Severfield Regulatory News (SFR)

22 April 2021

Severfield plc

('the Company' or 'the Group')

Pre-close trading update

FY21 upgrade: improved expectations for the full year

Severfield plc, the market leading structural steel group, today issues the following trading update for the year ended 31 March 2021, ahead of the announcement of its annual financial results on Wednesday 16 June.

FY21 expectations and outlook

The Group is currently performing well and based on the good progress made in the second half of the 2021 financial year, we now expect to deliver a full year result which is comfortably above management's previous expectations.

Whilst we continue to be mindful of the COVID-19 backdrop, we remain optimistic about the future. We continue to regularly win high-quality work resulting a strong order book of £315m, which supports trading throughout the 2022 financial year and beyond. We have an encouraging pipeline of opportunities in the UK, Europe and India, a strong balance sheet position, expertise in managing complex projects and good long-standing client relationships. This leaves us 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 in the future.

Operational and trading update

UK and Europe

The Group has, to date, been well-prepared for and coped well with the challenges presented by the COVID-19 pandemic, including the most recent national lockdown in January. The Group's factories and sites are fully operational, and we have been trading at normal (pre-pandemic) levels, in line with government and industry guidelines, since the beginning of Q2 of the 2021 financial year.

In the second half of the year, we have continued to secure a significant value of new work, resulting in a UK and Europe order book of £315m as at 1 April 2021 (1 November 2020: £287m), including £17m for the recently acquired DAM Structures, of which £252m is for delivery over the next 12 months. This leaves the Group well-positioned with a strong future workload for the 2022 financial year and beyond. In terms of geographical spread, 80 per cent of this order book represents projects in the UK, with the remaining 20 per cent representing projects for delivery in Europe and the Republic of Ireland.

We remain very encouraged by the current level of tendering and pipeline activity across the Group. We continue to see a good number of opportunities, albeit at more competitive prices given the current market conditions, in our key market sectors, including in the industrial and distribution, transport infrastructure, stadia and leisure, nuclear and data centre sectors.

India

The Indian joint venture ('JSSL') has continued its recovery from the disruptive effects of COVID-19. After a difficult first half, the company has maintained a largely break-even profit position in H2, reflecting an Indian market which is starting to show signs of recovery. JSSL's order book as at 1 April 2021 was £104m (1 November 2020: £98m) and this includes several recent commercial awards (a large data centre in Chennai and commercial offices in Bangalore and Hyderabad) and some further industrial work for JSW. In terms of mix, 90 per cent of the order book represents higher margin commercial work, with the remaining 10 per cent representing industrial projects, mainly for JSW. 

JSSL's pipeline of potential orders continues to include several commercial projects for key developers and clients with whom it has established strong relationships. JSSL is also developing formal strategic alliances with certain key clients, mainly for commercial, data centre and healthcare projects. This leaves the business well placed to win more work in the future, albeit we remain mindful of the evolving COVID-19 backdrop in India.

Strong balance sheet and financial position

Cash generation in H2 was good and our financial position remains strong, allowing us to support continued investment in efficiency and growth, both organically and by acquisition, including the recent purchase of DAM Structures, which is integrating well into the Group's operations. Year-end net funds (on a pre-IFRS 16 basis) were c.£4m, representing cash of c.£25m offset by the outstanding acquisition loans for Harry Peers of £9m and DAM Structures of £12m. The Group has continued to operate in a net funds position throughout the pandemic maintaining significant amounts of cash headroom (c.£50m as at 31 March 2021) in banking facilities, which expire in October 2023.

The Group has made no claims for support under any employee-related government schemes (including the Coronavirus Job Retention Scheme) and all PAYE, VAT and other COVID-related tax deferrals have now been repaid in full.

SteelZero - building a sustainable future

The Group has strengthened its commitment to reducing carbon emissions by signing up to SteelZero, a global initiative to speed up the transition to a net zero steel industry. SteelZero is led by the international non-profit organisations, the Climate Group and Responsible Steel. This customer-led initiative, which aims to drive a major shift in the global market for the responsible sourcing and production of steel, is being signed up to by an increasing number of steel buyers, both in the UK and internationally.

Targeting net zero steel from the demand-side of the supply chain makes this the first initiative of its kind, with the potential for it to have significant impact on investment, policy, manufacturing, and production in the construction sector. By signing up, we are making a public commitment to transition to procuring, specifying, or stocking 100 per cent net zero steel by 2050, with certain interim targets to be achieved by 2030.

Jenny Chu, Head of Energy Productivity Initiatives at the Climate Group, said: 'We are delighted that Severfield, one of the UK's leading structural steel construction companies, has become the latest member to join SteelZero. The initiative gives forward-looking companies a springboard from which they can use their collective purchasing power and influence to demonstrate there is strong demand for clean and sustainable steel.'

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.165,000 tonnes of steel per annum. The Group has six sites, c.1,500 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).