Severfield, Britain’s biggest constructional steelwork contractor, has reported an expected fall in half year profits, but said a number of large ongoing projects are expected to deliver stronger results in the second half.
The Thirsk-based group, which supplied steel for the new stadium at Tottenham Hotspur FC and the retractable roof for Wimbledon No.1 Court, said that despite the soft market backdrop in the UK, its pipeline of potential future orders is stable with a good balance of work across all key market sectors.
Revenue fell 12 per cent to £132m in the six months to September 30 as Severfield returns to previous trends when it made two thirds of its sales in the second half.
Severfield’s chief executive Alan Dunsmore said: “The phasing has been 50/50 over the first and second halves, but we are now back to one third in the first half and two thirds in the second. The visibility of projects is really quite strong.”
The group announced a 10 per cent increase in the interim dividend, reflecting its confidence going forward.
“The order book is strong and we have good visibility of the pipeline,” said Mr Dunsmore.
“We have confidence in the strategy and the cash generation.”
Talking about the soft UK market amid the current political turmoil, Mr Dunsmore said: “We keep hoping it will get better once the General election is out of the way. UK confidence is weak.”
The group has taken on more work in Ireland and mainland Europe. A year ago these two markets accounted for just 5 per cent of sales, but they now account for 45 per cent.
Mr Dunsmore said this was not a result of attempting to Brexit-proof the company.
“The big change is the Republic of Ireland. It just so happened - it’s good to have mainland Europe and Irish possibilities.”
In the UK, the group is pursuing a number of significant infrastructure opportunities, particularly in the transport sector.
It said that although decision-making on some of these projects has been delayed, HS2 (both stations and bridges) and the expansion of Heathrow airport (both of which have a large steelwork content) are expected to contribute to the Government’s investment in infrastructure commitment over the next few years.
“HS2 is part of the general uncertainty,” said Mr Dunsmore.
“UK construction is weak. We’d like to do quite well with HS2 in due course. We will see where all the reports get to.”
Underlying pre-tax profit fell from £13m to £8m in the first half, in line with expectations. Severfield said current trading remains good with a number of large ongoing contracts expected to deliver stronger profits in the second half.
The group has been working on a number of high profile contracts, including the new Google Headquarters at King’s Cross and the new commercial tower at 22 Bishopsgate, where Severfield’s work is now complete. Both contracts have total project revenues in excess of £20m.
The firm will also be working on the redevelopment of Lords Cricket Ground (Compton and Edrich stands).
Over 80 projects were undertaken during the first half in the UK, Ireland and continental Europe in a diverse range of market sectors including commercial offices (both in London and the UK regions), industrial and distribution, data centres and transport infrastructure.
The UK and Europe order book stood at £323m at the beginning of November, up from £295m at the beginning of June.
The group reported good cash generation, resulting in period-end net funds of £22.5m.
Mr Dunsmore said: “Despite the ongoing political uncertainty, the UK market appears broadly stable, however we continue to see evidence of some delayed decision-making by clients against a backdrop of a generally more cautious commercial investment climate.