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Eurocell pushes on as new homes make up for quiet improvement market

The supplier of window, door and roofline products overcame a challenging repair market
August 24, 2016

A muted home-improvement market threatened to scupper Eurocell (ECEL) in the first half of 2016. But brisk demand for new houses, combined with investments and lower raw material costs, drove the building plastics group's adjusted cash profits up 9 per cent to £14.2m.

IC TIP: Buy at 162p

Exclude acquisitions and Eurocell's turnover rose 11 per cent. Winning two big customers in late 2015 helped to push organic sales up 5 per cent in the profiles division, which includes PVC windows and folding doors. Moreover, modest resin prices and greater use of recycled materials supported its margin. The building plastics segment grew comparable sales by 12 per cent, and the overall branch network grew from 141 to 148. But management and investment costs meant operating margin shrunk by more than a third to 4.2 per cent.

Eurocell acquired Vista Panels, expanding its customer base and adding composite and PVC entrance doors to its product range. Management also rejigged sales incentives and in-branch product lines to fuel sales of more profitable products such as Skypod skylights.

Organic sales rose 8 per cent in the seven weeks after the period ended. But rising resin costs and overheads prompted broker Peel Hunt to trim its forecasts. It now expects adjusted pre-tax profits of £25.5m for the full year, giving EPS of 20.7p (up from £24.2m and 19p in 2015).

EUROCELL (ECEL)
ORD PRICE:162pMARKET VALUE:£162m
TOUCH:160-164p12-MONTH HIGH:222pLOW: 135p
DIVIDEND YIELD:4.9%PE RATIO:8
NET ASSET VALUE:30p*NET DEBT:105%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201582.56.34.62.7
201697.210.38.42.8
% change+18+63+83+4

Ex-div: 8 Sep

Payment: 7 Oct

*Includes intangible assets of £20.1m, or 20p a share