Severfield — Momentum to be informed by order intake

Severfield (LSE: SFR)

Last close As at 19/07/2024

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Research: Industrials

Severfield — Momentum to be informed by order intake

A strong second-half performance in the UK (plus an acquisition) and good progress in India (including capacity expansion) were the FY20 trading highlights, although near-term COVID-19 sentiment is overshadowing these achievements. A decision on the FY20 final dividend is pending; we have assumed one is not declared and our estimates remain suspended. Severfield’s liquidity and order book positions suggest the company is well placed to service current business levels and compete for new work as opportunities arise.

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Industrials

Severfield

Momentum to be informed by order intake

FY20 results

Construction & materials

13 July 2020

Price

59.26p

Market cap

£182m

Net cash (£m) at end March 2020

16.4

Shares in issue

305.9m

Free float

100%

Code

SFR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(14.4)

(13.2)

(13.1)

Rel (local)

(11.3)

(17.0)

5.5

52-week high/low

93.0p

59.0p

Business description

Severfield is a leading UK structural steelwork fabricator operating across a broad range of market sectors. An Indian facility undertakes structural steelwork projects for the local market and was expanded in FY20.

Next events

AGM

September (tbc)

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Severfield is a research client of Edison Investment Research Limited

A strong second-half performance in the UK (plus an acquisition) and good progress in India (including capacity expansion) were the FY20 trading highlights, although near-term COVID-19 sentiment is overshadowing these achievements. A decision on the FY20 final dividend is pending; we have assumed one is not declared and our estimates remain suspended. Severfield’s liquidity and order book positions suggest the company is well placed to service current business levels and compete for new work as opportunities arise.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS**
(p)

P/E
(x)

Yield**
(%)

03/18**

274.2

24.1

6.5

4.3

9.1

7.3

03/19

274.9

25.1

6.8

2.8

8.7

4.7

03/20

327.4

29.1

7.9

1.1

7.5

1.9

Note: *PBT and EPS are Edison normalised, excluding pension net finance costs, intangible amortisation and exceptional items. **FY18 DPS included a 1.7p special dividend.

UK and India performed well in FY20

Company-reported FY20 underlying PBT was £1.0m better than we had anticipated at £28.6m (up almost £4m y-o-y). This comfortably exceeded management’s strategic £26m PBT target, double the level when it was set in 2016. UK activity was particularly strong in H2, although the EBIT margin was slightly softer overall year-on-year. The newly acquired Harry Peers contribution was as expected. The Indian JV profit contribution was as anticipated and a good step up from the prior year including a 210bp EBIT margin improvement to 8.5%. Capacity was also successfully increased during the year. Year-end pre-IFRS 16 net cash was better than we had previously anticipated at £16m; a lower initial Harry Peers net cash cost was the primary variance but with slightly better operating cash flow and lower than expected capex also contributing. The FY20 final dividend payment decision has been deferred pending greater visibility on industry impacts of COVID-19.

FY21: UK largely operational, locked down in India

FY20 results were unaffected by COVID-19; the UK appears to have come through initial Q1 disruption although India is being affected to a greater extent. Respective order books have naturally declined with higher activity/lower order intake since November but UK forward visibility and Indian JV project mix are both positive features. In the current environment, strong financial liquidity (ie net cash, a £25m RCF substantially drawn down plus a further £20m accordion facility) are noted by prospective clients; management notes that tendering and pipeline activity remains encouraging but some investment decisions are being delayed by clients.

Valuation: Tracking order intake

Ahead of reinstating estimates, we note that Severfield’s FY20 P/E and EV/EBITDA are now 7.5x and 4.9x respectively. Order book levels provide some forward visibility albeit with some challenges to operational efficiency. The rate at which new business is won and on what terms will determine the best outcome for FY21 and momentum going into FY22.

FY20 results overview

Delivering PBT in excess of the FY16 strategic target with strong operating performance in the second half was the major achievement of FY20. The acquisition of Harry Peers further diversified Severfield’s sector exposure and reduced the year-end pre-IFRS 16 net cash position to c £16m. With FY21 trading to date seeing the impact of COVID-19 restrictions, we have assumed no final dividend will be declared, although the board has yet to announce whether this is the case.

UK: Strong H220 performance

Exhibit 1 shows the reported P&L development for the company over the last four half-year periods. As the Indian JV (and CMF associate) earnings are equity accounted, the figures shown represent the performance of UK-based operations.

