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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Base Grp. | LSE:BS. | London | Ordinary Share | GB0000566389 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.04 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS No 3717v
BRITISH STEEL PLC
7 June 1999
BRITISH STEEL plc - RESULTS FOR 1998/99
CONTENTS
Index
Chairman's Statement
Chief Executive's Statement
Review of the Year
Consolidated Profit and Loss Account
Consolidated Balance Sheet
Statement of Total Recognised Gains and Losses
Reconciliation of Movements in Shareholders' Funds
Consolidated Cash Flow Statement
Reconciliation of Net Cash Inflow to Movement in Net Funds
Supplementary Information
The Consolidated Profit and Loss Account, Consolidated Balance
Sheet, Statement of Total Recognised Gains and Losses,
Reconciliation of Movements in Shareholders' Funds, Consolidated
Cash Flow Statement and Reconciliation of Net Cash Inflow to
Movement in Net Funds, have been extracted from the audited
accounts to be delivered to the Registrar of Companies and on
which the auditors issued an unqualified report.
The Report and Accounts will be mailed to shareholders in
late-June 1999 at which time copies will also be available from
the Secretary's Office, British Steel plc, 15 Marylebone Road,
London NW1 5JD, or by telephoning 0800 484113.
CHAIRMAN'S STATEMENT
The past year was increasingly tough and challenging for British
Steel due mainly to the disruptive effects of the economic
crises in the Far East and the continuing strength of sterling.
In my interim statement in November I said that if the trend of
deteriorating selling prices continued it would lead to Group
losses for the full year, particularly if pressures intensified
on sales volume.
The subsequent period through to March 1999 saw further and
rapid falls in selling prices coupled with significant
reductions in volume. These factors combined with the adverse
impact of the continuing and renewed strength of sterling
resulted in a pre-tax loss of #142m for the year.
Avesta Sheffield, the Company's 51% owned stainless steel
subsidiary, accounted for #90m of the Group's loss before tax.
Rationalisation provisions were a major feature of the year,
accompanied by the impact of significant price deterioration
in both stainless steel and nickel.
Despite the very difficult trading conditions good cash
management resulted in the Group's net cash funds increasing to
#463m at the year end. The robust financial position of the
Group underpins the Board's proposal to pay a final dividend of
7p which, with the interim dividend of 3p, makes a total for the
year of 10p per share, the same level as last year.
During the year, British Steel continued to pursue vigorously
its cost and efficiency improvement strategy. Excellent
progress was made on the Company's manpower productivity
programme, so that with the growth of team working and
skill-enhancement programmes, accompanied by the implementation
of simplified management structures and pay arrangements,
further significant job reductions were obtained. Strengthening
and improving the efficiency of our supply base continued during
the year. This was facilitated by the successful introduction
of networked purchasing hubs across the Company, and in turn led
to further substantial cost reductions being achieved. Finally,
the initial projects of the business improvement programme were
launched in Autumn 1998, benefits from which we expect to
accelerate in the coming years.
Since the end of the financial year, I am pleased to report that
we have obtained some increases in selling prices and the volume
of business booked has improved. We hope that this indicates
that the price recovery has begun. The strength of sterling,
however, continues to more than offset the combined effect of
these recent price increases and our cost and efficiency
improvements and this means that the Group continues to incur
losses, albeit at a lower rate than in the final quarter of the
year ended 3 April 1999.
The competitive position of British Steel is seriously
disadvantaged by the strength of sterling. Although there was
some weakening during the latter months of 1998 as a result of
reductions in interest rates, the renewed strength through 1999
to date is a matter of great concern to British Steel and the UK
manufacturing sector.
British Steel supports the Government's aim for the UK to join
the Economic and Monetary Union (EMU) and recognises the need
for economic convergence if this is to happen. UK interest
rates are however still more than double those of the members of
EMU and, so far as manufacturing is concerned, UK inflation is
negligible. Sterling is clearly too strong and further urgent
action is required to ensure in the short term that exchange
rates do not cause permanent and irrevocable damage to the UK
manufacturing sector. It is imperative that if sterling joins
the single currency it should be at a sensible rate.
