Trading Update - In Line with Expectations

Eurocell plc

25 July 2023

 

25 July 2023

EUROCELL PLC

("Eurocell" or the "Group")

Trading Update - In Line with Expectations

Eurocell plc, the market leading, vertically integrated UK manufacturer, recycler and distributor of innovative window, door and roofline PVC products, provides the following update for the six months ended 30 June 2023.

First Half Trading Performance

Against a challenging backdrop and an exceptionally strong 2022 comparative period, we have delivered some resilience in the Group's sales performance for the first half.

Reported Group sales for the six months to 30 June 2023 were £184 million, down 2% on H1 2022, with volume 6% lower. Comparisons by division were as follows:

Sales to 30 June 2023	vs 2022
Total Group	-2%
Profiles Division	-1%
Building Plastics Division	-3%

Profiles - reduced repair, maintenance and improvement (RMI) activity and a weaker new build market resulted in lower sales volumes, partially offset by the benefit of recent market share gains. We have continued to acquire new fabricator accounts, and our pipeline of potential new fabricator customers remains positive, further supported by a net reduction in UK capacity following the recent announcement by UK Windows & Doors Group that it intends to shut its Duraflex extrusion business in September.

Building Plastics - RMI volumes in the branch network remain steady but subdued, with increased competition for limited demand leading to some pressure on margins.

We have experienced persistent input cost inflation, particularly for labour and electricity (where we operate a rolling 12-month forward hedging policy), but we continue to offset this with selling price increases.

PVC resin prices fell back slightly, and whilst we anticipate some easing of input cost pricing in H2, recycling feedstock prices remain significantly higher than the comparative period in 2022.

Outlook and Seasonality

The latest Construction Product Association (CPA) forecasts published earlier this week predict greater declines for 2023 in the RMI market of 11% and new build market of 19% (previously 9% and 17% respectively), before both markets begin to recover in 2024.

As demand has softened, we have acted to lower our cost base. We completed a restructuring programme in Q4 2022, which has reduced operating costs by c.£5 million per annum from the start of 2023. With end markets again weakening in H1, and given the more challenging outlook for the remainder of the year, we have recently completed a further headcount reduction, which will lower operating costs by another c.£2 million in H2 and by c.£4 million per annum thereafter. A charge of c.£2 million will be included as a non-underlying item in the first half financial statements for the related redundancy costs. In addition, we continue to seek operational efficiencies, for profit improvement, the benefits of which we should begin to see next year.

Last year, in a change to historical seasonal patterns, sales volume and profit generation was weighted towards H1. This reflected strong demand in the RMI market in the first half, followed by a slowdown in smaller discretionary RMI work in H2. As previously highlighted, for 2023 we anticipate a heavy weighting towards H2, with sales returning to a more normal seasonality and profits in the second half benefiting from lower input prices (including raw materials and hedged electricity) and operational cost savings already implemented.

Taking the above factors into account, our expectations for the full year remain unchanged.

We enter the second half of the year with a strong balance sheet. Net debt on a pre-IFRS 16 basis was £15 million at 30 June 2023 (31 December 2022: £14 million), including a net inflow from working capital of c.£4m, driven by careful cash flow management and reduced stocks.

Overall, we believe the actions we are taking leave the business well placed to benefit from a recovery in our markets and will, over the medium-term, drive sustainable growth in shareholder value.

Half Year Results

We look forward to providing a full update when we announce our half year results for the six months ending 30 June 2023 on 5 September 2023.

Enquiries:

Eurocell plc

Darren Waters, Chief Executive Officer                                [phone]

Michael Scott, Chief Financial Officer                                   [phone]

Teneo

Nick de Bunsen                                                                      [phone]

 

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