Last close As at 05/08/2026
GBP0.37
▲ −0.30 (−0.80%)
Market capitalisation
GBP111m
Research: Industrials
Severfield’s FY21 year-end trading update led management to raise its full year guidance following a solid UK performance in H2. Order books remain firm and the company has ended FY21 with a modest net cash position.
Written by
Severfield |
Solid end to FY21 |
Year-end update |
Construction & materials |
27 April 2021 |
Share price performance
Business description
Next events
Analyst
Severfield is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Severfield’s FY21 year-end trading update led management to raise its full year guidance following a solid UK performance in H2. Order books remain firm and the company has ended FY21 with a modest net cash position.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS (p) |
P/E |
Yield |
03/19 |
274.9 |
25.1 |
6.8 |
2.8 |
11.3 |
3.5 |
03/20 |
327.4 |
29.1 |
7.9 |
2.9 |
9.7 |
3.6 |
03/21e |
354.5 |
23.4 |
6.2 |
2.9 |
13.0 |
3.6 |
03/22e |
365.3 |
27.9 |
7.4 |
3.0 |
10.8 |
3.8 |
Note: *PBT and EPS are Edison normalised, excluding pension net finance costs, intangible amortisation and exceptional items.
Operating efficiencies coming through in the UK
UK market conditions do not appear to have been materially different from when Severfield reported its H1 results in November. Consequently, efficient execution of projects on hand with good operational cost control have driven management’s expectation of a higher profit outturn for the year on revenues in line with our existing estimates. As expected, the Indian JV (JSSL) has traded at break even in H2 and there has been no further COVID-19 disruption in its main operating regions at this stage. Order books have firmed slightly in both cases in H2 with a higher proportion of domestic projects in the UK – supplemented by the acquisition of DAM Structures – and a stronger commercial bias in India. Severfield has ended FY21 in a £4m net cash (pre IFRS 16) position – after paying initial DAM and deferred Harry Peers considerations in H2 – and the company retains a healthy liquidity position.
Firm order books and margins lift profit expectations
In outlook terms, the £315m UK order book includes £252m for FY22 and this represents c 80% of our existing revenue expectation for the year, which is a good number. We have reflected operating performance improvements in all three estimate years with modest EBIT margin increases which equate to pre-tax profit uplifts of c £1m pa. Market risks do exist – through competitive pricing and input cost pressures – but based on the orders on hand, visible pipeline and breadth of sector capabilities, management comments continue to have a positive tone. The company’s participation in the relatively new SteelZero initiative (a collective of international steel buyers and environmental groups aiming to reach a zero net carbon emissions position on steel products by 2050) is aligned with wider construction industry trends driving projects with common goals.
Valuation: Positive newsflow driving share price rise
The DAM acquisition announcement and the latest trading update have contributed to a 12% rise in Severfield’s share price since the start of the year, broadly double that of the FTSE All Share Index. Based on our revised estimates, the company is now trading on FY22 P/E and EV/EBITDA multiples of 10.8x and 6.9x respectively which reduce to 9.6x and 6.2x one year out. A rising dividend yield (currently 3.6%) adds further attraction.
