Stelrad Group (SRAD) H1 2024 earnings summary

Executive summary

• Revenue declined by 8.9% year-on-year in H1 2024 to £143.1m due to challenging macroeconomic conditions, but adjusted operating profit rose by 12.8% to £15.7m, driven by operational discipline, margin management, and improved product mix.

• Contribution per radiator increased by 16% to over £20, reflecting a strong product mix, operational flexibility, and new designs in the U.K. and Ireland.

• Market share leadership in Europe was extended by 1.6 percentage points to 20.8% in 2023, consolidating the number one position in several core markets.

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

• The group remains confident in achieving full-year consensus expectations and maintains a positive long-term outlook, supported by regulatory tailwinds and selective working capital investments.

Financial highlights

• Adjusted operating profit margin increased to 11.0% (up from 8.9%); adjusted operating profit up 12.8% to £15.7m.

• Revenue declined 8.9% year-over-year to £143.1m, mainly due to lower sales volumes.

• Adjusted earnings per share was flat year-on-year at 6.34p, as higher interest and tax charges offset profit growth.

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

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

Outlook and guidance

• Full-year 2024 outlook remains unchanged, with expectations for volume reductions to moderate in H2 and early signs of volume recovery in Belgium, Netherlands, Poland, and Sweden.

• Selective investments in working capital and inventory are positioning the group for anticipated market recovery.

• Key input prices, including steel, expected to remain stable; capital expenditure (excluding leases) expected to be around £6.0m.

• Group effective tax rate expected at 31.5% due to higher withholding tax and UK rates.

• Board remains confident in long-term growth plans, supported by regulatory tailwinds for decarbonized heating and premium products.