First half results from piping systems specialist Polypipe (PLP) were never likely to be stellar but the market is rewarding a resilient performance despite the impact of adverse weather at the beginning of 2018.

The shares are up 5.4% to 374p as the company reports flat revenue and a small decline in pre-tax profit and reiterates full year expectations.

If the £8m impact from the exceptionally wintry weather in February and March is stripped out, then the UK business actually delivered very healthy growth of 5%.

The period also encompassed the sale of its low margin French operation for €16.5m. This helps reduce the net debt ratio from two times to 1.7 times. Notably, operational cash flow was 5.7% higher at £22.3m and this helps support a 2.8% increase in the dividend to 3.7p per share.


The company has a good track record of outperforming its markets. In the 2009 recession, earnings before interest, tax, depreciation and amortisation (EBITDA) declined by just 10%.

The company has a flexible cost base which can be adjusted rapidly in response to market conditions.

Chief executive Martin Payne, who has only been in post since October 2017, says: ‘With the group's balanced business model, underpinned by the long-term growth drivers of legacy material substitution and continuing legislative tailwinds in water management and climate change, I am confident the Group will make good progress in the second half of the year.’

Numis analyst Christen Hjorth reiterates his ‘add’ advice and 450p price target. He comments: ‘Following a 10% year-to-date decline in Polypipe's share price, the group now trades on a 2019 PE ratio of 11.9 times, dividend yield of 3.4% and FCF (free cash flow) yield of 8.8%.

‘Our medium term analysis, which assumes a flat construction backdrop, suggests that Polypipe could deliver a double-digit CAGR (compound annual growth rate) TSR (total shareholder return) out to 2022. We therefore retain our positive recommendation.’

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Issue Date: 14 Aug 2018