2017 has been another year of good progress, both operationally and strategically. We have increased our underlying pre-tax profits by 50 per cent and continued to invest in the business, thereby setting the foundations upon which we will continue to implement our strategy.
2017 has been another year of good progress for the Group, both operationally and strategically. The Group has delivered a second successive year of strong revenue growth, with revenue of £262.2m representing a 10 per cent increase from the previous year. This growth is reflected in the significant improvement in underlying* operating profit (before JVs and associates), which has increased by 43 per cent to £19.6m, along with continued good cash generation. The higher underlying operating profit (before JVs and associates) reflects an improvement in operating margin (before JVs and associates) (from 5.7 per cent in the prior year to 7.5 per cent), which has continued to benefit from the embedding of operational efficiencies across the Group through better contract execution and improved flow of fabrication processes in our factories. In addition, our new joint venture, CMF Limited, is performing well and its integration into the supply chain has had a beneficial impact on operating margins as well as the share of results from JVs and associates.
Underlying* profit before tax has increased by 50 per cent to £19.8m from £13.2m in the previous year. This mainly reflects both the good performance in the UK and a stable year-on-year performance from our Indian joint venture resulting from a consistent order book and good levels of production through the factory. Overall, we are very pleased with the profit progress we have made during the year which positions us well to achieve our previously stated strategic target of doubling our 2016 underlying profit before tax over the following four years.
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Our Group balance sheet continues to be very strong. Year-end net funds were £32.6m, an increase of £13.9m over 2016, a result of our excellent cash generation during the year (operating cash conversion was 112 per cent). This underlying cash performance has enabled further capital investment in 2017, demonstrating our commitment to developing and improving the business.
We have a progressive dividend policy which has established clear priorities for the use of capital. The total dividend for the year has been increased by 53 per cent to 2.3p per share (2016: 1.5p per share) which includes a proposed final dividend of 1.6p per share (2016: 1.0p per share). This reflects the improved result for the year and the board's confidence in the future prospects of the Group.
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Interim board change
On 28 March 2017, following the temporary leave of absence of Ian Lawson due to physical ill health, I agreed to act as executive chairman on an interim basis and am working with Alan Dunsmore, who has assumed the role of chief executive on a similar basis. Adam Semple, the Group financial controller, has temporarily taken on the responsibilities of Group finance director.
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Strategy and markets
Reviewing the strategic objectives of the Group, continuing to assess their appropriateness, and evaluating progress against these objectives has continued to be a key focus for the board. During the year, the board held strategy sessions at which we challenged and shaped the strategic priorities presented by management.
We have again made good progress against our strategic priorities during the year. 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. We are also seeking to develop opportunities in continental Europe and have recruited a new European business development director, the first time that we have had a full-time employee to focus on this market.
We will continue to build on our breadth of capability and service levels to clients to take advantage of opportunities in both our core construction and infrastructure sectors. In particular, the UK Government has stated its commitment to significant improvements to infrastructure including HS2, Hinkley Point (nuclear power station) and a new runway at Heathrow Airport in addition to the ongoing Network Rail and Highways England investment programmes, all of which represent opportunities for the Group in the medium term.
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The decision of the UK to leave the European Union has so far not had any significant impact on the Group. Although Brexit has the potential to change the competitive and commercial landscape for the Group and the construction industry as a whole, the extent of this is likely to remain unclear for some time. We remain vigilant to respond to any such changes in market conditions.
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On behalf of the board I would like to thank all of our employees for the hard work and commitment they have again shown this year. The safety of our people remains central to all of the Group's operations and our extensive programme of activities and improvements continued during the year under the direction of Phillipa Recchia, our new Group SHE director. We have continued to build on the initial success of our behavioural safety programme and are now in the process of further developing the safety culture of the Group.
The Group's AFR for the year, which includes our Indian joint venture, was 0.24 (2016: 0.25). This includes an AFR of 0.42 for our UK operations, a slight improvement from the 0.44 achieved in 2016.
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Our performance in 2017 demonstrates the considerable strategic and operational progress that we have made over the last few years and the underlying strength of the Group. We now have a strong basis from which to continue to implement our strategy and to create value for our shareholders.
14 June 2017
* The basis for stating results on an underlying basis is set out on our year