Are there signs Brexit will be a good thing as Polypipe Group plc soars?

Should you invest in Polypipe Group plc (LON: PLP) after its upbeat update?

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Fears surrounding Brexit uncertainty appear unfounded for some firms as plastic piping specialist Polypipe (LSE: PLP) has reported an encouraging trading statement. It shows that the company is on track to meet full-year expectations.

In fact, its sales for the first 10 months of the year were 23.7% higher compared to the same period of the prior year. Its overseas revenue benefitted from weak sterling, but even with the positive impact of a weaker pound excluded from its top line, Polypipe managed a rise in sales of 7.1%.

Furthermore, Polypipe has reported no impact on revenue or order intake since the EU referendum. Growth in the UK in the four months to 31 October has increased by 8% on a like-for-like (LFL) basis, which indicates that the UK residential and commercial property segments are benefitting from favourable operating conditions.

Good news

It’s a similar story for UK housebuilders. Also reporting today was Crest Nicholson (LSE: CRST), with it recording growth in open-market completions of 7% and a rise in overall housing delivery of 5% for the most recent full year. In addition, open-market average selling prices have increased by 20% to £371k, which is in line with the company’s target to reposition the business at broadly this level by 2016.

Crest Nicholson’s revenues for the full year are expected to be at a record level of around £1bn. It said that by the beginning of August, purchasers’ confidence had largely recovered and sales rates across the last quarter of the year have averaged 0.77. This is the same as in the comparable period of last year, which shows that there’s been little negative impact from Brexit.

Be careful

But does that mean everything is rosy? Not necessarily. Despite the positive updates released by Polypipe and Crest Nicholson, the reality is that Brexit hasn’t yet started. The government hasn’t invoked Article 50 of the Lisbon Treaty and isn’t expected to do so for around another four months. This means that in the near term the performance of the property and construction industry could continue in a similar vein to recent months. However, jump ahead and Brexit could cause uncertainty to increase and it may have a negative impact on the wider UK economy.

One reason for this is the quandary in which the UK finds itself. It wishes to maintain access to the single market, but doesn’t want to give up any immigration controls to the EU. Achieving both of these aims could be very challenging and may lead to an inability to thrash out a deal within the two-year negotiation period. This could lead to even greater uncertainty in the UK economy which may cause purchases within the property and construction industry to be delayed.

Even if there is a deal, it may not be satisfactory to some. They may argue that ‘Brexit means Brexit’ and so anything less than a ‘hard’ Brexit may not be feasible for the government. Therefore, while Brexit hasn’t yet proven to be a negative for the UK economy, there’s still a very long way for it to run.

However, with Polypipe and Crest Nicholson trading on price-to-earnings (P/E) ratios of 11.6 and 7.4 respectively, they offer sufficiently wide margins of safety to merit investment at the present time.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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