Leading manufacturer of plastic piping and ventilation systems Polypipe Group has announced record performance driven by continued growth with the publication this morning of its final results for the year ended 31 December 2016.

Revenue rose by 23.8% to £436.9m (2015: £352.9m), accompanied by a 28% increase in underlying operating profit to £69.4m (2015: £54.2m) which represents a record operating margin of 15.9% (2015: 15.4%). Profit before tax rose 31.1% to £54.4m, compared with £41.5m in 2015. The company has increased its final dividend per share by 29.5% to 10.1p from 7.8p in 2015.

Polypipe said the Group had seen excellent UK revenue growth reflecting continued strong demand for its products, with “no discernible impact of the EU Referendum on its end markets.”  It also saw significant growth in export revenue, up by 28.7%.

Underlying fundamentals and growth prospects in the overall UK construction market remain positive – however, the Group expects to see the impact of selling price increases, due to the increase in base polymer and other costs, coming through as it moves into the second quarter.

Commenting on the anticipated increases, Polypipe said:

“Passing on the impact of input inflation on our base polymers and other costs is one of our most immediate priorities.  Whilst doing everything we can to alleviate the need for selling price increases, we are confident that our customers expect us to pass on essential increases.” 

Focus on flood alleviation continues to drive strong sales growth

Commenting on its Commercial and Infrastructure Systems division, Poplypipe   said that UK, Government and legislative focus on flood alleviation had continued to drive strong sales growth for its comprehensive range of engineered water management solutions.  Revenue from the UK segment was £184.2m and represented 41% of overall Group revenue in 2016.

In addition to providing an increasing number of SUDS (sustainable urban drainage solutions) to developers for a variety of different contracts, Polypipe were specified for a number of significant projects helping to design some innovative prefabricated solutions, minimizing site work and time, enhancing quality and health and safety. 

In one London development project alone, the company installed a shallow Permavoid system, designed to handle a one-in-one-hundred-year storm event and capable of handling 1.5 million litres of storm water.  Further north, its 1.5m diameter Ridgistorm-XL catchpits were pre-fabricated off-site and helicoptered into position as part of SSE's repair programme on the Loch Sloy Hydraulic Power Station in the Highlands.

 Polypipe said the progressive introduction of new products enabled the Group to win an increasing number of high profile project specifications and secure further penetration into the sectors of the construction industry that offer opportunities to add value.

New Middle East facility to manufacture storm water attenuation products

 The Group’s most significant operational development project during 2016 was the setting up of a manufacturing facility in the Middle East in the Jebel Ali Free Zone in Dubai. 

Polypipe has set up one manufacturing cell for its geocellular storm water attenuation products which are the most space hungry items it exports to the region.  All other products and ancillaries continue to be manufactured in the UK and exported as previously.

 The building is on a relatively short lease, while the Group evaluates the potential opportunity, and the production cell mirrors those in the UK.  After a very fast set up, manufacturing samples for test started in July and sales of £3.8m from the facility were fulfilled during the year.  Polypipe commented:

“We will continue to move forward cautiously as we refine our knowledge and skills of operating in the region, to ensure we can as closely as possible match supply and demand in an arena where the average project is considerably larger than those we are used to supplying in the UK.”

Export revenue is predominantly from commercial and infrastructure systems product portfolio and is primarily targeted at the Gulf states. Sales from the new Middle East facility are reported in this segment as the products are combined with pipes, fittings and ancillaries which are exported from the UK.  Including locally manufactured products, export revenue grew by 28.7% over 2015.

Revenue from the Mainland Europe segment was £57.9m and represented 13% of overall Group revenue in 2016. 

Circular economy: reprocessed polymer makes up third of UK production

 The Group is also continuing to invest in its capability to reprocess consumer waste into durable, long lifecycle, high performance systems.  Approximately one third of UK production utilises reprocessed polymer, making a considerable contribution to the circular economy with Polypipe one of the largest recyclers of household plastic waste in the UK.  Polypipe’s latest investment is in state-of-the-art multilayer technology for sewerage pipe within the Building Products business, which will come on stream in early 2017. Polypipe said:

“We are committed to continue to increase our use of recycled polymer and believe our customers regard it as an important factor in their environmentally responsible sourcing strategies.”

Polypipe will continue to seek "bolt on" acquisition opportunities

David Hall, Chief Executive said:

"Our record performance during 2016 and continuing growth underscores the strength of the Polypipe business model and the robust fundamentals underlying the majority of our market segments.  In a period of heightened political and market uncertainties, Polypipe continued to focus on its priorities and delivered results toward the top end of our expectations.  The combination of forecast market growth, our focus on executing our strategic development initiatives and resolve to recover input cost inflation mean that we look forward to 2017 being a further year of progression for the Group".

"Following on from a record performance in 2016 I am confident that our strategic development initiatives will continue to deliver growth ahead of the market".

“….we have sufficient financial headroom to continue to develop our investment opportunities and will continue to seek compelling "bolt on" acquisition opportunities.”

Polypipe is the largest manufacturer in the UK, and among the ten largest manufacturers in Europe, of plastic piping systems for the residential, commercial, civils and infrastructure sectors by revenue. 

The Group operates from 20 facilities in total, and with over 20,000 product lines, manufactures the UK's widest range of plastic piping systems for heating, plumbing, drainage and ventilation. Polypipe primarily targets the UK, French and Irish building and construction markets with a presence in Italy and the Middle East and sales to specific niches in the rest of the world.