A strong set of interim results from Severfield this morning, indicating that full year results are expected to be comfortably ahead of previous expectations. All key metrics were moving in the right direction in H1. Revenue was up 16% to £137.1m and further self help led the operating margin higher to 9.3% from 7.0% last year, slightly flattered by a number of contract completions in the period. Adj. PBT was up 59% to £12.9m. Encouragingly, the order book has increased, with the UK order book at £245m in November vs. £221m in September and the India order book at £79m vs. £64m in September. The Group continues to win contracts across its end markets and with a strong pipeline of projects, we are confident that Severfield is on its way to achieving its target to double PBT by FY’20 (from £13.2m in FY’16). We expect to upgrade our current year PBT forecast by 11% to c.£23.5m. Trading on an FY’18 P/E multiple of 9.7x (post upgrades), we believe that Severfield is attractively valued vs. peers.
