Eurocell profits rise by a third despite fall in sales

The London-listed firm said adjusted profit before tax rose 33%, driven by effective margin management and reduced input costs, such as electricity and PVC resin.

However, group sales fell 5% compared to the first six months of 2023, reflecting subdued activity in the repair, maintenance, and improvement (RMI) sector and ongoing weakness in the new build housing market.

Despite challenging macroeconomic conditions, Eurocell said it was still confident in achieving its full-year expectations, citing early progress with new strategic initiatives.

The company said it was continuing to focus on shareholder returns, completing a £10m share buyback and launching a new £5m buyback programme, alongside a 10% increase in the interim dividend to 2.2p per share.

Operationally, Eurocell reported cost savings of £2m following a restructuring in the second quarter of 2023, and continued improvements in sustainability, with recycled material now making up 33% of its PVC production.

The company said it was also advancing its strategic growth initiatives, including plans to expand its branch network, increase sales of windows and doors, and capitalise on strong demand for garden rooms, which generated £3.6m in sales in the first half.

“Trading conditions continue to be tough in 2024, with ongoing macroeconomic uncertainty impacting our key markets, exacerbated by wet weather and the general election,” said chief executive officer Darren Waters.

“Customers remain cautious, resulting in lower investment in home improvements and subdued activity levels in the residential construction market.

“As a result, first-half sales were 5% below the first half of 2023.”

However, Waters noted that first half adjusted profit before tax was up 33% on the year, as the firm continued to proactively manage its gross margin and cost base, supporting a reduction in input cost pricing, while expectations for the full year remained unchanged.

“Earlier this year we launched our new strategy, which identified a pathway to building a £500m revenue business, generating a 10% operating margin, over a five-year period.

“We have good early momentum with our new strategic initiatives and are becoming increasingly confident that, whilst this is an ambitious target, it is achievable.

“The UK construction market continues to have attractive medium and long-term growth prospects, driven by the structural deficit in new build housing and an ageing housing stock that requires increased repair and maintenance.”

At 1050 BST, shares in Eurocell were down 0.83% at 143.8p.

Reporting by Josh White for Sharecast.com.