severfield - analyst presentation – full year results june 2014
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Severfield plc Full year results for 12 months to 31 March 2014
Severfield-Rowen Plc March 2011
Chief executive officer
Ian Lawson
2
Overview
• Margin progression in line with expectations
• New UK structure delivering operational efficiencies
• Improved management of risk and governance
• Strong balance sheet and net cash
• Solid order book
• Indian JV business disappointing
• Strategy for future growth now in place
• Clear vision and new branding
3 3
Severfield-Rowen Plc March 2011
Finance director
Alan Dunsmore
4
Severfield-Rowen Plc March 2011
Income statement (£m)
12 months to
31 Mar 2014
15 months to
31 Mar 2013
Revenue 231.3 318.3
Underlying Group operating profit (Pre-JVs and associates) 7.6 3.3%
(19.2) (6.0%)
Results of JVs and associates (3.0) (0.3)
Net finance charges (0.6) (2.0)
Underlying profit/(loss) before tax 4.0 (21.5)
Tax
(1.4) 3.0
Underlying profit/(loss) after tax 2.6 (18.5)
5 5
6 6
Revenue and margin
6
Margin recovery on track
6
*
* Pro-forma 12-month numbers
Severfield-Rowen Plc March 2011
Balance sheet (£m)
31 Mar 2014
31 Mar 2013
Non-current assets 147.7 154.9
Current assets:
Inventories 5.8 8.2
Trade & other receivables 60.8 71.6
Cash & cash equivalents 5.5 0.7
72.1 80.5
Total assets 219.8 235.4
Less:
Current liabilities (52.7) (70.9)
Borrowings (5.2) (41.9)
Retirement benefit obligations (12.5) (11.8)
Deferred tax liabilities (5.9) (8.4)
Total liabilities (76.4) (133.0)
Net assets 143.4 102.4
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Cash flow
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• The Group has a £35m banking facility with RBS and National Australia Bank in place until November 2016.
(41.2)
44.8
8.4
7.5 (8.3)
(3.5)
(5.3) (2.1)
0.3
(45.0)
(35.0)
(25.0)
(15.0)
(5.0)
5.0
15.0N
et d
ebt -
Mar
13
Righ
ts is
sue
EBIT
DA
Cont
ract
deb
tors
Trad
e cr
edito
rs
Oth
er w
orki
ng c
apita
l
Cape
x
Indi
a eq
uity
Net
fund
s - M
ar 1
4
£ m
illion
Net debt bridge – year ended March 2014
Outflow on trade creditors mainly represents reversion to 30 day payment terms for TATA (c£4m).
Equipment for construction sites and general replacements.
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Severfield-Rowen Plc March 2011 9
Statutory profit reconciliation (£m)
12 months to Mar 2014
15 months to
31 Mar 2013
Underlying profit/(loss) after tax 2.6 (18.5)
Restructuring and redundancy costs (2.6) (0.8)
Amortisation of acquired intangible assets (2.7) (3.4)
Retirement of acquired intangible asset (2.4) -
Impairment of investment in associates (0.4) -
All costs associated with amendment of banking facilities - (2.1)
Contract legal costs and provision movements - (1.1)
Movements in value of derivative financial instruments - 0.1
Tax on non-underlying items 2.8 2.7
Statutory loss after tax (2.6) (23.1)
Underlying EPS* 0.88p (10.78p)
EPS (0.89p) (13.49p)
Dividend per share nil 1.5p
*There is no difference between basic and diluted EPS in both years. Comparative EPS has been restated to reflect the new shares issued in the rights issue 9
Severfield-Rowen Plc March 2011
Contract costs
Individual Cost Breakdown % Fixed / Variable
Costs Comment
Steel and Other Materials 35% FIXED Pricing fixed for the duration of contracts
Factory Direct Labour 15% FIXED Pay awards annually in July
Overheads 20% FIXED Tightly controlled – any inflation currently offset by efficiency improvements, pay awards annually in July
Transport 3% VARIABLE 3 year fixed contract now in place with Stobart, fuel surcharge only variable
Sub-contractors 12% VARIABLE Negotiated for each contract – back-to-back with tenders
Site Construction Labour 15% FIXED Mainly directly employed, pay awards annually in July
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Severfield-Rowen Plc March 2011
(£m) (£m)
Equity invested by Severfield since 2009 - 12.0 Severfield share of losses at 31 March 2013 (5.7) - Severfield share of losses for 2013/14 (3.0) (8.7) Severfield net investment at 31 March 2014 3.3
India - Summary of investment and results to date
• Equity invested has financed one third of factory cost and trading losses to date • Factory cost : £26m • Debt within JV : £22m, including £15m term debt for factory build and £7m of
working capital debt
(Matched by JSW)
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Severfield-Rowen Plc March 2011
Chief executive officer
Ian Lawson
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The UK market (2013)
• Current estimated UK capacity – 1,000,000 tonnes
• Total UK production of constructional steelwork – 848,000 tonnes
• Our current addressable market – 500,000 tonnes
• Our current share of UK market – 90,000 tonnes
• Our potential capacity – 150,000 tonnes
Source: BCSA 13
Current tonnage outputs (2013) Top 12 companies
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Out
put (
tonn
es)
BCSA Member
Top 12 BCSA Membership – current UK market outputs
Source: BCSA # William Hare includes output from UAE factory 14
Consistent and quality order book
209 197
178 172 168
0
50
100
150
200
250
Dec-12 May-13 Aug-13 Nov-13 May-14
Order book values (£m)
15
Severfield-Rowen Plc March 2011
UK order book
Sector November 2013 £172m
May 2014 £168m
Future Trend
Commercial Offices 27% 31%
Transport 22% 18%
Stadia & Leisure 5% 18%
Industrial 16% 11%
Power & Energy 12% 7%
Data Centres & Other 5% 6%
Retail 6% 4%
Bridges 3% 3%
Health 3% 2%
Education 1% -
