“Edison’s accessible and high-quality research gives us the opportunity to communicate an independent perspective of Tyman to a wide variety of potential stakeholders.”
Currency in CAD
Last close As at 26/05/2023
CAD60.36
▲ −0.75 (−1.23%)
Market capitalisation
CAD27,333m
Research: Metals & Mining
FY17 has seen a strong close and we have increased FY17 and FY18 estimates as a result. Margin improvement has been a key focus, but this successful trading period shows through in a broader number of areas. Severfield’s full year results are scheduled for 14 June; order book progression and revenue run rates at that time will inform FY18 prospects more fully.
Written by
Toby Thorrington
Severfield |
Better revenue, margin and cash progress |
FY17 year-end update |
Construction & materials |
29 March 2017 |
Share price performance
Business description
Next events
Analysts
Severfield is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
FY17 has seen a strong close and we have increased FY17 and FY18 estimates as a result. Margin improvement has been a key focus, but this successful trading period shows through in a broader number of areas. Severfield’s full year results are scheduled for 14 June; order book progression and revenue run rates at that time will inform FY18 prospects more fully.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/15 |
201.5 |
8.8 |
2.5 |
0.5 |
32.3 |
0.6 |
03/16 |
239.4 |
13.7 |
3.8 |
1.5 |
21.2 |
1.9 |
03/17e |
263.2 |
20.1 |
5.6 |
2.0 |
14.4 |
2.5 |
03/18e |
263.2 |
21.4 |
6.0 |
2.2 |
13.4 |
2.7 |
Note: *PBT and EPS are normalised, excluding pension net finance costs, intangible amortisation and exceptional items.
Strong revenue growth in H2, margins also improve
Severfield’s UK order book began to pick up at the beginning of 2016 (from c £185m in November 2015 to £315m a year later) and this has progressively fed into its FY17 trading performance. H117 revenue was comparable y-o-y, but a marked EBIT margin improvement was the standout feature of results for the first half. We had factored in a good sales uptick in H2 and it appears that the run rate has exceeded our expectations with y-o-y progress approaching 20%. Importantly, this has not come at the expense of margin, which looks to be at or around 8% in H2 (and 7.5% for the year, +180bp). Additionally, good cash collection and receipt of advance payments give our new estimated year-end cash position of c £30m (vs c £19m at the end of FY16). Taken together, this provides persuasive evidence that the enhanced commercial procedures across project lifecycles introduced a few years ago have been rigorously applied. Elsewhere, the Indian JV trading performance has been stable, as has the local order book (at £40m).
Estimates raised for FY17 and FY18
We have raised our FY17 and FY18 PBT estimates by c 9% and c 5% respectively with increased revenue and margin expectations in both years. FY17 UK revenue throughput – especially on larger projects – has brought the year-end order book back down to £267m; we would like to see how the pipeline converts to new work over the next quarter before taking a stronger view on FY18 prospects. Also, at this stage, we have left our dividend expectations unchanged; firming earnings estimates and good cash performance could support an enhanced payout in due course. Lastly, Alan Dunsmore (group FD for seven years) will assume the duties of Severfield’s CEO during his period of temporary absence through illness and John Dodds (chairman since 2011) will act as executive chairman on an interim basis.
Valuation: Driving outperformance
Severfield’s share price has now outperformed the FTSE All-Share Index over 12 months, 2017 to date and one-month periods. We believe the company is still on track to double FY16 PBT by FY20 (implicitly, PBT c £26m) and the closing year P/E of 14.4x and EV/EBITDA of 8.2x compress meaningfully on this basis.
