Eurocell Reports 12% Rise In Annual Sales

Eurocell plc, the market leading, vertically integrated UK manufacturer, recycler and distributor of innovative window, door and roofline PVC products, provides the following update for the for the year ended 31 December 2022. 

Trading Performance

Group sales for the year ended 31 December 2022 were £384 million, up 12% compared to 2021. Divisional growth rates were as follows: 

Following a strong first six months of the year, new build, large contract and RMI project work continued to be robust throughout the second half of 2022. This was offset by the impact of the previously reported cyber incident and a slowdown in smaller discretionary RMI work experienced by our branch network and trade fabricators in H2, albeit against an exceptionally strong comparative period. After a period of very strong demand, we believe the market is now returning to pre-pandemic norms. 

Price was the driver of sales growth in 2022. Whilst we continue to offset input cost inflation with selling price increases and surcharges, we experienced margin pressure in the second half, reflecting a lag on implementing some selling price increases. However, the cost of key raw materials does now appear to be stabilising, and in some cases beginning to fall. 

Cyber Insurance Claim

As reported at the Half Year, we experienced a cyber incident towards the end of July, which resulted in some temporary disruption. The incident was efficiently resolved, with the business remaining operational throughout and trading normally from mid-August. We have now partially resolved our cyber insurance claim and expect to recognise compensation in excess of £1 million as an underlying item in our 2022 financial statements, primarily for business interruption. Work is ongoing with the insurer to resolve the remaining aspects of the claim.   

Disposal of Security Hardware

To further streamline our business, in December 2022 we sold the trade and assets of Security Hardware, a supplier of window locks, hardware and spares to the RMI market with annual third-party sales of c.£3 million, to UAP Limited, a UK-based door hardware supplier. Going forward, UAP will supply hardware to all our branches. 

As a result of the sale, we expect to report an overall loss from discontinued operations in the 2022 financial statements of c.£2 million. This incorporates a trading loss for the period of c.£1 million (inclusive of costs incurred to prepare the business for sale), as well as the sale proceeds and associated asset impairments. 

2022 Financial Results

Reflecting the factors described above, we expect underlying profit before tax from continuing operations for the year ended 31 December 2022 to be in line with market expectations, with the trading loss at Security Hardware of c.£1 million separately classified within discontinued operations. 

Outlook and Cost Saving Programme

We are mindful of the uncertain macro-economic background and its impact on our markets. The Construction Product Association's latest forecast, published in November 2022, predicts declines in both the RMI and new build markets of 9% for 2023, before recovering in 2024, and we have experienced some recent weakness in those sectors. 

In anticipation of weaker markets in 2023, we completed a restructuring programme in Q4 2022, which along with other cost saving measures, will reduce operating costs by approximately £5 million per annum from the start of 2023. A charge of c.£2 million will be included as a non-underlying item in our 2022 financial statements in respect of the programme. We also intend to temporarily pause our branch opening programme until the economic outlook is clearer. 

However, we continue to take market share and have increased the run rate on new fabricator account acquisitions, with our pipeline of other potential new fabricator customers remaining healthy. Market share gains are further supported by the impact of maturing branches and a widening product range, all underpinned by very high product availability and increasingly efficient operations. 

Our debt is low, our balance sheet is strong and we remain confident of continuing to outperform our markets.

Notice of Results

We expect to publish our results for the year ending 31 December 2022 on 16 March 2023, at which time we will provide further guidance on the year ahead.

Source : Eurocell

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