Last close As at 05/08/2026
GBP0.37
▲ −0.30 (−0.80%)
Market capitalisation
GBP111m
Research: Industrials
Severfield has overcome supply chain strains to deliver H2-weighted profitability in line with management’s expectations. Input cost inflation pass-through and order visibility cause us to raise our revenue expectations, leaving PBT and EPS estimates unchanged at this stage. Outlook confidence from orders on hand and pipeline comments is only latterly being reflected in share price performance.
Written by
Severfield |
Strong H2 performance and order book growth |
FY22 year-end update |
Construction & materials |
28 April 2022 |
Share price performance
Business description
Next events
Analyst
Severfield is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Severfield has overcome supply chain strains to deliver H2-weighted profitability in line with management’s expectations. Input cost inflation pass-through and order visibility cause us to raise our revenue expectations, leaving PBT and EPS estimates unchanged at this stage. Outlook confidence from orders on hand and pipeline comments is only latterly being reflected in share price performance.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/20 |
327.4 |
29.1 |
7.9 |
2.9 |
9.1 |
4.0 |
03/21 |
363.3 |
24.8 |
6.6 |
2.9 |
11.0 |
4.0 |
03/22e |
396.2 |
28.3 |
7.5 |
3.1 |
9.6 |
4.3 |
03/23e |
422.3 |
31.8 |
8.4 |
3.3 |
8.5 |
4.6 |
Note: *PBT and EPS are Edison normalised, excluding pension net finance costs, intangible amortisation and exceptional items.
Delivering profitability and record order books
Severfield’s in-line year-end update infers that it has generated two-thirds of our estimated UK EBIT in H2, successfully delivering orders won in the previous 18 months or so. Notwithstanding input cost inflation, absolute levels of profitability seem to have remained robust, indicating that Severfield’s through-project risk management approach (from tendering through to final accounts) has been effective. The pass-through impact of higher input prices will have boosted both revenue and order book development (now £479m for UK/Ireland from £393m in November) to some extent, but the underlying order intake has clearly been healthy. Severfield’s Indian JV (JSSL) has also hit management expectations, including further profitable trading in H2 and a year-end order book reaching £166m (£140m in November). This now has a mix more weighted towards industrial projects (60%: commercial 40%), underpinned by projects for Severfield’s JV partner JSW. Year-end group net debt (pre IFRS 16) of £19m is somewhat higher than the £8m we had anticipated, which reflects inflationary impacts on receivables, busy activity levels at the year end and some investment in steel inventory, we believe.
Revenue expectations boosted, EBIT unchanged
Inflationary effects, the strong UK/Ireland order position (including £382m for FY23 delivery) and active tendering activity levels cause us to raise our revenue expectations by c 6% for FY22 and by over 10% for the following two years, leaving EBIT estimates unchanged at this stage. We will revisit margin development when the FY22 results are announced in June.
Valuation: Take confidence from order position
The year-end update has been well-received by the market and Severfield’s share price is now back above its levels at the start of 2022, after a period of softness. On unchanged EPS estimates, an FY23 P/E of 8.5x and EV/EBITDA of 6.2x look too conservative to us, given visibility from orders on hand and a tender pipeline that is said to be encouraging.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||||||||||||||
