the predicted recovery in certain
sectors, particularly for our shorter
cycle businesses such as distribution, has been slower than
previously anticipated, and pricing has remained at tighter levels
for longer than expected for some projects. In addition, some large
project opportunities for FY25 and FY26 have been either delayed or
cancelled and, given the current market backdrop, we remain
vigilant to the increased risk of delay to expected orders in the
short-term. Looking further ahead, our businesses remain
well-positioned to win work in markets with positive long-term
growth trends including those which are driving the green energy
transition, providing us with a strong platform to fulfil our
strategic growth aspirations.
Our balance sheet, supported by
our strong cash position, has enabled us to focus on making the
right capital allocation decisions to drive growth over the
longer-term, including through our ongoing capital investment
programme, while also supporting the returns to shareholders,
through the interim dividend and our ongoing share buyback
programme.
In India, despite the lower first
half profits, which have been driven by short-term delays to
existing and expected projects in the run up to and immediately
following the Indian elections in June 2024, we remain very
positive about the long-term trajectory of the market and of the
value creation potential of JSSL. To support this expected market
growth, we have agreed with our joint venture partner, JSW, to
accelerate expansion plans for the business, with some new factory
capacity increases expected to be completed in H2 and a new
production facility expected to be operational in FY26.
Bridge remedial works
programme
Since the publication of the 2024
results, the Group identified some bridge structures which were not
in compliance with the client's weld specification requirements,
predominantly relating to twelve bridge projects that are either
ongoing or were completed over the past four years. The issues all
arise out of a particular bridge specification and related
sub-optimal choices of welding procedures, exacerbated by
limitations in the specified weld testing regime for these
projects. A comprehensive review is currently being undertaken by
the Group, in conjunction with its affected clients, relevant
industry authorities and insurers to fully understand the extent of
the actions required to resolve the issue, which has not affected
the safety of any operational bridges. Notwithstanding this, we are
continuing our work on ongoing road and rail bridges for a variety
of clients, which we are confident will meet the required
specification.
Whilst the precise nature of the
overall remedial work required for all affected bridge structures
has not yet been fully determined, the Group has incurred costs of
£7.1m relating to testing and remedial works undertaken during H1
and for eight bridge projects, where the Group is able to estimate
with sufficient reliability the remaining testing and remedial
costs, a further liability of £13.3m has been assessed. A
non-underlying charge of £20.4m has therefore been recognised for
these costs as at 28 September 2024. All amounts will be kept under
review until our assessment of all affected structures has been
concluded. The Group will be pursuing all potential recoveries from
third parties, including insurance, with preliminary indications
suggesting a good prospect of insurance recovery, albeit not yet
with the level of certainty required for such recovery to be
recognised under accounting standards.
At this stage, the Group is not
able to estimate with sufficient reliability the cost of its
obligation for the four remaining bridge projects where either the
results of the ongoing testing are not yet known or a rectification
solution has not yet been agreed with the client, as any estimate
is subject to a number of unknown factors. These include what the
proposed rectification solution is (if any is required),
sequencing, timeline and consequential disruption. Furthermore, the
Group is also not able to estimate with sufficient reliability any
possible consequential costs (if any) from third parties as these
are not yet known. As such there is a range of potential outcomes
in these specific cases and since the Group is unable to quantify
the possible exposure based on current information, a contingent
liability has been disclosed.
STRATEGY
The Group's well-established
strategy is unchanged, focused on growth and diversification (both
organic and through selective acquisitions), operational
improvements and building further value in JSSL which, in
combination, is expected to deliver strong EPS growth in the medium
term. Our clear focus on balance sheet strength and cash generation
enables us to continue making the right capital allocation
decisions for the long-term, to maximise our competitive advantage
and to best position us in our chosen markets for long-term
growth.
The Group delivers steel
superstructures through its Core
Construction Operations, separated operationally into a
Commercial and Industrial
division (bringing together the Group's strong capabilities in the
industrial and distribution, commercial offices, stadia and
leisure, data centres, retail, and health and education market
sectors), which includes our European operations, and a
Nuclear and Infrastructure
division (encompassing the Group's market-leading positions in the
nuclear, power and energy, transport (road and rail) and process
industries sectors). The Group's Modular Solutions division consists of
the growing product ranges of Severfield Modular Solutions ('SMS')
and of Construction Metal Forming ('CMF'), our specialist cold
rolled steel joint venture business.
OUTLOOK
In the UK and Europe, the market
backdrop is currently challenging. The previously anticipated
recovery in some sectors has been slower than expected and tighter
prices are continuing to impact our profitability in the
short-term. In addition, some large project opportunities for FY25
and FY26 have been either delayed or cancelled and, given the
current market backdrop, we remain vigilant to the increased risk
of delay to expected orders in the short-term. As such, the Group
now expects underlying profits for the full year to be below our
previous expectations. The increase in employer national insurance
rates announced by the UK Government in the October budget will
impact our business from FY26 onwards. We estimate the combination
of lowering the earnings threshold at which employers start paying
national insurance contributions together with the increase in rate
will in aggregate increase our employment costs by c.£2m per annum
before any possible mitigation.
Underpinned by a strong balance
sheet, the Group remains in a strong financial position with a
successful track record and, looking further ahead, the longer-term
outlook for the Group remains very encouraging. Our businesses
remain well-positioned to win work in markets with positive
long-term growth trends including those which are driving the green
energy transition in both Europe and the UK, with the new
government reinforcing commitments to critical national
infrastructure. Our prospects across these markets provide the
board with confidence that the Group will continue to deliver
significant and attractive shareholder returns in the coming years
and our medium-term growth targets remain unchanged.
FINANCIAL REVIEW
H1 2025 (£m)
|
Revenue
|
UOP*
|
UPBT*
|
Core Construction
Operations
|
247.2
|
17.1
|
17.1
|
Modular Solutions
|
9.8
|
0.1
|
0.4
|
India
|
-
|
-
|
0.1
|
Central items /
eliminations
|
(4.7)
|
-
|
(1.5)
|
Group
|
252.3
|
17.2
|
16.1
|
H1 2024 (£m)
|
Revenue
|
UOP*
|
UPBT*
|
Core Construction
Operations
|
208.0
|
14.7
|
14.7
|
Modular Solutions
|
10.7
|
0.1
|
0.2
|
India
|
-
|
-
|
0.6
|
Central items /
eliminations
|
(3.4)
|
-
|
(1.3)
|
Group
|
215.3
|
14.8
|
14.2
|
*The references to underlying
operating profit (before JVs and associates) and underlying profit
before tax are defined in the 'notes to financials' and reconciled
to the statutory measures in note 17.
Revenue of £252.3m (H1 2024:
£215.3m) represents an increase of £37.0m (17 per cent) compared to
the prior period. This reflects an increase in revenue from our
Core Construction Operations, mainly representing an increase in
production activity in the period.
Underlying operating profit
(before JVs and associates) of £17.2m (H1 2024: £14.8m) represents
an increase of £2.4m (16 per cent) over the prior period. This
reflects the increase in revenue and final account upsides, which
helped to offset the impact of some tighter pricing in certain
market sectors. The statutory operating loss (before JVs and
associates), which includes the non-underlying costs associated
with the programme of bridge remedial works and other
non-underlying items, was £4.6m (H1 2024: profit of £11.9m), a
reduction in profit of £16.5m over the prior period.
The share of profit from the
Indian joint venture in the period was £0.1m (H1 2024: £0.6m). The
lower H1 profits have been driven by short-term delays to existing
and expected projects before and after the Indian elections in June
2024.
The Group's underlying profit
before tax was £16.1m (H1 2024: £14.2m), an increase of 14 per cent
compared to the previous period. The statutory loss before tax was
£5.8m (H1 2024: profit of £11.0m), a reduction in profit of £16.8m
over the prior period.
An underlying tax charge of £3.9m
is shown for the period (H1 2024: £3.4m). This tax charge is
recognised based upon the best estimate of the average effective
tax rate on profit before tax for the full financial year and
equates to the statutory rate in the UK and the Netherlands of c.25
per cent (H1 2024: statutory rate of c.25 per cent). The total tax
credit of £1.5m (H1 2024: charge of £2.7m) also includes a
non-underlying tax credit of £5.4m (H1 2024: credit of
£0.7m).
Underlying basic earnings per
share is 4.0p (H1 2024: 3.5p). This calculation is based on the
underlying profit after tax of £12.2m (H1 2024: £10.8m) and
307,188,953 shares (H1 2024: 309,538,321 shares) being the weighted
average number of shares in issue during the period. Basic loss per
share, which is based on the statutory loss after tax, is 1.4p (H1
2024: earning per share of 2.7p).
Non-underlying
items
Non-underlying items for the
period of £21.9m (H1 2024: £3.1m) consisted of the
following:
£m
|
|
H1 2025
|
H1 2024
|
Bridge testing and remedial
costs
|
|
20.4
|
-
|
Amortisation of acquired
intangible assets
|
|
1.3
|
2.8
|
Other expenses
|
|
0.2
|
0.3
|
Non-underlying items
|
|
21.9
|
3.1
|
The costs of £20.4m relate to a
programme of remedial work that is predominantly affecting twelve
bridge structures and represent works undertaken during H1 and the
remaining testing and remedial costs for eight bridge projects
where management is able to reliably estimate the cost to the
Group. The possible liability of the Group for the four remaining
bridge projects and for any possible consequential costs from third
parties has not yet been determined and has been disclosed as a
contingent liability. In addition, no possible recoveries from
third parties have been recognised in H1, including insurance as,
although preliminary indications suggest a good prospect of
insurance recovery, these cannot yet be recognised under
IFRS.
