Severfield - Analyst Presentation – Full Year Results June 2014

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Severfield plc Full year results for 12 months to 31 March 2014

Severfield-Rowen Plc March 2011

Chief executive officer

Ian Lawson

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Overview

• Margin progression in line with expectations

• New UK structure delivering operational efficiencies

• Improved management of risk and governance

• Strong balance sheet and net cash

• Solid order book

• Indian JV business disappointing

• Strategy for future growth now in place

• Clear vision and new branding

3 3

Severfield-Rowen Plc March 2011

Finance director

Alan Dunsmore

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Severfield-Rowen Plc March 2011

Income statement (£m)

12 months to

31 Mar 2014

15 months to

31 Mar 2013

Revenue 231.3 318.3

Underlying Group operating profit (Pre-JVs and associates) 7.6 3.3%

(19.2) (6.0%)

Results of JVs and associates (3.0) (0.3)

Net finance charges (0.6) (2.0)

Underlying profit/(loss) before tax 4.0 (21.5)

Tax

(1.4) 3.0

Underlying profit/(loss) after tax 2.6 (18.5)

5 5

6 6

Revenue and margin

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Margin recovery on track

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*

* Pro-forma 12-month numbers

Severfield-Rowen Plc March 2011

Balance sheet (£m)

31 Mar 2014

31 Mar 2013

Non-current assets 147.7 154.9

Current assets:

Inventories 5.8 8.2

Trade & other receivables 60.8 71.6

Cash & cash equivalents 5.5 0.7

72.1 80.5

Total assets 219.8 235.4

Less:

Current liabilities (52.7) (70.9)

Borrowings (5.2) (41.9)

Retirement benefit obligations (12.5) (11.8)

Deferred tax liabilities (5.9) (8.4)

Total liabilities (76.4) (133.0)

Net assets 143.4 102.4

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Cash flow

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• The Group has a £35m banking facility with RBS and National Australia Bank in place until November 2016.

(41.2)

44.8

8.4

7.5 (8.3)

(3.5)

(5.3) (2.1)

0.3

(45.0)

(35.0)

(25.0)

(15.0)

(5.0)

5.0

15.0N

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Mar

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Net

fund

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4

£ m

illion

Net debt bridge – year ended March 2014

Outflow on trade creditors mainly represents reversion to 30 day payment terms for TATA (c£4m).

Equipment for construction sites and general replacements.

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Severfield-Rowen Plc March 2011 9

Statutory profit reconciliation (£m)

12 months to Mar 2014

15 months to

31 Mar 2013

Underlying profit/(loss) after tax 2.6 (18.5)

Restructuring and redundancy costs (2.6) (0.8)

Amortisation of acquired intangible assets (2.7) (3.4)

Retirement of acquired intangible asset (2.4) -

Impairment of investment in associates (0.4) -

All costs associated with amendment of banking facilities - (2.1)

Contract legal costs and provision movements - (1.1)

Movements in value of derivative financial instruments - 0.1

Tax on non-underlying items 2.8 2.7

Statutory loss after tax (2.6) (23.1)

Underlying EPS* 0.88p (10.78p)

EPS (0.89p) (13.49p)

Dividend per share nil 1.5p

*There is no difference between basic and diluted EPS in both years. Comparative EPS has been restated to reflect the new shares issued in the rights issue 9

Severfield-Rowen Plc March 2011

Contract costs

Individual Cost Breakdown % Fixed / Variable

Costs Comment

Steel and Other Materials 35% FIXED Pricing fixed for the duration of contracts

Factory Direct Labour 15% FIXED Pay awards annually in July

Overheads 20% FIXED Tightly controlled – any inflation currently offset by efficiency improvements, pay awards annually in July

Transport 3% VARIABLE 3 year fixed contract now in place with Stobart, fuel surcharge only variable

Sub-contractors 12% VARIABLE Negotiated for each contract – back-to-back with tenders

Site Construction Labour 15% FIXED Mainly directly employed, pay awards annually in July

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Severfield-Rowen Plc March 2011

(£m) (£m)

Equity invested by Severfield since 2009 - 12.0 Severfield share of losses at 31 March 2013 (5.7) - Severfield share of losses for 2013/14 (3.0) (8.7) Severfield net investment at 31 March 2014 3.3

India - Summary of investment and results to date

• Equity invested has financed one third of factory cost and trading losses to date • Factory cost : £26m • Debt within JV : £22m, including £15m term debt for factory build and £7m of

working capital debt

(Matched by JSW)

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Severfield-Rowen Plc March 2011

Chief executive officer

Ian Lawson

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The UK market (2013)

• Current estimated UK capacity – 1,000,000 tonnes

• Total UK production of constructional steelwork – 848,000 tonnes

• Our current addressable market – 500,000 tonnes

• Our current share of UK market – 90,000 tonnes

• Our potential capacity – 150,000 tonnes

Source: BCSA 13

Current tonnage outputs (2013) Top 12 companies

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Out

put (

tonn

es)

BCSA Member

Top 12 BCSA Membership – current UK market outputs

Source: BCSA # William Hare includes output from UAE factory 14

Consistent and quality order book

209 197

178 172 168

0

50

100

150

200

250

Dec-12 May-13 Aug-13 Nov-13 May-14

Order book values (£m)

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Severfield-Rowen Plc March 2011