Exhibit 1: Financial summary
£m |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
2019e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
12m to Dec |
12m to Dec |
12m to Dec |
15m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
12m to Mar |
|||
PROFIT & LOSS |
||||||||||||
Revenue |
|
|
266.7 |
267.8 |
256.6 |
318.3 |
231.3 |
201.5 |
239.4 |
263.2 |
263.2 |
267.8 |
Cost of Sales |
(242.6) |
(246.9) |
(268.8) |
(330.9) |
(217.8) |
(186.7) |
(219.6) |
(237.1) |
(235.7) |
(238.0) |
||
Gross Profit |
24.1 |
20.9 |
(12.2) |
(12.7) |
13.5 |
14.9 |
19.8 |
26.0 |
27.5 |
29.7 |
||
EBITDA |
|
|
21.6 |
19.5 |
(13.6) |
(13.6) |
12.0 |
13.6 |
18.9 |
25.7 |
27.2 |
29.5 |
Operating Profit - Edison |
|
|
17.1 |
15.0 |
(17.7) |
(18.6) |
8.4 |
10.0 |
15.2 |
21.8 |
23.0 |
25.0 |
Net Interest |
(0.9) |
(1.6) |
(1.6) |
(2.0) |
(0.6) |
(0.5) |
(0.2) |
(0.1) |
(0.1) |
0.0 |
||
Associates |
(0.4) |
(2.5) |
0.2 |
(0.3) |
(3.0) |
(0.2) |
(0.2) |
0.0 |
0.0 |
0.0 |
||
SBP |
(0.0) |
(0.3) |
(0.0) |
(0.1) |
(0.2) |
(0.5) |
(1.1) |
(1.5) |
(1.5) |
(1.5) |
||
Intangible Amortisation |
(2.7) |
(2.7) |
(2.7) |
(3.5) |
(2.7) |
(2.6) |
(2.6) |
(2.6) |
(1.7) |
0.0 |
||
Pension Net Finance Costs |
(0.5) |
(0.5) |
(0.5) |
(0.6) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
||
Exceptionals |
(1.4) |
(0.6) |
(1.0) |
(3.8) |
(5.3) |
(5.9) |
(0.9) |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) - Edison |
|
15.8 |
10.6 |
(19.1) |
(20.9) |
4.5 |
8.8 |
13.7 |
20.1 |
21.4 |
23.5 |
|
Profit Before Tax (norm) |
|
|
15.3 |
10.1 |
(19.6) |
(21.5) |
4.0 |
8.3 |
13.2 |
19.6 |
20.9 |
23.0 |
Profit Before Tax (FRS 3) |
|
|
11.1 |
6.8 |
(23.3) |
(28.9) |
(4.1) |
(0.2) |
9.6 |
17.0 |
19.2 |
23.0 |
Tax |
(3.5) |
(0.9) |
3.9 |
5.7 |
1.4 |
0.3 |
(1.0) |
(3.2) |
(3.5) |
(3.8) |
||
Profit After Tax (norm) |
11.7 |
7.7 |
(16.2) |
(17.9) |
3.1 |
7.4 |
11.4 |
16.8 |
17.9 |
19.7 |
||
Profit After Tax (FRS 3) |
7.6 |
5.8 |
(19.4) |
(23.1) |
(2.6) |
0.1 |
8.6 |
13.8 |
15.7 |
19.2 |
||
Average Number of Shares Outstanding (m) |
89.0 |
89.3 |
89.3 |
89.3 |
295.8 |
297.5 |
297.5 |
298.5 |
298.5 |
298.5 |
||
EPS - normalised (p) - Edison |
|
|
6.82 |
4.51 |
(9.42) |
(10.42) |
1.05 |
2.47 |
3.84 |
5.64 |
6.01 |
6.59 |
EPS - normalised (p) |
|
|
6.51 |
4.21 |
(9.72) |
(9.45) |
0.88 |
2.31 |
3.67 |
5.47 |
5.84 |
6.42 |
EPS - FRS 3 (p) |
|
|
4.47 |
3.41 |
(11.33) |
(13.49) |
(0.89) |
0.05 |
2.89 |
4.64 |
5.26 |
6.42 |
Dividend per share (p) |
7.5 |
5.0 |
1.5 |
0.8 |
0.0 |
0.5 |
1.5 |
2.0 |
2.2 |
2.4 |
||
Gross Margin (%) |
9.0 |
7.8 |
-4.8 |
-4.0 |
5.8 |
7.4 |
8.3 |
9.9 |
10.4 |
11.1 |
||
EBITDA Margin (%) |
8.1 |
7.3 |
-5.3 |
-4.3 |
5.2 |
6.7 |
7.9 |
9.8 |
10.3 |
11.0 |
||
Operating Margin - Edison (%) |
6.4 |
5.6 |
-6.9 |
-5.8 |
3.6 |
4.9 |
6.4 |
8.3 |
8.8 |
9.4 |
||
BALANCE SHEET |
||||||||||||
Fixed Assets |
|
|
165.0 |
156.9 |
155.6 |
154.9 |
147.7 |
145.1 |
149.3 |
149.0 |
148.6 |
149.6 |
Intangible Assets |
75.2 |
72.9 |
70.4 |
69.8 |
