Pre-close Trading Update

RNS Number : 6604I

Severfield PLC

20 April 2022

 

20 April 2022

Severfield plc

('the Company' or 'the Group')

Pre-close trading update

Order books at record levels

Severfield plc, the market leading structural steel group, today issues the following trading update for the year ended 31 March 2022, ahead of the announcement of its annual financial results on Wednesday 15 June.

FY22 expectations

The Group expects to deliver a full year result in line with management's previous expectations.

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 £479m at 1 April 2022 (1 November 2021: £393m), of which £382m is for delivery over the next 12 months. The order book remains well-diversified and contains a healthy mix of projects across the Group's key market sectors. In terms of geographical spread, 94 per cent of this order book represents projects in the UK, with the remaining 6 per cent representing projects for delivery in Europe and the Republic of Ireland.

We continue to be encouraged by the current level of tendering activity across the Group, both in the UK and in continental Europe, and are well-positioned to take advantage of some significant opportunities in the industrial and distribution (battery plants and distribution centres), stadia and leisure, transport infrastructure, nuclear and data centre sectors.

Despite seeing further input cost inflation (including in steel prices) and some disruption to raw material supplies as a result of Russia's invasion of Ukraine, we are currently managing these effectively, and steel remains largely a pass-through cost for the Group.

India

The Indian joint venture ('JSSL') has performed profitably and in line with expectations in the second half of the year. This follows a difficult start to the year when output was disrupted by the second wave of COVID-19. Notwithstanding some current inflationary pressures, JSSL has continued to win new work, resulting in a record order book of £166m at 1 April 2022 (1 November 2021: £140m). In terms of mix, 40 per cent of the order book represents higher margin commercial work, with the remaining 60 per cent representing industrial projects, mainly for JSW. This order book, together with JSSL's improving pipeline of potential orders, reflects a continuing strong underlying demand for structural steel in India, leaving the business very well-positioned to take advantage of an improving economy.

Strong balance sheet and financial position

The financial position of the Group remains good and year-end net debt (on a pre IFRS 16 basis) was c.£19m, representing an overdraft of c.£4m and outstanding acquisition loans of c.£15m. Net working capital has increased in H2 reflecting the impact of steel and other input price rises, together with higher steel purchases to meet production requirements in early FY23 when executing our record UK and Europe order book.

In December 2021, the Group completed a refinancing of its revolving credit facility ('RCF'). The new £50m RCF provides additional liquidity above the £25m RCF which it replaced and extends the term of the facility which now expires in December 2026. The new facility provides the Group with enhanced liquidity and long-term financing to help support its growth strategy.
 

Outlook

With a record UK and Europe order book of £479m, a very encouraging pipeline of opportunities, and a well-positioned business in India, the outlook for the Group remains positive, although we remain mindful of the ongoing effects of Russia's invasion of Ukraine.

For further information, please contact:

Severfield                                    Alan Dunsmore                                       01845 577 896

Chief Executive Officer

Adam Semple                                         01845 577 896

Group Finance Director

Jefferies International                 Simon Hardy                                           020 7029 8000

Will Soutar                                              020 7029 8000

Liberum Capital                           Nicholas How                                         020 3100 2000

                                                    Ben Cryer                                               020 3100 2000

Camarco                                     Ginny Pulbrook  020 3757 4980

Tom Huddart                                           020 3757 4980

Notes to editors:

Severfield is the UK's market leader in the design, fabrication and construction of structural steel, with a total capacity of c.165,000 tonnes of steel per annum. The Group has six sites, c.1,500 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).

 

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