REG - Epwin Group PLC - Half-year results
20/09/2023 07:00
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RNS Number : 9756M Epwin Group PLC 20 September 2023
20 September 2023
The information contained within this announcement is deemed by the Company to
constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014 which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement via the
Regulatory Information Service, this inside information is now considered to
be in the public domain.
Epwin Group Plc
("Epwin" or the "Group")
Half year results for the six months to 30 June 2023
Trading ahead of a strong 2022 comparative; confident of achieving full year
expectations
Epwin Group Plc (AIM: EPWN), the leading manufacturer of energy efficient and
low maintenance building products, with significant market shares, supplying
the Repair, Maintenance and Improvement ("RMI"), new build and social housing
sectors, announces its unaudited half year results for the six months to 30
June 2023 ("H1 2023").
Financial highlights
£m H1 2023
H1 2022
Revenue 180.0 178.0
Underlying operating profit (1) 11.9 10.7
Underlying operating margin 6.6% 6.0%
Adjusted profit before tax (1) 8.7 8.3
Profit before tax 7.9 7.9
Adjusted EPS (1) 4.82p 4.68p
Basic EPS 4.27p 4.40p
Interim dividend per share 2.00p 1.90p
Pre-tax operating cash flow 19.1 13.9
Covenant net debt(2) 16.1 7.3
Covenant net debt to adjusted EBITDA(2) 0.6x 0.3x
Underlying operating cash conversion (3) 160.5% 129.9%
(1) Stated before amortisation of acquired other intangible assets,
share-based payments and other non-underlying items.
(2) Covenant net debt and covenant net debt to adjusted EBITDA represent
pre-IFRS 16 measures.
(3) Underlying operating cash conversion is pre-tax operating cash flow as a
percentage of underlying operating profit.
Financial headlines
· Strong trading continues:
o Revenue ahead of a strong H1 2022, despite challenging market conditions
and slight moderation of trading in the second quarter
o Underlying operating profit 11% ahead of H1 2022, with a 60 bps
improvement in underlying operating margin
o Margin recovery driven by pricing actions, operational improvement, easing
raw material price inflation and cost management
o Ongoing positive cash generation, with pre-tax operating cash flow of
£19.1m (HY22: £13.9m) and underlying operating cash conversion of 160%
· Robust financial position:
o Robust balance sheet, with in excess of £60 million headroom on banking
facilities to support strategic objectives
o Banking facilities renewed - £65 million Sustainability Linked Loan
facility agreed with existing lenders through to August 2026 alongside a £10
million overdraft facility
o Reduction in covenant net debt to £16.1 million from £17.9 million as at
31 December 2022, primarily due to strong operational cash flows
o Covenant net debt 0.6x adjusted EBITDA, well within covenant limits and
unchanged from the year-end notwithstanding the normal first half increase in
working capital and prior year acquisitions
· Interim dividend of 2.00 pence per share declared, an increase of 5%
on H1 2022
Operational and strategic headlines
· Inflationary pressures easing; continues to be actively managed:
o Raw material cost inflation has continued to ease, although PVC resin
prices remain at elevated levels
o Labour, energy and other inflationary cost pressures continue to be
managed carefully
· Good progress delivering on our strategy:
o Operational improvement:
§ Consolidation of decking manufacturing to a single site completed, with
operational synergies being realised, and the integration of the distribution
network and consolidation of IT systems progressing
o New product development:
§ Progress being made on increasing the use of recycled materials within
extruded products and wider product range extension
o Value enhancing acquisitions:
§ Focus on integration of 2022 acquisitions, progressing in line with
management expectations
§ Healthy pipeline of potential acquisitions
o Further progress on sustainability:
§ Sustainability Linked Loan incorporated into Group's banking facilities on
renewal
§ Integration of Poly-Pure acquisition along with investment to expand
recycling capabilities and increase use of recycled material within the Group
and for the market
§ Continued focus on energy usage and production efficiency
Current trading and outlook - 2023 results expected to be in line with
expectations
· Q3 trading to date has been encouraging with profitability ahead of
2022
· RMI demand has remained robust into H2 2023, with trading in core
markets remaining resilient
· The Group's broad product range, diverse customer base, well-invested
operations, flexible cost base, longstanding supplier relationships and strong
balance sheet provide a large measure of resilience against the potential
effect of short-term macro-economic headwinds
· The Board remains confident of delivering a 2023 result in line with
market consensus* expectations - demonstrating continued delivery against
rising post-Covid market expectations
· Medium and long-term drivers for the Group's markets remain positive
Jon Bednall, Chief Executive Officer, said:
"We delivered another positive performance in our first half, both in line
with the Board's expectations and ahead of a strong H1 2022 as well as
continuing to make good progress on our strategy. This is testament to the
combined efforts of all my Epwin colleagues and I would like to thank them for
continuing to deliver strong post‐Covid performance improvement.
