Epwin Group plc (LON:EPWN), the leading manufacturer of low maintenance building products, supplying the Repair, Maintenance and Improvement, new build and social housing sectors has announced a half year trading update for the six months ended 30 June 2020 and notice of its half year results.
Summary
· All manufacturing and distribution sites have returned to operation with additional Covid safe-working practices implemented
· Demand has been stronger than anticipated from customers serving the RMI market
· Newbuild sector demand initially slower to return, but call-offs now increasing steadily
· H1 sales of £93m are ahead of the Board’s expectations, although 34% lower than the comparative period last year due to lockdown.
· Strong balance sheet – funding headroom increased £10m to c. £55m since the AGM update
· Expect to meet all Bank Covenants
· Optimistic for trading prospects in H2
Trading performance
Up until the third week of March, trading was slightly ahead of the Board’s expectations when the Group suspended operations following the Government’s Covid-19 announcements. Operations remained suspended from then, throughout April, only recommencing during May after the implementation of enhanced health and safety procedures in line with Government guidance.
During June demand recovered at a stronger rate than anticipated from our customers serving the RMI market, which is Epwin’s largest end market. June window systems and cellular extrusions sales were over 10% up on June 2019 and 12.2% up in the month of July. Export market demand continued and was supplied from stock throughout the H1.
Demand from the Newbuild and social housing sector, which makes up around 25% of Group revenues, had been initially slower to recover, but this has improved with orders increasing significantly into the start of August.
With demand stronger and more sustained following lock-down than anticipated, Group revenues in the first half year were ahead of the Board’s expectations at £93 million (H1 2019: £140 million), with very strong demand for PVC profiles in June, continuing throughout July and into August.
Balance sheet and liquidity
The Group’s balance sheet remains strong. Net debt at the half year, on a pre-IFRS 16 basis, was £21.3 million (H1 2019: £29.2 million) with over £55 million of cash and facility headroom, significantly up from c£45 million since the last update on 16 June 2020.
The Group’s banking facilities, which were increased last year, total £75 million. The Board has not sought to increase these bank facilities further nor access other sources of funding, as it believes its available cash and facility headroom provides sufficient liquidity and flexibility to pursue its strategic objectives.
The Group met its banking covenants as at 30 June 2020 and does not currently anticipate needing to seek any variation to these pre-Covid-19 measurements.
Outlook
Towards the end of the second quarter we made significant progress with our programme of site consolidation and rationalisation. The construction of the new Telford distribution and finishing facility is now complete and expected to be fully operational by the end of the year. This industry-leading facility will help us achieve operational efficiencies going into 2021 and support both the growth of our existing products as well as the development of our planned new products.
As previously stated, the impact of COVID-19 will inevitably have a material impact on trading for the current year and it is still too soon to quantify this at this stage. The Group continues to monitor levels of demand across its operations and is implementing cost saving measures when and where appropriate. Therefore, in line with other businesses in the sector, all market guidance and forecasts remain withdrawn until the half year announcement.
Notice of results
The Group intends to announce its half year results on 10 September 2020.
Jon Bednall, CEO of Epwin Group, commented:
“Since our last announcement in June we have seen sustained demand at higher levels than anticipated from the key RMI market and have continued to ramp up our activities to meet this. Market demand in other sectors is now showing good signs of returning and current trading remains better than the Board expected.
We are optimistic for trading prospects in the second half and expect to make further strategic progress with our site consolidation and rationalisation programme, whilst continuing to manage the challenges that the pandemic presents. Looking further ahead, the medium and long-term drivers for the RMI market remain positive.”