Exhibit 1: Severfield interim splits

Year-end March, £m

H119

H219

2019

H120

H220

2020

% change y-o-y

H120

H220

2020

Revenue

149.1

130.2

274.9

131.7

196.5

327.4

-11.7%

+51.0%

+19.1%

Operating profit – reported

12.5

10.8

23.3

7.0

20.0

27.0

-43.9%

+85.4%

+16.0%

Op margin

8.4%

8.3%

8.5%

5.3%

10.2%

8.2%

-310bp

+190bp

-30bp

Operating profit – adjusted*

12.8

12.6

25.4

8.0

21.2

29.3

-37.2%

+68.4%

+15.3%

Op margin*

8.6%

9.7%

9.2%

6.1%

10.8%

8.9%

-250bp

+110bp

-30bp

Order book**

230

295

323

293

40.4%

-0.7%

Source: Severfield, Edison Investment Research. Note: *We adjust reported operating profit for share-based payments and estimated pension net finance costs. IFRS 16 added £0.4m to reported operating profit in FY20. Neither profit line includes any contribution from JV/associates. **UK and Europe, at date of reporting results, including c £20m for Harry Peers (acquired 1 October).

Early in the FY20 trading year, management flagged a significant expected H2 bias based on the likely progression and phasing of project contracts in the order book. In the event, the underlying H1:H2 splits of revenue and reported operating profit were 42:58 and 27:73 respectively. The half-year contribution from Harry Peers amplified this effect slightly (to 40:60 and 26:74) in reported terms.

While the full-year adjusted EBIT margin was 30bp below the FY19 level – and remained within the company’s 8–10% target range – the profit contribution generated and margins earned in H2 were noteworthy. We believe that pre-acquisition H2 revenue and EBIT margin were the highest in any six-month reporting period for more than 10 years. Project mix and stage of completion/profit recognition effects make it difficult to assess a drop-through/gross contribution margin by looking at the delta between H2 and H1. We feel the proportion of later-stage work/completed projects was certainly above average in the second half of the year. That said, the cumulative effect of a number of contributing factors will also have had a bearing on this outturn, including:

Volume – the tonnage of fabricated and erected steelwork was likely to have been significantly higher in H2.

Sustained operational improvements including:

Fab efficiency via capex, flow management (using StruMIS production control software).

Enhanced contract management tools with improved oversight of project progress from inception to completion.

Consolidation of activity at the main Dalton site.

Severfield (Products & Processing) – a relatively new service based at the Sherburn facility providing steelwork packages to smaller contracts starting to generate revenues and reduce cost drag.

We have covered active projects in previous notes and FY20’s results commentary also names some of the work undertaken in the year, so we will not repeat it here. Our key observation is that sector breadth remains an important business characteristic with commercial offices (London and regional), data centres, distribution centres, industrial facilities, bridges and sport stadiums all featured on the project list in the year. Several projects were also undertaken outside the UK chiefly in the Republic of Ireland with one in each of Finland and Sweden also. At the time of reporting FY20 results, all UK and European project sites were said to be open.

Harry Peers was acquired on 1 October and made a full six-month contribution to second-half trading, including £14.4m revenue and EBIT of £1.3m (both c 7% of H2 revenue and EBIT). The company’s position in the nuclear sector added further sector diversity to Severfield and we understand that Peers has achieved a higher level accreditation since being acquired. Its other industrial sector specialism is process industries (including petrochemicals, pharmaceuticals, waste to energy plants) with particular strengths in modular pipe racks and building structures. Severfield management has made positive noises about the internal capabilities and external customer relationships since owning the business. Although Peers primarily operates in different market segments, order selectivity (assessing scope to grow) and potential referrals of higher volume packages of related work are two group benefits that have already been identified. Peers brought in an order book of £20m and it stood at £17m eight months after completion. Given positions on frameworks at Sellafield, a degree of order book stability should be expected.

Order book: unsurprisingly with a significant spike in revenue in H2, Severfield’s total UK/Europe orders on hand reduced to £293m at the year-end (from £323m at the beginning of November). We believe the geographic mix at this time was similar to November, being just over half on UK projects, just under half in Europe/Eire. The latest order book reading was £271m at 1 June; the industrial/distribution sector combined accounted for 45% of this value (probably more weighted towards distribution), while commercial offices were 24%, data centres/other a further 15%, with a tail of other sectors/projects. (Noting that two months of the FY21 trading year have already passed, £243m of orders on hand are for delivery within the next 12 months.)

