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Last close As at 27/03/2023
GBP0.73
▲ −0.50 (−0.68%)
Market capitalisation
GBP107m
Research: Industrials
Building on previous updates – and having reopened all facilities – Epwin has confirmed that it has seen demand levels rebuilding following COVID-19 disruption during H1. In particular, sales in the replacement market have exceeded their prior year equivalents in the latest two trading months. Net debt dipped at the period end, further boosting liquidity headroom. The near-term focus is on delivering increased customer requirements and full commissioning of the new Telford warehouse facility. Our estimates remain suspended currently.
Written by
Toby Thorrington
Epwin Group |
Rising activity levels as H1 closes |
H120 pre-close update |
Construction & materials |
7 August 2020 |
Share price performance
Business description
Next events
Analyst
Epwin Group is a research client of Edison Investment Research Limited |
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Building on previous updates – and having reopened all facilities – Epwin has confirmed that it has seen demand levels rebuilding following COVID-19 disruption during H1. In particular, sales in the replacement market have exceeded their prior year equivalents in the latest two trading months. Net debt dipped at the period end, further boosting liquidity headroom. The near-term focus is on delivering increased customer requirements and full commissioning of the new Telford warehouse facility. Our estimates remain suspended currently.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
281.1 |
16.5 |
9.8 |
4.9 |
7.0 |
7.2 |
12/19 |
282.1 |
15.0 |
8.5 |
1.8 |
8.1 |
2.6 |
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.
Recovery momentum at the end of H1
A good start and end to H120 punctuated by major COVID-19 related operational trading disruption (from the end of March into mid-May) led to revenue in the first six months of the year being 34% below H119. This echoed an earlier update by sector peer Eurocell (8 July). Management notes that the replacement market has been relatively strong; specifically, y-o-y sales increases of 10%+ in June and 12.2% in July indicated good momentum at the period end and into H2. Safestyle’s own H1 update (24 July) noted increased installation activity and order book momentum also. The new housebuilders’ return to sites during May has subsequently also been reflected in a steady increase in volume call-offs in Epwin’s businesses again into H2 thus far. With all manufacturing, distribution and branch operations now open again, the near-term task is to meet recovery phase pent-up demand while also having an eye on where sales patterns settle over the remainder of the year. The government stamp duty holiday and reductions seen in consumer borrowing during Q2 may serve to stimulate housing transactions and RMI spending, although this of course needs to be weighed against dented (but recovering) consumer confidence and rising unemployment.
Healthy liquidity position, net debt dips in June
H120 ended with net debt of c £21m; this was a c £5m increase from December but a noted decline from the c £30m levels previously reported (end March, April and early June). While group profitability was not disclosed – and UK government support will have contributed to the underlying cash control within the business –improved trading momentum and associated working capital management are likely to have been the key drivers behind the recent net debt reduction. FY20 profitability will clearly be lower y-o-y but to provide context, H120 net debt is equivalent to c 0.7x EBITDA generated in FY19. Epwin has not required fresh equity funding or made any changes to its banking facilities and available liquidity headroom is now stated as being over £55m. We expect to reinstate our estimates when H120 results are published in September.
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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