Severfield ‘on the corner’ as it returns to black

​The Thirsk-based group​, which has worked on Arsenal’s Emirates Stadium, the Shard skyscraper and the London 2012 Olympic stadium, announced pre-tax profits of £1.4m in the six months to September 30, up from a loss of £2.5m last year.

Underlying pre-tax profits, stripping out restructuring and redundancy costs and other charges, rose from £1.4m to £3m.

The group’s UK order book stood at £185m on November 1, up from £168m at the beginning of May, reflecting strong order intake and an increase in general market activity.

Severfield took on over 70 projects during the half year in key market sectors such as rail, transport, bridges, office developments, stadia, warehouses and distribution centres.

The group said that business is looking stronger than it did earlier this year when the sluggish economy took its toll.

CEO Ian Lawson said: “We do feel that things are better. I wouldn’t get too excited about it, but things are moving in the right direction.

“The order book is up to £185m and the pipeline of opportunities is better than I’ve seen in a year.”

Analysts at Whitman Howard said in a note: “Severfield’s half year results to end September indicate that the new top team is getting to grips with the business.

“Revenue in the period was down 17 per cent at £97m, as expected, but importantly operating margins in the UK rose to 3.7 per cent from 2.5 per cent last year and the losses in India have fallen to £300,000 in the period from £1.3m last year.

“Severs has faced a very tough time on several key projects, but those are now completed and the approach to tendering new work is very much more cautious.”

Severfield was forced to seek emergency funding last year after uncovering severe losses on contracts, most notably the Cheesegrater skyscraper in London.

Analysts said the UK order book is set for further growth as UK market conditions improve.

Severfield said it has seen a much improved performance in India.

“In India, the initial euphoria following the election of prime minister Modi has faded somewhat, but the business has maintained its order book levels whilst increasing production output to record levels,” said Mr Law- son.

Analysts at Whitman Howard said the recovery in India is encouraging as it is a “Kill It or Cure It for the new team” and “so far it is trending the right way”.

“I wouldn’t say we’ve finally turned the corner,” said Mr Lawson.

“We’re on the corner and the business has started to bear fruit over the past six months. We are still making losses which is not acceptable, but as the market improves the business should improve.”

Analysts said that the period-end net cash position of £7.3m allows the company to invest in capital to support its performance improvement and means Severfield can remain selective about projects.

“Cash is very good despite the first capital expenditure on new equipment and equity into the Indian joint venture,” said Mr Lawson.

Severfield said it is on course to deliver full-year earnings in line with expectations.