64.6 |
61.8 |
59.2 |
56.4 |
54.7 |
54.7 |
||
Tangible Assets |
82.9 |
79.6 |
76.2 |
76.1 |
74.1 |
76.6 |
77.4 |
79.3 |
80.1 |
80.7 |
||
Investments |
6.9 |
4.4 |
8.9 |
8.9 |
9.0 |
6.7 |
12.7 |
13.2 |
13.7 |
14.2 |
||
Current Assets |
|
|
88.1 |
100.5 |
69.8 |
80.5 |
72.2 |
76.3 |
75.1 |
92.4 |
104.4 |
118.2 |
Stocks |
12.6 |
9.1 |
7.1 |
8.2 |
5.8 |
4.8 |
5.3 |
5.7 |
5.7 |
5.7 |
||
Debtors |
71.9 |
89.2 |
61.2 |
71.6 |
60.8 |
64.6 |
50.7 |
55.2 |
56.0 |
57.6 |
||
Cash |
3.6 |
2.3 |
1.4 |
0.7 |
5.5 |
6.9 |
19.0 |
31.5 |
42.7 |
54.9 |
||
Current Liabilities |
|
|
(99.8) |
(103.6) |
(97.0) |
(112.5) |
(57.9) |
(59.7) |
(58.2) |
(66.9) |
(67.4) |
(68.3) |
Creditors |
(81.2) |
(70.3) |
(66.1) |
(70.9) |
(52.7) |
(59.5) |
(58.1) |
(66.8) |
(67.2) |
(68.1) |
||
Short term borrowings |
(18.6) |
(33.3) |
(30.9) |
(41.7) |
(5.2) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
||
Long Term Liabilities |
|
|
(22.3) |
(21.6) |
(21.7) |
(20.4) |
(18.5) |
(21.1) |
(17.9) |
(23.4) |
(23.4) |
(23.4) |
Long term borrowings |
0.0 |
(0.3) |
(0.3) |
(0.2) |
(0.0) |
(0.6) |
(0.4) |
(0.3) |
(0.3) |
(0.3) |
||
Other long term liabilities |
(22.3) |
(21.3) |
(21.4) |
(20.2) |
(18.5) |
(20.5) |
(17.5) |
(23.1) |
(23.1) |
(23.1) |
||
Net Assets |
|
|
130.9 |
132.3 |
106.6 |
102.4 |
143.4 |
140.6 |
148.2 |
151.1 |
162.2 |
176.1 |
CASH FLOW |
||||||||||||
Operating Cash Flow |
|
|
(5.8) |
(5.4) |
12.9 |
3.1 |
2.1 |
11.4 |
24.8 |
26.0 |
26.1 |
27.9 |
Net Interest |
(0.8) |
(2.0) |
(1.3) |
(1.7) |
(0.8) |
(0.8) |
(0.2) |
(0.1) |
(0.1) |
0.0 |
||
Tax |
(5.4) |
(3.7) |
(2.7) |
(2.3) |
0.4 |
(1.0) |
(0.9) |
(1.9) |
(3.2) |
(3.5) |
||
Capex |
(2.8) |
(1.5) |
(0.2) |
(1.4) |
(1.5) |
(1.3) |
(4.3) |
(5.8) |
(5.0) |
(5.0) |
||
Acquisitions/disposals |
(2.9) |
(0) |
(2) |
(3.0) |
(3.5) |
(1.7) |
(4.1) |
(0.5) |
(0.5) |
(0.5) |
||
Financing |
0 |
0 |
0 |
0.0 |
44.8 |
0 |
0 |
0 |
0 |
0 |
||
Dividends |
(8.9) |
(3.6) |
(4.5) |
(4.5) |
0.0 |
0.0 |
(3.0) |
(5.1) |
(6.1) |
(6.7) |
||
Net Cash Flow |
(26.6) |
(16.3) |
1.7 |
(9.7) |
41.5 |
6.7 |
12.4 |
12.6 |
11.2 |
12.2 |
||
Opening net debt/(cash) |
|
|
(11.5) |
15.0 |
31.3 |
31.3 |
41.2 |
(0.3) |
(6.1) |
(18.4) |
(31.0) |
(42.2) |
HP finance leases initiated |
0 |
0.0 |
0.1 |
0.0 |
(0.2) |
(0.3) |
(0.2) |
(0.1) |
0.0 |
0.0 |
||
Other |
0 |
(0) |
(0) |
(0) |
0.2 |
(0.6) |
0.2 |
0 |
0 |
(0) |
||
Closing net debt/(cash) |
|
|
15.0 |
31.3 |
29.7 |
41.2 |
(0.3) |
(6.1) |
(18.4) |
(31.0) |
(42.2) |
(54.4) |
Source: Company accounts, Edison Investment Research
|
|
FY17 has seen a strong close and we have increased FY17 and FY18 estimates as a result. Margin improvement has been a key focus, but this successful trading period shows through in a broader number of areas. Severfield’s full year results are scheduled for 14 June; order book progression and revenue run rates at that time will inform FY18 prospects more fully.
Get access to the very latest content matched to your personal investment style.
