Last close As at 05/08/2026
GBP0.37
▲ −0.30 (−0.80%)
Market capitalisation
GBP111m
Research: Industrials
FY23 results highlight that we believe revenue quality remains materially underappreciated by the market (see our June update note), especially now the UK and EU are embarking on huge investment programmes to renew and upgrade infrastructure. In our view, the outlook in the UK, continental Europe, especially post recent M&A, and India is not fully reflected in the FY24e P/E rating of c 7.5x, which is comfortably below the long-term average of 10.0x. Our positive stance is supported by the company’s strong balance sheet, progressive dividend and yield over 5%.
Severfield |
FY23 results highlight progress and strength |
Post preliminary comment |
Construction and materials |
16 June 2023 |
Share price performance
Business description
Next events
Analyst
Severfield is a research client of Edison Investment Research Limited |
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FY23 results highlight that we believe revenue quality remains materially underappreciated by the market (see our June update note), especially now the UK and EU are embarking on huge investment programmes to renew and upgrade infrastructure. In our view, the outlook in the UK, continental Europe, especially post recent M&A, and India is not fully reflected in the FY24e P/E rating of c 7.5x, which is comfortably below the long-term average of 10.0x. Our positive stance is supported by the company’s strong balance sheet, progressive dividend and yield over 5%.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/22 |
403.6 |
27.1 |
7.2 |
3.1 |
9.9 |
4.4 |
03/23 |
491.8 |
32.5 |
8.4 |
3.4 |
8.5 |
4.8 |
03/24e |
566.5 |
35.2 |
8.9 |
3.6 |
8.0 |
5.1 |
03/25e |
589.2 |
37.5 |
9.5 |
3.8 |
7.5 |
5.3 |
Note: *PBT and EPS (diluted) are underlying, on a company basis.
FY profits exceed expectations and offer upside
Although FY23 revenue of £491.8m, up 21.9%, was in line with our expectations, underlying operating profit, including joint ventures (JVs) and associates, materially exceeded our forecast of £33.0m, coming in at £35m, up 23.9%, suggesting management’s action to offset inflationary pressures has been effective. Underlying operating margins, ex JVs and associates, were maintained at 6.7%. The Indian JV performed well, generating revenue of £137.7m and an EBITDA of £11.0m. Severfield’s 50% share of post-tax profit increased 73% to £1.3m. Group underlying diluted EPS was up 16.7% to 8.4p and the company declared a 3.4p total dividend, up 10%. Net debt reversed from £18.4m to net cash of £2.7m, boosted by a £4m working capital unwind and a £10m forward payment from a client.
Market undervalues the quality of the income stream
We argued in our recent note that we believe the quality of Severfield’s revenue streams are underappreciated as the total value of infrastructure in the UK increases every year and continues to age. For the foreseeable future, government investment in infrastructure, in both the UK and the EU, is likely to be underpinned by investment plans to renew and to decarbonise. We believe Severfield’s new divisional structure and Project Horizon should allow it to address these plans and continue to take market share in the UK, EU and India.
Valuation: P/E of 7.5x well below LT average of 10.0x
The total UK and Europe order book stood at a record £510m in March 2023 (£464m in November) with a solid pipeline behind it. In India, the JV order book stood at £139m (£143m in November), again with a good tailwind of prospects. Therefore, we would argue that the outlook for Severfield remains very encouraging. Furthermore, it has managed inflationary pressures well and these are now abating. Although we have made no material changes to forecasts, we believe the risks are to the upside. The company is trading on an FY24e P/E of 7.5x, which compares favourably with the long-term average ratio of 10x. The yield of over 5% is an added attraction.
Exhibit 1: Financial summary
£m |
2021 |
2022 |
2023 |
2024e |
2025e |
2026e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||
Revenue |
|
|
363.3 |
403.6 |
491.8 |
566.5 |
589.2 |
612.7 |
EBITDA |
|
|
29.6 |
33.4 |
40.4 |
45.0 |
47.5 |
50.2 |
Normalised operating profit |
|
|
25.1 |
28.2 |
35.0 |
