Group's three areas of growth as revenues enjoy healthy leap

'‹'‹'‹'‹Structural steel group Severfield, which supplied the steel for Arsenal's Emirates Stadium, the Shard skyscraper and the London 2012 Olympic stadium, '‹reported a huge jump in its order book following a number of contract wins.

The Thirsk-based company said its UK order book now stands at £246m, up from £185m at the start of November.​

The group, which can’t release the identity of the new projects at this early stage, said​ its trading performance and financial position for the year are in line with management expectations.

Hide Ad
Hide Ad

​In the UK, the group reported improving ​operating margins, primarily from internal efficiency benefits.

​​Severfield’s CEO Ian Lawson said​: “The market continues to present a good level of opportunities although as indicated in November’s interim results, slippage in potential time scales still remains a risk as clients scrutinise forecast overall project costs with caution.”

​​The group has previously reported delay​s​ in several​ major projects. A number of larger projects​ it has bid on​, including three strong prospects worth over £100m, have been subject to material delays ​and​ in one case ​a​ cancellation, as the availability of funding and cost concerns have ​hit projects before they convert to orders.

​​​Mr Lawson said the issue was costs are coming in higher than the original budgets, causing concern that the developers don’t have the money.

Hide Ad
Hide Ad

“They then either then shelve the project or redefine it. The cost advisers have not kept abreast of how prices have risen, particularly in the labour market,” he said.

“They need to spend a lot more time talking to the supply chain.”

Despite this, he said he wasn’t worried about funding as advisers will catch up with higher labour prices.​

Severfield said​ the order book at its Indian division increased to £39m by November, up from £35m last year.

Hide Ad
Hide Ad

“The Indian market environment remains somewhat challenging but the business continues to perform satisfactorily in this climate,” said Mr Lawson.

​Severfield said its ​UK business is making good progress in a relatively stable environment and the current order book will lead to growth in both revenue and margins.

“Overall, the group is on track to meet management expectations for the year,” said Mr Lawson.

Analyst Andy Douglas at Jefferies said: “On a particularly positive note, the UK order book​ ​now stands at £246m, which is a material increase from Nov​ember​.

Hide Ad
Hide Ad

​“​We remain positive on Severfield and expect the shares to go better​ ​on the back of this update.

“We​ ​maintain the view that there is still attractive recovery potential in the group and this will be driven by the UK business (there is still potential in India, but it’s a touch painful and any​ ​recovery will be modest in reality, over the medium​ ​term).

“We would like to see a few other​ ​positive pieces of news flow to kick the shares on further, but this statement contains good​ ​news​.”

Analyst Stephen Rawlinson at Applied Value added: “The company, realistic as always, tell us that in the UK clients are scrutinising overall project costs with caution.

Hide Ad
Hide Ad

“This is not the first time we have heard recently that clients are taking a more granular look at the costs of work. In Severfield’s case the concern is reflected as potential delays. In other cases it may impact differently.

“This may in the long run be a benefit for contractors as it may mean clients are more realistic about what their budgets will buy and they will not seek to get a champagne building at brown ale prices and make the contractor pay for the difference. But in the short term the result is probably delays and more costs in terms of quantity surveyors and consultants.”

Related topics:
News you can trust since 1754
Follow us
©National World Publishing Ltd. All rights reserved.Cookie SettingsTerms and ConditionsPrivacy notice