Specialist contractor stems overall losses but is hit by further losses in India
Severfield stemmed its losses in the year to 31 March 2014 and predicted recovery in the specialist steelwork sector by the end of the year.
The firm posted a pre-tax loss of £4.1m, down from a £28.9m pre-tax loss over the previous reporting period covering the 15 months to 31 March 2013.
Revenue fell to £231.3m, down from £318.3m, partly reflecting a “reduction in capacity” in the business due to downsizing and also the shorter reporting period.
The firm was hit by further losses from its Indian steelwork joint venture, with its share of losses growing to £3m, up from £0.3m over the previous period.
The firm said it made an overall underlying pre-tax profit, which strips out exceptional costs, of £4m, compared to a £21.5m underlying loss the previous year.
The firm’s underlying operating margin hit 3.3% compared to -6% the previous year.
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The firm’s UK order book stood at £168m on 31 March 2014, down marginally from 1 November 2013 at £172m, while the Indian order book grew slightly to £41m from £34m over the same period.
Severfield’s share price was down 2.8% in early trading following the results announcement.
The firm, formerly known as Severfield Rowen, launched a rebrand dropping ‘Rowen’ from its name yesterday.
The improved results come after a tough period of trading for the firm.
Last year the firm was hit by £20.1m of cost overruns on a number of problem contracts, including a £10m write-off on the 122 Leadenhall tower in London, known as the Cheesegrater (pictured), with the firm reporting a loss of £29m.
The period saw a number of profit warnings and the departure of the firm’s chief executive Tom Haughey, with a rights issue in February raising £44.8m.
Former Kier board member Ian Lawson was recruited as chief executive in September.
Severfield said it had made “good progress” resolving contract cost overruns during the year and “the board believes that balance sheet risk relating to these contracts has now been removed”.
The firm said it expects the steelwork market to “pick up towards the end of 2014 but the current order book does not yet reflect this”.
The firm said a rights issue launched in February 2013 and completed in April 2013 had “significantly strengthened” the firm’s balance sheet.
Ian Lawson, chief executive of Severfield, said: “During the financial year Severfield has achieved substantial operational improvements across the Group and delivered a significant turnaround in underlying profit before tax.
“Pleasingly, the Group’s ongoing stabilisation and recovery generated increasing UK operating margins supported by a strong balance sheet and solid order book.
“While our Indian joint venture performed below expectations, actions are being taken to put the business in a sustainable position and we believe the market in India continues to present significant future growth opportunities.
“The development of a clear Group strategy in addition to the anticipated recovery in the core UK market means Severfield is well placed for future growth.”