Interactive Investor

One of London’s largest ‘green’ stocks lifts profit forecast

17th August 2021 15:51

Graeme Evans from interactive investor

Our equities writer has the details on a firm that has managed to qualify for the Green Economy Mark while making a handy profit.


One of the largest stocks to qualify for London's Green Economy Mark today upgraded its profit forecasts as it ramps up a strategy putting sustainability at the heart of its business.

Shares in FTSE 250-listed Genuit Group (LSE:GEN), which changed its name from Polypipe in April, rose as much as 6% to 688p after interim results showed the benefits of a sharp recovery in the construction markets it serves through water, climate and ventilation products.

It has linked its growth to meeting the challenges facing society, such as the need for flood water drainage systems better able to cope with severe weather events, or through the focus on clean air and drive for green urbanisation.

It also sees opportunities in the move from gas boilers to low-carbon heat sources.

Genuit's own pledges on sustainability include using recycled materials for 62% of its polymer consumption by 2025, compared with 46% last year.

It has already reduced its like-for-like carbon intensity by 53% in the first half of the year, with a significant contribution coming from renewable energy sources.

Chief executive Martin Payne said the combination of environmental drivers and strong market conditions had boosted the outlook for this year after Genuit achieved a 30.6% rise in half-year underlying profits to £46.5 million.

Three acquisitions made during the period have performed well so far, with the addition of water-based heating systems business Adey exceeding expectations.

The others were Nu-Heat, which supplies sustainable underfloor heating and ground source heat pumps, and Plura as a manufacturer of products for utility companies and road and rail operators.

The company's strongest performance has been in its residential systems division, with half-year revenues of £183.8 million being 42.5% ahead of the 2019 level.

The commercial and infrastructure systems division improved by 18.6% to £111.8 million, with sales of ventilation products particularly benefiting from the increased focus on fresh air in the workplace.

Genuit pointed out it has a balanced exposure to the different elements of the UK construction market, but added that labour supply constraints and cost inflation primarily affecting raw materials presented some risk to the financial performance.

Its dividend policy is to pay a minimum of 40% of the group's annual underlying profit, leading to today's award of a 4p a share pay-out. The shares have risen from 539p in May.

Analysts at Numis Securities have a price target of 780p, pointing out that Genuit trades on a 2022 price/earnings multiple of 19.6 times and dividend yield of 2.1%.

Numis said: “We view these as attractive valuation metrics for a company that is well placed to continue to outperform its markets, particularly driven by its exposure to sustainability trends.”

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