Trading has been encouraging in the second half to date and the Board remains
confident of achieving full year expectations in line with market consensus.
We are optimistic about our future prospects despite the short‐term
macroeconomic headwinds, with long-term structural drivers of demand for our
energy efficient, recyclable and low maintenance building products in place."
*Company collated analyst consensus for FY23 underlying operating profit is
£24.0m
Contact information
Epwin Group Plc 0203 128 8168
Jon Bednall, Chief Executive
Chris Empson, Group Finance Director
Shore Capital (Nominated Adviser and Joint Broker) 0207 408 4090
Corporate Advisory
Daniel Bush / Iain Sexton
Corporate Broking
Fiona Conroy
Zeus Capital Limited (Joint Broker) 0203 829 5000
Dominic King / Nick Searle
MHP 078 3462 3818
Reg Hoare / Charlie Barker / Pauline Guenot epwin@mhpgroup.com
Forthcoming dates:
Ex-dividend date 28 September 2023
Dividend record date 29 September 2023
Dividend payment date 17 October 2023
About Epwin
Epwin is the leading manufacturer of energy efficient and low maintenance
building products, with significant market shares, supplying the Repair,
Maintenance and Improvement ("RMI"), new build and social housing sectors.
The Company is incorporated, domiciled and operates principally in the United
Kingdom.
Information for investors can be accessed at www.epwin.co.uk/investors
(http://www.epwin.co.uk/investors)
Group business review
Trading and results
The Group delivered a pleasing trading performance in H1 2023, with revenues
of £180.0 million marginally ahead of a strong comparative period despite the
well-publicised challenging trading conditions. The increase in revenue was
driven by pricing actions to recover material and other input cost inflation
and the acquisitions undertaken in 2022, which contributed £7.3 million of
revenue to H1 2023. This was offset by a slight decline in volumes, as
macroeconomic and fiscal factors impacted demand in Q2, as anticipated.
Underlying operating profit increased by 11% to £11.9 million (HY22: £10.7
million), as pricing actions, operational improvement, easing raw material
price inflation and cost management continue to drive a recovery in margin.
Underlying operating margin improved by 60 basis points, to 6.6% in H1 2023.
The inflationary pressures that significantly impacted raw material costs in
2021 and 2022 continued to ease, with PVC resin prices starting to normalise,
although remaining at elevated levels by historical standards. However, other
inflationary cost pressures, in particular labour and energy, continued to be
key themes through Q1 2023, before starting to ease in Q2.