Year end 31 March |
IFRS |
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 |
363.3 |
396.2 |
422.3 |
429.5 |
||||||||||||
Cost of Sales |
(217.8) |
(186.7) |
(219.6) |
(236.3) |
(244.9) |
(244.6) |
(292.2) |
(329.4) |
(359.4) |
(381.9) |
(387.5) |
||||||||||||||
Gross Profit |
13.5 |
14.9 |
19.8 |
25.9 |
29.3 |
30.3 |
35.1 |
33.9 |
36.8 |
40.4 |
42.0 |
||||||||||||||
EBITDA |
|
|
12.0 |
13.6 |
18.9 |
25.7 |
29.1 |
29.0 |
33.2 |
30.9 |
35.2 |
38.8 |
40.3 |
||||||||||||
Operating Profit - Edison adjusted |
|
|
8.4 |
10.0 |
15.2 |
22.1 |
25.4 |
25.3 |
29.3 |
26.5 |
30.1 |
33.4 |
34.7 |
||||||||||||
SBP |
(0.2) |
(0.5) |
(1.1) |
(2.0) |
(2.0) |
(1.6) |
(1.8) |
(0.6) |
(1.5) |
(1.5) |
(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) |
(0.4) |
||||||||||||||
Operating Profit - company norm |
|
|
7.6 |
9.0 |
13.7 |
19.6 |
22.9 |
23.3 |
27.0 |
25.5 |
28.2 |
31.4 |
32.7 |
||||||||||||
Net Interest |
(0.6) |
(0.5) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.7) |
(0.8) |
(1.2) |
(1.1) |
(0.9) |
||||||||||||||
Associates |
(3.0) |
(0.2) |
(0.2) |
0.5 |
0.9 |
1.7 |
2.4 |
(0.3) |
0.9 |
1.0 |
1.7 |
||||||||||||||
Intangible Amortisation |
(2.7) |
(2.6) |
(2.6) |
(2.6) |
(1.3) |
0.0 |
(1.4) |
(2.8) |
(4.1) |
(4.1) |
(1.5) |
||||||||||||||
Exceptionals |
(5.3) |
(5.9) |
(0.9) |
0.8 |
0.0 |
0.0 |
(1.4) |
(0.4) |
(0.3) |
0.0 |
0.0 |
||||||||||||||
Profit Before Tax (norm) - Edison |
|
|
4.5 |
8.8 |
13.7 |
20.3 |
24.1 |
25.1 |
29.1 |
24.8 |
28.3 |
31.8 |
34.0 |
||||||||||||
Profit Before Tax (norm) |
|
|
4.0 |
8.3 |
13.2 |
19.8 |
23.5 |
24.7 |
28.6 |
24.3 |
27.8 |
31.3 |
33.6 |
||||||||||||
Profit Before Tax (statutory) |
|
|
(4.1) |
(0.2) |
9.6 |
18.1 |
22.2 |
24.7 |
25.8 |
21.1 |
23.5 |
27.3 |
32.0 |
||||||||||||
Tax |
1.4 |
0.3 |
(1.0) |
(2.7) |
(4.1) |
(4.5) |
(5.4) |
(3.8) |
(5.1) |
(5.7) |
(6.0) |
||||||||||||||
Profit After Tax (norm) |
3.1 |
7.4 |
11.4 |
17.0 |
19.6 |
20.6 |
24.1 |
20.2 |
23.2 |
26.1 |
28.0 |
||||||||||||||
Profit After Tax (statutory) |
(2.6) |
0.1 |
8.6 |
15.3 |
18.0 |
20.2 |
20.4 |
17.3 |
18.4 |
21.6 |
26.0 |
||||||||||||||
Average Number of Shares Outstanding (m) |
295.8 |
297.5 |
297.5 |
298.9 |
299.7 |
303.1 |
305.4 |
307.3 |
308.6 |
309.3 |
309.3 |
||||||||||||||
EPS - normalised (p) - Edison |
|
|
1.05 |
2.47 |
3.84 |
5.70 |
6.53 |
6.80 |
7.89 |
6.57 |
7.52 |
8.43 |
9.06 |
||||||||||||
EPS - normalised (p) |
|
|
0.88 |
2.31 |
3.67 |
5.53 |
6.35 |
6.66 |
7.75 |
6.43 |
7.38 |
8.29 |
8.92 |
||||||||||||
EPS - statutory (p) |
|
|
(0.89) |
0.05 |
2.89 |
5.13 |
6.02 |
6.66 |
6.68 |
5.63 |
5.96 |
6.98 |
8.42 |
||||||||||||
Dividend per share (p) |
0.0 |
0.5 |
1.5 |
2.3 |
4.3 |
2.8 |
2.9 |
2.9 |
3.1 |
3.3 |
3.6 |
||||||||||||||
Gross Margin (%) |
5.8 |
7.4 |
8.3 |
9.9 |
10.7 |
11.0 |
10.7 |
9.3 |
9.3 |
9.6 |
9.8 |
||||||||||||||
EBITDA Margin (%) |
5.2 |
6.7 |
7.9 |
9.8 |
10.6 |
10.5 |
10.1 |
8.5 |
8.9 |
9.2 |
9.4 |
||||||||||||||
Operating Margin - Edison (%) |
3.6 |
4.9 |
6.4 |
8.4 |
9.3 |
9.2 |
8.9 |
7.3 |
7.6 |
7.9 |
8.1 |
||||||||||||||
BALANCE SHEET |
|||||||||||||||||||||||||
Fixed Assets |
|
|
147.7 |
145.1 |
149.3 |
148.3 |
154.5 |
163.0 |
203.8 |
230.1 |
228.5 |
227.1 |
230.2 |
||||||||||||
Intangible Assets |
64.6 |
61.8 |
59.2 |
56.3 |
54.8 |
54.7 |
78.1 |
95.4 |
91.0 |
86.9 |
85.4 |
||||||||||||||
Tangible Assets |
74.1 |
76.6 |
77.4 |
78.9 |
81.2 |
84.0 |
99.0 |
101.5 |
106.4 |
109.0 |
111.4 |
