Severfield — Full year trading update disappoints

Severfield (LSE: SFR)

Last close As at 09/04/2025

GBP0.19

−0.45 (−2.31%)

Market capitalisation

GBP58m

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Research: Industrials

Severfield — Full year trading update disappoints

Trading conditions have not improved as hoped for in the second half of the current financial year, which has resulted in a reduction in Severfield’s expected outcome for FY25. This weakness is reflected in our revised FY26 estimates. Given the uncertainty, Severfield has cancelled the share buyback programme and, at the end of March, it is likely to have c £25–30m of headroom in its banking arrangements. Furthermore, given the implied reduction in EPS, we have taken the opportunity to rebase the dividend at 1.5p, from 3.7p, implying cover of 2x in FY26e, while offering a yield of 6.8%.

Andy Murphy

Written by

Andy Murphy

Director of content, industrials

General industrials

Full year trading update

7 March 2025

Price 22.10p
Market cap £68m

Shares in issue

296.2m
Code SFR
Primary exchange LSE
Secondary exchange N/A
Price Performance
% 1m 3m 12m
Abs (51.8) (50.6) (52.6)
52-week high/low 87.1p 25.4p

Business description

Severfield is a market-leading UK structural steelwork fabricator operating across a broad range of market sectors, now with a Dutch subsidiary. An Indian facility undertakes structural steelwork projects for the local market in a joint venture with India’s largest steel producer, JSW Steel.

Next events

Preliminary results

Mid-June 2025

H1 trading update

October 2025

Analyst

Andy Murphy
+44 (0)20 3077 5700

Severfield is a research client of Edison Investment Research Limited

Note: PBT and EPS are on an underlying, diluted, company basis, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Year end Revenue (£m) PBT (£m) EPS (p) DPS (p) P/E (x) Yield (%)
3/23 491.8 32.5 8.38 3.40 2.6 15.4
3/24e 463.5 36.5 8.85 3.70 2.5 16.7
3/25e 449.6 18.1 4.56 1.50 4.8 6.8
3/26e 449.6 10.1 2.53 1.50 8.8 6.8

Second half of FY25 remains tough

The market backdrop for Severfield has been challenging in both the UK and Europe for some time and so far there are no signs of improvement, with pricing remaining tighter for longer than expected, squeezing margins and resulting in some project opportunities being delayed or cancelled. This includes a large project that was due to commence in January 2025, but which has been deferred until FY26.

Order book remains elevated, but below peak

The company’s order book had slipped from £410m on 1 November (with £307m due in the next 12 months) to £403m (£281m due in next 12 months) as at 1 February. This level is below the peak of £507m in March 2023, but is comfortably higher than the November 2018–2021 average of £308m.

Update on bridge remedial work expected soon

Severfield continues to progress with bridge remedial works and this appears to be going to plan. Discussions with affected clients, relevant industry authorities, insurers and other stakeholders are ongoing and Severfield is hoping to update the market in the ‘coming weeks’. The company usually reports its preliminary results in June so this may be an appropriate time to expect news.

Forecasts reduced, reflecting underlying conditions

Given the headwinds, Severfield anticipates that FY25 PBT is likely to be in the range of £18–20m, with lower profit contributions, offset by internal cost-saving initiatives. The company anticipates that FY25 net debt (pre-IFRS) will be in the range of £45–50m, implying £25–30m of headroom on banking arrangements. We have updated our forecasts accordingly. Finally, given the implied reduction in EPS to c 3.0p in FY26, we have reduced the dividend payout for FY25e and FY26e to 1.5p, from 3.7p in FY24. This implies dividend cover of 2x in FY26e and saves c £6m pa in annual dividend payments. Given the move in the share price, this revised dividend gives rise to a yield of 6.8%.

Valuation

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