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Currency in GBP
Last close As at 30/03/2023
GBP0.72
▲ −1.00 (−1.37%)
Market capitalisation
GBP107m
Research: Industrials
A disrupted and volatile trading year – with COVID-19 hitting in Q2 and well above-average growth rates in other months – ended for Epwin with positive year-on-year revenue growth into Q4. Although we have reinstated estimates at lower levels, the company’s business resilience is reflected in good cash flow management and a likely FY20 final dividend payment.
Written by
Toby Thorrington
Epwin Group |
Positive trading tone into Q4 |
Year-end update |
Construction & materials |
6 January 2021 |
Share price performance
Business description
Next events
Analyst
Epwin Group is a research client of Edison Investment Research Limited |
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A disrupted and volatile trading year – with COVID-19 hitting in Q2 and well above-average growth rates in other months – ended for Epwin with positive year-on-year revenue growth into Q4. Although we have reinstated estimates at lower levels, the company’s business resilience is reflected in good cash flow management and a likely FY20 final dividend payment.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
281.1 |
16.5 |
9.8 |
4.9 |
9.3 |
5.4 |
12/19 |
282.1 |
15.0 |
8.5 |
1.8 |
10.8 |
1.9 |
12/20e |
239.1 |
4.1 |
2.4 |
1.0 |
38.9 |
1.1 |
12/21e |
260.5 |
9.0 |
5.1 |
2.5 |
17.9 |
2.7 |
Note: *PBT and EPS (fully diluted) are normalised, excluding intangible amortisation and exceptionals, on an IFRS 16 basis from FY19. Dividends: FY19 represents a H1 payment only; FY20 represents our expected final DPS.
Busy end to 2020
Epwin’s positive end to 2020 saw improving momentum in Q4. Specifically, revenue of +2–3% y-o-y in July and August has amplified to +5% for the five months to November. Implicitly, then the September/October/November months – a seasonally important trading period in any year – were ahead in the order of 6–8%. (We note that year-on-year revenues grew in both divisions in H219, so the comparators for H220 were reasonably firm.) Hence, the combined sales uplift in window systems and cellular lines (which are substantially part of Extrusion & Moulding) of 9% for the July to November period represents a strong performance. Group revenues have recovered to c -15% y-o-y for the 11-month period, which is less than half of the c 33% y-o-y shortfall at the H1 stage. RMI demand has remained firm, supplemented by recovering newbuild and, most recently, social housing activity.
Taking a cautious stance on earnings recovery
Management noted revenues and PBT are expected to be ahead of consensus while net debt will be lower. Our reinstated EPS estimates for FY20 and FY21 are c 75% and c 50% lower than levels at the beginning of May (when they were withdrawn) chiefly due to the small loss recorded in H120 and a cautious view on the rate of recovery beyond this year. Current run rates probably include a combination of pent-up demand and behaviour influenced by housing market incentives. We recognise this but are also wary of the potential effect of rising unemployment on consumer sentiment. Nevertheless, we expect (Epwin defined) net debt:EBITDA to fall from c 1.3x for FY20 to c 0.9x one year out and factor in a nominal FY20 final dividend payment consistent with management comments.
Valuation: Earnings recovery to drive share price
Epwin’s share price participated in the market rally from the beginning of November and ended 2020 just 10% down for the year, slightly better than the FTSE All Share Index performance. Consequently, the FY20e rating is inflated due to the greater impact of COVID-19 on earnings (P/E 38.9x, EV/EBITDA 9.6x). We feel rising confidence in the post-COVID-19 rate of earnings recovery will be a key sentiment driver going into FY21.
