Strong Interim Performance At Stelrad

• Continued progress across all territories.
• Acquisition of DL Radiators in July 2022 strongly aligned with strategic objectives.

Stelrad Group plc ("Stelrad" or "the Group" or "the Company", LSE: SRAD), a leading specialist manufacturer and distributor of steel panel radiators in the UK, Europe and Turkey, today announces its unaudited interim results for the six months ended 30 June 2022.

Results summary* 

*As a result of inflation in Turkey exceeding 100% over a three-year period, the Group was required to adopt IAS 29 in respect of its Turkish subsidiary for the first time in the financial statements for the six months ended 30 June 2022. The impact of the adoption of IAS 29 is a non-cash item but has a £10.9m negative impact on statutory profit after tax. See note 15 for further details.

**Adjusted figures are stated before exceptional items, foreign exchange differences, the impact of IAS 29 and tax thereon where applicable. See note 9 for a reconciliation of adjusted profit after tax.  See note 5 for a reconciliation of adjusted operating profit.  See the finance and business review for a reconciliation of adjusted free cash flow.

Financial and operational highlights

• Continued progress across all territories during the first half of 2022:

-  UK & Ireland: 13.1% revenue growth, 19.4% growth in adjusted operating profit.

- Europe: 17.7% revenue growth, 11.9% growth in adjusted operating profit.

- Turkey & International: 42.9% revenue growth, 33.3% growth in adjusted operating profit.

• Increased margin per radiator more than offset a 12.3% year-on-year decline in volumes versus exceptionally strong first half comparatives in 2021.
  
  
• Performance underpinned by pro-active margin management and an improved mix of premium steel panel radiators.
  
  
• Completion of production line transfer from UK to lower cost Turkish facility in the period.
  
  
• Net cash of £13.5 million (December 2021: £15.6 million) and undrawn available facilities of £19.0 million (December 2021: £23.5 million) provides the Group with significant financial flexibility.
  
  
• Acquisition of Italian manufacturer of heat emitters, DL Radiators for €28.3 million in July 2022.
  
  
• Rising energy costs across Europe expected to drive increased, long-term demand for more energy efficient heating solutions.
  
  
• Recommended interim dividend of 2.92 pence per share, to be paid on 28 October 2022.

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

"After entering 2022 with good momentum, we are pleased to have delivered strong financial performance during the first half of the year, testament to the underlying resilience of our business, with increased revenues and improving margins per radiator more than offsetting previously flagged volume reductions.

"Rising energy costs across Europe are sharpening consumers' focus on the need for more energy efficient heating solutions and this, combined with the ongoing decarbonisation agenda, is expected to drive increased, long-term demand for our products.

"Whilst we continue to monitor the challenging economic conditions in our end markets closely, we remain confident in the outcome for the full year and are well-positioned to drive long-term shareholder value thanks to the resilience of our business model, our market-leading positions and the strength of our customer and supplier relationships."

CHIEF EXECUTIVE OFFICER'S REVIEW

Overview

Stelrad's results in the first half of 2022 continue to demonstrate the resilience of our business model and the robustness of our strategy. 

The Group delivered 17.4% organic revenue growth in the first half of 2022, resulting in revenue up from £127.9 million in H1 2021 to £150.1 million this year.  Adjusted operating profit rose to £19.0 million, a 13.1% increase from the £16.8 million reported in the first half of last year.

In line with our strategic objectives, Stelrad Group's recent acquisition of Italy's DL Radiators offers considerable potential for the future, extending the range of heat emitters for sale through our existing sales and distribution networks and, through DL Radiators' highly regarded brands, providing access to markets in countries and channels where the Group has historically been underrepresented. 

Results and performance for the period

In the first half of 2022, good progress has been made across all territories.  The UK & Ireland delivered revenue growth of 13.1%, whilst adjusted operating profit rose by 19.4%.  In Europe, revenue and adjusted operating profit were up 17.7% and 11.9% respectively, whilst in our Turkey & International markets, revenue grew by 42.9%, adjusted operating profit by 33.3%.

Our growth in revenue has been driven primarily by timely and proactive margin management, as steel, logistics and energy costs increased.  Profitability was enhanced by optimisation of our low-cost Turkish facility and an improvement in the mix of premium steel panel radiators sold. This improvement was achieved despite a 12.3% decrease in volume relative to the exceptionally strong first half comparatives of 2021.  

Strategic priorities

To fulfil our purpose of helping to heat homes sustainably, we continue to pursue the commercial and operational strategies developed to achieve our four key objectives:  growing market share, improving product mix, optimising routes to market and positioning effectively for decarbonisation. 

DL Radiators acquisition

Stelrad Group completed the acquisition of leading Italian heat emitter manufacturer DL Radiators for €28.3 million in July 2022.  This acquisition extends the range of radiators available to the Group's existing sales and distribution network, expands our routes to market, increases manufacturing capacity and gives the Group access to the well-established and complementary DeLonghi brand.

From its Moimacco, Italy, facility DL Radiators generated €86.9 million revenue and €5.0 million normalised EBITDA for its financial year ended December 2021, with gross assets of €62.9 million.

Its product range includes steel panel, multicolumn steel, aluminium and towel warmer radiators, providing customers with flexible heat emitter solutions in both hydronic and electric technologies, suitable for a wide variety of installations.

The acquisition is expected to be earnings enhancing in this financial year. It is well aligned with Stelrad's stated strategic objectives and will allow us to grow share both in steel panel and other heat emitter categories, to drive product mix improvement and to position the Group more effectively for decarbonisation whilst increasing our access to market through a combination of retail and trade channels. 

Sustainability

Stelrad Group is fully committed to high standards of corporate responsibility, sustainability and employee engagement and aims to consider fully the long-term impact of all our business operations. 

At the end of 2021, we set up a task force to develop a comprehensive and well-integrated ESG strategy, consistent with our purpose of helping to heat homes sustainably.  Understanding the needs of Stelrad Group's stakeholders has been central to the development of our strategic framework "Fit for the future".  

During the second half of 2022, we plan to develop our sustainability targets, including Key Performance Indicators for future publication.

Interim dividend

Based on the Group's financial results in the first half of 2022, the Board recommends an interim dividend of 2.92 pence per share.  The interim dividend will be paid on 28 October 2022 to shareholders on the register on 7 October 2022. 

Outlook

We continue to monitor the challenging economic conditions in our end markets closely, and particularly consumer sentiment. While we are mindful of broader macro-economic uncertainties and key leading indicators, we remain confident in the outcome for the full year. This is testament to the resilience of our business model, our market-leading positions which improved further in 2021 (Source: BRG Building Solutions), and the strength of customer and supplier relationships. 

Our acquisition of DL Radiators extends the range of radiators available to our existing sales and distribution network, expands our routes to market, provides well-established complementary brands and increases our manufacturing capacity. Providing improved access to the European heat emitter market, the acquisition is in line with our strategic objectives and our role as a natural consolidator within the sector.  Early integration of the business is proceeding to plan and remains in line with expectations. We expect the acquisition to be earnings enhancing in this financial year and to deliver double digit earnings accretion in future years. 

Longer term, the conflict in Ukraine has highlighted structural considerations relating to European energy security and fossil fuel costs and, as a result, we believe that there will be an inevitable focus on, and acceleration of, renewable energy initiatives across Europe which in turn, will continue to drive interest in and awareness of our products. 

Trevor Harvey, Chief Executive Officer

Source : Stelrad

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