In the year ended 31st March 2019 Severfield generated revenue of £274.9m (2018: £274.2m) and made a pre-tax profit of £24.7m (2018: £22.2m).
Revenue was broadly flat year-on-year mainly as a result of the softer UK market conditions and some project delays impacting volumes in the second half of the year.
The year was dominated by three large projects in London, each of which ae worth more than £20m to Severfield. These are the 22 Bishopsgate office tower, the new stadium for Tottenham Hotspur FC and the retractable roof for Wimbledon No. 1 Court, all of which are either now complete or substantially complete.
Chief executive Alan Dunsmore said: ‘We are pleased to have delivered another year of good performance. Our UK and Europe order book of £295m contains a healthy mix of projects across a diverse range of sectors and we have made strategic progress in the UK, Europe and India.
“There is now considerable positive momentum within the group which, in combination with our cash generative nature and strong positions in our core markets, provides us with the platform for further operational and strategic progress. We remain on track to deliver on our strategic targets, including the doubling of underlying profit before tax to £26m by 2020 and we look forward to another positive year ahead.”
The underlying operating margin (before JVs and associates) was 8.5% (2018: 8.3%) resulting in an underlying operating profit of £23.3m (2018: £22.9m). Although this was only moderately up, the previous year was a particularly strong one, the company said.
Mr Dunsmore said: “The UK margin performance continues to reflect better risk and contract management processes, which are now deeply embedded within the group’s methodologies, and improvements in our operational execution. This includes the benefits from our programme of projects categorised under the banner of ‘Smarter, Safer, more Sustainable’, which provides a framework for the ongoing improvements to our business and factory processes, use of technology and operating efficiencies.”
The ‘Smarter, Safer, more Sustainable’ initiatives include the introduction of lean manufacturing techniques, further automation of factory processes and investment in digital technologies.
“Following the improvements to our IT infrastructure and manufacturing processes over recent years, we are also continuing to take steps to better capture and utilise real-time data, to better inform decision-making and improve efficiencies both in our factories and on our construction sites. This will minimise time spent manually collating and processing data, freeing up resource to focus on project delivery and facilitating more streamlined ways of working,” Mr Dunsmore said.
The £295m order book, of which £256m is for delivery over the next 12 months, includes the new Google headquarters in London, for which an order of £50m was secured in December 2017. This involves the supply of more than 15,000 tonnes of structural steelwork for an 11-storey office building at Kings Cross. Work on this project has now started and is scheduled to be substantially completed in the current financial year. However, the company is broadly optimistic about future prospects.
Mr Dunsmore said: “Overall, the UK market continues to appear largely stable, with modest economic growth forecast, however we have seen evidence of some UK investment decisions being delayed in some of our market sectors particularly in the second half of the year against a backdrop of a generally more cautious commercial investment climate. “Pricing remains an important factor and we continue to see some tender margins tightening on projects that we are bidding in the UK where some spare fabrication capacity now exists in the market. The impact of these UK market conditions is being mitigated by the continued re-emergence of the market in the Republic of Ireland and certain other significant opportunities in continental Europe where we have demonstrated our ability to win more work, supported by our new European business.
“In general, our pipeline of potential future orders remains stable with a good balance of work across all key market sectors. The market for data centres and the industrial and distribution sector continues to be strong, both in the UK and in Europe, and these projects play to our strengths, requiring high-quality, rapid throughput, on-time performance and full co-ordination between stakeholders.
“Looking further ahead, we are now starting to see more bidding activity in the London commercial market, a trend which we expect to increase over the next few years. In addition, we continue to pursue a number of significant infrastructure opportunities, particularly in the transport sector, which are being driven by the UK government’s investment in infrastructure commitment, which is targeted to increase over the next few years. This will include projects such as HS2 (both stations and bridges) and the expansion of Heathrow airport. In addition, we also see good opportunities from the government’s ongoing Network Rail and Highways England investment programmes.”