||||||||||||||
Investments |
9.0 |
6.7 |
12.7 |
13.1 |
18.5 |
24.3 |
26.7 |
33.2 |
31.1 |
31.2 |
33.4 |
||||||||||||||
Current Assets |
|
|
72.2 |
76.3 |
75.1 |
107.1 |
99.2 |
91.8 |
127.4 |
107.7 |
119.1 |
124.2 |
127.4 |
||||||||||||
Stocks |
5.8 |
4.8 |
5.3 |
7.8 |
9.6 |
8.9 |
6.9 |
10.2 |
16.2 |
17.2 |
18.4 |
||||||||||||||
Debtors |
60.8 |
64.6 |
50.7 |
66.5 |
56.4 |
57.7 |
76.1 |
72.4 |
94.7 |
104.9 |
108.5 |
||||||||||||||
Cash |
5.5 |
6.9 |
19.0 |
32.8 |
33.1 |
25.2 |
44.5 |
25.1 |
8.2 |
2.2 |
0.4 |
||||||||||||||
Current Liabilities |
|
|
(57.9) |
(59.7) |
(58.2) |
(78.7) |
(66.1) |
(58.6) |
(106.4) |
(85.4) |
(97.7) |
(93.6) |
(90.5) |
||||||||||||
Creditors |
(52.7) |
(59.5) |
(58.1) |
(78.5) |
(65.9) |
(58.6) |
(87.0) |
(79.5) |
(79.7) |
(77.5) |
(79.5) |
||||||||||||||
Short term borrowings |
(5.2) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.0) |
(19.4) |
(5.9) |
(17.9) |
(16.1) |
(11.0) |
||||||||||||||
Long Term Liabilities |
|
|
(18.5) |
(21.1) |
(17.9) |
(22.5) |
(18.7) |
(21.2) |
(41.2) |
(50.8) |
(43.9) |
(39.7) |
(37.3) |
||||||||||||
Long term borrowings |
(0.0) |
(0.6) |
(0.4) |
(0.2) |
(0.0) |
0.0 |
(8.8) |
(14.9) |
(9.0) |
(4.8) |
(2.4) |
||||||||||||||
Other long term liabilities |
(18.5) |
(20.5) |
(17.5) |
(22.3) |
(18.6) |
(21.2) |
(32.4) |
(35.9) |
(34.9) |
(34.9) |
(34.9) |
||||||||||||||
Net Assets |
|
|
143.4 |
140.6 |
148.2 |
154.2 |
169.0 |
175.0 |
183.7 |
201.6 |
206.0 |
218.0 |
229.7 |
||||||||||||
CASH FLOW |
|||||||||||||||||||||||||
Operating Cash Flow |
|
|
2.1 |
11.4 |
24.8 |
27.4 |
22.9 |
18.0 |
28.0 |
30.0 |
6.5 |
33.4 |
37.6 |
||||||||||||
Net Interest |
(0.8) |
(0.8) |
(0.2) |
(0.1) |
(0.2) |
(0.4) |
(0.6) |
(0.7) |
(1.1) |
(1.1) |
(0.9) |
||||||||||||||
Tax |
0.4 |
(1.0) |
(0.9) |
(2.4) |
(3.9) |
(3.4) |
(6.0) |
(4.6) |
(6.8) |
(5.1) |
(5.7) |
||||||||||||||
Capex |
(1.5) |
(1.3) |
(4.3) |
(5.3) |
(5.4) |
(6.3) |
(6.2) |
(6.5) |
(9.9) |
(8.0) |
(8.0) |
||||||||||||||
Acquisitions/disposals |
(3.5) |
(1.7) |
(4.1) |
(0.4) |
(5.5) |
(4.2) |
(13.4) |
(19.9) |
(0.5) |
(7.1) |
(4.5) |
||||||||||||||
Financing |
44.8 |
0 |
0 |
0 |
0 |
1.7 |
0 |
0 |
1 |
0 |
0 |
||||||||||||||
Dividends |
0.0 |
0.0 |
(3.0) |
(5.1) |
(7.5) |
(13.4) |
(8.9) |
(8.9) |
(9.3) |
(9.6) |
(10.4) |
||||||||||||||
Net Cash Flow |
41.5 |
6.7 |
12.4 |
14.0 |
0.4 |
(8.0) |
(7.0) |
(10.3) |
(20.6) |
2.5 |
8.1 |
||||||||||||||
Opening net debt/(cash) |
|
|
41.2 |
(0.3) |
(6.1) |
(18.4) |
(32.4) |
(32.9) |
(25.2) |
(16.4) |
(4.4) |
18.7 |
18.7 |
||||||||||||
Finance lease - cash |
(0.2) |
(0.3) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(1.8) |
(1.7) |
(2.4) |
(2.4) |
(2.4) |
||||||||||||||
Other |
0.2 |
(0.6) |
0.2 |
0 |
0.2 |
0 |
0 |
(0) |
(0) |
(0) |
0 |
||||||||||||||
Closing net debt/(cash) |
|
|
(0.3) |
(6.1) |
(18.4) |
(32.4) |
(32.9) |
(25.2) |
(16.4) |
(4.4) |
18.7 |
18.7 |
13.0 |
||||||||||||
IFRS 16 leases |
11.4 |
11.1 |
10.9 |
10.9 |
10.9 |
||||||||||||||||||||
Source: Company accounts, Edison Investment Research
|
||||||||||||
|
||||||||||||
Research: TMT
Checkit made good progress during FY22 with its strategy to transition to a pure SaaS business. Annualised recurring revenue (ARR) grew 44%
y-o-y, helped by new customer wins and expansion of existing contracts, with recurring revenue reaching 75% of total revenue in Q422 compared to 51% for the full year. Management expects to meet market expectations for FY23; our FY23 forecasts are substantially unchanged and we introduce FY24 forecasts that factor in ARR growth of 32%.