REG - Severfield PLC - Interim Results
23/11/2021 07:00
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RNS Number : 1932T Severfield PLC 23 November 2021
23 November 2021
Interim results for the period ended 30 September 2021
UK and Europe order book of £393m, India order book of £140m, continued
operational and strategic progress, good visibility of earnings through FY23
Severfield plc, the market leading structural steel group, announces its
results for the six-month period ended 30 September 2021.
£m 6 months to 6 months to
30 September 2021 30 September 2020
(unaudited) (unaudited)
Revenue 195.9 186.0
Underlying(1) operating profit 10.2 9.5
(before JVs and associates)
Operating profit (before JVs and associates) 8.2 8.1
Underlying(1) profit before tax 10.3 8.4
Profit before tax 7.9 6.6
Underlying(1) basic earnings per share 2.7p 2.2p
Basic earnings per share 1.7p 1.7p
Interim dividend per share 1.2p 1.1p
Headlines
§ Revenue up 5% to £195.9m (H1 2020: £186.0m)
§ Underlying(1) profit before tax up 23% to £10.3m (H1 2020: £8.4m)
§ Period-end net debt (excluding IFRS 16 lease liabilities(2)) of £6.7m
(31 March 2021: net funds of £4.4m), including acquisition loans of £17.8m
(31 March 2021: £20.7m), reflects unwinding of unusually low March 2021
working capital position
§ Record UK and Europe order book of £393m at 1 November 2021 (1 June
2021: £301m), includes new industrial and distribution and bridge orders and
the new stadium for Everton F.C.
§ Share of profit from JSSL of £0.3m (H1 2020: loss of £0.7m), return to
profitability reflects an Indian market which is now showing clear signs of
recovery from second wave of COVID-19
§ India order book of £140m at 1 November 2021 (1 June 2021: £140m)
§ Interim dividend increased by 9% to 1.2p per share (H1 2020: 1.1p per
share)
ESG
§ Certified by the Carbon Trust as carbon neutral for manufacturing and
construction operations
§ Net Zero carbon target established for 2040, Group signed up to the UN
'Race to Zero' campaign
Outlook
§ UK and Europe - tendering and pipeline activity remain very encouraging -
including opportunities in the industrial and distribution, transport
infrastructure, nuclear and data centre sectors
§ India - strong and growing underlying demand for structural steel - JSSL
is very well-positioned to take advantage of an improving economy
§ Expectations are unchanged despite ongoing supply chain and inflationary
pressures for us and our clients
§ Record UK and Europe order book gives us good profit visibility through
FY23
Alan Dunsmore, Chief Executive Officer commented:
'The operational and strategic progress we have made over recent years has
underpinned our first half performance. Tendering activity in UK and Europe
remains very encouraging and our pipeline of opportunities spans a wide range
of sectors demonstrating the benefits of both the strategic acquisitions and
the organic investments we have made in recent years.
We are making strong progress in our Indian business and are well-placed to
capitalise on this exciting market opportunity as the economy recovers from
the pandemic and construction continues to transition from concrete to steel.
Our people and communities remain a priority as we further our 'Smarter,
Safer, more Sustainable' programme, as well as advancing our sustainability
agenda, playing our part in the shift to a decarbonised economy.
While the inflationary outlook and labour market and supply chain pressures
present challenges, our strong order book position and operational experience
give us confidence for the rest of this year and provide good visibility
through FY23.'
For further information, please contact:
Severfield Alan Dunsmore 01845 577 896
Chief Executive Officer
Adam Semple 01845 577 896
Group Finance Director
Jefferies International Simon Hardy 020 7029 8000
Will Soutar 020 7029 8000
Camarco Ginny Pulbrook 020 3757 4980
Tom Huddart 020 3757 4980
Notes to financials:
(1 )stated before non-underlying items of £2.4m (H1 2020: £1.8m) consisting
of the amortisation of acquired intangible assets of £2.0m (H1 2020: £1.4m)
and acquisition-related expenses of £0.4m (H1 2020: £0.4m). Non-underlying
items have been separately identified as a result of their magnitude,
incidence or unpredictable nature. Their separate identification results in a
calculation of an underlying profit measure in the same way as it is presented
and reviewed by management (see note 7 to the interim financial statements)
(2 )the Group excludes IFRS 16 lease liabilities from its measure of net funds
/ debt as they are excluded from the definition of net debt as set out in the
Group's borrowing facilities (see note 13 to the interim financial statements)
Notes to editors:
Severfield is the UK's market leader in the design, fabrication and
construction of structural steel, with a total capacity of c.165,000 tonnes of
steel per annum. The Group has six sites, c.1,500 employees and expertise in
large, complex projects across a broad range of sectors. The Group also has an
established presence in the expanding Indian market through its joint venture
partnership with JSW Steel (India's largest steel producer).
INTERIM STATEMENT 2021
Introduction
The Group has continued to perform well in the first half, building on the
positive momentum coming into the financial year, following our successful
response to the challenges of COVID-19. This, together with the benefits of
further operational and strategic progress, is reflected in our record UK and
Europe order book of £393m, increased revenues, improved profitability, and a
significantly improved performance from JSSL, our Indian joint venture.
The Group's first half profit performance is slightly ahead of the previously
anticipated profit weighting for H1 / H2 of approximately one third / two
thirds. Notwithstanding this, profits for the 2022 financial year are still
expected to have a second-half bias reflecting the phasing of ongoing contract
works in our record UK and Europe order book. This order book provides us with
good visibility over the next 18 months and gives us confidence of a strong
future performance by the Group. Furthermore, we continue to be very
encouraged by the current level of tendering and pipeline activity across the
Group. We remain well-positioned to take advantage of some significant
opportunities, including in the industrial and distribution, transport
infrastructure, nuclear and data centre sectors, providing us with greater
resilience and the ability to drive future profitable growth.
JSSL has continued to recover well from the effects of the second wave of
COVID-19. The factory in Bellary and all the business's construction sites are
currently operational. After a difficult start to the first half, when output
was disrupted, the company has reported a slightly above break-even profit
position in H1, reflecting an improving Indian market picture. Despite the
recent COVID-19 challenges, JSSL has continued to win new work, resulting in a
strong order book of £140m. This, together with JSSL's ever-improving
pipeline of potential orders, reflects a continuing strong underlying demand
for structural steel in India, leaving the business very well-positioned to
take advantage of an improving economy.
