Lens On Earnings Of 2 Industrial Stocks: Severfield Plc and Castings Plc

Summary

  • Severfield Plc reported an 11% rise in revenue for FY21 and recommended dividend of 2.9p per share.
  • Castings Plc reported a 17.3% drop in annual revenue and dividend of 11.69p per share.

Several FTSE-listed companies are announcing their earnings showing the impact of Covid-19 related hardship. Let us have a look at the earnings of Severfield Plc (LON: SFR) and Castings Plc (LON: CGS), two industrial sector stocks and see how they performed during the period of pandemic and what are their future plans.

Severfield Plc (LON: SFR):

Severfield is the largest structural steel specialist in the UK, which provides a market-leading suite of services like design, manufacturing, construction, and project management of structural steelwork. The company works on various projects like commercial offices, stadia and Leisure, Health & Education buildings.

For the year ended 31 March 2021, the company reported an 11% rise in revenue to £363.3 million (FY20 revenue: £327.4million) and profit before tax of £21.1million (FY20: £25.8million), which indicates the company’s strength even during pandemic hit year.

The company reported basic earnings per share (EPS) of 5.6p and total dividends of 2.9p per share, which includes the proposed final dividend of 1.8p per share.

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Key Highlights of the financial year:

  • The company made strategic acquisition of DAM structure in February 2021, which is UK based innovative steel fabrication company, giving the Severfield access to its existing projects as well as propping, railway, and steel piling markets. The acquisition will be funded with a combination of cash and a term loan.
  • During the pandemic hit period, the company had undertaken over 100 projects, and these projects were from diverse sectors like data centres, nuclear and commercial offices.
  • As of 1st June, the company’s total order book stood at £301 million (Europe and the UK combined), including £18 million of DAM structure, of which £241 million is for the delivery over the next 12 months, which provides the company with the strong future outlook for the 2022 financial year.

Outlook for FY22:

A high-quality order book of £301 million in the UK and Europe markets, along with a £140 million order book from an Indian joint venture (JSSL) will support the company’s growth in 2022.

Even though the company saw a drop in pre-tax profit, Severfield Plc shares closed at GBX 81.00, up by 1.5% with a market cap of £245.97 million.

Castings Plc (LON: CGS):

Castings Plc is a market-leading iron casting and machining group based in the UK, supplying its products both to domestic as well as export markets. The company primarily works with clients from the commercial vehicles and automotive sectors. 

In FY21, the revenue of the company saw a dip of 17.3% to £114.7 million (FY20: £138.7 million) with pre-tax profits at £4.4 million (FY20: £12.7 million). Revenue and profit fall was attributed to the COVID-19 led lockdown in which most of the big clients of the company from commercial vehicle sectors closed their factories and new order flow was limited.

Even during the challenging year hit by the pandemic, the company has managed to declare final dividends of 11.69p per share to be paid on 23 August 2021. Basic earnings per share for the company was 9.51p.

Key Highlights of the financial year:

  • The company’s iron foundry plant which is located in Brownhills was upgraded with improved cooling and sand plant and now it is functioning at full capacity.
  • William Lee, the second iron foundry has invested in a heat treatment plant which will cut off the need for a subcontractor for this process and hence improve productivity.

Outlook for FY22:

As the economy is opening up after the second wave of the coronavirus, the company is expecting increased volume from its clients and hence maintaining full production and increasing stock back to previous levels.

After the result announcement, Castings Plc shares closed in red at GBX 384, down by 3.27% on 16 June with a market cap of £173.22 million.

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