Just as Severfield (SFR) starts knocking its UK business into shape, its Indian joint venture goes awol. Four years ago, Severfield was "excited and confident of success", having recently inked a deal with Indian congolmerate JSW. On paper, the opportunity is huge: India is a vast and rapidly growing construction market that still mostly uses concrete, but should be ready to switch to steel.
But it has proved tricky converting that potential into profit. Severfield's share of joint-venture losses rose tenfold to £3m last year - a result new chief executive Ian Lawson called "very disappointing". His response has been to move a board member to India to take over as managing director. But Mr Lawson admits progress will not come overnight and says his best guess at present is that the joint venture will not reach break-even this year.
That takes the shine off decent progress in the UK business, which made underlying operating profit of £7.6m, versus a £19.2m loss in the prior 15-month period. The UK operating margin now sits at 3.3 per cent, which puts it well on the way to meeting management's 5-6 per cent target.
Current City consensus is for adjusted earnings per share of 2.3p this year (from 0.9p in 2013-14), but broker Jefferies thinks this may slip a little due to the Indian joint venture.
| SEVERFIELD (SFR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 55p | MARKET VALUE: | £164m | |
| TOUCH: | 54-55p | 12-MONTH HIGH: | 70p | LOW: 44p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 48p* | NET CASH: | £0.3m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 267 | 11.1 | 8.6 | 7.5 |
| 2011 | 268 | 6.8 | 6.5 | 5 |
| Year to 31 Mar | ||||
| 2013† | 318 | -28.9 | -13.5 | 1.5 |
| 2014 | 231 | -4.1 | -0.9 | nil |
| % change | -27 | - | - | - |
*Includes intangible assets of £65m, or 22p a share †15-month period | ||||
