Severfield Rowen bosses take 20% pay cut ahead of big cost review

Senior directors at structural steelwork specialist Severfield-Rowen plan to take a 20% pay cut from January 2010 as part of a broad ranging review of costs at the business.

The management team, which imposed a directors' pay freeze this year, is consulting the workforce in a major review of costs and capacity at the business. The outcome will be announced to staff next month.

Despite earlier warnings of a sharp deterioration in the constructional steelwork market, Severfield Rowen produced better than expected results for the first half of the year.

Severfield said the decline in demand had reduced capacity across the industry but warned this was insufficient to offset a decline in prices and margins. A recovery in prices and margins is not expected before 2011.

Despite tough trading underlying half-year pre-tax profits fell just 3% to £24.6m, while revenue grew 15% to £200m. As a result operating margins slipped back to 12.7%.

Tom Haughey, chief executive, said: "The trading performance in the second half of 2009 is now forecast to be ahead of the board’s expectations, primarily as a result of project timing towards the end of the year and better than anticipated financial performance.

A key contract win for the company in recent months was the major steelwork package on the Shard of Glass office development in London, which will be Europe's tallest tower when complete.

He added: "For some time, we have expressed concerns about the UK market which have materialised, and accordingly we expect UK steel demand and prices to be at significantly reduced levels throughout 2010, which will translate into reduced margins. 

"Our sales efforts in targeted export markets are on course but a more competitive cost base in the UK is required to support and sustain these developments."

Severfield said finance director Peter Davison planned to retire in March 2010.