Firm says slowing workloads means underlying number could be down by as much as half when results come out this summer
Steelwork contractor Severfield has said slowing workloads and falling business confidence means profit will be lower than expected this year.
The warning was made in a trading update this morning with the firm saying underlying pre-tax profit for the year to March will be between £18m and £20m. Last year the figure was £36.5m.
The firm said: “Market conditions have shown no signs of improvement [since its interim results last November], with pricing remaining at tighter levels for longer than expected in a competitive market and project opportunities continuing to be either cancelled or delayed. This includes a large project for which production was expected to commence in January and which has been recently delayed until early FY26.”
It said it had cancelled a £10m share buyback programme and made other “cost reductions” but admitted: “It has not been possible to secure sufficient work in the short term to fully offset the non-recovery of factory overheads in Q4.”
And it said that “a revised contract judgement to reflect changes on a long-term nuclear project originally tendered in 2019” was also behind the fall in underlying profit which will be announced when it publishes its full-year results, expected to be in June.
Severfield also warned underlying pre-tax profit for FY26 would be below the number predicted this year.
It said: “Whilst we continue to see a good pipeline of project opportunities, client decision-making continues to be deferred and projects are not being awarded or progressing within normal timescales, consistent with the current lower level of business confidence in the UK economy as a whole. This, in tandem with the absence of large ‘anchor’ projects in the order book and a general market backdrop which is not expected to improve in the short-term, is having a consequential impact on FY26. As such, underlying profit before tax for FY26 is now expected to be below our revised expectations for FY25.”
Last November, Severfield said that having to repair 12 bridges. including several on HS2, because of welding problems will cost it more than £20m and in this morning’s update, the firm said: “The bridge remedial works programme is progressing as expected and our view of testing and remedial costs and insurance recoveries is broadly unchanged, with more clarity expected in the coming weeks as discussions with affected clients, relevant industry authorities, insurers and other stakeholders progress.”
It said that it had secured “some attractive large projects for FY27, and we are also seeing future large opportunities in sectors such as data centres, manufacturing (industrial) and commercial offices, including the emergence of several planned large developments in London”.
It said its order book for the UK and Europe at 1 February this year was £403m with £281m due to be completed in the next year. Severfield said the order book did not include the “large project” as the full order had not yet been received.
In its last set of annual results, Severfield saw pre-tax profit slip 15% to £23m on revenue down 6% to £463.5m in the year to 30 March 2024.
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