Severfield-Rowen defies downturn with record performance

STRUCTURAL steel company Severfield-Rowen is bucking the economic downturn with record results and a healthy order book.

The North Yorkshire firm, which is providing the structural steel for a distribution centre for Tesco at Teesport, work on Terminal 2B for BAA at Heathrow Airport, and a new rehearsal studio for the BBC in Cardiff, reported a £93.6m increase in revenue for the year ended December 31, 2008 from £300.7m to £394.3m.

Pre-tax profit for the period increased to £52.5m – a jump of 14.3%. Year end net borrowings fell drastically from £49.1m in 2007 to £15.8m.

Severfield-Rowen’s order book currently stands at £311m representing around 12 months activity and consists of business from all sectors of the UK market, including power stations, education, bridgework, stadiums, health and transport.

Its pipeline is also boasting a healthy glow with potential work in both domestic and overseas markets giving the firm cause for “cautious optimism” beyond the current order book.

Despite its confidence and strong position, Severfield-Rowen said that some key traditional sectors in the UK had declined significantly.

But it added that the company has a highly competitive cost base and capability, which is being further enhanced through management initiatives, controlled spending and continuous review.

In the latter half of 2008, production and overhead cost reductions were made across the group providing annual savings going forward of £3m.

However, it’s the firm’s diverse operation that offers it shelter from the economic storm.

“Our range of service has been successfully extended to more clients in all sectors, including power stations, waste to energy facilities, data centres, public buildings, education facilities, transport and infrastructure, many in areas where significant investment programmes remain,” it said.

“Trading conditions in the UK will be difficult over the next two years, but the company will continue to exploit its key commercial cost and operational benefits to develop its market leading position. We are, therefore, confident of further satisfactory results in 2009 and beyond.”

In November, it announced the launch of a joint venture with India’s third largest steel company and the opening of a new office in Abu Dhabi.

The 50/50 partnership with JSW Steel, part of the $8bn Mumbai-based OP Jindal will be be based next to JSW Steel’s Vijayanagar works in Bellary District, 220 miles south of Bangalore and 390 miles south-east of Mumbai.

The business, which was launched with a £30m investment of equity and two-thirds of debt from UK and Indian banks, will be involved in the design, fabrication and erection of structural steelwork for the Indian market.

Severfield-Rowen has also created a new business division at Atlas Ward in Sherburn, to produce structural steel staircases and light steel.

The projected annual turnover is now £4m, which previously would have been subcontracted to companies outside of the group.

Investments at Watson Steel Structures, Bolton and Fisher Engineering near Enniskillen, have been made to improve site accommodation, storage, handling and logistics.

However, subsidiary Severfield-Reeve Projects, which specialises in small scale design and build projects, has already had its operations “trimmed” and looks set to be scaled back even further during 2009.

The firm has also opened an office in Abu Dhabi.

Toby Hayward, Severfield-Rowen’s chairman, said: “In 2008, we have produced higher revenues and underlying profits, a robust balance sheet, good order recruitment and have created new opportunities outside of the UK, for both the short and long term.

“Importantly, the company has moved its focus sufficiently early into those sectors of the UK that have been expanding and has also targeted overseas markets, to counteract the anticipated fall in demand in some of the major, traditional UK segments.”

He continued: “The company is positioning itself to face the challenges of the short term and to take advantage of its strategically strengthened position when economic conditions improve.”