Financials
Revenue of £195.9m (2020: £186.0m) represents an increase of £9.9m compared
to the prior period. This predominately reflects six months of additional
revenue for DAM Structures, which was acquired in February 2021.
Underlying operating profit (before JVs and associates) of £10.2m (2020:
£9.5m) represents an increase of £0.7m over the prior period which included
the disruptive effects of COVID-19, particularly in the first quarter of the
previous year. As anticipated, the results for the 2022 financial year are
expected to be considerably weighted to the second half, with several
contracts in the order book expected to deliver higher profits during this
period.
The share of results of JVs and associates in the first half of the year was a
profit of £0.6m (2020: loss of £0.6m). This includes a share of profit from
the Indian joint venture of £0.3m (2020: loss of £0.7m), reflecting revenue
growth and margin improvement as the business continues its recovery from the
effects of the second wave of COVID-19. The share of results of JVs and
associates also includes those of Construction Metal Forming ('CMF') Limited
which has contributed a share of profit for the Group of £0.3m (2020:
£0.1m), the prior period for CMF also having been impacted by COVID-19.
The Group's underlying profit before tax was £10.3m (2020: £8.4m), an
increase of 23 per cent compared to the previous period. The statutory profit
before tax, which includes both underlying and non-underlying items, was
£7.9m (2020: £6.6m), an increase of 20 per cent.
Non-underlying items for the period of £2.4m (2020: £1.8m) consisted of the
amortisation of acquired intangible assets of £2.0m (2020: £1.4m) and
acquisition-related expenses of £0.4m (2020: £0.4m). The amortisation of
acquired intangible assets represents the amortisation of customer
relationships, order books and brand name, which were identified on the
acquisitions of Harry Peers and DAM Structures. These assets are being
amortised over a period of 18 months to five years.
An underlying tax charge of £1.9m is shown for the period (2020: £1.7m).
This tax charge is recognised based upon the best estimate of the average
effective income tax rate on profit before tax for the full financial year and
equates to the UK statutory rate of 19 per cent. A non-underlying tax charge
of £0.8m has been recognised, comprising a tax credit on non-underlying items
of £0.5m, offset by a charge of £1.3m relating to the increase in future tax
rates from 19 per cent to 25 per cent.
Underlying basic earnings per share is 2.7p (2020: 2.2p). This calculation is
based on the underlying profit after tax of £8.3m (2020: £6.7m) and
308,287,952 shares (2020: 306,860,362 shares) being the weighted average
number of shares in issue during the period. Basic earnings per share, which
is based on the statutory profit after tax, is 1.7p (2020: 1.7p). Diluted
earnings per share, which includes the effect of the Group's performance share
plan, is 1.7p (2020: 1.7p).
Net debt (pre-IFRS 16 basis) at 30 September 2021 was £6.7m (31 March 2021:
net funds of £4.4m) following the payment of the 2021 final dividend
(£5.5m). This represents cash of £11.1m offset by the outstanding term loans
of £17.8m for the Harry Peers and DAM Structures acquisitions. Operating cash
flow for the period before working capital movements was £13.3m (2020:
£11.8m). Net working capital increased by £11.8m in the period reflecting
the impact of recent steel and other input price rises, together with the
expected unwinding of the unusually low (two per cent of revenue) working
capital position at 31 March 2021. Excluding advance payments, period-end net
working capital was slightly below six per cent of revenue, which is within
our well-established target range of four to six per cent.
Capital expenditure of £3.5m (2020: £1.8m) represents the continuation of
the Group's capital investment programme. This predominantly consisted of site
improvements at Ballinamallard and the purchase of additional land at Dalton
to future-proof the site. There remain some significant capital projects
planned for the second half of the year, including new and upgraded equipment
for our fabrication lines, and we continue to expect 2022 capital expenditure
levels to be higher than our recent run rate of £6m to £8m per annum.
Depreciation in the period was £3.3m (2020: £3.0m), of which £0.8m (2020:
£0.8m) relates to right-of-use assets under IFRS 16.
The Group's net defined benefit pension liability at 30 September 2021 was
£20.4m, a decrease of £2.0m from the year-end position of £22.4m. The
deficit has decreased largely because of higher-than-expected returns on the
scheme's assets and ongoing deficit contributions.
The Group has a £25m revolving credit facility ('RCF') with HSBC Bank and
Virgin Money (formerly Yorkshire Bank), which matures in October 2023. The
RCF, of which £10m is available as an overdraft facility, continues to
include an additional accordion facility of £20m, which allows the Group to
increase the aggregate available borrowings to £45m. As part of the Harry
Peers and DAM Structures acquisitions, new amortising term loans of £14m and
£12m, respectively were established as amendments to the existing RCF. At 30
September 2021, of these original loans of £26m, £17.8m remained
outstanding.
Dividend
The board considers the dividend to be a very important component of
shareholder returns. Accordingly, based on its current assessment of the
performance of the business, the outlook for the year and our strong balance
sheet and cash position, the board has decided to increase the interim
dividend by 9 per cent to 1.2p per share (2020: 1.1p per share).
UK and Europe
The Group's main activities continue to be the design, fabrication and
construction of structural steel for construction projects in the UK, Republic
of Ireland and Europe. During the period, we continued to work on a large
industrial facility, which includes a bespoke paint package, in the Republic
of Ireland, several large distribution facilities in the UK and our first HS2
bridge package, Water Orton Viaducts in the Midlands. We have also continued
our work on the new Google Headquarters at King's Cross, together with a
number of mid-sized office developments, both in London and the UK regions
(including Argyle Street in Glasgow, Sky Studios in Elstree, and Sherwood
Street and 30 South Colonnade, both in London).
The UK and Europe order book at 1 November includes a significant amount of
new work which we have secured over recent months and now stands at a record
level of £393m (1 June 2021: £301m), of which £318m is planned for delivery
over the next 12 months. This leaves the Group very well-positioned with a
strong future workload for the remainder of the 2022 financial year and
beyond. The growth in the order book has been driven by several significant
project awards. These include the new stadium for Everton F.C., two large and
various smaller distribution facilities in the UK, reflecting a sector which
continues to remain buoyant, a waste-to-energy facility, new HS2 bridge
packages and other bridge awards reflecting investment in infrastructure by
Highways England and Network Rail. The order book remains well-balanced,
showcasing the benefits of our strategic diversification over recent years,
and contains a healthy mix of projects across the Group's key market sectors.
