Severfield 's (SFR) market value surged after management confirmed that trading was ahead of expectations, with gathering commercial activity reflected by a marked increase in profitability in its latest half-year results. The steelwork specialist's performance belies any anxieties either side of the EU referendum, undertaking work on 90 projects across a range of sectors during the period. Revenues may have been flat on the 2015 comparative, but a 270 basis point increase in the underlying operating margin saw profits more than double.
Margins have been expanding because of increased efficiencies in the steel production process, in addition to a two-year programme of contract management improvement. With one eye on rising infrastructure budgets, Severfield also plans to invest another £2m in its bridge fabrication business.
The group's order book stood at £315m at the beginning of November, representing a six-year high, and a 17 per cent increase in just five months. Major contract wins in the first half include a tower project at 22 Bishopsgate, London and the Graphene Innovation Centre in Manchester. The backlog is expected to feed through into increased production volumes and revenues in the second half.
Jefferies has upgraded its forecasts for March 2017 full-year profits and EPS to £17.9m and 5p, respectively, rising to £20.8m and 5.7p in 2018 (from £13.2m and 3.7p in 2016).
| SEVERFIELD (SFR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 68.5p | MARKET VALUE: | £205m | |
| TOUCH: | 68.5p-69.5p | 12-MONTH HIGH: | 75p | LOW: 43p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 49p* | NET CASH: | £24m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 117 | 3.2 | 0.9 | 0.5 |
| 2016 | 118 | 7.4 | 2.1 | 0.7 |
| % change | +1 | +135 | +133 | +40 |
Ex-div: 15 Dec Payment: 13 Jan *Includes intangible assets of £57.7m, or 19p a share | ||||
