Last close As at 05/08/2026
GBP0.37
▲ −0.30 (−0.80%)
Market capitalisation
GBP111m
Research: Industrials
As the end of FY21 approaches, Severfield is deepening its structural steelwork capabilities with the acquisition of DAM Structures. The strategic fit is sound and the deal enhances full-year earnings by c 7% on our estimates. We now expect Severfield to end FY21 in a modest net debt position.
Written by
Severfield |
Expanding into adjacent steelwork sectors |
Acquisition of DAM |
Construction & materials |
3 March 2021 |
Share price performance
Business description
Next events
Analyst
Severfield is a research client of Edison Investment Research Limited |
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As the end of FY21 approaches, Severfield is deepening its structural steelwork capabilities with the acquisition of DAM Structures. The strategic fit is sound and the deal enhances full-year earnings by c 7% on our estimates. We now expect Severfield to end FY21 in a modest net debt position.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/19 |
274.9 |
25.1 |
6.8 |
2.8 |
11.3 |
3.6 |
03/20 |
327.4 |
29.1 |
7.9 |
2.9 |
9.7 |
3.8 |
03/21e |
354.5 |
22.4 |
5.9 |
2.9 |
13.0 |
3.8 |
03/22e |
365.3 |
26.9 |
7.2 |
3.0 |
10.7 |
3.9 |
Note: *PBT and EPS are Edison normalised, excluding pension net finance costs, intangible amortisation and exceptional items.
Excellent strategic fit
Severfield’s acquisition of DAM Structures brings earlier construction project involvement and significantly strengthens its presence in the rail/transport sector. Like Severfield, DAM offers design, engineering and installation services to main contractors founded on core steelwork fabrication expertise. Project structures can be either permanent (eg bridges, gantries) or temporary (eg propping, façade retention, support structures) and end customers include rail (eg Network Rail, Crossrail, London Underground) as well as some other non-rail customers. DAM’s fabrication facility is in east Yorkshire, only c 60 miles from Severfield’s main Dalton site and c 20 miles from Severfield P&P (Sherburn); this group footprint increases the capacity available to DAM if it is successful in winning new business. Other group benefits that one might expect to accrue include enhanced materials purchasing, contract management and administration functions, and deeper main contractor relationships.
Full-year earnings enhanced by 7%
Having reported FY19 (to October) revenue and PBT of c £22m and £1.9m, we infer that DAM’s trading in the latest, COVID-19-affected, year was at comparable levels. The initial consideration is £12m on a cash- and debt-free basis (funded by cash reserves and a new term loan); a deferred payment of c £7m is expected to be paid in April 2022. Factoring this in, our revised estimates are c 7% above previous levels (for FY22 and FY23). Note that further contingent consideration may become payable in tranches (up to £8m in total) based on commercially acceptable new business won over the five years to April 2026.
Valuation: Favourable reaction to DAM
Severfield’s share price has responded well to the DAM acquisition and is up c 5% ytd. Looking beyond the COVID-19-affected FY21 trading year, we expect earnings to exceed FY20 levels in FY23, by which time Severfield’s rating compresses to a P/E of 9.5x and EV/EBITDA of 6.2x. At current share price levels, the prevailing dividend yield is just below 4% on our estimates.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021e |
