Stelrad Group (SRAD) H2 2023 earnings summary

Executive summary

• Resilient 2023 results amid subdued demand; adjusted operating profit was in line with expectations, supported by pricing, cost management and operational improvements.

• Contribution per radiator rose for a sixth consecutive year, while sales volumes fell; scale, market position and a flexible operating base support readiness for recovery.

• FY24 trading to date was in line with expectations; markets were expected to remain subdued, with H2 2023 cost-saving initiatives set to benefit 2024.

Financial highlights

• Revenue fell 2.6% to £308.2m; like-for-like revenue declined 12.9%.

• Adjusted operating profit decreased 13.8% to £29.3m; EBITDA fell £1.0m to £41.2m.

• Adjusted profit for the year was £17.3m, down £7.0m; adjusted EPS declined 28.7% to 13.62p.

• Reported operating profit was £26.7m versus £22.6m; profit for the year was £15.4m versus £4.3m.

• Free cash flow increased to £17.8m from £12.7m, helped by improved working capital and lower capital expenditure.

Outlook and guidance

• FY24 trading to date was in line with expectations, with subdued markets expected to continue through 2024.

• 2023 reorganisation benefits were expected to support contribution per radiator in 2024, tempered by ongoing cost pressure.

• H2 2023 steel price reductions were expected to benefit Q1 2024; overall steel prices were expected to rise during 2024.

• FY24 capital expenditure, excluding finance leases, was expected to fall to ~£6.5m; a small working-capital investment, particularly in inventories, was expected.

• Year-end leverage was expected below ~1.5x EBITDA after a seasonal H1 increase; effective tax rate guidance was ~29%.