Last close As at 07/08/2026
GBP2.62
▲ 3.60 (1.39%)
Market capitalisation
GBP662m
Research: Industrials
Polypipe is benefiting from its leading position as a supplier into the new housebuilders who are expecting further growth. Other sectors are seeing different conditions but activity levels – including price increases – appear to be holding up reasonably well here also. Our estimates are unchanged and we retain the view that a sector premium rating is warranted.
Written by
Polypipe Group |
Sector variation, solid performance |
Trading update |
Construction & materials |
22 November 2017 |
Share price performance
Business description
Next events
Analyst
Polypipe Group is a research client of Edison Investment Research Limited |
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Polypipe is benefiting from its leading position as a supplier into the new housebuilders who are expecting further growth. Other sectors are seeing different conditions but activity levels – including price increases – appear to be holding up reasonably well here also. Our estimates are unchanged and we retain the view that a sector premium rating is warranted.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
352.9 |
48.0 |
19.4 |
7.8 |
19.6 |
2.0 |
12/16 |
436.9 |
61.8 |
25.0 |
10.1 |
15.2 |
2.7 |
12/17e |
465.9 |
66.2 |
26.4 |
11.7 |
14.4 |
3.1 |
12/18e |
481.5 |
71.6 |
29.0 |
12.9 |
13.1 |
3.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Residential leading the way
Overall, group like-for-like (LFL) 10-month revenue growth was +7.1% (including +7.3% in H2 to date), enhanced to 8.2% with FX effects. Against H1, divisional LFL revenue growth in the latest four months (to October) is tracking slightly higher in UK Residential and Commercial & Infrastructure (C&I) Europe and lower in C&I UK Market comments are similar to before with residential newbuild still the standout sector; as Polypipe addresses the full build cycle from below ground through to internal fixes, it offers a good read on activity here. A sluggish road-building programme is continuing to limit volume progress in UK C&I, though price increases have contributed to some revenue growth. This sub-division will also feel some y-o-y drag from reduced business in the Middle East. Polypipe’s ventilation products – supplied into both UK divisions – are understood to be growing at least in line with and probably ahead of divisional trends. C&I Europe serves a competitive end customer base and supply chain, but demand conditions are clearly favourable currently.
Minor rebalancing, unchanged headline estimates
Recent housebuilder reports point to stable/robust conditions and an expectation of further progress so this should remain a firm segment. Prospective price increases do influence buyer behaviour; this benefited Q416 and the pattern may recur this year, though order visibility is limited at this stage. We have put through a minor rebalancing of our UK expectations in favour of residential and lowered C&I. This apart, estimates are very much intact. We continue to expect some recovery in EBIT margins next year as input cost increases are recovered and more moderate revenue growth rates than in FY17 (ie +3.3% FY19, +2.8% FY20, both unchanged).
Valuation: Retain sight of sector premium
Having traded largely between 380-420p since April, Polypipe’s share price currently sits below this range, having sold off in the last week. Market sentiment has softened a little and construction-related exposure more so. The current year P/E and EV/EBITDA are now 14.4x and 10.0x, respectively. Sector constituent ratings are polarising; Polypipe is on a c 7% sector P/E premium only and still on discounts to mid-250 peers Marshalls and Howden.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016 |
