Our vision is to be recognised as world-class leaders in structural steel. We will deliver this vision through the Group's strategy, which is supported by a focus on five key elements.

Medium-term target: to double 2016 underlying profit before tax by 2020

Growth

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Clients

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People

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Operational excellence

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India

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Key performance indicator reference:

1 Underlying operating profit and margin (before JVs and associates)

2 Underlying basic earnings per share ('EPS')

3 Revenue growth

4 Operating cash conversion

5 Return on capital employed ('ROCE')

6 Order book

7 Accident frequency rate ('AFR')

Principal risks reference:

a Mispricing a contract (at tender)

b Commercial and market environment

c Health and safety

d Supply chain

e Indian joint venture

f Information technology ('IT') resilience

g People

h Industrial relations

Strategic pillarsDescriptionLink to KPIsLink to risks

Growth

Growth icon

Our aim is to capitalise on growth opportunities both in the UK and in overseas markets and to maximise our market share.

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Clients

Clients icon

By understanding, anticipating and responding to client needs we aim to build secure, sustainable and mutually valuable relationships and create lasting client satisfaction.

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People

People icon

Our people are at the heart of our business and are vital to the success of our vision and the achievement of our strategic goals.

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Operational excellence

Operational excellence icon

Our emphasis is on delivering high quality projects and reducing costs by driving excellence through our core business processes.

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India

India icon

We continue to believe that the Indian market presents great opportunities for steel fabrication.

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In 2017, the progress that we have made in delivering our strategy, together with how this strategy has been further developed, is set out below:

Our aim is to capitalise on growth opportunities both in the UK and in overseas markets and to maximise our market share.

Strategic priorities

Increase UK market share — growing profitable market share in areas where the business already operates.

Enter new UK market sectors — looking for new market areas where the business has not operated in the past, taking advantage of our existing capacity and capabilities.

Building from existing European opportunities — driving more opportunities from European contractors with whom we have strong relationships in the UK.

Achievements in 2017

We have grown Group revenue by 10 per cent (following on from 19 per cent revenue growth in the previous year), taking advantage of the Group's market-leading position.

We have continued to focus on larger projects within our target markets, playing to our strengths of capability and capacity (delivering projects for 22 Bishopsgate, London Development Project, Tottenham Hotspur F.C. and Wimbledon (No. 1 Court roof)). We have also recognised the opportunity for smaller mid-tier projects where our economies of scale allow us to increase market share profitably.

We have fully integrated our bridge team within the Group's operations. We have secured a number of infrastructure opportunities during the year and we are also well advanced in bidding for infrastructure projects such as HS2.

Our investment in CMF has provided us with an excellent platform for cold-formed steel products. Having successfully integrated the metal decking supply into our operations, CMF has invested further allowing for the production of purlins and additional cold-formed products.

We have employed a European business development director, based in the Netherlands, who will help drive opportunities to extend our capabilities to continental Europe.

Objectives for 2018

To further grow Group revenue and maintain the quality of the order book.

Continue to focus on enhancing our position in existing UK markets where the Group already has specialist expertise (at good margins and with acceptable levels of risk).

Deliver a full range of projects in UK markets including regional and mid-market opportunities. To continue the development of further cold-formed steel opportunities in CMF.

Maintain the targeted approach with key UK infrastructure project owners, to exploit identified growth opportunities (infrastructure and bridge markets). Large infrastructure opportunities for the Group in the medium term include Hinkley Point nuclear power station and the new runway at Heathrow Airport together with the ongoing Network Rail and Highways England investment programmes.

Win opportunities in European markets and establish a full service delivery model.

Review growth opportunities in the rest of the world.

By understanding, anticipating and responding to client needs we aim to build secure, sustainable and mutually valuable relationships and create lasting client satisfaction.

Strategic priorities

Quality of service — our industry experience allows us to better understand our customers' own strategic objectives and enables us to design, fabricate and construct structural steelwork solutions to support these objectives.

Achievements in 2017

We have continued to develop our relationships with key clients during the year. Our increased emphasis on client engagement has led to regular contact with key clients on market developments and future business opportunities.

Our extensive investment in the Group in recent years has allowed us to deliver real benefits to our clients in terms of the reliability and speed of project delivery, coupled with the quality of service we can offer.

We have also focused on developing new and strengthening existing relationships with our wider client base to develop our pipeline of opportunities in both existing and adjacent markets.

Objectives for 2018

Client retention is vital to the achievement of our strategic plans and we will continue to ensure that the customer is at the centre of everything we do.

We will further focus on opportunities to improve client satisfaction, build on existing client relationships and develop new relationships.

Following the appointment of a new European business development director, we plan to develop new European relationships, many of which will extend our UK relationships across international boundaries.

We will continue to seek to engage with our clients at an early stage to enhance our understanding of their requirements and to add value throughout the project life cycle.

Our people are at the heart of our business and are vital to the success of our vision and the achievement of our strategic goals.

Strategic priorities

Develop our people – our aim is to retain and develop the right person at every level and to keep them engaged so that we can deliver our goals and customer commitments whilst maintaining a safe working environment.

