Edison Investment Research - Severfield (SFR) Severfield - Revenue visibility and growth underappreciated

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Edison Investment Research

Toby Thorrington

Severfield - Revenue visibility and growth underappreciated

The quality of Severfield’s revenues is materially underappreciated by the market in our view, especially now that the UK and EU are embarking on huge investment programmes to renew and upgrade infrastructure to address global trends, such as the drive for net zero emissions. The reorganisation of the group, the internal improvement project (Project Horizon) and the EPS-enhancing M&A deal are not fully reflected in the FY24e P/E rating of c 7.0x, which is comfortably below the long-term average of 10.0x. Our positive stance is supported by the company’s strong balance sheet, progressive dividend and yield of over 5%.

08/06/2023 1 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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Edison Investment Research

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appears compelling.

April 17, 2024 April 17, 2024 1 EN

Edison Investment Research

Severfield - FY24 expectations unchanged, order book robust

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.

December 14, 2023 December 14, 2023 1 EN

Edison Investment Research

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

Severfield’s AGM statement highlights that FY24 is expected be in line with management expectations and that the quality of the orderbooks – both in the UK and Europe, and India – remains a key support for the future. That said, the outlook for the UK and continental Europe is less robust in the short term than it was due to the impact of high inflation and the rising interest rate cycle. The FY24e P/E rating of c 7x remains comfortably below the long-term average of 10.0x, implying that some risk is discounted in the rating. The stock yields more than 5%.

September 8, 2023 September 8, 2023 1 EN

ProCredit Holding - A solid start to 2024

ProCredit Holding (PCB) has delivered another strong set of results, posting Q124 net income of €33.5m (up 14% y-o-y), which translates into an annualised ROE of 13.4%. Earnings were supported by a sustained solid net interest margin (NIM; at 3.7% annualised vs 3.4% in Q123) and low cost of risk (2bp). Meanwhile, PCB reported a higher cost-income ratio (CIR, 61.7% in Q124 vs 59.7% in Q123) as it ramps up its new strategic agenda. In line with PCB’s dividend policy, the management board will propose at the AGM (on 4 June 2024) the payout of one-third of PCB’s FY23 profits, translating into a di...

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Britvic - Buoyant volumes in H124

Britvic’s interim results showcased a positive first half of FY24, with strong revenue growth across core brands and geographies. This was underpinned by a robust increase in volumes, reflecting product innovation and growth across its strategic pillars. Positive price/mix helped enable a 70bp improvement in margins. The enhanced profitability permitted a 16% increase in the interim dividend. Britvic continues to make strategic progress against the growth pillars of family favourite brands, Brazil and new growth areas. Management remains confident in the outlook, particularly with several key ...

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Topps Tiles - Looking to the future

Topps Tiles’ (TPT’s) H124 results demonstrate the effects of the general market softness of spend on repairs, maintenance and improvement, as evidenced by other companies and external data. Of more importance is TPT’s updated strategy, which includes targeting new markets and further/better leverage of existing brands, and ‘medium-term’ financial goals, the most notable being an indicated more than quadrupling of adjusted PBT from our FY24 estimates. Management points to more encouraging forward indicators for customer spend (including mortgage approvals and consumer confidence), albeit curren...

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Severfield - Revenue visibility and growth underappreciated

Severfield - Multiple positives should excite investors

Severfield - FY24 expectations unchanged, order book robust

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

ProCredit Holding - A solid start to 2024

Britvic - Buoyant volumes in H124

Topps Tiles - Looking to the future

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