In March of this year the Chancellor's budget contained
proposals for new levies or taxes on energy-using companies, as
part of the Government's strategy to meet the emission reduction
target agreed at Kyoto. For many years British Steel has led a
major programme to improve progressively the energy efficiency
of the UK steel industry. We lead the way with a 6% reduction
in carbon dioxide emissions since 1990, already halfway to the
Kyoto target. The application of an onerous levy or tax will
effectively amount to a fine for making steel in the UK. It
will place at risk thousands of jobs in the UK steel industry
without reducing global carbon dioxide emissions, as a result of
increased imports to the UK from less energy efficient
producers. I believe that a negotiated and financially neutral
agreement is the best route to address this issue and British
Steel is actively consulting with Government for adoption of
such an agreement.
British Steel's objective is to enhance shareholder value. We
are constantly looking for growth opportunities in steel or
steel related businesses, and fundamental changes in the European
metals industry present new challenges and opportunities for all
players. I am therefore extremely pleased that the Boards of
British Steel and Hoogovens have agreed in principle to propose
to our respective shareholders a merger to form a new group.
The proposed merger will encompass the carbon steel activities
of the two companies as well as Hoogovens' aluminium activities and
British Steel's interest in the stainless steel activities of
Avesta Sheffield. The new group will be incorporated in the UK,
headquartered in London and will seek listings on the London,
Amsterdam and New York Stock Exchanges.
Sir Brian Moffat
Chairman
CHIEF EXECUTIVE'S STATEMENT
The consequences of severe Asia-related turbulence and the
adverse nature of the Group's exposure to exchange rates have
led to significant losses being incurred by the Group since
Autumn 1998. Although these factors are beyond the direct
influence of British Steel, it is of vital importance that we
pursue a rapid and effective strategy in order to minimise their
very severe impact.
I believe that British Steel's determination in this regard
continues to be amply demonstrated by the measures taken to
restore our competitive advantage. The twelve months ended 3
April 1999 was the second year of a programme to radically
improve the Company's manpower productivity and create a more
cost effective, reliable and innovative supplier base. Savings
estimated at #200m were secured during the year from these
initiatives, and the process will accelerate further in the
coming year.
The IT outsourcing to Cap Gemini commenced in March 1998 and
there was a smooth and effective transfer of staff and
equipment, followed by rationalisation and concentration of data
centres. The lessons learned from the initial projects of our
business improvement programme, launched in Autumn 1998 in
conjunction with Cap Gemini, are being extended to other parts of
the Company in order to deliver significant commercial benefits
in the future.
A co-ordinated and international approach across our production,
commercial and distribution businesses has been of critical
importance in ensuring that we are able to optimise production
levels, and the product mix and geographical market spread of
our sales. This was particularly evident in the second half
year when trading pressures were at their most severe following
the surge of imports into western markets which led to serious
oversupply and excess stocks.
Capital expenditure was significantly below the level of recent
years, with the focus on the progressing and completion of major
schemes approved in previous years, with the continuous
annealing line at Port Talbot being of major significance. At a
capital cost of #121m, the new line started commissioning in
July 1998 and is already providing improved product range and
quality.
Cash flow is of paramount importance and the management team and
workforce are to be particularly congratulated on achieving an
excellent performance on working capital, which was the major
factor in being able to achieve an increase in net funds during
the year, despite the very difficult trading environment.
The proposed merger of British Steel and Hoogovens will create a
leading metals group with a strong customer base and
geographical spread, and proven strength in innovative
applications, product quality, product efficiency and customer
service. I am confident that we will create a unique group
which will be to the long term benefit of shareholders,
customers and employees.
John Bryant
Chief Executive
REVIEW OF THE YEAR
Group turnover for the year totalled #6,259m, down 10% from the
previous year. For steel industry products, turnover fell by
13% to #5,279m (1998:#6,068m), reflecting a combination of :
average revenue, at #367 per tonne, 6% lower due to the marked
reductions in selling prices, particularly during the second
half year; and, a sharp fall in sales volume to 14.4mt
(1998:15.6mt), resulting in production pauses being taken during
the final four months of the year. The adverse trend for the
year on average revenue and on sales volume was caused primarily
by the impact of the Asian crises which in western markets led
to sharply reduced exports to Asia, together with a large
increase in imports. As a consequence, there was significant
oversupply in most product areas.
In the UK, our major market, sales volume totalled 7.0 mt
(1998:7.7mt) and average revenue fell by 5% to #330 per tonne.
Included in sales volume were deliveries of the Company's main
carbon and engineering steel products amounting to 6.2mt
(1998:6.8mt). Total demand in the UK for this range of products
fell by 5% to 11.4mt as growth in domestic demand eased and
exports came under pressure, with the continued strength of
sterling being a major factor in reducing the competitiveness of
manufacturing exporters. Against the above background, the
Company's market share fell to 55% (1998:57%).
