Our chairman's view
2023 was another year of strong progress for the Group despite market headwinds. We have grown the business, launched our new digitisation programme, Project Horizon, and have increased our presence in Europe in April 2023 through the acquisition of VSCH. These achievements are down to the resilience, dedication and creativity of our teams, and the support of our clients, supply chain and stakeholders.
Revenue increased by 22 per cent to £491.8m (2022: £403.6m) and underlying¹ profit before tax by 20 per cent to £32.5m (2022: £27.1m), ahead of our previous expectations and reflecting a strong operating performance both in the UK and India. This profit performance has been supported by good cash generation and our strong balance sheet has enabled us to make the right long-term decisions for the business. Year-end net funds (on a pre-IFRS 16 basis) were £2.7m, an increase of over £20m on the previous year.
Our total dividend for the year has increased by 10 per cent to 3.4p per share (2022: 3.1p), reflecting our results, balance sheet and our confidence in the Group’s future prospects.
Board changes
We continue to evolve the board to ensure that it has the right balance of knowledge, experience and outside-in perspective. In October 2022, we welcomed Mark Pegler as a non-executive director, who brings with him many years of business and leadership experience in manufacturing and international businesses and is a strong addition to the board. His appointment forms part of the board succession process and it is intended that Mark will become the audit committee chairman following the retirement of Tony Osbaldiston in July 2023.
Markets and strategy
Our business model and strategy remain unchanged. Despite some challenging market conditions, our clients have continued to regularly place orders and we have secured a significant value of new work over the past 12 months. This has resulted in order books at 1 June 2023 of £510m for the UK and Europe, and of £139m for India, leaving us well-positioned with a strong secured workload for the 2024 financial year and beyond.
In the UK and Europe, we have a prominent position in market sectors with strong growth potential and are well-positioned to help accelerate the journey to Net Zero. Our Nuclear and Infrastructure division is well-placed to meet the demand for ongoing state-backed investment, including a growing focus on infrastructure which can mitigate climate change, such as nuclear power. In our Commercial and Industrial division, we continue to see some significant opportunities, both in the UK and continental Europe, supported by the acquisition of VSCH. This includes projects in support of a low-carbon economy such as battery plants, energy efficient buildings and manufacturing facilities for renewable energy.
Creating value in JSSL remains a key strategic objective of the board. In India, an improving pipeline of potential orders reflects a continuing strong demand for structural steel. This, together with JSSL’s strong order book, leaves the business very well-positioned to take advantage of a strongly growing economy which will drive the success and long-term value of the business.
Health and safety
The health, safety and wellbeing of our employees is of utmost importance, and both our IFR and AFR continue to outperform the industry averages.
Although we have seen another reduction in our AFR to 0.14 from 0.16, our injury frequency rate (‘IFR’) increased to 1.61 from 1.49. The slight increase in IFR follows several years of significant improvement but we are not complacent and in 2023, we have updated our behavioural safety programme and launched our Safer@Severfield initiative, which will further ingrain our culture of employee engagement, commitment and our life saving rules.
Sustainability
Although the macroeconomic environment is somewhat uncertain, there is one enduring long-term certainty and that is the need to act against climate change. We have some great initiatives underway to reduce our carbon emissions and to help our clients and supply chain reduce theirs, including our involvement with SteelZero. We have maintained our accreditation as carbon neutral for our manufacturing and construction operations by Achilles, an important building block in our journey towards Net Zero by 2050.
In 2023, we were awarded a ‘B’ rating in the CDP index and a supply chain score of ‘A-’ as well as maintaining our ‘very good’ BES 6001 responsible sourcing accreditation, highlighting our continued engagement with our supply chain to promote sustainability. We are delighted that our ESG progress has also been recognised by the Group’s inclusion, for the third year running, in the Financial Times listing of Europe’s climate leaders which showcases corporate progress in fighting climate change.
The Group took steps during the year to help our employees manage the rise in the cost-of-living. These included agreeing a one-off cost-of-living payment and providing enhanced employee benefit packages. In addition, our annual pay awards have taken into account ongoing inflationary pressures, and we have implemented higher pay increases for our more junior and lower paid colleagues.
Summary and outlook
The Group has substantial, high-quality order books which provide us with good earnings visibility in the future. Whilst we remain mindful of the macroeconomic backdrop, ours is a strong, diverse and resilient business, well placed to overcome the challenges of the coming year and to take advantage of the many opportunities that we are seeing.
We remain focused on our successful strategy, have a solid platform from which to continue Severfield’s continued long-term development and I look forward to the year ahead with optimism.
Kevin Whiteman
Non-executive chairman
14 June 2023