Severfield return to growth cheers investors

​This was despite a delay in several​ major projects. The ​Thirsk-based group said 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.

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

“They then either then shelve the project or redefine it. The cost advisors 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 advisors will catch up with higher labour prices.

Revenue jumped 20 per cent to £117m in the six months to September 30 and underlying pre-tax profits rose 60 per cent to £4.8m.

Severfield worked on over 80 projects during the half year, including ​the redevelopment of Anfield stadium for Liverpool FC which includes extending the main stand to increase its seating capacity.

It is also working on a large number of commercial developments in London and has seen huge demand for retail warehouses as retailers increase their online presence.

A third area of growth is station​ ​​redevelopments and road and rail bridges after the Government promised to spend £100bn in road, rail and airport infrastructure in the life time of this parliament.

The group said the order book is solid at £185m and it has a healthy pipeline of new work as UK demand stays strong.

As part of the group’s commitment to a progressive dividend policy, it will pay out an interim dividend of 0.5p per share.

“The rise is the dividend is nice to see,” said Mr Lawson.

“It was nil in the first half last year and there was a final dividend of 0.5p so we’re paying another 0.5p. It’s showing confidence in the future.”

Analyst Andy Douglas at Jefferies said: “Severfield has come a long way since the severe challenges faced some two to three years ago. The group is on significantly firmer foundations, discipline has been brought to the group and this continues to strengthen.”

He said UK earnings margins have improved, the Indian joint venture is performing more solidly and the group’s balance sheet “is in great shape”.

“At the same time, Severfield’s impressive UK market position remains very much intact and whilst there is competition, Severfield remains a go-to operator in its chosen field,” he added.