Severfield is a leading UK structural steelwork fabricator operating across a broad range of market sectors. An Indian facility currently undertakes structural steelwork projects for the local market and is fully operational.
FY19 revenue was flat y-o-y, with increased company-defined PBT and earnings (by 5%) and an 8% uplift in conventional DPS. (No special dividend was declared, as expected.) The Indian JV was the strongest contributor to progress with profitability more than doubling as the sharp pick up in orders started to translate into revenue. UK performance was generally robust with stable operating margins in both half years and modest y-o-y progress on a reported basis. The AGM update (3 September) confirmed much of the year-end messaging and was followed by the acquisition of Harry Peers & Co (on 1 October, for an initial £18m). This brings additional expertise into the group, with particular strengths in relatively robust infrastructure sub-segments. The deal enhances our earnings estimates by over 6% in a full year and raises Severfield’s three-year EPS CAGR to FY22 to just over 8%.
The primary strategic aim is to maintain Severfield’s position as the leading UK structural steelwork supplier. An Indian JV (established in 2010) targets similar sectors to those served in the UK; management has valued the Indian construction market at c £100bn pa, with a very low penetration of steel structures currently and the JV is in the process of expanding capacity.