Stelrad Group (SRAD) Investor & Trading Update summary

Strategic Growth Drivers and Market Opportunities

• Premiumization and decarbonization are key structural growth drivers, enabling above-market growth and margin expansion over the medium term.

• Premium and designer radiators offer significantly higher contribution per unit, with the UK market underpenetrated and representing a major growth opportunity; designer radiator volume has increased 264% since 2015.

• Decarbonization, driven by EU and UK net-zero legislation, is accelerating demand for high-output, hybrid, and electric radiators, with product innovation and portfolio expansion supporting this trend.

• Replacement demand for hydronic radiators is expected to rebound, supported by a large installed base and evolving consumer preferences toward design and efficiency.

• Direct-to-consumer channels, especially Stelrad.com, are growing rapidly, with designer products making up over half of online sales and D2C being the fastest-growing channel.

Competitive Advantages and Operational Excellence

• Flexible, low-cost, pan-European manufacturing footprint with standardized core product design enables operational efficiency and rapid response to market changes.

• Industry-leading product availability and customer service, supported by robust supply chain management and high stock levels, drive customer loyalty and market share gains.

• Strategic investments in automation, capacity, and distribution centers underpin cost leadership and scalability, with £40m recent investment enhancing efficiency and profit margins.

• Strong, long-term supplier relationships and dual sourcing strategies provide resilience against supply chain disruptions.

• Market-leading Trustpilot score and award-winning customer service reflect high customer satisfaction and service quality.

Market Share, Consolidation, and Financial Framework

• Market share in steel panel radiators increased to 20.2% in 2023, with consistent organic growth and successful integration of acquisitions like Radiators S.p.A.; #1 position in seven core markets.

• The European market remains fragmented, offering further consolidation opportunities, especially as smaller competitors struggle with scale and distribution.

• Medium-term financial targets include 1-2% market share growth, contribution per radiator above £21, operating margin of 13%, cash conversion over 90%, and ROCE above 30%.

• Targets are based on organic growth, with additional upside from market recovery and further margin enhancement through premiumization, decarbonization, and operational excellence.

• Capital allocation priorities focus on organic investment, progressive dividends, deleveraging, and selective M&A aligned with strategic objectives.