In terms of geographical spread, of the order book of £393m, 95 per cent
represents projects in the UK, with the remaining 5 per cent representing
projects for delivery in Europe and the Republic of Ireland (1 June 2021: 84
per cent in the UK, 16 per cent in Europe and the Republic of Ireland). The
more UK-centric nature of the current order book is driven by the inclusion of
DAM Structures' UK order book, following its acquisition in the previous year,
together with a lower proportion of work in the Republic of Ireland, as
several projects, including the large industrial facility, draw to completion.
Furthermore, whilst the order book is currently at record levels, only 17 per
cent of this represents commercial offices, compared to the more normal
previous range of 30 to 35 per cent and a peak of c.60 per cent around four
years ago, highlighting the success of our strategic diversification.
We remain very encouraged by the current level of tendering and pipeline
activity across the Group and are well-positioned to take advantage of some
significant opportunities in the industrial and distribution (battery plants
and distribution centres), transport infrastructure, nuclear and data centre
sectors. We are also seeing new opportunities in the commercial office market,
including in London, a trend which we expect to increase over the coming
years, given that some of the challenges recently experienced by this sector
are now alleviating. With the return to more normal trading conditions and
with the most significant effects of COVID-19 behind us, we remain well-placed
to win work across a wide client base and in a diverse range of market sectors
and geographies, including in Europe, supported by our European business. This
diversity provides us with greater resilience and the ability to drive future
profitable growth.
As a key component of economic growth, the construction industry will be
central to a sustainable recovery from the effects of COVID-19. New, low
carbon infrastructure (including HS2, wind power, new nuclear, rail
electrification, energy efficient buildings) will play a leading role in
stimulating sustainable growth. In November 2020, the UK Government released
details of its five-year plan, the National Infrastructure Strategy ('NIS') to
invest in digital, transport and energy to drive economic recovery, levelling
up and meeting the UK's net zero emissions target by 2050. This plan announced
funding of £640 billion, an increase of £100 billion from the previous plan,
for developments in roads, railways, power networks, telecommunications and
other UK infrastructure projects. We have already secured some significant
road bridge awards and orders for HS2 from a variety of consortia, and we
continue to make good progress with several other similar opportunities,
including rail electrification work. We remain well-positioned to win work in
the transport sector given the Group's historical track record and our
in-house bridge capability, together with the in-depth expertise of DAM
Structures.
Smarter, Safer, more Sustainable
The Group's 'Smarter, Safer, more Sustainable' ('SSS') operational improvement
programme has engendered a self-help culture within the organisation. This
programme has served us well in maintaining efficient operations during the
pandemic and in helping us to offset many of the supply chain and cost
pressures currently being experienced by the Group (see below).
During the period, we have continued our drive to reduce costs and increase
and upgrade our fabrication capacity and efficiency. This includes the
continued roll out of our new coatings management system at Dalton covering
the reduction of paint waste and improvements to the specification, management
and application of factory paint systems, together with initiatives to improve
overall quality including the targeted reduction of factory NCRs (rework
items). Having rolled out a new Group wide production management system
(StruMIS) in 2019, we are currently in the process of further streamlining
production flows and improving real-time factory information at our main
centre in Dalton, including the use of mobile devices to capture information
at the point of use to provide live information to both operatives and
management. This will help drive quality, reduce bottlenecks, and improve the
reliability and speed of our operations. As part of our ongoing capital
investment programme, we have also continued to expand our fabrication
capability at Dalton and invested in new and more efficient production
machinery to improve the throughput and efficiency of these operations.
Our digital transformation initiative is targeting a connected organisation
which eliminates waste and increases automation. As part of this process, we
are devoting skilled resource to reviewing and responding to developing
technologies and continue to make good progress with the automation of
repetitive tasks. This includes our innovative approach to drawing and design,
and the optimisation of engineering software under the leadership of our Group
engineering director.
Supply chain
We continue to be mindful of industry-wide supply chain pressures for both us
and our clients which are, in some instances, impacting material costs and
availability. This includes certain steel products, in part reflecting a price
of steel which, although stabilising recently, has nearly doubled over the
past year. Notwithstanding this, steel remains largely a pass-through cost for
the Group, albeit the recent steel price increases are having an impact on
working capital in the short term. For steel, we benefit from relationships
with several partners in the UK and continental Europe, reducing the risk of
interruptions to the Group's steel supply.
During the first half, the Group has also experienced some increases in lead
times and supply restrictions for a limited number of other products, together
with upward pressures on costs due to tighter labour markets and more general
inflationary pressures for certain products and services. Whilst not immune to
this, the impact has been managed without any significant disruption to
operations, and the Group is managing these pressures through contractual
protection, operating efficiencies and by forward purchasing as appropriate,
leveraging the Group's scale and supply chain and sub-contract management
strengths.
Overall, it is expected that these pressures will normalise and that any
disruption can be minimised by the focused sourcing of materials through the
supply chain and our ongoing SSS operational improvement programme.
DAM Structures
DAM Structures is integrating well into our core operations and we are seeing
significant opportunities for growth in the UK from Network Rail
electrification programmes including piling, overhead line equipment and
general rail works, and temporary and permanent tunnel work for HS2. This will
complement the Group's existing expertise in the transport sector. We also see
ongoing opportunities for growth in DAM's propping business which provides
bespoke fabricated propping systems to demolition and groundwork contractors.
In addition to the initial consideration of £12.0m which was paid in February
2021, a further deferred consideration of £7.0m is payable in cash in April
2022. An additional performance-based contingent consideration of up to £8.0m
is also in place, payable if certain work-winning targets in the railway and
steel piling sectors are achieved over a five-year period, ending in April
2026.
Modular construction
Our modular (off-site) construction offering continues to include the growing
product ranges of Severfield (Products & Processing) ('SPP') based in
Sherburn and of CMF, our cold rolled steel joint venture business based in
Wales. We continue to be the only hot rolled steel fabricator in the UK to
have a cold rolled manufacturing capability.
