The Group's strategic focus is to build on our UK market share from construction activities, to enter new market sectors and to widen our geographical spread into Europe and beyond.
In 2017 (calendar year), the UK constructional steelwork market, as measured by the British Constructional Steelwork Association ('BCSA'), remains stable at c.900,000 tonnes (this equates to a market of approximately £1.7 billion). This follows three strong years of growth; four per cent growth in 2016, eight per cent growth in 2015 and four per cent growth in 2014.
During the year, we reorganised our factory operations in North Yorkshire, resulting in steel fabrication at Dalton and Sherburn being consolidated in our Dalton facility, and the establishment of a new business venture, Severfield (Products & Processing) Limited ('SPP'), to allow us to specialise in smaller scale projects. Following this reorganistion, the Group's potential production capability remains at approximately 150,000 tonnes, which represents c.17 per cent of 2017 UK structural steel production.
In 2018, Group revenue rose to an eight-year high of £274 million. This represents a third successive year of revenue growth, reinforcing our market-leading position and the continued evolution of our strategy.
Market conditions have remained relatively stable during 2017. The market forecast prepared by the BCSA, suggests a return to growth in the short to medium-term, with total UK steelwork consumption of 950,000 tonnes forecast by 2020. This is assisted by UK government policy which is continuing to help drive a strong pipeline of major infrastructure projects, particularly in the transport sector. Over the next few years, we see significant opportunities to participate in these projects including HS2 (bridges and stations), UK airport expansion as well as the ongoing Network Rail and Highways England investment programmes, all of which have a significant steelwork content.
The mix of work within the market sectors that we target will be a key determinant of the Group's outlook. Larger, more complex projects will continue to offer strong opportunities and the Group continues to focus on operating efficiencies and has launched SPP to address smaller projects more competitively.
The market for data centres and industrial and distribution appears strong at present and although pricing remains competitive, the projects in these sectors play to our strengths requiring high-quality, rapid throughput, on time performance and full co-ordination between stakeholders. The market for commercial offices, predominantly in London, is forecast by the BCSA to decline slightly over 2018 and 2019, although this will be offset by growth in the construction of commercial offices in regional cities, together with projects in the infrastructure, industrial and distribution, and data centre markets as previously described.
The market sectors targeted by the Group, and their estimated size in tonnes during 2017, are shown below:
Total market tonnage 2017: 894,000 tonnes
|Industrial and distribution||47%||419,000|
|Infrastructure (including bridges)||7%||66,000|
|Health and education||11%||101,000|
|Power and energy||7%||65,000|
|Stadia and leisure||4%||37,000|
UK order book
The Group has a very healthy, well-diversified order book of £237m (1 June 2018) which represents approximately eight to ten months of annualised revenue. This reflects the anticipated increase in the order book from the June 2017 position of £229m.
The contract mix within the order book incorporates a diverse range of projects, including significant new orders secured in the year for a number of commercial office developments in London and in the regions, including the landmark contract for the new Google Headquarters at Kings Cross, the Engineering Campus Development at Manchester University, the Westfield Stratford City expansion, industrial and distribution projects for a variety of clients, together with two large data centres in the Republic of Ireland and Belgium.
The Group continues to monitor the future pipeline of projects currently being tendered. This provides forward visibility of future orders and allows us to make strategic decisions that impact on our production planning and facilities. The Group's current pipeline of contract opportunities is encouraging and includes a range of projects in the commercial office, industrial and distribution, data centre, transport and retail sectors in the UK and Europe.
During the year, the Group has successfully secured work in the Republic of Ireland and Belgium and is actively pursuing a number of other European opportunities following the development of our European business venture. Based in the Netherlands, our team is dedicated to tailoring our established UK offering for expansion into this market.
Group potential capacity
Total UK production of structural steelwork
UK order book