Achievements in 2017

We recruited 183 people across the Group, in particular strengthening across a range of disciplines to further improve our commercial and project management procedures.

We also made the following key appointments:

  • Group SHE director
  • Group head of procurement
  • Group IT director
  • Group research and development engineer
  • Group communications manager
  • 39 apprentices/trainees

We conducted a further Group-wide employee engagement survey. This has enabled us to identify areas in need of improvement and create benchmarks against which to measure our progress since our first survey in 2015.

We have strengthened our dedicated health and safety team and our training team during the year to further drive safety improvements and reduce our AFR.

We have undertaken a thorough review of internal communications across the Group. This has included further feedback opportunities for our employees, together with more informative communication channels and messages suitable to all audience groups.

We developed a training programme on lean production techniques which will lead to many employees developing new skills and achieving new qualifications.

We have continued our behavioural safety training and awareness programme, the objective of which is to have a significant and lasting benefit on the Group's safety culture.

Objectives for 2018

We will continue to prioritise investment in our people to ensure a healthy pipeline of talent to achieve our strategic goals.

In 2017 we designed the Severfield Development Programme and have launched this in April 2017. This programme will help us build sustainable leadership capability within our next generation of leaders.

We will implement an integrated Group-wide HR information system that will enable us to make better people-related decisions across the business.

Following the successful scheme in 2015, we will launch a further 'save as you earn' ('SAYE') scheme to provide our employees with an improved choice in the way in which they participate. This will support buy-in to the long-term success of the business and assist in employee retention.

We are committed to a target of zero injuries and we will continue to apply the highest standards in health and safety across all operations in order to further improve the Group's AFR.

Our emphasis is on delivering high quality, value added projects and reducing costs by driving excellence through our core business processes.

Strategic priorities

Drive operational improvements and efficiencies — the objective of our comprehensive operational improvement programme is to improve the Group's risk assessment, and 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 2017

We have further improved our underlying* operating margin (before JVs and associates) to 7.5 per cent in 2017. Our profit performance in 2017 (underlying* PBT was £19.8m) keeps us firmly on track to deliver our strategic target of doubling our 2016 underlying PBT by 2020.

The 2017 operating profit has benefited from three main aspects of the Group's ongoing business improvement programme:

  • contract and risk management –ongoing improvements to contract management processes focusing on contract execution, the documentation of project progress and changes, and communication with clients throughout projects;
  • production process improvement – changes have been made to the production flows of steel through our factories, making better use of new and more efficient equipment and increasing throughput;
  • CMF – the integration of CMF into our supply chain has had a beneficial impact on operating margins as well as the share of results from joint ventures and associates.

Other operational improvements include the roll-out of a new MRP system, reconfiguration of our Lostock facility and increased fabrication throughput at Dalton.

These operational improvements were also evidenced in the Group's operating cash flow of £27.4m, which, after net capital expenditure of £5.3m, represents an operating cash conversion of 112 per cent (see note 24 of the consolidated financial statements).

The Group's improvement programme has included further capital investment in 2017 of £7.0m. This represents further production-related equipment for our fabrication lines in Dalton, new bridge capacity and improved painting and shot blasting capability in Lostock, an extension to the paint shop in Ballinamallard, additional mobile equipment for use on our construction sites and continued investment in a range of health, safety and environmental efficiency-related improvements. This will benefit the Group both now and in the future.

In addition, our CMF joint venture has invested in new machinery to enable the production of purlins and additional cold-formed products.

Objectives for 2018

Our target remains to double our underlying PBT from the previous year (2016) by 2020.

We will continue to develop our 'smarter, safer, more sustainable' business improvement programme (which was launched in 2017 and covers all of the Group's ongoing improvement initiatives) to enable us to focus further on many aspects of our internal operations to the benefit of Group profitability.

We will also continue the roll-out of the MRP system across the Group which will assist in embedding operational efficiencies and improved factory processes. This will also support further improvements to contract and commercial management processes.

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 information technology programme.

We will continue to invest in new state-of-the-art manufacturing technology to help drive production efficiencies, improve our capabilities and product range and to expand the capital equipment base where there is a strong return on investment case.

We will continue to upgrade and replace existing equipment where appropriate.

We continue to believe that the Indian market presents great opportunities for steel fabrication.

Strategic priorities

Sustainability of India - our aim is to further develop and grow the business whilst the market continues its conversion to steel.

Achievements in 2017

The joint venture has delivered another year of stability, producing a Group share of profit for the first time. The business also generated strong operating margins of 9.7 per cent reflecting an improved mix of higher margin commercial work compared to lower margin industrial work.

Our aim for India remains to continue to grow the business and to build value for our shareholders.

Objectives for 2018

We will continue to focus on business development opportunities, particularly with key clients in targeted market sectors.

We aim to strike the appropriate balance between commercial and industrial projects to ensure that production continues to remain at satisfactory levels whilst we focus on improving the operating margin.

We will also continue to evaluate geographically proximate export opportunities to support the existing order book and pipeline.

The rebalancing of its capital structure will position the business well for the next phase of its development.

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

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