2022e |
2023e |
|||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|||
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
||||
PROFIT & LOSS |
|||||||||||||
Revenue |
|
|
231.3 |
201.5 |
239.4 |
262.2 |
274.2 |
274.9 |
327.4 |
354.5 |
365.3 |
376.9 |
|
Cost of Sales |
(217.8) |
(186.7) |
(219.6) |
(236.3) |
(244.9) |
(244.6) |
(292.6) |
(322.7) |
(329.5) |
(338.2) |
|||
Gross Profit |
13.5 |
14.9 |
19.8 |
25.9 |
29.3 |
30.3 |
34.7 |
31.7 |
35.7 |
38.7 |
|||
EBITDA |
|
|
12.0 |
13.6 |
18.9 |
25.7 |
29.1 |
29.0 |
33.2 |
28.6 |
33.6 |
37.2 |
|
Operating Profit - Edison adjusted |
|
8.4 |
10.0 |
15.2 |
22.1 |
25.4 |
25.3 |
29.3 |
24.2 |
28.5 |
31.6 |
||
SBP |
(0.2) |
(0.5) |
(1.1) |
(2.0) |
(2.0) |
(1.6) |
(1.8) |
(0.5) |
(1.0) |
(1.5) |
|||
Pension Net Finance Costs |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
(0.6) |
(0.4) |
(0.4) |
(0.4) |
(0.4) |
(0.4) |
|||
Operating Profit - company norm |
|
7.6 |
9.0 |
13.7 |
19.6 |
22.9 |
23.3 |
27.0 |
23.309 |
27.060 |
29.714 |
||
Net Interest |
(0.6) |
(0.5) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.7) |
(0.9) |
(1.2) |
(1.2) |
|||
Associates |
(3.0) |
(0.2) |
(0.2) |
0.5 |
0.9 |
1.7 |
2.4 |
(0.5) |
0.6 |
1.3 |
|||
Intangible Amortisation |
(2.7) |
(2.6) |
(2.6) |
(2.6) |
(1.3) |
0.0 |
(1.4) |
(2.9) |
(2.9) |
(2.2) |
|||
Exceptionals |
(5.3) |
(5.9) |
(0.9) |
0.8 |
0.0 |
0.0 |
(1.4) |
(0.9) |
0.0 |
0.0 |
|||
Profit Before Tax (norm) - Edison |
|
4.5 |
8.8 |
13.7 |
20.3 |
24.1 |
25.1 |
29.1 |
22.4 |
26.9 |
30.2 |
||
Profit Before Tax (norm) |
|
|
4.0 |
8.3 |
13.2 |
19.8 |
23.5 |
24.7 |
28.6 |
21.9 |
26.5 |
29.8 |
|
Profit Before Tax (statutory) |
|
|
(4.1) |
(0.2) |
9.6 |
18.1 |
22.2 |
24.7 |
25.8 |
18.2 |
23.6 |
27.6 |
|
Tax |
1.4 |
0.3 |
(1.0) |
(2.7) |
(4.1) |
(4.5) |
(5.4) |
(4.2) |
(4.9) |
(5.4) |
|||
Profit After Tax (norm) |
3.1 |
7.4 |
11.4 |
17.0 |
19.6 |
20.6 |
24.1 |
18.2 |
22.0 |
24.9 |
|||
Profit After Tax (statutory) |
(2.6) |
0.1 |
8.6 |
15.3 |
18.0 |
20.2 |
20.4 |
13.9 |
18.7 |
22.3 |
|||
Average Number of Shares Outstanding (m) |
295.8 |
297.5 |
297.5 |
298.9 |
299.7 |
303.1 |
305.4 |
307.2 |
308.0 |
308.0 |
|||
EPS - normalised (p) - Edison |
|
|
1.05 |
2.47 |
3.84 |
5.70 |
6.53 |
6.80 |
7.89 |
5.91 |
7.15 |
8.08 |
|
EPS - normalised (p) |
|
|
0.88 |
2.31 |
3.67 |
5.53 |
6.35 |
6.66 |
7.75 |
5.77 |
7.01 |
7.94 |
|
EPS - statutory (p) |
|
|
(0.89) |
0.05 |
2.89 |
5.13 |
6.02 |
6.66 |
6.68 |
4.54 |
6.09 |
7.24 |
|
Dividend per share (p) |
0.0 |
0.5 |
1.5 |
2.3 |
4.3 |
2.8 |
2.9 |
2.9 |
3.0 |
3.3 |
|||
Gross Margin (%) |
5.8 |
7.4 |
8.3 |
9.9 |
10.7 |
11.0 |
10.6 |
9.0 |
9.8 |
10.3 |
|||
EBITDA Margin (%) |
5.2 |
6.7 |
7.9 |
9.8 |
10.6 |
10.5 |
10.1 |
8.1 |
9.2 |
9.9 |
|||
Operating Margin - Edison (%) |
3.6 |
4.9 |
6.4 |
8.4 |
9.3 |
9.2 |
8.9 |
6.8 |
7.8 |
8.4 |
|||
BALANCE SHEET |
|||||||||||||
Fixed Assets |
|
|
147.7 |
145.1 |
149.3 |
148.3 |
154.5 |
163.0 |
203.8 |
217.4 |
217.8 |
226.1 |
|
Intangible Assets |
64.6 |
61.8 |
59.2 |
56.3 |
54.8 |
54.7 |
78.1 |
87.7 |
84.9 |
89.7 |
|||
Tangible Assets |
74.1 |
76.6 |
77.4 |
78.9 |
81.2 |
84.0 |
99.0 |
