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Severfield : Analyst Presentation (24 November 2020) – Interim Results for 6 Months to 30 September 2020

11/24/2020 | 08:11am

Interim Results

30 September 2020

Severfield Interim Results

Alan Dunsmore

Chief Executive Officer

September 2020

2

Severfield Interim Results

Highlights

  • Revenue up 40% at £186.0m
  • Underlying profit before tax up 3% at £8.4m - despite the impact of COVID-19
  • Good cash generation resulting in net funds of £19.5m, including outstanding acquisition loan of £10.5m for Harry Peers
  • UK and Europe order book of £287m
  • Share of loss from India of £0.7m reflecting COVID-19 related disruption to operations
  • India order book is stable at £98m
  • Underlying basic EPS of 2.2p
  • Interim dividend maintained at 1.1p per share

September 2020

3

Severfield Interim Results

COVID-19

  • UK and Europe - factories are fully operational, all construction sites are open, underlying operations performing well
  • Strong balance sheet and cash position, sufficient committed funding in place until 2023 and cash generative business model
  • Tendering and pipeline activity remain very encouraging
  • Pricing is more competitive and some client investment decisions taking longer than normal
  • Additional resilience provided by our market sector, geographical and client diversity
  • India - economy opening up slowly, JSSL well placed to win more work once improved market clarity returns
  • No claims made under government support packages - including furlough scheme
  • Optimistic in our outlook for FY21 and beyond

September 2020

4

Severfield Full Year Results

Adam Semple

Group Finance Director

September 2020

5

Severfield Interim Results

Group income statement

£m

Revenue

Underlying operating profit (before JVs and associates)

Results of JVs and associates

Net finance expense

Underlying profit before tax

Tax

Underlying profit after tax

6 months to

6 months to

30 Sept 2020

30 Sept 2019

186.0

131.7

9.5

7.0

(0.6)

1.5

(0.4)

(0.3)

8.4

8.2

(1.7)

(1.3)

6.7

6.9

  • Improved visibility of second half and full year outturn
  • Market guidance reinstated (assuming no material impact from further lockdowns)

September 2020

6

Severfield Interim Results

India income statement

£m

6 months to

6 months to

12 months to

30 Sept 2020

30 Sept 2019

31 Mar 2020

Revenue

23.1

56.3

109.3

Operating profit

-

4.8

9.3

-

8.5%

8.5%

Finance expense

(1.6)

(1.3)

(2.9)

(Loss) / profit before tax

(1.6)

3.5

6.4

Tax

0.3

(0.9)

(1.9)

Profit after tax

(1.3)

2.6

4.5

Group share after tax (50%)

(0.7)

1.3

2.2

  • India order book of £98m (June 2020: £110m)
  • Production of 18,000 tonnes (H1 2019: 50,000 tonnes)

September 2020

7

Severfield Interim Results

Balance sheet

£m

Non-current assets

Current assets

Inventories

Trade and other receivables

Cash and cash equivalents

Current tax asset

Total assets

Liabilities

Current liabilities

Borrowings (includes IFRS 16 leases)

Retirement benefit obligations

Deferred tax liabilities

Total liabilities

Net assets

30 Sept 2020

31 Mar 2020

200.7

203.8

6.1

6.9

68.3

74.6

29.8

44.3

2.0

1.6

106.2

127.4

306.9

331.2

(81.2)

(85.4)

(21.1)

(39.4)

(23.0)

(18.7)

(2.8)

(4.0)

(128.1)

(147.5)

178.8

183.7

September 2020

8

Severfield Interim Results

Cash flow

Net funds bridge - period ended 30 September 2020

£ million

35.0

30.0

3.1

(1.7)

(5.5)

25.0

11.8

(2.4)

20.0

(2.2)

15.0

Working capital as a %age of

sales was 2% at the period-end

10.0

(below target range of 4 - 6%).

19.5

16.4

5.0

-

Net funds

Operating cash flow

Working capital

Net capex

Dividends paid

Taxation

Other

Net funds

- Mar 2020

movement

- Sept 2020

September 2020

9

Severfield Interim Results

Alan Dunsmore

Chief Executive Officer

September 2020

10

Severfield Interim Results

Group strategy

Growth

India

• Both organic and through selective acquisitions

• Growth and creating value in JSSL

  • European business - new geographies and markets
  • Severfield (Products & Processing) - new product ranges including 'Severstor' and 'Seversilo'
  • Harry Peers - nuclear, process industries and power sectors
    • modular steel offerings
  • CMF - expansion underway - more cold rolled steel products

Operational improvements

  • Manufacturing efficiency
  • Innovation
  • Digital transformation, including systems
  • People
  • Risk management, control, health and safety

September 2020

11

Severfield Interim Results

Responding to the 'new normal'

Our capability and agility to respond to the post COVID- 19 market dynamics is greater than it has ever been before

