Last close As at 05/08/2026
GBP1.20
▲ 0.50 (0.42%)
Market capitalisation
—
Research: Industrials
Consistent messaging from the Epwin management team continued with a year-end update that confirmed that FY18 trading had been in line with market expectations. The theme of self-help given market headwinds is ongoing with tangible evidence of actions taken and planned. Market backdrop uncertainty is reflected in Epwin’s rating multiples. A dividend yield approaching 7% (c 1.9x covered) should be of interest to investors.
Written by
Epwin Group |
In-line year-end update |
FY18 year-end update |
Construction & materials |
6 February 2019 |
Share price performance
Business description
Next events
Analyst
Epwin Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Consistent messaging from the Epwin management team continued with a year-end update that confirmed that FY18 trading had been in line with market expectations. The theme of self-help given market headwinds is ongoing with tangible evidence of actions taken and planned. Market backdrop uncertainty is reflected in Epwin’s rating multiples. A dividend yield approaching 7% (c 1.9x covered) should be of interest to investors.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16** |
293.2 |
24.3 |
14.7 |
6.6 |
5.1 |
8.8 |
12/17 |
298.3 |
20.5 |
12.4 |
6.7 |
6.1 |
8.9 |
12/18e |
292.2 |
17.0 |
9.7 |
5.3 |
7.7 |
7.0 |
12/19e |
295.8 |
17.9 |
10.2 |
5.5 |
7.3 |
7.3 |
Note: *PBT and EPS (fully diluted) are normalised, excluding intangible amortisation and exceptionals. **FY16 and FY17 EPS benefited in part from recovered tax losses.
H2 progress, net debt below 1x EBITDA
FY18 ended in line with a narrow range of market expectations, which confirms a material improvement in H2 profitability was achieved versus H1. This is partly a normal seasonal effect but also shows some year-on-year progress, demonstrating some recovery from previously noted customer ownership changes. Operational improvements – including exits from two sites (Cardiff and Macclesfield) – and a contribution from Amicus (the 15-branch building products distribution business acquired in March) would have contributed to this outturn, which was achieved despite input cost pressures (especially PVC). Management commented that year-end net debt was less than 1x EBITDA in the year and our c £25m expectation (vs EBITDA of c £27m) is consistent with this and suggests good cash flow control.
More self-help actions in uncertain markets
Reference to macroeconomic and Brexit uncertainty is now commonplace in trading updates. Epwin has repeated this business caveat and expects no RMI rebound in FY19. The post year-end disposal of glass sealed unit manufacturing operations (likely to give rise to an exceptional charge in discontinuing this business) and proposed new warehouse facility at Telford (completion likely by the end of FY19) are further examples of internal actions being taken to enhance business resilience and core growth prospects in challenging markets. These features aside, volume growth, new product sales – including aluminium window systems - and the extent to which polymer price changes need and are able to be passed through to customers will remain the primary drivers of profitability in FY19.
Valuation: Expecting earnings progress from FY19
Epwin’s share price currently sits in the lower half of its 12-month 71–90p trading range, being modestly above December levels. Investor sentiment towards cyclical stocks weakened noticeably in Q418 and the shadow of Brexit is creating uncertainty over future economic growth rates. On our estimates, Epwin is now trading on a trailing year P/E of 7.7x, EV/EBITDA of 4.9x and a dividend yield of almost 7% (covered c 1.9x). We expect FY18 to be an earnings low point with gradual growth to resume from FY19.
