Drive operational improvements and efficiencies: the objective of our comprehensive operational improvement programme is to improve the Group's risk assessment, operational and contract management processes.
Invest in market-leading technology: we will make this investment in the short and medium term in order to support the Group's ongoing requirements and for growth.
Achievements in 2018
Our profit performance in 2018 (underlying PBT was £23.5m) keeps us firmly on track to deliver our 2020 strategic profit target of £26m. We have also continued to improve our operating margin to 8.3 per cent in 2018 (2017: 7.5 per cent).
2018 operating profit has continued to benefit from the embedding of operational efficiencies across the Group through better risk and contract management processes and production process improvements, together with higher profits from certain project completions in the first half of the year.
Our 'Smarter, Safer, more Sustainable' business improvement programme, which was launched in 2017, continues to drive improvements to our business processes, use of technology and operating efficiencies. In 2018, as part of this initiative, we reorganised our factory operations in North Yorkshire. This resulted in the consolidation of steel fabrication at Dalton and Sherburn into the Dalton facility and a new business venture, Severfield (Products & Processing) ('SPP'), being launched at Sherburn. The reorganisation will allow us to make more efficient use of our operational footprint in Yorkshire and also, through SPP, to address new smaller scale projects.
We have completed the implementation of our new production management system which will assist in embedding operational efficiencies and improved factory processes and have also rolled out a Lean manufacturing programme.
The Group's improvement programme has included further capital investment in 2018 of £6.4m, taking our capital investment in the business to £24m over a four-year period. The investment in 2018 represents further factory machinery, completion of the in-house painting projects at Lostock and Ballinamallard, office and yard improvements, a new trailer park and additional site construction machinery.
We have continued to invest in research and development into advanced technologies. We have also established an engineering forum to identify new and innovative ways of working which are then embedded across the Group to become business as usual.
Objectives for 2019
Our target remains the achievement of underlying PBT of £26m by 2020.
We will develop our 'Smarter, Safer, more Sustainable' business improvement programme and have recently established a dedicated 'SSS' team whose sole focus is on improving many aspects of our internal operations.
We will continue to drive operational efficiencies following the establishment of the new manufacturing arrangements at Dalton.
The roll out of the second phase of our production management system across the Group will support further improvements to estimating, production and contract and commercial management processes. This will help optimise processes between factories, production lines and projects.
This improved profitability will continue to generate surplus cash flows and support future dividends, in accordance with the Group's business model.
As part of the Group's capital investment programme, we will continue to invest at levels in excess of depreciation. This will include focused capital expenditure to target market opportunities and to maximise the benefits of our IT programme.
We will continue to invest in new state-of-the-art manufacturing technology and in our research and development programme to help drive production efficiencies. We have project teams focusing on various areas of development including introducing Lean into the design process, refining our production planning system, developing collaborative tools to provide real-time support to our project and commercial teams and reducing waste in our coatings application.
We will continue to upgrade and replace existing equipment where appropriate and to expand the capital equipment base where there is a strong return on investment case.