2017e |
2018e |
2019e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|
|
|
|
|
|
|
Revenue |
|
|
327.0 |
352.9 |
436.9 |
465.9 |
481.5 |
495.0 |
Cost of Sales |
|
|
(202.4) |
(210.0) |
(256.8) |
(277.0) |
(283.6) |
(290.1) |
Gross Profit |
|
|
124.6 |
142.9 |
180.1 |
188.9 |
197.9 |
204.9 |
EBITDA |
|
|
60.8 |
69.3 |
86.4 |
90.8 |
96.6 |
100.8 |
Operating Profit (underlying) |
|
|
46.3 |
54.2 |
70.4 |
74.5 |
80.1 |
84.0 |
SBP |
|
|
0.0 |
0.0 |
(1.0) |
(1.2) |
(1.3) |
(1.3) |
Operating Profit (reported) |
|
|
46.3 |
54.2 |
69.4 |
73.4 |
78.8 |
82.7 |
Net Interest |
|
|
(7.7) |
(5.3) |
(6.6) |
(6.0) |
(6.0) |
(6.0) |
Other finance |
|
|
(1.0) |
(0.9) |
(1.0) |
(1.2) |
(1.2) |
(1.2) |
Intangible Amortisation |
|
|
0.0 |
(3.0) |
(6.8) |
(5.6) |
(5.6) |
(5.6) |
Exceptionals |
|
|
(20.7) |
(3.5) |
(0.6) |
(1.2) |
0.0 |
0.0 |
Profit Before Tax (norm) |
|
|
37.6 |
48.0 |
61.8 |
66.2 |
71.6 |
75.5 |
Profit Before Tax (FRS 3) |
|
|
16.9 |
41.5 |
54.4 |
59.4 |
66.0 |
69.9 |
Tax |
|
|
(5.4) |
(9.2) |
(11.8) |
(13.2) |
(13.6) |
(13.6) |
Profit After Tax (norm) |
|
|
32.2 |
38.8 |
50.0 |
52.9 |
58.0 |
61.9 |
Profit After Tax (FRS 3) |
|
|
11.5 |
32.3 |
42.6 |
46.1 |
52.4 |
56.3 |
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
|
199.9 |
199.3 |
198.9 |
199.3 |
199.3 |
199.3 |
|
EPS - normalised (p) |
|
|
16.1 |
19.4 |
25.0 |
26.4 |
29.0 |
30.9 |
EPS - FRS 3 (p) |
|
|
5.8 |
16.2 |
21.4 |
23.1 |
26.3 |
28.3 |
Dividend per share (p) |
|
|
4.5 |
7.8 |
10.1 |
11.7 |
12.9 |
14.2 |
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
38.1 |
40.5 |
41.2 |
40.6 |
41.1 |
41.4 |
EBITDA Margin (%) |
|
|
18.6 |
19.6 |
19.8 |
19.5 |
20.1 |
20.4 |
Operating Margin (underlying) (%) |
|
|
14.2 |
15.4 |
16.1 |
16.0 |
16.6 |
17.0 |
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
324.2 |
476.5 |
472.6 |
475.8 |
473.7 |
471.3 |
Intangible Assets |
|
|
235.0 |
378.4 |
371.6 |
366.0 |
360.4 |
354.8 |
Tangible Assets |
|
|
89.2 |
98.1 |
101.0 |
109.8 |
113.3 |
116.5 |
Investments |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Current Assets |
|
|
103.9 |
99.6 |
119.5 |
162.5 |
194.3 |
228.2 |
Stocks |
|
|
39.9 |
47.5 |
52.2 |
56.3 |
57.6 |
59.0 |
Debtors |
|
|
20.2 |
29.3 |
38.9 |
40.6 |
42.4 |
43.7 |
Cash |
|
|
43.1 |
21.6 |
26.5 |
63.7 |
91.9 |
122.7 |
Current Liabilities |
|
|
(69.8) |
(87.2) |
(104.5) |
(107.6) |
(108.5) |
(109.0) |
Creditors |
|
|
(69.8) |
(87.2) |
(104.5) |
(107.6) |
(108.5) |
(109.0) |
Short term borrowings |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Long Term Liabilities |
|
|
(120.6) |
(227.9) |
(200.2) |
(216.6) |
(217.7) |
(218.7) |
Long term borrowings |
|
|
(118.0) |
(215.9) |
(190.8) |
(207.0) |
(207.0) |
(207.0) |
Other long term liabilities |
|
|
(2.6) |
(12.0) |
(9.4) |
(9.6) |
(10.7) |
(11.7) |
Net Assets |
|
|
237.7 |
261.0 |
287.4 |
314.0 |
341.8 |
371.8 |
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
50.6 |
72.6 |
86.5 |
87.6 |
93.2 |
97.7 |
Net Interest |
|
|
(10.4) |
(5.7) |
(7.3) |
(6.0) |
(6.0) |
(6.0) |
Tax |
|
|
(3.7) |
(5.2) |
(10.1) |
(12.5) |
(13.2) |
(13.6) |
Capex |
|
|
(14.9) |
(18.9) |
(18.7) |
(24.8) |
(20.0) |
(20.0) |
Acquisitions/disposals |
|
|
(0.3) |
(149.5) |
0.0 |
0.0 |
0.0 |
0.0 |
Financing |
|
|
(1.7) |
0.0 |
(2.9) |
(1.5) |
(1.5) |
(1.5) |
Dividends |
|
|
(3.0) |
(10.6) |
(17.1) |
(21.1) |
(24.2) |
(25.8) |
Net Cash Flow |
|
|
16.6 |
(117.3) |
30.5 |
21.7 |
28.3 |
30.8 |
Opening net debt/(cash) |
|
|
84.7 |
74.9 |
194.3 |
164.3 |
143.3 |
115.1 |
HP finance leases initiated |
|
|
(9.6) |
(1.7) |
0.0 |
0.0 |
0.0 |
0.0 |
Other |
|
|
2.8 |
(0.4) |
(0.5) |
(0.7) |
0.0 |
0.0 |
Closing net debt/(cash) |
|
|
74.9 |
194.3 |
164.3 |
143.3 |
115.1 |
84.3 |
Source: Polypipe Group accounts, Edison Investment Research
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