Revenue for the year is up 19 per cent, reflecting organic growth and the second half acquisition of harry peers.

Adam Semple

Group finance director


Underlying* operating profit (before JVs and associates)£27.0m£23.3m
Underlying* operating margin (before JVs and associates)8.2%8.5%
Underlying* profit before tax£28.6m£24.7m
Underlying* basic earnings per share7.7p6.7p
Operating profit (before JVs and associates)£24.7m£23.3m
Profit before tax£25.8m£24.7m
Basic earnings per share6.7p6.7p
Return on capital employed ('ROCE')17.2%15.7%

* The basis for stating results on an underlying basis is set out on the highlights page. The board believes that non-underlying items should be separately identified on the face of the income statement to assist in understanding the underlying performance of the Group. Accordingly, certain Alternative Performance Measures ('APMs') have been used throughout this report to supplement, rather than replace the measures provided under IFRS.


Trading performance

2020 has been another successful year for the Group. Revenue for the year of £327.4m represents an increase of £52.5m (19 per cent) compared with the previous year, predominantly reflecting an increase of £38.1m in order flow and higher production activity, particularly in the second half of the year, together with H2 revenue of £14.4m from the Harry Peers acquisition. The Group's order book at 1 June 2020 of £271m represents a decrease of £52m from the record position at the time of announcing the half year results (1 November 2019: £323m), mainly reflecting the higher than normal revenue recorded in the second half of the 2020 financial year.

Underlying operating profit (before JVs and associates) of £27.0m (2019: £23.3m) was £3.7m higher than in the previous year. The underlying operating margin (before JVs and associates) of 8.2 per cent (2019: 8.5 per cent) remains within our strategic margin range of 8 to 10 per cent. The slight reduction in the margin reflects the mix of work undertaken during the year and the slightly softer market conditions in the UK, particularly toward the end of the 2019 calendar year. The statutory operating profit (before JVs and associates), which includes the Group's non-underlying items, was £24.7m (2019: £23.3m).

The share of results of JVs and associates was a profit of £2.4m (2019: £1.6m), reflecting a year of strong performance from our Indian joint venture ('JSSL'). Net finance costs were £0.7m (2019: £0.2m), the increase over the prior year representing interest on the Harry Peers acquisition loan in H2 and finance expenses on the new IFRS 16 lease liabilities.

Underlying profit before tax, which is management's primary measure of Group profitability, was £28.6m (2019: £24.7m). The statutory profit before tax, reflecting both underlying and non-underlying items, was £25.8m (2019: £24.7m).

Acquisition of Harry Peers

On 1 October 2019, the Group completed the acquisition of 100 per cent of the share capital of Harry Peers & Co Limited for a net initial cash consideration of £18.9m, after working capital adjustments of £0.9m, on a cash free, debt free basis. This was funded by a combination of a term loan of £14.0m and cash reserves of £4.9m. The gross initial cash consideration was £30.8m, which included the cash and cash equivalents (excluding payments in advance) of Harry Peers of £11.9m. A performance-based contingent consideration of up to £7m is also payable if certain financial and operational targets are achieved for the period to 31 August 2020. The acquired assets included intangible assets of £8.8m, which were attributed to customer relationships, order books and brand name, and residual goodwill of £16.0m.

The business contributed revenue of £14.4m and an operating profit of £1.3m in the year. Interest of £0.1m was payable during the year on the acquisition loan.

Share of results of JVs and associates

The Group's share of results from JSSL was a profit of £2.2m (2019: £1.2m). The improved result is mainly due to an increase in revenue of 30 per cent, together with an increase in the operating margin to 8.5 per cent (2019: 6.4 per cent), reflecting an increased level of commercial work in 2020. JSSL's order book was £110m at 1 June 2020 (1 November 2019: £134m), and this continues to include a good mix of higher margin commercial work.

Our specialist cold rolled steel joint venture business, CMF, contributed a Group share of profit of £0.2m (2019: £0.4m), the business being adversely impacted by the softer UK market conditions during the year. The business has continued to develop its product range to drive organic revenue growth. We continue to be the only hot rolled steel fabricator in the UK to have this cold rolled manufacturing capability.

