Join our community of smart investors

Polypipe sees faster-than-expected recovery

While revenue remains behind pre-pandemic levels, it has bounced back quicker than anticipated from the April lows
Polypipe sees faster-than-expected recovery

With Covid-19 bringing most construction activity to a halt, plastic piping and ventilation systems provider Polypipe (PLP) saw its like-for-like revenue fall by a quarter year-on-year in the six months to 30 June. Cost cutting was unable to offset the sudden loss of volumes, meaning underlying operating profit collapsed by almost three-quarters to £10.5m.

IC TIP: Hold at 428p

Revenue from the ‘commercial and infrastructure systems’ division proved to be more resilient – the 14 per cent decrease to £81m was less severe than the 28 per cent drop seen in ‘residential systems’. This was partly thanks to the contribution of drainage specialist Alderburgh – which was acquired in October – as well as work on essential government programmes continuing throughout lockdown.   

Overall revenue bottomed out in April, coming in two-thirds lower than a year earlier. By August, this had recovered to just a 3 per cent shortfall. The recovery has been much faster than even the optimistic scenario Polypipe laid out in May prior to its equity raise. Back then, it was anticipating that revenue from September onwards would be 10-15 per cent lower than in 2019.

Benefitting from the £120m raised through a share placing, net debt (excluding lease liabilities) has more than halved from the December year-end position to £71m, equivalent to 1.1 times pro-forma cash profits. While there is no interim dividend, if trading continues to track above its May expectations, Polypipe will consider declaring a final payout.

House broker Numis anticipates £33m of underlying operating profit for the full year – down from £78m in 2019 – increasing to £64m in 2021.

POLYPIPE (PLP)    
ORD PRICE:428pMARKET VALUE:£ 973m
TOUCH:424-428p12-MONTH HIGH:620pLOW: 372p
DIVIDEND YIELD:NILPE RATIO:34
NET ASSET VALUE:211p*NET DEBT:18%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201922331.412.9

4

20201742.30.7nil
% change-22-93-95-
Ex-div:na   
Payment:na   
*Includes £398m in intangible assets or 175p a share