Investors will have to wait "another year or two" for a UK construction recovery, admits Tom Haughey, chief executive of structural steel group Severfield-Rowen. Yes, the industry has likely troughed, but an upturn is unlikely until 2014 and shareholders will have less to tide them over following a decision to slash the dividend by one third – leaving the shares set to tread water.
That dividend cut shouldn't come as a shock, though, given that the harsh climate and further margin deterioration wiped 28 per cent off underlying group operating profit. A bigger than expected £9m cash outflow from operating activities meant net debt doubled, too. A handful of contracts needing extra work towards the year-end increased site costs, which are still being recovered. Clients are also taking longer to pay. Still, winning The Leadenhall Building contract was good news and Severfield is negotiating several other London office projects. It has identified over £500m of work worth bidding for and the company must win its fair share given the UK order book has slipped to £221m now that Olympics work has washed through. The Indian joint venture has also had hiccups, but should make a small profit this year.
Broker Peel Hunt has cut its forecasts for adjusted pre-tax profit in 2012 by 15 per cent to £12.75m, giving adjusted EPS of 10.4p (£10.1m and 8.05p in 2011).
SEVERFIELD-ROWEN (SFR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 185p | MARKET VALUE: | £165m | |
| TOUCH: | 184-185p | 12-MONTH HIGH: | 272p | LOW: 142p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 28 | |
| NET ASSET VALUE | 148p* | NET DEBT: | 24% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 301 | 38.4 | 31.8 | 20.0 |
| 2008 | 394 | 42.6 | 27.1 | 20.0 |
| 2009 | 349 | 44.1 | 35.3 | 15.0 |
| 2010 | 267 | 11.1 | 8.58 | 7.5 |
| 2011 | 268 | 6.78 | 6.52 | 5.0 |
| % change | - | -39 | -24 | -33 |
Ex-div: 23 May Payment: 21 Jun *Includes intangible assets of £72.9m, or 82p a share | ||||
