The cancellation of a major film studio project has significantly affected Severfield’s financial performance this year.
- A client-driven decision led to the pausing of the Sunset Studios project, resulting in a substantial revenue gap.
- Severfield’s turnover decreased by 6 per cent, compounded by lower steel prices and softer market conditions.
- Despite the financial hit, Severfield’s strategic measures and acquisitions have provided some resilience.
- The company remains optimistic, with a diverse project portfolio and ongoing growth in energy and infrastructure sectors.
The cancellation of a proposed film studio in Hertfordshire has had a notable impact on the financial performance of Severfield, a leading specialist in steel construction. The cessation of the £50 million Sunset Studios project was described as a ‘client-driven decision to pause construction,’ according to Severfield’s latest financial disclosures. This decision has left a considerable gap in the company’s revenue streams and has contributed to a 6 per cent drop in turnover, from £491.8 million to £463.5 million for the financial year ending 30 March 2024.
In a statement, Chief Executive Alan Dunsmore emphasised that the downturn was not solely due to the project cancellation. He pointed out that lower steel prices and a ‘softer warehousing and distribution market’ also played significant roles in diminishing the firm’s fiscal outcomes. These factors culminated in a 15 per cent reduction in pre-tax profit, descending from £27.1 million to £23 million. Nevertheless, Severfield highlighted that its profit figures were still ‘ahead of expectations,’ showcasing the firm’s ability to navigate challenging market conditions.
Severfield’s financial strategy has involved a focus on robust risk management and careful contract selection to counterbalance the market fluctuations. The firm’s acquisition of Voortman, a Netherlands-based steel fabricator, for €24 million (£20.3 million) in March 2023, has been hailed as a key move to ‘improve market resilience’ and expand its European presence. Severfield’s operations in Europe have grown to represent 32 per cent of its order backlog, a notable increase from the previous figures.
The current order book, valued at £478 million, encompasses a wide variety of projects across the UK and Europe, including significant infrastructure works. In the UK alone, Severfield is engaged in high-profile projects such as the Everton FC stadium in Liverpool and the Envision gigafactory in Sunderland. The company’s diversified project portfolio includes major UK infrastructure efforts like the HS2 high-speed rail programme, Hinkley Point C, and the Silvertown Tunnel.
Despite a minor decrease in net cash from £11.3 million to £10.4 million, Severfield reported a decade-long streak of dividend growth, reaching a payout of £10.7 million. The firm’s financial outlook remains positive, with £384 million worth of projects set for execution in the upcoming year. Severfield continues to position itself strategically within the energy and decarbonisation sectors, aiming for substantial growth through developments in energy-efficient buildings and green infrastructure initiatives. ‘While there remains uncertainty in the wider economy, we are seeing an improvement in market conditions,’ a sentiment echoed in Severfield’s official communications.
While the project cancellation has impacted Severfield’s immediate financials, strategic acquisitions and a robust project pipeline have positioned it favourably for future growth.
