Severfield-Rowen buys steel fabricator for £90m

Severfield-Rowen has paid £90m for Fisher Engineering, an extremely profitable construction steel fabricator with a manufacturing base near Enniskillen, Northern Ireland.

Fisher works mostly on larger projects, principally in Ireland. Started in 1974, it currently has 240 employees.

Fisher's profit margins in the past three years have ranged from a low of 29% to a high of 33%. Its latest financial figures (12 months to 31 December 2006) show a pre-tax profit of £10m from a turnover of £35m, which represents a profit margin of 29%.

In the previous year, pre-tax profit ran to £14m, representing a margin of 32%, while the £16m profit in 2004 resulted in a 33% margin.

Key projects currently in progress include Victoria Square in Belfast, The Point District Centre in Dublin and the Kingsgate shopping centre in Dunfermline.

Peter Levine, chairman of Severfield, said: "We are delighted with the acquisition of Fisher. It is an excellent fit. The combination will strengthen our offering. Fisher marks the next step in the group's growth strategy."

Levine said the future looks rosy as the combined future orderbook runs to more than £300m.

Fisher's management team is led by Ernie Fisher, managing director, along with Ivan Fisher (works director), Ian Cochrane (project director) and Wesley Knox (financial director).

Following the deal, Cochrane and Ernie Fisher will become joint MDs of Fisher.

Severfield is raising the £90m through a combination of £53m in cash and £37m-worth of new shares.

Cochrane and Knox have both entered into lock-in agreements whereby the 610,000 new shares they have been given cannot be sold during the 12 months following the date of the deal being formally approved.

In a second move, Severfield is paying £24m for the half of DAEL that it does not already own.

DAEL owns the long leasehold title to the group's headquarters and to its fabrication facility at Dalton Airfield Industrial Estate.

The move will eliminate the annual rent cost of £1.6m.

In 2001, Severfield sold the half-stakes in the two properties for £14m and used this money to fund a £5m new plate line to finance a share buy-back programme and to pump extra working capital into the business.

It was thanks to this extra cash that Severfield was able to buy Watson Steel for £2.6m.

Severfield says the financial move was the driver in its surge in profits from £7m in 2001 to the latest figure of £30m.