Key financials
6 months ended 6 months ended
30 June 2023 30 June 2022
£m £m
Revenue 180.0 178.0
Underlying operating profit 11.9 10.7
Amortisation of acquired other intangible assets (0.5) (0.1)
Share-based payments expense (0.3) (0.3)
Operating profit 11.1 10.3
Underlying operating margin 6.6% 6.0%
Operating margin 6.2% 5.8%
Segmental results
6 months ended 6 months ended
30 June 2023 30 June 2022
£m £m
Revenue
Extrusion and moulding 113.4 111.3
Fabrication and distribution 66.6 66.7
Total 180.0 178.0
Underlying segmental operating profit
Extrusion and moulding 10.6 8.0
Fabrication and distribution 3.1 4.0
Underlying segmental operating profit 13.7 12.0
Corporate costs (1.8) (1.3)
Underlying operating profit 11.9 10.7
Amortisation of acquired other intangible assets (0.5) (0.1)
Share-based payments expense (0.3) (0.3)
Operating profit 11.1 10.3
Extrusion and moulding
· Revenues remained strong, increasing by 1.9% in comparison to H1
2022, to £113.4 million, primarily due to the impact of selling price
increases implemented to recover material and other cost inflation and the
impact of the 2022 acquisition of Poly-Pure, which contributed £4.4 million
of external sales.
· As a result of the steps taken by the business, primarily in 2022, to
recover margins in an equitable manner through selling price increases and
surcharges, the underlying operating margin increased to 9.3% (HY22: 7.2%).
Fabrication and distribution
· Revenue was broadly in line with a strong H1 2022 at £66.6 million,
of which £2.9 million is through additional revenue from the Mayfield
acquisition completed in 2022. The impact of macroeconomic factors and fiscal
tightening has been particularly experienced in our downstream businesses.
· In our distribution network, subdued market conditions have impacted
volumes. The Group's approach has been to balance volume and profitability
through responsible pricing to maintain our returns from these markets.
Strategic progress
The Group's focus continues to be on product and material development,
operational efficiency, identifying and completing value‐enhancing
acquisitions and building on the Group's inherent ESG credentials.
New product development
Following the acquisition of Poly-Pure in 2022, the Group commenced the
introduction of in-house recycled materials into its extruded product range
during the first half of the year, with further investment in plant and
tooling in the process of being brought onstream to further increase recycled
material usage. This investment will continue, selectively, in line with
tooling replacement programmes.
The Group continues to see significant opportunities for its aluminium window
system, Stellar, and the PVC decking product, Dekboard.
Progress with site consolidation and rationalisation programme
The project, commenced in 2022, to consolidate our decking production into a
single site has been completed and will enable operational synergies to be
realised from the second half of 2023.
The project to consolidate IT systems across our distribution network is
progressing and is expected to go live on a phased basis in Q4 2023 with the
roll-out across our branch network to be completed in 2024. The single system
will result in improved information flow, enabling more streamlined reporting
and monitoring of KPIs.
Value-enhancing acquisitions
During 2022, the Group completed the acquisition of Poly-Pure, a leading UK
materials re-processor, and Mayfield, a supplier of decking and related
products to the holiday park industry. Integration of the 2022 acquisitions
has been a key focus of the Group and is progressing in line with management's
expectations.
The initial Poly-Pure integration is well progressed, although capital
investment plans to raise capacity and margins have been impacted by long lead
times on plant to expand re-processing capacity and produce higher margin
materials. The business has also been impacted by increased prices for
recyclate driven by an increase in market demand. However, the acquisition has
enabled the Group to accelerate its ambitions to integrate a greater
proportion of recycled materials into its core product range, as well as
recycle more of its own production waste and develop the wider market for
recycled raw materials. This programme will continue, selectively, in line
with the Group's tooling replacement programme.
Mayfield has expanded the geographical coverage of the Group's growing decking
operations and outdoor products range and the transition of third-party
production to our own facilities has commenced. As a result, Mayfield has
delivered an encouraging performance against challenging conditions in the
holiday park market.
Completion of selective, value enhancing acquisitions remains a core part of
the Group's strategy and there continues to be a healthy pipeline of further
potential acquisitions that the Group is seeking to progress.
Sustainability
The Group continues to make progress with developing its sustainability
framework and targets, while delivering on its sustainability agenda in
support of its wider strategy. We continue to see a key role for the Group's
products, as sustainable building products, in the UK's journey to net zero
and as part of efforts to address the shortage of affordable and energy
efficient homes as well as improve the existing housing stock.
