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By Josh White
Date: Tuesday 21 Apr 2020
LONDON (ShareCast) - (Sharecast News) - Structural steel company Severfield updated the market on its trading on Tuesday, following the end of its financial year on 31 March.
The London-listed firm said that, in line with the current guidance on Covid-19 from the UK government, its factories and sites remained operational where it was safe and practical to do so, and with strict precautions in place including enhanced levels of cleaning, additional hygiene facilities and social distancing.
All employees who can work from home were now doing so, and had the technology and capability to service clients remotely.
For construction sites in the Republic of Ireland and in continental Europe, the group said it was following local government guidance.
"The overall impact of Covid-19 remains uncertain, and the group is experiencing some disruption to its operations, both on its sites and within its factories, as a result of the outbreak," the board said in its statement.
"Notwithstanding this, the UK and Europe order book at 1 April stands at £293m, providing the group with a strong future workload during this unprecedented period of uncertainty."
That was a reduction from £323m on 1 November.
"The level of tendering and pipeline activity for the group remains good."
Looking at its current trading, Severfield said that while it had started to see the initial impacts of the pandemic, those were not expected to have a material impact on the results for the year ended 31 March.
Its financial position remained "good", and year-end net funds excluding IFRS 16 lease liabilities were around £16m, down from £25m at the end of March.
Net funds at 31 March comprised cash of £44m, offset by borrowings under the group's revolving credit facility of £15m, and the outstanding term loan of £13m for the Harry Peers acquisition.
For the year ending 31 March 2021, it was expecting that the extent of the overall disruption from Covid-19 would inevitably have an impact on group profitability.
"Whilst the majority of the Group's construction sites remain open and its factories remain operational, given the ongoing market uncertainty, it is not possible to accurately predict either the duration of the disruption or its impact on the 2021 financial year outturn.
"We will continue to monitor external events, manage the situation closely and update the market as appropriate."
To mitigate the financial impact of the pandemic, and protect the group's cash position during the current uncertain period, Severfield said a number of precautionary actions had been implemented, including the deferral of all non-essential and uncommitted capital expenditure, together with restrictions on discretionary operating expenditure.
It also reported the "tight" management of working capital while continuing to support supply chain partners, and added that it was taking advantage of the opportunity to defer tax payments including PAYE, NIC and VAT.
An agreement had been struck with its lenders too, to defer quarterly term loan repayments due in March and June until September.
Severfield noted that it has a £25m revolving credit facility, which matures in October 2023, of which £10m was available as an overdraft facility.
"As a precautionary measure, the group has fully drawn down all available amounts under this facility to provide control over its own cash resources.
"Overall, cash headroom exceeds £50m at 31 March."
In India, the company said that, despite seeing the initial impacts of Covid-19, the joint venture had continued to perform well in the second half of the 2020 financial year.
Looking further ahead, in light of the extended nationwide lockdown announced by the Indian government in response to the pandemic and the developing impact of it on the Indian economy, the joint venture's operations were expected to be disrupted over a period of several months.
Given the rapidly changing dynamics in the external environment, the board said it was "difficult to predict with any accuracy" what the impact of the disruption would be on the joint venture in the 2021 financial year.
Its order book was £112m as at 1 April, down from £134m on 1 November, which the firm said contained a "good mix" of higher margin commercial work.
Despite the ongoing market uncertainty, the India joint venture's pipeline of potential orders still included a number of commercial projects for key developers and clients, with whom it had established "strong" relationships.
The expansion of the Bellary facility, which increased factory capacity to around 90,000 tonnes from about 60,000 tonnes, was now complete.
"Following discussions with its auditors, KPMG, the group is currently planning to announce its financial results for the year ended 31 March on 17 June," Severfield said.
At 1502 BST, shares in Severfield were down 1.48% at 66.6p.
|52 Week High||82.60p|
|52 Week Low||65.80p|
Compare performance with the sector and the market.
|Time||Volume / Share Price|
|14:29||33,523 @ 69.00p|
|14:28||1,391 @ 69.31p|
|14:24||770 @ 69.20p|
|14:24||1,736 @ 69.00p|
|14:24||4,000 @ 69.00p|
|Finance Director||Adam Semple|