2013/14 was a year of transition for the Group. We have made a number of changes to the board, including the appointment of a new chief executive officer and three new non-executive directors, and the Group executive team has been strengthened. We now have a strategy in place for future growth, a clear vision for the future and a new Group branding.
John Dodds Chairman
The Group reported underlying operating profits for the year of £7.6m which represents a recovery in the UK operating margin to 3.3 per cent which is a good step towards our previously stated target of 5–6 per cent by 2015/16 in current market conditions. Underlying profit before tax of £4.0m represented a significant turnaround from the underlying loss of £21.5m in the 15 months to 31 March 2013. The UK order book of £168m remains solid.
This year has seen stabilisation and recovery in the UK business, but disappointment in India. The recovery in UK operating margins reflects the positive effects of the reorganisation undertaken in the first half of the year in the Group's largest trading entity, Severfield (UK) Limited, together with the Group's ongoing operational improvement programme.
Performance from the Indian joint venture was disappointing. The Group's share of losses for the year was £3.0m reflecting contract delays and timing variations which led to underutilisation of the factory. This situation was exacerbated by the effects on the Indian market of uncertainties around the election process. In response, significant changes have been made to the senior management team in India and a new business development and operational improvement programme has been implemented. We believe the market in India continues to present significant future growth opportunities, particularly in light of the recent election results.
Find out more in the operating review
The rights issue which launched in February 2013 with the overwhelming support of our principal shareholders, was completed in April 2013, significantly strengthening the Group's balance sheet. The Group ended the year with net funds of £0.3m.
Find out more in the financial review
The composition of our board has changed substantially over the last 12 months and has, I believe, a stronger balance of skills and mix of experience.
Ian Lawson was appointed as chief executive officer in November 2013, allowing me to revert to my previous role of non-executive chairman. Ian has made an excellent start to his tenure and has been instrumental in formulating a fresh strategy and branding for the business which I am confident will make a significant contribution to our future performance. In addition, the executive team has been further strengthened with the appointment of Ian Cochrane as chief operating officer, Mark Sanderson as Group legal director and Company secretary, and Lee Mills as Group safety, health and environment (SHE) director.
Alun Griffiths joined the board as a non-executive director with effect from 1 May 2014 and Kevin Whiteman and Tony Osbaldiston will join the board with effect from 19 July 2014. In combination, they bring to the board a wealth of experience that will be of significant benefit to the Group as we continue our strategic and operational progression.
Two non-executive directors will retire from the board following the year-end: Keith Elliott having served fifteen years, including as senior independent non-executive director, and Toby Hayward having served six years, including as non-executive chairman and chairman of the audit committee. I would like to wish both all the best for the future and thank them for all their efforts within the business.
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Employees and safety
We remain committed to the health and safety of all our people and with the appointment of a new SHE director are looking forward to continued improvements in our performance in this area as we strive constantly to adopt the best safety, health and environmental practices. Our key strength remains the dedication and commitment of our people and on behalf of the board I would like to thank them for their hard work, loyalty and support especially in the difficult times experienced recently by the Group.
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Strategy and branding
Following Ian's appointment as chief executive officer, the Group undertook a review of its brand and strategy. This resulted in the change of the Group's name to Severfield plc, a simpler naming structure for the main operating businesses, and a new branding strategy to enable improved and clearer communication with all stakeholders in the future. A significant amount of work was also undertaken in developing a new long-term strategy, the core of which revolves around the continuation of the UK operational improvement plan to ensure that we have a sustainable, profitable base for the business. The strategy will provide a platform for continued growth and we will be looking more actively for opportunities to expand the business both in the UK and in overseas markets.
Furthermore, a new vision was expressed for the Group, and its core values. The vision is 'to be recognised as world-class leaders in structural steel, known for our ability to deliver any project, to the highest possible standards'. The core values are safety, integrity, customer focus and commitment.
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Overall we expect 2014/15 to be another year of progress. We believe we are well placed, with the right leadership team, to deliver stronger growth in the future. We have excellent relationships with a number of key clients, unrivalled capacity and performance, a solid UK order book and have implemented a series of wide-ranging operational improvements both in the UK and India.
We now look ahead to a more optimistic industry outlook whilst not underestimating the challenges that lie ahead.
11 July 2014
We expect 2014/15 to be another year of progress."