Exhibit 1: Financial summary
£m |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018e |
2019e |
2020e |
|||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|||
PROFIT & LOSS |
|
|
|
Restated |
|
|
|
|
|
|
|
|
Revenue |
|
|
294.4 |
255.3 |
259.5 |
256.0 |
293.2 |
298.3 |
292.2 |
295.8 |
300.0 |
|
Cost of Sales |
|
|
(209.9) |
(185.8) |
(186.7) |
(178.6) |
(200.6) |
(207.5) |
(206.0) |
(206.5) |
(209.4) |
|
Gross Profit |
|
|
84.5 |
69.5 |
72.8 |
77.4 |
92.6 |
90.8 |
86.2 |
89.3 |
90.6 |
|
EBITDA |
|
|
21.8 |
21.4 |
24.5 |
25.6 |
33.3 |
30.3 |
27.2 |
28.2 |
28.9 |
|
Operating Profit (before GW and except.) |
15.4 |
15.6 |
19.5 |
20.1 |
25.6 |
22.3 |
18.9 |
19.7 |
20.2 |
|||
Intangible Amortisation |
|
|
(1.7) |
(1.7) |
(1.7) |
(0.0) |
(1.1) |
(1.1) |
(1.2) |
(1.2) |
(1.2) |
|
Exceptionals |
|
|
(4.3) |
(5.1) |
2.3 |
(0.6) |
(0.2) |
(7.4) |
(1.5) |
0.0 |
0.0 |
|
Other |
|
|
0.0 |
0.0 |
(0.8) |
(0.4) |
(0.3) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
|
Operating Profit |
|
|
9.4 |
8.8 |
19.3 |
19.1 |
24.0 |
13.2 |
15.6 |
17.9 |
18.4 |
|
Net Interest |
|
|
(1.9) |
(1.0) |
(0.7) |
(0.5) |
(1.0) |
(1.2) |
(1.3) |
(1.2) |
(1.0) |
|
Profit Before Tax (norm) |
|
|
13.5 |
14.6 |
18.0 |
19.2 |
24.3 |
20.5 |
17.0 |
17.9 |
18.6 |
|
Profit Before Tax (FRS 3) |
|
|
7.5 |
7.9 |
18.6 |
18.6 |
23.0 |
12.0 |
14.3 |
16.7 |
17.4 |
|
Tax |
|
|
(2.2) |
(1.3) |
(3.5) |
(3.3) |
(3.4) |
(1.9) |
(3.1) |
(3.2) |
(3.3) |
|
Profit After Tax (norm) |
|
|
10.4 |
12.4 |
14.4 |
15.9 |
20.9 |
17.6 |
13.9 |
14.6 |
15.2 |
|
Profit After Tax (FRS 3) |
|
|
4.5 |
5.1 |
15.1 |
15.3 |
19.6 |
10.1 |
11.2 |
13.4 |
14.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding (m) |
|
122.3 |
122.3 |
128.0 |
135.2 |
141.5 |
142.6 |
142.9 |
142.9 |
142.9 |
||
EPS - normalised (p) |
|
|
8.5 |
10.1 |
11.2 |
11.8 |
14.8 |
12.4 |
9.8 |
10.2 |
10.6 |
|
EPS - normalised (p) FD |
|
|
|
|
11.2 |
11.7 |
14.7 |
12.4 |
9.7 |
10.2 |
10.6 |
|
EPS - FRS 3 (p) |
|
|
3.7 |
4.2 |
11.8 |
11.3 |
13.8 |
7.1 |
7.9 |
9.4 |
9.8 |
|
Dividend per share (p) |
|
|
0.0 |
0.0 |
4.2 |
6.4 |
6.6 |
6.7 |
5.3 |
5.5 |
5.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
28.7 |
27.2 |
28.1 |
30.2 |
31.6 |
30.4 |
29.5 |
30.2 |
30.2 |
|
EBITDA Margin (%) |
|
|
7.4 |
8.4 |
9.4 |
10.0 |
11.3 |
10.2 |
9.3 |
9.5 |
9.6 |
|
Operating Margin (before GW and except.) (%) |
5.2 |
6.1 |
7.5 |
7.9 |
8.7 |
7.5 |
6.5 |
6.6 |
6.7 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
56.9 |
54.7 |
53.8 |
93.5 |
108.5 |
106.2 |
111.7 |
111.0 |
110.0 |
|
Intangible Assets |
|
|
27.9 |
26.4 |
24.7 |
59.7 |
70.2 |
69.6 |
73.7 |
72.5 |
71.3 |
|
Tangible Assets |
|
|
26.1 |
25.1 |
26.2 |
33.1 |
37.9 |
36.0 |
37.5 |
38.0 |
38.2 |
|
Other |
|
|
2.8 |
3.2 |
2.9 |
0.7 |
0.4 |
0.6 |
0.5 |
0.5 |
0.5 |
|
Current Assets |
|
|
59.9 |
62.1 |
62.3 |
87.2 |
82.6 |
82.2 |
82.7 |
83.3 |
84.2 |
|
Stocks |
|
|
20.9 |
