Shares of Severfield, the Thirsk, North Yorkshire-based international steel group, rose as much as 25% on Thursday after it published a trading update for the year ended March 29, reporting a “solid” order book but outlining cost cuts, a plan for a 6% reduction in its 1,800 workforce, and lower capital expenditure.
“We continue to take appropriate cost reduction actions to mitigate the effects of the trading pressures the group is currently facing,” said Severfield.
“We have recently completed a headcount review which will result in a reduction in group headcount of c.6% through a combination of redundancies and the non-recruitment of approved vacancies.
“In addition, there is an even stronger than normal focus on cash generation and conservation. This includes careful working capital management, the acceleration of certain 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.”
The company said it expects FY25 underlying profit before tax to be in the range of £18 million – £20 million.
Last month, Severfield announced that chief executive Alan Dunsmore “by mutual consent” agreed to step down after seven years as CEO and will leave Severfield with effect on June 30, 2025.
The Severfield board has initiated a search process to find his successor.
The company’s shares are down about 65% for the past year, reducing the company’s stock market value to about £74 million.
Severfield’s high-profile achievements in recent years have included its work on Wimbledon No.1 Court, Tottenham Hotspur FC Stadium, First Direct Arena, Outernet London and the Lord’s Cricket Ground Expansion.
On Thursday, the firm said: “The UK and Europe order book remains solid and stands at £440m at 1 April (1 February: £403m), of which £327m (1 February: £281m) is for delivery over the next 12 months.
“The order book remains well-diversified and contains a good mix of projects across the group’s key market sectors including in Europe, with 20 per cent of the order book representing projects in continental Europe and Ireland (1 February: 21 per cent).
“The Indian order book of £210m at 1 April (1 November: £197m) is at record levels and contains a good mix of higher margin commercial work of 79 per cent (1 November: 77 per cent). This order book reflects a construction sector in India which continues to grow strongly, together with the increased use of steel as a construction material.”
In its outlook, Severfield said: “Whilst we continue to see a good pipeline of project opportunities, 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.
“As such, our expectations for FY26 are unchanged from those communicated at the time of the trading update on 3 March.
“Looking further ahead, we have already secured some attractive large projects for FY27, and we are also seeing significant future opportunities in sectors such as manufacturing (industrial), commercial offices, including the emergence of several planned large developments in London, and data centres, driven by Artificial Intelligence (‘AI’) applications which are driving even greater dependence on data centre infrastructure.
“Our businesses also remain well positioned to win work in other markets with positive long term growth trends including those which are driving the green energy transition. Our prospects across these markets provide the board with confidence that the group will deliver attractive shareholder returns in the future and our medium term growth targets remain unchanged.”