Sustainability considerations are embedded throughout our operations and
decision-making processes and a focus on operational efficiency, one of our
core operational objectives, inherently drives sustainable behaviour. Energy
usage, scrap rates and production efficiency are closely monitored at all
manufacturing locations, enabling the Group to identify opportunities for
improvement. For example, at our glass-reinforced plastic operations, we have
expanded the use of cold pour moulding during the period, which results in
reduced waste and energy usage.
Our commitment to our sustainability strategy is underlined by the
formalisation of sustainability metrics within our new Sustainability Linked
Loan Facility with Barclays and HSBC. Further details of this facility are set
out below.
The Group's core focus during the period has been the integration of Poly-Pure
and expansion of the Group's PVC recycling activities, enabling us to
contribute to a circular economy through recycling of post-consumer waste. As
recycled material replaces virgin PVC, it is expected that the Group's carbon
footprint will continue to reduce over time.
Cash flow
6 months ended 30 June 2023 6 months ended 30 June 2022
£m
£m
Pre-tax operating cash flow 19.1 13.9
Tax paid (0.6) (1.0)
Payment of deferred and contingent consideration (1.7) -
Net capital expenditure (3.5) (3.6)
Interest on borrowings (1.5) (0.7)
Net repayment of borrowings (5.0) (0.5)
Lease payments (6.7) (3.5)
Dividends (3.7) (3.4)
(Decrease)/Increase in cash and cash equivalents (3.6) 1.2
Opening cash and cash equivalents 15.1 9.8
Closing cash and cash equivalents 11.5 11.0
Borrowings (24.8) (14.7)
Lease assets 5.5 4.6
Lease liabilities (93.3) (84.2)
Net debt including IFRS 16 (101.1) (83.3)
Covenant net debt (16.1) (7.3)
Operating cash flows
The Group remains highly cash generative, achieving a pre-tax operating cash
flow of £19.1 million (HY22: £13.9 million), representing an underlying
operating cash conversion of 160%. The first half of 2023 saw the traditional
increase in working capital following the Christmas and New Year industry
shutdown.
Investing cash flows
Capital expenditure is in line with H1 2022, as the Group continues to invest
in line with its strategic objectives. During H1 2023, capital expenditure has
been focussed on expanding the Group's material re-processing capabilities and
ability to incorporate recycled material into our core products.
Deferred and contingent consideration of £1.7 million was paid during the
period, relating to £0.9 million of contingent consideration in relation to
the acquisition of PVS in 2019 and £0.7 million relating to net cash/debt and
working capital adjustments associated with the acquisitions of Poly-Pure and
Mayfield in 2022.
Financing cash flows
Covenant net debt has reduced to £16.1 million from £17.9 million as at 31
December 2022, primarily due to strong operational cash flows.
The higher interest cost of £1.5 million (HY22: £0.7 million) is driven by
higher borrowings during the period as a result of these acquisitions, as well
as the well-publicised increases to the Bank of England base rate.
In August 2023 the Group renewed its existing revolving credit facilities with
Barclays and HSBC on comparable terms. The new facility is a Sustainability
Linked Loan facility of £65 million for an initial period of 3 years with the
option to extend for a further two years. The sustainability metrics included
in the facility are based on the Group's energy intensity ratio and the amount
of material recycled. In combination with the £10 million overdraft facility,
the new borrowing facility maintains the Group's significant financial
headroom, which at 30 June 2023 was in excess of £60 million, supporting the
Group's strategic objectives.
Dividend
The Board has declared an interim dividend of 2.0 pence per share (HY22: 1.90
pence), representing an increase on the prior period of 5%. The dividend will
be paid on 17 October 2023 to shareholders on the register on 29 September
2023 and is in line with the Board's dividend policy.
Outlook
The Group's robust trading performance during the first half of 2023 has been
encouraging and our core markets have remained resilient in the face of
challenging macroeconomic conditions.
