Since the half-year point, management at steel structure specialist Severfield (SFR) has been relatively cautious about the group's full-year performance, so these expectation-beating results took the market by surprise. Investors sent the share price up 11 per cent as the group reported a return to revenue growth and its first pre-tax profit since 2011.
In its major UK and Ireland business, sales growth and a big improvement in operating margin helped to boost group underlying operating profit by just over a half to £13.7m. Investors should also take heart in the health of the order book, which stood at £270m at the start of June - a six-year high - with £211m of that expected to be delivered in the next 12 months.
Concerns are lessening around the domestic steel production industry, and Severfield navigated the stormy waters pretty well in the year to ensure only minimum impact on the supply chain. Management is confident that previous issues with the conversion of larger projects have improved: the group has three projects valued at over £20m within its order book.
However, operations via the joint venture in India continue to disappoint, and the group's share of the loss of this business stayed relatively steady at £0.3m.
Broker Jefferies expects adjusted pre-tax profit of £17m for the year to March 2017, giving adjusted EPS of 4.7p (from £13.2m and 3.7p in FY2016).
SEVERFIELD (SFR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 53p | MARKET VALUE: | £158m | |
| TOUCH: | 52.5-53p | 12-MONTH HIGH: | 75p | LOW: 47p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 50p* | NET CASH: | £19m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011^ | 268 | 6.8 | 6.5 | 5.0 |
| 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 |
| % change | +19 | - | +5680 | +200 |
Ex-div: 18 Aug Payment: 16 Sep ^Year to 31 Dec *Includes intangible assets of £59m, or 20p a share | ||||