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 |
||||
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) |
(321.7) |
(328.5) |
(337.2) |
||||
Gross Profit |
13.5 |
14.9 |
19.8 |
25.9 |
29.3 |
30.3 |
34.7 |
32.7 |
36.8 |
39.7 |
||||
EBITDA |
|
|
12.0 |
13.6 |
18.9 |
25.7 |
29.1 |
29.0 |
33.2 |
29.6 |
34.6 |
38.3 |
||
Operating Profit - Edison adjusted |
|
8.4 |
10.0 |
15.2 |
22.1 |
25.4 |
25.3 |
29.3 |
25.2 |
29.5 |
32.7 |
|||
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 |
24.312 |
28.102 |
30.742 |
|||
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 |
23.4 |
27.9 |
31.3 |
|||
Profit Before Tax (norm) |
|
|
4.0 |
8.3 |
13.2 |
19.8 |
23.5 |
24.7 |
28.6 |
22.9 |
27.5 |
30.8 |
||
Profit Before Tax (statutory) |
|
|
(4.1) |
(0.2) |
9.6 |
18.1 |
22.2 |
24.7 |
25.8 |
19.2 |
24.7 |
28.7 |
||
Tax |
1.4 |
0.3 |
(1.0) |
(2.7) |
(4.1) |
(4.5) |
(5.4) |
(4.4) |
(5.1) |
(5.5) |
||||
Profit After Tax (norm) |
3.1 |
7.4 |
11.4 |
17.0 |
19.6 |
20.6 |
24.1 |
19.0 |
22.9 |
25.7 |
||||
Profit After Tax (statutory) |
(2.6) |
0.1 |
8.6 |
15.3 |
18.0 |
20.2 |
20.4 |
14.8 |
19.6 |
23.1 |
||||
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 |
6.17 |
7.43 |
8.35 |
||
EPS - normalised (p) |
|
|
0.88 |
2.31 |
3.67 |
5.53 |
6.35 |
6.66 |
7.75 |
6.03 |
7.29 |
8.22 |
||
EPS - statutory (p) |
|
|
(0.89) |
0.05 |
2.89 |
5.13 |
6.02 |
6.66 |
6.68 |
4.80 |
6.36 |
7.51 |
||
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 |
9.2 |
10.1 |
10.5 |
||||
EBITDA Margin (%) |
5.2 |
6.7 |
7.9 |
9.8 |
10.6 |
10.5 |
10.1 |
8.4 |
9.5 |
10.2 |
||||
Operating Margin - Edison (%) |
3.6 |
4.9 |
6.4 |
8.4 |
9.3 |
9.2 |
8.9 |
7.1 |
8.1 |
8.7 |
||||
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 |
126.4 |
133.2 |
135.6 |
||
Stocks |
5.8 |
4.8 |
5.3 |
7.8 |
9.6 |
8.9 |
6.9 |
10.5 |
11.8 |
13.1 |
||||
Debtors |
60.8 |
64.6 |
50.7 |
66.5 |
56.4 |
57.7 |
76.1 |
91.6 |
102.6 |
107.6 |
||||
Cash |
5.5 |
6.9 |
19.0 |
32.8 |
33.1 |
25.2 |
44.5 |
24.3 |
18.8 |
14.9 |
||||
Current Liabilities |
|
|
(57.9) |
(59.7) |
(58.2) |
(78.7) |
(66.1) |
(58.6) |
(106.4) |
(108.7) |
(111.2) |
(112.5) |
||
Creditors |
(52.7) |
(59.5) |
(58.1) |
(78.5) |
(65.9) |
(58.6) |
(87.0) |
(102.8) |
(105.3) |
(108.3) |
||||
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 |
185.0 |
195.5 |
209.1 |
||
CASH FLOW |
||||||||||||||
Operating Cash Flow |
|
|
2.1 |
11.4 |
24.8 |
27.4 |
22.9 |
18.0 |
28.0 |
27.9 |
27.5 |
34.1 |
||
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) |
(7.4) |
(5.1) |
||||
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) |
(11.2) |
2.1 |
3.6 |
||||
Opening net debt/(cash) |
|
|
41.2 |
(0.3) |
(6.1) |
(18.4) |
(32.4) |
(32.9) |
(25.2) |
(16.4) |
(3.6) |
(4.0) |
||
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) |
(3.6) |
(4.0) |
(5.9) |
||
IFRS16 leases |
11.4 |
10.6 |
10.6 |
10.6 |
||||||||||
Source: Company accounts, Edison Investment Research
|
||||||||||||
|
||||||||||||
Research: Investment Companies
Tetragon Financial Group (Tetragon) reported a 9.5% NAV TR in FY20 in US dollar terms. Its main value driver remains TFG Asset Management, which delivered a 24% return in FY20 as it continues to expand its assets under management (AUM, up by 10% in FY20 mainly assisted by Equitix). In contrast, Tetragon’s CLO and real estate investments were a drag on FY20 performance. Moreover, Polygon funds (the majority of Tetragon’s exposure to hedge funds) delivered positive returns, but below broader equity markets. As a result, Tetragon posted a 7.6% return on equity, below its long-term target of 10–15%. Still, its long-term performance remains intact with an average 13.7% NAV TR pa over the last 10 years.