SPP
SPP was originally established in 2019 to allow us to address smaller scale
projects and provide a one-stop shop for smaller fabricators to source
high-quality processed steel and ancillary products, at lower margins. We have
continued to grow and invest in the business, including strengthening the
factory management, engineering and commercial functions, to maintain our
focus on growing our 'Severstor' modular product range and 'Rotoflo' products,
both of which attract higher margins. For Severstor, we are already making
significant progress in growing our client base and have secured repeat orders
from several blue-chip clients. The Rotoflo team has also recently appointed a
new sales manager in India as we look to develop the overseas footprint of the
business. In the previous year, SPP was awarded 'Fit for Nuclear' and certain
Network Rail accreditations which, together with an expanding client base and
our previous record in modular construction, we believe will help us to
achieve our future growth aspirations for the business.
As well as servicing its growing external client base, SPP has also continued
to provide high-quality sub-contract fabrication packages for other Group
companies to assist in the delivery of our record UK and Europe order book,
thus ensuring a greater proportion of project work remains in-house and
subject to Severfield quality standards.
CMF
CMF has continued to develop its product range which now includes load bearing
frame and deck profiles, purlins and side rail systems to service a cold
formed steel market which has grown significantly in recent years through the
increased use of steel in off-site and modular construction. As a result of
these market developments and with the agreement of our joint venture partner,
an expansion of the business is currently underway. The expansion, which
involves the development of a new, separate manufacturing facility in South
Wales, is required as the existing CMF facility in Pontypool is operating at
close to full capacity and cannot be developed any further due to space
constraints. This will allow CMF to serve an external client base and ensure
that its market share is maintained and increased in line with market growth.
Significant work on this expansion commenced earlier in the financial year and
the facility is expected to be operational in the next 12 months. The overall
cost of construction for CMF is c.£10m, including land of £3m, which is
being financed by a combination of equity of c.£5m, provided in equal amounts
by the joint venture partners in the previous year, and debt of c.£5m.
India
After a difficult start to the first half, when output was disrupted, JSSL has
continued its recovery from the effects of the second wave of COVID-19. This
is evident in the Group's after-tax share of profit of £0.3m (2020: share of
loss of £0.7m), reflecting an Indian market which is now showing clear signs
of improvement. This return to profitability reflects an increase in JSSL's
revenue to £41.2m, compared to £23.1m in the previous period, and an
operating margin of 5.6 per cent, compared to a break-even operating margin in
the previous period. Financing expenses of £1.6m (2020: £1.6m) turn JSSL's
operating profit of £2.3m (2020: £nil) into a profit before tax of £0.7m
(2020: loss before tax of £1.6m).
Despite the recent COVID-19 challenges, JSSL's clients have continued to place
orders, resulting in a strong order book of £140m (1 June 2021: £140m). In
terms of mix, 62 per cent of the order book represents higher margin
commercial work, with the remaining 38 per cent representing industrial
projects, mainly for JSW (1 June 2021: commercial work of 68 per cent,
industrial work of 32 per cent).
JSSL's pipeline of potential orders continues to include several commercial
projects for key developers and clients with whom it has established strong
relationships, including in the commercial office, data centre and healthcare
sectors. This, together with JSSL's healthy order book, reflects a strong and
growing underlying demand for structural steel in India, leaving the business
very well-positioned as the market continues to recover well from the second
wave of COVID-19.
In response to this underlying demand, which is supported by strong long-term
growth projections for India and the continued conversion of the market from
concrete to steel, in tandem with our joint venture partner, we are currently
evaluating several locations in which to purchase land to facilitate further
expansion of the business in the future. Whilst Bellary continues to ramp up
towards its maximum capacity of c,100,000 tonnes, this proposed land purchase
will allow the business to expand its geographical footprint in India whilst
providing it with the platform to build quickly and incrementally add the
necessary volume when future market conditions are suitable.
Safety, health and the environment ('SHE')
Our updated SHE strategy is based around three key areas: people,
communication and engagement, and systems and processes. The strategy will
serve to further enhance and progress our SHE culture and values as we strive
to be industry-leading in our approach.
In the previous year, we rolled out a new platform for reporting SHE incidents
and completing inspections to identify trends and root causes in safety
performance to enable targeted improvements. Following the reduction in the
Group's injury frequency rate ('IFR') in the previous year, we have made
further improvements in 2022, and our leading safety indicators continue to
trend in a positive direction.
Our annual safety awards, now in their third successful year, saw a marked
increase in nominations. These were held in November and it was a pleasure to
recognise all the great work our people do by celebrating the event together.
Sustainability
As part of our ambitious sustainability strategy, the Group has committed to
reduce our scope 1 and 2 greenhouse gas ('GHG') emissions by 25 per cent by
2025 against a 2018 baseline. These targets are based on the 2015
International Treaty on Climate Change (the Paris Agreement), which seeks to
limit global warming to below 1.5 degrees Celsius, compared to pre-industrial
levels. We have also committed to reach Net Zero for our scope 1 and 2 carbon
emissions by 2040.
Having reduced our scope 1 and 2 GHG emissions intensity by more than 60 per
cent since 2015, the Group was recently included on the Financial Times
inaugural listing of Europe's climate leaders (May 2021) that details
corporate progress in fighting climate change and lists the 300 companies
which achieved the greatest reduction in their GHG emissions between 2014 and
2019. One of the key metrics for ESG is reducing CO2 emissions, with the Group
producing figures that are audited by the Carbon Trust on an annual basis.
Ahead of COP26 in October, the Group signed up to the United Nations 'Race to
Zero' campaign, in conjunction with the Science Based Targets Initiative, to
build momentum around the shift to a decarbonised economy. This requires the
Group to set a net zero target in line with a 1.5-degree world to hold off
some of the worst climate impacts. We are also involved with a supply chain
project with Balfour Beatty, showcasing how we are engaged in their ambition
to 'Green The Chain', together with our existing SteelZero commitments which
demonstrate how important the transition to low embodied carbon steel
production is to the construction sector.
In line with our sustainability strategy, in August 2021, we achieved our
current year target to be accredited as carbon neutral for our manufacturing
and construction operations by the Carbon Trust, in accordance with PAS 2060,
the only recognised international standard for carbon neutrality. This is an
important milestone in our journey towards Net Zero. Carbon neutral in this
context means that we use carbon offsetting to eliminate our combined scope 1,
scope 2 and operational scope 3 (business travel, transport and distribution,
employee commuting, and waste) greenhouse gas emissions.
Summary and outlook
The Group has performed well during the first six months of the year,
reflecting the benefit of the strategic and operational progress made over
recent years. Our balance sheet remains strong, we have increased revenues and
profits, including a return to profitability for JSSL, and we have continued
to drive efficiencies through our SSS programme. Our strategy remains
unchanged, focused on growth, both organic and through selective acquisitions,
operational improvements and creating further value in JSSL.
