It’s the start of a new year and we’re about to start earnings season in UK fenestration as some of our biggest companies begin to published results for Q4 and H2 of 2020.
Eurocell’s results have been announced and they finished 2020 in a very strong position.
Here are some of the key takeaways from the statement that was published:
The strong sales performance previously announced for the 4 months to 31 October continued through to the end of the year.
Reported Group sales for H2 were £164 million, up 15% on H2 2019. Group sales for the full year were £257 million, a reduction of 8% on 2019. Gross margins and operating efficiencies in H2 were in line with our expectations.
As a result of stronger than anticipated sales for November and December, we now believe underlying profit before tax for the full year 2020 will be ahead of current expectations.
A reduction of 8% on the year compared to 2019, given the circumstances and the enormous upending of the economy has to be seen as a good result. No one knew how the rest of the year would play out. We all thought there would be very little to come back to. In the end, the general public decided to plough their spare cash into their homes driving a boom for the home improvement sector, which saw our industry claw back a great deal of the losses suffered in the first half of the year.
As you can see, growth took a battering in H1. That was the case across the board as the country was shuttered for almost all of Q2. Signs of the recovery were visible in July and August. We had no idea at this point whether this would be temporary or if it would continue. As it was, the strength of the consumer spending drive continued all the way to the end of the year. Ending in H2 results for Eurocell with a 15% jump compared to the same period as last year.
To be only 8% down on the year after a 31% drop in H1 is a very good result in the grand scheme of 2020. A year to forget for all sorts of reasons.
Here are the rest of the key points:
The repair, maintenance and improvement (RMI) market was stronger than we anticipated throughout the second half. House building activity has also been increasing, supported by high levels of mortgage approvals. Furthermore, we believe we have continued to gain market share. The H2 like-for-like(1) sales increase of 15% on 2019 was comprised of:
· Profiles up 10%, including good contributions from trade fabricators, who are substantially focused on the RMI market. New build and commercial markets began the second half slowly, but run rates started to improve from September
· Building Plastics up 19%, including a strong performance across our range of own-manufactured products and traded goods, as well as an excellent start for our new range of outdoor living products
Whilst strong demand in our markets has put sector supply chains under pressure, we have continued to secure the raw materials we require, supported by our market-leading recycling plants. These facilities currently supply c.25% of our raw material consumption and enhance the sustainability credentials of our business.
Net debt at 31 December 2020 on a pre-IFRS 16 basis was c.£10 million (31 December 2019: £35 million). Cash receipts from customers have continued to be good throughout H2 and, as at 31 December 2020, substantially all our suppliers had been paid in accordance with terms.
It remains our intention to return to paying dividends in 2021.
Fit-out of our new state-of-the-art warehouse remains on track. We achieved a major milestone earlier this month, with commercial operations beginning successfully from the new site. In line with our plans, transition will continue over the coming weeks, with the final stages expected to complete in Q2. As well as being central to increasing capacity, the new warehouse is key to delivering anticipated improvements in operational efficiencies.
We have maintained a good health and safety performance, with safe working practices for COVID-19 operating well across the business. In line with UK Government guidance, our manufacturing plants, branch network, distribution and recycling operations all remain open.
You can read the entire update here.
With lockdowns now in place across the UK, mass holiday travel looking unlikely during the entire H1 period and restrictions of some kind likely throughout most of the year, the home improvement sector once again looks like it will benefit from homeowners spending their disposable cash on their properties instead of other avenues.
As earnings season ramps up, it will be interesting to see if our other major companies mirror these types of updates or whether there will be differences between the businesses.
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