27 August 2008

SEVERFIELD-ROWEN PLC

2008 Half Year Results

RECORD HALF YEAR RESULTS

Severfield-Rowen Plc, the UK's market leading structural steel group, announces its half year results to 30 June 2008.

Highlights

• Underlying operating margin increased to 15.5% 
  
  

• Cash generated from operations of £35.64m contributing to the reduction in  net debt to £35.86m
  

• Very strong order book of £431m
  
  

• Successful integration of Fisher Engineering
  
  

• Confident of meeting management expectations for 2008
  
  

• A more evenly balanced split between first and second half year revenues
  
  

• Dividend increased 48.1% to 10.00p
  

• Projects undertaken in the period include:
  
  More London
  Dublin International Airport
  Staythorpe Power Station
  Stratford City Retail Development
  Wimbledon Centre Court
  Glasgow Museum
  

*      Underlying is before the amortisation of acquired intangible assets of £4.57m and the valuation of derivative financial instruments of £0.79m in 2008 (2007: Nil).

Commenting, Tom Haughey, Chief Executive Officer, said:

"Severfield-Rowen Plc has delivered substantial growth in the first half of 2008 and is very pleased with the improvement in its financial performance, the strength and longevity of the order book and the very strong cash generation.

The general UK economic background and its impact on the construction sector cannot be ignored, however, we are not exposed to the residential sector and our significant share of Olympic related work illustrates our competences and value, as well as our high supplier preference rating. Our order book continues to replenish and the Company's strengths enable it to increase UK domestic market share and engage large prime international contracts where significant opportunities prevail. 

The Group's robust financial position and continued strong cash generation provides a platform for our growth ambitions, including overseas investment.  Accordingly, we are confident of meeting the board's expectations for 2008 and have a clear strategy to deliver continued shareholder value over the medium and long term."

Enquiries

Severfield-Rowen Plc    

Tom Haughey, CEO        +44 (0)1845 577896

Peter Davison, FD           +44 (0)1845 577896

Pelham PR

Alex Walters                    +44 (0)20 3170 7435

INTERIM STATEMENT 2008

INTRODUCTION

The Company has delivered substantial growth in the first half of 2008 and is very pleased with the improvement in its financial performance, the strength and longevity of the order book and its strong cash generation.

The general UK economic background cannot be ignored and may ultimately influence margins, but the Company's strengths will enable it to increase domestic market share and engage large prime international contracts in a range of market sectors.

We have a clear strategy to deliver continued shareholder value over the medium and long term and look forward to exciting developments in coming periods.

FINANCIALS

The Group has had a record first six months with underlying profit before tax (before amortisation of acquired intangible assets of £4.57 million and the movement in the valuation of derivative financial instruments of £0.79 million) of £25.34 million (2007: £15.88 million), an increase of 59.6% over the corresponding period of 2007.

This was achieved on revenue in the period of £173.32 million, a 26.0% increase over the £137.56 million achieved in the first half of 2007.  This is partially due to our order book strength lessening traditional seasonality variations, to provide a more evenly balanced split between first and second half year revenues.

The Group's underlying operating profit increased by 77.8% to £26.95 million (2007: £15.16 million).

These results have produced an increase in the Group's margins to 15.55% at the underlying operating profit level and 14.62% at the underlying profit before tax level.

Non-underlying items are included in the 'other items' column of the Income Statement and amount to £5.36 million (2007: £Nil) which relates to:

a)    Amortisation of acquired intangible assets - £4.57 million

b)    Movement in forward contract valuations - £0.79 million

The tax charge of £6.09 million represents an effective tax rate of 30.47% compared with 31.09% the previous year, the fall helped by the change in corporation tax rate from 30% to 28% announced in the Finance Act 2007.  

Various changes were also proposed to the industrial buildings allowance regime in the 2007 budget announcement. Provision in respect of the withdrawal of industrial buildings allowances forms part of the Finance Bill 2008 which was not substantively enacted at 30 June 2008. The directors believe that the result of these changes when substantively enacted will be a deferred tax charge of approximately £6.9 million, based on the estimated loss of tax base in April 2011.

Underlying basic earnings per share increase 49.1% to 20.04p (2007: 13.44p). This calculation is based on the underlying profit after tax of £17.75 million and 88,607,876 shares, being the weighted average number of shares in issue during the period. Basic earnings per share, based on profit after tax after non-underlying items is 15.68p (2007: 13.44p).

Underlying diluted earnings per share is 19.96p. This calculation is based on the underlying profit after tax of £17.75 million and 88,938,488 shares, being the weighted average number of shares in issue during the period, allowing for contingent shares under a share based payment scheme.

Retained profit after tax of £13.89m (2007: £10.97m) has been transferred to reserves.

During the first six months of the year capital expenditure amounted to approximately £2.36 million (2007: £3.30 million).

The Group ended the period with net borrowings of £35.86 million, a considerable reduction in the net borrowings of £48.06 million as at 31 December 2007 (30 June 2007: net cash of £28.80 million). The Group has a revolving credit facility of £70 million with RBS and National Australia Bank as joint lenders until August 2010.

During the period £35.64 million was generated from operations (2007: £4.78 million). Significant cash outflows in the period included dividends paid of £11.74 million, corporation tax of £8.84 million and net expenditure on assets of £1.49 million.