In India, we remain enthused about the long-term development potential of the
business, which is very well-positioned to take advantage of a market which
continues to show clear signs of recovery from the second wave of COVID-19.
Whilst we retain an element of caution given the ongoing supply chain and
inflationary pressures which are impacting both us and our clients, our
expectations remain unchanged. With a record UK and Europe order book, which
provides good visibility of earnings through FY23, a very encouraging pipeline
of opportunities, and a well-positioned business in India, the outlook for the
Group remains good.
Alan Dunsmore
Chief Executive Officer
23 November 2021
Condensed consolidated interim financial information
Consolidated income statement
Six months ended Six months ended Year ended
30 September 2021 (unaudited) 30 September 2020 (unaudited) 31 March 2021 (audited)
Non-underlying Non-underlying Non-underlying
Underlying £000 Total Underlying £000 Total Underlying£000 £000 Total
£000 £000 £000 £000 £000
Revenue 195,890 - 195,890 186,031 - 186,031 363,254 - 363,254
Operating costs (185,710) (2,025) (187,735) (176,539) (1,421) (177,960) (337,784) (2,795) (340,579)
Operating profit before share of results of JVs and associates 10,180 (2,025) 8,155 9,492 (1,421) 8,071 25,470 (2,795) 22,675
Share of results of JVs and associates 581 - 581 (623) - (623) (344) - (344)
Operating profit 10,761 (2,025) 8,736 8,869 (1,421) 7,448 25,126 (2,795) 22,331
Net finance expense (479) (338) (817) (447) (429) (876) (795) (429) (1,224)
Profit before tax 10,282 (2,363) 7,919 8,422 (1,850) 6,572 24,331 (3,224) 21,107
Taxation (1,939) (809) (2,748) (1,719) 352 (1,367) (4,574) 771 (3,803)
Profit for the period 8,343 (3,172) 5,171 6,703 (1,498) 5,205 19,757 (2,453) 17,304
Earnings per share:
Basic 2.71p (1.03)p 1.68p 2.18p (0.48)p 1.70p 6.43p (0.80)p 5.63p
Diluted 2.69p (1.02)p 1.67p 2.18p (0.48)p 1.70p 6.43p (0.80)p 5.63p
Consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
30 September 2021 30 September 2020 31 March 2021
(unaudited) (unaudited) (audited)
£000 £000 £000
Actuarial gain/(loss) on defined benefit pension scheme* 1,030 (4,957) (4,906)
(Losses)/gains taken to equity on cash flow hedges (177) (916) 1,699
Reclassification adjustments on cash flow hedges 14 455 251
Exchange difference on foreign operations 1 (26) 34
Tax relating to components of other comprehensive income* (258) 942 734
Other comprehensive income 610 (4,502) (2,188)
for the period
Profit for the period from continuing operations 5,171 5,205 17,304
Total comprehensive income for the period attributable to equity shareholders 5,781 703 15,116
of the parent
* These items will not be subsequently reclassified to the consolidated income
statement.
Consolidated balance sheet
At At At
30 September 2021 30 September 2020 31 March
(unaudited) (unaudited) 2021
£000 £000 (audited)
£000
ASSETS
Non-current assets
Goodwill 85,390 70,714 85,782
Other intangible assets 7,610 6,230 9,630
Property, plant and equipment 92,401 88,160 91,698
Right-of-use asset 9,994 9,494 9,808
Interests in JVs and associates 29,371 26,066 28,790
Contract assets, trade and other receivables 4,282 - 4,368
229,048 200,664 230,076
Current assets
Inventories 9,102 6,119 10,231
Contract assets, trade and other receivables 88,112 68,345 67,847
Derivative financial instruments 679 - 1,049
Current tax asset 177 1,963 3,584
Cash and cash equivalents 11,045 29,802 24,983
109,115 106,229 107,694
Total assets 338,163 306,893 337,770
LIABILITIES
Current liabilities
Trade and other payables (87,413) (79,531) (77,803)
Financial liabilities - borrowings (5,900) (3,500) (5,900)
Financial liabilities - leases (1,531) (1,086) (1,744)
Derivative financial instruments - (1,612) -
(94,844) (85,729) (85,447)
Non-current liabilities
Trade and other payables (4,009) - (10,639)
Retirement benefit obligations (20,366) (23,022) (22,379)
Financial liabilities - borrowings (11,900) (7,000) (14,850)
Financial liabilities - leases (9,321) (9,513) (9,365)
Deferred tax liabilities (5,225) (2,795) (4,161)
(50,821) (42,330) (61,394)
Total liabilities (145,665) (128,059) (146,841)
NET ASSETS 192,498 178,834 190,929
EQUITY
Share capital 7,725 7,689 7,706
Share premium 88,167 87,292 87,658
Other reserves 4,090 281 3,464
Retained earnings 92,516 83,572 92,101
TOTAL EQUITY 192,498 178,834 190,929
Consolidated statement of changes in equity
Share Share Other Retained Total
capital premium reserves earnings equity
£000 £000 £000 £000 £000
At 1 April 2021 7,706 87,658 3,464 92,101 190,929
Total comprehensive income for the period - - (163) 5,944 5,781
Ordinary shares issued* 19 509 - - 528
Equity settled share-based payments - - 789 - 789
Dividends paid - - - (5,529) (5,529)
At 30 September 2021 (unaudited) 7,725 88,167 4,090 92,516 192,498
*The issue of shares represents shares allotted for the 2018 and 2020
Sharesave schemes.
Share Share Other Retained Total
capital premium reserves earnings equity
£000 £000 £000 £000 £000
At 1 April 2020 7,648 87,292 1,402 87,333 183,675
Total comprehensive income for the period - - (487) 1,190 703
Ordinary shares issued* 41 - - - 41
Equity settled share-based payments - - (634) 572 (62)
Dividends paid - - - (5,523) (5,523)
At 30 September 2020 (unaudited) 7,689 87,292 281 83,572 178,834
*The issue of shares represents shares allotted to satisfy the 2017
Performance Share Plan award, which vested in June 2020.
