Restructuring efforts under new chief executive Ian Lawson helped steel supplier Severfield-Rowen (SFR) to deliver a half-year underlying operating profit of £3m - compared to a £20.6m loss in the half-year to end-December 2012.
Admittedly, group revenue did fall on the back of lower sales volumes - but that reflected a planned 10 per cent reduction in capacity at its largest business, Severfield-Watson Structures. The group's headcount has been pared back, too, which - along with other rationalisation measures - helped its underlying operating margin (before joint ventures and associates) recover to 2.5 per cent from loss-making territory in the comparative period - management is targeting a 6-7 per cent margin. The group's debt pile has been wiped out as well, reflecting funds raised through April's £45m rights issue. But management is still working through problematic legacy contracts - such as London's cheesegrater tower at 122 Leadenhall Street. Moreover, the £34m order book from its Indian joint venture is still well short of the estimated £50m that's needed to achieve a break-even level there. And the UK order book fell to £172m from £197m at the end of March.
Broker Cenkos believes that the group should meet consensus full-year estimates - pre-tax profit of £5m and EPS of 1.9p (from 13.5p loss per share in 2013).
| SEVERFIELD-ROWEN (SFR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 63p | MARKET VALUE: | £187m | |
| TOUCH: | 62-63p | 12-MONTH HIGH: | 68p | LOW: 32p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | na | |
| NET ASSET VALUE: | 49p* | NET CASH: | £1.5m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 121 | -23.5 | -11.4 | nil |
| Half-year to 30 Sep† | ||||
| 2013 | 117 | -2.75 | -0.86 | nil |
| % change | -3 | - | - | - |
Ex-div: - Payment:- *Includes intangible assets of £68.4m, or 23p a share †Reflects change of year-end to end-March | ||||