Exhibit 1: Financial summary
£m's |
2013 |
2014 |
2015 |
2016 |
2017 |
2017 |
2018 |
2019 |
2020e |
2021e |
2022e |
|||
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS* |
IFRS* |
IFRS* |
IFRS* |
|||
PROFIT & LOSS |
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
Revenue |
|
|
255.3 |
259.5 |
256.0 |
293.2 |
298.3 |
292.8 |
281.1 |
282.1 |
239.1 |
260.5 |
273.5 |
|
Cost of Sales |
|
|
(185.8) |
(186.7) |
(178.6) |
(200.6) |
(207.5) |
(201.5) |
(196.4) |
(193.3) |
(169.7) |
(183.0) |
(190.0) |
|
Gross Profit |
|
|
69.5 |
72.8 |
77.4 |
92.6 |
90.8 |
91.3 |
84.8 |
88.8 |
69.3 |
77.5 |
83.5 |
|
EBITDA (pre IFRS16) |
|
|
21.4 |
24.5 |
25.6 |
33.3 |
30.3 |
32.1 |
26.7 |
26.4 |
15.3 |
20.6 |
24.3 |
|
Operating Profit (pre IFRS16 norm) |
|
15.6 |
19.5 |
20.1 |
25.6 |
22.3 |
24.2 |
18.7 |
19.1 |
6.9 |
11.9 |
15.4 |
||
Operating Profit (IFRS16 norm) |
|
|
|
|
|
|
|
|
21.2 |
9.0 |
14.0 |
17.5 |
||
Intangible Amortisation |
|
|
(1.7) |
(1.7) |
(0.0) |
(1.1) |
(1.1) |
(1.1) |
(1.2) |
(0.3) |
(0.4) |
(0.4) |
(0.4) |
|
Exceptionals |
|
|
(5.1) |
2.3 |
(0.6) |
(0.2) |
(7.4) |
(7.4) |
(2.0) |
(2.3) |
(2.2) |
0.0 |
0.0 |
|
Other |
|
|
0.0 |
(0.8) |
(0.4) |
(0.3) |
(0.6) |
(0.6) |
(0.7) |
(1.4) |
(0.4) |
(0.7) |
(0.7) |
|
Operating Profit |
|
|
8.8 |
19.3 |
19.1 |
24.0 |
13.2 |
15.1 |
14.8 |
17.2 |
6.0 |
12.9 |
16.4 |
|
Net Interest |
|
|
(1.0) |
(0.7) |
(0.5) |
(1.0) |
(1.2) |
(1.2) |
(1.5) |
(4.8) |
(4.5) |
(4.3) |
(4.1) |
|
Profit Before Tax (IFRS16 norm) |
|
14.6 |
18.0 |
19.2 |
24.3 |
20.5 |
22.4 |
16.5 |
15.0 |
4.1 |
9.0 |
12.7 |
||
Profit Before Tax (statutory) |
|
|
7.9 |
18.6 |
18.6 |
23.0 |
12.0 |
13.9 |
13.3 |
12.4 |
1.5 |
8.6 |
12.3 |
|
Tax |
|
|
(1.3) |
(3.5) |
(3.3) |
(3.4) |
(1.9) |
(2.3) |
(2.5) |
(2.8) |
(0.7) |
(1.6) |
(2.3) |
|
Profit After Tax (norm) |
|
|
12.4 |
14.4 |
15.9 |
20.9 |
17.6 |
19.1 |
14.0 |
12.1 |
3.4 |
7.4 |
10.4 |
|
Profit After Tax (statutory) |
|
|
5.1 |
15.1 |
15.3 |
19.6 |
10.1 |
11.6 |
10.8 |
9.5 |
0.8 |
7.0 |
10.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
|
122.3 |
128.0 |
135.2 |
141.5 |
142.6 |
142.6 |
142.9 |
142.9 |
143.0 |
144.5 |
144.5 |
||
EPS - normalised (p) |
|
10.1 |
11.2 |
11.8 |
14.8 |
12.4 |
13.4 |
9.8 |
8.5 |
2.4 |
5.1 |
7.2 |
||
EPS - normalised (p) FD |
|
|
11.2 |
11.7 |
14.7 |
12.4 |
13.4 |
9.8 |
8.5 |
2.3 |
5.1 |
7.2 |
||
EPS - statutory (p) |
|
|
4.2 |
11.8 |
11.3 |
13.8 |
7.1 |
7.1 |
4.1 |
6.7 |
