Polypipe Group plc

Broomhouse Lane Edlington
Doncaster, DN12 1ES
England
Telephone: (+44) 1709 770-000
Fax: (+44) 1709 770 001
Web site: http://www.polypipe.com

Public Company
Founded:
1980
Employees: 3,056
Sales: £411.7 million ($538.8 million) (2017)
Stock Exchanges: London
Ticker Symbol: PLP
NAICS: 326122 Plastics Pipe and Pipe Fitting Manufacturing; 326191 Plastics Plumbing Fixture Manufacturing

Polypipe Group plc is the leading producer of plastic piping systems, water management systems, ventilation systems, and other building components in the United Kingdom, and one of the largest in Europe. The company is organized into two main divisions: Residential Systems and Commercial and Infrastructure Systems, representing approximately 54 percent and 46 percent of the group's revenues, respectively. Nearly 90 percent of the company's revenues are generated in the United Kingdom, with continental Europe and the Middle Eastern markets making up the rest. In 2017 the company refocused its production and logistics operations around its core network of 15 facilities in the United Kingdom, shutting down factories in France and Dubai. It maintains a site in Italy. In the United Kingdom, the company operates a fleet of 150 tractors and more than 300 trailers, completing more than 10,000 deliveries each year. Polypipe is led by chair Ron Marsh and CEO Martin Payne.

PLASTICS ENTREPRENEUR

Polypipe was founded by Kevin McDonald, a plumber by training, whose career spanned much of the development of plastic building components in the United Kingdom. Born in South Yorkshire in 1933 as one of seven children, McDonald appeared an unlikely candidate to become one of the most successful entrepreneurs in the United Kingdom. Although McDonald's father was an insurance salesman, McDonald himself was enrolled in the building trades course at MexBorough Technical School in Yorkshire. McDonald left school at the age of 15 and took a position as an apprentice plumber with a local contractor. During his apprenticeship, he completed a City and Guilds vocational training course. Backed by this diploma, McDonald was able to return to MexBourough Tech, this time as an employee to teach a plumbing course.

COMPANY PERSPECTIVES

Polypipe is one of Europe's largest manufacturers of piping systems, water and climate management systems, delivering engineered solutions that enable a sustainable built environment.

Bartol's success caught the attention of Hepworth Ceramics, a company founded in 1857 to produce ceramics-based pipes and plumbing fixtures. Hepworth then added the production of cast-iron and other metal plumbing fixtures, changing its name to Hepworth Iron Co. in 1897. Hepworth later expanded into other markets, such as providing the ceramic conduits for the British Post Office's underground telephone cable system during the 1920s. This became a major part of Hepworth's business during World War II. After the British Post Office reduced its purchases of clay conduits during the 1950s, Hepworth refocused itself as a producer of sanitary and sewer piping. It then launched a series of acquisitions, including a 60 percent stake in Bartol Plastics. Nonetheless, Hepworth's focus remained largely on ceramic piping, which the company underscored when it changed its name to Hepworth Ceramics in 1970.

Although Hepworth's 60 percent stake in Bartol Plastics was valued at £450,000, the full value of the acquisition, including earn-outs and share options, raised the total purchase price to £2 million. Instead of cashing out, McDonald decided to take shares in Hepworth Ceramics, as well as a seat on the company's board of directors and the position as head of the company's plastics division.

Hepworth's decision to rename itself Hepworth Ceramics and to focus on its ceramics production led to disagreements between McDonald and Hepworth. These disagreements came to a head in 1972, when McDonald stepped down from the company's board of directors and left to found a new company, called MacDee, to produce plastic bath tubs. He still retained his shares in Hepworth, a decision that helped keep him afloat as MacDee struggled amid the deep recession that afflicted the United Kingdom and much of the world during the decade. By the late 1970s MacDee was on its last legs, and McDonald was finally forced to sell the company to the building products group McKechnie Brothers, barely breaking even.