The amortisation of acquired
intangible assets of £1.3m represents the non-cash amortisation of
customer relationships and order books which are being amortised
over a period of 12 months to five years. Acquisition-related
expenses of £0.2m include the unwinding of the discount on the
contingent consideration for DAM Structures which is payable over a
five-year period.
In H2 of the prior year, the Group
recorded a non-underlying legacy employment tax charge of £4.4m
relating to an assessment raised by HMRC for historical income tax
and national insurance ('NIC') liabilities. The Group is disputing
this assessment but since HMRC issued formal determinations for the
amounts it considers are due, a charge was recognised in the FY24
results. Discussions are ongoing with HMRC to attempt to reach a
final settlement and we expect this matter to be concluded by the
end of FY25.
Cash flow and
financing
Net debt (pre-IFRS 16 basis) at 28
September 2024 was £11.6m (30 March 2024: £9.4m). This included net
cash balances of £5.1m (30 March 2024: £10.8m) and outstanding
acquisition-related term loans of £16.9m (30 March 2024: £20.0m).
Operating cash flow for the period before working capital movements
was £20.8m (H1 2024: £19.0m), the reduction over the prior period
mainly reflects bridge testing and remedial cash costs of £3.0m
incurred in H1. Net working capital has increased by £8.4m during
the period mainly reflecting the unwinding of advance payments held
on the balance sheet at 30 March 2024. Excluding advance payments,
period-end net working capital represented approximately five per
cent of revenue, within our normal range of four to six per cent
(net working capital including advance payments was three per cent
of revenue).
Capital expenditure of £3.1m (H1
2024: £5.4m) represents the continuation of the Group's capital
investment programme. Depreciation in the period was £4.8m (H1
2024: £4.4m), of which £1.3m (H1 2024: £1.2m) relates to
right-of-use assets under IFRS 16.
The Group has a £60m revolving
credit facility ('RCF') with HSBC Bank and Virgin Money, which
matures in December 2026. This provides the Group with long-term
financing to help support its growth strategy. The RCF is subject
to three financial covenants, namely interest cover, net debt to
EBITDA and debt service (cash flow) cover. In addition to the RCF,
which was undrawn at 28 September 2024, amortising term loans have
been used to fund previous acquisitions, of which £16.9m remained
outstanding at 28 September 2024.
Share buyback programme
update
In April 2024, the Group announced
a share buyback programme to repurchase up to £10m of ordinary
shares, subject to market conditions. The board is satisfied with
the progress of this buyback programme, with a total of 8,611,558
shares purchased and cancelled to date, at a cost of
£6.8m.
Pensions
The Group's net defined benefit
pension liability at 28 September 2024 was £9.1m (scheme
liabilities of £32.5m offset by scheme assets of £23.4m), a
decrease of £2.4m from the year-end position of £11.5m. The deficit
has reduced as a result of a higher discount rate, reflecting an
increase in bond yields, lower inflation assumptions and employer
deficit contributions over the period.
OPERATIONAL REVIEW
UK AND EUROPE
Maintaining contract selectivity
and bidding discipline to ensure there remains the appropriate risk
balance in the order book is of critical importance to the future
success of the Group. Almost all of our work continues to be
derived through either negotiated, framework or two-stage bidding
procurement processes, in line with our established approach to
strong risk management, commercial discipline and careful contract
selection.
The Group is pleased with the
volume of work secured in the UK and Europe order book which stands
at £410m at 1 November (1 July: £460m, 1 June: £478m), of which
£307m is for delivery over the next 12 months. The order book
remains well-diversified and contains a good mix of projects across
the Group's key market sectors including in Europe, with 29 per
cent of the order book representing projects in continental Europe
and Ireland (1 June: 32 per cent). This reflects our greater access
to growing European market sectors and our stronger market position
in Europe, facilitated by the acquisition of Voortman ('VSCH') in
the previous financial year. Notwithstanding this, the current
market backdrop remains challenging and whilst we continue to see
some good projects coming to market in the UK and in Europe, the
predicted recovery in certain market sectors, particularly for our
shorter cycle businesses such as distribution, has been slower than
previously anticipated, and pricing has remained at tighter levels
for longer than expected for some projects. In addition, some large
project opportunities for FY25 and FY26 have been either delayed or
cancelled and, given the current market backdrop, we remain
vigilant to the increased risk of delay to expected orders in the
short-term.
Looking further ahead, we welcome
the new UK government's budget which established a National Wealth
Fund to invest in energy, transport projects and critical national
infrastructure. Many of our chosen markets continue to have a
favourable long-term outlook - the Group has a prominent position
in market sectors with strong growth potential and is
well-positioned to win projects in support of a low-carbon economy
and to deliver energy security. These include opportunities in both
Commercial and Industrial and Nuclear and Infrastructure, such as
battery plants, energy efficient buildings, manufacturing
facilities for renewable energy and offshore wind projects together
with work in the transport, nuclear and power and energy sectors
given our capability to deliver major infrastructure
projects.
Project
Horizon
As part of Project Horizon, our
digital transformation project, we continue to make good progress
with drawing and design automation which includes automated
connection design and planning tools. Other projects either being
worked on or completed recently include a new estimating system
(part of an overall project to integrate pricing, design and
production databases to drive production and planning processes), a
digital time recording system to facilitate improved monitoring of
factory processes, the use of barcoding for steel to improve
traceability and for paint to reduce waste, the creation of
'digital twins' to provide real-time insights into project
performance, together with ongoing work on artificial intelligence
to improve administrative processing times.
To date, based on the original
plan, we have successfully completed 24 projects, and a further 25
of the 59 projects that we have classified as short to medium term
are currently on-going. Our dedicated project team is currently
self-funded through annual savings, with further benefits being
tracked as more of the identified projects and initiatives are
implemented.
Core Construction
Operations
£m
|
H1 2025
|
H1 2024
|
Change
|
Revenue
|
247.2
|
208.0
|
+19%
|
Underlying operating profit
(before JVs and associates)
|
17.1
|
14.7
|
+16%
|
Underlying profit before
tax
|
17.1
|
14.7
|
+16%
|
|
|
|
|
Revenue:
|
|
|
|
Commercial and
Industrial
|
205.0
|
166.5
|
+23%
|
Nuclear and
Infrastructure
|
42.2
|
41.5
|
+2%
|
Revenue of £247.2m (H1 2024:
£208.0m) represents an increase of £39.2m (19 per cent) compared to
the prior period, reflects higher activity levels in the current
period. Underlying operating profit of £17.1m was up 16 per cent on
the prior period (H1 2024: £14.7m), which reflects the increase in
revenue and final account upsides which have helped offset the
impact of some tighter pricing in certain market sectors,
particularly in distribution and short cycle
infrastructure.
Commercial and Industrial
Revenue has increased by 23 per
cent to £205.0m (HY 2024: £166.5m), mainly due to an increase in
production activity over the comparable period which was adversely
impacted by the pause in construction at Sunset Studios in July
2023. During the period, work progressed on the SeAH Wind monopile
manufacturing facility in Teeside, the AESC UK (Envision) battery
plant in Sunderland, a manufacturing facility for BAE in Scotland,
an Energy from Waste facility based near the River Thames in London
and a petrochemical project for Ineos in Belgium. We have also
worked on a number of data centre projects including two for Google
in Belgium and the Netherlands, one in Dublin and a package of data
centres in Sweden, together with various mid-sized office
developments, both in London and Ireland (including Harcourt Square
in Dublin and Salisbury Square, 334 Oxford Street and 105 Victoria,
in London).
The Commercial and Industrial
order book at 1 November was £202m (1 June: £312m). This includes
projects secured in recent months such as new industrial
facilities, commercial offices, data centres and distribution
centres. Whilst not yet included in the order book, we have also
recently received the client recommendation for 'Building One' of
the new state-of-the-art battery cell manufacturing facility for
Agratas in Somerset, which will initially supply batteries for
Jaguar Land Rover and Tata Motors. This gigafactory, for which
production is expected to commence in Q4 of FY25, is set to be the
largest of its kind in the UK once it is fully operational, and by
the early 2030s could provide 40 per cent of the batteries needed
by the domestic car industry.
We continue to see opportunities
in markets which are driving the green energy transition such as
energy efficient buildings, manufacturing facilities for renewable
energy and offshore wind projects, together with new battery
gigafactories in the UK and Europe. The Group's manufacturing
scale, speed of construction and on-time delivery capabilities,
leaves us well-positioned to win work from such projects, the
majority of which are likely to be designed in steel. We are also
seeing strong continued demand for data centres in the UK and
Europe, driven by cloud computing, 5G and Artificial Intelligence
('AI') applications which are driving even greater dependence on
data centre infrastructure.
Strategic targets: we are
targeting future revenue growth in line with GDP, enhanced by our
European operations, with margins of 8-10 per cent.
Nuclear and Infrastructure
Revenue has remained broadly flat
at £42.2m (HY 2024: £41.5m). During the period, despite the bridge
weld issues, we continued our work on road and rail bridges for a
variety of clients. From a nuclear perspective, ongoing contracts
include work at Hinkley Point and some large projects at
Sellafield. Our nuclear operations have recently been awarded the
ISO 19443:2018 certification, making us only the twelfth company in
the UK to achieve this accreditation, which sets strict
requirements for quality management systems, ensuring compliance
with stringent statutory and regulatory requirements. This
achievement also creates new opportunities for the Group in the UK
and Europe as a Tier-1 supplier in the nuclear industry.
