2015 Full Year Results

RNS Number : 2437S

Eurocell plc

16 March 2016

 

Eurocell plc

2015 Full Year Results

ROBUST PERFORMANCE, STRONG PROFITABILITY IN LINE WITH EXPECTATIONS

16 March 2016

Eurocell PLC, a market leading, vertically integrated UK manufacturer and distributor of innovative window, door and roofline PVC products, today announces its results for the year ended 31 December 2015

Notes

(1)        Adjusted EBITDA represents earnings before interest, tax, depreciation, amortisation and non-recurring costs

(2)        Adjusted PBT represents profit before tax and non-recurring costs

(3)        Adjusted basic EPS excludes non-recurring costs

(4)        Underlying operating cash conversion is cash generated from underlying operations as a % of adjusted EBITDA

Highlights

§ Performance in-line with consensus forecasts with strong gross profit and EBITDA improvements

§ Revenue growth of 1.6% despite the widely reported slow-down in Repair, Maintenance and Improvement ('RMI') market

§ Strong margin and profit growth driven by improved manufacturing performance, enhanced procurement, increasing use of recycled materials and lower raw material prices

§ Continued expansion of the branch network to 141, with an increase of 13 branches in the year

§ Further innovation in new Modus, Skypod and Equinox product ranges

§ Branch sales of higher margin Eurocell manufactured products increased by 6%

§ Acquisition of injection moulding business completed in July 2015 performing well

§ Appointment of Mark Kelly as CEO, following Patrick Bateman's retirement in June 2016

§ Positive start to the current financial year

Commenting on the Group's performance, Bob Lawson, Chairman of Eurocell, said:

"I am delighted to report a strong performance for our first full set of results as a listed company.  Notwithstanding market conditions that have remained challenging throughout the year, we have reported higher revenues and, as a result of the cost and efficiency measures we have taken, profits that are well ahead of last year.  We have also made firm progress with all of our strategic priorities - product innovation, expansion of our branch network and the acquisition of S and S Plastics. 

"Looking forward, the new financial year has started positively.  Whilst we are not anticipating a significant improvement in the markets we serve in the near term, we believe that our strategy combined with the proven capabilities of the company will enable Eurocell to continue to deliver significant value to customers and shareholders in the current year and beyond."

Bob Lawson

Chairman

16 March 2016

Enquiries:

Eurocell PLC                Tel: +44 1773 842100

Patrick Bateman, Chief Executive Officer

Teneo Strategy

Ben Foster                   Tel: +44 20 3603 5221

Board developments

As previously announced, Patrick Bateman will be retiring from Eurocell this summer.  The board undertook an extensive and rigorous process to find his replacement and are delighted that Mark Kelly joins the Company from Grafton Plc as Patrick's successor.

After 11 years with Eurocell, Matthew Edwards has informed the Board of his desire to seek new opportunities. The Board wishes to thank him for his excellent work in taking the Company into private equity and through to public ownership; they wish him well with his new endeavours. Matthew will continue in his role as CFO, if needed, up until the end of June 2016 and a search process to seek his successor is well underway.

Chief Executive's Statement

I am pleased to report our maiden results as a public company following our successful IPO in March.

2015 was another year of strong progress for the group.  Group revenues grew by 1.6%, ahead of a muted overall RMI market. At the same time, we improved our gross margin by 3.4 percentage points as a result of lower raw material costs, enhanced procurement measures and an improved manufacturing performance.  This led to a significant improvement in profitability, with adjusted PBT ahead by 29%. The continuing investment in new branches and supporting structure together with the investment in factory operations to allow increased use of recycled product and lower scrap levels has supported this performance.

We are committed to a strategy of growing the business by expanding the branch network, continuing to bring innovative new products to market and by providing excellent customer service. I am pleased to report significant development in all of these areas in 2015.

The appointment of two additional major trade fabricators at the end of 2015 will bring revenue and margin in 2016, one being a major trade fabricator nationally in the UK and the other will provide a strong base in the commercial market.

