Alan Dunsmore
Severfield will reduce its staff pool by 6 per cent to “mitigate the effects of the trading pressures” it is facing.
The contractor – ranked 42nd in the latest edition of the CN100 and CN‘s top structural steel specialist – carried out a headcount review last year. It now expects to cut more than one in 20 of its staff, “through a combination of redundancies and the non-recruitment of approved vacancies”.
In a trading update for the year to 29 March, published this morning (24 April), the firm said it has “an even stronger than normal focus on cash generation and conservation” looking forward.
“This includes careful working capital management, the acceleration of certain [unspecified] tax refunds from HMRC, a reduction in planned capital expenditure, taking into account the significant investment in the asset base over recent years, and other ongoing cost reduction actions,” it added.
However, Severfield does expect to achieve an underlying pre-tax profit tax of between £18m and £20m in the year to 29 March, which would be within its March estimates.
The firm issued a profit warning in March, following delays to an unnamed “large project” and hits to client confidence.
The £18m-£20m projection was a reduction on its previous prediction. Less than a month later, Severfield chief executive Alan Dunsmore announced that he would step down at the end of June.
Net debt was £44m, which is better than Severfield predicted last month.
Severfield also issued an update on its programme to remediate structural issues on 12 bridges it constructed, including nine on HS2. It has spent around £18m of the £20m it has allocated to deal with the matter.
The contractor expects to spend the rest of the money over the next two years, and has secured coverage from its professional indemnity insurers for the payments.
Looking ahead, Severfield revealed a “solid” and “well-diversified” order book in the UK and Europe of £440m.
But it added: “The market backdrop in the UK and Europe remains challenging, with pricing remaining at tighter levels for longer than expected in a competitive market and some projects not being awarded or progressing within normal timescales, all of which is consistent with the current lower level of business confidence in the UK economy as a whole.”
In the trading update, Severfield said it had secured some “attractive large projects” for the financial year to 29 March 2027.
It also pointed to “significant future opportunities” in sectors including the industrial, office and data centre sectors.
In an analyst note published today, Progressive Equity Research analyst Alastair Stewart said he was “encouraged” by the 9 per cent increase to Severfield’s order book, maintaining his Severfield forecasts up to the financial year ending 29 March 2027.
He agreed that the firm’s long term prospects are “solid”, especially “given the group’s dominance in ‘must have’ sectors that have gained further urgency in light of the new geopolitical reality”.
“These include datacentres and industrial sectors addressing energy and economic security, where the group dominates due to its scale, skills and financial strength,” he said.
