REG - Epwin Group PLC - Final Results for the Year Ended 31 December 2022
04/04/2023 07:00
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RNS Number : 2302V Epwin Group PLC 04 April 2023
4(th) April 2023
This announcement contains inside information for the purposes of Regulation
11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310 (as
amended). Upon the publication of this announcement via a Regulatory
Information Service, this inside information is now considered to be in the
public domain.
Epwin Group Plc
Final results for the year ended 31 December 2022
Strong performance and strategic delivery
Epwin Group Plc (AIM: EPWN) ("Epwin" or the "Group"), 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 full year results for the year
ended 31 December 2022.
2022 Financial highlights
£m
2022 2021
Revenue 355.8 329.6
Underlying operating profit (1) 21.5 18.5
Underlying operating margin (1) 6.0% 5.6%
Statutory operating profit 16.9 17.7
Adjusted profit before tax (1) 16.5 13.7
Profit before tax 11.9 12.9
Basic EPS 5.78p 8.61p
Adjusted EPS(1) 8.95p 9.16p
Dividend per share for the year 4.45p 4.10p
Pre-tax operating cash flow 38.6 34.9
Covenant net debt (2) 17.9 9.4
Covenant net debt to adjusted EBITDA (2) 0.6x 0.4x
Underlying operating cash conversion (3) 180% 189%
(1) Adjusted for amortisation of acquired other intangible assets, share-based
payments expense 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 performance, demonstrating continued resilience of
core products and markets:
o Record revenues of £355.8 million, growth of 8% on a strong 2021
comparative
o Underlying operating profit increased by 16% to £21.5 million (2021:
£18.5 million), ahead of pre-pandemic levels
o Strong cash generation with pre-tax operating cash inflow of £38.6
million (2021: £34.9 million)
· Robust financial position:
o Covenant net debt at year end of £17.9 million (2021: £9.4 million),
better than expected, after net acquisition cash consideration of £17.8
million in 2022
o Covenant net debt 0.6x adjusted EBITDA, well within covenant limits
o Significant headroom on banking facilities, in excess of £60 million, to
support the Group's strategy
· Dividend per share increased by 8.5%:
o Proposed final dividend of 2.55 pence per share, resulting in a total
dividend for 2022 of 4.45 pence per share (2021: 4.10 pence per share)
Operational and strategic headlines
· Strong progress delivering on our strategy:
o Value-enhancing acquisitions:
§ Acquired Poly-Pure, a UK-based materials recycler and re-processer
providing a strong strategic fit whilst enhancing our sustainability
credentials
§ Acquired Mayfield, expanding the geographical coverage and product range
for our decking operations and outdoor products range
o New product development:
§ Aluminium window system and PVC decking sales building momentum, with
demand levels for these products ahead of management's expectations
§ Further investment in new tooling to increase re-processed material usage
and enhance sustainable materials capabilities
o Operational improvement:
§ Investment to increase aluminium finishing plant capacity completed
§ Relocation of inventories and logistics operations to the new Telford
facility progressing
o Progress continues on ESG framework and targets, building on inherent
environmental and sustainability credentials of the Group's energy efficient,
low maintenance and recyclable products
· Actively managing operational and inflationary challenges:
o Continuing to work with customers to pass on input cost inflation
sustainably
o Labour availability and wage inflation being managed through measures to
attract and retain the best people
Current trading and outlook
· Current trading is in line with the Board's expectations, with 2023
revenue to date ahead of a strong H1 2022 comparative
· Poly-Pure and Mayfield integration on-track
· Core businesses are operating well, with Window Systems resolving its
operational challenges and continuing to address margin pressures
· Positive medium and long-term RMI market drivers
o Poorly maintained and ageing housing stock, underinvested social housing
and a shortage of housing supply
o Environmental concerns driving government policy focus on decarbonising
the UK housing stock and improving the energy efficiency of homes
· Healthy pipeline of further M&A opportunities
Jon Bednall, CEO of Epwin, commented:
"I am grateful once again to all of the Group's employees who worked hard
together to deal with the challenges of 2022 and deliver a strong overall
performance.
Our trading performance remained robust through 2022, delivering operating
profit above pre-pandemic levels. We made good strategic progress, and I am
delighted to welcome the Poly-Pure and Mayfield businesses to the Group, both
of which continue to broaden the Group's product range, materials capabilities
and sustainability credentials. I am equally delighted to welcome an increased
number of apprentices to the Group, along with our first graduate programme
intake.
We have begun the new financial year well. Whilst cognisant of the
macroeconomic and market headwinds, the Group remains confident of delivering
a further year of strategic and operational progress in 2023, supported by the
strength of the medium and long-term drivers of our markets."
