Shares in water and climate management group Genuit (GEN) charged 10% higher to 336p on its FY25 results update. The shares had lost around 20% in the preceding week and a half as markets sold off.
A year of two halves
For the year to December, Genuit posted a 7.3% increase in sales to £602 million. Like-for-like growth was 3.2%, driven by new products and market share gains, with the balance due to acquisitions.
Underlying operating profit rose 2.4% with flat underlying growth, in line with expectations. Growth was hindered by higher labour costs due to increases in NICs and the National Minimum Wage.
Margins improved significantly in H2, however, leading an 11% jump in H2 profits. Cash generation was also strong thanks to continuous improvements stemming from the Genuit Business System.
As a result, year-end leverage was 1.5 times EBITDA even after funding two strategic bolt-on acquisitions. FY EPS rose 5.7% to 26p while the dividend was raised 3.2% to 12.9p per share.
Simplifying the business
The firm also announced it was merging its Sustainable Business Solutions and Water Management Solutions divisions. The new Water Division will focus on solutions in water distribution, conservation, collection and attenuation.
Total revenue for the two businesses was around £417 million last year meaning the new division makes up two thirds of sales. The Climate Division will remain a stand-alone business addressing the heating and ventilation markets and building sustainability.
Looking ahead, the firm said Q1 demand was ‘subdued, albeit with some positive signs on order intake’. This was partly due to prolonged wet weather which impacted new-build housing activity in January and February.
These aren’t blow-out numbers but given how hard the shares had been hit this month they were due a bounce. That’s not to play down the good work the firm has done against a challenging overall backdrop.
Genuit has generated LFL growth in a weak new-build and RMI market by focusing on higher-growth segments. It has also developed a toolkit to structure its market approach and generate deeper customer insights to drive product design.
Simplifying the business into two units will help going forward not just in terms of management time but in marketing to new clients. Meanwhile the Genuit Business System is generating tangible benefits in terms of operating costs and margins and there is more to come.
Read the press release here: https://www.genuitgroup.com/investors/
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