Polypipe is a leading supplier of largely plastic building products and systems. Operations in the UK (c 90% of revenue) address a broad range of sectors including residential, commercial and civil building demand and a number of subsectors within them.
After a flat Q1 y-o-y, Polypipe’s H120 revenue was down c 22% for the period as a whole (-25% like-for-like) and the associated c £50m reduction fed through into c £29m lower EBIT, illustrating significant operational gearing in the business. Commercial & Infrastructure was relatively more resilient in revenue terms (-14%) compared to Residential Systems (-28%) substantially reflecting the timing of returning/restoring non-residential site activity versus a slower process in residential newbuild. All main factories were operational at the period end. End H120 net debt of c £71m benefitted from the May equity funding (£120m gross, £116.4m net) and, otherwise, we believe that the underlying cash outflow from the end of March was very modest. No interim dividend was declared. Thus far in H2, y-o-y revenue trends (July -6%, August -3%) confirm a pick up from the -19% exit rate level in June. Our estimates are under review.
The Construction Products Association’s Spring outlook update was unsurprisingly more bearish than previously and included a number of different scenarios all of which involved sharp contractions in total construction activity in 2020 and material rebounds in 2021.