Eurocell Reports Strong Second-Half Trading

Eurocell plc - a market leading, vertically integrated UK manufacturer, distributor and recycler of innovative window, door and roofline PVC building products - has reported preliminary results for the year ended 31st December 2020.

Operational Headlines
• Major impact of COVID-19 on the business in H1 2020, with decisive action taken in response
- Closed all sites from late March to mid-May, in line with UK Government guidance 
- Health & safety, operational and financial measures taken to protect the business and stakeholders 
- Good operating performance and efficiencies in H2 2020, with all sites open since July

• Now operating from state-of-the-art new warehouse
- Key to increasing capacity and delivering anticipated operating efficiencies in 2021 and beyond
- Final stages of transition expected to complete in Q2

• Strong on sustainability, as the leading UK-based recycler of PVC windows
- Use of recycled material increased to 25% of material consumption (2019: 23%)
- Bank facility converted to a Sustainable RCF, with adjustments to the margin based on annual recycling targets

Financial Headlines
• Sales for the year 8% lower than 2019, comprised of:
- H1 sales down 31%, reflecting business closed from late March to mid-May
- Strong second half, with sales up 15% compared to H2 2019
- Full year like-for-like(3) sales up 6%

• Gross margin down 180bps to 49.4%:
- H1 gross margin of 46.8%, reflecting reduced production volumes and therefore lower recovery of direct costs
- 50.9% in H2, with gross margins improving as volumes increased

• Underlying overheads down 3%, including support received under the Coronavirus Job Retention Scheme of £6.5 million and retail grants / rates relief of £1.8 million, partially offset by an increase to IFRS 9 impairment charges (bad debts) of £2.2 million (substantially incurred in H1)

• Adjusted(1) profit before tax of £8.5 million (2019: £22.7 million) reflecting:
- H1 loss, driven by lower sales volumes and the impact of operational gearing
- Strong sales and good operating efficiencies in the second half, with profits well up on H2 2019

• Reported loss before tax of £1.5 million includes non-cash goodwill impairment charge (£5.8 million) and dual running
costs of the new warehouse (£2.7 million)

• Capex of £13.7 million (2019: £15.2 million), including £8.0 million in relation to fit-out of the new warehouse

• Strong balance sheet and liquidity, with pre-IFRS 16 net debt of £9.9 million (31 December 2019: £34.6 million),
reflecting focus on cash flow management and benefit of April share placing (£17.1 million, net)

Mark Kelly, Chief Executive of Eurocell plc said: “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 again for their continued commitment and support.

“In response to the pandemic, we took a number of decisive actions to safeguard our future and ensure the business was well-placed to capitalise on opportunities as markets developed.

“The repair, maintenance and improvement (‘RMI’) market was stronger than we anticipated throughout the second half. Sales exceeded our expectations, particularly in the branch network, operating efficiencies were good and gross margins improved as volumes increased. As a result, we were very pleased to report strong profit growth for H2. 

“Our focus now includes completing the warehouse transition successfully, thereby facilitating future growth and the delivery of anticipated operating efficiencies. Whilst the current levels of uncertainty mean it is difficult to predict the outcome for the year, 2021 has started well with sales to the end of February up 8% on 2020 and it remains our intention to return to paying dividends this year. We continue to see good potential to outperform our markets, take share and deliver further progress.”

Review the full publication here.

Source : Eurocell

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