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 Communications 0203 128 8168
Reg Hoare / Charlie Barker / Pauline Guenot epwin@mhpc.com (mailto:epwin@mhpc.com)
Forthcoming dates:
Ex-dividend date 11 May 2023
Dividend record date 12 May 2023
Annual General Meeting 23 May 2023
Dividend payment date 5 June 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 www.epwin.co.uk/investors/
(http://www.epwin.co.uk/investors/)
Chairman's Statement
Robust performance
Trading remained robust through to the end of the year following a strong
first half, with revenues increasing by 8% to £355.8 million against a strong
comparative (2021: £329.6 million), predominantly driven by pricing actions
to recover the significant sector-wide cost inflation as well as acquisitions
completed in 2022, which contributed revenues of £3.8 million in the year.
After a period of unprecedented demand, following the post-pandemic boom in
RMI spending and high levels of activity in the new build market, there were
signs of demand softening in the second half of the year. The Group has
continued to navigate the well-publicised issues of labour, energy and raw
material cost inflation to deliver an underlying operating profit in line with
expectations.
On behalf of the Board and our shareholders, I would again like to thank our
hard-working employees for their efforts and the commitment they have
continued to demonstrate to the Group during the year, whilst welcoming the
employees of Poly-Pure and Mayfield to the Epwin Group. In recognition of the
impact that the exceptional energy cost inflation has had on household
budgets, we were pleased to be able to make a contribution to help through the
award of a cost of living support payment to all employees with the exception
of senior management.
Macroeconomic environment
Consistent with other industries, inflation and the impact of the rising cost
of living have been the dominant factors during 2022. The Group experienced
unprecedented raw material cost inflation, in particular in relation to
energy, following the invasion of Ukraine, and to PVC resin, which reached an
all-time high cost in April. The Group continues to pass on cost increases to
its customer base through a mixture of price increases and surcharges where
needed, whilst being mindful of the impact on our customers' operations. There
are signs that inflation is now starting to ease. As well as raw material cost
inflation, further emerging themes during the course of the year have been
wage inflation and employee retention, due to high levels of employment in the
UK generally and, in particular, in many of our key manufacturing locations,
as well as the cost of living and the impact this is having on our employees.
Measures continue to be introduced to improve both employee retention and
recruitment, to manage the near-term impacts of labour availability and
increasing market pay rates.
Strategic progress
The Group's strategy remains focused on extending our product portfolio,
technical capability and channels to market, both through investment in new
products and acquisitions, operational improvement, cross-selling across our
customer base, and leveraging the recognition and channels of our brands for
the benefit of the Group.
Value-enhancing acquisitions
The Group continued to implement its strategy of pursuing selective,
value-enhancing acquisitions that help us to achieve our broader objectives,
with two further acquisitions undertaken in 2022.
On 9 September 2022, the Group acquired Poly-Pure Limited ("Poly-Pure"), a
leading UK materials re-processor, recycling post-consumer and post-industrial
PVC building materials, including PVC window frames. The acquisition, for an
initial cash consideration, net of cash acquired, of £14.9 million and
further earnout of up to £15 million, is a major investment in the Group's
recycling capabilities and a strong strategic fit with the Group.
On 1 December 2022, the Group acquired the Mayfield Group of companies
("Mayfield"), for an initial cash consideration, net of cash acquired, of
£2.9 million. The main trading entity in the Group is Hampton Decking
Limited. Mayfield supplies high-quality decking and related products to the
holiday park industry primarily under the Mayfield name. The acquisition
further extends the Group's operations in these markets, which have seen good
growth over recent years, offering the opportunity for operational synergies
and increased cross-selling of the Group's products.
Progress with site consolidation and rationalisation programme
The relocation of inventories and logistics operations to the Group's
purpose-built Telford facilities is progressing. The Group continues to
explore further opportunities for consolidation and rationalisation of its
activities. During the year, the Group commenced projects to consolidate
decking production into a single site and to consolidate IT systems across our
distribution network.
Product and materials development
Strong demand continues for the Group's newest products, in particular the
aluminium window system, Stellar®, and the PVC decking product, Dekboard®,
which have seen demand ahead of management's expectations. We continue to
upgrade and improve our existing products, selectively and as technology
advances, to improve their functionality and relevance. In 2022 we have
further increased the capacity of our aluminium finishing plant.
The Group's priority for 2023 is to increase the utilisation of recycled
materials across our product range, particularly in our PVC extrusion
operations. Capital expenditure projects, commenced in 2021, and the
acquisition of Poly-Pure during the year, which extends the Group's in-house
recycling capabilities and ability to source recycled material, mean the Group
is well placed to deliver on this during 2023.
