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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
Following a temporary shutdown of facilities at the end of March, Epwin has been reversing this process which is expected to complete in the next week with all main sites operational by then. The next phase will depend on the rate at which demand returns in the company’s product space. Previously announced actions have contributed to a stable funding picture with core net debt at the end of April – the first full month of the coronavirus impact – unchanged from the end of March. Our estimates remain suspended for now.
Written by
Toby Thorrington
Epwin Group |
Resuming operations |
COVID-19 update |
Construction & materials |
1 June 2020 |
Share price performance
Business description
Next events
Analyst
Epwin Group is a research client of Edison Investment Research Limited |
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Following a temporary shutdown of facilities at the end of March, Epwin has been reversing this process which is expected to complete in the next week with all main sites operational by then. The next phase will depend on the rate at which demand returns in the company’s product space. Previously announced actions have contributed to a stable funding picture with core net debt at the end of April – the first full month of the coronavirus impact – unchanged from the end of March. Our estimates remain suspended for now.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
281.1 |
16.5 |
9.8 |
4.9 |
7.4 |
6.8 |
12/19 |
282.1 |
15.0 |
8.5 |
1.8 |
8.5 |
2.5 |
Note: *PBT and EPS (fully diluted) are normalised, excluding intangible amortisation and exceptionals, with estimates on an IFRS 16 basis. FY19 dividend represents the H1 payment only; no final dividend is expected.
Progressive restarting of operations in May
Post Epwin’s FY19 results and last trading update, the UK government began to ease lockdown conditions in the second week in May and the company, along with its sector peers, has gradually resumed operations. Having re-established product availability, it then restarted extrusion lines and began re-opening distribution depots. This phase – covering all remaining sites – is expected to conclude in the next week. Accordingly, Epwin is set to further reduce the number of furloughed employees (which had peaked at c 90%). The business typically runs with a relatively short order horizon and so the next step up in activity levels will be informed by new business, customer intentions and perceived ongoing order levels.
Robust financial position
Recent trading is already faring better than the ‘worst case’ version (ie zero sales for six months). Encouragingly, end April net debt remained at end March levels (c £30m) so Epwin retained c £45m headroom under existing facilities and continues to look financially robust as sales recover. The receipt of UK government furlough monies (starting in April), a good receivables performance and perhaps some inventory reduction will have contributed to this outturn. We acknowledge that a stronger ramp up phase is likely to require some cash absorption – especially working capital build – but otherwise the aim will be to match resources to prevailing business levels with an eye to expected order intake.
Near-term challenges, long-term drivers
The key long-term macro drivers for Epwin’s revenue development (ie UK population growth and an ageing housing stock) remain very much intact in our view. The currently subdued housing transactions and rising unemployment rate are a near-term consequence of the coronavirus pandemic and will impact consumer sentiment. An optimistic view might be that lockdown has lifted home improvements further up the agenda; the rate at which consumer sentiment recovers will be an important marker of improving demand we believe.