Private housing RMI, the Group's core end market, is now the third largest
construction sector having reached historic high levels following the
post-pandemic boom in 2021. While there was a slight moderation of trading in
the second quarter and continuing uncertainty regarding the length and depth
of any potential economic downturn in the short to medium-term, Q3 trading to
date has been encouraging with profitability ahead of 2022. A majority of RMI
activity relates to essential repairs that cannot be delayed or maintenance
work that cannot be postponed indefinitely, providing a resilient base level
of activity for the Group. We believe that underlying home improvement works
continue to perform strongly.
After two very strong years for housebuilders, the Construction Products
Association now predicts a decline in the new build market of 19% for 2023
before starting to recover in 2024, driven by house price contraction and
increased mortgage rates. This has not yet been borne out in our new
build-facing businesses, which have had a strong H1, as housebuilders have
focussed on completing existing developments driving demand for products such
as our GRP porches, dormers and chimneys.
Some of the significant material cost inflation that impacted the Group
throughout 2021 and 2022 has eased, with PVC resin prices falling back,
although still significantly above historic averages. However, other input
cost inflation remains, particularly in relation to labour, where recruitment
and retention have improved, but wage inflation remains, and power prices,
which have come down from the record highs of 2022, but remain high due to the
ongoing uncertainty around the situation in Ukraine.
The Board is cognisant of the potential impact of short-term macroeconomic
headwinds. However, the Group's broad product range, diverse customer base,
well-invested operations, flexible cost base, longstanding supplier
relationships and strong balance sheet provide a large measure of resilience.
As a result, the Board remains confident of the Group delivering underlying
operating profit for the full year in line with expectations.
The medium to long-term drivers for the market remain positive. The UK faces a
shortage of new and affordable housing, an ageing and underinvested housing
stock and increasing concern about the quality of social housing. The Group's
products have inherently strong environmental credentials and a clear role to
play in the improvement and decarbonisation of the UK housing stock which will
be required to meet net zero ambitions.
Condensed consolidated income statement
for the six months ended 30 June 2023
6 months ended 6 months ended Year ended 31 December 2022
30 June 2023 30 June 2022
(unaudited) (unaudited) (audited)
Note £m £m £m
Group revenue 2 180.0 178.0 355.8
Cost of sales (125.1) (127.6) (250.5)
Gross profit 54.9 50.4 105.3
Distribution expenses (21.2) (20.5) (40.1)
Administrative expenses (22.6) (19.6) (48.3)
Underlying operating profit 11.9 10.7 21.5
Amortisation of acquired other intangible assets 3 (0.5) (0.1) (0.3)
Share-based payments expense 3 (0.3) (0.3) (0.6)
Other non-underlying items 3 - - (3.7)
Operating profit 11.1 10.3 16.9
Finance costs (3.2) (2.4) (5.0)
Profit before tax 7.9 7.9 11.9
Taxation 4 (1.7) (1.5) (3.5)
Profit for the period 6.2 6.4 8.4
Pence Pence Pence
Basic earnings per share 5 4.27 4.40 5.78
Diluted earnings per share 5 4.20 4.35 5.71
Condensed consolidated balance sheet
as at 30 June 2023
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
Note £m £m £m
Assets
Non-current assets
Goodwill 93.2 75.5 93.2
Other intangible assets 5.8 2.1 6.3
Property, plant and equipment 34.2 28.8 34.3
Right of use assets 70.6 62.4 70.0
Lease assets 7 5.0 4.4 5.3
Deferred tax asset 0.8 4.6 0.8
209.6 177.8 209.9
Current assets
Inventories 38.5 45.5 41.1
Trade and other receivables 48.9 50.5 40.5
Lease assets 7 0.5 0.2 0.4
Income tax receivable - - 0.5