0.5 |
4.8 |
6.9 |
|
Dividend per share (p) |
|
|
0.0 |
4.2 |
6.4 |
6.6 |
6.7 |
6.7 |
4.9 |
1.8 |
1.0 |
2.5 |
3.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
27.2 |
28.1 |
30.2 |
31.6 |
30.4 |
31.2 |
30.2 |
31.5 |
29.0 |
29.8 |
30.5 |
|
EBITDA pre IFRS16 Margin(%) |
|
8.4 |
9.4 |
10.0 |
11.3 |
10.2 |
11.0 |
9.5 |
9.3 |
6.4 |
7.9 |
8.9 |
||
Operating Margin pre IFRS16 norm (%) |
|
6.1 |
7.5 |
7.9 |
8.7 |
7.5 |
8.3 |
6.7 |
6.8 |
2.9 |
4.6 |
5.6 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
54.7 |
53.8 |
93.5 |
108.5 |
106.2 |
|
111.7 |
125.6 |
120.4 |
120.3 |
120.0 |
|
Intangible Assets |
|
|
26.4 |
24.7 |
59.7 |
70.2 |
69.6 |
|
73.7 |
75.7 |
75.3 |
74.9 |
74.5 |
|
Tangible Assets |
|
|
25.1 |
26.2 |
33.1 |
37.9 |
36.0 |
|
37.3 |
46.1 |
41.3 |
41.6 |
41.7 |
|
Other |
|
|
3.2 |
2.9 |
0.7 |
0.4 |
0.6 |
|
0.7 |
3.8 |
3.8 |
3.8 |
3.8 |
|
Current Assets |
|
|
62.1 |
62.3 |
87.2 |
82.6 |
82.2 |
|
75.7 |
91.5 |
84.5 |
92.8 |
102.7 |
|
Stocks |
|
|
21.7 |
22.4 |
23.6 |
28.2 |
29.6 |
|
29.2 |
30.3 |
30.1 |
32.5 |
33.7 |
|
Debtors |
|
|
40.1 |
37.6 |
41.5 |
41.4 |
45.3 |
|
40.4 |
44.0 |
37.4 |
42.0 |
43.9 |
|
Cash |
|
|
0.3 |
2.3 |
22.1 |
13.0 |
7.3 |
|
6.1 |
17.2 |
17.1 |
18.4 |
25.1 |
|
Current Liabilities |
|
|
(54.5) |
(49.0) |
(68.8) |
(79.2) |
(79.2) |
|
(69.3) |
(77.4) |
(68.1) |
(72.1) |
(74.9) |
|
Creditors |
|
|
(51.5) |
(48.6) |
(53.2) |
(62.9) |
(58.2) |
|
(63.7) |
(76.1) |
(64.1) |
(68.1) |
(70.9) |
|
Short term borrowings |
|
|
(3.0) |
(0.4) |
(15.6) |
(16.3) |
(21.0) |
|
(5.6) |
(1.3) |
(4.0) |
(4.0) |
(4.0) |
|
Long Term Liabilities |
|
|
(25.7) |
(4.3) |
(31.8) |
(21.0) |
(15.5) |
|
(28.1) |
(36.7) |
(36.0) |
(36.0) |
(36.0) |
|
Long term borrowings |
|
|
(16.0) |
(0.8) |
(20.9) |
(17.3) |
(11.4) |
|
(25.3) |
(32.3) |
(32.3) |
(32.3) |
(32.3) |
|
Other long term liabilities |
|
|
(9.7) |
(3.5) |
(10.9) |
(3.7) |
(4.1) |
|
(2.8) |
(4.4) |
(3.7) |
(3.7) |
(3.7) |
|
Net Assets |
|
|
36.6 |
62.8 |
80.1 |
90.9 |
93.7 |
|
90.0 |
103.0 |
100.8 |
105.0 |
111.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
12.1 |
19.8 |
23.8 |
30.8 |
19.9 |
18.1 |
25.8 |
34.8 |
22.9 |
27.9 |
32.8 |
|
Net Interest |
|
|
(0.9) |
(0.7) |
(0.5) |
(1.0) |
(1.0) |
(1.0) |
(1.3) |
(1.6) |
(1.7) |
(1.5) |
(1.4) |
|
Tax |
|
|
(0.9) |
(1.7) |
(2.3) |
(3.8) |
(2.7) |
(2.7) |
(2.6) |
(3.3) |
(0.7) |
(3.1) |
(2.3) |
|
Capex |
|
|
(4.9) |
(5.6) |
(9.0) |
(12.7) |
(7.1) |
