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12 May 2023 07:00
12 May 2023
EUROCELL PLC
("Eurocell" or the "Group")
Trading Update and Board Changes
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 first four months of 2023.
Trading Performance
Group sales for the four months to 30 April 2023 were down 2% compared to a very strong equivalent period in 2022. Comparisons by division were as follows:
Sales to 30 April 2023 | vs 2022 |
Total Group | -2% |
Profiles Division | level |
Building Plastics Division | -3% |
Whilst we have benefited from recent market share gains in Profiles, trading volumes for the Group were nonetheless down 6% in the period, impacted by weakness in both the repair, maintenance and improvement (RMI) and new build markets as follows:
• | Profiles - subdued RMI and fragile new build markets have resulted in lower sales volumes. However, we have continued to acquire new fabricator accounts, and our pipeline of potential new fabricator customers remains healthy. |
• | Building Plastics - RMI volume in the branch network is also subdued but remains steady. |
We have continued to experience cost inflation, particularly for electricity (where we operate a rolling 12-month forward hedging policy for the majority of our requirements). PVC resin prices have fallen back slightly this year, but remain volatile, and feedstock prices for our recycling plants remain significantly higher than the comparative period in 2022.
We have continued to offset input cost inflation with selling price increases and surcharges. However, lower volumes and resin prices are driving increasingly competitive markets for our products, resulting in margin pressure.
Outlook and Seasonality
The Construction Product Association's (CPA) latest forecast, published earlier in May, reaffirmed a reduction in the RMI market of -9% for 2023 (unchanged from the January CPA update), but now predicts a further decline in new build to -17% (previously -11%), before both markets recover in 2024.
As market volumes and oil prices retreat, we have acted quickly and are capturing further cost savings. Also, driven by our increasingly efficient operations, we have identified additional opportunities for cost reduction and profit improvement.
Last year, in a change to historical seasonal patterns, sales volume and profit generation was weighted towards H1. This reflected very strong demand in the RMI market in the first half, followed by a slowdown in smaller discretionary RMI work in H2. For 2023, we now anticipate a heavy weighting towards H2, with sales returning to normal seasonality and profits in the second half also benefiting from lower input prices (including hedged electricity) and cost savings.
Taking the above factors into account, we now expect adjusted profit before tax for 2023 to come in below current market expectations (1).
Our balance sheet is strong and the actions we have taken and plan to implement will improve our efficiency and resilience, and position us well to benefit when our end markets recover.
Board Changes
The following Board changes took place following the conclusion of yesterday's AGM.
As previously announced, following an agreed handover period, Darren Waters assumed the position of Chief Executive Officer and Mark Kelly retired. Also as previously announced, Martyn Coffey stood down from the Board.
We are also delighted to announce that the Board appointed Will Truman as an independent Non-executive Director, and member of the Nomination Committee.
Will brings strong commercial expertise, as well as a wealth of experience in stakeholder management and M&A. He is currently engaged in a non-executive advisory role at Imagesound Limited, having served as Chief Executive Officer for 9 years up to April 2023, and as Chief Financial Officer for 7 years prior to that. Previously, Will was an Associate Director in Transaction Services at KPMG LLP and is a Fellow of the Institute of Chartered Accountants in England and Wales.
Derek Mapp, Chair of the Board, said:
"I am delighted that Will is joining the Eurocell Board. He brings extensive and complementary experience of delivering sustainable business growth, both organically and through acquisition, and we are looking forward to working with him."
This announcement is made pursuant to LR 9.6.11R(3) of the Listing Rules and there are no further matters, required by paragraphs 9.6.13R (1) to (6) of the Listing Rules, to be disclosed in relation to Will Truman.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
Notes:
(1) Eurocell-calculated analyst consensus profit before tax forecast for 2023 of £22.0 million.
Enquiries:
Eurocell plc
Darren Waters, Chief Executive Officer +44 (0) 1773 842 105
Michael Scott, Chief Financial Officer +44 (0) 1773 842 140
Teneo
Nick de Bunsen +44 (0) 7825 575 258
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