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Table of Contents

Executive Summary

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TABLE OF CONTENTS

1. INTRODUCTION 5

2. SUMMARY 7

2.1 OVERALL MARKET 7

2.2 PRODUCT MIX 8

2.3 SPACE HEATING 11

2.4 WATER HEATING 12

3. ECONOMIC ENVIRONMENT 13

3.1 INTEREST RATES 13

3.2 INFLATION 13

3.3 PUBLIC SPENDING, TAXATION AND UNEMPLOYMENT 14

3.4 CONSTRUCTION 15

4. CENTRAL HEATING 16

4.1 CENTRAL HEATING SYSTEMS 16

4.2 CENTRAL HEATING BOILERS 24

4.3 DRY SYSTEMS 40

4.4 RADIATORS 42

4.5 PUMPS 54

4.6 CONTROLS 61

4.7 MAJOR COMPETITORS 69

4.8. DISTRIBUTION 76

4.9 INSTALLATION & SPECIFICATION 80

4.10 FUTURE PROSPECTS 82

5 SPACE HEATING 84

5.1 MARKET SIZE 84

5.2 PRODUCT MIX 86

5.3 ELECTRIC SPACE HEATING 89

5.4 GAS SPACE HEATING PRODUCTS 99

5.5 SOLID FUEL ROOM HEATERS 106

5.6 IMPORTS & EXPORTS 106

5.7 FUTURE PROSPECTS 108

6. WATER HEATING 110

6.1 GAS WATER HEATING - DIRECT 110

6.2 GAS WATER HEATING - STORAGE 115

6.3 ELECTRIC WATER HEATING 123

6.4 FUTURE PROSPECTS 130

7. KEY MARKET INFLUENCES 133

7.1 THE HOUSING MARKET 133

7.2 POPULATION PROFILE 139

7.3 PERSONAL DISPOSABLE INCOME & SAVINGS 141

TABLES & CHARTS

TABLE 1: TOTAL DOMESTIC HEATING MARKET (£M MSP)

CHART 2: DOMESTIC HEATING EQUIPMENT BY PRODUCT GROUP percent BY VALUE 1996

TABLE 3: UK DOMESTIC CENTRAL HEATING INSTALLATIONS ('000'S)

TABLE 4: UK CENTRAL HEATING OWNERSHIP - percentAGE AMONGST TOTAL NUMBER OF HOUSEHOLDS

CHART 5: UK CENTRAL HEATING SALES BY TYPE OF ACQUISITION - 1996

TABLE 6: UK DOMESTIC CENTRAL HEATING BOILER MARKET

TABLE 7: UK DOMESTIC CENTRAL HEATING BOILER MARKET BY MIX OF FUEL

CHART 8: UK DOMESTIC BOILER MARKET BY TYPE 1996

TABLE 9: UK DOMESTIC HEATING MARKET SHARES IN CENTRAL HEATING BOILERS IN 1996

TABLE 10: IMPORTS AND EXPORTS OF CENTRAL HEATING BOILERS - VALUE £M

TABLE 11: IMPORTS AND EXPORTS OF CENTRAL HEATING BOILERS BY COUNTRY - 1995

TABLE 12: UK DOMESTIC CENTRAL HEATING RADIATORS MARKET BY VOLUME AND VALUE

CHART 13: MIX OF RADIATOR SALES - 1996

TABLE 14: UK RADIATOR MATERIAL MARKET 1996

TABLE 15: UK RADIATOR MARKET SHARES 1996

TABLE 16: IMPORTS AND EXPORTS OF CAST IRON AND STEEL RADIATORS BY VALUE (£M)

TABLE 17: IMPORTS AND EXPORTS OF RADIATORS BY COUNTRY - 1995

TABLE 18: UK CENTRAL HEATING GLANDLESS CIRCULATORS MARKET (£M MSP)

CHART 19: MIX OF UK GLANDLESS CIRCULATORS MARKET BY DOM APPLICATION 1996

TABLE 20: UK CENTRAL HEATING PUMP MARKET SHARES 1995

TABLE 21: UK DOMESTIC HEATING CONTROLS MARKET - £M MSP

CHART 22: UK DOMESTIC HEATING CONTROLS PRODUCT MIX 1996

TABLE 23: SPACE HEATING MARKET 1990 - 2000 - VALUE (£M MSP)