Exhibit 1: Financial summary
£m |
2013 |
2014 |
2015 |
2016 |
2017 |
2017 |
2018 |
2019 |
|||||
Year end 31 December |
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 |
|||
Cost of Sales |
|
|
(185.8) |
(186.7) |
(178.6) |
(200.6) |
(207.5) |
(201.5) |
(196.4) |
(193.3) |
|||
Gross Profit |
|
|
69.5 |
72.8 |
77.4 |
92.6 |
90.8 |
91.3 |
84.8 |
88.8 |
|||
EBITDA (pre IFRS 16) |
|
|
21.4 |
24.5 |
25.6 |
33.3 |
30.3 |
32.1 |
26.7 |
26.4 |
|||
Operating Profit (pre IFRS 16 norm) |
|
15.6 |
19.5 |
20.1 |
25.6 |
22.3 |
24.2 |
18.7 |
19.1 |
||||
Operating Profit (IFRS 16 norm) |
|
|
|
|
|
|
|
|
|
21.2 |
|||
Intangible Amortisation |
|
|
(1.7) |
(1.7) |
(0.0) |
(1.1) |
(1.1) |
(1.1) |
(1.2) |
(0.3) |
|||
Exceptionals |
|
|
(5.1) |
2.3 |
(0.6) |
(0.2) |
(7.4) |
(7.4) |
(2.0) |
(2.3) |
|||
Other |
|
|
0.0 |
(0.8) |
(0.4) |
(0.3) |
(0.6) |
(0.6) |
(0.7) |
(1.4) |
|||
Operating Profit |
|
|
8.8 |
19.3 |
19.1 |
24.0 |
13.2 |
15.1 |
14.8 |
17.2 |
|||
Net Interest |
|
|
(1.0) |
(0.7) |
(0.5) |
(1.0) |
(1.2) |
(1.2) |
(1.5) |
(4.8) |
|||
Profit Before Tax (IFRS 16 norm) |
|
14.6 |
18.0 |
19.2 |
24.3 |
20.5 |
22.4 |
16.5 |
15.0 |
||||
Profit Before Tax (statutory) |
|
|
7.9 |
18.6 |
18.6 |
23.0 |
12.0 |
13.9 |
13.3 |
12.4 |
|||
Tax |
|
|
(1.3) |
(3.5) |
(3.3) |
(3.4) |
(1.9) |
(2.3) |
(2.5) |
(2.9) |
|||
Profit After Tax (norm) |
|
|
12.4 |
14.4 |
15.9 |
20.9 |
17.6 |
19.1 |
14.0 |
12.2 |
|||
Profit After Tax (statutory) |
|
|
5.1 |
15.1 |
15.3 |
19.6 |
10.1 |
11.6 |
10.8 |
9.6 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Average Number of Shares Outstanding (m) |
|
122.3 |
128.0 |
135.2 |
141.5 |
142.6 |
142.6 |
142.9 |
142.9 |
||||
EPS - normalised (p) – IFRS 16 from 2019 |
10.1 |
11.2 |
11.8 |
14.8 |
12.4 |
13.4 |
9.8 |
8.5 |
|||||
EPS - normalised (p) FD – IFRS 16 from 2019 |
|
|
11.2 |
11.7 |
14.7 |
12.4 |
13.4 |
9.8 |
8.5 |
||||
EPS - statutory (p) |
|
|
4.2 |
11.8 |
11.3 |
13.8 |
7.1 |
7.1 |
4.1 |
6.7 |
|||
Dividend per share (p) |
|
|
0.0 |
4.2 |
6.4 |
6.6 |
6.7 |
6.7 |
4.9 |
1.8 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Gross Margin (%) |
|
|
27.2 |
28.1 |
30.2 |
31.6 |
30.4 |
31.2 |
30.2 |
31.5 |
|||
EBITDA pre IFRS 16 Margin (%) |
|
|
8.4 |
9.4 |
10.0 |
11.3 |
10.2 |
11.0 |
9.5 |
9.4 |
|||
Operating Margin pre IFRS 16 norm (%) |
|
6.1 |
7.5 |
7.9 |
8.7 |
7.5 |
8.3 |
6.7 |
6.8 |
||||
|
|
|
|
|
|
|
|
|
|
|
|||
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|||
Fixed Assets |
|
|
54.7 |
53.8 |
93.5 |
108.5 |
106.2 |
|
111.7 |
125.6 |
|||
Intangible Assets |
|
|
26.4 |
24.7 |
59.7 |
70.2 |
69.6 |
|
73.7 |
75.7 |
|||
Tangible Assets |
|
|
25.1 |
26.2 |
33.1 |
37.9 |
36.0 |
|
37.3 |
46.1 |
|||
Other |
|
|
3.2 |
2.9 |
0.7 |
0.4 |
0.6 |
|
0.7 |
3.8 |
|||
Current Assets |
|
|
62.1 |
62.3 |
87.2 |
82.6 |
82.2 |
|
75.7 |
91.5 |