The N&I order book at 1
November was £201m (1 June: £160m) of which 44 per cent represents
transport infrastructure (1 June: 54 per cent) and 56 per cent
represents power and energy (including nuclear) projects (1 June:
41 per cent). Recent orders include a recycling infrastructure
project in Scotland, a large energy project in the Netherlands and
a growing scope of nuclear work at Hinkley Point and also at
Sellafield as part of the long-term Programme and Project Partners
('PPP') framework. We are also seeing some near-term opportunities
for offshore wind projects, which would represent another major
step into the renewables market for the Group.
In the 2024 full year results
announcement, we highlighted that the markets in which we operate
are showing signs of continued growth supported by state backed
spending on clean and domestically generated energy and improved
transport infrastructure, both key components of the green energy
transition. Our outlook for these markets remains encouraging,
driven by a combination of bidding activity and improved economic
and political stability, particularly in the UK. The new Labour
government has committed to grow the UK economy and has highlighted
proposed investment in energy and transport infrastructure, the
leveraging of private investment, planning reform and upskilling
the UK's workforce as key components of their plan to achieve
this.
In the UK energy sector, we are
seeing an increased volume of attractive opportunities including
from the strengthening and upgrading of the power transmission
network, for which the demand for engineering and construction
expertise continues to outweigh supply, together with areas such as
offshore wind, carbon capture, nuclear (including small modular
reactors and Sizewell C) and hydrogen production. In the UK
transport sector, we continue to make good progress with HS2
station opportunities in the pipeline including at Birmingham
Interchange and we welcome the UK government's commitment to
improving connectivity across cities in the north of England and
giving more power to devolved regions to deliver their own
transport solutions, all of which align to our transport expertise.
We remain well-positioned to win work from these structural
opportunities given our end-to-end capabilities and complex
infrastructure project experience.
Strategic targets: our medium-term
target is to grow revenues to over £125m, representing a doubling
of FY22 revenues, with margins of 8-10 per cent.
Modular
Solutions
£m
|
H1 2025
|
H1 2024
|
Change
|
Revenue
|
9.8
|
10.7
|
-8%
|
Underlying operating profit
(before JVs and associates)
|
0.1
|
0.1
|
-
|
Share of results of CMF
|
0.3
|
0.1
|
+0.2
|
Underlying profit before
tax
|
0.4
|
0.2
|
+0.2
|
Modular Solutions consists of the
growing modular product ranges of SMS and of CMF, our cold rolled
steel joint venture business. We continue to be the only hot rolled
steel fabricator in the UK to have a cold rolled manufacturing
capability. The division has been awarded 'Fit for Nuclear' and
certain Network Rail accreditations which, together with an
expanding client base and our previous record in modular
construction, we believe will help us to achieve our future organic
growth aspirations. The division consists of three main business
areas:
§ Severstor - specialist equipment housings for critical
electrical equipment and switchgear,
§ Supply
chain (steel components for modular homes and buildings) - raw
material fabrication and modular systems including steel cassettes
and framing, and
§ Bulk
handling solutions - a high-performance silo discharge system for
the bulk handling of materials such as paints and other dispersible
solids (of which Rotoflo is the premium product).
Although revenue of £9.8m (H1
2024: £10.7m) represents a slight decrease compared to the prior
period, overall profitability has remained broadly unchanged. The
lack of growth in H1 reflects some delays to higher-margin
Severstor orders which are now expected to be delivered in H2.
Divisional underlying PBT of £0.4m (H1 2024: £0.2m) also includes
the post-tax share of profit of CMF of £0.3m (H1 2024: £0.1m). The
increased profitability at CMF reflected better volumes in the
period, as the business continues the ramp up of its expanded
manufacturing operations in Wales.
We have made further progress in
growing our client base for Severstor and for steel framing
solutions for modular building manufacturers, which is evident in
SMS's growing order book and pipeline of opportunities. For
Severstor, we are seeing future opportunities in growth markets
such as renewables and data centres, alongside work in areas such
as power, rail and oil and gas, and we now have visibility of some
large projects in the pipeline (>£5m). We are also encouraged by
the pipeline of opportunities in steel framing solutions, supported
by our expanding customer base, and by CMF's growing product range
and its recently enlarged cold rolled manufacturing
capacity.
Strategic targets: our medium-term
target is to grow combined SMS and CMF revenues to between £75m and
£100m, with margins of greater than 10 per cent. In FY24, the
Modular Solutions division delivered revenue of £50.6m (SMS: £21.5m
and CMF: £29.1m).
INDIA
£m
|
H1 2025
|
H1 2024
|
Change
|
Revenue
|
49.3
|
51.7
|
-5%
|
EBITDA
|
3.8
|
5.0
|
-24%
|
Operating profit
|
2.5
|
3.9
|
-36%
|
Operating margin
|
5.1%
|
7.5%
|
-240
bps
|
Finance expense
|
(2.5)
|
(2.5)
|
-
|
Profit before tax
|
-
|
1.4
|
(1.4)
|
Tax
|
0.2
|
(0.2)
|
+0.4
|
Profit after tax
|
0.2
|
1.2
|
(1.0)
|
Group share of profit after tax
(50%)
|
0.1
|
0.6
|
(0.5)
|
In the first half of 2025, JSSL
recorded an output of 31,000 tonnes, broadly in line with the
32,000 tonnes achieved in the prior period. This position is
evident in JSSL's revenue of £49.3m, also broadly unchanged from
the prior period. Despite the lower than expected activity levels
in H1, output in H2 is expected to increase, reflecting the volume
of work in JSSL's record order book.
JSSL has reported a reduced
operating profit of £2.5m (H1 2024: £3.9m), which has been driven
by short-term delays to existing and expected projects in the run
up to and immediately following the Indian elections in June 2024,
together with a sub-optimal mix of sub-contracted work, which has
resulted in some production gaps at the Bellary factory. Financing
expenses of £2.5m (H1 2024: £2.5m) are unchanged from the previous
period and result in JSSL's operating profit reducing to a
break-even position (H1 2024: profit before tax of
£1.4m).
Despite the lower first half
profits, India's construction sector, and the use of steel within
construction, continues to grow strongly, supported by public and
private sector investment in manufacturing and energy projects, and
government investment to improve and expand transport
infrastructure. This position is evident in a record order book at
1 November of £197m (1 July: £181m, 1 June: £181m), which contains
a mix of higher margin commercial work of 77 per cent (1 June: 71
per cent). The expanding market picture is reflected in an
improving pipeline of potential orders and in numerous growth
opportunities in target markets, including commercial real estate,
data centres, warehouses, infrastructure and in manufacturing
sectors such as steel, cement and speciality chemicals. JSSL is
also targeting opportunities for growth markets in new sectors and
export markets including in Saudi Arabia, building on its brand and
reputation for delivering high-quality steel solutions.
To support this expected market
growth, in conjunction with our joint venture partner, JSW, we are
accelerating the expansion plans for the business. Work is already
underway on some of these expansion projects, which are expected to
be completed by the end of H2, increasing factory capacity at the
Bellary site to c.110,000 tonnes (c.160,000 tonnes including
sub-contracted work). The development of the new site at Gujarat is
also already underway, with new open yard and factory production
facilities expected to be completed and ready for operation in
FY26, further increasing JSSL's in-house production capacity from
c.110,000 tonnes to c.180,000 tonnes. Further expansion work at
Gujarat is expected in future years which, once complete, will
result in JSSL's combined factory capacity (Bellary and Gujarat)
increasing to c.250,000 tonnes (c.350,000 tonnes including
sub-contracted work). The majority of this investment will be
financed by debt, provided directly to JSSL by Indian lenders. JSSL
is also in the process of strengthening its sales and estimating
teams, bringing people with new skills into the business and
enhancing its supply chain partnerships to support the expansion of
the business and to provide a springboard to deliver future
profitable growth.
Value continues to build in JSSL
and the business is well positioned to take advantage of a very
encouraging outlook for the Indian economy and a strong underlying
demand for structural steel. We remain very positive about the
long-term trajectory of the market and of the value creation
potential of JSSL.
ESG
Safety
The Group's top priority remains
the health, safety and wellbeing of all our stakeholders and we
have maintained our unrelenting focus on safety through a number of
initiatives, ensuring that our safety statistics remain industry
leading. During the period we continued to roll out our
Safer@Severfield behavioural safety programme and are in the
process of implementing a new risk management process, to improve
the management and control of critical safety risks, further
enhancing our safety processes.
Sustainability and
ESG
During the period, we have
continued to make good progress against our near and long-term
carbon emissions targets, which were validated by the Science-Based
Target initiative ('SBTi') in the previous year. We also achieved
ESOS (Energy Savings Opportunity Scheme) Phase 3 compliance ahead
of schedule, demonstrating our effectiveness in reducing energy
demand and improving efficiency.
We have continued to maintain our
focus on social value, exploring key partnerships to help support
delivery of our social value commitments. During the period, we
have partnered with Chapter One, an organisation that provides
one-to-one reading support to young children who need help with
their reading skills. This initiative is fully supported by our new
Group volunteering policy, which supports initiatives which make a
positive impact in our communities. We continue to monitor how much
value we deliver annually in line with the National TOMs
methodology framework.
BOARD CHANGES
As previously announced, Cynthia
Gordon, Janice Crawford and Ian McAulay have all recently joined
the board as non-executive directors. Cynthia has become Chair of
the Remuneration Committee and Ian has assumed the responsibilities
of workforce engagement director, taking over from Louise Hardy,
who stepped down from the board in October. Their considerable
combined strategic, financial, operational and commercial expertise
and their knowledge and experience gained in global organisations
will be highly beneficial to the Group as it continues to grow and
diversify.