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• London Bridge Station Canopies • Glasgow Smartbridge • Data Centre, Amsterdam • Manchester Victoria Station • Nova, Victoria • Essex Waste Handling Plant • Birmingham New Street Station • Smurfitt Kappa Paper Mill, Snodland • 5 Broadgate • Old Livestock Market, Hereford
Current major projects
5 Broadgate, London Essex Waste
London Bridge Station Canopies Smurfitt Kappa Paper Mill, Snodland
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Manchester Victoria Station
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Pipeline/prospects
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Data Centres • Here East, London 1 • Telehouse North2, London
Commercial Offices • One Lime Street, London • London Wall Place 3 • One Angel Court, London
Stadia • Liverpool FC 2 • Tottenham Hotspur FC
Transport / Warehousing • Ordsall CT, Manchester • Project Thunderbird, Kettering • Distribution Centres for Gazeley
1 2
3
Sector Market tonnage in 2013 (000s)
SFR market share (estimated)
Industrial & Warehousing 350 42% 5-10%
Commercial Offices 88 10% 30-40%
Education 88 10% <5%
Power & Energy 37 4% 20-30%
Agriculture 35 4% 0%
Healthcare 31 4% 5-10%
Leisure 31 4% 20-30%
Bridges 25 3% <5%
Retail 20 2% 40-50%
Other 53 6% 5-10%
Exports 90 11% <5%
848 100%
Our sectors
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India – Work in progress
• Factory capacity 60,000 tonnes • Current order book - £41m • Challenging market • Election outcomes • Views in the market • Our partner JSW • Current strategy:
1. Self help 2. Business development 3. Debt reduction / interest mitigation
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OPG Power Station
JSSL Facility, Bellary
Proud of our past: Positioning for our future Our Vision: To be leaders in structural steel, creating a legacy for future generations through world class engineering and design excellence • Simpler, market-facing structure • Clearer differentiation of the company in our market • A dynamic brand and new website
Our Values: • Safety • Integrity • Customer Focus • Commitment
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Our strategy
Strategy
Margin improvement (0-3 yrs) Prove India is a sustainable business (0-1yr) Increase UK market share (1-3yrs) Enter new market sectors (1-3yrs) Build from existing European opportunities (1-5yrs) Improved technology (0-5yrs) Capitalise on improving economy
Results
Operating margin 5-6% (0-2yrs) Profit growth Increased revenue (1-5yrs) Positive cash flow Net capital investment £4-5m/pa Return to dividend
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A strong platform for growth • The business is in a much improved state from 12 months ago • We have unrivalled capabilities which puts us in prime position as the economy starts to
improve • Our facilities are the best in the UK and possibly Europe • In the UK there are areas and sectors of the market where our market share can possibly
be improved • There are potential opportunities for growth in Europe • We have a very skilled and dedicated workforce • We have appointed a new SHE director • We have appointed new NEDs to make us both compliant and to inject fresh ideas and
support into the business • Strong differentiating brand and clear purpose and direction for the company • UK markets showing signs of growth
A Clear Strategy 23
Thank you.
Questions
For more information: Ian Lawson – Chief executive officer Alan Dunsmore – Finance director
+44 (0) 1845 577 896
Dalton Airfield Industrial Estate, Dalton, Thirsk, North Yorkshire, YO7 3JN, UK
www.severfield.com
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Appendices
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What we are
• Severfield is the UK's premier structural steel company
• We are the largest structural steel business in the UK and one of the biggest in Europe
• We are a business built on the pride, passion, and quality of our people
• We have an enviable track record in designing, fabricating and erecting steel structures
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Where we are
Dalton, Thirsk Lostock, Bolton Sherburn, Scarborough
Enniskillen, N. Ireland Bellary, India
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What sets us apart?
• What we do • Our markets and our position within them • Our capability and people • Our stability and capacity • International operation • A strong platform for growth
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What we do
Design Fabrication Construction
29
UK consumption of constructional steelwork - historical and projected 2009-2017
Source: BCSA (historical data) 30
31
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000FY
'51
FY'6
1
FY'7
1
FY'8
1
FY'9
1
FY'0
1
FY'1
3
FY'2
0
FY'2
6
5%10%15%20%25%30%35%40%45%50%55%60%
Indian economic growth
6.9%
9%
11.5%
2.0%
Manufacturing and infrastructure development to drive Indian economic growth
Ref. : Planning Commission – December, 2013 // Derived
GDP at MP // US$-Billion GDP Proj. @ +7% Agriculture
Manufacturing Services
Industry
31
Source : Joint Plant Committee
25 27 2731 33
3641
4752 52
59
6671 73 74
1999
-00
2000
-01
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
CAGR : + 8.6%
Indian steel demand
32
mt
Particulars %-Pvt. Share %-GDP Share
10th Plan (2002-03 to 2006-07)
20% 5.1%
11th Plan (2007-08 to 2011-12)
38% 7.1%
12th Plan-Projected (2012-13 to 2016-17)
48% 8.3%
FY 2016-17-Projected (Terminal year of 12th Plan)
54% 9.0%
12th Five year plan - Investment for infrastructure development projected to increase two-fold to US$ 1-Trillion
Reference : Planning Commission of India
Indian infrastructure investment plan
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