Polypipe builds on success

Underlying top-line growth came in at 5.1 per cent in the UK. That would have been higher but for a slow finale - last year's figures were boosted by a rush of orders in anticipation of price increases. Management opted to postpone price rises this year, but told us that any raw material swings would eventually be passed on to customers. Despite creating a "lead-lag effect" in the short term, chief executive David Hall says volatile polymer prices have no long-term impact on the business, especially as the entire market faces the same challenge.

With UK planning approvals on the up and The Construction Products Association expecting construction output to climb about 5 per cent in 2015, Mr Hall is confident that Polypipe can maintain its current momentum. Buoyed by the recent acquisition of Nuaire, the group's legislation-backed ventilation business continues to prosper, while appetite also remains robust for Polypipe's plastic plumbing, underfloor heating and water management systems. New rules regarding the storage and drainage of water is driving demand for the group's water products in particular.

Polypipe's continental European operations are facing much more challenging conditions, with constant-currency sales falling 2 per cent. Its core French market may have "bottomed out", but Mr Hall concedes there isn't much evidence of a recovery. Encouragingly, however, divisional profits remained flat at £0.9m thanks to pricing discipline.

An improved operating performance saw the group record a 16 per cent year-on-year reduction in net debt. Although cash generation was hindered somewhat by rebate settlements, it still doubled to £18m, prompting management to increase the dividend by more than half.

Broker Deutsche Bank expects adjusted pre-tax profits of £48m for the full year, giving EPS of 19.2p, rising to 25.5p in 2016 (from £17m and 14.95p in 2014).