Epwin Group Plc (LON: EPWN) a leading manufacturer of low maintenance building products, supplying the Repair, Maintenance and Improvement, new build and social housing sectors, announced today its half year results for the six months to 30 June 2019.
| H1 2019 | H1 2018 4 | ||
| £m | H1 2019 | pre-IFRS 16 | |
| Revenue | 140 | 140 | 140.5 |
| Underlying operating profit 1 | 9.4 | 8.3 | 7.5 |
| Underlying operating profit margin | 6.70% | 5.90% | 5.30% |
| Adjusted profit before tax 1 | 7.3 | 7.5 | 6.8 |
| Profit before tax | 6.7 | 6.9 | 5.8 |
| Adjusted EPS 2 | 4.20p | 4.34p | 3.78p |
| Basic EPS – continuing | 3.78p | 3.92p | 3.29p |
| Dividend per share | 1.75p | 1.75p | 1.70p |
| Net debt (excluding IFRS 16) | -29.2 | -29.2 | -28.6 |
| Underlying operating cash conversion 3 | 156.40% | 115.70% | 158.70% |
1) Stated before amortisation of acquired other intangible assets, share-based payments and other non-underlying items.
(2) Adjusted EPS is calculated based on continuing profit after tax adding back amortisation of acquired other intangible assets, share-based payments and other non-underlying items.
(3) Underlying operating cash conversion is pre-tax operating cash flow as a percentage of underlying operating profit.
(4) Restated for 2018 discontinued glass sealed unit operations.
Financial headlines
· Revenue of £140.0 million, in line with expectations:
o Strong demand in Q1 driven by new customer wins and Brexit-related stockpiling, which unwound in Q2.
o Revenues up 0.5% on a like for like basis, against strong H1 2018 comparatives.
· Underlying operating profit increased by 10.7% to £8.3 million on a pre-IFRS 16 basis (up by 25.3% to £9.4 million on a reported basis):
o Benefited from the site rationalisation programme launched in 2018.
o Stable material prices have enabled recovery of some of the significant cost increases suffered during 2017 and 2018.
· Financial position remains robust:
o Operating cash conversion remains strong, with net debt of £29.2m at the half year, representing 1x adjusted EBITDA.
o Bank facilities renegotiated increasing to £65.0 million revolving credit facility plus £10.0 million overdraft, on more favourable terms.
· Interim dividend of 1.75 pence per share declared (up 3%), to be paid on 18 October 2019 to shareholders on the register on 20 September 2019.
Delivering on our strategy
· Further progress with the Group’s site consolidation and rationalisation programme, in particular at the Telford site:
o Warehouse build and site consolidation project is progressing to plan – will ultimately consolidate seven existing units into two.
o Purchase and sale of the site completed and agreement to build and lease the facility. The lease is on an arm’s length basis at commercial market rates.
o Taken together, these agreements are expected to generate net additional cash of approximately £8.0 million in the current year.
o The site will be fully developed and operational in H1 2020 and will significantly improve the logistics and finishing operations of the Window Systems business and enable the growth and development of the new aluminium window system.
o Unrelated to the Telford site, as previously reported, the Group disposed of its non-core glass-sealed unit manufacturing operation in Northampton in early January 2019.
· Continued investment in enhancing the product portfolio to further develop the Group’s long-term market position:
o New aluminium window system launched in May 2019. Strong reception from both existing customer base and potential new customers with sales commencing in Q4.
o Acquisition of PVS, a decking installation business, completed in February 2019 for £2.5m. PVS provides additional routes to market for the Group’s decking products.
o Continued strong sales growth from the Profile 22 Optima window system, up 15% year on year, with further new customer wins during H1 2019.
Current trading
· Current trading is in line with expectations.
· Short-term macroeconomic uncertainty continues to impact market conditions, particularly in the key RMI market.
· Medium-term drivers remain positive:
o Underinvestment in existing UK housing stock becoming more acute as repair and maintenance expenditure cannot be deferred indefinitely.
o New build housing supported by underlying demand and government incentives.
o Social housing market likely to see growth as government allows greater flexibility on financing.
Jon Bednall, Chief Executive Officer, said:
“The Group delivered a robust trading performance in the first half of 2019, in line with expectations in what continues to be challenging market conditions.
We have made good strategic progress on all fronts – the acquisition of PVS provides further routes to market and supports the investment we made to develop our decking system; the new aluminium window system was launched on time and has been well received by our customer base and the wider market.
Operationally, our site consolidation programme has continued to plan, including important steps forward on our new warehousing and finishing facility in Telford, where the transactions will significantly reduce the Group’s debt. We also successfully exited from our Northampton glass-sealed unit manufacturing operations.
Current trading is line with expectations, and the Board retains its positive view of the medium-term prospects for the market given the continued under investment in RMI, long-term new build demand and pent up demand in social housing markets.”
