As a manufacturer, distributor and recycler of PVC building materials, Eurocell (ECEL) uses resin – which is priced in pounds, but whose underlying components are priced in euros and dollars. So sterling’s weakness thus forced the company to pay higher prices for raw materials in 2017. Management partly offset these costs by lifting their own selling prices, meaning the gross margin only fell by one percentage point. However, such inflationary pressures were part of a wider “almost perfect storm” of macro-economic challenges, along with a subdued repair, maintenance and improvement market.
Despite these headwinds, the full-year numbers offered signs of progress. Revenues improved, and while underlying operating cash flow declined to £28.8m from £32.2m in 2016, net debt also fell from £20.3m to £14.5m.
The group acquired Security Hardware last February for £1.6m, and has integrated the supplier of locks and hardware into its building plastics division. This contributed £2.5m in sales during the reporting period, and takes Eurocell closer to becoming a one-stop shop for multiple product lines.
Analysts at Peel Hunt forecast adjusted pre-tax profits of £27.1m and EPS of 22.5p for the 12 months to December 2018, against £26.1m and 21.5p in 2017.
| EUROCELL (ECEL) | ||||
| ORD PRICE: | 213p | MARKET VALUE: | £ 213m | |
| TOUCH: | 210-216p | 12-MONTH HIGH: | 273p | LOW: 194p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 49.4p* | NET DEBT: | 29% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 173 | 16.7 | 11.9 | nil |
| 2015 | 176 | 19.7 | 15.5 | 7.9 |
| 2016 | 205 | 23.8 | 19.6 | 8.5 |
| 2017 | 225 | 23.7 | 19.6 | 9.0 |
| % change | +10 | -1 | - | +6 |
| Ex-div: | 26 Apr | |||
| Payment: | 23 May | |||
| *Includes intangible assets of £19.4m or 20p per share | ||||
