Castlefield Stock Story - Genuit

In this Castlefield Stock feature, David Gorman introduces Genuit Group - the manufacturer of sustainable products for the heating, plumbing, drainage and ventilation industries, which is held in the CFP Castlefield Sustainable UK Opportunities Fund. 

Bouts of heavy rain were a feature of disappointing summer weather in the UK this year and these deluges seem to be more frequent of late. When we get caught in such heavy rain, it brings home the need to protect ourselves from extreme weather events.   

This got me thinking about Genuit Group PLC, a relatively recent addition to our CFP Castlefield Sustainable UK Opportunities Fund. Probably best known for its Polypipe brand (see image below), Genuit manufactures the UK's widest range of sustainable products for heating, plumbing, drainage and ventilation and it is among the ten largest manufacturers in Europe of piping systems for the residential, commercial, civils and infrastructure sectors.

Image above shows Polypipe products being installed into a new build project in London.

It is also a leading designer and manufacturer of energy efficient heating systems, so it’s very much in our sweet spot with its environmental credentials. In the public consciousness, the construction industry is not associated with a commitment to the environment, but that isn’t the case these days and Genuit’s growth strategy is firmly based upon improving the sustainability of the built environment, such as using a majority of recycled materials in the manufacture of its products.

The company operates through three divisions: Climate Management Solutions, Water Management Solutions and Sustainable Building Solutions.

It's very much in our sweet spot with its environmental credentials

In Climate Management, Genuit has developed new low-carbon heating and cooling technologies to facilitate the energy transition in the built environment. For example, if an old building such as a church needs to re-lay its floor, highly efficient Polypipe underfloor heating can be installed with minimal effect on the aesthetics of the building but a positive impact on the comfort of those using it.

In Water Management, Genuit is a leader in what are known as blue-green roof technologies. Blue-green roofs operate like a sophisticated roof garden; they combine a selection of hardy plants rooted in soil-filled beds and planters which soak up rainwater with “blue” technology which collects excess rainwater, stores it and dispenses it back to the building’s residents to be used for watering plants and flushing toilets.

Example of a blue-green roof featuring Genuit products in the picture above. 

In Ventilation Management, the company’s Nuaire division installs systems which, when combined with natural ventilation, offer high levels of both fresh air and heat recovery. These systems are ideal for schools, health centres, offices, etc.

We invested in Genuit because it is very well placed to benefit from factors such as the increase in extreme weather events, with wetter winters and hotter summers, as well as the general shortage of housing. New legislation as well as greater demand for recycled materials in new building and in refurbishment work are all supportive of the investment case.

We see sustainable construction as a vital component of economic growth 

The company is an active acquirer of other business to increase market share, bring in new customers or incorporate a wider product set, all with the intention driving growth.

We see sustainable construction as a vital component of economic growth to the extent that we also own shares in Alumasc Group, a smaller company which operates in broadly the same categories as Genuit. We wrote about Alumasc back in 2021, highlighting the company’s own living roof systems and its other water management products. The company’s recent financial performance has been very pleasing.

Genuit aims to outperform the overall construction market by 2-4% through the cycle. The company’s addressable market is valued at around £3bn and, within that, the company targets segments which offer above-average growth rates.

With the groups annual revenues coming in at just under £200m and with inflation under control and interest rates on the turn, we are optimistic about the construction industry and Genuit’s opportunity to grow within it. The company is well-managed and the shares have performed strongly over the last nine months or so, but we feel they have further to run.

Written by David Gorman

Information is accurate as at 24.09.2024. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment, capital is at risk.