3rd Jun 2014 08:49
LONDON (Alliance News) - Severfield PLC Tuesday posted a narrowed loss for the year to end-March, as it recovered its operating margin in the UK and reorganised its largest business, helping to offset weakness at the company's Indian joint venture.
The structural steel company posted a pretax loss of GBP4.1 million, narrowed from a loss of GBP28.9 million in the previous year, despite seeing revenue decline to GBP231.3 million from GBP318.3 million. The improvement resulted from Severfield's operating margin swinging to 3.3% from a negative margin of 6.0%.
The company said the positive operating margin resulted from an operational improvement programme launched during the year. Severfield said this improvement was a good step towards its target of an underlying operating margin of 5% to 6% by the 2015/16 financial year.
It reorganised its Severfield-Watson Structures business in the first half, reducing capacity, cutting overheads, and restructuring and strengthening its management team. As a result the company posted a restructuring charge of GBP2.6 million. However, it took total savings to GBP4 million a year.
Severfield continued to reduce outstanding balances on some of its legacy contracts, which it said had been the core of its operating losses in the previous year.
However, despite these improvements in the UK, the company's Indian joint venture JSW Severfield Structures Ltd posted a loss during the year, hit by delayed contracts.
The company said that, in looking to utilise its Indian factory's spare capacity, its project mix had deteriorated, as it took on low and negative margin products to contribute to overheads.
Severfield said that India remains primarily a concrete construction market, and the market for steel fabrication is not progressing as well as hoped. Although there is a great opportunity in the region, converting concrete projects to steel projects continued to take longer than expected, it said.
As a result of the business's poor performance, Severfield and its joint venture partner agreed to reorganise the management of the business, and reduce its cost base.
The company decided to not to pay a dividend for the year, but noted that it was committed to reinstating the payment of a dividend when its financial performance improves.
Shares in Severfield were trading down 2.7% at 55.00 pence Tuesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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