Furthermore, as part of our
ongoing board succession and retirement process, Derek Randall will
retire from his position on the Severfield plc board at the end of
the current financial year. Derek has recently transitioned from
his previous position of Managing Director to Non-Executive Chair
of JSSL, and he will continue to represent the Group in this
capacity on JSSL's board in India, together with Alan Dunsmore.
Derek will also continue in his role as Chair of JSWSMD, the Indian
joint venture metal decking business.
Alan
Dunsmore
Adam Semple
Chief Executive
Officer
Chief Financial Officer
Consolidated statement of comprehensive
income
|
Six months
ended
28 September
2024
(unaudited)
£000
|
Six
months
ended
23
September 2023
(unaudited)
£000
|
Year
ended
30 March
2024
(audited)
£000
|
Items that will not be reclassified to income
statement:
|
|
|
|
Actuarial gain/(loss) on defined
benefit pension scheme
|
1,170
|
737
|
(745)
|
Share of other comprehensive
income of JVs and associates accounted for using the equity
method
|
-
|
-
|
869
|
Tax relating to components that
will not be reclassified
|
(293)
|
(183)
|
186
|
|
877
|
554
|
310
|
Items that are or may be reclassified to income
statement:
|
|
|
|
Cash flow hedges - reclassified to
income statement
|
(647)
|
(165)
|
(314)
|
Exchange difference on foreign
operations
|
(269)
|
(122)
|
(264)
|
Tax relating to components that
may be reclassified
|
69
|
-
|
(398)
|
Gains taken to equity on cash flow
hedges
|
374
|
78
|
1,239
|
|
(473)
|
(209)
|
263
|
Other comprehensive income
for the period
|
404
|
345
|
573
|
|
|
|
|
(Loss)/profit for the period from
continuing operations
|
(4,252)
|
8,358
|
15,901
|
Total comprehensive (expense)/income for the period
attributable to equity shareholders of the parent
|
(3,848)
|
8,703
|
16,474
|
|
|
|
|
Consolidated balance sheet
|
|
|
|
|
At
28 September
2024
(unaudited)
£000
|
At
23
September 2023
(unaudited)
£000
|
At
30 March
2024
(audited)
£000
|
ASSETS
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
Goodwill
|
98,469
|
98,510
|
98,469
|
Other intangible assets
|
4,159
|
8,100
|
5,508
|
Property, plant and
equipment
|
95,815
|
99,421
|
96,434
|
Right-of-use assets
|
18,078
|
18,040
|
18,651
|
Interests in JVs and
associates
|
37,763
|
32,580
|
37,364
|
Deferred tax assets
|
1,828
|
-
|
1,828
|
Contract assets, trade and other
receivables
|
3,236
|
2,805
|
1,050
|
|
259,348
|
259,456
|
259,304
|
Current assets
|
|
|
|
Inventories
|
10,872
|
12,823
|
11,648
|
Contract assets, trade and other
receivables
|
100,582
|
77,997
|
88,334
|
Current tax asset
|
7,028
|
1,235
|
4,646
|
Derivative financial
instruments
|
669
|
254
|
675
|
Cash and cash
equivalents
|
9,422
|
25,664
|
13,803
|
|
128,573
|
117,973
|
119,106
|
|
|
|
|
Total assets
|
387,921
|
377,429
|
378,410
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
Overdraft
|
(4,307)
|
-
|
(3,409)
|
Trade and other
payables
|
(96,322)
|
(94,413)
|
(78,934)
|
Provisions
|
(23,860)
|
-
|
(11,819)
|
Financial liabilities -
borrowings
|
(6,200)
|
(8,625)
|
(6,200)
|
Financial liabilities -
leases
|
(2,616)
|
(2,572)
|
(2,931)
|
|
(133,305)
|
(105,610)
|
(103,293)
|
Non-current liabilities
|
|
|
|
Trade and other
payables
|
(540)
|
(1,483)
|
(1,095)
|
Retirement benefit
obligations
|
(9,145)
|
(11,155)
|
(11,464)
|
Financial liabilities -
borrowings
|
(10,700)
|
(16,900)
|
(13,800)
|
Financial liabilities -
leases
|
(15,754)
|
(16,076)
|
(16,142)
|
Deferred tax
liabilities
|
(11,825)
|
(7,948)
|
(11,865)
|
|
(47,964)
|
(53,562)
|
(54,366)
|
|
|
|
|
Total liabilities
|
(181,269)
|
(159,172)
|
(157,659)
|
|
|
|
|
NET ASSETS
|
206,652
|
218,257
|
220,751
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
Share capital
|
7,639
|
7,739
|
7,739
|
Share premium
|
85,590
|
88,522
|
88,522
|
Other reserves
|
3,435
|
3,530
|
4,728
|
Retained earnings
|
109,988
|
118,466
|
119,762
|
TOTAL EQUITY
|
206,652
|
218,257
|
220,751
|
Consolidated statement of changes in equity
|
Share
Capital
£000
|
Share
premium
£000
|
Other
reserves
£000
|
Retained
earnings
£000
|
Total
equity
£000
|
|
|
|
|
|
|
At 31 March 2024
|
7,739
|
88,522
|
4,728
|
119,762
|
220,751
|
Total comprehensive expense for
the period
|
-
|
-
|
(542)
|
(3,306)
|
(3,848)
|
Equity settled share-based
payments
|
-
|
-
|
(920)
|
1,808
|
888
|
Purchase of shares
|
-
|
-
|
(4,128)
|
-
|
(4,128)
|
Allocation of owned
shares
|
-
|
-
|
1,265
|
(1,265)
|
-
|
Shares cancelled
|
(100)
|
(2,932)
|
3,032
|
-
|
-
|
Dividend provided for or
paid*
|
-
|
-
|
-
|
(7,011)
|
(7,011)
|
|
|
|
|
|
|
At 28 September 2024 (unaudited)
|
7,639
|
85,590
|
3,435
|
109,988
|
206,652
|
|
|
|
|
|
|
*The 2024 final dividend of £7.0m
was paid to shareholders on 11 October 2024.
|
Share
Capital
£000
|
Share
premium
£000
|
Other
reserves
£000
|
Retained
earnings
£000
|
Total
equity
£000
|
|
|
|
|
|
|
At 26 March 2023
|
7,739
|
88,522
|
5,959
|
115,498
|
217,718
|
Total comprehensive income for the
period
|
-
|
-
|
(209)
|
8,912
|
8,703
|
Equity settled share-based
payments
|
-
|
-
|
433
|
478
|
911
|
Purchase of shares
|
-
|
-
|
(2,653)
|
-
|
(2,653)
|
Dividend provided for or
paid*
|
-
|
-
|
-
|
(6,422)
|
(6,422)
|
|
|
|
|
|
|
At 23 September 2023 (unaudited)
|
7,739
|
88,522
|
3,530
|
118,466
|
218,257
|
|
|
|
|
|
|
*The 2023 final dividend of £6.4m
was paid to shareholders on 11 October 2023
|
|
|
|
|
|
|
Share
Capital
£000
|
Share
premium
£000
|
Other
reserves
£000
|
Retained
earnings
£000
|
Total
equity
£000
|
|
|
|
|
|
|
At 26 March 2023
|
7,739
|
88,522
|
5,959
|
115,498
|
217,718
|
Total comprehensive income for the
year
|
-
|
-
|
1,530
|
14,944
|
16,474
|
Equity settled share-based
payments
|
-
|
-
|
(1,234)
|
3,007
|
1,773
|
Purchase of shares
|
-
|
-
|
(4,500)
|
-
|
(4,500)
|
Allocation of owned
shares
|
-
|
-
|
2,973
|
(2,973)
|
-
|
Dividend provided for or
paid
|
-
|
-
|
-
|
(10,714)
|
(10,714)
|
|
|
|
|
|
|
At 30 March 2024 (audited)
|
7,739
|
88,522
|
4,728
|
119,762
|
220,751
|
|
|
|
|
|
|
Consolidated cash flow statement
|
|
|
|
|
Six months
ended
28 September
2024
(unaudited)
£000
|
Six
months ended
23
September 2023
(unaudited)
£000
|
Year
ended
30
March
2024
(audited)
£000
|
Net cash flow from operating activities
|
6,817
|
31,390
|
45,136
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Proceeds on disposal of property,
plant and equipment
|
242
|
94
|
408
|
Purchases of land and
buildings
|
-
|
(240)
|
(410)
|
Purchases of other property, plant
and equipment
|
(3,109)
|
(5,127)
|
(10,911)
|
Investments in JVs and
associates
|
-
|
-
|
(2,801)
|
Payment of deferred and contingent
consideration
|
(120)
|
(1,183)
|
(1,183)
|
Investment in subsidiary entity,
net of cash acquired
|
-
|
(22,554)
|
(22,551)
|
Net cash used in investing activities
|
(2,987)
|
(29,010)
|
(37,448)
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Interest paid
|
(1,115)
|
(1,106)
|
(3,220)
|
Dividends paid
|
-
|
-
|
(10,714)
|
Proceeds from
borrowings
|
-
|
19,000
|
19,000
|
Repayment of borrowings
|
(3,100)
|
(2,425)
|
(7,950)
|
Repayment of lease
liabilities
|
(1,399)
|
(870)
|
(2,628)
|
Purchase of shares (net of SAYE
cash received)
|
(3,495)
|
(2,653)
|
(3,120)
|
Net cash (used in)/generated from financing
activities
|
(9,109)
|
11,946
|
(8,632)
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash
equivalents
|
(5,279)
|
14,326
|
(944)
|
Cash and cash equivalents at beginning
of period
|
10,394
|
11,338
|
11,338
|
Cash and cash equivalents at end of period
|
5,115
|
25,664
|
10,394
|
|
|
|
|
Notes to the condensed consolidated interim financial
information
1)
General
information
Severfield plc ('the Company') is
a company incorporated and domiciled in the UK. The address of its
registered office is Severs House, Dalton Airfield Industrial
Estate, Dalton, Thirsk, North Yorkshire, YO7 3JN. The Company is
listed on the London Stock Exchange.