Cash and cash equivalents (excluding bank overdrafts) 7 13.0 22.1 15.1
100.9 118.3 97.6
Total assets 310.5 296.1 307.5
Liabilities
Current liabilities
Bank overdrafts 7 1.5 11.1 -
Lease liabilities 7 10.5 9.7 9.7
Trade and other payables 75.2 79.3 70.6
Deferred consideration 0.2 - 1.9
Income tax payable 0.6 0.9 -
Provisions 1.2 0.8 1.7
89.2 101.8 83.9
Non-current liabilities
Other interest-bearing loans and borrowings 7 24.8 14.7 29.8
Lease liabilities 7 82.8 74.5 82.9
Deferred and contingent consideration 7.6 1.1 7.6
Provisions 2.2 2.4 2.2
117.4 92.7 122.5
Total liabilities 206.6 194.5 206.4
Net assets 103.9 101.6 101.1
Equity
Ordinary share capital 0.1 0.1 0.1
Share premium 13.0 13.0 13.0
Merger reserve 25.5 25.5 25.5
Retained earnings 65.3 63.0 62.5
Total equity 103.9 101.6 101.1
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2023
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
Note £m £m £m
Balance at the start of the period 101.1 98.3 98.3
Profit for the period 6.2 6.4 8.4
Share-based payments expense 0.3 0.3 0.6
Dividends 6 (3.7) (3.4) (6.2)
Balance at the end of the period 103.9 101.6 101.1
Consolidated cash flow statement
for the six months ended 30 June 2023
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
Note £m £m £m
Cash flows from operating activities
Profit for the period 6.2 6.4 8.4
Adjustments for:
Depreciation, amortisation and impairment 9.4 7.8 20.1
Profit on disposal of fixed assets - - (0.4)
Net finance costs 3.2 2.4 5.0
Taxation 4 1.7 1.5 3.5
Share-based payments 0.3 0.3 0.6
20.8 18.4 37.2
Decrease/(Increase) in inventories 2.6 (4.5) 0.3
(Increase)/Decrease in trade and other receivables (8.4) (6.9) 5.4
Increase/(Decrease) in trade and other payables 4.6 7.3 (4.4)
(Decrease)/Increase in provisions (0.5) (0.4) 0.1
Pre-tax operating cash flow 19.1 13.9 38.6
Tax paid (0.6) (1.0) (2.2)
Net cash flow from operating activities 18.5 12.9 36.4
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired - - (17.8)
Payment of contingent and deferred consideration (1.7) - (0.3)
Acquisition of fixed assets (3.5) (3.6) (9.1)
Net cash flow from investing activities (5.2) (3.6) (27.2)
Cash flows from financing activities
Interest on borrowings (1.5) (0.7) (1.6)
Net (repayment)/drawdown of borrowings (5.0) (0.5) 14.5
Interest on lease liabilities (1.7) (1.6) (3.2)
Repayment of lease liabilities (5.0) (1.9) (7.4)
Dividends paid 6 (3.7) (3.4) (6.2)
Net cash flow from financing activities (16.9) (8.1) (3.9)
Net (decrease)/increase in cash and cash equivalents (3.6) 1.2 5.3
Cash and cash equivalents at the beginning of the period 15.1 9.8 9.8
Cash and cash equivalents at the end of the period 7 11.5 11.0 15.1
Notes to the condensed consolidated financial statements
for the six months ended 30 June 2023
1. Basis of preparation
These financial statements have been prepared on the basis of the accounting
policies expected to be adopted for the year ended 31 December 2023. These
are in accordance with the accounting policies as set out in the Group's
consolidated financial statements for the year ended 31 December 2022.
The recognition and measurement requirements of all UK-adopted International
Accounting Standards as required to be adopted by AIM listed companies have
been applied. AIM listed companies are not required to comply with IAS 34
'Interim Financial Reporting' and accordingly the Company has taken advantage
of this exemption.
The financial information in these financial statements does not constitute
statutory accounts for the six months ended 30 June 2023 and should be read in
conjunction with the Group's consolidated financial statements for the year
ended 31 December 2022 which were unqualified and did not contain statements
under sections 498(2) and (3) Companies Act 2006.
The condensed consolidated financial statements for the six months to 30 June
2023 have not been audited or reviewed by auditors pursuant to the Auditing
Practices Board guidance on Review of Interim Financial Information.