The last time the order book was around this level in June/August 2016 it was followed by similar FY18 revenue of c £270m. To be strictly accurate, FY18 also included work on Bishopsgate 22, a significant project that did not come into the order book until November 2016. While this was a major project, it serves to demonstrate that a simple order book value does not provide the complete picture. More typically, some work is shorter cycle and may contribute to revenue without having been part of an initial order book position at a point in time. Of course, we are not in normal times and pipeline dynamics (eg rates of new project development, tender conversion rates and decisions to proceed) are being stress-tested now under what is likely to be a recessionary outlook, or at least not as strong on a two-year view as one might have expected at the beginning of calendar year 2020.

As pointed out earlier, sector diversity is a Severfield strength, although it would be reasonable to expect relatively busier ones to attract competition if volumes shrink in other areas. Scale, sector portfolio/track record and main contractor relationships are all inhibitors to perfect substitution of switching supply across sectors. The smaller volume end of the market with the widest number of potential suppliers is traditionally where price competition becomes most visible. That said, capacity utilisation at larger fabricators can influence pricing on larger-scale projects. Before allowing for relative raw materials purchasing power, tighter pricing usually means tighter margins and/or reduced contingency with greater onus on execution. The appetite for – and pricing of – risk are key drivers of market dynamics in lower-volume trading environments. Access to near European markets provides Severfield with additional opportunities to diversify its project selectivity over and above prospective UK-based work.

India: Good progress on all fronts in FY20

A step forward in profit generated, a rising proportion of commercial sector work and the completion of an extension to the Bellary facility were all good milestones for JSSL (Severfield’s JV with JSW Steel) in FY20. That said, we are unlikely to see the full benefit of additional capacity during FY21 given a more pronounced COVID-19 lockdown effect on the local construction industry.

Exhibit 2: Severfield Indian JV (JSSL, partnered with JSW Steel) financial progress

Year end March, £m

H1

H2

2019

H1

H2

2020

H1

H2

FY

Revenue

31.8

52.3

84.1

56.3

53.0

109.3

77%

1%

30%

Operating profit

2.2

3.2

5.4

4.8

4.5

9.3

118%

40%

72%

Margin %

6.9%

6.2%

6.4%

8.5%

8.5%

8.5%

Net interest

(1.1)

(1.1)

(2.2)

(1.3)

(1.6)

(2.9)

18%

49%

33%

PBT

1.1

2.1

3.2

3.5

2.9

6.4

218%

35%

97%

Tax

(0.3)

(0.6)

(0.9)

(0.9)

(1.0)

(1.9)

PAT

0.8

1.6

2.4

2.6

1.9

4.5

Share of PAT

0.4

0.8

1.2

1.3

0.9

2.2

228%

19%

90%

Source: Severfield

Financial performance: JSSL delivered a strong uplift in revenue and profitability in FY20 including an EBIT margin slightly ahead of that generated in the UK. Average exchange rates were broadly the same so this performance reflected sustained increased volumes over the year and an improved business mix. Improving the proportion of commercial work compared to lower-margin industrial work contributed to the margin uplift; while other factors come into play (such as contract phasing) we note that, on comparable revenues, the EBIT margin in H220 was 210bp above its prior-year equivalent level. We note also that JSSL achieved an 8.5% margin in both half years. Interest costs rose year-on-year in FY20 primarily due to increased borrowings for capacity expansion. The net result was a £1m uplift in Severfield’s share of post-tax profit to £2.2m (reported as part of the Share of results of JVs and associates in the group P&L, along with a smaller CMF contribution).

Trading performance: the initial COVID-19 lockdown phase began in India on 25 March, right at the end of Severfield’s financial year and therefore is unlikely to have had any material impact on FY20 trading performance. Looking at company presentation materials and the Indian order book development we note that:

Industrial sector work for JV partner JSW Steel has broadened out from its adjacent Vijaynagar facility in Bellary to its Dolvi facility, south of Mumbai.

Commercial projects are varied both by sub-sector and geographic location including healthcare (National Cancer Institute, Nagpur), office space (Phoenix Aquila and Centaurus, both in Hyderabad) and retail (IKEA Bengaluru).

