7 Jul 2020 07:00
7 July 2020
Polypipe Group plc COVID-19 update
Polypipe Group plc ("Polypipe", the "Company" or the "Group"), a leading provider of sustainable water and climate management solutions for the built environment, today provides an update following its announcement on 7 May 2020, and ahead of its interim results now due to be announced on 15 September 2020 on the impact of the COVID-19 pandemic and the Group's response to date.
Current operations
We continue to prioritise the health, safety and wellbeing of our employees, adhering to government guidelines on social distancing and hygiene in all aspects of our operations.
The Group has seen an improving trend since our update on 7 May, with June 2020 revenue some 30% below 2019 levels compared to 66% below in April 2020. Our Commercial and Infrastructure Systems segment has remained relatively resilient throughout this period, with many contractors managing to return to operations (albeit at reduced productivity levels) and the Group servicing specific, crisis-related emergency project work for NHS hospitals and care/recovery applications, particularly in our Nuaire ventilation business. Recovery in the Residential Systems segment has been somewhat more subdued, reflecting the shutdown of the new house build market for much of April and May, followed by a more measured return to work. Overall, Group revenue for the six months to June 2020 was approximately 24% lower than the six months to June 2019.
We are encouraged by the Group's performance in May and June compared to April and also by reports of better than expected activity in the housing market after its reopening on 13 May 2020, as well as Government-announced increased levels of investment in infrastructure projects. However, at this stage we remain cautious as to whether this performance will be sustained into the autumn and winter.
We are currently manufacturing at all main sites at varying levels of capacity utilisation, and currently have 25% of our workforce furloughed, compared to 61% at the height of the crisis.
Restructuring
Medium-term economic and industry forecasts show a significant impact from the COVID-19 outbreak on both the wider UK economy and specifically the UK construction industry. Latest forecasts from the Construction Products Association show that residential new build demand in 2021 is likely to be 20% lower than 2019 levels, Housing RMI 15% lower than 2019 levels, and commercial demand 18% lower than 2019 levels, even with recovery in the second half of 2021.
In light of this medium-term outlook, we are taking regrettable but necessary steps to adjust our manning levels and cost base to reflect this level of demand. Unfortunately, it means that we are entering a consultation period with our employees to review these steps, which if actioned in full, will lead to the loss of approximately 250 jobs or 8% of the workforce. It is important to note that there is no planned permanent closure of any facility, which leaves the Group well placed to react to any sustained but unexpected increase in customer demand.
Balance sheet and liquidity
The Group reported net debt of £184 million on 31 March 2020 and subsequently completed an equity raise of £120 million in May 2020. The Group's liquidity includes a £350 million revolving credit facility, enabling the Group to continue to invest in its key strategic growth projects.
Summary
In response to the challenges created by the COVID-19 crisis, the Group has taken significant actions to protect the Group's resilience. Whilst there is inevitable uncertainty in the near term, the Board remains confident it is taking the necessary actions to continue to deliver long-term sustainable returns in markets that remain fundamentally attractive. With this current level of uncertainty, we are not yet reinstating financial guidance, and this remains under review by the Board for the time being.
Enquiries:
Polypipe +44 (0) 1709 772204
Martin Payne, Chief Executive Officer
Paul James, Chief Financial Officer
Brunswick +44 (0) 20 7404 5959
Nina Coad / Dan Roberts
Notes to Editors:
Polypipe Group plc ("Polypipe", the "Company" or the "Group"), a leading provider of sustainable water and climate management solutions for the built environment is the largest manufacturer in the UK, and among the ten largest manufacturers in Europe, of plastic piping systems for the residential, commercial, civils and infrastructure sectors by revenue. It is also a leading designer and manufacturer of energy efficient ventilation systems in the UK.
The Group operates from 19 facilities in total, and with over 20,000 product lines, manufactures the UK's widest range of plastic piping systems for heating, plumbing, drainage and ventilation. The Group primarily targets the UK and European building and construction markets with a presence in Italy, the Netherlands, Ireland and the Middle East and sales to specific niches in the rest of the world.