Polypipe confident in second half as it recovers from Carillion collapse

Plastic piping and ventilation systems manufacturer Polypipe Group issued its unaudited interim results for the six months ended 30 June on Tuesday, reporting results in line with expectations, with revenue eking out gains of 0.1% year-on-year to £210.2m.

The FTSE 250 company, which said it remained “confident” of delivering its full year expectations, said its underlying operating profit was down 4.2% to £36.3m for the half-year, with its underlying operating margin falling 70 basis points to 17.3%.

Underlying profit before tax was off 4.6% to £32.9m, with operating profit down 1.2% at £33.5m and profit before tax 1.3% lower at £30.1m.

Basic earnings per share rose 0.8% to 12.4p, though basic underlying earnings per share were down 4.3% at 13.5p.

Cash generated from operations grew 5.7% to £22.3m, with the firm’s leverage falling to 1.7x EBITDA from 2.0x in the first half of the last financial year.

The board declared an interim dividend per share of 3.7p, up 2.8% from the 2.6% paid at the same time last year.

“On 29 March, the group completed the sale of Polypipe France Holding to Ryb - a France-based manufacturer and distributor of plastics in Europe - for €16.5m on a cash-free, debt-free, normalised working capital basis,” the company explained in its results.

“Accordingly, the results for Polypipe France have been treated as discontinued.

“Comparatives for 2017 have been restated where necessary to reflect this treatment.”

On the operational front, Polypipe said its UK residential systems business achieved “good” organic growth of 5.9%, while commercial and infrastructure systems revenue fell 6.6%.

It said that was impacted by previously-disclosed project delays in road and other commercial projects, affecting short-term performance.

It said it made “good progress” on innovative manufacturing and sustainability, with increased use of recycled material.

The board said the new £5.0m large diameter continuous corrugator at its Horncastle plant was performing “well”, with revenue generation in line with plan.

It also said the Dubai factory exit and alternative manufacturing strategy was going to plan, with the first product manufactured by a subcontracted partner using Polypipe tooling delivered in July.

Looking ahead, Polypipe said the UK market outlook for the second half remained “mixed”, with fundamentals in the residential systems segment continuing to be strong, driven by the new house build sector.

UK RMI was said to be likely to remain challenging.

It also saw signs of improvement in its commercial and infrastructure systems segment towards the end of the period and the start of the second half, with road programmes beginning to increase in activity.

Commercial activity was said to be improving as the impact of Carillion-related delays reduced, and improved project awards in 2017 worked through.

Trading started well in the second half, the board said, adding that it was “confident” that the group would deliver results in line with management expectations for the year ending 31 December.

“Against a backdrop of mixed market conditions and adverse weather the group has performed well in the first half,” said chief executive Martin Payne.

“With the group's balanced business model, underpinned by the long-term growth drivers of legacy material substitution and continuing legislative tailwinds in water management and climate change, I am confident the group will make good progress in the second half of the year.”