In mainland Europe, British Steel's sales volume at 5.3 mt was
3% below the level of the previous year, as the market was
distorted by a combination of a sharp fall in exports and a
surge in imports. The Group's average revenue was 5% lower than
the previous year at #414 per tonne. Outside of Europe, sales
volume of 1.2 mt was maintained in North America but average
revenue, at #410 per tonne, was 14% below last year. In other
markets the effects of the Asian crises were the major
influences impacting on significantly reduced sales volume of
0.9 mt and a 18% fall in average revenue to #315 per tonne.
Operating costs totalled #6,433m (1998:#6,682m), 4% below the
level of the previous year, with a myriad of factors affecting
comparisons. These included : a 53 week financial year; a 7%
fall in sales volume; an increase in rationalisation and related
costs to #85m (1998:#43m); costs associated with year 2000
compliance of #30m (1998:#10m); and insurance-related credits
of #48m (1998:nil). Further and significant progress was
achieved on the Group's cost and efficiency improvement
programmes so that: after adjusting for redundancy costs, there
was a 3% fall in employment costs as average numbers of
employees reduced to 46,500 (1998 : 50,000); benefits of around
#100m were secured from the Suppliers' Initiative; and, new
supply chain and distribution planning systems have been
identified and are being introduced as part of the Company's
business improvement initiatives. The Company's manpower
productivity programme and the efficiency improvement measures
being undertaken by Avesta Sheffield were the main factors in a
net reduction of 4,200 employees during the year. At the year
end the total number of employees was 44,200.
For ordinary shareholders, the proposed final dividend of 7p per
share is payable on 9 August 1999 to shareholders on the
register at close of business on 18 June 1999. For American
Depositary Receipt holders, the dividend is payable in US
dollars on August 19, 1999 by the Depositary, The Bank of New
York, to the ADR holders of record on June 18, 1999.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Audited Audited
full year to full year to
3 April 1999 28 March 1998
#m #m
TURNOVER : GROUP AND SHARE OF JOINT VENTURES 6,455 7,166
Less : share of joint ventures' turnover (196) (219)
------- -------
GROUP TURNOVER 6,259 6,947
OPERATING COSTS (6,433) (6,682)
------- -------
GROUP OPERATING (LOSS)/PROFIT (174) 265
Share of operating results of joint ventures
and associated undertakings (3) -
------- -------
(177) 265
Profit on sale of fixed assets 7 6
Profit on disposal of businesses, subsidiaries
and associated undertakings 1 5
------- -------
(LOSS)/PROFIT BEFORE INTEREST (169) 276
NET INTEREST AND INVESTMENT INCOME
Group 30 41
Joint ventures and associated undertakings (3) (2)
------- -------
(LOSS)/PROFIT BEFORE TAXATION (142) 315
Taxation 19 (82)
------- -------
(LOSS)/PROFIT AFTER TAXATION (123) 233
Minority interests 42 (7)
------- -------
(LOSS)/PROFIT FOR FINANCIAL YEAR (81) 226
Dividends (201) (195)
------- -------
(LOSS)/PROFIT RETAINED FOR FINANCIAL YEAR (282) 31
======= =======
BASIC (LOSS)/EARNINGS PER ORDINARY SHARE (4.09)p 11.44p
======= =======
DILUTED (LOSS)/EARNINGS PER ORDINARY SHARE (4.09)p 11.25p
======= =======
There were no material acquisitions or discontinued activities in 1999.
