Last close As at 05/08/2026
GBP0.37
▲ −0.30 (−0.80%)
Market capitalisation
GBP111m
Research: Industrials
Severfield, the leading structural steel work fabricator in the UK, is benefiting from robust demand from a range of sectors, which is reflected in the elevated order book (£483m vs 2016–21 average of £266m). In India, the joint venture is growing rapidly and capacity is to be expanded to cater for additional demand. However, the growth is not reflected in the c 7x P/E rating, which is the lowest level since the global financial crisis (GFC).
Severfield |
Trading robust with lowest P/E since GFC |
AGM update |
Industrial engineering |
13 September 2022 |
Share price performance
Business description
Next events
Analyst
Severfield is a research client of Edison Investment Research Limited |
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Severfield, the leading structural steel work fabricator in the UK, is benefiting from robust demand from a range of sectors, which is reflected in the elevated order book (£483m vs 2016–21 average of £266m). In India, the joint venture is growing rapidly and capacity is to be expanded to cater for additional demand. However, the growth is not reflected in the c 7x P/E rating, which is the lowest level since the global financial crisis (GFC).
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/21 |
363.3 |
24.3 |
6.7 |
2.9 |
8.8 |
4.9 |
03/22 |
403.6 |
27.1 |
7.0 |
3.1 |
8.4 |
5.3 |
03/23e |
460.1 |
31.2 |
8.3 |
3.3 |
7.1 |
5.6 |
03/24e |
473.9 |
33.6 |
8.9 |
3.6 |
6.6 |
6.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
AGM statement confirms robust FY expectation
The AGM statement confirmed that activity across the group in the first five months of the year has been strong and that trading has been in line with management’s expectations. There are also several ongoing contracts that are expected to deliver significant profits in H2. We are forecasting revenue and operating profit growth of c 14%, partly driven by inflation, partly by volume growth.
UK and European order book remains robust
In the UK and Europe, the order book at 1 September was £483m, broadly unchanged on the 1 June position, of which £363m is due for delivery over the next 12 months. The order book is well-diversified over multiple projects and market sectors, with the UK accounting for 97% of the total. In the longer term, the outlook is encouraging as the pipeline of opportunity is exciting for both the UK and the European markets, across both the Commercial and Industrial and the Nuclear and Infrastructure divisions.
India set for investment to double capacity
In India, the JSSL JV is pushing its Bellary facility towards its maximum capacity of 100,000 tonnes, which it expects to hit this year. Again, the order book is robust at £152m, down c 4% y-o-y, but the pipeline is also benefiting from strong underlying demand in India for structural steel, both as the economy grows and as the market is converting from concrete to steel. In H2, Severfield is likely to complete a land purchase, which will provide a platform for future growth that could double capacity.
Valuation: P/E of c 7x and c 6% yield are attractive
Severfield is managing inflationary pressures well and, given the workload visibility, expects to deliver on its previous FY23 expectations. Our profit estimates are essentially unchanged from our previous position given the in-line statement. A P/E ratio of c 7x is the lowest rating since the GFC, which compares well with an average ratio of 10.4x over the last five years. The c 6% yield is an added attraction.