UK order book

Sector November 2013 £172m

May 2014 £168m

Future Trend

Commercial Offices 27% 31%

Transport 22% 18%

Stadia & Leisure 5% 18%

Industrial 16% 11%

Power & Energy 12% 7%

Data Centres & Other 5% 6%

Retail 6% 4%

Bridges 3% 3%

Health 3% 2%

Education 1% -

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• London Bridge Station Canopies • Glasgow Smartbridge • Data Centre, Amsterdam • Manchester Victoria Station • Nova, Victoria • Essex Waste Handling Plant • Birmingham New Street Station • Smurfitt Kappa Paper Mill, Snodland • 5 Broadgate • Old Livestock Market, Hereford

Current major projects

5 Broadgate, London Essex Waste

London Bridge Station Canopies Smurfitt Kappa Paper Mill, Snodland

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Manchester Victoria Station

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Pipeline/prospects

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Data Centres • Here East, London 1 • Telehouse North2, London

Commercial Offices • One Lime Street, London • London Wall Place 3 • One Angel Court, London

Stadia • Liverpool FC 2 • Tottenham Hotspur FC

Transport / Warehousing • Ordsall CT, Manchester • Project Thunderbird, Kettering • Distribution Centres for Gazeley

1 2

3

Sector Market tonnage in 2013 (000s)

SFR market share (estimated)

Industrial & Warehousing 350 42% 5-10%

Commercial Offices 88 10% 30-40%

Education 88 10% <5%

Power & Energy 37 4% 20-30%

Agriculture 35 4% 0%

Healthcare 31 4% 5-10%

Leisure 31 4% 20-30%

Bridges 25 3% <5%

Retail 20 2% 40-50%

Other 53 6% 5-10%

Exports 90 11% <5%

848 100%

Our sectors

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India – Work in progress

• Factory capacity 60,000 tonnes • Current order book - £41m • Challenging market • Election outcomes • Views in the market • Our partner JSW • Current strategy:

1. Self help 2. Business development 3. Debt reduction / interest mitigation

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OPG Power Station

JSSL Facility, Bellary

Proud of our past: Positioning for our future Our Vision: To be leaders in structural steel, creating a legacy for future generations through world class engineering and design excellence • Simpler, market-facing structure • Clearer differentiation of the company in our market • A dynamic brand and new website

Our Values: • Safety • Integrity • Customer Focus • Commitment

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Our strategy

Strategy

Margin improvement (0-3 yrs) Prove India is a sustainable business (0-1yr) Increase UK market share (1-3yrs) Enter new market sectors (1-3yrs) Build from existing European opportunities (1-5yrs) Improved technology (0-5yrs) Capitalise on improving economy

Results

Operating margin 5-6% (0-2yrs) Profit growth Increased revenue (1-5yrs) Positive cash flow Net capital investment £4-5m/pa Return to dividend

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A strong platform for growth • The business is in a much improved state from 12 months ago • We have unrivalled capabilities which puts us in prime position as the economy starts to

improve • Our facilities are the best in the UK and possibly Europe • In the UK there are areas and sectors of the market where our market share can possibly

be improved • There are potential opportunities for growth in Europe • We have a very skilled and dedicated workforce • We have appointed a new SHE director • We have appointed new NEDs to make us both compliant and to inject fresh ideas and

support into the business • Strong differentiating brand and clear purpose and direction for the company • UK markets showing signs of growth

A Clear Strategy 23

Thank you.

Questions

For more information: Ian Lawson – Chief executive officer Alan Dunsmore – Finance director

+44 (0) 1845 577 896

Dalton Airfield Industrial Estate, Dalton, Thirsk, North Yorkshire, YO7 3JN, UK

www.severfield.com

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Appendices

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What we are

• Severfield is the UK's premier structural steel company

• We are the largest structural steel business in the UK and one of the biggest in Europe

• We are a business built on the pride, passion, and quality of our people

• We have an enviable track record in designing, fabricating and erecting steel structures

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Where we are

Dalton, Thirsk Lostock, Bolton Sherburn, Scarborough

Enniskillen, N. Ireland Bellary, India

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What sets us apart?

• What we do • Our markets and our position within them • Our capability and people • Our stability and capacity • International operation • A strong platform for growth

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What we do

Design Fabrication Construction

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UK consumption of constructional steelwork - historical and projected 2009-2017

Source: BCSA (historical data) 30

31

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000FY

'51

FY'6

1

FY'7

1

FY'8

1

FY'9

1

FY'0

1

FY'1

3

FY'2

0

FY'2

6

5%10%15%20%25%30%35%40%45%50%55%60%

Indian economic growth

6.9%

9%

11.5%

2.0%

Manufacturing and infrastructure development to drive Indian economic growth

Ref. : Planning Commission – December, 2013 // Derived

GDP at MP // US$-Billion GDP Proj. @ +7% Agriculture

Manufacturing Services

Industry

31

Source : Joint Plant Committee

25 27 2731 33

3641

4752 52

59

6671 73 74

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

CAGR : + 8.6%

Indian steel demand

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mt

Particulars %-Pvt. Share %-GDP Share

10th Plan (2002-03 to 2006-07)

20% 5.1%

11th Plan (2007-08 to 2011-12)

38% 7.1%

12th Plan-Projected (2012-13 to 2016-17)

48% 8.3%

FY 2016-17-Projected (Terminal year of 12th Plan)

54% 9.0%

12th Five year plan - Investment for infrastructure development projected to increase two-fold to US$ 1-Trillion

Reference : Planning Commission of India

Indian infrastructure investment plan

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