CONSOLIDATED BALANCE SHEET
Audited at Audited at
3 April 1999 28 March 1998
#m #m
FIXED ASSETS
Tangible assets 3,240 3,335
Investments in joint ventures 95 104
Investments in associated undertakings 9 9
Other investments and loans 136 181
Own shares - 18
------- -------
3,480 3,647
------- -------
CURRENT ASSETS
Stocks 1,007 1,222
Debtors 1,315 1,643
Short term investments 1,206 1,043
Cash at bank and in hand 163 163
------- -------
3,691 4,071
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (1,359) (1,672)
------- -------
NET CURRENT ASSETS 2,332 2,399
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 5,812 6,046
CREDITORS: AMOUNTS FALLING DUE AFTER
MORE THAN ONE YEAR (852) (723)
PROVISIONS FOR LIABILITIES AND CHARGES (253) (292)
ACCRUALS AND DEFERRED INCOME
Regional development and other grants (50) (58)
------- -------
4,657 4,973
======= =======
CAPITAL AND RESERVES
Called up share capital 991 991
Share premium account 51 51
Capital redemption reserve 47 47
Statutory reserve 2,338 2,338
Profit and loss account 919 1,195
------- -------
SHAREHOLDERS' FUNDS - EQUITY INTERESTS 4,346 4,622
MINORITY INTERESTS
Equity interests in subsidiary undertakings 311 351
------- -------
4,657 4,973
======= =======
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Audited Audited
full year to full year to
3 April 1999 28 March 1998
#m #m
(Loss)/profit for financial year (81) 226
Exchange translation differences on
foreign currency net investments 6 (29)
------- -------
Total recognised (losses)/gains
relating to the year (75) 197
======= =======
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Audited Audited
full year to full year to
3 April 1999 28 March 1998
#m #m
(Loss)/profit for financial year (81) 226
Dividends (201) (195)
------- -------
(282) 31
Exchange translation differences on
foreign currency net investments 6 (29)
Share buy back - (146)
New shares issued - 19
Goodwill arising on consolidation - (10)
------- -------
Net decrease in shareholders' funds (276) (135)
Shareholders' funds at beginning of year 4,622 4,757
------- -------
Shareholders' funds at end of year 4,346 4,622
======= =======
CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
full year to full year to
3 April 1999 28 March 1998
#m #m
Net cash inflow from operating
activities 437 512
Dividends from joint ventures and
associated undertakings 12 6
Returns on investments and servicing
of finance 27 36
Tax paid (60) (183)
Capital expenditure and financial investment (179) (366)
Acquisitions and disposals (6) (25)
Equity dividends paid (201) (201)
------- -------
CASH INFLOW/(OUTFLOW) BEFORE USE OF
LIQUID RESOURCES AND FINANCING 30 (221)
MANAGEMENT OF LIQUID RESOURCES
Net (purchase)/sale of short term
investments (159) 311
FINANCING
Purchase of own shares - (146)
Issue of ordinary shares 3 16
Increase in debt 131 88
------- -------
NET CASH INFLOW/(OUTFLOW) FROM
FINANCING ACTIVITIES 134 (42)
------- -------
INCREASE IN CASH IN YEAR 5 48
======= =======
RECONCILIATION OF NET CASH INFLOW TO MOVEMENT IN NET FUNDS
Increase in cash 5 48
Increase/(decrease) in liquid resources 159 (311)
Increase in debt (131) (88)
------- -------
Change in net funds resulting from cash flows 33 (351)
Long term debt acquired - (1)
Other non cash items - (3)
Effect of foreign exchange rate changes (16) 16
------- -------
Movement in net funds 17 (339)
Net funds at beginning of year 446 785
------- -------
Net funds at end of year 463 446
======= =======
SUPPLEMENTARY INFORMATION
Audited Audited
full year to full year to
3 April 1999 28 March 1998
#m #m
1. GROUP TURNOVER
a. BY DESTINATION
United Kingdom 2,663 3,010
Rest of Europe 2,532 2,687
North America 657 654
Other areas 407 596
------- -------
6,259 6,947
======= =======
b. BY PRODUCT GROUPING
Uncoated strip products 919 1,140
Coated strip products 1,128 1,218
Sections and plates 945 1,014
Tubular products 321 347
Wire rod 199 227
Semi-finished carbon steel products 102 121
Engineering steels 450 528
Stainless steel products 1,215 1,473
------- -------
Total steel industry products (*) 5,279 6,068
Distribution and further processing 870 779
Others 110 100
------- -------
6,259 6,947
======= =======
(*): By destination:
