Last close As at 05/08/2026
GBP0.37
▲ −0.30 (−0.80%)
Market capitalisation
GBP111m
Research: Industrials
An AGM update confirmed much of the year-end messaging and management expectations for FY20 are unchanged. Order book positions in the UK and India remain encouraging and there have been no discernible changes in pipeline opportunities. The earnings outlook appears solid and the 8.4x P/E and 4.9% prospective yield have appeal.
Written by
Severfield |
Stable outlook |
AGM update |
Construction & materials |
10 September 2019 |
Share price performance
Business description
Next events
Analyst
Severfield is a research client of Edison Investment Research Limited |
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An AGM update confirmed much of the year-end messaging and management expectations for FY20 are unchanged. Order book positions in the UK and India remain encouraging and there have been no discernible changes in pipeline opportunities. The earnings outlook appears solid and the 8.4x P/E and 4.9% prospective yield have appeal.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS** |
P/E |
Yield** |
03/18** |
274.2 |
24.0 |
6.5 |
4.3 |
9.5 |
6.9 |
03/19 |
274.9 |
25.2 |
6.8 |
2.8 |
9.1 |
4.5 |
03/20e |
285.9 |
27.3 |
7.4 |
3.0 |
8.4 |
4.9 |
03/21e |
292.5 |
28.1 |
7.6 |
3.3 |
8.1 |
5.3 |
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.
Firm order books in the UK and India
The UK order book has nudged up further (£301m versus £295m in June) to the highest reported level since November 2016. Moreover, the mix is more diverse now than it was then with material order values on hand in four core sectors, only one large current project (KGX1, initially £50m) and a significant proportion is now outside the UK (in the Republic of Ireland and continental Europe). We believe comments relating to a greater H2 skew to trading performance in FY20 are a natural corollary of the shape of the order book build (+ c £65m between November 2018 and June 2019) necessitating more early-stage projects in H1 and greater profit recognition as they progress into H2. The fact that the order book has been sustained/increased a little indicates that intake has been comparable to throughput so far in FY20 and the run rate for the next 12 months (£281m) is around our current FY20 projection. Project selectivity has stood the company in good stead in recent years and execution against tenders remains key to margin development.
In India, the JV order book is also stable at a record £134m. Management cites an expected improving proportion of commercial project work in both order book and pipeline, which bodes well for future margin development. The capacity expansion at Bellary (+30,000 tonnes to 90,000 tonnes total, to complete by the end of this financial year) is underway, which will facilitate increased throughput of higher-margin commercial project work in due course.
Valuation: Solid performer in a weaker sector
