Last close As at 05/08/2026
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Market capitalisation
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Research: Industrials
Epwin Group’s H223 trading was robust and management has navigated inflationary pressures well. As a result we have increased our FY23 and FY24 underlying operating profit estimates by 13.6% and 10.3%, respectively. Longer term, well-established growth trends imply that Epwin is well placed to leverage off increasing demand for its energy-efficient and low-maintenance building products. Management action contributed to overall margin expansion, a feature that we expect to continue in FY24. Epwin offers an attractive investment case with the potential for uplifts from additional self-funded M&A. It trades on a P/E ratio of 7.4x, some 30% below the long-term average of 10.7x, and yields 6%.
Epwin Group |
Solid H223 leads to useful earnings upgrade |
FY23 trading update |
Construction and materials |
30 January 2024 |
Share price performance
Business description
Next events
Analyst
Epwin Group is a research client of Edison Investment Research Limited |
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Epwin Group’s H223 trading was robust and management has navigated inflationary pressures well. As a result we have increased our FY23 and FY24 underlying operating profit estimates by 13.6% and 10.3%, respectively. Longer term, well-established growth trends imply that Epwin is well placed to leverage off increasing demand for its energy-efficient and low-maintenance building products. Management action contributed to overall margin expansion, a feature that we expect to continue in FY24. Epwin offers an attractive investment case with the potential for uplifts from additional self-funded M&A. It trades on a P/E ratio of 7.4x, some 30% below the long-term average of 10.7x, and yields 6%.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/21 |
329.6 |
13.7 |
9.2 |
4.1 |
8.1 |
5.5 |
12/22 |
355.8 |
16.5 |
8.9 |
4.5 |
8.3 |
6.0 |
12/23e |
349.7 |
18.3 |
10.0 |
4.5 |
7.4 |
6.1 |
12/24e |
354.9 |
19.0 |
10.0 |
4.6 |
7.4 |
6.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Robust trading, margins better than expected
Trading continued to be resilient throughout H223, such that the company anticipates FY23 revenue to be in line with the consensus of £349.8m. More importantly, however, it expects underlying operating profit to be ‘towards the upper end’ of the range of £22m to £25m. This is despite a number of inflationary headwinds, and the fact that although PVC resin prices have eased, they remain at elevated levels. Furthermore, management expects net debt to be c £14.5m, c £3.4m lower than consensus despite the ongoing share buyback, implying a net debt to EBITDA ratio of less than c 0.5x.
Consistent strategic focus remains in place
Epwin has for many years followed a set of strategic targets, which drive the development of the business and improve profitability and its sustainability credentials. In 2024 and beyond, we believe Epwin will continue to evolve these strategic targets, which include product and materials development, operational leverage and efficiency, cross-selling and business development, the pursuit of value-enhancing acquisitions and sustainability developments.
Valuation: Revised EPS implies 30% P/E discount
Following the FY trading update, we have raised our FY23 and FY24 underlying EBIT forecasts from £22.0m and £23.0m, respectively, to £24.0m and £24.5m, with potential risks to the upside in both years for earnings and dividends. Our revised forecasts imply normalised EPS of 10.0p in both years, which in turn gives a P/E ratio of 7.4x, a material discount to its long-term average of 10.7x. The company remains acquisitive but, even without M&A, Epwin is cash generative, and we note that the shares offer an attractive 6.1% yield from a twice covered dividend.
Exhibit 1: Financial summary
£m |
2020 |
2021 |
2022 |
2023e |
2024e |
2025e |
||
31-March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||
Revenue |
|
|
241.0 |
329.6 |
355.8 |
349.7 |
354.9 |
358.4 |
Cost of Sales |
(168.8) |
(236.9) |
(250.5) |
(248.3) |
(251.1) |
(253.4) |
||
Gross Profit |
72.2 |
92.7 |
105.3 |
101.4 |
103.8 |
105.0 |
||
EBITDA |
|
|
28.6 |
36.3 |
41.6 |
42.0 |
42.5 |
43.7 |
Normalised operating profit |
|
|
9.4 |