TABLE 24: UK DOMESTIC SPACE HEATING MARKET 1996 - VALUE (£M MSP)

CHART 25: UK STORAGE HEATER MARKET BY VOLUME ('000S)

CHART 26: UK ELECTRIC SPACE HEATING MARKET SHARE - 1996

TABLE 27: CHANNELS OF DISTRIBUTION OF ELECTRIC SPACE HEATING - 1996

CHART 28: MIX OF FUEL EFFECT FIRES BY VOLUME AND VALUE 1996

CHART 29: UK GAS SPACE HEATING SUPPLIERS MARKET SHARE 1996

TABLE 30: CHANNELS OF DISTRIBUTION - GAS SPACE HEATING EQUIPMENT - 1996

TABLE 31: IMPORTS AND EXPORTS OF SPACE HEATERS BY VALUE (£M)

TABLE 32: UK GAS DIRECT WATER HEATING MARKET - £M MSP

TABLE 33: UK GAS DIRECT WATER HEATING PRODUCT MIX - 1996

TABLE 34: IMPORTS AND EXPORTS OF GAS WATER HEATERS - VALUE (£M)

TABLE 35: UK MARKET FOR GAS WATER HEATING STORAGE UNITS - £M MSP

TABLE 36: MIX OF CYLINDER PRODUCTS 1996

TABLE 37: UK ELECTRIC WATER HEATING MARKET - £M MSP

TABLE 38: UK ELECTRIC WATER HEATING PRODUCT 1996

TABLE 39: IMPORTS AND EXPORTS OF ELECTRIC WATER HEATING PRODUCTS - BY VALUE £M.

TABLE 40: UK HOUSEBUILDING COMPLETIONS 1990-1996 (000'S DWELLINGS)

TABLE 41: UK HOUSING STARTS 1990-1996 (000'S DWELLINGS)

TABLE 42: NUMBER OF PROPERTY TRANSACTIONS IN ENGLAND & WALES

CHART 43 : NUMBER OF OCCUPANTS PER UK HOUSEHOLD 1971 AND 1991

TABLE 44: MIX OF NEW BUILD HOUSES/FLATS BY NUMBER OF BEDROOMS IN GB YEAR

TABLE 45: AGE DISTRIBUTION OF UK RESIDENT POPULATION (JUNE 1995)

CHART 46 : PDI & SAVINGS RATIO

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EXECUTIVE SUMMARY

In 1996 the domestic heating market was worth around £940m at manufacturers selling prices. The domestic heating market showed a marked decline between 1988 and 1992, which was primarily driven by the economic climate. Subsequently, there was a modest recovery in 1993 and 1994 though interest rate rises in late 1994 led to a more difficult period in 1995 and the first half of 1996.

In overall terms 1996 saw some signs of recovery in the housing market, with a greater number of housemoves and improving prices, particularly in the second half. Whilst this was too late to stimulate a significant recovery in the central heating market in that year, if continued it should result in an improving market particularly in the medium to longer term, with greater levels of new build and RMI (repair, maintenance and improvement). The replacement sector also offers considerable potential, with a growing number of existing appliances reaching the end of their operating lives.

In addition, as is common with mature markets, added-value products designed to fill particular market niches will help to grow the market in value terms. In particular, the growth of combination boilers, system boilers and unvented systems will add value to the sector, without necessarily stimulating significant additional volumes.

Central Heating dominates the domestic heating market and continues to grow its share at the expense of space heating. Central heating is comprised of boilers, which account for over half the sector, radiators, pumps and controls.

Gas is the preferred fuel source amongst UK households. It accounts for 88 percent of all new wet central heating installations and had a household penetration of 64 percent in 1996. Oil fired central heating systems have shown good growth over the last few years due particularly to it's cost effectiveness as a fuel source, having grown largely at the expense of the declining solid fuel sector. Other minor sectors include electricity, which is also declining, and LPG.

Wall mounted products dominate the boiler market. They have been consistently taking share from floorstanding boilers for some years due to their aesthetic and space saving advantages, as well as the growth in combination boilers. Back boilers have consistently maintained a share of around 15 percent for some years, with sales dominated by the replacement sector. Traditional boilers continue to hold the dominant position although they have been consistently losing share for some years. Combination boilers have continued to demonstrate good growth and now account for some 36 percent of all boiler sales. System boilers represent a relatively minor niche sector although have been demonstrating growth well ahead of the overall market over the last few years. Condensing boilers account for only a very small share despite their energy efficiency and the availability of an EST grant, with sales concentrated into the local authority and housing association sectors.