DIVIDEND

Reflecting the Group performance in the first half and its strong financial position, the Board is pleased to recommend a significant increase in the interim dividend of 48.1% to a record 10.00p per share (2007: 6.75p). This maintains the Board's policy of having the dividend covered approximately 2.0 times by underlying earnings at the interim stage (2007: 2.0 times).  

The interim dividend will be paid on 24 October 2008 to shareholders on the register on 3 October 2008.

BOARD CHANGES & EMPLOYEES

Peter Levine left his role in May 2008, ending a highly successful tenure as Company Chairman. The Company owes Peter immense gratitude for his guidance and his contribution to the growth of the Group since 1993.

Toby Hayward joined the Company as Non-Executive Chairman on 30 May 2008. His experience in the financial sector and his international exposure will be of immense value to the Company in the future.

Mr John Featherstone, our longest serving Non-Executive Director, retired from his role on 30 May 2008 and takes with him the board and management's sincere appreciation for his valued contributions over many years.

Messrs Peter Ellison, Brian Hick, Nigel Pickard and Ian Cochrane have moved from the Plc Board to take positions on the Company's Executive Management Committee, which is now effectively focused on strategic and operational performance matters relating to the business.

The management and workforce in all of the Group Companies continue to be the key asset in delivering our strong performances and shaping our future success.

OPERATIONS

Group Overview

The principal business of the Group is carried out by its five main operating companies: Severfield-Reeve Structures, Watson Steel Structures, Atlas Ward Structures, Fisher Engineering and Rowen Structures.

The Group is the clear market leader in its sector and its production facilities, technology and broad range of structural steel services are unparalleled in the industry. Sustained investment preserves the Group's advantage in the industry. Margins remain in the forefront of our attention and have shown further improvement in the first six months of 2008. Whilst we are confident that margins can be maintained in the short to medium term, they may come under some pressure in the longer term as export sales develop.

The core businesses of the Group have performed profitably and in line with management's expectations. They continue to be well placed to supply a balanced and comprehensive range of services and products to meet the needs of the structural steel markets:  

• Severfield-Reeve Structures, the single largest production unit in the UK in terms of capacity and an industry leader in productivity and use of technology;
  
• Watson Steel Structures, a world leader in specialist steel work used in stadiums, airports, bridges and high-rise towers;
  
• Atlas Ward Structures, a market leader in design and build and, following a capital investment programme, has extended to multi-sector engagements;
  
• Fisher Engineering Ltd is the largest fabricator in Ireland, and has now integrated into the operations of the Group while maintaining its own strong identity and customer focused service provision; 
  
• Rowen Structures provides management, technical and project management support to the Group while retaining its own strong brand and customer relationships.

Each of the companies above is supported by Steelcraft Erection Services, a wholly owned subsidiary of Severfield-Rowen, which is responsible for the on-site erection of the fabricated steel.

The broad range of capabilities outlined above, together with the Group's financial strength and excellence of its workforce, enable Severfield-Rowen to benefit from, and be resilient to, the ever changing market place.

Contracts

Projects being worked upon by the Group in the first 6 months, include:

• Stratford City Retail Development, London

• Wimbledon Centre Court's new closing roof 

• National Conference Centre in Dublin

• Thameside Hospital, London

• Commercial office no7 of the More London development 

• New production facility for Laing O'Rourke at Steetley

• Dublin International Airport

• Distribution centre for Tesco at Teesport

• Staythorpe Power Station

• Glasgow Museum

• One Hyde Park, London

• Erneside Shopping Centre, Enniskillen, Northern Ireland

• Data Centres in Hertfordshire and Yorkshire

• Distribution centre for Morrisons in Sittingbourne

• Project Altitude, an indoor ski-slope at Hemel Hempstead

• New rehearsal studio for the BBC at Cardiff

• Commercial offices at Central Park, Dublin

• Heathrow Airport, Terminal 2B, Phase 1 for BAA

• St Andrews University, Scotland

OUTLOOK

The Group's robust financial position and continued strong cash generation provides both a platform for our growth ambitions, including overseas investment, and a comfort against any wider industry downturn.

The order book remains very strong and incorporates Olympic related work together with an excellent spread of business across all of our key sectors, including Power, Health and Education. The Company's prospects list extends to export markets and remains extensive.

We are, therefore, confident of meeting the board's expectations for 2008 and have a clear strategy to deliver continued shareholder value over the medium and long term.

TOM HAUGHEY

CHIEF EXECUTIVE OFFICER

27 August 2008

Condensed Consolidated Income Statement

1    Other items relate to the amortisation of acquired intangibles and unrealised losses on derivative contracts. Other items have been disclosed separately in order to give an indication of the underlying earnings of the Group. There were no such items in the first half of 2007.

Condensed Consolidated Statement of Recognised Income and Expense

  Condensed Consolidated Balance Sheet

  Condensed Consolidated Cash Flow 

  Notes to the Condensed Consolidated Financial Statements

1)     Basis of preparation

The interim financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") and in accordance with IAS34 "Interim Financial Reporting" as adopted for use in the European Union and in accordance with the accounting policies included in the Company's Annual Report for the year ended 31&#