Shares digital

Severfield-Rowen (SFR) – Finals PTP: £42.9m (£30.3m) Divi: 35.74p (25.64p)

The shares have more than halved in the past year, partly because of the company being too downbeat last time round. Last week, directors stressed strong prospects backed by record orders, up from £207 million to £455 million. Profits surged over a third but sales hardly moved.

The explanation is that profit margins jumped due to concentration on major clients on major projects, such as Terminal 5 for BAA and the White City shopping centre for Westfield. Higher prices were not the reason, said S-R which insists it is increasing its value for money to clients.

The City was not totally convinced, marking the shares up just 3%. Worries persist about reliance on commercial property, retail and warehousing units.

Severfield-Rowen countered, saying orders were streaming in for steelwork to build transport and power stations, data centres and London Olympics infrastructure. It is also pushing joint ventures in emerging countries and the Middle East. Profits could reach almost £50 million this year, with EPS of 39p cutting the PE to eight. The near-7% dividend is a big support.

Shares Says: A quality act. As long as the UK doesn’t slump the rebalancing from property to infrastructure projects should keep profits rising.

by: Timon Day