Severfield (LON:SFR): A good all-round performance in FY18 provided some positive markers of progress including rising UK margins, a steep step-up in the Indian JV order book and a special dividend declared for the year. While we acknowledge some sector variations, the overall trading outlook appears to be similarly robust and our estimates are modestly higher now. A c 4% near-term yield (ie final plus special DPS) is an obvious draw. Sector diversity provides resilience and additional growth potential in our view.
Solid FY18 performance
FY18 results matched our expectations and management deserves credit for achieving a solid UK trading result while at the same time undertaking some strategic rebalancing across its fabrication facilities. Revenues rose by c 5%, reported underlying PBT and EPS by 19% and 15% respectively, while a special dividend declaration supplemented a 13% underlying DPS increase (making an 87% y-o-y uplift overall). Moreover, there is good momentum in the Indian JV now, as measured by a record £106m order book. The group net cash position rose slightly to £33m after funding investment and increased dividend payments.
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