Stelrad Preliminary Results Show 12.9% Decline In LFL Revenue

• Resilient performance, strategically positioned for market improvement

Stelrad Group plc ("Stelrad" or "the Group" or "the Company", LSE: SRAD), a leading specialist manufacturer and distributor of steel panel and other designer radiators in the UK, Europe and Turkey, today announces its audited financial results for the year ended 31 December 2023.

(1) The Group uses some alternative performance measures to track and assess the underlying performance of the business. Alternative performance measures are defined in the glossary of terms and reconciled to the appropriate financial statements line item at the end of this announcement.

Financial and operational highlights

• Revenue down 2.6%, 12.9% on a like-for-like basis, to £308.2 million, driven by subdued new build and renovation activity due to high inflation and interest rate environment.

o  UK & Ireland: revenue down 0.5% (0.6% like-for-like) broadly flat despite market headwinds.

o  Europe: revenue down 0.4% (21.2% like-for-like) as a result of depressed levels of RMI activity.

o  Turkey & International: revenue down 25.8% (30.5% like-for-like) driven primarily by volume decline in China.

• 13.0% rise in contribution per radiator, the sixth consecutive year on year increase, driven by proactive price and cost management.
  
  
• Volume mix of higher added-value premium steel panel radiators maintained despite challenging market backdrop.
  
  
• Operating profit rose to £26.7 million, an increase of £4.1 million, benefiting from foreign exchange gains and the discontinuation of IAS 29 accounting, partially offset by adverse sales volumes and higher depreciation charges.
  
  
• Adjusted operating profit of £29.3 million was adversely impacted by a 5.2% volume decline and a £3.7 million increase in depreciation and amortisation charges, partially offset by proactive margin management and cost reduction initiatives.
  
  
• Cost base management initiatives implemented in the second half of 2023, resulting in an exceptional charge of £2.9 million in the current year, with benefits to be realised from 2024 onwards.
  
  
• Strong cash flow performance driven by working capital management and a return to a maintenance level of capital spend.
  
  
• Leverage at 31 December 2023 was 1.47x (2022: 1.62x), based on net debt before finance leases.
  
  
• Recommended unchanged final dividend of 4.72 pence per share (2022 final dividend: 4.72 pence per share), to be paid on 29 May 2024, reflecting the Board's confidence in the Group's prospects and balance sheet.

Current trading and outlook

• Despite the headwinds impacting volumes in new build and RMI during 2023,  the robust performance delivered by the Group has continued into 2024 with trading during the initial weeks of the current financial year remaining in line with management's expectations.
  
  
• Although we expect these headwinds to continue throughout 2024, Stelrad believes that management's considerable experience of successfully navigating other challenging market cycles will enable the business to navigate this turbulence and deliver another encouraging year of progress.
  
  
• The cost saving initiatives implemented in the second half of 2023 will be realised from 2024 onwards and will further strengthen the Group's resilience to challenging conditions, while ensuring that Stelrad remains well positioned for a sustained period of profitable growth when markets recover. 

• As a result, our outlook for the current financial year remains unchanged thanks to the resilience and flexibility of our business model, the strength of our market positioning and the robustness of our strategy.
  
  
• Longer term, Stelrad will benefit from strong underlying replacement demand combined with regulatory tailwinds for decarbonised, energy efficient heating systems.

Commenting on the Group's performance, Trevor Harvey, Chief Executive Officer, said:

"Our performance in 2023 is testament to the resilience and flexibility of our business model, the strength of our market positioning and the robustness of our strategy that continues to see us focus on our four key strategic objectives of growing market share, improving product mix, optimising routes to market and positioning effectively for decarbonisation. 

"After many years as challenger, Stelrad has now gained market leadership of both the steel panel radiator category and the hydronic heat emitter market in total, across the combined market of Europe, the UK and Turkey, taking market share from our competitors during a prolonged period of wider market uncertainty.  

"Although we expect these macroeconomic headwinds to continue during 2024, management's considerable experience of managing through numerous other challenging market cycles will enable us to navigate current market conditions to deliver another robust financial performance. In combination with our focused strategy,  this positions Stelrad well for a sustained period of profitable growth when markets recover, with the Group well placed to benefit from strong underlying replacement demand across Europe and the long-term regulatory tailwinds for decarbonised energy efficient heating systems."

Source : Stelrad plc

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