For the year to 31st March 2016 Severfield made a pre-tax profit of £9.64m on revenue up 19% to £239.4m (2015: £201.5m).
The previous year it has lost £191,000 before tax, although that figure included a £6m provision for the cost of replacing faulty bolts in the Leadenhall Building (aka the Cheesegrater). Bolt replacement work has continued this year and is finally nearly complete. No further provision has been made in the 2016 accounts as the £6m taken last year should cover it. In fact, Severfield still hopes it might get some of this back. The lawyers of various parties continue to argue over where the liability for the total remedial works costs should rest.
The underlying operating margin has increased from 4.5% to 5.7%, achieving the target set three years ago at the time of the rights issue, when Severfield had just announced a significant loss.
The UK order book is now at its highest level for more than six years, currently standing at £270m, up from £185m seven months ago.
Chief executive Ian Lawson said: “Severfield has had a strong year with excellent revenue and profit growth and a good cash performance. Our increased profitability is as a result of our focus on operational improvements and efficiencies over the last three years and with the strength of the platform from which the group now operates and the opportunity for further margin improvement, our target is now to double our underlying profit before tax over the next four years.
“With the current UK order book at its highest level for over six years and a continued stable market environment, the group is well placed to continue delivering against its near-term financial targets whilst continuing to build for the longer term. Overall the outlook remains encouragingly positive.”
He added: “Particularly pleasing are the inroads that we have made into the infrastructure market, with our enhanced bridge capability we have secured work with the infrastructure teams of Costain, Skanska, BAM and Hochtief, working on contracts for Network Rail and Highways England. These relationships will serve us well in the future as we expect to see growth in the infrastructure market over the coming years.”
However, Severfield’s Indian joint venture continues to lose money. It is profitable at an operating level but cannot afford its debt burden. Severfield’s share of the loss was £300,000 for the past year.
There was some disruption during the year when Tata closed its UK steel plate production facility in December 2015. Severfield managed to secure alternative sources of supply for all its plate requirements.
Mr Lawson said: “While some of the issues around the UK steel industry have been highly publicised and a source of concern for many, it is important to recognise that only around 40% of steel used in UK construction is produced in the UK, the majority being imported. Nevertheless, I am pleased to report that we have managed the changes which affect us with no disruptive impact on the business.”
Tata’s facility has since been bought by Greybull Capital, and re-named British Steel.