The condensed consolidated financial statements were approved by the Board of
Directors on 20 September 2023.
Going concern
These condensed financial statements have been prepared on the going concern
basis, as the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future.
As disclosed in the FY22 Annual Report and Accounts, the Directors prepared
cash flow forecasts for a period of at least 12 months from the date of
approval of those financial statements which indicated that, taking account of
reasonably possible downsides and the ongoing anticipated impact of input cost
inflation, labour availability and wider macroeconomic conditions on the
operations and its financial resources, the Group had sufficient funds to meet
its liabilities as they fell due. Actual revenues, profits and cash flows
during the 6 months to 30 June 2023 and current financial projections indicate
that the Group continues to have sufficient funds to meet its liabilities as
they fall due. As such, the Directors believe that it remains appropriate for
the Group to continue to adopt the going concern basis in preparing these
condensed financial statements.
The Group's balance sheet remains robust and it retains significant headroom
on committed banking facilities through to August 2026. The bank facilities
available to the Group comprise a £65 million Revolving Credit Facility and a
£10 million overdraft facility. At 30 June 2023 the Group had in excess of
£60 million of headroom on its banking facilities.
Based on the above, the Directors believe that it remains appropriate for the
Group to continue to adopt the going concern basis in preparing these
condensed financial statements.
2. Segmental reporting
Segmental information is presented in respect of the Group's reportable
operating segments in line with IFRS 8 'Operating Segments', which requires
segmental information to be disclosed on the same basis as it is viewed
internally by the Chief Operating Decision Maker.
Reportable segments Operations
Extrusion and moulding Extrusion and marketing of PVC and aluminium window profile systems, PVC
cellular roofline and cladding, rigid rainwater and drainage products as well
as PVC, Wood Plastic Composite ("WPC") and aluminium decking products.
Moulding of Glass Reinforced Plastic ("GRP") building components.
Re-processing of post-industrial and post-consumer PVC waste.
Fabrication and distribution Fabrication, installation and marketing of windows and doors, cellular
roofline, cladding, decking, rainwater and drainage products.
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£m £m £m
Revenue from external customers
Extrusion and moulding 113.4 111.3 221.1
Fabrication and distribution 66.6 66.7 134.7
Total 180.0 178.0 355.8
Segmental operating profit
Extrusion and moulding 10.6 8.0 16.8
Fabrication and distribution 3.1 4.0 7.5
Segmental operating profit before corporate and other costs 13.7 12.0 24.3
Corporate costs (1.8) (1.3) (2.8)
Underlying operating profit 11.9 10.7 21.5
Amortisation of acquired other intangible assets (0.5) (0.1) (0.3)
Share-based payments expense (0.3) (0.3) (0.6)
Other non-underlying items - - (3.7)
Operating profit 11.1 10.3 16.9
3. Underlying operating profit
'Underlying operating profit' is the key profit measure used by the Board to
assess the underlying financial performance of the operating divisions and the
Group as a whole. Items excluded from operating profit in arriving at
underlying operating profit are non-cash items such as amortisation of
acquired other intangible assets and share-based payments expense, and
significant one-off incomes or costs that are not part of the underlying
trading performance of the business.
Non-underlying items included within operating profit include:
6 months ended 6 months ended Year ended 31 December 2022
30 June 2023 30 June 2022 (audited)
(unaudited) (unaudited)
£m £m £m
Amortisation of acquired other intangible assets (0.5) (0.1) (0.3)
Share-based payments expense (0.3) (0.3) (0.6)
Acquisition-related costs - - (0.7)
Goodwill impairment - - (3.0)
Non-underlying expense (0.8) (0.4) (4.6)
Amortisation of acquired other intangible assets
£0.5 million (HY22: £0.1 million) amortisation of brand and customer
contract intangible assets acquired through business combinations. The
increased amortisation compared to HY22 is due to intangible assets relating
to the acquisitions of Poly-Pure and Mayfield in H2 2022.