Share Share Other Retained Total
capital premium reserves earnings equity
£000 £000 £000 £000 £000
At 1 April 2020 7,648 87,292 1,402 87,333 183,675
Total comprehensive income for the year - - 1,984 13,132 15,116
Ordinary shares issued* 58 366 - - 424
Equity settled share-based payments - - 78 531 609
Dividends paid - - - (8,895) (8,895)
At 31 March 2021 (audited) 7,706 87,658 3,464 92,101 190,929
*The issue of shares represents shares allotted to satisfy the 2017
Performance Share Plan award, which vested in June 2020 and the 2017 Sharesave
scheme.
Consolidated cash flow statement
Six months ended Six months ended Year
30 September 2021 30 September 2020 ended
(unaudited) (unaudited) 31 March
£000 £000 2021
(audited)
£000
Net cash flow from operating activities (367) 12,506 25,349
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment 185 90 104
Purchases of land and buildings (2,098) - (247)
Purchases of other property, plant and equipment (1,310) (1,553) (6,097)
Purchases of intangible assets (125) (276) (276)
Investment in JVs and associates - - (2,444)
Investment in subsidiary entity, net of cash acquired (526) - (17,489)
Net cash used in investing activities (3,874) (1,739) (26,449)
Cash flows from financing activities
Interest paid (537) (477) (699)
Dividends paid (5,529) (5,523) (8,895)
Proceeds from shares issued 528 41 424
Proceeds from borrowings - - 12,000
Repayment of borrowings (2,950) (17,625) (19,375)
Repayment of lease liabilities (1,209) (775) (1,710)
Loans issued to JVs and associates - (944) -
Net cash used in financing activities (9,697) (25,303) (18,255)
Net decrease in cash and cash equivalents (13,938) (14,536) (19,355)
Cash and cash equivalents at beginning 24,983 44,338 44,338
of period
Cash and cash equivalents at end of period 11,045 29,802 24,983
Notes to the condensed consolidated interim financial information
1) General information
Severfield plc ('the Company') is a company incorporated and domiciled in the
UK. The address of its registered office is Severs House, Dalton Airfield
Industrial Estate, Dalton, Thirsk, North Yorkshire, YO7 3JN. The Company is
listed on the London Stock Exchange.
The condensed consolidated interim financial information does not constitute
the statutory financial statements of the Group within the meaning of section
435 of the Companies Act 2006. The statutory financial statements for the year
ended 31 March 2021 were approved by the board of directors on 16 June 2021
and have been delivered to the registrar of companies. The report of the
auditors on those financial statements was unqualified, did not draw attention
to any matters by way of emphasis and did not contain any statement under
section 498 of the Companies Act 2006.
The condensed consolidated interim financial information for the six months
ended 30 September 2021 has been reviewed, not audited, and was approved for
issue by the board of directors on 22 November 2021.
2) Basis of preparation
The condensed consolidated interim financial information for the six months
ended 30 September 2021 has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted for use in the UK. As required by the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority,
the condensed consolidated interim financial information has been prepared
applying the accounting policies and presentation that were applied in the
preparation of the statutory financial statements for year ended 31 March
2021, which were prepared in accordance with International Financial Reporting
Standards ('IFRS') adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006.
Going concern
Net debt (pre-IFRS 16 basis) at 30 September 2021 was £6.7m, representing
cash of £11.1m offset by term loans of £17.8m. The Group has a £25m
revolving credit facility ('RCF') with HSBC and Virgin Money that matures in
October 2023. The RCF, of which £10m is available as an overdraft facility,
includes an additional accordion facility of £20m, which allows the Group to
increase the aggregate available borrowings to £45m. Throughout the
year-to-date, the Group has maintained significant amounts of headroom in its
financing facilities and associated covenants.
In the previous year, the Group continued to trade safely and profitably with
positive operating cash flows whilst operating under various COVID-19
restrictions. Whilst there continues to be some uncertainty associated with
COVID-19, the directors expect the Group to remain similarly resilient over
the forecast period whilst it continues to operate under any further potential
restrictions until the end of the pandemic. The directors have reviewed the
Group's forecasts and projections for the remainder of the 2022 financial year
and up to 12 months from the date of approval of the interim financial
statements, including sensitivity analysis to assess the Group's resilience to
potential adverse outcomes including a highly pessimistic 'worst case'
scenario. This 'worst case' is based on the combined impact of securing no
further orders and further significant disruption for the entirety of the
going concern period. Given the strong previous performance of the Group, this
scenario is only being modelled to stress test our strong financial position
and demonstrate the existence of considerable headroom in the Group's
covenants and borrowing facilities.
Having also made appropriate enquiries, the directors consider it reasonable
to assume that the Group has adequate resources to be able to operate within
the terms and conditions of its financing facilities for at least 12 months
from the approval of the condensed Group financial statements. For this
reason, the directors continue to adopt the going concern basis in preparing
the condensed consolidated interim financial information.
3) Accounting policies
Except as described below, the accounting policies applied in preparing the
condensed consolidated interim financial information are consistent with those
used in preparing the statutory financial statements for the year ended 31
March 2021.
Taxes on profits in interim periods are accrued using the tax rate that will
be applicable to expected total annual profits.
New and amended standards and interpretations need to be adopted in the first
interim financial statements issued after their effective date (or date of
early adoption).
There are no new IFRSs and IFRICs that are effective for the first time for
the six months ended 30 September 2021 which have a material impact on the
Group.
4) Risks and uncertainties
The principal risks and uncertainties which could have a material impact upon
the Group's performance over the remaining six months of the year ending 31
March 2022, other than as disclosed below, have not changed significantly from
those disclosed on pages 80 to 86 of the strategic report included in the
annual report for the year ended 31 March 2021. The annual report is available
on the Company's website www.severfield.com. These risks and uncertainties
include, but are not limited to:
§ Health and safety
§ Supply chain
§ Commercial and market environment
§ COVID-19
§ Cyber security
§ Failure to mitigate onerous contract terms
§ Indian joint venture
§ People
The preparation of the condensed consolidated interim financial information
under IFRS requires management to make judgements, assumptions and estimates
that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expense. Assumptions and estimates are
reviewed on an ongoing basis and any revisions to them are recognised in the
period in which they are revised. The Group's critical accounting judgements
and estimates have not changed significantly from those disclosed on page 167
of the annual report for the year ended 31 March 2021.