Exhibit 1: Financial summary
£m |
2019 |
2020 |
2021 |
2022 |
2023e |
2024e |
2025e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||||
Revenue |
|
|
274.9 |
327.4 |
363.3 |
403.6 |
460.1 |
473.9 |
473.9 |
EBITDA |
|
|
28.6 |
33.3 |
29.6 |
33.4 |
37.8 |
40.3 |
42.2 |
Normalised operating profit |
|
|
24.9 |
29.3 |
25.1 |
28.2 |
32.3 |
34.6 |
36.2 |
Operating profit (U/L, Company basis) |
|
24.9 |
29.3 |
25.1 |
28.2 |
32.3 |
34.6 |
36.2 |
|
Amortisation of acquired intangibles |
0.0 |
(1.4) |
(2.8) |
(5.2) |
(5.2) |
(5.2) |
(5.2) |
||
Exceptionals |
0.0 |
(1.4) |
(0.4) |
(0.7) |
0.0 |
0.0 |
0.0 |
||
Share-based payments |
(0.1) |
(0.3) |
0.6 |
1.0 |
1.0 |
1.0 |
1.0 |
||
Impairment |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.5 |
0.4 |
0.4 |
0.4 |
0.4 |
0.4 |
||
Reported operating profit |
24.8 |
26.7 |
22.9 |
23.8 |
28.5 |
30.8 |
32.4 |
||
Net Interest |
(0.2) |
(0.7) |
(0.8) |
(1.1) |
(1.1) |
(1.0) |
(1.0) |
||
Exceptionals |
0.0 |
(0.5) |
(0.4) |
(0.7) |
(0.4) |
(0.4) |
(0.4) |
||
Profit Before Tax (norm) |
|
|
24.7 |
28.6 |
24.3 |
27.1 |
31.2 |
33.6 |
35.2 |
Profit before tax (U/L, Company basis) |
|
24.7 |
28.6 |
24.3 |
27.1 |
31.2 |
33.6 |
35.2 |
|
Profit Before Tax (reported) |
|
|
24.7 |
25.8 |
21.1 |
21.0 |
26.0 |
28.4 |
30.0 |
Reported tax |
(4.5) |
(5.4) |
(3.8) |
(5.4) |
(5.5) |
(6.0) |
(6.3) |
||
Profit After Tax (norm) |
20.2 |
23.2 |
20.5 |
21.7 |
25.8 |
27.6 |
28.9 |
||
Profit After Tax (reported) |
20.2 |
20.4 |
17.3 |
15.6 |
20.6 |
22.4 |
23.7 |
||
Net income (normalised) |
20.2 |
23.2 |
20.5 |
21.7 |
25.8 |
27.6 |
28.9 |
||
Net income (reported) |
20.2 |
20.4 |
17.3 |
15.6 |
20.6 |
22.4 |
23.7 |
||
Basic average number of shares outstanding (m) |
303 |
305 |
307 |
309 |
309 |
310 |
310 |
||
EPS - basic reported (p) |
|
|
6.65 |
6.68 |
5.63 |
5.05 |
6.65 |
7.24 |
7.66 |
EPS - basic normalised (p) |
|
|
6.65 |
7.60 |
6.68 |
7.03 |
8.33 |
8.92 |
9.34 |
EPS - diluted normalised (p) |
|
|
6.58 |
7.56 |
6.68 |
7.00 |
8.30 |
8.88 |
9.30 |
EPS - (U/L, diluted, Company basis) |
|
|
6.58 |
7.70 |
6.43 |
7.19 |
8.30 |
8.88 |
9.30 |
Dividend (p) |
2.80 |
2.90 |
2.90 |
3.10 |
3.30 |
3.60 |
3.70 |
||
Revenue growth (%) |
N/A |
19.1 |
11.0 |
11.1 |
14.0 |
3.0 |
0.0 |
||
EBITDA Margin (%) |
10.4 |
10.2 |
8.1 |
8.3 |
8.2 |
8.5 |
8.9 |
||
Normalised Operating Margin |
9.1 |
9.0 |
6.9 |
7.0 |
7.0 |
7.3 |
7.6 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
163.0 |
203.8 |
230.1 |
230.1 |
242.1 |
245.2 |
249.6 |
Intangible Assets |
54.7 |
78.1 |
95.4 |
92.5 |
92.7 |