Demand in the new build market remains strong and our ability to supply excellent products on time is supporting growth in this area.  Our close working relationship with a number of the major house builders remains strong, nurtured through good technical support as well as our competitive pricing through the fabricator network. The continued expansion in the use of recycled PVC windows remains attractive to the new build market.

In July 2015 we successfully completed the small bolt-on acquisition of S and S Plastics Limited. S and S Plastics specialises in Injection Moulding in the windows market and other profitable sectors. The acquisition is allowing the Company to extend its customer base and also provide further cross-selling opportunities for the extended product range. Whilst the main core of the S and S business is window related, its work in other specialist areas such as healthcare, and electrical distribution introduces new markets to the wider business.  The S and S leadership team has brought additional expertise to the Company.

The integration is proceeding to plan and the business is performing ahead of expectations.

Operational review

Operational Review - Profiles Division

§ RMI market buoyant in 2014 but cooled off from February 2015

§ New Build sector 10% up on 2014

§ New Build and public sector putting more emphasis on thermal efficiency

§ Larger customers (>£1m revenue pa) have seen growth of c 10%

§ Small customers have maintained their volumes

§ Demand is increasing for higher value aspirational products, bifold doors, skypod, and a whole range of coloured windows and doors

§ New product sales show encouraging growth, bringing sales and margin to both sides of the business

§ Introduction of the BIM system for house builders and architects

§ Improved use of Salesforce, and integrated CRM management package

Operational Review - Building Plastics Division

§ 13 new branches opened in the year

§ Improved management infrastructure to support future branch expansion

§ Additional management training through the year

§ Improved use of Sales force CRM System

§ Month on month growth of website hits and sales leads

Current trading and outlook

In the first ten weeks of the current financial year, total sales in Profiles and Building plastics are +10.6% and like-for-like sales in our branch network are +8.8%.

On 9 March 2016, after the year end, we announced the acquisition of Vista Panels Limited a composite door manufacturing business with £13.7m Revenue and £1.6m EBITDA. This will provide further potential in the New Build Market.

Whilst we are not anticipating a significant improvement in the markets we serve in the near term, we believe that our strategy combined with the proven capabilities of the company will enable Eurocell to continue to deliver significant value to customers and shareholders in the current year and beyond.

Financial review

Adjusted EBITDA for the period was up 14.1% to £29.7m (2014: £26.1m), driven by:

§ Revenue growth (£1.2m gross margin);

§ Improvements to gross margin of £5.7m (including saving on resin procurement of £2.8m);

§ Logistics savings (£1.0m)

§ Investment in support functions and people (£1.9m);

§ Additional costs from new branches (£1.1m); and

§ The ongoing costs of being a listed entity (£1.2m)

Revenue of £175.9m (2014: £173.1m) has been negatively impacted by the slowing of the RMI market, the delayed sign-on of a major new customer and has benefitted from new branch openings in the year. We will continue our current strategy and are confident that this will deliver growth ahead of the market in future years.

The margin is 51.7% (2014: 48.3%). We have benefitted from low PVC resin prices (through both market forces and improved procurement) and production efficiencies. The new supply contract for PVC resin gives the company improved prices but also secures planned requirements. The increased use of recycled material from our unique plant has further benefitted the margin by replacing more expensive virgin

The business continues to keep tight control of the overheads, with highlights being:

§ Efficiencies in the factories have kept production overheads in line with management expectations

§ Investment in the recycling plant has delivered increased recycled raw material at lower cost

§ With the expansion of the branch network, overall Branch overheads have increased but only in line with the estate size

§ The improvements to the management infrastructure relating to the branches will increase overhead but are necessary to support our plans in respect of the future expansion of the branch network

§ Costs arising as a result of being a listed Company were £1.2m (2014: £nil)

§ Non-recurring items of £3.3m (2014: £1.1m) related to professional fees and other costs incurred as a result of the IPO of the Company

Adjusted basic earnings per share have increased by 43.3% to 18.60 (2014: 12.97).

The Company continues to invest in its future with capital expenditure this year of £6.3m (2014: £5.1m).