Non-underlying items

Non-underlying items are classified as such as they do not form part of the profit monitored in the ongoing management of the Group. Non-underlying items for the year of £2.8m (2019: £nil) consisted of the amortisation of acquired intangible assets of £1.4m (2019: £nil) and acquisition-related expenses of £1.4m (2019: £nil).

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. These assets are being amortised over a period of 18 months to five years.

The acquisition-related expenses include non-recurring legal and consultancy costs associated with the Harry Peers acquisition and have been expensed in accordance with IFRS 3 (revised).


The Group's underlying taxable profits of £26.3m (2019: £23.1m) resulted in an underlying tax charge of £5.0m (2019: £4.5m), which represents an effective tax rate of 19.0 per cent (2019: 19.7 per cent).

The total tax charge of £5.4m (2019: £4.5m) also includes adjustments relating to prior years and the deferred tax impact of the future increase in UK corporation tax from 17 per cent to 19 per cent, both of which are categorised as non-underlying and are included in non-underlying items.

Earnings per share

Underlying basic earnings per share increased by 15per cent to 7.7p (2019: 6.7p) based on the underlying profit after tax of £23.7m (2019: £20.2m) and the weighted average number of shares in issue of 305.4m (2019: 303.1m). Basic earnings per share, which is based on the statutory profit after tax, was 6.7p (2019: 6.7p), this growth reflects the increased profit after tax offset by an increase in non-underlying items. Diluted earnings per share, which includes the effect of the Group's performance share plan, was 6.6p (2019: 6.6p).

Dividend and capital structure

The Group has a progressive dividend policy. Funding flexibility is maintained to ensure there are sufficient cash resources to fund the Group's requirements. In this context, the board has established the following clear priorities for the use of cash:

  • To support the Group's ongoing operational requirements, and to fund profitable organic growth opportunities where these meet the Group's investment criteria;
  • To support steady growth in the core dividend as the Group's profits increase;
  • To finance other possible strategic opportunities that meet the Group's investment criteria; and
  • To return excess cash to shareholders in the most appropriate way, whilst maintaining a good underlying net funds position.

The board is not currently recommending a final dividend (2019: 1.8p per share). Given the wide range of potential profit and cash flow outcomes for 2021, the board believes it is prudent to defer any dividend payment decisions until there is greater visibility on the impact of COVID-19.

Goodwill and intangible assets

Goodwill was £70.7m at 31 March 2020 (2019: £54.7m), the increase reflecting the goodwill arising on the Harry Peers acquisition. In accordance with IFRS, an annual impairment review has been performed. No impairment was required during either the year ended 31 March 2020 or the year ended 31 March 2019.

Other intangible assets are recorded at £7.4m (2019: £nil). This represents the net book value of the intangible assets (customer relationships, order books and brand name) identified on the acquisition of Harry Peers.

Property, plant and equipment

The Group has property, plant and equipment of £88.9m (2019: £84.0m). Capital expenditure of £6.5m (2019: £7.2m) represents the continuation of the Group's capital investment programme. This predominantly comprised continued investment in the painting facilities at Ballinamallard, an expansion of our operations at Ballinamallard and Dalton, including new equipment for our fabrication lines, and the purchase of construction site equiment. Depreciation in the year was £5.5m (2019: £3.6m) of which £1.5m relates to new right-of-use assets under IFRS 16.

Joint ventures

The carrying value of our investment in joint ventures and associates was £26.7m (2019: £24.3m), which consists of the investment in India of £18.3m (2019: £16.1m) and in CMF of £8.4m (2019: £8.2m).


The Group's defined benefit pension scheme, which is closed to new members, had an IAS 19 deficit of £18.7m at 31 March 2020 (2019: £20.0m). The decrease in the liability is mainly due to lower inflation (RPI) assumptions and the ongoing deficit contributions of £1.5m made by the Group during the year offset by an increase in the scheme's cash commutation factors. The triennial funding valuation of the scheme will be carried out in 2021, with a valuation date of 31 March 2020. All other pension arrangements in the Group are of a defined contribution nature.

