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Polypipe half-time profits gush higher, Qatar spat hits margins

By Conor Coyle

Date: Tuesday 08 Aug 2017

Polypipe half-time profits gush higher, Qatar spat hits margins

(ShareCast News) - Plastic piping manufacturer Polypipe reported a 5.3% rise in pre-tax profits for the first half of 2017 on Tuesday and reiterated full year guidance.
Profits before tax were up £35.5m from £33.7m in the corresponding period for 2016 as revenues increased 8.4% to £242m in the first six months of the year.

Solid revenue performances in its UK segments boosted the Doncaster-based firm's numbers between January and June.

However, while UK sales were up 5%, divisional operating profits fell 4% due to the timing of price increases and lower revenue from higher margin export markets, in particular from the company's Dubai plant due to the trade embargo between many of the Gulf States and Qatar.

Polypipe also confirmed it had taken measures to cease manufacturing and cut costs at its Middle East plant, due to the ongoing embargo between the UAE and Qatar.

"The group has delivered another record performance, building on the strong momentum from last year and demonstrating that our strategic focus on structural growth opportunities is delivering results," said CEO David Hall.

The company also highlighted that it was cautious approaching the second part of the year, in part due to to ongoing political uncertainty caused by Brexit.

"Although underlying fundamentals remain positive, the group has experienced varying conditions in its different markets and has also faced some challenges in the first half of the year. I am encouraged by the way the business has risen to these challenges which is further evidence of the depth and strength of management across the group."

Despite the positive earnings report, Polypipe was trading 1.7% lower at 397.8p, as of 1000 BST on Tuesday.

House broker Numis said the implied first- and second-half split in operating profits of 53/47, "provides us with comfort
in regards to our full year forecasts".

With the Qatar spat leading to manufacturing at the Dubai facility temporarily stopping, which represents less than 1% of group revenue, analysts noted that this plus generally lower export revenue impacted margins.

"Elsewhere, demand for water management projects remains strong and there are promising signs that delayed road projects will commence in H2."

Numis left forecasts unchanged and longer term predicted operating profits can continues to grow at 5% per year out to 2020.

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