Stelrad Group (SRAD) H1 2024 earnings summary

Executive summary

• Delivered strong H1 2024 performance despite challenging macroeconomic conditions, with revenue down 8.9% to £143.1m but adjusted operating profit up 12.8% to £15.7m, driven by margin management and improved product mix.

• Market share increased by 1.6 percentage points to 20.8% in core European markets, extending leadership.

• Contribution per radiator rose 16% to over £20, reflecting strong product mix and operational flexibility.

• Interim dividend increased by 2% to 2.98p per share, reflecting confidence in future growth and cash generation.

• Board remains confident in full-year 2024 outlook and long-term growth plans, supported by selective working capital investments and regulatory tailwinds.

Financial highlights

• Adjusted operating profit margin improved to 11.0% (up from 8.9%); adjusted EPS nearly flat year-on-year at 6.34p.

• Leverage reduced to 1.49x EBITDA; net debt before leases at £64.6m.

• Return on capital employed increased by 2.5 percentage points to 26.4%.

• Free cash flow remained positive but declined to £1.3m due to higher working capital and interest paid.

• Operating cash conversion at 57.7%, down from 75.6%.

Outlook and guidance

• Full-year 2024 outlook unchanged, with confidence in achieving consensus expectations and long-term growth.

• Early signs of volume recovery in select European markets; year-on-year volume reductions expected to moderate in H2 2024.

• Continued investment in working capital and inventories anticipated for the remainder of the year.

• Regulatory and decarbonization trends expected to drive long-term demand for energy-efficient heating systems.

• Group effective tax rate expected at 31.5%, elevated due to withholding tax and absence of prior year credit.