The condensed consolidated interim
financial information does not constitute the statutory financial
statements of the Group within the meaning of section 435 of the
Companies Act 2006. The statutory financial statements for the year
ended 30 March 2024 were approved by the board of directors on 19
June 2024 and have been delivered to the registrar of companies.
The report of the auditors on those financial statements was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain any statement under section 498 of the
Companies Act 2006.
The condensed consolidated interim
financial information for the six months ended 28 September 2024
has been reviewed, not audited, and was approved for issue by the
board of directors on 25 November 2024.
2)
Basis of
preparation
The condensed consolidated interim
financial statements for the six months ended 28 September 2024 has
been prepared in accordance with the UK-adopted international
accounting standard 34 'Interim Financial Reporting' as adopted for
use in the UK and the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority. The condensed consolidated interim
financial statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of
the statutory financial statements for year ended 30 March 2024,
which were prepared in accordance with UK-adopted international
accounting standards (IFRS) and the requirements of the companies
Act 2006. The condensed consolidated financial statements have also
been prepared in accordance with UK-adopted financial reporting
standards.
Going concern
Net debt (pre-IFRS 16 basis) at 28
September 2024 was £11.6m, representing cash (net of overdrafts) of
£5.1m and the outstanding term loans of £16.9m, net of debt
arrangement costs of £0.2m. The Group has
a £60m revolving credit facility ('RCF') with HSBC and Virgin Money
that matures in December 2026. The RCF, of which £15m is available
as an overdraft facility, includes an additional facility of £45m,
which allows the Group to increase the aggregate available
borrowings to £60m. Throughout the period, the Group has maintained
significant amounts of headroom in its financing facilities and
associated covenants.
The directors have reviewed the
Group's forecasts and projections for the remainder of the 2025
financial year and up to 12 months from the date of approval of the
interim financial statements, including sensitivity analysis to
assess the Group's resilience to potential adverse outcomes
including a 'severe but plausible' scenario. This scenario is based
on the combined impact of securing only 25 per cent of forecast
uncontracted orders for the next 12 months, one-off contract
losses, a deterioration of market conditions, a significant one-off
event (including the possibility of the Group incurring further
bridge remedial costs) and other downside factors. The
scenario also takes into account likely mitigating actions,
including the reduction of any non-essential or committed capital
expenditure, operating expenditure and dividend
payments.
Given the Group's diversified
operations, successful track record and previous strong performance
during periods of challenging market conditions, this 'severe but
plausible' scenario was modelled to stress test our strong
financial position and demonstrates that the Group will operate
within its existing facilities and pass covenants tests.
Having also made appropriate
enquiries, the directors consider it reasonable to assume that the
Group has adequate resources to be able to operate within the terms
and conditions of its financing facilities for at least 12 months
from the approval of the condensed Group financial statements. For
this reason, the directors continue to adopt the going concern
basis in preparing the condensed consolidated interim financial
information.
3)
Accounting
policies
Except as described below, the
accounting policies applied and judgments and estimates considered
in preparing the condensed consolidated interim financial
statements are consistent with those used in preparing the
statutory financial statements for the year ended 30 March
2024.
Taxes on profits in interim
periods are accrued using the tax rate that is expected to be
applicable to total earning for the full year based on enacted
rates at the interim date.
New and amended standards and
interpretations need to be adopted in the first interim financial
statements issued after their effective date (or date of early
adoption).
There are no new accounting
standards that are effective for the first time for the six months
ended 28 September 2024 which have a material impact on the
Group.
Critical accounting judgements and
estimates
Provisions and contingent
liabilities
The Group has identified some
bridge structures which were not in compliance with the client's
weld specification requirements predominantly relating to twelve
bridge projects. For eight of the bridge projects identified,
management is able to estimate with sufficient reliability the
remaining testing and remedial costs and have recognised a
provision - see note 12 for further details. Management is not able
to estimate with sufficient reliability the cost (if any) of its
remaining obligation for four further bridge projects and has
therefore disclosed a contingent liability - see note 16 for
further details.
A provision is recognised when (i)
the Group has a present legal or constructive obligation as a
result of a past event, (ii) it is probable that an outflow of
resources will be required to settle the obligation; and (iii) the
amount of the obligation can be estimated reliably. If a reliable
estimate of a potential outflow of resources cannot be made due to
uncertainties surrounding future events, the obligation is
disclosed as a contingent liability. Contingent liabilities
represent possible obligations where the timing and amount of any
outflow is subject to significant uncertainty. These liabilities
are not recognised on the balance sheet but are disclosed unless
the likelihood of an outflow is deemed remote. If a contingent
liability becomes probable and can be reliably measured, it is
reclassified and recognised as a provision.
Management applies judgement to
determine whether the criteria for recognising a provision are
satisfied or, alternatively, if disclosure of a contingent
liability is more appropriate. The recognition of provisions also
involves a degree of estimation. In forming these estimates,
management makes an assessment of the costs likely to be incurred
after consulting with relevant experts and legal advisers where
appropriate. Both judgements and estimates are subject to change
based on new information, future developments, or changes in
circumstances. Management continually assesses any changes to
ensure the financial statements reflect the most up to date
information available.
4)
Risks and
uncertainties
The principal risks and
uncertainties which could have a material impact upon the Group's
performance over the remaining six months of the year ending 29
March 2025, other than as disclosed below, have not changed from
those disclosed on pages 92 to 104 of the strategic report included
in the annual report for the year ended 30 March 2024. The annual
report is available on the Company's website www.severfield.com.
These risks and uncertainties include, but are not limited
to:
· Health and safety
· Supply chain
· People
· Commercial and market environment
· Mispricing a contract (at tender)
· Cyber
security
· Failure to mitigate onerous contract terms
· Industrial relations
· Meeting bridge specifications (new risk to reflect recent
bridge weld issue)
The preparation of the condensed
consolidated interim financial
statements under IFRS requires management
to make judgements, assumptions and estimates that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expense. Assumptions and estimates
are reviewed on an ongoing basis and any revisions to them are
recognised in the period in which they are revised. The Group's
critical accounting judgements and estimates have not changed
significantly from those disclosed on pages 187 and 188 of the
annual report for the year ended 30 March 2024.
Revenue and profit
recognition
Recognition of revenue and profit
is based on judgements made in respect of the ultimate
profitability of a contract. Such
judgements are arrived at through the use of estimates in relation
to the costs and value of work performed to date and to be
performed in bringing contracts to completion. These estimates are
made by reference to recovery of pre-contract costs, surveys of
progress against the construction programme, changes in design and
work scope, the contractual terms and site conditions under which
the work is being performed, delays, costs incurred, claims
received by the Group, external certification of the work performed
and the recoverability of any unagreed income from claims and
variations.
Management continually reviews the
estimated final outturn on contracts and makes adjustments where
necessary. Based on the above, management believes it is reasonably
possible, on the basis of existing knowledge, that outcomes within
the next financial year that are different from these assumptions
could require a material adjustment. However, due to the level of
uncertainty, combination of cost and income variables and timing
across a large portfolio of contracts at different stages of their
contract life, it is impracticable to provide a quantitative
analysis of the aggregated judgements that are applied at a
portfolio level.
Within this portfolio, there are a
limited number of long-term contracts where the Group has
incorporated significant judgements over revenue and profit, which
have been recognised at a level that is considered highly probable
not to significantly reverse. However, there are a host of factors
affecting potential outcomes in respect of these entitlements which
could result in a range of reasonably possible outcomes on these
contracts in the following financial year, ranging from a gain of
£12,000,000 to a loss of £7,000,000. Management has assessed the
range of reasonably possible outcomes on these limited number of
contracts based on facts and circumstances that were present and
known at the balance sheet date. As with any contract applying
long-term contract accounting, these contracts are also affected by
a variety of uncertainties that depend on future events, and so
often need to be revised as contracts progress. The range excludes
any uncertainties associated with the ongoing programme of bridge
remedial work.
The Group has appropriate internal
control procedures over the determination of each of the above
variables to ensure that profit recognised as at the balance sheet
date and the extent of future costs to contract completion are
reasonably and consistently determined and subject to appropriate
review and authorisation.
At the balance sheet date, amounts
due from construction contract customers, included in contract
assets, trade and other receivables was £52,064,000 (30 March 2024:
£36,800,000).
5)
Segmental
analysis
In line with the requirements of
IFRS 8, operating segments are identified on the basis of the
information that is regularly reported and reviewed by the chief
operating decision maker ('CODM'). The Group's CODM is deemed to be
the Executive Committee, who are primarily responsible for the
allocation of resources and the assessment of performance of the
segments. Consistent with previous periods, management continues to
identify multiple operating segments, primarily at an individual
statutory entity level, which are reported and reviewed by the
CODM. For the purpose of presentation under IFRS 8, the individual
operating segments meet the aggregation criteria that allows them
to be aggregated and presented as one reportable segment for the
Group.
