Eurocell: COVID-19 And Trading Update

Eurocell, the market leading, vertically integrated UK manufacturer, recycler and distributor of innovative window, door and roofline PVC products, provides the following update.

Re-opening the Business

In line with official guidance from the UK Government on 23 March, we temporarily closed our manufacturing plants, branch network, distribution and recycling operations. 

Following updated guidance from the Government in May, which permits tradesmen to work in domestic dwellings so long as appropriate precautions are taken, we began to implement a phased re-opening of the business as follows: 

·    11 May - we started to supply our fabricator customers from existing stocks and opened six branches around the country. This allowed us to test safe working practices and begin to assess the level of customer demand

·    20 May - following encouraging early results, we re-opened the full branch network

·    26 May - we recommenced manufacturing operations, on a progressive basis 

The re-opening process has gone well. We continue to maintain good health and safety performance, with safe working practices for COVID-19 implemented successfully across the business. Operational efficiencies since re-opening have been strong. 

By the end of June, our extrusion operation was running at June 2019 levels. Eurocell Recycle North (Ecoplas) remains our only site still to re-open, although we expect production to recommence at the end of July, in response to the increasing demand for recycled material. 

Trading Performance

Group sales for the 6 months ended 30 June 2020, which includes the period from late-March to mid-May when the business was closed, were £94 million, or 31% below H1 2019. 

Performance in the 11 weeks to 20 March 2020 was in line with our expectations and there was no discernible impact on trading from COVID-19 up until the point of closure. This result is set against a strong comparative, with organic revenues in Q1 2019 up 15%. 

Since re-opening, sales have exceeded our expectations, particularly in the branch network. We believe we are taking market share, and whilst we have not been open long, gross margins are good across the business. Group sales for June 2020 were £25 million, which is 6% up on June 2019, albeit this includes the benefit of two extra trading days. 

The following table illustrates sales performance by division, stated on a trading days basis to provide better comparability. Taking account of the closed period, there were 90 trading days in H1 2020 compared to 124 trading days in H1 2019. 

⁽¹⁾  Average sales per trading day in 2020 (i.e. excluding days closed) vs average sales per trading day in 2019

⁽²⁾ Like-for-like excludes acquisitions and new branches opened in 2019/20

Sales have increased progressively since re-opening. In June, Group sales increased from c.80% of 2019 in week one, to c.105% in week four. This comprises:

·    Profiles - a strong contribution from trade fabricators, who are increasingly reporting full order books. New build started slowly, but run rates are now improving

·    Building Plastics - a favourable mix, with an increased proportion of own-manufactured products, and an excellent start for our new range of outdoor living products (including garden rooms)

New Warehouse

Fit-out of our new state-of-the-art warehouse remains on track and we continue to target being operational early in 2021, subject to no further significant disruption from COVID-19. Capital investment on the project to 30 June 2020 was £2.6 million (total investment estimated at c.£8 million). As well as being key to increasing capacity, the new warehouse will deliver improved operational efficiencies in 2021 and beyond.

Net debt

We increased our bank facility to £75 million in March 2020.

Following the business closure, we took a number of significant, swift actions to conserve cash, including the deferral of non-essential capex and other discretionary expenditure. In April we raised £17.6m by way of a share placing, with the net proceeds to be used to ensure we retain headroom on our bank facility, even under an extended shut-down, and to provide sufficient liquidity to continue investment in the new warehouse.

In addition, we have continued to utilise various Government support measures available, including the Coronavirus Job Retention Scheme, through which we recorded income of c.£6 million in the first half. 

The measures we have taken to conserve cash have been effective. Net debt at 30 June 2020 on a pre-IFRS 16 basis, including the benefit of the share placing, was c.£24 million (31 December 2019: £35 million), and in compliance with our revised covenants. In reporting this reduction in net debt, we are pleased to say that cash receipts from customers have been good and, as at 30 June, substantially all our suppliers had been paid in accordance with terms. 

As a result, we have good headroom on our bank facility, which ensures the business is well placed to capitalise on opportunities as markets continue to re-open.

Notice of Results

As previously announced, we will publish our half year results for the six months ending 30 June 2020 on 4 September 2020.

Source : Eurocell

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