Severfield delivers "significant" turnaround in pre-tax profit

STRUCTURAL steel group Severfield said today it is well placed for future growth as it boasted a “significant” turnaround in underlying pre-tax profit.

For the year ended March 31, the group reported profit before tax of £4m, up from a £21.5m loss the year before.

However, UK turnover of £231.3m compared with £318.3m in the prior 15 month period reflected a modest reduction in capacity at its largest business, Severfield-Watson Structures, the group said.

The North Yorkshire headquartered group, which rebranded last month dropping the Rowen name, also said further restructuring of Severfield-Watson Structures was successfully completed.

Performance from Severfield’s Indian joint venture, JSW Severfield Structures, was “disappointing” in the year, the company said, with the group’s share of losses totalling £3m, while in the previous period the business had achieved close to a breakeven position.

Severfield’s UK order book was steady at £168m at May 1 (November 1 2013: £172m) while its India order book stood at £41m (November 1 2013: £34m).

Ian Lawson, chief executive, said: “During the financial year Severfield has achieved substantial operational improvements across the group and delivered a significant turnaround in underlying profit before tax. Pleasingly, the group’s ongoing stabilisation and recovery generated increasing UK operating margins supported by a strong balance sheet and solid order book.

“While our Indian joint venture performed below expectations, actions are being taken to put the business in a sustainable position and we believe the market in India continues to present significant future growth opportunities.”

He added: “The development of a clear group strategy in addition to the anticipated recovery in the core UK market means Severfield is well placed for future growth.”

Toby Thorrington, analyst at Edison Investment Research, said: “Overall, an improving UK margin despite flat/lower revenues and order book is the strongest signal that the new management team is making progress. Market conditions will improve and Severfield has the strongest position in the industry to be able to take advantage when they do.”