Severfield warns on profits despite first-half growth

(Sharecast News) - Shares in structural steel group Severfield were sliding on Tuesday morning, despite a 17% rise in first-half revenue to £252.3m, as the company warned on profits amid a number of short-term headwinds.

The London-listed firm said that for the six months ended 28 September, underlying profit before tax increased 14% to £16.1m.

It said its UK and Europe order book stood at £410m as of 1 November, down from £460m in July, encompassing projects across industrial, data centre, infrastructure, energy, and commercial office sectors.

Severfield said its operations in India showed strong momentum, with a record order book of £197m, up from £181m in July, driven by accelerated expansion plans for new production facilities expected to be operational by the 2026 financial year.

Net debt widened to £11.6m, compared to £9.4m in March, reflecting acquisition loans and stable working capital.

The board left the interim dividend unchanged at 1.4p per share, with a £10m share buyback programme continuing to provide additional capital returns.

Severfield said the period's results were impacted by a £20.4m non-underlying cost related to a bridge remedial works programme, with the potential for future recoveries from third parties under assessment.

While Severfield noted a slower-than-anticipated recovery in some UK sectors, coupled with tighter pricing and delays or cancellations of large projects, it said it continued to see opportunities in the European market.

The company said it expected 2025 underlying profits to fall below previous forecasts.

"In the first half of the year, we have delivered further underlying profit growth and have secured some attractive projects which are reflected in our diversified order books," said chief executive officer Alan Dunsmore.

"We continue to see some good projects coming to market; however, the predicted recovery in certain sectors has been slower than previously anticipated, and pricing has remained tighter for longer than expected.

"In addition, a number of large project opportunities for the 2025 and 2026 financial years have been either delayed or cancelled and, given the current market backdrop, we remain vigilant to the increased risk of delay to expected orders in the short-term."

Dunsmore said that although the wider market backdrop continued to be challenging, Severfield's track record and diversified activities gave the board and management confidence in delivering the targets set for the medium-term.

"Looking further ahead, we welcome the new government's budget which established a National Wealth Fund to invest in energy, transport projects and critical national infrastructure.

"We have a prominent position in market sectors with strong growth potential and are well-positioned to win projects in markets with positive long-term growth trends including in support of a low-carbon economy and those which are driving the green energy transition, providing us with a strong platform to fulfil our strategic growth aspirations."

At 1004 GMT, shares in Severfield were down 35.78% at 56p.

Reporting by Josh White for Sharecast.com.