|||
Stocks |
|
|
21.7 |
22.4 |
23.6 |
28.2 |
29.6 |
|
29.2 |
30.3 |
|||
Debtors |
|
|
40.1 |
37.6 |
41.5 |
41.4 |
45.3 |
|
40.4 |
44.0 |
|||
Cash |
|
|
0.3 |
2.3 |
22.1 |
13.0 |
7.3 |
|
6.1 |
17.2 |
|||
Current Liabilities |
|
|
(54.5) |
(49.0) |
(68.8) |
(79.2) |
(79.2) |
|
(69.3) |
(77.3) |
|||
Creditors |
|
|
(51.5) |
(48.6) |
(53.2) |
(62.9) |
(58.2) |
|
(63.7) |
(76.0) |
|||
Short term borrowings |
|
|
(3.0) |
(0.4) |
(15.6) |
(16.3) |
(21.0) |
|
(5.6) |
(1.3) |
|||
Long Term Liabilities |
|
|
(25.7) |
(4.3) |
(31.8) |
(21.0) |
(15.5) |
|
(28.1) |
(36.7) |
|||
Long term borrowings |
|
|
(16.0) |
(0.8) |
(20.9) |
(17.3) |
(11.4) |
|
(25.3) |
(32.3) |
|||
Other long term liabilities |
|
|
(9.7) |
(3.5) |
(10.9) |
(3.7) |
(4.1) |
|
(2.8) |
(4.4) |
|||
Net Assets |
|
|
36.6 |
62.8 |
80.1 |
90.9 |
93.7 |
|
90.0 |
103.1 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|||
Operating Cash Flow |
|
|
12.1 |
19.8 |
23.8 |
30.8 |
19.9 |
18.1 |
25.8 |
34.1 |
|||
Net Interest |
|
|
(0.9) |
(0.7) |
(0.5) |
(1.0) |
(1.0) |
(1.0) |
(1.3) |
(1.6) |
|||
Tax |
|
|
(0.9) |
(1.7) |
(2.3) |
(3.8) |
(2.7) |
(2.7) |
(2.6) |
(2.6) |
|||
Capex |
|
|
(4.9) |
(5.6) |
(9.0) |
(12.7) |
(7.1) |
(5.3) |
(12.5) |
1.5 |
|||
Acquisitions/disposals |
|
|
(0.2) |
0.0 |
(20.9) |
(10.2) |
(3.9) |
(3.9) |
0.0 |
(2.2) |
|||
Financing |
|
|
0.0 |
10.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(0.0) |
(12.3) |
|||
Dividends |
|
|
0.0 |
(1.9) |
(6.7) |
(9.1) |
(9.5) |
(9.5) |
(8.8) |
(7.1) |
|||
Net Cash Flow |
|
|
5.2 |
19.9 |
(15.6) |
(6.1) |
(4.3) |
(4.3) |
0.6 |
9.8 |
|||
Opening net debt/(cash) |
|
|
23.2 |
18.7 |
(1.1) |
14.4 |
20.6 |
20.6 |
25.1 |
24.8 |
|||
Finance leases initiated |
|
|
(0.5) |
(0.3) |
0.4 |
1.9 |
(1.4) |
(1.4) |
(1.1) |
0.0 |
|||
Other |
|
|
(0.1) |
0.2 |
(0.3) |
(2.1) |
1.2 |
1.2 |
0.8 |
(1.5) |
|||
Closing net debt/(cash) |
|
|
18.6 |
(1.1) |
14.4 |
20.6 |
25.1 |
25.1 |
24.8 |
16.4 |
|||
IFRS 16 Leases |
|
|
|
|
|
|
|
|
|
71.0 |
|||
Source: Company accounts, Edison Investment Research
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Research: Financials
Following muted results in FY18, ÖKOWORLD (ÖWAG) reported significant top- and bottom-line expansion in FY19, driven by a €2.8m improvement in performance fee income. As total assets under management (AUM) reached €1.65bn at end 2019 (up more than €554m vs 2018), the resulting management fee improved by a further €2.1m (up 21% y-o-y). Given the equity market collapse in early 2020, the performance fee this year could fall short of the 2019 level. However, this could be at least partially offset by management fees being supported by higher AUM, as ÖWAG was able to expand these further during the slowdown, to €1.68bn at end April.
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