The embattled Indian joint venture at Severfield (SFR) is now under new management. Losses there narrowed significantly during the first half, coming in at just £300,000, compared with £1.3m this time last year and £3m for the full year. Higher levels of production at the Indian factory boosted the operating margin to 4.3 per cent, but the resulting profit was wiped out by financing costs.
At the group level, Severfield's plan to recover margins and improve profits - at the expense of the top line if need be - seems to be on track. A reduction in capacity and careful selection of contracts cut revenues to £97.4m for the first six months, but operating profits (excluding the Indian joint venture) rose from £3m to £3.6m. This represented a margin of 3.7 per cent, compared with 2.5 per cent for the first half of last year.
Chief executive Ian Lawson said he hoped to restore the dividend at the end of the current financial year, but that remains dependent on "good cash flow, a strong forward order book and ongoing improvements in the Indian business".
Analysts at Jefferies still expect pre-tax profits of £8m for the current financial year, giving EPS of 2.1p - up from £4m and 0.88p, respectively.
| SEVERFIELD (SFR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 60p | MARKET VALUE: | £179m | |
| TOUCH: | 59-60p | 12-MONTH HIGH: | 66p | LOW: 53p |
| DIVIDEND YIELD: | nil | PE RATIO: | 133 | |
| NET ASSET VALUE: | 48p* | NET CASH: | £7.3m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 117.1 | -2.7 | -0.9 | nil |
| 2014 | 97.4 | 1.7 | 0.5 | nil |
| % change | -17 | - | - | - |
Ex-div: na Payment: na *Includes intangible assets of £63.2m, or 21p a share | ||||
