Severfield, the Thirsk, North Yorkshire-based steel group, said its order book was £479 million at September 1, down from £510 million at June 1 — with £337 million is for delivery over the next 12 months.
In a trading update ahead of its AGM, Severfield said its financial performance in the first five months of the year is in line with its expectations and its cash and balance sheet position remains strong.
However, the company cautioned that the current backdrop of more persistent high inflation and rising interest rates “is resulting in some ongoing delays in the conversion of our existing pipeline of opportunities.”
It said these more challenging recent market conditions were a factor in the decision by Sunset Studios to pause construction on its planned new film production base in Hertfordshire, a contract which was removed from Severfield’s order book in July.
Severfield operates from seven sites with 1,800 employees. The group also has an established presence in the expanding Indian market through its joint venture partnership with JSW Steel, India’s largest steel producer.
For its UK and Europe business, Severfield said: “The order book remains well-diversified and contains a good mix of projects across the group’s key market sectors.
“In terms of geographical spread, 90 per cent of the order book represents projects in the UK, with the remaining 10 per cent representing projects for delivery in Europe and the Republic of Ireland (1 June 2023: 90 per cent in the UK, 10 per cent in Europe and the Republic of Ireland).
“Since the announcement of the 2023 results in June, we have secured a significant amount of high quality new work and variations to existing contracts, and our large order book continues to provide us with good earnings visibility for the remainder of the 2024 financial year and beyond.
“We are also continuing to see some large project opportunities in the UK and in continental Europe, supported by the recent acquisition of Voortman Steel Construction (VSCH), which is integrating well into the group’s operations.
“Notwithstanding this, the current backdrop of more persistent high inflation and rising interest rates is resulting in some ongoing delays in the conversion of our existing pipeline of opportunities, as clients wait for economic stability, together with some lower tendering activity, particularly in the distribution sector.
“These more challenging recent market conditions were also a factor in the decision by Sunset Studios to pause construction on its planned new film production base in Hertfordshire, a contract which was removed from the order book in July.
“Many of our chosen markets continue to have a favourable outlook – the group has a prominent position in market sectors with strong growth potential and is well-positioned to win projects in support of a low-carbon economy.
“These include opportunities in both our Commercial and Industrial division and Nuclear and Infrastructure division, such as battery plants, energy efficient buildings, manufacturing facilities for renewable energy, together with work in the transport, nuclear and power and energy sectors given our capability to deliver major infrastructure projects.
“In our Modular Solutions division, we have maintained our focus on growing our Severstor and Rotoflo product ranges, which attract higher margins.
“We continue to make significant progress in growing our revenues and client base and are on track to achieve a good performance for the 2024 financial year.”
On its India business, Severfield said: “The order book has increased to £170m at 1 September (1 June: £139m).
“With this record order book, improving pipeline of potential orders and numerous identified growth opportunities, JSSL is well-positioned to take advantage of a very encouraging outlook for the Indian economy and a strong underlying demand for structural steel in construction.”
In its outlook, Severfield said: “The outlook for the group remains positive and our businesses are well-positioned in markets with excellent long-term growth opportunities.
“Whilst current trading conditions are more challenging, given the group’s historical performance, diversified activities and the strength of our order books, we continue to expect to deliver further progress and a result for 2024 which is in line with our expectations.”