102.4 |
104.5 |
106.2 |
|||
Investments |
9.0 |
6.7 |
12.7 |
13.1 |
18.5 |
24.3 |
26.7 |
27.3 |
28.4 |
30.2 |
|||
Current Assets |
|
|
72.2 |
76.3 |
75.1 |
107.1 |
99.2 |
91.8 |
127.4 |
121.7 |
127.5 |
129.1 |
|
Stocks |
5.8 |
4.8 |
5.3 |
7.8 |
9.6 |
8.9 |
6.9 |
10.6 |
11.8 |
13.1 |
|||
Debtors |
60.8 |
64.6 |
50.7 |
66.5 |
56.4 |
57.7 |
76.1 |
91.6 |
99.6 |
104.5 |
|||
Cash |
5.5 |
6.9 |
19.0 |
32.8 |
33.1 |
25.2 |
44.5 |
19.5 |
16.2 |
11.5 |
|||
Current Liabilities |
|
|
(57.9) |
(59.7) |
(58.2) |
(78.7) |
(66.1) |
(58.6) |
(106.4) |
(104.7) |
(107.3) |
(108.5) |
|
Creditors |
(52.7) |
(59.5) |
(58.1) |
(78.5) |
(65.9) |
(58.6) |
(87.0) |
(98.8) |
(101.4) |
(104.4) |
|||
Short term borrowings |
(5.2) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.0) |
(19.4) |
(5.9) |
(5.9) |
(4.2) |
|||
Long Term Liabilities |
|
|
(18.5) |
(21.1) |
(17.9) |
(22.5) |
(18.7) |
(21.2) |
(41.2) |
(50.2) |
(44.3) |
(40.1) |
|
Long term borrowings |
(0.0) |
(0.6) |
(0.4) |
(0.2) |
(0.0) |
0.0 |
(8.8) |
(14.9) |
(9.0) |
(4.8) |
|||
Other long term liabilities |
(18.5) |
(20.5) |
(17.5) |
(22.3) |
(18.6) |
(21.2) |
(32.4) |
(35.3) |
(35.3) |
(35.3) |
|||
Net Assets |
|
|
143.4 |
140.6 |
148.2 |
154.2 |
169.0 |
175.0 |
183.7 |
184.2 |
193.8 |
206.6 |
|
CASH FLOW |
|||||||||||||
Operating Cash Flow |
|
|
2.1 |
11.4 |
24.8 |
27.4 |
22.9 |
18.0 |
28.0 |
23.1 |
29.4 |
33.2 |
|
Net Interest |
(0.8) |
(0.8) |
(0.2) |
(0.1) |
(0.2) |
(0.4) |
(0.6) |
(0.9) |
(1.2) |
(1.2) |
|||
Tax |
0.4 |
(1.0) |
(0.9) |
(2.4) |
(3.9) |
(3.4) |
(6.0) |
(2.4) |
(7.2) |
(4.9) |
|||
Capex |
(1.5) |
(1.3) |
(4.3) |
(5.3) |
(5.4) |
(6.3) |
(6.2) |
(6.9) |
(7.3) |
(7.3) |
|||
Acquisitions/disposals |
(3.5) |
(1.7) |
(4.1) |
(0.4) |
(5.5) |
(4.2) |
(13.4) |
(20.0) |
(0.5) |
(7.5) |
|||
Financing |
44.8 |
0 |
0 |
0 |
0 |
1.7 |
0 |
0 |
0 |
0 |
|||
Dividends |
0.0 |
0.0 |
(3.0) |
(5.1) |
(7.5) |
(13.4) |
(8.9) |
(8.9) |
(9.1) |
(9.5) |
|||
Net Cash Flow |
41.5 |
6.7 |
12.4 |
14.0 |
0.4 |
(8.0) |
(7.0) |
(16.0) |
4.2 |
2.9 |
|||
Opening net debt/(cash) |
|
|
41.2 |
(0.3) |
(6.1) |
(18.4) |
(32.4) |
(32.9) |
(25.2) |
(16.4) |
1.3 |
(1.3) |
|
Finance lease - cash |
(0.2) |
(0.3) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(1.8) |
(1.6) |
(1.6) |
(1.6) |
|||
Other |
0.2 |
(0.6) |
0.2 |
0 |
0.2 |
0 |
0 |
(0) |
(0) |
(0) |
|||
Closing net debt/(cash) |
|
|
(0.3) |
(6.1) |
(18.4) |
(32.4) |
(32.9) |
(25.2) |
(16.4) |
1.3 |
(1.3) |
(2.5) |
|
IFRS16 leases |
11.4 |
10.6 |
10.6 |
10.6 |
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Source: Company accounts, Edison Investment Research
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Research: Consumer
PPHE’s FY20 results demonstrate how well management has managed operating costs and cash in what is described as ‘the most testing year’. Management enters FY21 with a confident message on liquidity and its commitment to medium-term development plans. The success of vaccination roll-outs produces a more favourable outlook than for some time. Management points to an ‘encouraging early uplift’ in demand in the UK following the new timetable for easing restrictions and early signs of potential recovery in business-related custom later in the year. The shares continue to trade at a large discount, c 36% to the new and updated EPRA NRV of 2,208p/share.