I am delighted to report another year of strong performance in 2018. We remain focused on delivering our strategy and continue to invest for the future in order to deliver sustainable long-term value for shareholders.

John Dodds
Non-executive chairman

The Group has delivered a third successive year of revenue growth, with revenue of £274.2m, up five per cent from the previous year. We are also extremely pleased with our profit performance in 2018 with underlying* profit before tax increasing by 19 per cent to £23.5m from £19.8m in 2017. This mainly reflects good operating performance in the UK, where operating margins have increased to 8.3 per cent, and another year of profitable performance from our Indian joint venture.


We have a strong and flexible balance sheet which underpins our plans for the future. Year-end net funds were £33.0m and our continued cash generation has enabled further capital and strategic investment in 2018, in our factories, on our sites and in India, where the term debt has now been repaid.

Board changes

Following Ian Lawson's departure from the Group on 1 February 2018, Alan Dunsmore and Adam Semple were appointed as chief executive officer and Group finance director. Alan and Adam had held these roles on an acting basis since 28 March 2017, following Ian's continued absence due to physical ill health. During this period, I assumed the role of executive chairman on an acting basis and resumed my role as non-executive chairman from 1 February 2018.

I would like to pay tribute to Ian Lawson's tremendous contribution to the Severfield business since his arrival in November 2013 and he leaves with our thanks and best wishes. I would also like to acknowledge the important roles that Alan, Adam and Ian Cochrane have played over the last year and look forward to working with all of them as we continue to deliver on our growth strategy.


Dividends

We are confident in our ability to deliver sustainable returns to shareholders and in our dividend policy. The total dividend for the year has been increased by 13 per cent to 2.6p per share (2017: 2.3p per share) which includes a proposed final dividend of 1.7p per share (2017: 1.6p per share). The board is also recommending a special dividend of 1.7p per share, resulting in a total cash return to shareholders of 4.3p per share for 2018. These dividends reflect the improved result for the year and the board's confidence in the future prospects of the Group.

Strategy and markets

As well as making good progress towards our 2020 strategic profit target, we continue to deliver on our strategic objectives. We have seen further growth in revenue and underlying pre-tax profits, continued operating margin improvement and ongoing investment in our clients, people and facilities. The Group continues to be shaped by the programme of projects launched in 2017 under the banner of 'Smarter, Safer, more Sustainable' which include ongoing improvements to our business processes, use of technology and operating efficiencies. As part of this initiative, we have reorganised our factory operations in North Yorkshire, to make better use of our operational footprint and to launch a new business, Severfield (Products & Processing), which will allow us to address smaller scale projects, a new area of growth potential for the Group.

We have also continued to explore other new areas of organic growth for the business and have commenced bidding for work in continental Europe, where we have now established a small team based in the Netherlands, and in the medium to high-rise residential construction market, where we have developed a steel solution.

UK government policy continues to support investing in upgrading the UK's infrastructure and is helping to drive a strong pipeline of major projects, particularly in the transport sector, work which Severfield is well placed to benefit from. Despite the uncertainties of Brexit, we have a strong position in a number of sectors and our breadth of capabilities positions us well to address our clients' needs.


People

I was pleased to be able to visit a number of our sites in 2018 and I continue to be impressed by the skills and commitment our employees demonstrate. This, combined with our specialist capabilities and leading positions in our core markets, is at the centre of everything we do. I would like to thank all of our employees for their hard work this year.

The safety and, very importantly, the well-being of our people remain a priority of the board and I am pleased to report that during this year we, once again, reduced our accident frequency rate ('AFR') and have sought to raise employee awareness of good health and well-being, including mental health.


Outlook

Our 2018 results demonstrate our continued progress in executing our strategy. Our strong performance in 2018, together with our UK order book of £237m and stable pipeline of potential future orders, leaves us well positioned to achieve our 2020 strategic profit target of £26m. We will continue to invest in the business to improve our operational efficiency and to ensure that we have the best people in place to deliver our strategic objectives and growth over the long term.

John Dodds

Non-executive chairman

20 June 2018

* The basis for stating results on an underlying basis is set out in the our year.