Steel giant Severfield has slipped to a £5.8m pre-tax loss in its interim results after uncovering the need to remediate 12 bridges, nine of which form part of the High Speed 2 (HS2) megaproject.
The York-headquartered firm this morning (26 November) revealed it had set aside £20.4m to resolve structures it had identified as “not in compliance with the client’s weld specification requirements”.
This left Severfield with a plunge into the red in the six months to 28 September this year despite a 17 per cent hike in revenue to £252.3m.
It blamed “sub-optimal choices of welding procedures” for the bridge issues but added that these were “exacerbated by limitations in the specified weld testing regime for these projects”.
A “comprehensive review” was underway involving clients, insurers and “relevant industry authorities” said the firm.
HS2 bosses confirmed that nine of the 12 sub-standard bridges formed part of the rapid rail link.
A spokesperson for HS2 Ltd said: “We have identified a number of welding defects related to steel fabrication work undertaken by one of our suppliers.
“A comprehensive review has been undertaken to determine the extent of the further action required. We are working closely with the company and our supply chain to address the issue.
“This will not impact on the safety or quality of the operational railway which is being designed to the highest standards.”
The £20.4m set aside by Severfield in this morning’s results covers the expected outlay on eight structures, with expenditure on the remaining four as yet less clear.
The firm added that it would “be pursuing all potential recoveries from third parties… with preliminary indications suggesting a good prospect of insurance recovery”.
Severfield insisted the situation did not impact on the safety of any operational bridges, and it is understood the firm is confident that no more than the 12 identified crossings are affected.
Chief executive Alan Dunsmore hailed a strong six months for the firm but warned of challenges ahead.
“In the first half of the year, we have delivered further underlying profit growth and secured some attractive projects which are reflected in our diversified order books,” he said.
“We continue to see some good projects coming to market. However, the predicted recovery in certain sectors has been slower than previously anticipated, and pricing has remained tighter for longer than expected.
“In addition, a number of large project opportunities for FY25 and FY26 have been either delayed or cancelled and, given the current market backdrop, we remain vigilant to the increased risk of delay to expected orders in the short-term.
“Although the wider market backdrop continues to be challenging, our successful track record and diversified activities give us confidence in delivering the targets we have set for the medium-term.”