United Kingdom 2,311 2,662
Rest of Europe 2,204 2,387
North America 496 560
Other areas 268 459
------- -------
5,279 6,068
======= =======
2. SALES VOLUME mt mt
a. BY DESTINATION
United Kingdom 7.0 7.7
Rest of Europe 5.3 5.5
North America 1.2 1.2
Other areas 0.9 1.2
------- -------
14.4 15.6
======= =======
b. BY PRODUCT GROUPING
Uncoated strip products 3.9 4.4
Coated strip products 2.8 2.9
Sections and plates 3.3 3.4
Tubular products 0.8 0.9
Wire rod 1.0 1.0
Semi-finished carbon steel products 0.6 0.7
Engineering steels 1.1 1.4
Stainless steel products 0.9 0.9
------- -------
14.4 15.6
======= =======
3. OPERATING COSTS #m #m
Raw materials and consumables 2,667 3,019
Maintenance costs (excluding own labour) 530 578
Other external charges 1,022 1,044
Employment costs 1,352 1,348
Depreciation (net of grants released) 304 295
Other operating costs 376 434
Changes in stock of finished goods
and work in progress 190 (26)
Own work capitalised (8) (10)
------- -------
6,433 6,682
======= =======
The above costs include:
Redundancy and related costs 64 18
Accelerated depreciation 15 21
Other rationalisation costs 6 4
Costs incurred in rendering existing
software year 2000 compliant 30 10
Realised gains on insurance-related
investments (32) -
Reduction in insurance underwriting
provisions (16) -
4. NET INTEREST AND INVESTMENT INCOME
Dividends from other fixed asset
investments 4 2
Interest receivable 92 91
Interest payable (62) (48)
Finance leases (4) (4)
------- -------
30 41
Joint ventures and associated undertakings (3) (2)
------- -------
27 39
======= =======
5. TAXATION
UK Corporation tax at 31% 3 89
Double tax relief (14) (7)
Prior year credit (6) (4)
ACT written off 3 -
Overseas taxes 6 12
UK deferred tax (15) (5)
Overseas deferred tax - (8)
Joint ventures 4 4
Associated undertakings - 1
------- -------
(19) 82
======= =======
6. CAPITAL EXPENDITURE
Purchase of tangible fixed assets 248 396
Movement in capital creditors (59) 8
------- -------
189 404
======= =======
7. EMPLOYEES number number
Average weekly numbers employed:
Within UK 37,300 40,600
Overseas 9,200 9,400
------- -------
46,500 50,000
======= =======
Numbers employed at end of year
Within UK : 35,300 39,100
Overseas 8,900 9,300
------- -------
44,200 48,400
======= =======
8. RECONCILIATION OF OPERATING
(LOSS)/PROFIT TO NET CASH FLOW
FROM OPERATING ACTIVITIES #m #m
Operating (loss)/profit (174) 265
Depreciation (net of grants released) 304 295
Reduction/(increase) in stocks 227 (16)
Reduction/(increase) in debtors 324 (9)
(Reduction)/increase in creditors (204) 17
Rationalisation costs provided 70 22
Utilisation of rationalisation provisions (69) (44)
Other movements (net) (41) (18)
------- -------
437 512
======= =======
9 ANALYSIS OF NET FUNDS
Cash at bank and in hand 163 163
Bank overdrafts (56) (63)
Short term investments 1,206 1,043
Long term borrowings (784) (638)
Other loans (17) (2)
Obligations under finance leases (49) (57)
------- -------
463 446
======= =======
10. US GAAP
(LOSS)/PROFIT FOR FINANCIAL YEAR - UK GAAP (81) 226
Adjustments:
Amortisation of goodwill (14) (14)
Interest costs capitalised 21 27
Depreciation of capitalised interest (10) (8)
Pension costs 34 (18)
Stock-based employee compensation awards (8) (6)
Rationalisation costs (14) 14
Deferred taxation 48 9
Minority interests (17) -
------- -------
(LOSS)/PROFIT FOR FINANCIAL YEAR - US GAAP (41) 230
======= =======
BASIC (LOSS)/EARNINGS PER ADS - US GAAP #(0.21) #1.16
======= =======
DILUTED (LOSS)/EARNINGS PER ADS - US GAAP #(0.21) #1.14
======= =======
SHAREHOLDERS' EQUITY - UK GAAP 4,346 4,622
Adjustments:
Goodwill 193 207
Interest costs capitalised
(net of depreciation) 148 137
Pension costs 137 103
Stock-based employee compensation awards (19) (11)
Quest shares held in trust - (18)
Rationalisation costs - 14
Deferred taxation (448) (496)
Investments in equity securities 2 31
Proposed dividend 139 137
Minority interests 3 20
------- -------
SHAREHOLDERS' EQUITY - US GAAP 4,501 4,746
======= =======
British Steel plc Investor & Media Relations
15 Marylebone Road London NW1 5JD Tel +44 (0)171 314 5502/5503
Fax +44 (0) 171 314 5604
END
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