Severfield (SFR) already has a good reputation in the world of structural steel engineering. But investors now have fresh reason to view the company as an excellent custodian of capital, after full-year figures revealed a plethora of strong financial metrics.
A 10 per cent rise in the top line was encouraging, but it was the 180 basis point increase in the underlying operating profit margin to 7.5 per cent that caught the eye. According to acting chief executive Alan Dunsmore, this operational performance came from some fairly ordinary sources: "Better risk and contract management and developments to our production processes". A more effective contract payment schedule translated into a strong operating cash conversion ratio of 112 per cent and meant that, excluding advanced payments, net working capital was just 2 per cent of revenue by the end of the period.
Well-placed investment has also helped. Return on capital employed shot up in the period to 14.6 per cent, from 9.7 per cent in FY2016, while Severfield's Indian joint venture produced a profit for the first time. According to Bloomberg, consensus forecasts are for pre-tax profits of £21.6m and adjusted EPS of 6p a share in the year to March 2018, against £19.7m and 5.5p in FY2017.
SEVERFIELD (SFR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 82p | MARKET VALUE: | £245m | |
| TOUCH: | 81.5-82p | 12-MONTH HIGH: | 88p | LOW: 43p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 52p* | NET CASH: | £32.6m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 318 | -28.9 | -13.5 | 1.5 |
| 2014 | 231 | -4.1 | -0.9 | nil |
| 2015 | 202 | -0.2 | 0.1 | 0.5 |
| 2016 | 239 | 9.6 | 2.9 | 1.5 |
| 2017 | 262 | 18.1 | 5.1 | 2.3 |
| % change | +10 | +87 | +78 | +53 |
Ex-div: 17 Aug Payment: 15 Sep *Includes intangible assets of £56.3m, or 19p a share | ||||