PLASTIC PIPING START-UP: 1980

McDonald's attention returned to the plumbing sector, where plastic piping systems that utilized PVC and other new and more robust plastics were beginning to overtake traditional clay and copper pipes. McDonald spotted an opportunity to disrupt the plumbing fixtures industry, recognizing the potential to adopt emerging computerized manufacturing technologies and other modern production methods to lower the cost of production. He decided to found a new company that specialized in the production of plastic piping. For this, McDonald teamed up with Geoff Harrison, who supplied his engineering skills, and Brian Leesing, who brought in expertise in financial systems, and founded Polypipe in 1980. To provide the initial funding for the company, McDonald sold his shares in Hepworth and became Polypipe's majority shareholder.

Polypipe got off to a quick start, building one of Great Britain's most advanced plastics factories in Doncaster. Polypipe initially focused its production on a single product line: above-ground waste piping for both the residential and commercial construction sectors. The company held true to its promise, undercutting competitors' prices by as much as 80 percent. The company was profitable from the start, posting earnings of £150,000 during its first year. By 1984 its sales had climbed to £8.4 million, generating profits of more than £1 million. The company also claimed a 15 percent share of the entire U.K. above-ground plastic plumbing market and a 30 percent share in the country's northern region of England. It also expanded into the southern and Scottish regions, adding a factory in Sittingbourne in 1985.

Polypipe went public that same year, listing nearly 24 percent of its shares on the London Stock Exchange's Unlisted Securities Market (USM). The public offering enabled Polypipe to extend its operations into the underground piping sector, while it pursued its geographic expansion into the southern and southeastern regions as well.

KEY DATES
1980:
Kevin McDonald founds Polypipe along with partners Geoff Harrison and Brian Leesing.
1999:
The company is acquired by IMI plc.
2005:
The company completes a management buyout under CEO David Hall.
2014:
The Polypipe Group goes public on the London Stock Exchange.
2018:
The company sells its French operations to Belgium's RYB.

BUYOUT: 1999

Polypipe maintained its steady growth, with revenues rising to £45.6 million in 1988. External investments accounted for part of this growth, with acquisitions including Haye Pipe in Northern Ireland in 1987. The following year the company added its own tooling capacity by acquiring the plastic molding tool maker Mason Pinder (Toolmakers) for £3 million. Polypipe also acquired MacDee, by then known as Derwent MacDee. In 1991 it paid £2.5 million to acquire Fordham, a plastic cistern and animal drinking system producer that had formerly been part of Hepworth. At the same time, Polypipe rose to the number-two position in the U.K. plastics piping industry, behind the Shell subsidiary Wavin, with revenues of £81.2 million and a net profit of £13.9 million in 1991.

During this period Polypipe began a diversification program. In 1991 it acquired Oasis, a plastic garden furniture maker. It also entered the civil engineering sector by adding the production of sewer pipes and sewer system design services. Other diversified operations included the production of ducts for cable television network installations. The company also began supplying international markets, starting with Europe. It entered that market directly in 1994 with the acquisition of France's Janoplast for £9.8 million. Besides France, Janoplast was active in the Benelux, German, and east European markets. The following year Polypipe added a second French acquisition, Sud Ouest Plastiques.

The company's diversification was credited with helping it survive the financial turbulence of the early 1990s, as the United Kingdom slipped into a deep recession following the outbreak of the first Persian Gulf War. Despite the difficult economic period, the company managed to raise its total revenues to £85 million by mid-decade.

Also in 1999, as McDonald turned 65, Polypipe agreed to be acquired by the U.K. engineering giant IMI plc for £337 million ($543 million). McDonald took away £70 million from the sale of his shares, while founding partner Harrison earned £12.5 million from the sale of his own 3.7 percent stake. Under IMI, Polypipe continued its international expansion, adding factories in Italy and Poland. The company also formed a joint venture to build a factory in Guangzhou, China, to produce taps and sink wastes for bathrooms and kitchens. That factory began production in 2005.

