Steel giant stems the flow of profit decline but revenues dip to £255m

IT has been a “year of two halves” for independent steel stockholder Barrett Steel, which has improved pre-tax profitability but endured a decline in revenue as global markets fluctuate.

Turnover reduced by 10% to £255.7m from £284.9, its second consecutive year in decline, despite volumes increasing 3% during the year to 30 September 2016.

The steel giant said that the year began with further erosion in prices across all sectors, but second half saw sharp increases in pricing due to increased energy, iron ore and scrap price movements.

Barrett said it had been attempting to stem the flow of losses from its divisions that work closely in the oil and gas sector all year, selling BSEP Machine Shop in January 2016 and Forge in March 2016. It said these sales had had “little impact” on the core businesses.

Non-UK sales were reduced to £24.2m from £33.2m, which Barrett says is “entirely” down to the ongoing decline in the oil and gas sector, and further restructuring costs totalled £1.4m.

However pre-tax profits improved to £4.3m for the year, up from £986,000 the year before.

It also agreed an £80m funding during the year from HSBC, and invested £1.7m in its Bradford, Scunthorpe and Irish operations.

Barrett stipulated that although the Brexit decision in June had not affected work in its main sector, construction, the weakening pound had had a detrimental effect, forcing importers to consider price hikes.

It was also pessimistic about the oil and gas sector in 2017, saying it was unlikely to pick up until 2018 with oil hovering around $50 a barrel.

Staff numbers decreased by 100 to 1,077. No dividends were paid on ordinary shares this year, with the company’s profits going into reserves.

Chairman Roy Butcher said: “The year has seen the completion of the partial sale of the Tata business and some limited rationalisation within the supplier base. This has had minimal impact in addressing the ongoing predicament of worldwide over capacity in the steel industry.

“The group continues to have very good support from its key supply routes and remains confident of its continuity supply through the good relationships developed over many years.”

Mr Butcher has now retired from the business as of November 2016, with James Barrett taking over his role.

The company, which turned 150 years old last year has been located on the same site in Bradford since 1910.