(5.3) |
(12.5) |
1.5 |
(10.6) |
(9.2) |
(9.2) |
|
Acquisitions/disposals |
|
|
(0.2) |
0.0 |
(20.9) |
(10.2) |
(3.9) |
(3.9) |
0.0 |
(2.2) |
0.0 |
0.0 |
0.0 |
|
Financing |
|
|
0.0 |
10.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(0.0) |
(12.3) |
(10.0) |
(10.0) |
(10.0) |
|
Dividends |
|
|
0.0 |
(1.9) |
(6.7) |
(9.1) |
(9.5) |
(9.5) |
(8.8) |
(7.1) |
0.0 |
(2.7) |
(3.2) |
|
Net Cash Flow |
|
|
5.2 |
19.9 |
(15.6) |
(6.1) |
(4.3) |
(4.3) |
0.6 |
9.7 |
(0.1) |
1.3 |
6.7 |
|
Opening net debt/(cash) |
|
|
23.2 |
18.7 |
(1.1) |
14.4 |
20.6 |
20.6 |
25.1 |
24.8 |
16.4 |
19.2 |
17.9 |
|
Finance leases initiated |
|
|
(0.5) |
(0.3) |
0.4 |
1.9 |
(1.4) |
(1.4) |
(1.1) |
0.0 |
0.0 |
0.0 |
0.0 |
|
Other |
|
|
(0.1) |
0.2 |
(0.3) |
(2.1) |
1.2 |
1.2 |
0.8 |
(1.4) |
(2.7) |
0.0 |
0.0 |
|
Closing net debt/(cash)** |
|
|
18.6 |
(1.1) |
14.4 |
20.6 |
25.1 |
25.1 |
24.8 |
16.4 |
19.2 |
17.9 |
11.2 |
|
IFRS16 Leases |
|
|
|
|
|
|
|
|
|
71.0 |
66.2 |
66.2 |
66.2 |
|
Source: Company accounts, Edison Investment Research. Note: *IFRS16 from 2019. **Consistent with company defined pre IFRS16 net debt which includes some other (non IFRS16) finance leases (H120: £4m); we have assumed this category of leases to be constant in our estimate years (and shown as short term borrowings).
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Research: Metals & Mining
Auriant’s Q320 results were reported within the context of known production. While financial results were somewhat below our expectations (see Exhibit 1), the shortfall could be almost entirely attributed to the underperformance of Auriant’s peripheral Solcocon alluvial asset, where the operations of a third-party contractor were disrupted by the coronavirus. By contrast, operations at Auriant’s core Tardan asset were almost completely unaffected by COVID-19, with production within the expected range and costs below our expectations. We have reduced our EPS forecast for FY20 by 8.5% to reflect both Solcocon’s performance in Q3 and our expectations for Q4, and the decline in the gold price since 6 November. Nevertheless, three quarters into the year, Auriant achieving its full-year production guidance appears almost a foregone conclusion. In the meantime, its shares are trading on a current year P/E multiple of only 4.6x and at less than half our valuation of the company.
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