Steel fabricator Severfield Rowen is to merge its UK operations largely because of worsening market conditions that have seen profit margins and pre-tax profits more than halve, according to its interim results released today.
The firm’s profit margin plummeted from 4.7% in the first six months of 2011 to 1.8% during the same period in 2012, the results show. Turnover increased to £135.9M for the first half of this year from £122M, while over the same period pre-tax profit also more than halved to £1.5M for the period to 30 June this year against £3.4M for the first half of 2011.
The forward order book remained stable at £218M on 1 August slightly up on £216M in May.
The results reflected a challenging UK construction market, according to chief executive Tom Haughey, who added that conditions in the main continued to be “stagnant” at best. This had generated stiffer competition for work and forced down margins, he said.
“The Group has continued to encounter challenges in the UK business with diminishing overall UK construction demand, the re-emergence of pricing pressure and the protraction of contractual settlements,” said Haughey. “UK margins are nonetheless coming under pressure again as clients and the supply chain push much harder to compete in a shrinking market,” he added.
Haughey called for clarity from the government on energy policy, stating it would be a “helpful stimulus” to UK construction and that a potential projects pipeline of £465M would remain “sufficient for our needs in 2013”.
Largely in response to these conditions the firm now hopes to merge Severfield-Rowen Structures, Watson Steel Structures and Steelcraft Erection Services by the end of the year to enable it to “achieve improved efficiency, cost base and performance benefits”.