Radiator group’s profits rise despite ‘challenges’
RADIATOR maker Stelrad has grown profits despite an “extremely challenging year” in which it faced lower housebuilding and home renovation activity.
In new results for 2023, the Newcastle-based firm, which runs factories in Mexborough, Italy, the Netherlands and western Turkey, said operating profits increased more than 17% to £26.7m, even as revenue fell 2.6% to £308.2m and sales volumes dropped 5.2%. Stelrad bosses told the London Stock Exchange that demand was hit by squeezed household budgets and that the UK and Ireland performed stronger than its Turkish and international markets.
CEO Trevor Harvey said that after many years as a challenger, the firm had now grown to become the market leader in steel panel radiators and hydronic heat emitter across Europe, the UK and Turkey. Cost management and restructuring action taken in the second half of the year - part of which was the shedding of 90 jobs, including 25 in the UK - brought an exceptional charge of £2.9m, with benefits expected to come in 2024 and beyond. Stelrad said it had offset the volume and revenue declines via higher pricing of its radiators which had largely been introduced in 2022 to cover greater steel costs and other overheads.
Investors were told the firm expected macroeconomic headwinds to continue but that its strategy set it up for further, profitable growth.
Mr Harvey pointed to company leverage falling below 1.5x, a factor he said gives Stelrad capabilities to make further acquisitions. He said: “We are the natural consolidator in our sector and we will be making more acquisitions. We’re monitoring acquisition targets continually but I think it would be fair for me to tell you that I don’t anticipate any M&A activity in 2024.”
He added: “Our performance in 2023 is testament to the resilience and flexibility of our business model, the strength of our market positioning and the robustness of our strategy that continues to see us focus on our four key strategic objectives of growing market share, improving product mix, optimising routes to market and positioning effectively for decarbonisation.
“After many years as challenger, Stelrad has now gained market leadership of both the steel panel radiator category and the hydronic heat emitter market in total, across the combined market of Europe, the UK and Turkey, taking market share from our competitors during a prolonged period of wider market uncertainty.
“Although we expect these macroeconomic headwinds to continue during 2024, management’s considerable experience of managing through numerous other challenging market cycles will enable us to navigate current market conditions to deliver another robust financial performance. In combination with our focused strategy, this positions Stelrad well for a sustained period of profitable growth when markets recover, with the group well placed to benefit from strong underlying replacement demand across Europe and the long-term regulatory tailwinds for decarbonised energy efficient heating systems.”