18.5 |
21.5 |
24.0 |
24.5 |
25.7 |
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating profit - Underlying |
9.4 |
18.5 |
21.5 |
24.0 |
24.5 |
25.7 |
||
Amortisation of acquired intangibles |
(0.3) |
(0.3) |
(0.3) |
(0.6) |
(0.6) |
(0.6) |
||
Exceptionals |
(2.8) |
(0.1) |
(3.7) |
0.0 |
0.0 |
0.0 |
||
Impairment |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
(0.4) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
||
Reported operating profit |
6.3 |
17.7 |
16.9 |
22.8 |
23.3 |
24.5 |
||
Net Interest |
(4.4) |
(4.8) |
(5.0) |
(5.7) |
(5.5) |
(5.5) |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
5.0 |
13.7 |
16.5 |
18.3 |
19.0 |
20.2 |
PBT - Underlying |
|
|
- |
- |
- |
- |
- |
- |
Profit Before Tax (reported) |
|
|
1.9 |
12.9 |
11.9 |
17.1 |
17.8 |
19.0 |
Reported tax |
0.7 |
(0.4) |
(3.5) |
(3.8) |
(4.4) |
(4.8) |
||
Profit After Tax (norm) |
5.7 |
13.3 |
13.0 |
14.6 |
14.5 |
15.5 |
||
Profit After Tax (reported) |
2.6 |
12.5 |
8.4 |
13.4 |
13.3 |
14.3 |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
5.7 |
13.3 |
13.0 |
14.6 |
14.5 |
15.5 |
||
Net income (reported) |
2.6 |
12.5 |
8.4 |
13.4 |
13.3 |
14.3 |
||
Basic average number of shares outstanding (m) |
143 |
145 |
145 |
145 |
145 |
145 |
||
EPS - basic normalised (p) |
|
|
3.99 |
9.16 |
8.95 |
10.03 |
10.00 |
10.65 |
EPS - diluted normalised (p) |
|
|
3.98 |
9.06 |
8.84 |
9.89 |
9.85 |
10.50 |
EPS - Diluted, underlying |
|
|
- |
- |
- |
- |
- |
- |
EPS - basic reported (p) |
|
|
1.82 |
8.61 |
5.78 |
9.21 |
9.17 |
9.83 |
Dividend (p) |
1.00 |
4.10 |
4.45 |
4.50 |
4.60 |
4.80 |
||
Revenue growth (%) |
(-14.6) |
36.8 |
7.9 |
(-1.7) |
0.0 |
0.0 |
||
Gross Margin (%) |
30.0 |
28.1 |
29.6 |
29.0 |
29.3 |
29.3 |
||
EBITDA Margin (%) |
11.9 |
11.0 |
11.7 |
12.0 |
12.0 |
12.2 |
||
Normalised Operating Margin |
3.9 |
5.6 |
6.0 |
6.9 |
6.9 |
7.2 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
176.9 |
177.0 |
209.9 |
201.1 |
193.9 |
187.7 |
Intangible Assets |
75.0 |
77.9 |
99.5 |
98.9 |
98.3 |
97.7 |
||
Tangible Assets |
29.5 |
28.5 |
34.3 |
30.2 |
27.7 |
26.2 |
||
Investments & other |
72.4 |
70.6 |
76.1 |
72.0 |
67.9 |
63.8 |
||
Current Assets |
|
|
87.2 |
94.6 |
97.6 |
98.2 |
99.6 |
100.4 |
Stocks |
29.6 |
41.0 |
41.1 |
40.9 |
41.7 |
42.1 |
||
Debtors |
44.3 |
43.6 |
40.5 |
41.3 |
41.9 |
42.3 |
||
Cash & cash equivalents |
13.1 |
9.8 |
15.1 |
15.1 |
15.1 |
15.1 |
||
Other |
0.2 |
0.2 |
0.9 |
0.9 |
0.9 |
0.9 |
||
Current Liabilities |
|
|
(79.0) |
(83.0) |
(83.9) |
(85.5) |
(86.6) |
(87.4) |
Creditors |
(57.6) |
(71.5) |
(72.5) |
(74.1) |
(75.2) |
(76.0) |
||
Tax and social security |
0.0 |
(0.4) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Short term borrowings |
(10.9) |
(0.5) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(10.5) |
(10.6) |
(11.4) |
(11.4) |
(11.4) |
(11.4) |
||
Long Term Liabilities |
|
|
(96.3) |
(90.3) |
(122.5) |
(105.7) |
(92.0) |
(78.3) |
Long term borrowings |
(17.3) |
(14.6) |
(29.8) |
(26.5) |
(26.3) |
(26.1) |
||
Other long term liabilities |
(79.0) |
(75.7) |
(92.7) |
(79.2) |
(65.7) |
(52.2) |
||
Net Assets |
|
|
88.8 |
98.3 |
101.1 |
108.0 |
114.8 |
122.4 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
88.8 |
98.3 |
101.1 |
108.0 |
114.8 |
122.4 |
CASH FLOW |
||||||||
Op Cash Flow before WC and tax |
28.6 |
36.3 |
41.6 |
42.0 |
42.5 |
43.7 |
||
Working capital |
(1.8) |
(1.4) |
1.4 |
1.2 |
(0.2) |
0.0 |
||
Exceptional & other |
(3.1) |
0.0 |
(4.4) |
0.0 |
0.0 |
0.0 |
||
Tax |
(0.8) |
(0.5) |
(2.2) |
(3.8) |
(4.4) |
(4.8) |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net operating cash flow |
|
|
22.9 |
34.4 |
36.4 |
39.4 |
37.8 |
39.0 |
Capex |
(8.0) |
(0.6) |
(9.1) |
(11.9) |
(11.5) |
(11.5) |
||
Acquisitions/disposals |
0.0 |
(5.3) |
(18.1) |
(2.0) |
(4.0) |
(5.0) |
||
Net interest |
(1.4) |
(1.5) |
(1.6) |
(2.3) |
(2.1) |
(2.1) |
||
Equity financing |
0.0 |
(0.4) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Dividends |
0.0 |
(4.0) |
(6.2) |
(6.5) |
(6.5) |
(6.7) |
||
Other |
(15.6) |
(13.5) |
(9.9) |
(13.5) |
(13.5) |
(13.5) |
||
Net Cash Flow |
(2.1) |
9.1 |
(8.5) |
3.3 |
0.2 |
0.2 |
||
Opening net debt/(cash) |
|
|
16.4 |
18.5 |
9.4 |
17.9 |
14.6 |
14.4 |
Closing net debt/(cash) |
|
|
18.5 |
9.4 |
17.9 |
14.6 |
14.4 |
14.2 |
Source: Edison Investment Research
|
|
Research: Investment Companies
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