Urbanisation of global populations is a mega theme, as ever more people crowd into denser cities. It is expected that by 2050 over 6.5 billon people will live in urban centres, while approximately 3bn will live in rural areas1. This means that we can expect greater construction and property developments in the growing hubs. As these urban populations swell, so does the need to build in a way that is increasingly environmentally neutral, safe, and sustainable. While cities occupy 3% of the earth’s land, they consume two thirds of the world’s energy and account for 70% of CO2. We are creating these cities or urban zones in rapid fashion; with city property of the size of Paris built every day2! With this rapid expansion and the already known impact of the built environment on climate change, never has it been more important to re-engineer construction technologies for sustainability. Polypipe through its manufacture and design of water, and ventilation systems, is leading the way in the UK construction industry.
Our Ethical Investment Plans include Polypipe PLC, which is held in the Aberdeen Standard Investment (ASI) UK Ethical Equity Fund.
The finance stuff 📈
Company value: £1.20bn
Share price: £5.26
2019 Profits: £52.7mn
What does Polypipe do? 🤷
Polypipe was founded in 1980 in Doncaster by Kevin McDonald, who is a former plumber, and Geoff Harrison. After a series of acquisitions, the partners sold the business in 1999. The company has continued to grow and went public in 2014, with shares available for sale and purchase by the public on the London Stock Exchange3.
The company manufactures and designs water management (drainage, sewerage, ducting and plastic piping) and ventilation systems for the built environment. This includes the commercial, infrastructure and residential property mainly in the UK but also in selected global markets. Polypipe has 15 factories in the UK alone - where most of its revenue is generated. Smart engineering is at the heart of Polypipe’s values, offering 20 000 products that deliver sustainable solutions to the construction industry3. Polypipe manufactures - strong and lightweight plastic pipes, which are an essential input of their range of engineered solutions. While plastic use has garnered a bad reputation in certain sectors, it is one of the most efficient and sustainable materials in the built environment, with its use providing significant reductions in water waste and CO2 emissions.
What positive impact is Polypipe having? 🌱
Polypipe follows a four-step process to ensure that its products create a positive sustainable impact: Sustainable inputs, sustainable processes, sustainable materials, and sustainable solutions. The company’s approach means that all its products are sustainably produced and installed and contribute positively to sustainability in their everyday use in saving energy, reducing CO2 emissions, and saving water. In terms of materials and inputs, the company processed nearly 45 thousand tonnes of recycled plastic in the production of piping. Around 16000 tonnes of this came from recycled materials such as bottles and containers3. Polypipe has invested heavily in its own recycling plant and continues to work for industry leaders, such as Veolia, to source quality recyclable plastics for use in manufacturing4.
The nature of the product also leads to sustainability gains. The lightweight nature of the product means that they can be 70% cheaper to transport than concrete pipes of the same size, thereby reducing the overall carbon footprint. In addition, the product life of the piping is 50 years, with the product itself being fully recyclable at expiry date4.
What Polypipe has to say 📣
“Sustainability continues to be at the heart of what we do. We provide sustainable environmental solutions to the construction industry in the water management and climate management space, launching our ‘Inspiring Green Urbanisation’ design guide at the Future Build exhibition in March 2019. We not only help our customers create sustainable solutions, we also continue to drive our own business to be more sustainable. We have further increased our usage of recycled plastic during the year, with recycled plastic now representing 42.0% of our consumption of plastic, compared to 40.2% in 2018. This has been achieved through the further roll-out of our multi-layer extrusion process in our Residential Systems segment, helped in the latter part of the year with the acquisition of Alderburgh which uses recycled plastic for most of its production. We also reduced our carbon emissions in the year as measured by tonnes of carbon dioxide equivalent (tCO2e) by 10%. I am pleased to report that in December 2019 our sustainable credentials were recognised by the London Stock Exchange who awarded us one of 74 ‘Green Economy Issuer’ certificates for our efforts in this area. We are working on a comprehensive set of sustainability targets for the Group and will report on these later in the year.”
Annual Report, 2019
What Aberdeen Standard Investments think… 🤓
“Polypipe – the building materials supplier and manufacturer – offer environmentally friendly water, heating, ventilation and sewage management solutions to many of its customers. Environmental legislation relating to the movement of water and air continue to increase with regulations around water run-off, attenuation and flood alleviation significantly tightening in recent years. The frequency of storm events continues to increase and hence Polypipe is well placed to benefit from this. Furthermore, as construction becomes greener, building practices must align to become more climate aware and work towards carbon neutrality. In addition, aspects around ventilation and heat recovery are becoming more prevalent in building control; specific areas that Polypipe can offer solutions within. Through its manufacturing process, Polypipe uses recycled plastic bottles as a key input, accounting for 40% of their materials sourced. This represents an innovative and environmentally friendly manufacturing process to its customers. The business is overseen by a conservative management team who are well aligned to these ESG credentials and hence Polypipe continues to be a key investment idea for the ASI UK Ethical fund for 2021.”
To wrap up 🎁
With cities swelling and green regulation in the built environment increasing in sophistication (particularly in the UK), Polypipe is well positioned to deliver smartly manufactured products and engineered solutions to reduce the environmental impact of the construction industry. Plastic, if used within a circular economy that centres on recyclability, reliability and material efficiency has the potential to greatly reduce the overall impact of all types of man-made structures. Polypipe is a great example when it comes to using plastic to benefit society. Furthermore, the company’s solutions in the fields of water management, climate change management and ventilation systems hold much promise in increasing the resilience and sustainability of buildings in the context of extreme weather events.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.