Share-based payments expense
The share-based payment expense of £0.3 million (HY22: £0.3 million)
represents the IFRS 2: Share-based payments charge in respect of the Long-Term
Incentive Plan established in May 2021 for senior management and options under
the Group's Save As You Earn ("SAYE") scheme. During the period there was a
further issue of options under the Long-Term Incentive Plan.
4. Taxation
The tax charge for the six months to 30 June 2023 is based on the estimated
tax rate for the full year.
In the Budget held on 3 March 2021, the Government announced that the
corporation tax rate would increase to 25% from 1 April 2023. This change was
subsequently enacted on 10 June 2021. As at the 30 June 2023 balance sheet
date, the corporation tax rate was 25%. The net deferred tax asset has been
calculated based on this rate.
5. Earnings per share (EPS)
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December 2022
(unaudited)
(unaudited)
(audited)
pence pence pence
EPS
Basic 4.27 4.40 5.78
Diluted 4.20 4.35 5.71
6 months ended 6 months ended Year ended
30 June 2023 (unaudited) 30 June 2022 (unaudited) 31 December 2022
(audited)
No. No. No.
Number of shares
Weighted average number of shares used to calculate earnings per share
- Basic 145,313,382 145,305,993 145,305,993
- Diluted 147,553,941 147,008,926 147,138,638
6. Dividends
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
£m £m £m
2021 final dividend of 2.35 pence per share - 3.4 3.4
2022 interim dividend of 1.90 pence per share - - 2.8
2022 final dividend of 2.55 pence per share 3.7 - -
3.7 3.4 6.2
7. Net debt
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
£m £m £m
Cash and cash equivalents (excluding bank overdraft) 13.0 22.1 15.1
Bank overdraft (1.5) (11.1) -
Secured bank loans (24.8) (14.7) (29.8)
Lease assets 5.5 4.6 5.7
Lease liabilities (93.3) (84.2) (92.6)
Net debt (101.1) (83.3) (101.6)
Add back: lease liabilities 93.3 84.2 92.6
Deduct: lease assets (5.5) (4.6) (5.7)
Deduct: finance lease liabilities (2.8) (3.6) (3.2)
Covenant net debt (16.1) (7.3) (17.9)
In August 2023 the Group renewed its existing revolving credit facilities with
Barclays and HSBC on comparable terms. The new facility is a Sustainability
Linked Loan facility of £65 million for an initial period of 3 years with the
option to extend for a further two years. The sustainability metrics included
in the facility are based on the Group's energy intensity ratio and the amount
of material recycled. In combination with the £10 million overdraft facility,
the new borrowing facility maintains the Group's significant financial
headroom, which at 30 June 2023 was in excess of £60 million, supporting the
Group's strategic objectives.
8. Cautionary statement
This document contains certain forward-looking statements with respect of the
financial condition, results, operations and businesses of Epwin Group Plc.
Whilst these statements are made in good faith based on information available
at the time of approval, these statements and forecasts inherently involve
risk and uncertainty because they relate to events and depend on circumstances
that will occur in the future. There are a number of factors that could cause
the actual result or developments to differ materially from those expressed or
implied by these forward-looking statements and forecasts. Nothing in this
document should be construed as a profit forecast.
9. Copies of this half year report
Further copies of this half year report are available from the registered
office: Epwin Group Plc, 1b Stratford Court, Cranmore Boulevard, Solihull, B90
4QT or on the Company's website www.epwin.co.uk
(https://url.avanan.click/v2/___http:/www.epwin.co.uk___.YXAxZTpzaG9yZWNhcDphOm86NjRlYzEyYTg5NmEzM2QxZDFhNDVjYWNiYTZmMzhiYTE6Njo5NzFjOmQ0OGZjZmFlODliMWE2NzRlZjJiM2VhZGY3NzVhZWFlNGU4ODExODU3YTg1MGE2ZWU4YmIxNDI5NmJkZjQyYjU6cDpU)
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