reports
- Toby Thorrington
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 appear...
- Toby Thorrington
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...
- Toby Thorrington
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 ri...
- Toby Thorrington
Severfield - FY23 results highlight progress and strength
FY23 results highlight that we believe revenue quality remains materially underappreciated by the market (see our June update note), especially now the UK and EU are embarking on huge investment programmes to renew and upgrade infrastructure. In our view, the outlook in the UK, continental Europe, especially post recent M&A, and India is not fully reflected in the FY24e P/E rating of c 7.5x, which is comfortably below the long-term average of 10.0x. Our positive stance is supported by the compan...
- 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 ...
- Liberum Research Team
- Liberum Research Team
- Alex O’Hanlon
- Joe Brent
- Sanjay Vidyarthi
LIBERUM: Severfield* - Site visit to Lords highlights growth prospects
Site visit to Lords highlights growth prospects, both organic and acquisitive. Looking at the three divisions; 1) At Commercial and Industrial, the new divisional structure provides greater clarity to customers; 2) Nuclear and Infrastructure is the key revenue growth engine; and 3) Modular Solutions is the smallest division but should be capable of the highest margins. Looking at the business as a whole; 1) The new divisional disclosure shows the £5m to £6m recovery potential at Modular Solution...
- Liberum Research Team
- Liberum Research Team
- Alex O’Hanlon
- Joe Brent
- Sanjay Vidyarthi
LIBERUM: Severfield* - In line earnings and strong order book growth
Trading update indicates trading has been in line with expectations with a 65% PBT weighting to H2. We maintain our earnings estimates. Severfield is largely hedged against higher energy costs, although we assume a £1m hit in FY 25 which could prove conservative. We maintain our pre IFRS 16 FY 23 net debt estimate of £13m but expect this to increase to £25m in FY 24 as the VSCH acquisition completes. We make four key points: 1) The VSCH acquisition announced on 15 March is an accretive and strat...
- Liberum Research Team
- Liberum Research Team
- Alex O’Hanlon
- Joe Brent
- Sanjay Vidyarthi
LIBERUM: Severfield* - Accretive and strategically sensible acquisitio...
Severfield announces the acquisition of a European steel fabrication company. The net consideration is €24m payable in cash on completion. The deal should be revenue and cost synergistic. There is scope to grow in the Netherlands and neighbouring EU countries. We estimate 6% and 7% accretion in FY 2024 and FY 2025 respectively. The estimated price paid of FY 24 EV/EBIT of 5.9x seems reasonable. A revised CY 23 P/E of 7.1x is attractive, given the growth potential.
- Liberum Research Team
- Liberum Research Team
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Severfield Plc: 1 director
A director at Severfield Plc maiden bought 53,600 shares at 64p and the significance rating of the trade was 69/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two years clear...
- Toby Thorrington
Severfield - Constructing a robust future at a low rating
The strong interims confirmed Severfield’s robust performance in the current inflationary environment. The company is benefiting from solid demand across a range of sectors, which is reflected in the elevated UK order book (£464m versus the 2016–21 average of £266m). In India, the joint venture (JV) is growing rapidly and capacity is to be expanded to cater for additional demand. We believe the quality of the business and the anticipated growth is not reflected in the FY23e P/E rating of c 7.5x,...
- Toby Thorrington
Severfield - Trading robust with lowest P/E since GFC
Severfield, the leading structural steel work fabricator in the UK, is benefiting from robust demand from a range of sectors, which is reflected in the elevated order book (£483m vs 2016–21 average of £266m). In India, the joint venture is growing rapidly and capacity is to be expanded to cater for additional demand. However, the growth is not reflected in the c 7x P/E rating, which is the lowest level since the global financial crisis (GFC).
- Toby Thorrington
Severfield - Strong H2 performance and order book growth
Severfield has overcome supply chain strains to deliver H2-weighted profitability in line with management’s expectations. Input cost inflation pass-through and order visibility cause us to raise our revenue expectations, leaving PBT and EPS estimates unchanged at this stage. Outlook confidence from orders on hand and pipeline comments is only latterly being reflected in share price performance.
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