MIDAS TRADING TIPS: Plug into heating giant Genuit’s pipeline to generate profits

St Dunstan’s Church in Liverpool is large, impressive and a local landmark. It is a Grade II listed building and was built almost 140 years ago with all the pomp and grandeur of the late Victorian era. For most of its history, the church was also very windy.

But when renovation work began, local dignitaries wondered if they could make services a little warmer for parishioners. Ceilings were high, there were restrictions on registration, and money was limited. But engineers had an idea: underfloor heating, known for warming rooms of all sizes and shapes, often at a lower cost than traditional radiators.

The heating was installed by GenuineGenuit, formerly known as Polypipe (short for ‘ingenuity’), is the UK’s largest supplier of plastic pipes and fittings for heating, plumbing and drainage.

In recent years, the group has also positioned itself as a green company, helping developers, homeowners and commercial businesses reduce their carbon footprint and use water more efficiently.

Around 50 per cent of Genuit’s plumbing products are made from recycled plastic, and chief executive Joe Vorih is keen to increase that figure significantly. The Leeds-based group has its own recycling plant in Horncastle, Lincolnshire, where it turns milk, juice and detergent cartons into plastic pipes up to 3 metres wide.

Recycled plastic improves the environmental credentials of buildings when they are first built, but Genuit also helps make older properties greener.

Underfloor heating is just one example, especially when combined with air-source heat pumps, which run on electricity and often dramatically reduce energy bills. Widely used in the Nordic countries and central and eastern Europe, they account for just 3 per cent of central heating in Britain. Our reluctance is understandable: upfront costs are high and subsidies are far less generous than elsewhere.

But that is likely to change. New regulations aimed at reducing carbon emissions from new homes will come into force next year. Heating and ventilation are an important part of this initiative, and Genuit is in prime position to benefit from it.

The group also specialises in green roofs, where plants and grass help absorb water and reduce flooding.

Some even benefit from a “blue” element, where a layer of water lies beneath the vegetation to irrigate it during dry summers.

The last few years have been tough for the real estate sector. The volume of housing construction is 25% lower than in 2019 and spending on renovations has also decreased significantly.

Genuit has certainly suffered from the crisis, but its boss, Joe Vorih, has worked hard to make the company more resilient, and his efforts are now starting to bear fruit.

Although sales are expected to be slightly lower this year than last, profit margins are growing as Vorih introduces more efficient ways of working. At Genuit’s Nuaire ventilation business, for example, output has increased by 30 percent, even though workers use less space and spend less time assembling each unit.

Looking ahead, brokers are forecasting a 4 per cent rise in sales to £605m next year, rising to £640m by 2026.

Profits are expected to rise by 9% to more than £87m in 2025, with further strong growth the following year. Dividend increases are also planned, with 12.5p for this year, 12.8p for next year and more than 13p in 2026.

Midas Verdict: Genuit shares have topped £8 in 2021. Today, they are at £4.81. The stock has started to gain ground in recent months, but should continue to rise much higher as interest rates fall, house building picks up and homeowners start spending more on improving their homes. Vorih’s efficiency push adds fuel to the fire. Buy.

Listed in: Main market Heart: GEN Contact: genuitgroup.com or 0113 831 5315