Stelrad Group Expects Higher Profit and Margin Growth Despite Subdued Market

Stelrad guides to £32m-£33m adjusted operating profit as volumes stay soft

Stelrad Group has nudged guidance higher for profitability despite a tough backdrop, expecting FY25 adjusted operating profit of £32m-£33m, up on FY24’s £31.5m. Volumes remain subdued across repair, maintenance and improvement (RMI) and new build, and revenues are lower year-on-year. However, the company is squeezing more profit out of each unit, pointing to year-on-year operating margin expansion.

In short, the market is sluggish, but Stelrad is running the business well enough to grow profit and margins anyway. That’s not easy to do in a downcycle and tells you something about execution and pricing power.

What the trading update actually says

The company reports that end markets stayed muted in the ten months to 31 October 2025, with H2 looking more stable versus H1 in terms of the rate of volume declines. Even so, ongoing economic uncertainty continued to suppress demand, and revenue is below the prior year.

Against that, Stelrad highlights proactive margin management and cost reduction, plus a mix shift towards higher added value products. The outcome is higher contribution per radiator year-on-year, which supports the upgraded adjusted operating profit range of £32m-£33m and positive operating margin growth.

Margins up despite lower revenue – how they are doing it

Adjusted operating profit is a management measure that strips out certain one-off or non-cash items to give a cleaner view of underlying performance. The story here is classic operational discipline: tighter costs, better pricing, and a focus on products with richer margins.

Two details matter. First, “contribution per radiator” is rising again, suggesting the company is passing through value in the product mix and maintaining discipline in pricing and manufacturing efficiency. Second, operational excellence is explicitly cited as offsetting volume declines, so factories and logistics are doing more of the heavy lifting while demand bides its time.

My read: while revenue pressure is a headwind, improved unit economics mean Stelrad is not just hunkering down – it is making the business structurally stronger for when volumes recover.

Cash, debt and refinancing – why it matters

The Group’s debt leverage ratio is expected to improve further this year, from 1.37x in 2024. The absolute number for 2025 is not disclosed, but directionally this means net debt is trending down relative to profit, helped by strong cash management.

Refinancing of the loan facility is expected to complete before year end and will reduce future borrowing costs. That is a welcome tailwind to earnings and cash flow in 2026, and it gives management more flexibility to invest or return cash when the cycle turns.

One negative to note: the effective tax rate is expected to rise, due to non-cash deferred tax accounting charges and the country mix of profits. It is not quantified, but it will clip the bottom line versus what you might expect from operating profit alone.

Restructuring in Turkey and the exceptional cost

Stelrad has restructured its Turkish business in H2, incurring an exceptional expense of approximately £1.6m in 2025. “Exceptional” in this context means a one-off item that is excluded from adjusted profit to reflect underlying trading.

Management says the move will further enhance operational margins in future. If executed well, a small near-term cost for medium-term margin benefit is a trade most investors will take, particularly in a down market where efficiency gains stand out.

Market position and long-term drivers to watch

Stelrad calls out its leading market position and sustainable competitive advantages. By volume, it holds a 19.3% share in the combined UK, European and Turkish steel panel radiator market, or 24.2% excluding Russia in 2024. It is market leader in six countries – the UK, Ireland, France, the Netherlands, Belgium and Denmark – and top three in a further 12 territories.

Why this matters: leadership often brings scale economies, better distribution, and product breadth. That can translate into above-market growth when volumes return, especially with a push into higher-margin, higher added value products. The relaunched Stelrad.com site has also gained strong traction with customers, with encouraging traffic and high engagement – a small but telling sign that demand is still there, even if delayed.

Key numbers from the RNS

Metric	FY25 guidance / comment	Prior year / reference	Notes
Adjusted operating profit	£32m-£33m	FY24: £31.5m	Guided to be ahead year-on-year
Operating margin	Positive growth year-on-year	Not disclosed	No percentage provided
Revenue	Lower year-on-year	Not disclosed	Volumes remain subdued
Contribution per radiator	Increase vs prior year	Not disclosed	Driven by mix and efficiency
Debt leverage ratio	Expected to improve further	2024: 1.37x	Helped by strong cash management
Refinancing	Expected before year end	n/a	Will reduce future borrowing costs
Effective tax rate	Expected to increase	Not disclosed	Due to deferred tax and country mix
Exceptional expense	c. £1.6m in 2025	n/a	Turkish restructuring to enhance margins
Market share	19.3% by volume	24.2% excluding Russia (2024)	Leader in UK, Ireland, France, Netherlands, Belgium, Denmark

Positives and negatives for investors

What looks good

• Profit and margin guidance up despite lower revenue – evidence of pricing power and cost discipline.
• Leverage trending down and refinancing set to cut interest costs – supportive for free cash flow.
• Contribution per radiator rising – healthier unit economics heading into any recovery.
• Clear market leadership across multiple countries – scale advantage when demand normalises.

What to keep an eye on

• Volumes and revenue remain under pressure – no sign yet of a market upturn.
• Effective tax rate moving higher – a drag on net income not quantified in the update.
• Exceptional cost of c. £1.6m in Turkey – small in size, but execution will determine if margins step up as intended.
• Timing of refinancing completion – expected before year end, but worth tracking for certainty on interest savings.

My take: resilient execution in a tough market

This is a solid update in challenging conditions. Revenue is down, but Stelrad is delivering more profit from less volume, and doing it with better cash control and lower future interest costs on the way. That combination tends to be rewarded when recovery finally turns up.

The swing factors from here are largely exogenous: when do RMI and new build pick up, and how quickly. Internally, the levers look well set – mix, margins, cash, and a sharper Turkish footprint. On balance, it is a cautiously positive read-through, with the caveat of a higher tax rate and ongoing volume softness.

What to watch next

• Confirmation that FY25 adjusted operating profit lands within £32m-£33m.
• Completion of the refinancing before year end and any detail on new borrowing costs.
• Trend in volumes and revenue into early 2026 – any sign of end-market recovery.
• Evidence that the Turkish restructuring lifts operational margins as promised.
• Further traction from higher added value products and the relaunched Stelrad.com channel.

Bottom line: Stelrad is controlling what it can control and improving the quality of earnings while it waits for the cycle. That is exactly how you want a leader to behave in a slowdown.