Severfield’s share price is now down 13% year-to-date. To some extent this is understandable given downward revisions to UK construction and GDP expectations as the year has progressed and wider uncertainties prevail. However, the company’s order book has gone in the opposite direction and now has a greater non-UK hue and our estimates have not changed over the last 12 months. Consequently, the current year P/E and EV/EBITDA are now 8.4x and 4.9x, respectively, whereas the dividend yield is 4.9%.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020e |
2021e |
2022e |
|||
Year end 31 March |
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 |
||||
PROFIT & LOSS |
||||||||||||
Revenue |
|
|
231.3 |
201.5 |
239.4 |
262.2 |
274.2 |
274.9 |
285.9 |
292.5 |
296.5 |
|
Cost of Sales |
(217.8) |
(186.7) |
(219.6) |
(236.3) |
(244.9) |
(244.6) |
(253.2) |
(258.9) |
(262.0) |
|||
Gross Profit |
13.5 |
14.9 |
19.8 |
25.9 |
29.3 |
30.3 |
32.7 |
33.6 |
34.4 |
|||
EBITDA |
|
|
12.0 |
13.6 |
18.9 |
25.7 |
29.0 |
29.0 |
32.4 |
33.6 |
34.7 |
|
Operating profit - Edison |
8.4 |
10.0 |
15.2 |
22.1 |
25.4 |
25.4 |
28.3 |
29.0 |
29.6 |
|||
Net Interest |
(0.6) |
(0.5) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.1) |
(0.1) |
|||
Associates |
(3.0) |
(0.2) |
(0.2) |
0.5 |
0.9 |
1.7 |
1.2 |
1.3 |
2.2 |
|||
SBP |
(0.2) |
(0.5) |
(1.1) |
(2.0) |
(2.0) |
(1.6) |
(2.0) |
(2.0) |
(2.0) |
|||
Intangible Amortisation |
(2.7) |
(2.6) |
(2.6) |
(2.6) |
(1.3) |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Pension Net Finance Costs |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
|||
Exceptionals |
(5.3) |
(5.9) |
(0.9) |
0.8 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Profit Before Tax (norm) - Edison |
|
4.5 |
8.8 |
13.7 |
20.3 |
24.0 |
25.2 |
27.3 |
28.1 |
29.7 |
||
Profit Before Tax (norm) |
|
|
4.0 |
8.3 |
13.2 |
19.8 |
23.5 |
24.7 |
26.8 |
27.6 |
29.2 |
|
Profit Before Tax (statutory) |
|
(4.1) |
(0.2) |
9.6 |
18.1 |
22.2 |
24.7 |
26.8 |
27.6 |
29.2 |
||
Tax |
1.4 |
0.3 |
(1.0) |
(2.7) |
(4.1) |
(4.5) |
(4.8) |
(5.0) |
(5.1) |
|||
Profit After Tax (norm) |
3.1 |
7.4 |
11.4 |
17.0 |
19.5 |
20.7 |
22.5 |
23.2 |
24.6 |
|||
Profit After Tax (statutory) |
(2.6) |
0.1 |
8.6 |
15.3 |
18.0 |
20.2 |
22.0 |
22.7 |
24.1 |
|||
Avg number of shares outstanding (m) |
295.8 |
297.5 |
297.5 |
298.9 |
299.7 |
303.1 |
303.5 |
303.5 |
303.5 |
|||
EPS - norm (p) - Edison |
|
|
1.05 |
2.47 |
3.84 |
5.70 |
6.52 |
6.82 |
7.40 |
7.64 |
8.10 |
|
EPS - norm (p) |
|
|
0.88 |
2.31 |
3.67 |
5.53 |
6.35 |
6.65 |
7.24 |
7.47 |
7.94 |
|
EPS - statutory (p) |
|
|
(0.89) |
0.05 |
2.89 |
5.13 |
6.02 |
6.65 |
7.24 |
7.47 |
7.94 |
|
Dividend per share (p) |
0.0 |
0.5 |
1.5 |
2.3 |
4.3 |
2.8 |
3.0 |
3.3 |
3.6 |
|||
Gross Margin (%) |
5.8 |
7.4 |
8.3 |
9.9 |
10.7 |
11.0 |
11.4 |
11.5 |
11.6 |
|||
EBITDA Margin (%) |
5.2 |
6.7 |
7.9 |
9.8 |
10.6 |
10.6 |
11.3 |
11.5 |
11.7 |
|||
Operating Margin - Edison (%) |
3.6 |
4.9 |
6.4 |
8.4 |
9.2 |
9.2 |
9.9 |
9.9 |
10.0 |
|||
BALANCE SHEET |
||||||||||||
Fixed Assets |
|
|
147.7 |
145.1 |
149.3 |
148.3 |
154.5 |
163.0 |
167.6 |
171.7 |
176.3 |
|
Intangible Assets |
64.6 |
61.8 |
59.2 |
56.3 |
54.8 |
54.7 |
54.7 |
54.7 |
54.7 |