21.7 |
22.4 |
23.6 |
28.2 |
29.6 |
31.4 |
31.5 |
31.9 |
|
Debtors |
|
|
37.4 |
40.1 |
37.6 |
41.5 |
41.4 |
45.3 |
45.5 |
46.0 |
46.5 |
|
Cash |
|
|
1.6 |
0.3 |
2.3 |
22.1 |
13.0 |
7.3 |
5.8 |
5.8 |
5.8 |
|
Current Liabilities |
|
|
(53.2) |
(54.5) |
(49.0) |
(68.8) |
(79.2) |
(79.2) |
(91.0) |
(90.0) |
(84.8) |
|
Creditors |
|
|
(49.1) |
(51.5) |
(48.6) |
(53.2) |
(62.9) |
(58.2) |
(65.9) |
(65.5) |
(66.9) |
|
Short term borrowings |
|
|
(4.1) |
(3.0) |
(0.4) |
(15.6) |
(16.3) |
(21.0) |
(25.0) |
(24.5) |
(17.9) |
|
Long Term Liabilities |
|
|
(32.0) |
(25.7) |
(4.3) |
(31.8) |
(21.0) |
(15.5) |
(9.1) |
(4.1) |
(3.2) |
|
Long term borrowings |
|
|
(20.6) |
(16.0) |
(0.8) |
(20.9) |
(17.3) |
(11.4) |
(5.9) |
(0.9) |
0.0 |
|
Other long term liabilities |
|
|
(11.4) |
(9.7) |
(3.5) |
(10.9) |
(3.7) |
(4.1) |
(3.2) |
(3.2) |
(3.2) |
|
Net Assets |
|
|
31.5 |
36.6 |
62.8 |
80.1 |
90.9 |
93.7 |
94.3 |
100.1 |
106.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
15.7 |
12.1 |
19.8 |
23.8 |
30.8 |
19.9 |
22.4 |
26.7 |
28.4 |
|
Net Interest |
|
|
(1.4) |
(0.9) |
(0.7) |
(0.5) |
(1.0) |
(1.0) |
(1.2) |
(1.2) |
(1.0) |
|
Tax |
|
|
(1.6) |
(0.9) |
(1.7) |
(2.3) |
(3.8) |
(2.7) |
(2.6) |
(2.7) |
(2.8) |
|
Capex |
|
|
(4.6) |
(4.9) |
(5.6) |
(9.0) |
(12.7) |
(7.1) |
(9.3) |
(9.3) |
(9.3) |
|
Acquisitions/disposals |
|
|
(28.2) |
(0.2) |
0.0 |
(20.9) |
(10.2) |
(3.9) |
0.0 |
(0.3) |
0.0 |
|
Financing |
|
|
0.0 |
0.0 |
10.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Dividends |
|
|
0.0 |
0.0 |
(1.9) |
(6.7) |
(9.1) |
(9.5) |
(9.3) |
(7.6) |
(7.9) |
|
Net Cash Flow |
|
|
(20.2) |
5.2 |
19.9 |
(15.6) |
(6.1) |
(4.3) |
0.1 |
5.6 |
7.4 |
|
Opening net debt/(cash) |
|
|
0.5 |
23.2 |
18.7 |
(1.1) |
14.4 |
20.6 |
25.1 |
25.1 |
19.6 |
|
HP finance leases initiated |
|
|
(2.5) |
(0.5) |
(0.3) |
0.4 |
1.9 |
(1.4) |
(0.6) |
0.0 |
0.0 |
|
Other |
|
|
0.0 |
(0.1) |
0.2 |
(0.3) |
(2.1) |
1.2 |
0.5 |
(0.0) |
(0.0) |
|
Closing net debt/(cash) |
|
|
23.2 |
18.6 |
(1.1) |
14.4 |
20.6 |
25.1 |
25.1 |
19.6 |
12.1 |
|
Source: Epwin accounts, Edison Investment Research. Note: FY13 to FY17 EPS benefited in part from recovered tax losses.
|
|
Stride’s AGM confirmed that trading for the current financial year has been broadly in line, despite well documented regulatory headwinds. To counterbalance rising gaming taxes and other sector pressures, the group is implementing numerous cost-cutting initiatives, which will be key to hitting our FY19 EBITDA estimate. Looking ahead, we expect growth to resume in FY20 (once many regulatory burdens have been lapped) and we believe Stride will take market share within a disrupted industry. Cash conversion is c 90% and the new payout policy leads to a 15.0% yield in FY19 (including the special dividend). The stock continues to trade at a meaningful discount to peers, at 3.7x EV/EBITDA and 6.5x P/E for CY19e.