Severfield expects further progress in second half

The Thirsk-based firm expects further progress as it announced a 9 per cent increase in first half revenue to £149m for the six months to September 30.

Underlying pre-tax profit rose 2 per cent to £13.1m against a particularly strong first half last year when the group booked extra profits after projects were completed.

Chief executive Alan Dunsmore said: “It’s good progress in line with expectations.

“We are doing more lower risk, smaller projects, which reflects the market. There are not so many big, iconic projects around. Tottenham was a one-off. There are fewer big jobs before the next big cycle.”

The group has raised its interim dividend by 11 per cent to 1.0p per share, reflecting its confidence in the future.

“We see more progress ahead,” said Mr Dunsmore.

As a result of the increase in small, lower risk projects, the UK order book fell from £237m in June to £230m.

“In addition to a high quality and stable UK order book, we continue to see good progress in India and have established exciting new organic opportunities for growth,” said Mr Dunsmore.

“With our market-leading position, we are well placed to deliver on our strategic objectives and generate enhanced value for our shareholders.”

The group has continued work on its three large projects in London, each of which have project revenues in excess of £20m.

These include a new commercial tower at 22 Bishopsgate, where work remains ongoing, and two projects where work is substantially complete, namely the new stadium for Tottenham Hotspur FC and the retractable roof for Wimbledon No. 1 Court.

Last year the group secured a £50m order for the new Google Headquarters. Severfield will provide over 15,000 tonnes of structural steelwork for an 11 storey head office building at Kings Cross in London.

Work on the project is scheduled to start over the coming months.

“Overall, the UK market continues to appear stable, with modest economic growth forecast, in tandem with our pipeline of potential future orders which also remains stable,” said Mr Dunsmore.

“Whilst we are currently seeing some lower tender margins on projects that we are bidding we have been able to offset these with efficiency improvements and other contract execution gains.“

The group is chasing a number of significant infrastructure contracts, particularly in the transport sector, which are being driven by the Government’s investment in infrastructure commitment which is set to increase over the next few years.

This will include projects such as HS2, both stations and bridges, and the expansion of Heathrow airport.

Severfield said it is working with industry bodies to identify and manage any challenges caused by the UK’s exit from the European Union.

"At this stage, we have seen no material impact from Brexit, however with continued uncertainty, we are scenario-planning and working with our clients and others in the

industry to ensure we are able to respond to any future changes in market conditions," said Mr Dunsmore.

In January, the group re-organised its factory operations in North Yorkshire to drive operational improvements, resulting in the consolidation of steel fabrication at Dalton and Sherburn into the Dalton facility.

This combined facility is now operating at scale and the reorganisation of the operational footprint has contributed to increased operational efficiencies which are boosting operating margins.