Eurocell plc

Revenue increased 6% year over year in H1 to GBP 205 million from GBP 193 million. Adjusted operating profit rose 10% to GBP 11.1 million versus GBP 10.1 million, and adjusted basic EPS was 6.1p, up 2%. Organic volumes were 1% higher, organic sales were up 4% in Q2, and management said July organic sales were up 4% and August up 5%. Gross margin percentage was described as only slightly down excluding Alunet, despite competitive pressure and cost inflation. Forward guidance included full-year D&A of around GBP 29 million, full-year CapEx of up to GBP 13 million, a slightly lower full-year tax rate of 24%, and ERP non-underlying costs of about GBP 14 million for the 2024 to 2027 period. Management also said the 3 restructuring/business effectiveness projects should deliver more than GBP 5 million of annual savings, with GBP 2 million realized this year.

Will Truman said the first half showed “good progress” under his leadership, with improvement in the underlying business even after a soft first quarter. He emphasized that momentum improved in Q2 and continued into the second half, especially in the branch network and strategic initiatives, while Profiles remained challenged by weak end demand and a difficult housing market. He also framed ATT as a small but strategically important acquisition to deepen the extended living strategy and capture end-to-end margin in garden rooms.

Michael Scott highlighted that despite tough market conditions, organic volumes were 1% higher, total sales rose 6%, and adjusted operating profit increased 10% with support from Alunet and cost control. He pointed to adjusted EPS of 6.1p, finance costs of GBP 2.9 million due to Alunet-related debt, interim dividend growth of 9% to 2.5p, and leverage of 0.8x with good headroom on the recently refinanced GBP 75 million facility. He also detailed non-underlying charges of GBP 9.6 million, including GBP 9.4 million of restructuring costs and GBP 2.6 million of systems implementation costs, and said pre-IFRS 16 net debt was GBP 28.1 million at June.

Analysts focused on whether recent sales momentum was sustainable, with management saying July and August continued the Q2 improvement and that branch performance was offsetting weakness in Profiles. Questions on ATT centered on why Eurocell bought the business, and management said the goal was cleaner end-to-end control, exclusivity of the range, and keeping the margin within Eurocell. Analysts also asked about digital sales, recycled resin costs, Alunet margins, M&A appetite, pricing pass-through and branch profitability; management said digital is margin-enhancing but price-sensitive, recycled feedstock costs were stable, Alunet's operating margin of 14.1% is sustainable in the low teens, and the company is open to adjacent M&A only at the right price.