In addition the Company acquired S and S Plastics Limited at a cost of £2.5m

Inventory levels remain well controlled and provisioning remains prudent. Inventory at the year-end was £18.1m (2014: £14.7m).

The Company's trade accounts receivable remain in line with Management expectations. Provisioning remains prudent and consistent and there have been no material bad debts in the year.

Accounts payable have increased in 2015 as a result of more favourable terms from a major raw material supplier. The Company aims to negotiate the best terms possible but then ensures that suppliers are paid to terms.

The Board is pleased to recommend a final dividend of 5.2 pence per share for approval by shareholders at the Annual General Meeting. This represents a yield slightly above indications at the IPO. The shares will trade ex-dividend on 28 April 2016 and subject to shareholder approval, the dividend will be paid on 26 May 2016 to shareholders on the register at 29 April 2016.

Consolidated Statement of Comprehensive Income

For the Year Ended 31 December 2015

                                                                                                                                                          2015                         2014

                                                                                                                                                          £000                         £000

Cash generated from operations                                                                                            26,268                      20,046

Non-recurring costs                                                                                                                      3,323                        1,103

                                                                                                                                                __________               __________

Cash generated from underlying operations                                                                         29,591                      21,149

Income taxes paid                                                                                                                       (5,729)                      (1,179)

Non-recurring costs paid                                                                                                           (4,453)                         (172)

                                                                                                                                                __________               __________

Net cash from operating activities                                                                                          19,409                      19,798

Investing activities                                                                                                                                                                     

Acquisition of subsidiary, net of cash acquired                                                                     (1,662)                                -

Payment of deferred consideration                                                                                                   -                       (8,821)

Purchase of property, plant and equipment                                                                          (6,267)                      (5,060)

Sale of property, plant and equipment                                                                                          75                        3,563

Purchase of intangibles                                                                                                                   (85)                           (60)

                                                                                                                                                __________               __________

Net cash used in investing activities                                                                                        (7,939)                   (10,378)

Financing activities

Proceeds from the issue of shares                                                                                                     -                              50

Redemption of preference shares                                                                                                  (50)                                -

Proceeds from bank borrowings                                                                                              41,000                                 -

Repayment of bank and other borrowings                                                                           (48,599)                      (9,210)

Finance expense                                                                                                                          (4,023)                         (817)

Dividends paid to equity shareholders                                                                                    (2,700)                                -

                                                                                                                                                __________               __________

Net cash used in financing activities                                                                                      (14,372)                      (9,977)

                                                                                                                                                __________               __________

Net decrease in cash and cash equivalents                                                                            (2,902)                         (557)

Cash and cash equivalents at beginning of year                                                                     2,751                        3,308

                                                                                                                                                __________               __________

Cash and cash equivalents at end of year                                                                                  (151)                       2,751

                                                                                                                                                __________               __________

 

Eurocell plc

Notes to the full year results

For the year ended 31 December 2015

Changes in tax rates and factors affecting the future tax charge

A reduction in the mainstream rate of UK corporation tax from 21% to 20% took effect from April 2015 which gives rise to an effective rate of 20.25% for the year. A further reduction to 19% from 1 April 2017 and 18% from 1 April 2020 have been substantively enacted. UK temporary differences are measured at the rate at which they are expected to reverse.

The Board is recommending a final dividend of 5.2 pence per share for approval by shareholders at the Annual General Meeting.

The Board has become aware of a technical issue in respect of the interim dividend paid in October 2015. The Companies Act 2006 provides that a public company may pay a dividend out of its distributable profits as shown in the last accounts circulated to members or, if interim accounts are used, those that have been filed at Companies House. The requirement for the relevant accounts to have been filed applies even if the Company in question has sufficient distributable profits at the relevant time.

The Company had sufficient distributable profits to pay the interim dividend but did not file interim accounts to satisfy the procedural requirements of the Act before making the distribution. The Board intends to propose resolutions at the AGM to put all affected parties so far as possible in the position in which they were always intended to be had the distribution been made in accordance with the procedural requirements of the Act.

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