2014/15 saw the Group make good progress against our strategic priorities. We more than doubled underlying pre-tax profits, continued to strengthen our executive team and have established the foundations to achieve further growth in 2015/16.
The Group is set for another year of good progress."
I am pleased to report a strong set of results for 2014/15. The Group reported an underlying operating profit for the year of £9.0m which represents a further increase in the UK operating margin from 3.3 per cent in the previous year to 4.5 per cent, positioning us well to achieve our previously stated target of 5 to 6 per cent by 2015/16. The margin uplift reflects improved contract tendering disciplines, together with the continued benefits of our ongoing operational improvement programme which was initiated in 2013 following the rights issue. Furthermore, the UK order book of £194m has strengthened during the year, providing us with the platform required to return to revenue growth in 2015/16.
Underlying profit before tax was £8.3m, an increase of £4.3m from the previous year. This reflects both the increase in operating profit and the improved performance of the Indian joint venture, with the Group's share of losses significantly reducing to £0.2m from £3.0m. The joint venture result reflects the benefits of the changes made to the senior management team and the business development and operational improvement programmes, all of which were initiated in response to the disappointing performance in the previous year.
The 2014/15 result includes a non-underlying charge of £6.0m relating to a programme of bolt replacement works at the Leadenhall building, a contract that was completed in 2013. This programme is being undertaken in conjunction with British Land, Laing O'Rourke and Arup and is likely to continue until the end of the calendar year. This charge represents certain costs incurred at year-end together with management's best estimate of the remaining cost to the Group before taking account of possible future recoveries.
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Cash generated from operations was £11.4m (operating cash conversion was 107 per cent), which has resulted in year-end net funds of £6.4m.
In October, the Group refinanced its borrowing facilities with National Australia Bank and HSBC, with HSBC replacing previous lender Royal Bank of Scotland. The new facilities, which expire in July 2019, are for £25m with an accordion facility of up to £20m available at the Group's request. This new facility provides a solid foundation for the Group as it continues to develop its wider strategy.
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As a result of the improved underlying results and its commitment to a progressive dividend policy, the board has recommended a final dividend of 0.5p per share. This dividend will be payable on 11 September 2015 to shareholders on the register on 14 August 2015.
Underlying profit before tax £8.3m2014: £4.0m
Order book £194mNovember 2014: £185m
Accident frequency rate (AFR) 0.212014: 0.57 (UK only)
The Group's strategy is to continue building a solid platform for growth. We have made good progress against our strategic priorities during the year, particularly in the areas of operational excellence and India. Another significant step during the year was the recruitment of the legacy Mabey Bridge infrastructure team, providing us with additional resources and expertise to support stronger future growth within the bridge and infrastructure markets.
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During the year, Kevin Whiteman, Tony Osbaldiston and Alun Griffiths all joined the board as non-executive directors. Their considerable operational expertise and the knowledge and experience gained in global organisations have proved real assets to our board discussions as we continue our strategic and operational progression.
We have continued to strengthen our executive team with the appointment of Gary Wintersgill as managing director of Severfield (UK) Limited and Martin Kelly as Group strategic business development director.
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Employees and safety
Over 1,200 employees have contributed to the strong performance of the Group during the current year. On behalf of the board, I would like to thank them for their hard work and continued support. During the year, we launched a save as you earn share scheme to enable all of our employees to participate in the long-term success of the Group.
The health and safety of our people remains a priority of the board. All of the Group's employees should benefit from an incident-free environment. The Group's AFR for the year, which includes our Indian joint venture, was 0.21. This AFR score of 0.21 includes an AFR of 0.33 for our UK operations which was a significant improvement from the prior year of 0.57, reflecting certain new initiatives launched in the current year following the appointment of a new Group SHE director in April 2014. A number of new initiatives are also planned for 2015/16.
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The improved results for 2014/15 demonstrate the strength of the Group's business model and the progress that we have made in implementing key elements of our strategy.
Looking forward, our improved order book and a growing pipeline of contract opportunities leaves us well positioned to return to revenue growth in 2015/16 which, together with the continuing improvements in operational performance both in the UK and India, mean that we believe the Group is set for another year of good progress.
17 June 2015