Last checked at 3 Sep 2020 07:00
3 September 2020
Severfield plc
('the Company' or 'the Group')
AGM trading update
Ahead of today's Annual General Meeting ('AGM'), Severfield plc, the market leading structural steel group, announces the following trading update for the financial year ended 31 March 2021.
Highlights
§ UK and Europe - factories are fully operational, all construction sites are open, underlying operations are performing well
§ UK and Europe order book of £270m at 1 September 2020 (1 June 2020: £271m)
§ Tendering and pipeline activity remain encouraging despite some client investment decisions being deferred
§ Additional resilience provided by our market sector, geographical and client diversity
§ India order book of £94m at 1 September 2020 (1 June 2020: £110m)
§ Strong balance sheet and cash position, sufficient committed funding in place until 2023 and cash generative business model
§ Final dividend of 1.8p per share now proposed for 2020, resulting in total dividend of 2.9p per share
§ Cautiously optimistic in our outlook despite ongoing market uncertainty - based on order book strength, encouraging pipeline of opportunities, strong balance sheet position, expertise in managing complex projects and long-standing client relationships
Operational and trading update
UK and Europe
The Group responded quickly and decisively to the COVID-19 pandemic and has, to date, coped well with the challenges presented by COVID-19. The Group's factories are fully operational, and we are working on site across all our operations in the UK and Europe.
In managing our response to COVID-19, the primary focus has been on the health, safety and wellbeing of all employees, clients and the wider public, together with protecting the financial strength of the Group. All our factories and sites have implemented new operating procedures, in accordance with government and industry guidance, including changes to working practices, enhanced levels of cleaning, additional hygiene facilities and social distancing.
As expected, the disruption experienced by the Group as a result of COVID-19, both on its sites and within its factories, has impacted profitability, particularly in the first quarter of the 2021 financial year. Notwithstanding this, overall activity levels have continued to increase since the beginning of the lockdown and our operations are currently performing well, with activity levels returning to pre-lockdown levels in the second quarter of 2021.
Our clients have continued to regularly place orders, resulting in a UK and Europe order book at 1 September 2020 which stands at £270m (1 June 2020: £271m), providing the Group with a strong future workload during the current period of COVID-19 related uncertainty. In terms of geographical spread, 61 per cent of this order book represents projects in the UK, with the remaining 39 per cent representing projects for delivery in Europe and the Republic of Ireland.
We remain encouraged by the current level of tendering and pipeline activity across the Group despite evidence of some investment decisions being delayed. We continue to see a good number of opportunities, albeit at competitive prices, in our key market sectors, including in the industrial and distribution, data centre, infrastructure and stadia and leisure sectors.
India
The COVID-19 pandemic is impacting JSSL in 2021. In light of the continued slow easing of the nationwide lockdown and the developing impact of COVID-19 on the Indian economy, JSSL's operations have been disrupted in first half of the financial year. Whilst further opening up of the economy is expected, this disruption to operations is likely to continue over a period of several months with a corresponding impact on trading and profitability. JSSL's order book was £94m at 1 September 2020 (1 June 2020: £110m), and this contains a good mix of higher margin commercial work. JSSL's pipeline of potential orders continues to include several commercial projects for key developers and clients with whom it has established strong relationships.
Balance sheet and financing
The Group's balance sheet and cash position remains strong. Since 31 March 2020, when the Group reported net funds of £16.4m (including the outstanding acquisition loan of £13.1m for Harry Peers), the Group has continued to operate in a net funds position, maintaining significant amounts of cash headroom in banking facilities which mature in October 2023.
Cash management remains a priority for the Group and our strong financial position has been carefully managed during this current uncertain period whilst ensuring that we continue to support our supply chain partners. All PAYE liabilities and other discretionary tax deferrals are now fully up to date, except for VAT payments of £3m which have been deferred by HMRC to March 2021. Our strong financial position also means that, whilst we furloughed some of our workforce in the first quarter of the 2021 financial year, all of whom have since returned to work, we will not be claiming for support under any employee-related government support packages including the Coronavirus Job Retention Scheme. In addition, borrowings of £15m, originally drawn down in late March under the Group's revolving credit facility ('RCF') as a precautionary measure in response to the COVID-19 outbreak, have now been repaid.
The board is recommending a final dividend for the year ended 31 March 2020 of 1.8p per share, making a total for the year of 2.9p per share (2019: 2.8p per share). If the dividend is approved at today's AGM, it will be paid on 11 September 2020 to shareholders on the register at the close of business on 14 August 2020.
Board change
As announced with our full year results on 19 June 2020, John Dodds, Non-Executive Chairman, is retiring from the board at the conclusion of today's AGM, having served for ten years, including nine years as chairman. Kevin Whiteman, who has been on the board since 2014 and is the current Senior Independent Director, will succeed John as Non-Executive Chairman.
Outlook
Despite the current ongoing market uncertainty, the strength of our order book, our encouraging pipeline of opportunities, our strong balance sheet position, our expertise in managing complex projects and our long-standing client relationships enable us to feel cautiously optimistic in our outlook for the 2021 financial year.
We continue to be well-placed to win work in the diverse range of market sectors and geographies in which we operate and across a wide client base, providing us with extra resilience and the ability to increase our market share.
Half year results
The Group will announce its financial results for the half year ending 30 September 2020 on Tuesday 24 November 2020.
For further information, please contact:
Severfield Alan Dunsmore 01845 577 896
Chief Executive Officer
Adam Semple 01845 577 896
Group Finance Director
Jefferies International Simon Hardy 020 7029 8000
Will Soutar 020 7029 8000
Camarco Ginny Pulbrook 020 3757 4980
Tom Huddart 020 3757 4980
Notes to editors:
Severfield is the UK's market leader in the design, fabrication and construction of structural steel, with a total capacity of c.150,000 tonnes of steel per annum. The Group has five sites, c.1,400 employees and expertise in large, complex projects across a broad range of sectors. The Group also has an established presence in the expanding Indian market through its joint venture partnership with JSW Steel (India's largest steel producer).