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Steelwork deal for Stratford centre

Severfield-Rowen is poised to take a £75m steel contract for a shopping centre gateway to the Olympic site

Severfield-Rowen is set to pick up a £75 million steel contract on Westfield’s scheme to build the giant shopping complex that will go up in east London ahead of the 2012 Olympics.

The firm is one of the few subcontractors listed on the main Stock Exchange and last week took a battering after it said 2007 profits would be £42 million - a shade below some forecasts.

Nearly £150 million was wiped off its value after it said it had seen a softening in some key markets in the early part of this year, including distribution centres and inner London offices.

But the company is set to receive a fillip after the shopping centre developer gave formal intent for Severfield-Rowen to progress on the job to put up the steel at the project, which forms one part of the 1.9 million sq m of retail, leisure and entertainment space Westfield will build at the Stratford complex.
Severfield-Rowen is already working with the Australian firm at its Westfield London scheme on the other side of the capital at White City, where around 25,000 tonnes of steel has been used.

But the Stratford deal is likely to use double that amount with the price of each tonne coming in at £1,500.

One source said: “The final amounts are still being decided, but it will be significantly larger than White City. It’s looking like double.”

Westfield will begin work on Stratford later this year and a spokesman said: “We hope to have it operational by 2011. The idea is to get it ready about a year before the Olympics.”

The shopping centre is in zone one of a seven zone complex that will also include the athletes’ village that Bovis Lend Lease will build.

It will be anchored by John Lewis, Waitrose and Marks & Spencer and will feature 200 retail units.

The £4 billion investment will also include 106,000 sq m of office space, 34,800 sq m of hotels and 1,200 homes which Westfield will also be responsible for.

Severfield-Rowen said its order book stood at a record £440 million.

The company will release its 2007 results in April.

Analysis: Profit warning a sign of things to come

By Bill Fishlock

It was unfortunate for Severfield-Rowen that it should become the first quoted group in this cycle to warn on profits in the face of weakening non-housing construction markets.

The 37 per cent fall in its share price last week reflected City surprise that it should come from a company which has been a beacon of success in the structural steel sector and where expectations had become so high.

It was also a reminder that even if order books are growing, profits can still come under pressure if key markets - in Severfield’s case London offices and out-of-town warehouses - are weakening.

Apart from T Clarke, there are few subcontractors on the stock market today but many privately owned firms will be subject to the same forces which were behind Severfield’s warning.

And Taylor Wimpey will not be the only house builder or main contractor seeking to share some of its pain with its suppliers.