Eurocell Falls to Pre-tax Loss During First Half

Eurocell, the manufacturer of PVC window, roof and door products has announced their half-year results, falling to a pre-tax loss because of the Covid-19 pandemic.

The Derbyshire-headquartered company, which now has mote than 200 branches across the country, has reported a loss of £16.5m for the six months to 30 June 2020, compared to a profit of £10.4m it achieved during the same period in 2019.

Its revenue also went from £136.3m to £93.6m over the same time.

Operational Headlines

• Business temporarily closed in line with official COVID-19 guidance from the UK Government on 23 March.
• Phased re-opening from 11 May, following updated guidance and implementation of safe working practices
• All sites open in June except Eurocell Recycle North, which followed in July
• Better operating efficiencies since re-opening.
• Fit-out of new state-of-the-art warehouse on track and continuing to target being operational early in 2021.
• Key to increasing capacity and delivering further operating efficiencies.
• Strong on sustainability, as the leading UK-based recycler of PVC windows, with use of recycled material increased to 26% of material consumption (H1 2019: 22%)

Download the Half Year Results Investor Presentation here.

Financial Headlines

Sales down 31%, equivalent to a decline of 4% on a like-for-like(3) basis, reflects:

• Performance for 11 weeks to 20 March in line with expectations, with like-for-like(3) sales up 3% against a tough comparative (Q1 2019 like-for-like sales growth was 10%).
• Business closed from late March to mid-May, resulting in 90 trading days in H1 2020 compared to 124 in H1 2019.
• Good performance since re-opening, with June like-for-like(3) sales down just 6% on 2019 and strong start to Q2.
• Gross margin down 430bps, reflects reduced production volumes and therefore lower recovery of direct costs.
• Underlying overheads down 17%, includes support received under the Coronavirus Job Retention Scheme of £6.3million, partially offset by an increase to the provision for bad debts of £2.9 million.
• Adjusted(1) loss before tax of £8.6 million, driven by lower sales volumes and the impact of operational gearing.
• Reported loss before tax of £16.5 million includes non-cash goodwill impairment charge of £5.8 million.
• Strong balance sheet and liquidity, with pre-IFRS 16 net debt of £23.5 million (H1 2019: £36.7 million), reflecting swift actions taken to preserve cash and benefit of April share placing (£17.1 million, net)

Current Trading

• Stronger RMI(4) market than anticipated post-lockdown, with housing market activity also now increasing.
• July/August like-for-like(3) sales up 12% on 2019.
• Profiles includes good contributions from trade fabricators, who are substantially focused on the strengthening RMI(4) market. New build re-started slowly, but run rates are also now improving.
• Building Plastics includes a strong performance across our range of own-manufactured products and traded goods, as well as an excellent start for our new range of outdoor living products.
• Gross margins improving as volumes increase.
• Identified opportunities to streamline organisational structures, whilst not impacting on production capacity or ability to satisfy customer demand.
• Reduction in headcount of approximately 50 positions, or c.3% of the workforce

Mark Kelly, Chief Executive of Eurocell

“COVID-19 has created unprecedented challenges. Our first priority continues to be the health, safety and well-being of our employees. Through their hard work and dedication, we have implemented safe working practices in line with recommended guidelines, and I would like to thank them all for their continued commitment and support.

“In response to the pandemic, we took a number of swift and decisive actions to safeguard the future of the business, and we were grateful to receive support from investors with the share placing in April. As a result, the business was well prepared to re-open in May.

“Since re-opening, sales have exceeded our initial expectations, particularly in the branch network, and we have been encouraged by recent market trends. We are pleased that operating efficiencies have been better and that gross margins are improving as volumes increase. The actions we took to strengthen the business have left us well placed to capitalise on opportunities and continue to take market share.

“Our focus for the remainder of 2020 includes executing the warehouse transition successfully, thereby facilitating future growth and the delivery of further operating efficiencies. Whilst the current levels of uncertainty mean it is difficult to predict the outcome for the full year and beyond, we are pleased that the second half has started strongly. We continue to see good potential to outperform our markets and it is our intention to return to paying dividends in 2021.”

Source: Insight DIY & Eurocell

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