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Severfield warns on stalled contracts

24 Nov 15 Structural steel group Severfield has reported healthy profit and revenue growth but sounded a note of caution about delays in contracts coming to fruition.

Among Severfield's projects this year is a new stand at Liverpool FC's Anfield stadium
Among Severfield's projects this year is a new stand at Liverpool FC's Anfield stadium

In recent months the availability of funding and cost concerns have led to potential contract orders getting delayed, Severfield said.

It said that although it still has ‘a strong pipeline of opportunities’ it has seen ‘a number of larger projects’ that it has bid for in the last six months suffer material delays. One was cancelled altogether. Among the delayed projects are three strong prospects that together would be worth more than £100m to the company.

Despite all this, interim results for the six month period ended 30th September 2015 showed revenue up 20% to £117.1m (2014 H1: £97.4m) and pre-tax profit of £2.6m, which is nearly double the £1.4m made in the same period last year. Underlying profit before tax was £4.8m (2014 H1: £3.0m).

Chief executive Ian Lawson said it was 'another six months of good progress' with improved margins – underlying operating margins were up from 3.7% last time to 4.3%.

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He said: “We remain very active in our chosen sub-sectors of focus, specifically construction and infrastructure and our order book remains solid at £185m and the pipeline healthy. The order book comprises a good balance of small and medium-sized projects, and could have been even greater had some of our larger prospects not been subject to material delays in mandates being awarded.”

On 16th November, Severfield completed its investment in a 50% share of metal decking manufacturer CMF Ltd. CMF is an existing Severfield supplier but following this investment, all of Severfield’s metal decking requirements will come from CMF. The initial consideration for the investment is £4.0m and a further £2.5m is payable over the next five years subject to certain conditions.

“This investment is another step in the implementation of the group's strategy and will strengthen the group's supply chain as well enabling it to extract greater value from its existing activities,” Mr Lawson said.

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MPU
MPU

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