Stelrad Interim Results: Profit Growth Defies a 15% Volume Drop

Stelrad's first-half results at a glance

Stelrad Group PLC has delivered a curious but encouraging set of interim results. It sold substantially fewer radiators, yet generated more profit and expanded its margins.

Revenue for the six months ended 30 June 2026 fell by 9.1% to £124.0 million, driven by a 14.6% decline in sales volumes. However, adjusted operating profit increased by 4.9% to £16.7 million, while the adjusted operating margin rose from 11.7% to 13.5%.

That tells investors the main story. Stelrad is currently prioritising the profitability of its sales rather than chasing low-quality revenue in difficult markets.

Key figure	H1 2026	H1 2025	Movement
Revenue	£124.0 million	£136.5 million	-9.1%
Adjusted operating profit	£16.7 million	£15.9 million	+4.9%
Adjusted operating margin	13.5%	11.7%	+1.8 percentage points
Adjusted profit	£9.5 million	£8.2 million	+16.0%
Adjusted basic EPS	7.43p	6.41p	+16.0%
Free cash flow	-£0.2 million	£1.8 million	Down £2.0 million
Net debt before leases	£57.5 million	£64.8 million	-11.2% year-on-year
Interim dividend	3.19p	3.04p	+5.0%

The full original company announcement contains the detailed financial statements and alternative performance measure reconciliations.

How did profit rise when revenue fell?

The strongest part of these results is Stelrad's margin performance.

Contribution per radiator increased from £20.33 to £24.32. Contribution is the revenue left after directly variable costs, such as materials, distribution and direct labour, have been deducted.

Several factors drove that improvement:

• Operational and cost-control initiatives
• Selling price benefits
• The exit from a loss-making European contract at the end of 2025
• Reduced sales in lower-margin territories and market sectors
• A more favourable mix of products and geographical markets

The exited European contract reduced revenue by around £5.0 million, while the decision to cut lower-margin sales in Turkey had an impact of around £4.0 million. These were deliberate commercial choices rather than purely market-driven losses.

Europe was the clearest beneficiary. Regional revenue declined by 7.4% to £58.2 million, but adjusted operating profit jumped by 76.3% to £6.3 million. Exiting the loss-making contract and lower activity in the low-margin French market both helped profitability.

This is good evidence of management discipline. Revenue growth is not useful if the work being taken on destroys value.

The quality of the margin improvement needs watching

There is an important qualification. Stelrad does not expect contribution per radiator to remain at £24.32 indefinitely.

Management expects it to move towards the sustainable medium-term target of more than £21 as the company seeks volume growth in selected territories. It also acknowledged that favourable market and sales-mix trends may not continue during a wider recovery.

This sounds counterintuitive, but a recovery could bring back larger volumes of lower-margin business. Total profit could still benefit through operating leverage, where additional production is spread across a relatively stable fixed-cost base, but profit per radiator may fall.

Investors should therefore avoid treating the first-half contribution figure as a permanent run rate. The real test is whether Stelrad can maintain attractive margins while rebuilding volumes.

Demand remains the obvious weakness

Underlying markets are still difficult. Total volumes fell by 14.6%, with declines across all three reporting regions.

UK and Ireland

Revenue declined by 4.0% to £62.4 million as volumes fell by 6.6%. Stelrad blamed continued weakness in new-build housing and repair, maintenance and improvement activity, partly offset by price increases and mix benefits.

Adjusted operating profit fell by 6.3% to £14.1 million. Improved contribution per radiator was not enough to overcome the effect of lower volumes on a stable fixed-cost base.

Europe

Revenue fell by 7.4% to £58.2 million, with volumes down 14.4%. Germany was affected by the contract exit, while France suffered from subdued demand and customer overstocking during 2025.

There were some brighter spots, with year-on-year volume growth in the Netherlands, Sweden, Poland and Denmark. Stelrad said European trading has shown broader stability in recent periods.

Turkey and International

Revenue dropped by 60.6% to £3.4 million following a commercial decision to reduce lower-margin sales in Turkey. Adjusted operating profit fell by 65.6% to £0.2 million.

The company also recorded £1.0 million of exceptional redundancy costs as it resized the Turkish operation for reduced demand.

Cash flow was the soft spot

Free cash flow moved from a £1.8 million inflow to a £0.2 million outflow. Adjusted operating cash conversion also declined from 60.5% to 43.9%.

The main reason was an £11.0 million working-capital outflow. Stelrad built warehouse stocks ahead of the heating season and invested in inventory at its Turkish facility to improve customer service. Higher tax payments also weighed on cash flow, although lower interest payments provided some relief.

Management described June as a typical seasonal working-capital high point and expects cash conversion to improve during the second half.

Net debt before lease liabilities was £57.5 million. That was higher than £51.1 million at the end of December 2025, again reflecting seasonality, but lower than £64.8 million a year earlier. Leverage stood at 1.29 times EBITDA, compared with 1.48 times in June 2025.

Further debt reduction is expected in the second half, making year-end cash generation an important figure to monitor.

Dividend growth signals confidence

The interim dividend increased by 5% to 3.19p per share. It is due to be paid on 23 October 2026 to shareholders registered on 9 October.

Adjusted earnings per share grew faster, rising by 16% to 7.43p. That improvement reflected higher adjusted operating profit and lower interest charges, with average interest rates falling from 5.6% to 4.5%.

The dividend increase looks measured rather than aggressive, particularly while cash generation remains weighted towards the second half.

For context on the company's preceding full-year performance, see the earlier analysis of Stelrad's 2025 results.

Market leadership remains a useful advantage

Stelrad retained a 24.0% share of the European steel panel radiator market in 2025, giving it a 3.9 percentage-point lead over its nearest competitors.

Customer service also remains strong. On Time In Full delivery, meaning orders delivered completely and when promised, reached 98.5% in the UK and Ireland, compared with 99.0% previously.

The company believes its scale, product availability and cost position leave it well placed to capture market share when demand recovers. Longer-term opportunities identified by management include premium designer products and radiators suited to lower-carbon heating systems.

What investors should watch next

Stelrad has left its full-year outlook unchanged, with second-half trading to date in line with expectations. That provides reassurance, but the timing of a broader market recovery remains uncertain.

The first-half performance shows a business protecting profitability effectively in a weak market. Higher adjusted profit, stronger margins, lower year-on-year debt and a growing dividend are all positives.

The trade-off is that volumes remain under pressure, free cash flow was slightly negative and some of the margin benefit came from deliberately reducing lower-margin revenue. Cost inflation and soft end markets also remain active risks.

The next set of results should reveal whether Stelrad can convert its stronger operating performance into improved second-half cash flow, while preserving margins as it begins pursuing selective volume growth.