DOMESTIC FOCUS

In the meantime, IMI had completed a strategic review and launched a major restructuring, starting in 2001. As part of its strategic review, IMI announced plans to sell Polypipe. Four years later, in 2005, Polypipe was spun off in a management buyout (MBO) led by David Hall, a former manager of Polypipe's civil construction division. The U.S.-based investment group Castle Harlan Inc. backed the MBO, which was priced at £293 million.

Under Hall, Polypipe began its own restructuring as it focused itself around its core plastic building components business, and, later more specifically, around a dual focus on water management and air management systems. As part of this effort, the company added Terrain Drainage, the U.K.-based PVC piping production unit of Switzerland's Geberit AG. Terrain specialized in above-ground drainage systems and had its own factory in Aylesford, England. As part of its reorganization, Polypipe also focused most of its operations on the U.K. market.

Following this restructuring, Polypipe was reorganized into two primary divisions: Residential Systems and Commercial and Infrastructure Systems. With its revenues topping £300 million in 2014, Polypipe was also ready to return to the stock market, carrying out a new listing on the London Stock Exchange that same year.

Polypipe leveraged its new access to capital with a number of new acquisitions, including completing the Ferrob Ventilation purchase in February 2015. Soon after, the company completed its largest acquisition to date, paying £145 million to acquire the Welsh-based ventilation systems specialist Nuaire. The company also made a move into Middle Eastern markets that year, opening a technical center in Dubai's Jebel Ali Freezone in September 2015.

The move into Dubai proved short-lived, however, as new CEO Martin Payne, who took over as head of the company in 2017, continued Polypipe's refocusing on its U.K. operations. By that point the United Kingdom represented nearly 90 percent of the group's sales. This figure was expected to increase following the sale of the company's French operations to Belgium's RYB in early 2018, and the closure of the Dubai office slated for later that year. With revenues of £411.7 million ($538.8 million) in 2017, Polypipe looked forward to confirming its status as a U.K. leader in water and air management systems into 2020 and beyond.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Ferrob Ventilation Ltd.; Hayes Pipes (Ulster) Limited; Home Ventilation (Ireland) Limited; Insulated Damp-Proof Course Limited; Mason Pinder (Toolmakers) Limited; Mr Plumber Limited; Nuaire Limited; Nuhold Limited; Nu-Oval Acquisitions 1 Limited; Oracstar Limited; Oval (1888) Limited; Pipe Holdings plc; Pipe Luxembourg Sarl; Plumbexpress Limited; Robimatic Limited; Surestop Limited; Water Management Solutions LLC.

PRINCIPAL DIVISIONS

Residential Systems; Commercial and Infrastructure Systems.

PRINCIPAL COMPETITORS

Avon Rubber p.l.c.; Chemson Ltd.; Hill & Smith Holdings PLC; John Guest Limited; Mainetti (UK) Ltd.; Radius Systems Ltd.

FURTHER READING

Chaloin, Caroline. “Le Groupe RYB Rachète la Filiale Française de l'Anglais Polypipe Group PLC.” Le Dauphine, April 15, 2018.

Fitzpatrick, Tom. “Polypipe Buys Welsh Firm Nuaire for £145m.” Construction News, August 5, 2015.

Hill, Nick. “Polypipe Group Negotiating Sale of French Operation in €16.5m Deal.” BDaily News, January 31, 2018.

“Polypipe Acquires Ferrob Ventilation Business.” Builders Merchants News, February 17, 2015.

“Polypipe Acquires Nuaire for £145m.” Yorkshire Post (England), August 5, 2015.

“Polypipe Picks New CEO.” Construction Index, May 24, 2017. Accessed August 17, 2018. https://www.theconstructionindex.co.uk/news/view/polypipe-picks-new-ceo .

“Polypipe Ventilation Evolves into Domus Ventilation.” HPM Magazine, December 11, 2017.