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New housing boost for Polypipe

The plastic piping manufacturer benefited from strong new-build demand, but RMI continues to bump along the bottom
August 8, 2017

Specialising in plastic piping and ventilation systems, Polypipe (PLP) benefited from the strong new-build housing sector in the six months to June, with revenue at its residential systems division up 9.2 per cent at £115m, accounting for nearly half of the group total.

IC TIP: Buy at 395.8p

Within that division, the repair, maintenance and improvement (RMI) market remained static as a result of lower transactional volume in house sales, consumer uncertainty and a squeeze on disposable income. An increase in input costs, notably polymer prices, was largely recovered through price increases, although margins were slightly lower.

On the commercial and infrastructure side in the UK, revenue grew by 5.4 per cent, with water management and flood prevention driving demand for drainage systems, while carbon efficiency legislation boosted demand for ventilation systems. Trading in the Middle East remained tough, though, and a decision was taken to cease manufacturing at the Dubai plant, which accounts for around 5 per cent of group revenue. In Europe, revenue grew by 18.9 per cent or 8.6 per cent on a constant-currency basis, helped by encouraging signs of a recovery in the French market.

Analysts at Peel Hunt are forecasting adjusted pre-tax profit for the year to December 2017 of £68m and EPS of 27.2p (from £61.8m and 25p in 2016).

POLYPIPE (PLP)   
ORD PRICE:395.8pMARKET VALUE:£785m
TOUCH:394.6-395.7p12-MONTH HIGH:440pLOW: 244p
DIVIDEND YIELD:2.7%PE RATIO:17
NET ASSET VALUE:152p*NET DEBT:59%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201622329.912.03.1
201724231.512.73.6
% change+8+5+6+16
Ex-div:24 Aug   
Payment:22 Sep   
*Includes intangible assets of £369m, or 186p a share