TIDMSFR
RNS Number : 8626X
Severfield PLC
03 September 2020
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 GBP270m at 1 September 2020 (1
June 2020: GBP271m)
-- 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 GBP94m at 1 September 2020 (1 June 2020:
GBP110m)
-- 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
GBP270m (1 June 2020: GBP271m), 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 GBP94m at 1 September 2020 (1 June 2020: GBP110m),
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 GBP16.4m
(including the outstanding acquisition loan of GBP13.1m 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
GBP3m 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 GBP15m, 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).
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