Polypipe’s show of resilience despite £8m hit
POLYPIPE, ONE of Europe’s biggest manufacturers of plastic pipe systems, reported a “resilient” first half performance despite an £8m hit from the Beast from the East snowfall earlier this year.
UK revenue rose 1 per cent in the six months to June 30. Excluding the £8m estimated impact of adverse weather in February and March, the group reported growth of 5 per cent.
Polypipe’s chief executive Martin Payne said: “Some of the work will come back. It’s difficult to say how much impact the bad weather had.
“We had snow and then flooding. Once time is lost on construction projects, it’s quite difficult to get the work back.”
The Doncaster-based firm said the UK market outlook for the second half looks mixed, with the new housebuild sector driving the residential market, but the repair, maintenance and improvement market likely to remain challenging.
“There is a structural housing shortage,” said Mr Payne.
“The housebuilders are growing rapidly. New housebuilding will continue to grow in low single digits. We’ve got to build a lot more housing.”
Polypipe said UK Residential Systems achieved good organic growth of 5.9 per cent.
Commercial and Infrastructure Systems revenue was down 6.6 per cent. The division was hit by project delays in road and other commercial projects.
Mr Payne said: “With commercial projects, we track when contractors get awarded projects. It dipped around the EU referendum in 2016 and remained sluggish and didn’t pick up until 2017.
“We saw commercial soften in the second half of 2017 and into 2018, but we look into the second half with a bit more confidence. The A14 has suffered a lot of delays, but we are seeing momentum building.”
Polypipe said it is making good progress on innovative manufacturing and sustainability with increased use of recycled material.
“In Lincolnshire we have a £5m wash plant that takes bales of recycled milk bottles and turns them into drainage pipes on site. We handle 17,000 tonnes a year,” said Mr Payne.
“A third of our requirements are satisfied by recycled material. It’s bleach bottles, washing up liquid bottles. We can’t use water bottles.
“We want to improve although we are constrained by product standards. We will improve on that rate of one third.”
The group said that commercial activity is improving as the impact of Carillion-related delays reduces.
“There were two sorts of impact – when Carillion were part of a joint venture, the joint venture partners have swung in and taken over responsibility,” said Mr Payne.
“There have been issues where Carillion were the sole main contractor, for example, on the Lincoln bypass.”
The group said trading has started well in the second half and it is confident it will deliver annual results in line with management expectations.
“We are looking to the second half with a bit more confidence,” said Mr Payne.
“I’m encouraged by our performance. Growth rates have continued into the second half.”
Analyst Gavin Jago at Peel Hunt said: “Poor weather, delays in road/commercial projects and some cost pressures (raw materials and transport) were partly offset by strong growth in new residential, price increases and some self-help improvements in the first half.
“The second half has started well and we continue to believe the group has a medium-term tail wind in terms of regulatory impact for its products, as well as expected growth in new housing output.
“The softness in the share price provides an attractive entry point for a well run and strongly positioned business.”