Some of the above projects in both sectors are ongoing and form part of the current order book (see below). The value of Industrial orders peaked in June 2018 at £79m, running down steadily – implicitly with a book to bill ratio below 1x – to c £20m at the year end. This work has provided a good baseload for JSSL’s Bellary fab facility enhanced and now exceeded by successfully winning new business in Commercial.

Order book: over FY20, JV orders on hand declined from a record £149m initially to £112m at the year end. We estimate that c £5m of this reduction is attributable to the translation effects of relative sterling strength versus the rupee. Adjusting for this, with FY20 revenue of c £109m, the implied new business order intake for the year was approximately £75m. The mix development is of particular note for two reasons:

Compared to June 2018 when the order book was at a similar level, the split of Commercial:Industrial work by value has switched from 25:75 to 82:18 in June 2020.

While the order book has declined since November, the value of commercial work on hand is only marginally lower in local currency terms.

Apart from these key points, our other observation is that Hyderabad (Telangana state) appears to be an important focal point for major project work both for ongoing projects and those in the pipeline. In this regard, management has highlighted four non-industrial prospects in two sub-sectors being commercial offices (for two separate Indian conglomerates with construction and real estate interests) and data centres (so-called hyperscale facilities for two separate international clients, Colt and Amazon). As in the UK, we consider the diversity of clients in sectors of demonstrated expertise for the group to be a strong indicator of JSSL’s now established position in the Indian structural steel market.

JV capacity: as previously reported, JSSL successfully increased its annual Bellary fab capacity by 30,000 tonnes to 90,000 tonnes as FY20 concluded. The detail of this is included in our February note, which provides more background context for JSSL’s prospects. Near-term trading will clearly be heavily influenced by the rates at which COVID-19 effects recede and the Indian economy and corporate sector recover. The opportunities arising from an increasing penetration of steel structures compared to more traditional concrete construction methods in India remain undiminished in our view.

Acquisition reduces year-end net cash position

Severfield’s end-March pre-IFRS 16 net funds position was above our expectations at £16.4m – which included c £1m client advances, in line with the prior year – and represented a reduction of almost £9m y-o-y. This was the net result of good free cash inflow and deployment into the acquisition of Harry Peers and dividend payments. (Note that this is the group net debt position and does not consolidate any debt carried in the Indian JV.)

The company generated EBITDA (IAS 17 basis) of c £33m in FY20, an uplift of c £4m consistent with the EBIT progress described earlier. Although the relationship is not linear – and more dictated by the phasing of projects and contract payments – the c 14% organic increase in revenue saw an absorption of working capital (c £2m for the full year, driven by a c £4m H2 outflow). Inventories/work in progress was at the lower end of year-end levels seen historically but larger movements were seen in receivables outflows consistent with a busy H2 trading period and partly offset by increased payables. The year end coincided with the initial UK COVID-19 lockdown period, but this does not look to have had a material bearing on working capital in the balance sheet. Net working capital on hand at the year-end was 3% of revenues, in line with the prior year and below management’s typical 4–6% target. Non-trading cash outflow items totalled c £3m and included a c £1m pension cash contribution (similar to the prior year) and c £0.9m acquisition costs (relating to the Harry Peers deal). As a result of the above items, the trading cash inflow in FY20 was c £28m.

Cash interest and tax payments totalled £6.6m, up almost £3m y-o-y with increases in both line items reflecting acquisition-related debt on hand and higher levels of profitability respectively. Gross capex was at similar levels to the prior year and included both capability enhancement (eg in paint facilities in the Ballinamallard fab in Northern Ireland) as well as spend on more efficient replacement equipment. Net of modest disposal proceeds, capex in the year was just over £6m and FY20 free cash inflow was a healthy c £15m.

The Harry Peers acquisition had a headline initial consideration of £18.9m on a company cash-free/debt-free basis. In cash terms, this required a £13.4m payment in the year. In addition, Severfield assumes responsibility for delivering steelwork services for which Harry Peers had received c £5m early working capital payments, which may flow out as cash in future periods. Dividend payments of almost £9m were the other significant application of funds and IFRS 16 lease repayment cash approached £2m.

Cash flow outlook: Severfield did not make use of the UK government furlough scheme and there was no timing benefit from taxation payment deferrals either. At present, the decision regarding whether to declare an FY20 final dividend has been deferred until nearer the AGM, which was in early September last year. Otherwise, management has flagged a near-term capex expectation of c £4-5m focused on replacement items. We also note that a year-end balance sheet provision has been made for the Harry Peers deferred consideration payment (£6.7m discounted to £5.8m), which, subject to the acquisition terms, is scheduled for FY21. Of course the key driver behind future business cash flows is underlying profitability; since the initial UK COVID-19 lockdown at the end of March, we have elected to withdraw our estimates pending greater market clarity. Although more market data are beginning to emerge, this remains the case for now.