Return on capital employed

The Group adopts ROCE as a KPI to help ensure that its strategy and associated investment decisions recognise the underlying cost of capital of the business. The Group's ROCE is defined as underlying operating profit divided by the average of opening and closing capital employed. Capital employed is defined as shareholders' equity excluding retirement benefit obligations (net of tax), acquired intangible assets and net funds. For 2020, ROCE was 17.2 per cent (2019: 15.7 per cent), which exceeds the Group's target of 10 per cent through the economic cycle.

Cash flow
Operating cash flow (before working capital movements)£30.2m£25.8m
Cash generated from operations£28.0m£18.0m
Operating cash conversion81%50%
Net funds**£16.4m£25.1m

** 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.


The Group's business model has been established to generate surplus cash flows and we have always placed a high priority on cash generation and the active management of working capital. The Group ended the financial year with net funds of £16.4m (2019: £25.1m). Net funds at 31 March 2020 comprised cash of £44.3m offset by borrowings under the Group's revolving credit facility ('RCF') of £15.0m and the outstanding term loan of £13.1m for the Harry Peers acquisition.

Operating cash flow for the year before working capital movements was £30.2m (2019: £25.8m). Net working capital increased by £2.2m mainly due to the impact of increased levels of activity (and step up in revenues) in the second half of the year, offset by the partial unwinding of the large working capital outflow from the previous year. Excluding advance payments, year-end net working capital represented approximately three per cent of revenue (2019: four per cent). This is below our well-established target range of four to six per cent, reflecting our continued focus on working capital management.

Our cash generation KPI shows the conversion of 81 per cent (2019: 50 per cent) of underlying operating profit (before JVs and associates) into operating cash (cash generated from operations less net capital expenditure).

Prompt Payment Code

We believe in treating our suppliers and subcontractors fairly and with respect. Our three main businesses are all signatories of the Prompt Payment Code. Our relationships with our supply chain partners are of strategic importance and key to the Group's success, and payment practices will continue to be an area of focus.

Bank facilities committed until 2023

The Group has a £25m revolving credit facility ('RCF') with HSBC Bank and 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 acquisition, a new amortising term loan of £14m was established as an amendment to the existing RCF. This loan also matures in October 2023. The RCF remains subject to two financial covenants, interest cover (>4×) and net debt to EBITDA (<2.5×), and an additional financial covenant, cash flow cover, which has been included following the drawdown of the new term loan. The Group operated well within these covenant limits throughout the year ended 31 March 2020. Overall cash headroom exceeded £50m at 31 March 2020.


IFRS 16 'Leases' became effective for the Group from 1 April 2019. The profit before tax impact of IFRS 16 during the year was not material and represented a credit of £0.4m to underlying operating profit and a finance expense of £0.4m on lease liabilities. As at 31 March 2020, the Group has recognised right-of-use assets of £10.1m, lease liabilities of £11.2m, and associated deferred tax assets of £0.2m. The adoption of IFRS 16 will not impact the Group's banking covenants as the calculations are prepared based on the accounting treatment required under IAS 17, the previous lease accounting standard.

COVID-19 – focus on cash preservation

To mitigate the financial impact of COVID-19 and to protect the Group's cash position, the following precautionary actions have been implemented:

  • The deferral of all non-essential and uncommitted capital expenditure, together with restrictions on discretionary operating expenditure;
  • Tight management of working capital whilst continuing to support supply chain partners;
  • Taking advantage of the opportunity to defer tax payments including PAYE, NIC and VAT;
  • The agreement with the Group's lenders to defer quarterly term loan repayments (due in March and June) until September 2020; and
  • The drawdown of all available amounts under the RCF facility (£15m) to provide the Group with control over its own cash resources.

At this early point in our financial year it is impossible to predict the full extent of the financial impact of COVID-19 over the course of the year and a wide range of profit and cash outcomes are possible. We have modelled a broad range of scenarios including a 'base case' scenario (which captures the Group's most up-to-date 'realistic' forecast position), a 'severe but plausible' scenario (the impact on the 'base case' of a three month delay in our expected (unsecured) orders) and a 'worst case' scenario (the combined impact of securing no further orders for the next twelve months and a second lockdown in the second half of the 2021 financial year). There are many assumptions that sit behind these scenarios, above and beyond the duration of the different stages of lockdown, and there is not necessarily a linear relationship between the duration of COVID-19 and the impact on revenue and costs. However, even in our 'worse case' scenario, with our strong balance sheet, we are confident that we have sufficient cash and committed funding in place to meet our obligations for the foreseeable future.

