Edison Investment Research - Severfield (SFR) Severfield - Converting orders into profitability

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Edison Investment Research

Toby Thorrington

Severfield - Converting orders into profitability

FY19 results were in line with guidance and our expectations, with the Indian JV performance a clear highlight, while investment and order book development in the year in both the UK and India bode well for future progress. In the near term, the dividend yield is an obvious attraction but we believe converting strong order positions into profitability represents the driver of share price progress from here.

27/06/2019 7 EN

Underlying

Severfield

Severfield is a structural steelwork company, engaged in construction contracts business. Co. serves the construction and infrastructure markets, which cover a range of clients from contractors and developers, to engineers and architects. Co.'s construction sectors consist of commercial offices, Industrial and distribution, stadia and leisure, retail, and data centers and other. Co.'s infrastructure sectors consist of transport, power and energy, and health and education. Co. manages the fabrication and construction process, from initial scheme design, through detailing, specification and manufacture to the eventual handover to clients.

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GB00B27YGJ97 London Stock Exchange United Kingdom

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Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

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Analysts

Toby Thorrington

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Severfield’s H124 results highlighted profit growth despite declining revenue, and management continues to expect full-year results to be in line with previous guidance. The total order book has also remained at elevated levels despite the loss of a large studio contract, highlighting the quality of future work in the UK and Europe, and that it is a key indicator of future earnings visibility. The FY24e P/E rating of 7.0x is comfortably below the long-term average of c 10x, implying some risk is discounted in the rating. The stock yields nearly 6%, which is an added attraction.

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Severfield - Converting orders into profitability

Severfield - Multiple positives should excite investors

Severfield - FY24 expectations unchanged, order book robust

Severfield - FY24 in line, but risks edge up further on

Sylvania Platinum - Annual guidance maintained, despite strike

1Spatial - Investing in the transformational SaaS opportunity

Datatec - FY24 underlying EPS more than doubles y-o-y

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