As lockdown measures ease, India lags UK

As far as the trading environment so far in FY21 goes, some temporary site closures were reported in the UK in the early part of Q121; at least half appear to have been operational throughout and by the time FY20 results were reported on 4 June all project sites were live again. We understand that new working practices in the light of COVID-19 guidelines are only having a minor impact on live workstreams with the impact being felt more at site access points and common rest areas. Our sense is that other trades perhaps may be more affected – which could affect overall project progress – although we are unable to validate this to date.

With regard to future orders and pipeline conversion, we feel it is reasonable to expect significant project delays in those sectors most obviously affected including airports and retail. Elsewhere, the changing financial picture for landlords, tenants and developers alike is likely at the very least to require careful consideration of future staff and space requirements and the associated economics leading to lengthier decision-making processes. The cost of finance remains at very low levels and some sectors look set to be more robust. These include infrastructure (eg road, rail bridges) and nuclear, while new stadium opportunities are also visible. Distribution and data centres could both be said to have been critical backbone sectors during the lockdown phase, although there was also good momentum beforehand.

A survey by the Construction Leadership Council – which has also been an all parties focal point for return to site protocols – found that a c 10% reduction in the construction workforce was anticipated by respondents at the beginning of June. Upstream project participants such as architects (eg BDP), consultants (WS Atkins) and contractors (Mace, Multiplex) have been making redundancy announcements. These recent anecdotal news items may not be directly relevant to Severfield’s pipeline but do provide evidence that the construction industry is preparing for lower overall activity levels.

India imposed lockdown restrictions in March around the same time as in the UK and began the first unlock phase on 8 June (with a second on 1 July) although containment-zone restrictions still apply where COVID-19 incidences exceed limits. Since the lockdown began, the Reserve Bank of India has reduced its repo rate twice and to 4.0% from 22 May. We understand that JSSL JV partner JSW Steel re-started production during April and reached 85% capacity utilisation in May driven by government-related demand. However, construction site activity is said to be effectively shut down. A report by KPMG,1 admittedly more focused on infrastructure, has flagged a likelihood of rising labour costs but also lower input costs in its May assessment of the outlook for construction in the country. The rate at which India emerges from the COVID-19 pandemic, and its impact on inbound investment in particular, will clearly be different to that in the UK.

  https://home.kpmg/content/dam/kpmg/in/pdf/2020/05/covid-19-assessment-economic-impact-construction-sector.pdf?r

Exhibit 3: Financial summary

£m

2014

2015

2016

2017

2018

2019

2020

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

231.3

201.5

239.4

262.2

274.2

274.9

327.4

Cost of Sales

(217.8)

(186.7)

(219.6)

(236.3)

(244.9)

(244.6)

(292.6)

Gross Profit

13.5

14.9

19.8

25.9

29.3

30.3

34.7

EBITDA

 

 

12.0

13.6

18.9

25.7

29.1

29.0

33.2

Operating Profit - Edison adjusted

 

8.4

10.0

15.2

22.1

25.4

25.3

29.3

SBP

(0.2)

(0.5)

(1.1)

(2.0)

(2.0)

(1.6)

(1.8)

Pension Net Finance Costs

(0.5)

(0.5)

(0.5)

(0.5)

(0.6)

(0.4)

(0.4)

Operating Profit - company norm

 

7.6

9.0

13.7

19.6

22.9

23.3

27.0

Net Interest

(0.6)

(0.5)

(0.2)

(0.2)

(0.2)

(0.2)

(0.7)

Associates

(3.0)

(0.2)

(0.2)

0.5

0.9

1.7

2.4

Intangible Amortisation

(2.7)

(2.6)

(2.6)

(2.6)

(1.3)

0.0

(1.4)

Exceptionals

(5.3)

(5.9)

(0.9)

0.8

0.0

0.0

(1.4)

Profit Before Tax (norm) - Edison

 

4.5

8.8

13.7

20.3

24.1

25.1

29.1

Profit Before Tax (norm)

 

 

4.0

8.3

13.2

19.8

23.5

24.7

28.6

Profit Before Tax (statutory)

 

 