38.2 |
40.5 |
43.2 |
Operating profit (U/L, Company basis, inc JVs) |
25.1 |
28.2 |
35.0 |
38.2 |
40.5 |
43.2 |
||
Amortisation of acquired intangibles |
(2.8) |
(5.2) |
(3.3) |
(5.2) |
(3.3) |
(5.2) |
||
Exceptionals |
(0.4) |
(0.7) |
(2.0) |
0.0 |
0.0 |
0.0 |
||
Share-based payments |
0.6 |
1.0 |
3.4 |
1.0 |
1.0 |
1.0 |
||
Other |
0.4 |
0.4 |
0.6 |
0.4 |
0.4 |
0.4 |
||
Reported operating profit |
22.9 |
23.8 |
33.6 |
34.4 |
38.5 |
39.4 |
||
Net Interest |
(0.8) |
(1.1) |
(2.5) |
(3.0) |
(3.0) |
(3.0) |
||
Exceptionals |
(0.4) |
(0.7) |
(0.6) |
(0.4) |
(0.4) |
(0.4) |
||
Profit Before Tax (norm) |
|
|
24.3 |
27.1 |
32.5 |
35.2 |
37.5 |
40.2 |
Profit before tax (U/L, Company basis) |
|
24.3 |
27.1 |
32.5 |
35.2 |
37.5 |
40.2 |
|
Profit Before Tax (reported) |
|
|
21.1 |
21.0 |
27.1 |
30.0 |
32.3 |
35.0 |
Reported tax |
(3.8) |
(5.4) |
(5.5) |
(7.5) |
(8.1) |
(8.7) |
||
Profit After Tax (norm) |
20.5 |
21.7 |
26.9 |
27.7 |
29.4 |
31.4 |
||
Profit After Tax (reported) |
17.3 |
15.6 |
21.6 |
22.5 |
24.2 |
26.2 |
||
Net income (normalised) |
20.5 |
21.7 |
26.9 |
27.7 |
29.4 |
31.4 |
||
Net income (reported) |
17.3 |
15.6 |
21.6 |
22.5 |
24.2 |
26.2 |
||
Basic average number of shares outstanding (m) |
307 |
309 |
310 |
310 |
310 |
310 |
||
EPS - basic reported (p) |
|
|
5.63 |
5.05 |
6.97 |
7.27 |
7.82 |
8.47 |
EPS - basic normalised (p) |
|
|
6.68 |
7.03 |
8.71 |
8.95 |
9.50 |
10.15 |
EPS - diluted normalised (p) |
|
|
6.68 |
7.00 |
8.61 |
8.92 |
9.46 |
10.11 |
EPS - (U/L, diluted, Company basis) (p) |
|
|
6.43 |
7.19 |
8.395 |
8.92 |
9.46 |
10.11 |
Dividend (p) |
2.90 |
3.10 |
3.40 |
3.60 |
3.80 |
4.80 |
||
Revenue growth (%) |
11.0 |
11.1 |
21.9 |
15.2 |
4.0 |
4.0 |
||
EBITDA Margin (%) |
8.1 |
8.3 |
8.2 |
7.9 |
8.1 |
8.2 |
||
Normalised Operating Margin |
6.9 |
7.0 |
7.1 |
6.7 |
6.9 |
7.0 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
230.1 |
230.1 |
228.4 |
255.1 |
259.0 |
263.9 |
Intangible Assets |
95.4 |
92.5 |
89.3 |
89.5 |
89.7 |
89.9 |
||
Tangible Assets |
91.7 |
91.4 |
92.1 |
118.9 |
121.9 |
124.9 |
||
Investments & other |
43.0 |
46.1 |
47.0 |
46.7 |
47.4 |
49.1 |
||
Current Assets |
|
|
107.7 |
140.7 |
136.6 |
194.9 |
202.2 |
209.7 |
Stocks |
10.2 |
18.0 |
13.2 |
17.0 |
17.7 |
18.4 |
||
Debtors |
67.8 |
117.9 |
109.7 |
164.3 |
170.9 |
177.7 |
||
Cash & cash equivalents |
25.0 |
0.0 |
11.3 |
11.3 |
11.3 |
11.3 |
||
Other |
4.6 |
4.8 |
2.3 |
2.3 |
2.3 |
2.3 |
||
Current Liabilities |
|
|
(85.4) |
(123.3) |
(109.0) |
(150.2) |
(157.7) |
(163.8) |
Creditors |
(77.8) |
(111.7) |
(102.7) |
(143.9) |
(151.4) |
(157.5) |
||
Tax and social security |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Short term borrowings |
(5.9) |
(5.9) |
(4.2) |
(4.2) |
(4.2) |
(4.2) |
||
Other |
(1.7) |
(5.7) |
(2.2) |
(2.2) |
(2.2) |
(2.2) |
||
Long Term Liabilities |
|
|
(61.4) |
(43.5) |
(38.3) |
(69.1) |
(58.7) |
(49.5) |
Long term borrowings |
(14.9) |
(9.0) |
(4.8) |
(37.6) |
(29.2) |
(22.1) |
||
Other long term liabilities |
(46.5) |
(34.5) |
(33.5) |
(31.5) |
(29.5) |
(27.5) |
||
Shareholders' equity |
|
|
190.9 |
204.0 |
217.7 |
230.8 |
244.8 |
260.3 |
CASH FLOW |
||||||||
Op Cash Flow before WC and tax |
34.0 |
40.5 |
45.6 |
51.5 |
54.0 |
56.7 |
||
Working capital |
(0.2) |
(34.5) |
13.8 |
(17.1) |
0.3 |
(1.5) |
||
Exceptional & other |
(3.5) |
(5.4) |
(4.8) |
(4.8) |
(4.8) |
(4.8) |
||
Tax |
(4.6) |
(3.8) |
(3.5) |
(9.3) |
(10.1) |
(10.7) |
||
Other |
(0.2) |
(2.4) |
(0.8) |
(4.3) |
(5.1) |
(6.1) |
||
Net operating cash flow |
|
|
25.3 |
(5.7) |
50.3 |
16.0 |
34.2 |
33.6 |
Capex |
(6.5) |
(5.0) |
(6.2) |
(11.2) |
(8.7) |
(8.7) |
||
Acquisitions/disposals |
(19.9) |
(0.5) |
(8.5) |
(22.6) |
(1.5) |
(1.5) |
||
Net interest |
(0.7) |
(1.1) |
(2.5) |
(3.0) |
(3.0) |
(3.0) |
||
Equity financing |
0.4 |
0.9 |
0.0 |
1.0 |
1.0 |
1.0 |
||
Dividends |
(8.9) |
(9.2) |
(9.9) |
(10.5) |
(11.1) |
(11.8) |
||
Other |
(1.8) |
(2.2) |
(2.1) |
(2.5) |
(2.5) |
(2.5) |
||
Net Cash Flow |
(12.0) |
(22.8) |
21.1 |
(32.8) |
8.4 |
7.1 |
||
Opening net debt/(cash) |
|
|
(16.4) |
(4.4) |
18.4 |
(2.7) |
30.1 |
21.7 |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(4.4) |
18.4 |
(2.7) |
30.1 |
21.7 |
14.6 |
Source: Company accounts, Edison Investment Research
|
|
Research: Healthcare
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