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BRITISH STEEL plc - INTERIM RESULTS FOR 1997/98 |
Interim Statement
Dividend Payment
Consolidated Profit and Loss Account
17 November 1997
FINANCIAL HIGHLIGHTS
PROFIT BEFORE TAX of £143m
EARNINGS PER SHARE of 4.75p
INTERIM DIVIDEND of 3p per share
NET FUNDS of £471m
The results for the half year reflected the adverse impact of the sustained strengthening of sterling, particularly against the deutschmark. Nevertheless, British Steel achieved a pre-tax profit of £143m (1996/97 : £262m) and earnings per share of 4.75p (1996/97 : 8.58p). The Board has declared an unchanged interim dividend of 3p per share.
Deliveries during the first half year totalled 7.5mt, an increase of 4% over the corresponding period last year. Average revenue per tonne was, however, lower by 11% with the effect of the strong pound more than offsetting the benefits of improved selling prices. Turnover for steel industry products, therefore, fell 7% to £2,937m.
UK demand for British Steel's main finished products, at 5.7mt, was 5% above the corresponding period last year, largely reflecting buoyant conditions in the automotive sector and improved demand for commercial buildings. In mainland Europe, steel demand improved during the half year and in North America and South East Asia demand continued to be strong.
The results of Avesta Sheffield, our 51% owned stainless steel subsidiary, were disappointing with the benefits of higher sales and modest price improvements being offset by exchange rate effects in its UK and Swedish businesses.
Group results were also adversely affected by the commissioning costs of recent investments in North America. Tuscaloosa Steel continued its working-up programme and Trico Steel, our 25% owned joint venture, commenced its commissioning and build-up in the first half year. Commissioning of the Company's direct reduced iron making facility at Mobile began in September. We expect all three investments to achieve full capacity during 1998.
The Group achieved a net operating cash inflow of £197m. After taking account of capital expenditure of £201m and the buyback of 93 million shares, at a cost of £146m, net funds amounted to £471m at the half year end.
Sir Brian Moffat, Chairman and Chief Executive, said:
"This was a tough half year for British Steel due to the strength of sterling. Nevertheless, our commercial teams secured record order levels so that all our major UK plants worked at or close to capacity and we continue to operate profitably.
We have made good progress on the accelerated programme of cost and efficiency improvements. The radical manpower review is already yielding significant benefits with over 2,000 job reductions being identified since April, of which over 500 left the group in the first half. In parallel a simplified and much flatter management structure is being introduced which will result in more rapid decision making and progressive operating efficiencies throughout the Company. Our initiative on costs of supplies and services is now well underway. We have identified significant savings in this financial year and expect these to accelerate in 1998/99 and beyond. We have also just completed the negotiations for IT outsourcing and extending the innovative use of IT across the Group.
While our order book continues to be buoyant the current strength of sterling and the present volatility of financial markets inevitably give rise to uncertainties about steel demand. In this connection the recent financial turbulence also indicates the need for caution in the near term when considering proposals for investment in South East Asia, although the strength of sterling may yet facilitate investment opportunities for the Group in international markets."
For ordinary shareholders the interim dividend of 3p per share is payable on 12 January 1998 to shareholders on the register at close of business on 28 November 1997.
For American Depositary Receipt holders the dividend is payable in US dollars on January 22, 1998 by the Depositary, The Bank of New York, to the ADR holders of record on November 28, 1997.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
There were no material acquisitions or discontinued activities.
Unaudited
half year to
27 Sep 97Unaudited
half year to
28 Sep 96Audited
full year to 29
March 97£m £m £m Turnover
Operating costs3,398
(3,277)
=======3,651
(3,423)
=======7,224
(6,848)
=======TRADING PROFIT
Share of results of associated undertakings121
-
-----------228
9
-----------376
13
-----------OPERATING PROFIT
Profit on disposal of businesses and associated undertakings
121
-
-----------
237
-
-----------
389
18
-----------PROFIT BEFORE INTEREST
Net interest and investment income121
22
-----------237
25
-----------407
44
-----------PROFIT BEFORE TAXATION
Taxation143
(43)
-----------262
(82)
-----------451
(144)
-----------PROFIT AFTER TAXATION
Minority interests100
(5)
-----------180
(5)
-----------307
3
-----------PROFIT FOR THE PERIOD
Dividends95
(58)
-----------175
(61)
-----------310
(204)
-----------PROFIT RETAINED FOR THE PERIOD 37
=======114
=======106
=======EARNINGS PER ORDINARY SHARE 4.75p
=======8.58p
=======15.22p
=======
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