Trading Statement

Severfield PLC

17 April 2024

 

17 April 2024

Severfield plc

('the Company' or 'the Group')

Pre-close trading update and announcement of share buyback programme

Results slightly ahead of expectations, record UK and Europe order book, outlook is positive

Severfield plc, the market leading structural steel group, today issues the following trading update for the year ended 30 March 2024, ahead of the announcement of its annual financial results on Wednesday 19 June, and announces its intention to commence a share buyback programme to return £10m to shareholders.

FY24 results ahead of our previous expectations

The Group has made good progress in the second half of the 2024 financial year and we now expect to deliver a full year result which is slightly above our previous expectations. The financial position of the Group remains strong and year-end net debt (on a pre IFRS 16 basis) was c.£10m, also ahead of our previous expectations, reflecting an improvement in underlying working capital and an increase in advance payments.

Operational and trading update

UK and Europe

In the second half of the year, we have continued to secure a significant value of new work, resulting in a record UK and Europe order book of £511m at 1 April 2024 (1 November 2023: £482m), of which £397m is for delivery over the next 12 months. The order book remains well-diversified and contains a good mix of projects across the Group's key market sectors. The growth in the order book reflects the continued strengthening of our market position in Europe, supported by the acquisition of Voortman ('VSCH'), and 32 per cent of the order book now represents projects in continental Europe and Ireland (1 November 2023: 13 per cent).

We continue to see large project opportunities in both our Commercial and Industrial division and Nuclear and Infrastructure division, in the UK, continental Europe and Ireland. These include projects in support of a low-carbon economy such as battery plants, energy efficient buildings, manufacturing facilities for renewable energy and offshore wind projects. Furthermore, the Group remains well-placed to meet an ongoing demand for infrastructure investment, including a growing focus on major projects which can mitigate the impacts of climate change and deliver energy security. This includes nuclear (such as Sizewell C and small nuclear reactors), carbon capture and hydrogen production, together with HS2 and Northern Powerhouse Rail.

In our Modular Solutions division, we have maintained our focus on growing our Severstor product ranges, which attract higher margins, and on developing our growing pipeline of opportunities, including in growth areas such as renewable energy and data storage. We continue to make good progress in growing our revenues and client base and expect this division to report a small profit for the 2024 financial year.

India

The Indian joint venture ('JSSL') performed well in the second half of the year and is expected to deliver another step up in profitability in 2024. JSSL's total output for 2024 is likely to exceed 100,000 tonnes, including sub-contracted work, for the second year running. The order book was £142m at 1 April 2024 (1 November 2023: £165m). With an improving pipeline of potential orders and numerous identified growth opportunities, including those in new and existing market sectors, and with the land in Gujarat for future expansion now secured, JSSL is well positioned to take advantage of a very encouraging outlook for the Indian economy and a strong underlying demand for structural steel in construction.

Launch of £10m share buyback programme

Our well-established growth strategy is unchanged and is underpinned by our disciplined capital allocation policy. The Group's capital allocation priorities are to support its ongoing operational requirements and profitable organic growth opportunities, to pay sustainable core dividends to shareholders, to fund strategic growth opportunities, and to make further returns of capital to shareholders as appropriate, whilst maintaining a strong balance sheet. Consistent with this policy and given the highly cash generative nature of the business, the Group today announces that it intends to commence a £10m share buyback programme, subject to market conditions.

The purpose of this buyback programme is to return surplus capital to shareholders and reduce the Group's share capital, whilst maintaining the financial flexibility to invest in the ongoing execution of our strategy to deliver sustainable growth and attractive returns.

Board change

As referenced in a separate announcement today, we are pleased to announce the appointment of Charlie Cornish as non-executive Chair and director of the Company. Charlie will join the Company's Board on 1 May 2024 and will take over as Chair after the AGM on 30 July 2024 when Kevin Whiteman steps down from the Board, having completed his nine-year tenure.

Outlook

The Group is performing well, the outlook is positive and our businesses are well-positioned in markets with excellent long-term growth opportunities. Whilst there remains some uncertainty in the wider economy, we are seeing an improvement in market conditions which, together with our high-quality order books, diversified activities and operational delivery capabilities, provides us with confidence for the year ahead.

For further information, please contact:

Severfield                                    Alan Dunsmore                                     01845 577 896

Chief Executive Officer

Adam Semple                                     01845 577 896

Chief Financial Officer

Jefferies International                 Will Soutar                                           020 7029 8000

Shaam Vora                                        020 7029 8000

Liberum Capital                         Nicholas How                                        020 3100 2000

                                                  Satbir Kler                                              020 3100 2000

Camarco                                                                                                   [e-mail]

Ginny Pulbrook                                      [phone]

Tom Huddart                                          [phone]

Notes:

About Severfield

Severfield is the UK's market leader in the design, fabrication and construction of structural steel, with a total capacity of c.150,000 tonnes of steel per annum. The Group has seven sites, c.1,800 employees and expertise in large, complex projects across a broad range of sectors. The Group also has an established presence in the expanding Indian market through its joint venture partnership with JSW Steel (India's largest steel producer).

Inside information

The information relating to the proposed share buyback programme in this announcement constitutes inside information as stipulated under the Market Abuse Regulation (EU) No.596/2014 (as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018). On the publication of this announcement via a Regulatory Information Service, such information is now considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of Severfield is Adam Semple, Chief Financial Officer.

Share buyback programme

The Group has today announced its intention to commence a share buyback programme, subject to market conditions, to purchase ordinary shares of 2.5 pence each in the Company ('Ordinary Shares') for a maximum aggregate consideration of £10m (excluding stamp duty and expenses) from the date of this announcement (the 'Buyback').

The Company has entered into an irrevocable non-discretionary agreement with Liberum Capital Limited ('Liberum'), pursuant to which Liberum shall purchase Ordinary Shares as riskless principal (and not as agent of Severfield) for the subsequent sale on to, and purchase by, Severfield, up to the maximum aggregate consideration of £10m. Liberum will make its trading decisions in relation to the Ordinary Shares independently of, and uninfluenced by, the Company, within the programme terms and certain pre-set parameters.

Any purchase of Ordinary Shares under the Buyback will take place in open market transactions and may be made from time to time depending on market conditions, share price and trading volumes. The Buyback will be effected under the general authority to repurchase Ordinary Shares granted by the Company's shareholders at the 2023 annual general meeting and to be sought at the 2024 annual general meeting and in accordance with Chapter 12 of the UK Financial Conduct Authority's Listing Rules, and Regulation (EU) No 596/2014 and Commission Delegated Regulation (EU) No 2016/1052 (both as they form part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018), including where relevant pursuant to the UK Market Abuse Regulation.

Due to the limited liquidity in the Ordinary Shares, a buy-back of Ordinary Shares on any trading day may represent a significant proportion of the daily trading volume in the Ordinary Shares and may exceed the 25 per cent of the average daily trading volume specified in the provisions of the UK Market Abuse Regulation dealing with buyback programmes and accordingly the Company may not benefit from the exemption contained in Article 5(1) of that regulation.

Any purchase of Ordinary Shares pursuant to the Buyback will be announced by not later than 07:30 on the business day following the calendar day on which the purchase occurred. Any Ordinary Shares purchased by the Company will be cancelled and the number of Ordinary Shares in issue reduced accordingly.

 

END