Government

policy

Market

Our

sectors

clients

September 2020

12

Severfield Interim Results

Market sectors

Power and energy

Stadia and leisure

Health and education

Industrial and distribution

Nuclear

Retail

Commercial

Transport

Data centre and other

Process industries

September 2020

13

Severfield Interim Results

High quality UK and Europe order book

£m

350

323

313

295

300

287

271

256

237

243

245

250

230

200

200

183

150

100

50

0

Jun-18

Nov-18

Jun-19

Nov-19

Jun-20

Nov-20

Order book (total)

Order book (<12 months)

September 2020

14

Severfield Interim Results

Current major projects

Endorsing Severfield's leading market position

Google Headquarters King's Cross London

Lord's Cricket Ground London

Argyle Street Glasgow

Fulham Football Club Riverside Stand Development London

One Sherwood Street London

September 2020

15

Severfield Interim Results

Current major projects

Endorsing Severfield's leading market position

Distribution Centre Swindon

ESS Lund Sweden

Logistics Operations Centre Solihull

Data Centre Dublin

Bankside Yards London

September 2020

16

Severfield Interim Results

UK and Europe order book

Sector

Nov 2020

Jun 2020

Future Trend

£287m

£271m

Industrial and distribution

36%

45%

Commercial offices

27%

24%

Nuclear

17%

4%

Data centres and other

11%

15%

Transport

5%

4%

Stadia and leisure

3%

5%

Process industries

1%

1%

Power and energy

-

1%

Retail

-

1%

Health and education

-

-

UK

68%

54%

Europe and Republic of Ireland

32%

46%

September 2020

17

Severfield Interim Results

HS2 - a decade of infrastructure investment

Phase 1

Status

Opportunity

Underway

Four main stations

London Euston

London to

Consortia

Old Oak Common

BBV (Balfour Beatty, Vinci)

Birmingham Interchange

Birmingham

SCS (Skanska, Costain, Strabag)

Birmingham Curzon Street

EK (Eiffage Genie, Kier)

Bridges

Align (Bouyges, VolkerFitzpatrick, SRA)

Around 70 structures

Phase 2

Status

Opportunity

Birmingham to

2022+

Stations and bridges

Crewe

Phase 3

Status

Opportunity

Manchester and

Leeds (under

-

-

government

review)

September 2020

18

Severfield Interim Results

India - overview

  • COVID-19continues to disrupt operations
  • First half share of loss reflects lower activity levels and impact of site closures and remobilisation
  • All projects remain ongoing but opening up of economy from lockdown is progressing slowly
  • Slower pipeline conversion and some delayed decision making from clients
  • Order book is stable at £98m, close to pre-pandemic levels
  • Good order pipeline which includes a number of commercial projects for key developers and established clients
  • Key initiatives include development of strategic alliances with clients (nominated steelwork contractor) for commercial, data centre and healthcare projects
  • Share of steel in construction remains well below other developing countries
  • We remain positive about the long-term development of the Indian market and value creation potential of JSSL

September 2020

19

Severfield Interim Results

India order book

140

124

134

134

120

106

110

98

100

52

79

27

94

80

60

90

78

40

79

72

20

55

40

20

20

0

Jun-18

Nov-18

Jun-19

Nov-19

Jun-20

Nov-20

Commercial work

Industrial work

September 2020

20

Severfield Interim Results

Current major projects - India

Phoenix Business

Sattva Knowledge Park Hyderabad

HUB Hyderabad

Phoenix Centaurus Hyderabad

Data Centre Navi Mumbai

JSW Conveyors Dolvi

IKEA Bengaluru

September 2020

21

Severfield Interim Results

India - target sectors

Offices

Commercial

Hospitals

Data and

distribution centres

Sectors Industrial

Power

Infrastructure

Airports

Bridges

Work from home (WFH) affecting the growth

Pandemic has highlighted the lack of infrastructure in this sector - improving demand foreseen

WFH, lockdown and internet-based buying has increased demand for data and distribution storage facilities

Steel

Currently steady. Longer

term should be positive

Oil and gas

Steady demand

Cement

Dip in demand

Steady demand

Post pandemic international travelling has reduced

Currently steady - longer term should be positive

September 2020

22

Severfield Interim Results

Summary and outlook

  • Strong H1 despite the disruptive impact of COVID-19
    • Revenue up 40%, underlying profit before tax up 3%
    • Strong cash position allows us to make the right long-term decisions
    • Continued progress with 'SSS' operational improvement initiatives
    • Harry Peers integrating well
    • Interim dividend maintained
  • High quality UK and Europe order book of £287m of which £245m is for delivery over next twelve months
  • India order book of £98m, close to pre-pandemic levels
  • Tendering and pipeline activity remain very encouraging despite more competitive pricing and some client investment decisions taking longer than normal
  • Additional resilience provided by market sector, geographical and client diversity
  • Improved visibility of H2 and full year outturn - assumes no material impact from further lockdowns

September 2020

23

Disclaimer

Severfield plc published this content on 24 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 November 2020 13:10:04 UTC

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