Revenue and profit recognition
Recognition of revenue and profit is based on judgements made in respect of
the ultimate profitability of a contract. There are eight contracts that
management consider require significant accounting estimates and the Group had
included revenue and profit in the period relating to these contracts of
£63,100,000 and £7,100,000, respectively. Management has performed
sensitivity analysis on these contracts and assessed that if the Group's
average contract margin increased or decreased by one per cent, the impact of
this across these projects would result in an increase or corresponding
decrease in profit in the year of c.£630,000. At the balance sheet date,
amounts due from construction contract customers, included in contract assets,
trade and other receivables was £38,845,000 (2020: £22,764,000).
5) Segmental analysis
In accordance with IFRS 8, the Group has identified its operating segments
with reference to the information regularly reviewed by the executive
committee (the chief operating decision maker ('CODM')) to assess performance
and allocate resources. On this basis the CODM has identified one operating
segment (construction contracts) which in turn is the only reportable segment
of the Group.
The constituent operating businesses have been aggregated as they have
businesses with similar products and services, production processes, types of
customers, methods of distribution, regulatory environments, and economic
characteristics. Given that only one operating and reporting segment exists,
the remaining disclosure requirements of IFRS 8 are provided within the
consolidated income statement and balance sheet.
There has been no change in the basis of segmentation or in the basis of
measurement of segment profit or loss in the period.
6) Seasonality
There are no seasonal variations which impact the split of revenue between the
first and second half of the financial year. Underlying movements in contract
timing and phasing, which are an ongoing feature of the business, will
continue to drive moderate fluctuations in half yearly revenues.
7) Non-underlying items
At At At
30 September 2021 30 September 2020 31 March
£000 £000 2021
£000
Operating costs (2,025) (1,421) (2,795)
Finance expense (338) (429) (429)
Non-underlying items before tax (2,363) (1,850) (3,224)
Tax on non-underlying items (809) 352 771
Non-underlying items after tax (3,172) (1,498) (2,453)
Non-underlying items before tax consist of: At At At
30 September 2021 30 September 2020 31 March
£000 £000 2021
£000
Amortisation of acquired intangible assets (2,025) (1,421) (2,842)
Unwinding of discount on deferred and contingent consideration (338) (429) (429)
Acquisition-related expenses - - (689)
Contingent consideration movements - - 736
Non-underlying items before tax (2,363) (1,850) (3,224)
Amortisation of acquired intangible assets represents the amortisation of
customer relationships, order books and brand name, which were identified on
the acquisition of Harry Peers and provisionally on the acquisition of DAM
Structures.
Tax on non-underlying items includes the impact of an increase in future
corporation tax rates from 19 per cent to 25 per cent, that have been
substantively enacted, on the Group's deferred tax liability. In the period, a
charge of £809,000 has been recognised, comprising a tax credit on
non-underlying items of £505,000 offset by a charge of £1,314,000 relating
to the increase in future corporation tax rates.
In the prior year, the Group incurred acquisition-related expenses of
£689,000 representing non-recurring legal and consultancy costs associated
with the DAM Structures acquisition.
Non-underlying items have been separately identified to provide a better
indication of the Group's underlying business performance. They have been
separately identified as a result of their magnitude, incidence or
unpredictable nature. These items are presented as a separate column within
their consolidated income statement category. Their separate identification
results in a calculation of an underlying profit measure in the same way as it
is presented and reviewed by management.
8) Taxation
The income tax expense reflects the estimated underlying effective tax rate of
19 per cent on profit before taxation for the Group for the year ending 31
March 2022.
9) Dividends
Six months ended Six months ended Year
30 September 2021 30 September 2020 ended
£000 £000 31 March 2021
£000
2020 final - 1.8p per share - 5,523 5,523
2021 interim - 1.1p per share - - 3,372
2021 final - 1.8p per share 5,529 - -
5,529 5,523 8,895
The directors have declared an interim dividend in respect of the six months
ended 30 September 2021 of 1.2p per share (2020: 1.1p per share) which will
amount to an estimated dividend payment of £3,710,000 (2020: £3,372,000).
This dividend is not reflected in the balance sheet as it was declared and
will be paid after the balance sheet date.
10) Earnings per share
Earnings per share is calculated as follows:
Six months ended Six months ended Year
30 September 2021 30 September 2020 ended
£000 £000 31 March
2021
£000
Earnings for the purposes of basic earnings per share being net profit 5,171 5,205 17,304
attributable to equity holders of the parent company
Earnings for the purposes of underlying basic earnings per share being 8,343 6,703 19,757
underlying net profit attributable to equity holders of the parent company
Number of shares Number Number Number
Weighted average number of ordinary shares for the purposes of basic earnings 308,287,952 306,860,362 307,337,645
per share
Effect of dilutive potential ordinary shares and under share plans 2,109,620 - 112
Weighted average number of ordinary shares for the purposes of diluted 310,397,572 306,860,362 307,337,757
earnings per share
Basic earnings per share 1.68p 1.70p 5.63p
Underlying basic earnings per share 2.71p 2.18p 6.43p
Diluted earnings per share 1.67p 1.70p 5.63p
Underlying diluted earnings per share 2.69p 2.18p 6.43p
11) Property, plant and equipment
During the period, the Group acquired land and buildings of £2,098,000 (2020:
£nil) and other property, plant and equipment of £1,310,000 (2020:
£1,553,000). The Group also disposed of other property, plant and equipment
for £185,000 (2020: £90,000) resulting in a loss on disposal of £2,000
(2020: profit of £14,000).
12) Intangible assets
During the period, the Group capitalised software-related costs of £125,000.
In the prior period, the Group acquired intangible assets of £276,000,
relating to product licences.
13) Net (debt)/funds
At At At
30 September 2021 30 September 2020 31 March
£000 £000 2021
£000
Borrowings (17,800) (10,500) (20,750)
Cash and cash equivalents 11,045 29,802 24,983
Unamortised debt arrangement costs 103 152 128
Net (debt)/funds (pre-IFRS 16) (6,652) 19,454 4,361
IFRS 16 lease liabilities (10,852) (10,599) (11,109)
Net (debt)/funds (post-IFRS 16) (17,504) 8,855 (6,748)
The Group excludes IFRS 16 lease liabilities from its measure of net funds /
debt as they are excluded from the definition of net debt as set out in the
Group's borrowing facilities.
14) Fair value disclosures
Financial instruments consist of borrowings, cash, items that arise directly
from its operations and derivative financial instruments. Cash and cash
equivalents, trade and other receivables and trade and other payables
generally have short terms to maturity. For this reason, their carrying values
approximate to their fair values. Borrowings relate to amounts drawn down
against the revolving credit facility and amounts outstanding under the term
loan, the carrying amounts of which approximate to their fair values by virtue
of being floating rate instruments.
