The Group's strategic focus is to increase its UK market share from construction activities, to enter new market sectors and to build market share from its existing European opportunities.

Marketplace

The total value of structural steel output in the UK, estimated by the British Constructional Steel Association (BCSA), was approximately £1.6bn in 2013. This represents UK structural steel production for calendar year 2013 of 848,000 tonnes. The value of this market, which is considered addressable by the Group, is approximately £1.1bn, which represents production levels of 500,000 tonnes.

The Group's potential production capability is approximately 150,000 tonnes, which represents 15 per cent of the current estimated capacity of the UK market of 1,000,000 tonnes. Its current share of the UK market is approximately 90,000 tonnes, resulting in an addressable market share for 2013 of c.18 per cent and a total UK market share for 2013 of c.11 per cent.

The Group's key market sectors and estimated market share are shown below.

Our sectors

Market tonnage in 2013Group market
share (estimated)
Sector(000s)(%)
Industrial and distribution35042%5-10%
Commercial offices8810%30-40%
Education8810%<5%
Power and energy374%20-30%
Agriculture354%0%
Health314%5-10%
Leisure314%20-30%
Bridges253%<5%
Retail202%40-50%
Other536%5-10%
Export9011%<5%
Total848100%

Outlook

Market conditions have remained challenging over the past year, as a continued squeeze on margins has put pressure on contractors and, most notably, the supply chain. Nevertheless there are signs that the market will pick up towards the end of 2014. The Group is well placed for future growth given the anticipated recovery in the core UK market driven primarily by infrastructure and private sector construction growth.

Forecasts prepared by the BCSA over the next three years show an expected increase in UK structural steel production, including in the Group's key markets of power and energy, stadiums and leisure, commercial offices, industrial and health.

UK order book

The Group has a well-diversified order book of £168m (May 2014) which represents approximately eight months of forward production capacity. It has reduced in overall terms over the year from previous levels but this reflects both the capacity reduction arising from the reorganisation of Severfield (UK) Limited, as well as a longer negotiating period on major contracts arising from our improving risk management processes. The market has been stable during the year but prices have remained competitive and we continue to focus on ensuring that there is a fair balance of risk and reward within the contracts. The current order book does not yet reflect the positive impact of the improvement in market conditions anticipated towards the end of 2014.

UK order book

SectorNovember 2013
£172m
May 2014
£168m
Future trend
Commercial offices27%31%
Transport22%18%
Stadiums and leisure5%18%
Industrial and distribution16%11%
Power and energy12%7%
Data centres and other5%6%
Retail6%4%
Bridges3%3%
Health and education4%2%

Pipeline/prospects

The Group continues to monitor the future pipeline of work which is likely to convert to orders in the near term. This provides forward visibility of future orders and helps to facilitate production planning. The Group's pipeline of future orders is encouraging and includes prestigious developments in the commercial offices, stadiums and leisure, data centres, industrial (warehousing) and transport sectors.

Market sectors

With our extensive experience in multiple sectors, the Group's state-of-the-art facilities provide our clients with unrivalled services and value in the execution of their projects. Our structures serve people every day, whether for work, play or travel, or to provide essential services, from health to education. The Group's key market sectors are discussed in detail in the market sectors section.

Current estimated UK capacity

1,000,000

tonnes

Total UK production of constructional steelwork

848,000

tonnes

Group share of UK market

90,000

tonnes

Group potential capacity

150,000

tonnes