92.9 |
93.1 |
||
Tangible Assets |
84.0 |
88.9 |
91.7 |
91.4 |
104.9 |
108.7 |
112.7 |
||
Investments & other |
24.3 |
36.8 |
43.0 |
46.1 |
44.4 |
43.6 |
43.8 |
||
Current Assets |
|
|
91.8 |
127.4 |
107.7 |
140.7 |
135.7 |
141.3 |
143.2 |
Stocks |
8.9 |
6.9 |
10.2 |
18.0 |
11.3 |
11.8 |
11.8 |
||
Debtors |
57.1 |
74.6 |
67.8 |
117.9 |
119.6 |
124.6 |
126.5 |
||
Cash & cash equivalents |
25.0 |
44.3 |
25.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.8 |
1.6 |
4.6 |
4.8 |
4.8 |
4.8 |
4.8 |
||
Current Liabilities |
|
|
(58.6) |
(106.4) |
(85.4) |
(123.3) |
(124.8) |
(127.7) |
(127.7) |
Creditors |
(57.7) |
(84.4) |
(77.8) |
(111.7) |
(113.2) |
(116.1) |
(116.1) |
||
Short term borrowings |
0.0 |
(19.4) |
(5.9) |
(5.9) |
(5.9) |
(5.9) |
(5.9) |
||
Other |
(1.0) |
(2.6) |
(1.7) |
(5.7) |
(5.7) |
(5.7) |
(5.7) |
||
Long Term Liabilities |
|
|
(21.2) |
(41.2) |
(61.4) |
(43.5) |
(36.7) |
(28.6) |
(20.6) |
Long term borrowings |
0.0 |
(8.8) |
(14.9) |
(9.0) |
(4.2) |
1.9 |
7.9 |
||
Other long term liabilities |
(21.2) |
(32.4) |
(46.5) |
(34.5) |
(32.5) |
(30.5) |
(28.5) |
||
Net Assets |
|
|
175.0 |
183.7 |
190.9 |
204.0 |
216.2 |
230.2 |
244.5 |
Shareholders' equity |
|
|
175.0 |
183.7 |
190.9 |
204.0 |
216.2 |
230.2 |
244.5 |
CASH FLOW |
|||||||||
Op Cash Flow before WC and tax |
28.7 |
36.3 |
34.0 |
40.5 |
44.3 |
46.8 |
48.7 |
||
Working capital |
(7.9) |
(2.2) |
(0.2) |
(34.5) |
6.5 |
(2.7) |
(1.9) |
||
Exceptional & other |
0.0 |
(2.3) |
(3.5) |
(5.4) |
(4.8) |
(4.8) |
(4.8) |
||
Tax |
(3.4) |
(6.0) |
(4.6) |
(3.8) |
(7.0) |
(7.7) |
(8.3) |
||
Other |
(2.8) |
(3.8) |
(0.2) |
(2.4) |
(3.2) |
(3.8) |
(4.6) |
||
Net operating cash flow |
|
|
14.6 |
22.0 |
25.3 |
(5.7) |
35.8 |
27.8 |
29.2 |
Capex |
(6.3) |
(6.2) |
(6.5) |
(5.0) |
(7.7) |
(8.2) |
(8.7) |
||
Acquisitions/disposals |
(4.2) |
(13.4) |
(19.9) |
(0.5) |
(11.5) |
(1.5) |
(1.5) |
||
Net interest |
(0.4) |
(0.6) |
(0.7) |
(1.1) |
(0.4) |
(0.3) |
(0.3) |
||
Equity financing |
1.7 |
0.1 |
0.4 |
0.9 |
1.0 |
1.0 |
1.0 |
||
Dividends |
(13.4) |
(8.9) |
(8.9) |
(9.2) |
(9.9) |
(10.2) |
(11.1) |
||
Other |
0.1 |
(1.8) |
(1.8) |
(2.2) |
(2.5) |
(2.5) |
(2.5) |
||
Net Cash Flow |
(7.8) |
(8.8) |
(12.0) |
(22.8) |
4.7 |
6.1 |
6.0 |
||
Opening net debt/(cash) |
|
|
(33.0) |
(25.2) |
(16.4) |
(4.4) |
18.4 |
13.7 |
7.6 |
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(25.2) |
(16.4) |
(4.4) |
18.4 |
13.7 |
7.6 |
1.6 |
Source: company data and Edison Investment Research
|
|
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