Derivative financial instruments are the only instruments valued at fair value
through profit or loss and are valued as such on initial recognition. These
are foreign currency forward contracts measured using quoted forward exchange
rates and yield curves matching the maturities of the contracts. These
derivative financial instruments are categorised as level 2 financial
instruments, which are financial assets and liabilities that do not have
regular market pricing, but whose fair value can be determined based on other
data values or market prices.
The fair values of the Group's derivative financial instruments which are
marked-to-market and recorded in the balance sheet were as follows:
At At At
30 September 2021 30 September 2020 31 March
£000 £000 2021
£000
Assets/(liabilities)
Foreign exchange contracts 679 (1,612) 1,049
15) Net cash flow from operating activities
Six months ended Six months ended Year
30 September 2021 30 September 2020 ended
£000 £000 31 March
2021
£000
Operating profit from continuing operations 8,736 7,448 22,331
Adjustments:
Depreciation of property, plant and equipment 2,550 2,181 4,434
Right-of-use asset depreciation 765 789 1,569
Loss/(gain) on disposal of other property, plant 2 (14) 40
and equipment
Amortisation of intangible assets 2,032 1,421 2,846
Movements in pension scheme liabilities (983) (623) (1,215)
Share of results of JVs and associates (581) 623 344
Share-based payments 790 (62) 610
Movement in contingent consideration - - (736)
Operating cash flows before movements in working capital 13,311 11,763 30,223
Decrease/(increase) in inventories 1,195 737 (1,140)
(Increase)/decrease in receivables (16,864) 7,186 12,551
Increase/(decrease) in payables 3,852 (4,816) (11,645)
Cash generated from operations 1,494 14,870 29,989
Tax paid (1,861) (2,364) (4,640)
Net cash flow from operating activities (367) 12,506 25,349
Cash and cash equivalents (which are presented as a single class of assets on
the face of the balance sheet) comprise cash at bank and demand deposits and
other short-term highly liquid investments with a maturity of three months or
less.
16) Related party transactions
There have been no changes in the nature of related party transactions as
described in note 31 on page 193 of the annual report for year ended 31 March
2021 and there have been no new related party transactions which have had a
material effect on the financial position or performance of the Group in the
six months ended 30 September 2021, except as stated below.
During the period, the Group provided services in the ordinary course of
business to its Indian joint venture, JSW Severfield Structures ('JSSL') and
in the ordinary course of business contracted with and purchased services from
its UK joint venture, Construction Metal Forming Limited ('CMF'). The Group's
share of the retained profit in JVs and associates of £581,000 (2020: loss of
£623,000) for the period reflects a profit from JSSL of £275,000 (2020: loss
of £718,000) and a profit from CMF of £306,000 (2020: £95,000).
The Group incurred additional operating costs in relation to the day-to-day
running of its Indian joint venture ('JSSL') of £133,000 (2020: £237,000).
Those costs were recharged to JSSL during the period and the amount due from
JSSL at 30 September 2021 was £472,000 (2020: £589,000). The amount due to
JSSL at 30 September 2021 was £360,000.
During the period, the Group has contracted with and purchased services from
CMF amounting to sales of £81,000 and purchases of £8,165,000. The amounts
due from and to CMF at 30 September 2021 was £851,000 and £1,918,000
respectively. In July 2021, a short-term working capital loan of £750,000 was
made by Severfield plc to CMF, which was outstanding at 30 September 2021.
During the period, the Group contracted with and purchased services from MET
Structures, amounting to sales of £7,570,000 (2020: £750,000) and purchases
of £1,450,000 (2020: £572,000). The amount due from MET Structures at 30
September 2021 was £1,169,000 (2020: £611,000) and the amount outstanding to
MET Structures was £282,000 (2020: £nil). MET Structures shares common
directors with the Group.
17) Contingent liabilities
Liabilities have been recorded for the directors' best estimate of uncertain
contract positions, known legal claims, investigations and legal actions in
progress. The Group takes legal advice as to the likelihood of success of
claims and actions and no liability is recorded where the directors consider,
based on that advice, that the action is unlikely to succeed, or that the
Group cannot make a sufficiently reliable estimate of the potential
obligation. The Group also has contingent liabilities in respect of other
issues that may have occurred, but where no legal or contractual claim has
been made and it is not possible to reliably estimate the potential
obligation.
The Company and its subsidiaries have provided unlimited multilateral
guarantees to secure any bank overdrafts and loans of all other Group
companies. At 30 September 2021 this amounted to £nil (2020: £nil). The
Group has also given performance bonds in the normal course of trade.
18) Cautionary statement
The Interim Management Report ('IMR') has been prepared solely to provide
additional information to shareholders to assess the Group's strategies and
the potential for those strategies to succeed. The IMR should not be relied on
by any other party or for any other purpose.
The IMR contains certain forward-looking statements.
These statements are made by the directors in good faith based on the
information available to them up to the time of their approval of this report
but such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors, underlying
any such forward-looking information.
19) Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the condensed
consolidated interim financial information has been prepared in accordance
with IAS 34 as adopted for use in the UK, and that the interim report includes
a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R,
namely:
§ An indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed consolidated
interim financial information, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
§ Material related party transactions that have occurred in the first six
months of the financial year and any material changes in the related party
transactions described in the last annual report and financial statements.
The maintenance and integrity of the Severfield plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
By order of the board
Alan Dunsmore Adam Semple
Chief Executive Officer Group Finance Director
23 November 2021 23 November 2021
Independent review report to Severfield plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2021 which comprises the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated balance
sheet, the consolidated statement of changes in equity, the consolidated cash
flow statement, and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2021 is not prepared,
in all material respects, in accordance with IAS 34 'Interim Financial
Reporting' as adopted for use in the UK and the Disclosure Guidance and
Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the
UK FCA').
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the half-yearly financial report
and consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
The latest annual financial statements of the group were prepared in
accordance with International Financial Reporting Standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union and in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and the next annual financial
statements will be prepared in accordance with UK-adopted international
accounting standards. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly financial
report in accordance with IAS 34 as adopted for use in the UK.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
David Morritt
for and on behalf of KPMG LLP
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
23 November 2021
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