Impact of Brexit

Following the UK's departure from the European Union ('EU') in January 2020, there is continuing uncertainty concerning the UK government's negotiations on a trade deal and future co-operation with the EU. The Group has taken steps to prepare for the potential outcomes in December 2020 of these trade negotiations and has plans in place to ensure it can continue to deliver on current and future contractual commitments.

Going concern

In determining whether the Group's annual consolidated financial statements can be prepared on the going concern basis, the directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowing facilities and the risks and uncertainties relating to its business activities.

The following factors were considered as relevant:

  • The potential impact of COVID-19 on the Group's profits and cash flows;
  • The UK and Europe order book and the pipeline of potential future orders;
  • The Group's 'SSS' business improvement programme, which has delivered tangible benefits in 2020 and is expected to continue doing so in the 2021 financial year and beyond; and
  • The Group's net funds position and its bank finance facilities, which are committed until October 2023, including both the level of those facilities and the covenants attached to them.

Based on the above, the financial statements have been prepared on a going concern basis. In reaching this conclusion, the directors have reviewed liquidity forecasts for the Group, which have been updated for the expected impact of COVID-19 trading activities. The directors also considered sensitivities in respect of potential downside scenarios and the mitigating actions available in concluding that the Group is able to continue in operation for a period of at least 12 months from the date of approving the financial statements.

Adam Semple

Group finance director
17 June 2020


Viability statement


In accordance with the UK Corporate Governance Code (the 'Code'), the directors have carried out a robust assessment of the principal risks and uncertainties and assessed the Group's viability over a three-year period ending on 31 March 2023. The directors have determined that this three-year timescale, which is unchanged from 2019, is appropriate for the following reasons:

  • This period is consistent with that used for the Group's annual strategic planning process, and reflects the directors' best estimate of the future prospects of the business;
  • The programmes associated with the majority of the Group's most significant construction contracts, the execution period of which is normally less than three years;
  • The directors considered whether the assessment period of three years should be revisited in light of COVID-19. However, given the outcomes of the modelling below, our current strong balance sheet, and the lesser extent to which our operations have been adversely impacted compared to other businesses and sectors, it was concluded that the three-year time frame remained appropriate.

In making their assessment, the directors took account of the Group's strategy, current strong financial position, forward order book of £271m, recent and planned investments, the Group's main committed bank facilities (which mature in October 2023) and potential sources of additional government funding for which the Group is eligible.

The COVID-19 outbreak has developed rapidly in 2020, with lockdown restrictions implemented in the UK and Europe in an effort to curtail the spread of the virus. For our assessment of going concern (which covers a 12-month period), we have modelled a broad range of COVID-19 related scenarios including a 'base case' scenario (which captures the Group's most up-to-date 'realistic' forecast position), 'a severe but plausible' scenario (the impact on the 'base case' of a three-month delay in our expected (unsecured) orders), and a 'worst case' scenario (the combined impact of securing no further orders for the next 12 months and a second lockdown in the second half of the 2021 financial year).

The directors have also assessed the potential financial and operational impact of other 'severe but plausible' scenarios resulting from the crystallisation of one or more of the principal risks described in the annual report which include recent issues (such as COVID-19, the uncertainties caused by the UK government's ongoing negotiations on a trade deal and future co-operation with the EU and recent corporate failures) that are relevant to the industry sector in which the Group operates. In particular, the impact of a reduction in margin of 25 per cent, a reduction in revenue of 25 per cent, a deterioration in working capital (the extension of customer payment terms by one month), a period of business interruption (two months with no factory production caused by e.g. a further period of COVID-19 related lockdown) and a significant one-off event resulting in a cost to the Group of £15m. The range of scenarios tested was considered in detail by the directors, taking account of the probability of occurrence and the effectiveness of likely mitigation actions including the reduction of any non-essential capital expenditure and operating expenditure, bonuses and dividend payments.

Based on this assessment, the directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.