(Sharecast News) – Water, climate and ventilation solutions specialist Genuit Group reported a 4.2% decrease in first-half revenue on Tuesday, to £304.8m, although it remained confident in its full-year outlook.
The FTSE 250 company said that on a like-for-like basis, the reduction extended to 5%, which it put down to a 14.5% drop in volume.
However, the launch of new products, combined with competent pricing and cost management, had reportedly counteracted the decline to an extent.
An enhancement in its underlying operating margin was observed, with growth of 50 basis points.
Genuit highlighted a month-on-month surge in margins from April, which was the result of meticulous cost-cutting strategies, a refined profit portfolio mix, consistent measures on low-margin operations, and balanced pricing to withstand inflation.
Its underlying operating profit slipped 0.8% year-on-year to £47m, while underlying profit before tax was 9.6% lower at £40.3m.
Underlying earnings per share slid 11.4% to 12.4p.
Looking on specific sectors, sustainable building solutions saw a 10.7% drop in revenue, which was credited to reduced market volumes.
Still, the underlying operating margin observed a 220-basis point upswing due to internal rectifying actions.
The water management solutions segment experienced a 4% revenue dip, but still outperformed the market overall.
Genuit said the division saw growth of 180 basis points in its underlying operating margin, credited to self-help measures.
On a brighter note, the climate management solutions segment recorded an 8.9% revenue boost, overcoming the prior year’s isolated cybersecurity incident and recognising heightened demand for home ventilation solutions.
The company said it had intensified its investments in cybersecurity protection and insurance, particularly for that segment.
However, the increased expenditures, in conjunction with a temporary boiler market downturn, resulted in an operating margin 400 basis points below the prior year.
There was, however, evidence of an ongoing improvement in the underlying operating profit margin since the latter half of the prior year – a trend Genuit’s management expected to persist.
A notable reduction in net debt was reported, moving from 1.5x to 1.3x pro forma EBITDA, aligning with projections.
Consistent with the prior year, the company said it would be disbursing an interim dividend of 4.1p for each share.
Looking ahead, Genuit noted that its performance in the first half surpassed management expectations, and despite a challenging market backdrop, especially in the new residential and RMI segments, it maintained an optimistic stance.
Given current macroeconomic conditions, a market revival within the year was improbable, but the company said its resilience was expected to facilitate ongoing superior financial performance.
It said it anticipated a release in latent boiler and heating system demand as economic stability was achieved, presenting a potential resurgence of demand in the climate management domain.
The group said it remained hopeful that the increasing trend towards energy efficiency, stormwater management, and eco-friendly construction materials would augur well for its ventures.
Genuit said it was confident in maintaining a financial performance at the peak of market expectations, buoyed by the accumulating benefits of self-improvement measures.
“Genuit has made good progress in the first half of the year,” said chief executive officer Joe Vorih.
“Ongoing self-help measures, deployment of the Genuit Business System and continued business simplification enabled improvements in the quality of operating margin despite deteriorating market conditions.
“The group continues to make measurable progress towards our mid-term commitments.”
Vorih said its sustainability plans, including its ‘science-based targets’, were progressing well as it continued to focus on being the lowest carbon supplier of choice for customers.
“Despite more challenging conditions notably in the residential new build and RMI markets, we upgraded market expectations in May and expect group full-year operating profit to be at the top-end of current full year analyst expectations.
“Whilst the economic situation remains challenging, we have good momentum moving into the second half as we focus on improving efficiency, creating value and enabling growth.”
Reporting by Josh White for Sharecast.com.