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Severfield warns of client investment delays

The structural steelwork specialist's Indian activities look vulnerable to coronavirus
June 17, 2020

Severfield (SFR) is seeing evidence that coronavirus is prompting clients and developers to postpone investment decisions. Activity deteriorated in May when “it became clear that some clients weren’t going to push the button as quickly as they otherwise might have done” admitted chief executive Alan Dunsmore, who viewed the commercial office and retail development markets as the most exposed. Some of Severfield’s work has been pushed back by between three and six months, although there have been no cancellations.

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The structural steelwork specialist’s UK and European sites have reopened, and its £271m order book is backed up by high-profile projects including the redevelopment of Lord’s cricket ground and Fulham football club’s stadium. Of this pipeline, £243m is for delivery over the coming year, while the recognition of higher second-half revenues drove its order book down 16 per cent from a record £323m level last year.

Severfield’s Indian activities, which it conducts via a joint venture, look more vulnerable. Coronavirus deaths are on an upwards trajectory and its partners had to seek special treatment to keep its steel mill blast furnaces open, and while Severfield’s sites are beginning to reopen this process will be “slow and unsteady,” Mr Dunsmore says.

Peel Hunt analysts cut 2021 pre-tax profits and earnings per share forecasts to £20.8m and 5.5p respectively.

SEVERFIELD (SFR)   
ORD PRICE:75pMARKET VALUE:£ 229m
TOUCH:73-76p12-MONTH HIGH:96pLOW: 57p
DIVIDEND YIELD:1.5%PE RATIO:11
NET ASSET VALUE:60p*NET CASH:£5m**
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20162399.62.91.5
201726218.15.12.3
201827422.26.12.6
201927524.76.72.8
202032725.86.71.1
% change+19+4+0-61
Ex-div:na   
Payment:na   
*Includes intangible assets of £78m, or 26p a share **Includes lease liabilities of £11.2m