Servelec sees strong order book in 2017

The Sheffield-based firm​ said it has made significant strides forward in terms of product development, acquisitions, market​ ​development and staff development​.

The group said that w​hilst challenges persist, ​it is​ confident​ about its future outlook with a strong order book and improving market conditions.​​

Servelec issued a profits warning last June following contract delays, which saw £71m wiped off its value, after it said operating profits in 2016 would be significantly lower than market expectations.

On Tuesday it said results for the year to December 31 were in line with its revised expectations.

​P​re-tax p​rofit ​fell 29 per cent to £9.5m ​​and underlying operating profit ​fell 10 per cent to​ £14.6m. Revenue fell 3 per cent to £61m.

Servelec’s chief executive Alan Stubbs said: “When we had the profits warning last June we had to make 20 people redundant. Now we are recruiting again in Sheffield, we are continuing with the graduate programme we had with Sheffield University and we are also looking at taking on apprentices.

“We can recruit people more easily in Sheffield than London and I see the 20 people we lost will be replaced by the end of the year.”

He said the group had a tough time in 2016, but its healthcare business has since picked up, social care is “going down a storm” and the group is now seeing orders from the oil and gas market after projects were put on hold last year.

​Servelec​ said its healthcare division is benefiting from the decision to pursue deals outside the North and it has won contracts in Scotland, Ireland, Wales and Northern Ireland.

Pent-up demand in the UK water industry is ​now ​unlocking ​and the group has won several framework contracts under AMP6​. Its customers include Anglian Water​ and Affinity Water. ​

“2016 was a bump in the road. Things are back on track in 2017,” said Mr Stubbs.

The group is proposing a final dividend of 4.0p per ordinary share which, together with the interim dividend of 1.65p paid in October, equates to a total dividend of 5.65p per ordinary share, an increase of 10 per cent.

Mike Cane, Servelec’s chief financial officer, said: “The dividend is important to shareholders. We are confident about 2017.”

Analyst Chris Glasper at N+1 Singer said: “Servelec’s preliminary results are marginally ahead of expectations should further reassure the group is back on track after the stumble last year.

“Weakness in healthcare and controls was offset by strength in social care and technologies. We make no material changes to our forecasts at this stage.”

Analyst Julian Yates at Investec said: “Servelec’s results are in-line with the June 16 rebasing and the January pre-close and we retain our underlying forecasts.

“Healthcare growth was driven by social care wins and M&A. Both technologies and controls started to recover at the back end of 2016, suggesting growth off the low 2016 base is feasible.

“Good cost control, a diversified sales focus, slowly improving end markets and an order bank up 15 per cent year on year support our outlook for 2017 estimated profit growth.”