Blackfriar: Severfield will thrive whatever the outcome of the EU negotiations

Prime Minister Boris Johnson
Prime Minister Boris Johnson
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It’s hard to tell which Yorkshire firms will thrive in the wake of Britain’s departure from the EU last week.

A lot will depend on what sort of trade deal the UK can strike with the EU, but the news that Prime Minister Boris Johnson is now looking at two options - a Canada-style free trade agreement or the so called Australia-type deal (in other words a no-deal, WTO arrangement with tariffs) - will put an end to any hopes of a soft Brexit.

We shall have to see how this pans out, but one Yorkshire firm that should benefit over the coming months is Severfield, Britain’s biggest constructional steelwork contractor.

Admittedly, the Thirsk-based group recently reported a fall in half year profits, but this was expected and Severfield said a number of large, ongoing projects are expected to deliver stronger results in the second half.

The group, which supplied steel for the new stadium at Tottenham Hotspur FC and the retractable roof for Wimbledon No.1 Court, said that despite the soft market backdrop in the UK, its pipeline of future orders is stable with a good balance of work across all key market sectors.

Revenue fell 12 per cent to £132m in the six months to September 30 as Severfield returns to previous trends when it made two thirds of its sales in the second half.

The group has announced a 10 per cent increase in the interim dividend, reflecting its confidence going forward.

The firm has taken on more work in Ireland and mainland Europe. A year ago these two markets accounted for just 5 per cent of sales, but they now account for 45 per cent.

In the UK, the group is pursuing a number of significant infrastructure opportunities, particularly in the transport sector.

It said that although decision-making on some of these projects has been delayed, HS2 (both stations and bridges) and the expansion of Heathrow airport (both of which have a large steelwork content) are expected to contribute to the Government’s investment in infrastructure.

Severfield has said current trading remains good with a number of large ongoing contracts expected in the second half.

The group has been working on a number of high profile contracts, including the new Google Headquarters at King’s Cross and the new commercial tower at 22 Bishopsgate. Both contracts have total project revenues in excess of £20m. The firm will also be working on the redevelopment of Lords Cricket Ground (the Compton and Edrich stands).

Over 80 projects were undertaken during the first half in the UK, Ireland and continental Europe in a diverse range of market sectors.

Analyst Alastair Stewart at Progressive said Severfield saw one of the strongest share price reactions to the result of the General Election, rising 10 per cent the following day to 80p and reaching 87p by December 20.

Since the election, a succession of survey and company statements have indicated a release of pent-up demand following many months when projects were put on hold due to political uncertainty.

Mr Stewart said Government policies, particularly the emphasis on regional investment, helped by the reported support for HS2, could benefit Severfield in 2020 and beyond.

The clearer economic outlook comes at what he sees as a pivotal phase for the group, as it moves firmly out of a restructuring phase and into growth, in the UK, India and Europe.

Severfield has now opened a Netherlands office, which will help it thrive whatever the outcome of the EU negotiations.