Severfield profits beat forecasts despite lower revenue

19th Jun 2024 10:05

(Sharecast News) - Structural steel specialist Severfield reported revenue of £463.5m in its final results on Wednesday, down from £491.8m in 2023 amid softer market conditions.

The London-listed firm said despite that, underlying profit before tax rose 13% to £36.5m, surpassing expectations due to strong operational performance.

Underlying basic earnings per share increased 5% to 8.9p from 8.5p in the prior year.

Severfield also increased its total dividend by 9% to 3.7p per share, marking the 10th consecutive year of progressive dividends.

That included a proposed final dividend of 2.3p per share.

Year-end net debt, on a pre-IFRS-16 basis, stood at £9.4m, compared to net funds of £2.7m in 2023.

That figure included a £15.2m loan for the Voortman acquisition, and reflected an operating cash conversion of 110%, down from 145% the previous year.

Severfield said its UK and Europe order book remained robust at £478m as of 1 June, with an increased proportion of European orders.

In India, the company reported a record order book of £181m, up from £165m in November.

The joint venture in India, JSSL, showed increased profitability with a share of profit rising to £1.9m and a record EBITDA of £13m.

Severfield launched a £10m share buyback programme in April to return surplus capital to shareholders.

Looking ahead, market conditions in the UK and Europe were showing signs of improvement, while the integration of Voortman was progressing well, strengthening Severfield's market position in Europe.

In India, Severfield said it was poised to capitalise on significant growth opportunities, with new markets being targeted and a positive outlook driven by strong underlying demand for structural steel.

The company said it was well-positioned to secure work in markets with long-term growth trends, particularly those related to the green energy transition.

"We are delighted to be reporting another strong performance by the group, with our profits ahead of expectations," said chief executive officer Alan Dunsmore.

"This is the result of an excellent operational performance and the success of our strategy to diversify the sectors and geographies we serve.

"This has enabled us to deliver enhanced returns for shareholders through our recent share buyback scheme, building on our ten consecutive years of progressive dividends."

Dunsmore said looking ahead, the firm had strong order books in the UK, Europe and India which were providing good earnings visibility through 2025 and beyond.

"With market conditions showing signs of improvement and with our businesses well-placed in markets that are expected to benefit from positive long term growth trends, which are unlikely to be impacted by the result of the upcoming UK general election, we are confident in the outlook for the business."

At 0950 BST, shares in Severfield were down 0.02% at 71.59p.

Reporting by Josh White for Sharecast.com.