§ Core Construction Operations - comprising the combined
results of the Commercial and Industrial ('C&I') and Nuclear
and Infrastructure ('N&I') divisions, including the results of
our European operations.
§ Modular Solutions - comprising Severfield Modular Solutions
('SMS') and the Group's share of profit (50 per cent) from the
joint venture company, Construction Metal Forming Limited
('CMF').
The constituent operating segments
that make up 'Core Construction Operations' have been aggregated
because the nature of the products across the businesses, whilst
serving different market sectors, are consistent in that they
relate to the design, fabrication and erection of steel products.
They have similar production processes and facilities, types of
customers, methods of distribution, regulatory environments and
economic characteristics. This is reinforced through the use of
shared production facilities across the Group.
The C&I and N&I divisions
presented in the interim statement were established in April 2022
to provide better client service and increased organisational
clarity, both internally and externally. These still meet the
aggregation criteria to be presented as one reportable segment
under IFRS 8 and are therefore presented as such.
Segment assets and liabilities are
not presented as these are not reported to the CODM.
Segmental results
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Construction
Operations
|
Modular
Solutions
|
JSSL
|
Central costs/
elimination
|
Total
|
Period ended 28 September 2024:
|
£000
|
£000
|
£000
|
£000
|
£000
|
Revenue
|
247,171
|
9,794
|
-
|
(4,712)
|
252,253
|
Underlying operating
profit
|
17,137
|
14
|
-
|
-
|
17,151
|
Underlying operating profit margin
|
6.9%
|
0.1%
|
|
|
6.8%
|
|
|
|
|
|
|
Result from joint
ventures
|
|
|
|
|
|
- CMF
|
-
|
351
|
-
|
-
|
351
|
- JSSL
|
-
|
-
|
51
|
|
51
|
Finance costs
|
-
|
-
|
-
|
(1,465)
|
(1,465)
|
|
|
|
|
|
|
Underlying profit before tax
|
17,137
|
365
|
51
|
(1,465)
|
16,088
|
|
|
|
|
|
|
Non-underlying items (note
7)
|
(21,769)
|
-
|
-
|
(85)
|
(21,854)
|
|
|
|
|
|
|
(Loss)/profit before tax
|
(4,632)
|
365
|
51
|
(1,550)
|
(5,766)
|
|
|
|
|
|
|
Other material items of income and expense:
|
|
|
|
|
|
- Depreciation of owned
property,
plant and equipment
|
(3,442)
|
(78)
|
-
|
-
|
(3,520)
|
- Depreciation of right-of-use
assets
|
(1,248)
|
(21)
|
-
|
-
|
(1,269)
|
- Other operating
income
|
1,512
|
251
|
-
|
-
|
1,763
|
|
Core Construction
Operations
|
Modular
Solutions
|
JSSL
|
Central costs/
elimination
|
Total
|
Period ended 23 September 2023:
|
£000
|
£000
|
£000
|
£000
|
£000
|
Revenue
|
207,986
|
10,726
|
-
|
(3,456)
|
215,256
|
Underlying operating
profit
|
14,716
|
50
|
-
|
-
|
14,766
|
Underlying operating profit margin
|
7.1%
|
0.5%
|
|
|
6.9%
|
|
|
|
|
|
|
Result from joint
ventures
|
|
|
|
|
|
- CMF
|
-
|
191
|
-
|
-
|
191
|
- JSSL
|
-
|
-
|
609
|
-
|
609
|
Finance costs
|
-
|
-
|
-
|
(1,408)
|
(1,408)
|
|
|
|
|
|
|
Underlying profit before
tax
|
14,716
|
241
|
609
|
(1,408)
|
14,158
|
|
|
|
|
|
|
Non-underlying items (note
7)
|
(2,853)
|
-
|
-
|
(289)
|
(3,142)
|
|
|
|
|
|
|
Profit before tax
|
11,863
|
241
|
609
|
(1,697)
|
11,016
|
|
|
|
|
|
|
Other material items of income and expense:
|
|
|
|
|
|
- Depreciation of owned property,
plant and equipment
|
(3,162)
|
(77)
|
-
|
-
|
(3,239)
|
- Depreciation of right-of-use
assets
|
(1,145)
|
(17)
|
-
|
-
|
(1,162)
|
- Other operating
income
|
788
|
56
|
-
|
-
|
844
|
|
Core Construction
Operations
|
Modular
Solutions
|
JSSL
|
Central costs/
elimination
|
Total
|
53
week ended 30 March 2024:
|
£000
|
£000
|
£000
|
£000
|
£000
|
Revenue
|
449,168
|
21,489
|
-
|
(7,192)
|
463,465
|
Underlying operating
profit
|
37,430
|
260
|
-
|
-
|
37,690
|
Underlying operating profit margin
|
8.3%
|
1.2%
|
|
|
8.1%
|
|
|
|
|
|
|
Result from joint
ventures
|
|
|
|
|
|
- CMF
|
-
|
92
|
-
|
-
|
92
|
- JSSL
|
-
|
-
|
1,858
|
-
|
1,858
|
Finance costs
|
-
|
-
|
-
|
(3,095)
|
(3,095)
|
|
|
|
|
|
|
Underlying profit before
tax
|
37,430
|
352
|
1,858
|
(3,095)
|
36,545
|
|
|
|
|
|
|
Non-underlying items (note
7)
|
(14,270)
|
(115)
|
-
|
860
|
(13,525)
|
|
|
|
|
|
|
Profit before tax
|
23,160
|
237
|
1,858
|
(2,235)
|
23,020
|
|
|
|
|
|
|
Other material items of income and expense:
|
|
|
|
|
|
- Depreciation of owned property,
plant and equipment
|
(6,317)
|
(163)
|
-
|
-
|
(6,480)
|
- Depreciation of right-of-use
assets
|
(2,644)
|
(39)
|
-
|
-
|
(2,683)
|
- Other operating
income
|
1,625
|
245
|
-
|
-
|
1,870
|
Revenue
All revenue is derived from
construction contracts and related assets. Additional disclosures
are made under IFRS 15 to enable users to understand the relative
size of the divisions. An analysis of the Group's revenue is as
follows:
|
Half
year
|
Year
ended 30 March 2024
|
|
2025
|
2024
|
|
£000
|
£000
|
£000
|
Construction contracts:
|
|
|
|
- Commercial and
Industrial
|
205,016
|
166,468
|
361,734
|
- Nuclear and
Infrastructure
|
42,155
|
41,518
|
87,434
|
Core Construction Operations
|
247,171
|
207,986
|
449,168
|
Modular Solutions
|
9,794
|
10,726
|
21,489
|
Elimination of inter-segment
revenue
|
(4,712)
|
(3,456)
|
(7,192)
|
|
|
|
|
Total Group revenue
|
252,253
|
215,256
|
463,465
|
Geographical information
The following table presents
revenue according to the primary geographical markets in which the
Group operates. This disaggregation of revenue is presented for the
Group's two operating segments.
|
Half
year
|
Year
ended 30 March 2024
|
|
2025
|
2024
|
Core Construction Operations - revenue by
destination
|
£'000
|
£'000
|
£'000
|
United Kingdom
|
157,411
|
171,210
|
367,127
|
Republic of Ireland and continental
Europe
|
89,760
|
36,776
|
82,041
|
|
247,171
|
207,986
|
449,168
|
|
|
|
|
|
Half
year
|
Year
ended 30 March 2024
|
Modular Solutions - revenue by destination
|
2025
|
2024
|
£'000
|
£'000
|
£'000
|
United Kingdom
|
9,135
|
10,726
|
17,486
|
Republic of Ireland and continental
Europe
|
659
|
-
|
4,003
|
|
9,794
|
10,726
|
21,489
|
Elimination of intercompany revenue
(UK)
|
(4,712)
|
(3,456)
|
(7,192)
|
|
5,082
|
7,270
|
14,297
|
6)
Seasonality
There are no seasonal variations
which impact the split of revenue between the first and second half
of the financial year. Underlying movements in contract timing and
phasing, which are an ongoing feature of the business, will
continue to drive moderate fluctuations in half yearly
revenues.
7)
Non-underlying
items
|
|
|
March
2
|
|
|
At
28 September
2024
£000
|
At
23
September 2023
£000
|
At
30
March
2024
£000
|
Operating costs
|
(21,769)
|
(2,853)
|
(13,225)
|
Finance expense
|
(85)
|
(289)
|
(300)
|
Non-underlying items before tax
|
(21,854)
|
(3,142)
|
(13,525)
|
Tax on non-underlying
items
|
5,442
|
713
|
1,957
|
Non-underlying items after tax
|
(16,412)
|
(2,429)
|
(11,568)
|
|
|
|
|
|
|
| |
|
|
1
|
|
|
Non-underlying items before tax consist of:
|
At
28 September
2024
£000
|
At
23
September 2023
£000
|
At
30
March
2024
£000
|
|
Amortisation of acquired
intangible assets
|
(1,305)
|
(2,853)
|
(5,399)
|
|
Bridge testing and remedial
costs
|
(20,364)
|
-
|
-
|
|
Legacy employment tax
charge
|
(100)
|
-
|
(4,413)
|
|
Asset impairment
charges
|
-
|
-
|
(4,543)
|
|
Unwinding of discount on
contingent consideration
|
(85)
|
(289)
|
(300)
|
|
FV adjustment to contingent
consideration
|
-
|
-
|
1,130
|
|
Non-underlying items before tax
|
(21,854)
|
(3,142)
|
(13,525)
|
|
|
|
|
|
|
|
|
| |
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, DAM Structures and the Voortman
Steel Construction Group.
