Severfield tanks after profit warning

(Sharecast News) - Structural streel group Severfield tanked on Monday as it warned on profits, citing project cancellations and delays, and announced the cancellation of a share buyback. In an update for the year ending 29 March, the company said that since its interims last November, market conditions have shown no signs of improvement, with pricing remaining at tighter levels for longer than expected in a competitive market, while project opportunities continue to be either cancelled or delayed.

This includes a large project for which production was expected to begin in January and which has been recently delayed until early FY26.

"Whilst the group has sought to mitigate the effects of these prevailing market conditions through new project awards, our normal contract execution improvements and cost reductions, as well as the cancellation of the share buyback programme, it has not been possible to secure sufficient work in the short term to fully offset the non-recovery of factory overheads in Q4," it said.

As a result, it now expects full-year underlying pre-tax profit of between £18m and £20m, while FY26 profit is expected to be below that.

Jefferies, which rates the stock at 'buy', said the mid-point of the guidance for FY25 is equivalent to a downgrade of around 30%.

"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," Severfield said.

"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."

At 0910 GMT, the shares were down 44% at 26.48p.

Jefferies said: "While this is a disappointing update, it is the magnitude of the likely FY25F & FY26F consensus downgrades that will be the greatest challenge for the market to digest, we feel.

"We expect the shares to move meaningfully lower today, and it may take some time before there is an improvement in the group's underlying markets, but there is a lot to play for, the balance sheet is robust and a medium-term recovery story and Indian JV opportunity still exist."