Introduction
The overall performance for the first half of 2009 has been resilient, delivering strong results against a background of difficult macro economic conditions.
Whilst revenue has fallen in the wake of the general economic downturn, the swift and decisive action taken on adjusting our cost base in line with demand, together with other actions on interest costs and taxation, ensured we achieved a level of profitability in line with our strategic objective of delivering continuous growth in earnings per share and long term shareholder value. Of particular note was the robust demand in our Infrastructure Products markets, the strong margin management in the Galvanizing Services division and through good cash generation, a significant reduction in our level of net debt compared to the 2008 year end.
The performance of our various business units is outlined in the Business Review section of this report.
Results
Revenue in the period was £196.8m being 7.0% lower than for the same period last year (2008: £211.7m) primarily due to reduced volumes and the impact of lower steel and zinc prices.
Underlying profit before taxation was 2.0% ahead of the previous year at £20.5m (2008: £20.1m). Profit before taxation increased by 1.0% to £20.2m (2008: £20.0m).
Underlying earnings per share at 18.0p, achieved a 9.1% improvement on the previous year (2008: 16.5p). Basic earnings per share at 18.1p were 4.6% ahead of the previous year (2008: 17.3p).
Dividend
Your Board has declared an interim dividend of 4.7p per share (2008: 4.3p) which represents an increase of 9.3% over the corresponding period last year. This dividend is covered 3.8 times (2008: 3.8 times) by the underlying earnings per share. The interim dividend will be paid on 7 January 2010 to shareholders on the register on 27 November 2009.
Disposal
On 26 June 2009 we disposed of our minority investment in Neholl BV, a Netherlands based holding company with galvanizing operations across the Benelux region, for a net cash consideration of €5.7m (£4.9m). The cash proceeds were used to reduce the Group’s net debt and the disposal realised a profit on sale of £1.0m.
Net Debt
During the period we generated £35.2m of cash (2008: £32.9m) from our operations. This strong cash generation, together with currency benefits, substantially reduced our net debt from £146.2m at 31 December 2008 to £106.1m at 30 June 2009, a reduction of £40.1m (27.4%).
Management
We are delighted to welcome Jock Lennox to the Board, following his formal appointment after the Annual General Meeting in May. Jock’s extensive experience in the audit and corporate advisory fields, knowledge of industrial products sectors and understanding of international markets will be a great asset to the Board as the Group continues to grow.
Outlook
We have started to see signs of improved trading conditions in both Infrastructure Products and Galvanizing Services, with increased levels of order enquiry and availability of project funding reported in June and July. Whilst the extent to which these signs of improvement are maintained in the second half is difficult to predict, our results for the year will nevertheless benefit from the cost reductions already in place, lower interest costs and the actions taken on the rate of taxation.
The Group has strong positions in broadly resilient markets, increased geographical representation and a sound financial position, all of which will help in dealing with the current economic conditions and to capitalise on any sustained improvement.
David Grove
Chairman
17 August 2009