Bridge testing and remedial costs
relate to the ongoing programme of bridge remedial work and
represent works undertaken during H1 and the remaining testing and
remedial costs for bridge projects where management is able to
reliably estimate the remaining costs to the Group.
In the prior year, the Group
recorded a non-underlying legacy employment tax charge of £4.4m
relating to an assessment raised by HMRC for historical income tax
and national insurance ('NIC') liabilities. The Group is disputing
this assessment but since HMRC issued formal determinations for the
amounts it considers are due, a charge was recognised within the
FY24 results. Discussions are ongoing with HMRC to attempt to reach
a final settlement and we expect this matter to be concluded by the
end of FY25.
Non-underlying items have been
separately identified by virtue of their magnitude or nature to
enable a full understanding of the Group's financial performance
and to make year-on-year comparisons. They are excluded by
management for planning, budgeting and reporting purposes and for
the internal assessment of operating performance across the Group
and are normally excluded by investors, analysts and brokers when
making investment and other decisions. For an item to be considered
as non-underlying, it must satisfy at least one of the following
criteria:
· A
significant item, which may span more than one accounting
period,
· An
item directly incurred as a result of either a business
combination, disposal, or related to a major business change or
restructuring programme, and
· An
item which is unusual in nature (outside the normal course of
business).
Non-underlying items are presented
as a separate column within their related consolidated income
statement category on a consistent basis for each half year and
full year results. The exclusion of non-underlying items may result
in underlying earnings being materially higher or lower than total
earnings.
Accordingly, certain alternative
performance measures ('APMs') have been used throughout this report
to supplement rather than replace the measure provided under IFRS,
see note 17 for further details.
8)
Taxation
The corporation tax expense
reflects the estimated effective tax rate of 25 per cent on the
profit/loss before taxation for the Group for the period ending 28
September 2024.
9)
Dividends
|
|
|
|
March 2022
|
|
Six months
ended
28 September
2024
£000
|
Six
months ended
23
September 2023
£000
|
Year
ended
30 March
2024
£000
|
2023 final - 2.1p per
share
|
-
|
(6,422)
|
(6,422)
|
2024 interim - 1.4p per
share
|
-
|
-
|
(4,292)
|
2024 final - 2.3p per
share
|
(7,011)
|
-
|
-
|
|
(7,011)
|
(6,422)
|
(10,714)
|
|
|
|
| |
The 2024 final dividend of
£7,011,000 was paid to shareholders on 11 October 2024.
The directors have declared an
interim dividend in respect of the six months ended 28 September
2024 of 1.4p per share (H1 2024: 1.4p per share) which will amount
to an estimated dividend payment of £4,200,000 (H1 2024:
£4,292,000). This dividend is not reflected in the balance sheet as
it was declared and will be paid after the balance sheet date, on 7
February to shareholders on the register at the close of business
on 10 January.
10)
Earnings per
share
Earnings per share is calculated
as follows:
|
Six months
ended
28 September
2024
£000
|
Six
months ended
23
September 2023
£000
|
Year
ended
30
March
2024
£000
|
Earnings for the purposes of basic
earnings per share being net (loss)/profit attributable to equity
holders of the parent company
|
(4,252)
|
8,358
|
15,901
|
|
|
|
|
Earnings for the purposes of
underlying basic earnings per share being underlying net profit
attributable to equity holders of the parent company
|
12,160
|
10,787
|
27,469
|
|
|
|
|
Number of shares
|
Number
|
Number
|
Number
|
|
|
|
|
Weighted average number of
ordinary shares for the purposes of basic earnings per
share
|
307,188,953
|
309,538,321
|
307,131,912
|
|
|
|
|
Effect of dilutive potential
ordinary shares and under share plans
|
3,030,768
|
7,670,171
|
3,093,177
|
|
|
|
|
Weighted average number of
ordinary shares for the purposes of diluted earnings per
share
|
310,219,721
|
317,208,492
|
310,225,089
|
|
|
|
|
Basic (loss)/earnings per
share
|
(1.38)p
|
2.70p
|
5.18p
|
Underlying basic earnings per
share
|
3.96p
|
3.48p
|
8.94p
|
Diluted (loss)/earnings per
share
|
(1.37)p
|
2.63p
|
5.13p
|
Underlying diluted earnings per
share
|
3.92p
|
3.40p
|
8.85p
|
11)
Property, plant
and equipment
During the period, the Group acquired land and buildings of £nil (H1
2024: £240,000) and other property, plant and equipment of
£3,109,000 (H1 2024: £5,127,000). The Group also disposed of other
property, plant and equipment for £242,000 (H1 2024: £94,000)
resulting in a gain on disposal of £134,000 (H1 2024: loss of
£5,000).
12)
Provisions
|
1
|
|
1
|
|
|
Legacy
employment taxes
£000
|
Bridge
testing and remedial costs
£000
|
Loss
provisions
£000
|
Total
£000
|
Balance at 30 March
2024
|
3,373
|
-
|
8,446
|
11,819
|
Provisions made during the
year
|
100
|
13,266
|
3,087
|
16,453
|
Provisions used during the
year
|
-
|
-
|
(4,412)
|
(4,412)
|
Balance at 28 September 2024
|
3,473
|
13,266
|
7,121
|
23,860
|
For all provisions, the resulting
cash outflows are expected to occur within 12 months.
The provision for testing and
remedial costs relates to the ongoing programme of bridge remedial
work, predominantly for eight bridge projects where management can
reliably estimate the remaining costs to the Group.
Provisions are recognised and
measured based on management's best estimate of the expenditure
required to settle the obligation, considering relevant risks and
uncertainties. These estimates may change in response to new
information, future developments, or changes in circumstances.
Bridge testing and remedial costs will be kept under review until
our assessment of all affected structures has been
concluded.
The potential cost to the Group
for four further bridge projects and for any possible consequential
costs from third parties has not yet been determined and has been
disclosed as a contingent liability. In addition, no possible
recoveries from third parties have been recognised in H1, including
insurance as, although preliminary indications suggest a good
prospect of insurance recovery, these are not virtually certain and
therefore cannot yet be recognised under IFRS.
13)
Net
debt
|
1
|
|
1
|
|
At
28 September
2024
£000
|
At
23
September 2023
£000
|
At
30
March
2024
£000
|
Borrowings
|
(16,900)
|
(25,525)
|
(20,000)
|
Cash and cash
equivalents
|
5,115
|
25,664
|
10,394
|
Unamortised debt arrangement
costs
|
193
|
278
|
235
|
Net (debt)/funds (pre-IFRS 16)
|
(11,592)
|
417
|
(9,371)
|
IFRS 16 lease
liabilities
|
(18,370)
|
(18,648)
|
(19,073)
|
Net debt (post-IFRS 16)
|
(29,962)
|
(18,231)
|
(28,444)
|
The Group also presents net
debt/funds on a pre-IFRS 16 basis as lease liabilities are excluded
from the definition of net debt/funds as set out in the Group's
borrowing facilities.
14)
Net cash flow
from operating activities
|
|
|
March
2
|
|
Six months
ended
28 September
2024
£000
|
Six
months ended
23
September 2023
£000
|
Year
ended
30
March
2024
£000
|
|
Operating (loss)/profit from continuing
operations
|
(4,216)
|
12,713
|
26,415
|
|
Adjustments:
|
|
|
|
|
Depreciation of property, plant
and equipment
|
3,520
|
3,239
|
6,480
|
|
Right-of-use asset
depreciation
|
1,269
|
1,162
|
2,683
|
|
(Gain)/loss on disposal of other
property, plant and equipment
|
(134)
|
5
|
(92)
|
|
Asset impairment
charges
|
-
|
-
|
4,543
|
|
Amortisation of intangible
assets
|
1,350
|
2,898
|
5,489
|
|
Movements in pension scheme
liabilities
|
(1,149)
|
(1,066)
|
(2,152)
|
|
Share of results of JVs and
associates
|
(402)
|
(800)
|
(1,950)
|
|
FX movements
|
(82)
|
(86)
|
(373)
|
|
Share-based payments
|
256
|
911
|
392
|
|
Operating cash flows before movements in working
capital
|
412
|
18,976
|
41,435
|
|
|
|
|
|
|
Decrease in inventories
|
776
|
554
|
1,729
|
|
(Increase)/decrease in
receivables
|
(13,310)
|
41,298
|
31,232
|
|
Increase/(decrease) in
payables
|
21,548
|
(26,248)
|
(21,962)
|
|
Cash generated from operations
|
9,426
|
34,580
|
52,434
|
|
Tax paid
|
(2,609)
|
(3,190)
|
(7,298)
|
|
Net cash flow from operating activities
|
6,817
|
31,390
|
45,136
|
|
|
|
|
|
| |
15) Related party
transactions
There have been no changes in the
nature of related party transactions as described in note 31 on
page 217 of the annual report for year ended 30 March 2024 and
there have been no new related party transactions which have had a
material effect on the financial position or performance of the
Group in the six months ended 28 September 2024, except as stated
below.
During the period, the Group
provided services in the ordinary course of business to its Indian
joint venture, JSW Severfield Structures ('JSSL') and in the
ordinary course of business contracted with and purchased services
from its UK joint venture, Construction Metal Forming Limited
('CMF'). The Group's share of the retained profit in JVs
and associates of £402,000 (H1 2024: £800,000)
for the period reflects a profit from JSSL of £51,000 (H1 2024:
£608,000) and a profit from CMF of £351,000 (H1 2024:
£192,000).
During the period, the Group has
sold services to its Indian joint venture ('JSSL') of
£274,000 (H1 2024:
£128,000). The amount due from JSSL at 28 September 2024 was
£421,000 (30 March 2024: £132,000).