The major boiler producers include Blue Circle through Potterton, Hepworth through Glowworm and Saunier Duval, Caradon Ideal and Baxi. However, other brands account for over 20 percent of the market and have leadership of the combination and condensing sectors.

Sales of domestic radiators have followed a similar pattern to the overall central heating market. Steel radiators continue to dominate while Low Surface Temperature radiators have shown particularly good growth driven by more stringent safety regulations and a growing elderly population. The key suppliers in the radiator market are Stelrad, Myson and Barlo, who together account for over 80 percent of all sales.

The pump market has also followed the general trends in the overall market but is dominated to a greater extent by replacements and therefore has more inherent stability. There has however, been a change in the nature of the market, with an increasing proportion of pumps integrated with a boiler at the manufacturing stage which is characteristic of combination and system boilers. The market is dominated by three manufacturers - Grundfos, Myson and Wilo Salmson.

The controls market has exhibited good levels of growth despite the depressed state of the overall market. This has been driven by a number of factors including increasingly stringent regulations regarding energy efficiency, growing concern over environmental issues, the drive amongst consumers to reduce their heating costs and more recently an EST grant covering system upgrades. The controls market is somewhat fragmented with different brands leading different sectors. Overall, the major manufacturers in the domestic sector are Honeywell Control Systems, ACL Drayton, Danfoss Randall, Horstmann and Landis and Staefa.

Central heating appliance distribution is dominated by the heating and plumbing merchants with Plumb Center and Graham holding particularly strong shares. Distributors such as AHED and BSS are also significant, as are the fuel utilities. British Gas continues to represent a major distribution channel although it has lost some share due to the re-organisation of its retail division.

The overall space heating market has exhibited an underlying pattern of decline since the late 1980s driven by the economic climate and in particular the growth in the penetration of central heating. However, sales received a dramatic boost in 1996 due to cold winter weather both at the beginning and at the end of the year.

The electric space heating sector continues to be dominated by storage heaters which account for 45 percent of sales. However, storage heating has been in decline since the 1980's due to the increasing penetration of central heating. Many of the other electric space heating products are used to supplement existing heating rather than as the sole means of heating a room. They are often distress purchases and consequently benefited significantly from cold conditions in 1996.

The gas space heating market has been buoyed up by the gas fuel effect sector which has benefited from the returning emphasis on the fireplace as the focal point of the living room and from gradually improving levels of consumer expenditure.

The electric space heating market leaders are Dimplex, Creda and Unidare. Valor, Cannon, Myson, Flavel and Robinson Willey are dominant in the gas appliance sector. The potential offered by gas fuel effect fires has had a number of electric space heating manufacturers to enter the sector, including Creda through the acquisition of Cannon, and Dimplex.

The gas direct water heating market has shown limited growth over the last couple of years. Sales of instantaneous heaters have declined due to the growth in the penetration of central heating and in particular, the growth of combination boilers. However, the gas storage sector has been more buoyant and has contributed to growth of the overall sector. Unvented gas storage products have shown particularly good growth and this is expected to continue.

The cylinder market has shown only limited growth over the last few years. Volume sales have been adversely affected by the depressed nature of the housing market, as well as growth in combination boilers which require no cylinder. Sales of unvented cylinders have shown dramatic growth at the expense of vented products and this has contributed to growth in the overall market due to their much higher prices. Sales of vented cylinders are in a state of steady decline, supported to some extent by the replacement sector, with unit prices under threat from competitive pricing strategies by major manufactures.

The electric water heating market is comprised of immersion heaters with 34 percent, while electric storage heaters and instantaneous products account for the balance.

Electric storage products have shown some growth, particularly in the higher value, unvented sector and have effected limited growth in performance of the overall electric water heating market.

Distribution of gas water heating products tends to be through British Gas and the plumbers and builders merchants. Cylinder distribution tends to be dominated by the merchants. Electrical wholesalers, electrical distributors and the REC's take the majority of sales of electric water heating products.

This comprehensive report represents a detailed assessment of the market, reviewing major trends, key factors influencing developments and future prospects for the sector. Analysis is both quantitative and qualitative, based on our substantial experience of the building and home improvement markets.

Text © 1997 AMA Research

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