(4.1)

(0.2)

9.6

18.1

22.2

24.7

25.8

Tax

1.4

0.3

(1.0)

(2.7)

(4.1)

(4.5)

(5.4)

Profit After Tax (norm)

3.1

7.4

11.4

17.0

19.6

20.6

24.1

Profit After Tax (statutory)

(2.6)

0.1

8.6

15.3

18.0

20.2

20.4

Average Number of Shares Outstanding (m)

295.8

297.5

297.5

298.9

299.7

303.1

305.4

EPS - normalised (p) - Edison

 

 

1.05

2.47

3.84

5.70

6.53

6.80

7.89

EPS - normalised (p)

 

 

0.88

2.31

3.67

5.53

6.35

6.66

7.75

EPS - statutory (p)

 

 

(0.89)

0.05

2.89

5.13

6.02

6.66

6.68

Dividend per share (p)

0.0

0.5

1.5

2.3

4.3

2.8

1.1

Gross Margin (%)

5.8

7.4

8.3

9.9

10.7

11.0

10.6

EBITDA Margin (%)

5.2

6.7

7.9

9.8

10.6

10.5

10.1

Operating Margin - Edison (%)

3.6

4.9

6.4

8.4

9.3

9.2

8.9

BALANCE SHEET

Fixed Assets

 

 

147.7

145.1

149.3

148.3

154.5

163.0

203.8

Intangible Assets

64.6

61.8

59.2

56.3

54.8

54.7

78.1

Tangible Assets

74.1

76.6

77.4

78.9

81.2

84.0

99.0

Investments

9.0

6.7

12.7

13.1

18.5

24.3

26.7

Current Assets

 

 

72.2

76.3

75.1

107.1

99.2

91.8

127.4

Stocks

5.8

4.8

5.3

7.8

9.6

8.9

6.9

Debtors

60.8

64.6

50.7

66.5

56.4

57.7

76.1

Cash

5.5

6.9

19.0

32.8

33.1

25.2

44.5

Current Liabilities

 

 

(57.9)

(59.7)

(58.2)

(78.7)

(66.1)

(58.6)

(106.4)

Creditors

(52.7)

(59.5)

(58.1)

(78.5)

(65.9)

(58.6)

(87.0)

Short term borrowings

(5.2)

(0.2)

(0.2)

(0.2)

(0.2)

(0.0)

(19.4)

Long Term Liabilities

 

 

(18.5)

(21.1)

(17.9)

(22.5)

(18.7)

(21.2)

(41.2)

Long term borrowings

(0.0)

(0.6)

(0.4)

(0.2)

(0.0)

0.0

(8.8)

Other long term liabilities

(18.5)

(20.5)

(17.5)

(22.3)

(18.6)

(21.2)

(32.4)

Net Assets

 

 

143.4

140.6

148.2

154.2

169.0

175.0

183.7

CASH FLOW

Operating Cash Flow

 

 

2.1

11.4

24.8

27.4

22.9

18.0

28.0

Net Interest

(0.8)

(0.8)

(0.2)

(0.1)

(0.2)

(0.4)

(0.6)

Tax

0.4

(1.0)

(0.9)

(2.4)

(3.9)

(3.4)

(6.0)

Capex

(1.5)

(1.3)

(4.3)

(5.3)

(5.4)

(6.3)

(6.2)

Acquisitions/disposals

(3.5)

(1.7)

(4.1)

(0.4)

(5.5)

(4.2)

(13.4)

Financing

44.8

0

0

0

0

1.7

0

Dividends

0.0

0.0

(3.0)

(5.1)

(7.5)

(13.4)

(8.9)

Net Cash Flow

41.5

6.7

12.4

14.0

0.4

(8.0)

(7.0)

Opening net debt/(cash)

 

 

41.2

(0.3)

(6.1)

(18.4)

(32.4)

(32.9)

(25.2)

Finance lease - cash

(0.2)

(0.3)

(0.2)

(0.2)

(0.2)

(0.2)

(1.8)

Other

0.2

(0.6)

0.2

0

0.2

0

(0)

Closing net debt/(cash)

 

 

(0.3)

(6.1)

(18.4)

(32.4)

(32.9)

(25.2)

(16.4)

IFRS 16 leases

11.4

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Severfield and prepared and issued by Edison, in consideration of a fee payable by Severfield. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Severfield and prepared and issued by Edison, in consideration of a fee payable by Severfield. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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