During the period, the Group has
purchased services from CMF of £6,381,000 (H1
2024: £5,226,000). The amounts due to CMF at 28 September
2024 was £nil (30 March 2024: £2,126,000).
16)
Contingent
assets and liabilities
Liabilities have been recorded for
the directors' best estimate of uncertain contract positions, known
legal claims, legal actions in progress and circumstances that
could give rise to claims or actions. The Group takes legal advice
as to the likelihood of the success of and the likely value of such
claims and actions and no liability is recorded where the directors
consider, based on that advice, that the claim or action is
unlikely to succeed, or that the Group cannot make a sufficiently
reliable estimate of the potential obligation or liability arising
out of such claim or action.
Since the publication of the 2024
results, the Group identified some bridge structures which were not
in compliance with the client's weld specification requirements,
predominantly relating to twelve bridge projects that are either
ongoing or were completed over the past four years. The issues all
arise out of a particular bridge specification and related
sub-optimal choices of welding procedures, exacerbated by
limitations in the specified weld testing regime for these
projects.
Whilst the precise nature of the
overall remedial work required for all affected bridge structures
has not yet been fully determined, the Group has incurred costs of
£7.1m relating to testing and remedial works undertaken during H1
and for eight bridge projects, where the Group is able to estimate
with sufficient reliability the remaining testing and remedial
costs, a further liability of £13.3m has been assessed. A
non-underlying charge of £20.4m has therefore been recognised for
these costs as at 28 September 2024.
The Group is not able to estimate
with sufficient reliability the cost (if any) of its remaining
obligation for four further bridge projects where either the
results of the ongoing testing are not yet known or a rectification
solution has not yet been agreed with the client, as any estimate
is subject to a number of unknown factors including what the
proposed rectification solution is (if any is required),
sequencing, timeline and consequential disruption. Furthermore, the
Group is also not able to estimate with sufficient reliability any
possible consequential costs (if any) from third parties as these
are not yet known. As such there is a range of potential outcomes
in these specific cases and since the Group is unable to quantify
the possible exposure based on current information, a contingent
liability has been disclosed.
All amounts will be kept under
review until our assessment of all affected structures has been
concluded. The Group will be pursuing all potential recoveries from
third parties, including insurance, with preliminary indications
suggesting a good prospect of insurance recovery, albeit not yet
with the level of certainty required for such recovery to be
recognised under accounting standards.
The Company and its subsidiaries
have provided unlimited multilateral guarantees to secure any bank
overdrafts and loans of all other Group companies. At 28 September
2024 this amounted to £nil (30 March 2024: £nil). The Group has
also given performance bonds in the normal course of
trade.
17)
Alternative
performance measures
Our alternative performance
measures ('APM's) present useful information, which supplements the
financial statements. These measures are not defined under IFRS and
may not be directly comparable with APMs for other companies. The
APMs represent important measures for how management monitors the
Group and its underlying business performance. In addition, APMs
enhance the comparability of information between reporting periods
by adjusting for non-underlying items. The APMs are not intended to
be a substitute for, or superior to, any IFRS measures of
performance.
To facilitate understanding of the
APMs used by the Group, and their relationship to reported IFRS
measures, definitions and numerical reconciliations are set out
below.
Alternative performance measure ('APM')
|
Definition
|
Rationale
|
Underlying operating profit (before JVs and
associates)
|
Operating profit before
non-underlying items and the results of JVs and
associates.
|
Profit measure reflecting
underlying trading performance of wholly owned
subsidiaries.
|
Underlying profit before tax
|
Profit before tax before
non-underlying items.
|
Profit measure widely used by
investors and analysts.
|
Underlying basic earnings per share ('EPS')
|
Underlying profit after tax
divided by the weighted average number of shares in issue during
the year.
|
Underlying EPS reflects the
Group's operational performance per ordinary share
outstanding.
|
Net funds/(debt) (pre-IFRS 16)
|
Balance drawn down on the Group's
revolving credit facility, with unamortised debt arrangement costs
added back, less cash and cash equivalents (including bank
overdrafts) before IFRS-16 lease liabilities.
|
Measure of the Group's cash
indebtedness before IFRS-16 lease liabilities, which are excluded
from the definition of net funds/(debt) in the Group's borrowing
facilities. This measure supports the assessment of available
liquidity and cash flow generation in the reporting
period.
|
|
|
|
|
|
Reconciliations to IFRS measures
|
|
|
|
|
|
|
|
|
Six months
ended
28 September
2024
(unaudited)
|
Six
months
ended
23
September 2023
(unaudited)
|
Year
ended
30 March
2024
(audited)
|
Underlying operating profit/(loss) (before JVs and
associates)
|
£000
|
£000
|
£000
|
|
|
|
|
Underlying operating profit
(before JVs and associates)
|
17,151
|
14,766
|
37,690
|
Non-underlying operating
items
|
(21,769)
|
(2,853)
|
(13,225)
|
Share of results of JVs and
associates
|
402
|
800
|
1,950
|
Operating (loss)/profit
|
(4,216)
|
12,713
|
26,415
|
|
|
|
|
|
|
|
|
|
Six months
ended
28 September
2024
(unaudited)
|
Six
months
ended
23
September 2023
(unaudited)
|
Year
ended
30 March
2024
(audited)
|
Underlying profit/(loss) before tax
|
£000
|
£000
|
£000
|
|
|
|
|
Underlying profit before
tax
|
16,088
|
14,158
|
36,545
|
Non-underlying items
|
(21,854)
|
(3,142)
|
(13,525)
|
(Loss)/profit before tax
|
(5,766)
|
11,016
|
23,020
|
|
Six months
ended
28 September
2024
(unaudited)
|
Six
months
ended
23
September 2023
(unaudited)
|
Year
ended
30 March
2024
(audited)
|
Underlying basic earnings per share
|
£000
|
£000
|
£000
|
|
|
|
|
Underlying net profit attributable
to equity holders of the parent Company
|
12,160
|
10,787
|
27,469
|
Non-underlying items after
tax
|
(16,412)
|
(2,429)
|
(11,568)
|
Net (loss)/profit attributable to
equity holders of the parent Company
|
(4,252)
|
8,358
|
15,901
|
|
|
|
|
Weighted average number of
ordinary shares
|
307,188,953
|
309,538,321
|
307,131,912
|
|
|
|
|
Underlying basic earnings per share
|
3.96p
|
3.48p
|
8.94p
|
Basic (loss)/earnings per share
|
(1.38)p
|
2.70p
|
5.18p
|
|
|
|
|
|
|
|
|
|
Six months
ended
28 September
2024
(unaudited)
|
Six
months
ended
23
September 2023
(unaudited)
|
Year
ended
30 March
2024
(audited)
|
Net debt
|
£000
|
£000
|
£000
|
|
|
|
|
Borrowings
|
(16,900)
|
(25,525)
|
(20,000)
|
Cash and cash
equivalents
|
5,115
|
25,664
|
10,394
|
Unamortised debt arrangement
costs
|
193
|
278
|
235
|
Net (debt)/funds (pre-IFRS 16)
|
(11,592)
|
417
|
(9,371)
|
IFRS 16 lease
liabilities
|
(18,370)
|
(18,648)
|
(19,073)
|
Net debt (post-IFRS 16)
|
(29,962)
|
(18,231)
|
(28,444)
|
18)
Cautionary
statement
The condensed interim financial
statements (interim report) have been prepared solely to provide
additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed. The
IMR should not be relied on by any other party or for any other
purpose.
The interim report contains
certain forward-looking statements. These statements are made by
the directors in good faith based on the information available to
them up to the time of their approval of this report but
such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking
information.
19)
Statement of directors'
responsibilities
The directors confirm that, to the
best of their knowledge, the condensed consolidated interim
financial information has been prepared in accordance with IAS 34
as adopted for use in the UK, and that the interim report includes
a fair review of the information required by DTR 4.2.7R and DTR
4.2.8R, namely:
· An
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
consolidated interim financial information, and a description of
the principal risks and uncertainties for the remaining six months
of the financial year; and
· Material related party transactions that have occurred in the
first six months of the financial year and any material changes in
the related party transactions described in the last annual report
and financial statements.
The maintenance and integrity of
the Severfield plc website is the responsibility of the directors;
the work carried out by the auditors does not involve consideration
of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the
website.
Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
By order of the board
Alan Dunsmore
|
Adam Semple
|
Chief Executive Officer
|
Chief Financial Officer
|
25 November 2024
|
25 November 2024
|
INDEPENDENT REVIEW REPORT TO SEVERFIELD PLC
Conclusion
We have been engaged by Severfield
PLC "the Company" to review the condensed set of financial
statements in the half-yearly financial report for the six months
ended 28 September 2024 which comprises the consolidated income
statement, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated statement of changes in
equity, consolidated cash flow statement, and the related
explanatory notes.
Based on our review, nothing has
come to our attention that causes us to believe that the condensed
set of financial statements in the half-yearly financial report for
the six months ended 28 September 2024 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting as adopted
for use in the UK and the Disclosure Guidance and Transparency
Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK
FCA").
Basis for conclusion
We conducted our review in
accordance with International Standard on Review Engagements (UK)
2410 Review of Interim Financial
Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in
scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that
the directors have inappropriately adopted the going concern basis
of accounting, or that the directors have identified material
uncertainties relating to going concern that have not been
appropriately disclosed.
This conclusion is based on the
review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the Group to cease
to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the UK
FCA.
As disclosed in note 2,
the annual
financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards.