Eurocell pleased with performance as it invests in expansion

PVC window and door company Eurocell announced a 10% improvement in revenue in its preliminary results on Friday, to £279.1m.

The London-listed firm said its gross margin expanded by 170 basis points for the year ended 31 December to 51.2%, while its adjusted EBITDA was 5% higher at £31.7m.

Its adjusted profit before tax improved 3% year-on-year to £23.1m, and its adjusted basic earnings per share were also up 3% at 19.7p.

The company made total capital investment of £15.2m during 2019, which was 6.5% higher than in 2018, and its net debt narrowed by 11.1% to £34.6m.

Eurocell said its overheads were up 12% on a like-for-like basis, which included the impact of higher volumes and extra warehousing and distribution costs.

It implemented a stock build programme during the year, in a bid to protect itself against Brexit-related risks and improve availability in its branches.

The company said it remained “strong” on sustainability during the period, making investments to expand its recycling capacity, which was said to be “very well” advanced.

It also reported positive progress with its planned actions to drive operating efficiency, with Mark Hemming joining in August as chief operating officer, and an investment to increase its extrusion capacity complete.

A new warehouse was secured, which would facilitate future growth and the delivery of further operating efficiencies, which was expected to be operational in early 2021, after a fit-out capital investment of around £8m.

“We have reported robust financial results for 2019 and, despite Brexit-related and political uncertainty, delivered another year of strong sales growth and a good improvement in gross margin,” said chief executive officer Mark Kelly.

“Over the last four years, successful deployment of our commercial strategies has led to sales substantially exceeding our expectations.”

However, Kelly said profits had been impacted more recently as the firm built operating capacity to service its sales, and it had experienced inefficiencies and extra costs.

“With manufacturing constraints now resolved, our focus for 2020 will be on executing the warehouse transition successfully, thereby facilitating future growth and the delivery of further operating efficiencies.

“As a result, looking forward we see good potential to outperform our markets.”

As yet, Kelly there said there had been “no discernible impact” on the business from the Covid-19 coronavirus outbreak, although the board remained “very alert” to the possibility.

“We have a strong balance sheet, and in March 2020 we were pleased to increase our bank facility to £75m.

“We maintain a conservative approach to debt, in order to ensure good liquidity and to manage any emerging risks.”

Despite the impact of “very wet” weather so far in 2020, Mark Kelly said Eurocell had made a “good start” to 2020.

“Sales and margins for the first two months are in line with our expectations, and notwithstanding macroeconomic and political uncertainty, we expect to deliver further progress this year.”

At 0811 GMT, shares in Eurocell were up 1.38% at 220p.