|||
Tangible Assets |
74.1 |
76.6 |
77.4 |
78.9 |
81.2 |
84.0 |
86.8 |
89.2 |
91.0 |
|||
Investments |
9.0 |
6.7 |
12.7 |
13.1 |
18.5 |
24.3 |
26.0 |
27.8 |
30.5 |
|||
Current Assets |
|
|
72.2 |
76.3 |
75.1 |
107.1 |
99.2 |
91.8 |
101.6 |
113.0 |
124.1 |
|
Stocks |
5.8 |
4.8 |
5.3 |
7.8 |
9.6 |
8.9 |
9.2 |
10.4 |
11.6 |
|||
Debtors |
60.8 |
64.6 |
50.7 |
66.5 |
56.4 |
57.7 |
62.4 |
66.4 |
69.9 |
|||
Cash |
5.5 |
6.9 |
19.0 |
32.8 |
33.1 |
25.2 |
30.0 |
36.2 |
42.6 |
|||
Current Liabilities |
|
|
(57.9) |
(59.7) |
(58.2) |
(78.7) |
(66.1) |
(58.6) |
(60.7) |
(61.8) |
(62.7) |
|
Creditors |
(52.7) |
(59.5) |
(58.1) |
(78.5) |
(65.9) |
(58.6) |
(60.6) |
(61.8) |
(62.6) |
|||
Short term borrowings |
(5.2) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.0) |
(0.0) |
(0.0) |
(0.0) |
|||
Long Term Liabilities |
|
|
(18.5) |
(21.1) |
(17.9) |
(22.5) |
(18.7) |
(21.2) |
(21.2) |
(21.2) |
(21.2) |
|
Long term borrowings |
(0.0) |
(0.6) |
(0.4) |
(0.2) |
(0.0) |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Other long term liabilities |
(18.5) |
(20.5) |
(17.5) |
(22.3) |
(18.6) |
(21.2) |
(21.2) |
(21.2) |
(21.2) |
|||
Net Assets |
|
|
143.4 |
140.6 |
148.2 |
154.2 |
169.0 |
175.0 |
187.3 |
201.7 |
216.5 |
|
CASH FLOW |
||||||||||||
Operating Cash Flow |
|
|
2.1 |
11.4 |
24.8 |
27.4 |
22.9 |
18.0 |
27.3 |
28.0 |
29.2 |
|
Net Interest |
(0.8) |
(0.8) |
(0.2) |
(0.1) |
(0.2) |
(0.4) |
(0.1) |
(0.1) |
(0.1) |
|||
Tax |
0.4 |
(1.0) |
(0.9) |
(2.4) |
(3.9) |
(3.4) |
(6.2) |
(4.8) |
(5.0) |
|||
Capex |
(1.5) |
(1.3) |
(4.3) |
(5.3) |
(5.4) |
(6.3) |
(7.0) |
(7.0) |
(7.0) |
|||
Acquisitions/disposals |
(3.5) |
(1.7) |
(4.1) |
(0.4) |
(5.5) |
(4.2) |
(0.5) |
(0.5) |
(0.5) |
|||
Financing |
44.8 |
0 |
0 |
0 |
0 |
2 |
0 |
0 |
0 |
|||
Dividends |
0.0 |
0.0 |
(3.0) |
(5.1) |
(7.5) |
(13.4) |
(8.6) |
(9.3) |
(10.3) |
|||
Net Cash Flow |
41.5 |
6.7 |
12.4 |
14.0 |
0.4 |
(8.0) |
4.8 |
6.3 |
6.4 |
|||
Opening net debt/(cash) |
|
|
41.2 |
(0.3) |
(6.1) |
(18.4) |
(32.4) |
(32.9) |
(25.2) |
(29.9) |
(36.2) |
|
Finance leases |
(0.2) |
(0.3) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
0.0 |
0.0 |
0.0 |
|||
Other |
0.2 |
(0.6) |
0.2 |
0 |
0 |
0 |
(0) |
(0) |
(0) |
|||
Closing net debt/(cash) |
|
|
(0.3) |
(6.1) |
(18.4) |
(32.4) |
(32.9) |
(25.2) |
(29.9) |
(36.2) |
(42.5) |
|
Source: Company accounts, Edison Investment Research
|
|
Research: Financials
Following the high transaction activity in H218, FinLab has focused on value creation within its existing fintech companies. This includes initiating the transformation of Kapilendo into a banking partner for SMEs after the acquisition of wevest Digital in September 2019 and two follow-on funding rounds at Iconic Holding. Despite the c 25% decline in Heliad Equity Partner’s share price in H119, the NAV per share remained broadly stable (€20.21 vs €20.44 at end-2018) due to the positive impact from revaluations in the period. However, we note that Heliad’s share price has rebounded 28% since end-June 2019, presumably driven by stock catalysts at its largest portfolio holding, flatex.