ESG
The Group continued to make progress on our sustainability agenda during the
year to bolster our already strong inherent sustainability credentials. Our
ESG reporting has continued to develop, including presenting an integrated
Sustainability Report for the second year. We have been working with a third
party to establish a carbon footprint for the Group, including Scope 3
emissions, and have begun to take actions based on the initial results.
Capital investment to develop and increase recycling capabilities continued
during the year. The acquisition of Poly-Pure during the period also
represents a significant investment in our materials re-processing
capabilities.
Other notable progress during the period included:
· GHG emissions reduced per £m of gross revenue by 15% from prior year
· 87% of revenue from products that are widely recyclable
· Cost of living support payment to employees, excluding senior
management
· Fair Tax Mark retained
· Changes to Board composition during the year, now more Non-Executive
Directors than Executive Directors
Board changes
As reported in 2021, we were pleased to welcome Shaun Smith to the board at
the beginning of January 2022, establishing a balance between Non-Executive
and Executive Directors. Following the retirement of Mike O'Leary in March
2022, we commenced a process to recruit an additional Non-Executive Director,
resulting in the appointment of Stephen Harrison to the Board in November
2022. Stephen brings a wealth of industry and commercial experience to the
Board. He is currently CEO of Forterra plc, with plans to step down from that
role during the first half of 2023. As part of our ongoing review of Board
composition and in accordance with his retirement plan, Shaun Hanrahan stepped
down as Executive Director in June 2022. As at 31 December 2022, the Board
comprised two Executive Directors and three Non-Executive Directors.
Corporate governance and AGM
The Board of Directors, including myself as Chairman, acknowledges the
importance of the ten principles set out in the QCA Code and details of our
compliance with the Code can be found in the Corporate Governance section of
this Annual Report as well as on the corporate website.
The Annual General Meeting ("AGM") will be held at 1b Stratford Court,
Cranmore Boulevard, Solihull, B90 4QT on Tuesday 23 May 2023 at 11.00 am.
Results
Revenues increased by 8% to £355.8 million (2021: £329.6 million) driven
predominantly by pricing actions to recover the significant cost inflation in
the sector, as well as through acquisitions completed in 2022, which
contributed revenues of £3.8 million in the year. Underlying operating profit
increased to £21.5 million compared to £18.5 million in 2021, ahead of
pre-pandemic levels. Statutory operating profit was £16.9 million (2021:
£17.7 million) due to the impact of non-underlying acquisition-related costs
and a goodwill impairment charge.
Cash generation continued to be strong, with pre-tax operating cash flow of
£38.6 million (2021: £34.9 million). The Group finished the year with
covenant net debt of £17.9 million (2021: £9.4 million), ahead of
expectations given the cash cost of in-year acquisitions, representing 0.6x
adjusted EBITDA and well within covenant levels.
Dividends
The Board is recommending a final dividend of 2.55 pence per share (2021: 2.35
pence per share) to be paid on 5 June 2023 to shareholders on the register on
12 May 2023. Along with the interim dividend of 1.9 pence per ordinary share,
paid in October 2022, this takes the full year dividend to 4.45 pence per
ordinary share (2021: 4.10 pence per share), in line with the Board's policy
of a progressive dividend that is approximately twice covered by adjusted
profit after tax.
Summary and outlook
The Group's trading performance during 2022 has been robust and it has
continued to make good strategic progress, increasing revenue and underlying
operating profit in challenging operating conditions and against strong
comparatives.
The Board is cognisant of the uncertain macroeconomic environment and its
effect on our markets. The impact of the rising cost of living on consumer
confidence and spending, together with signs of a slowdown in the housing
market, have contributed to the Construction Product Association forecasting
declines in the RMI and new build markets for 2023. However, the Group's broad
product range, diverse customer base and operations, longstanding supplier
relationships and strong balance sheet provide a large measure of resilience
against any short-term changes in conditions.
Our strategy continues to be based on operational improvement, broadening the
product portfolio and capabilities, value-enhancing acquisitions,
cross-selling and market share growth in key sectors to build a sustainable
and resilient business.
The medium to long-term drivers of the market remain positive, with the UK
still facing a shortage of new and affordable housing, an ageing and
underinvested housing stock and increasing concern about the quality of social
housing. Environmental concerns are driving legislation and initiatives that
will require improvements to homes on a larger scale than simply essential
maintenance, with the need to decarbonise the UK housing stock and improve the
energy efficiency of homes growing in urgency given the UK's net zero
commitments.
We remain confident of executing our strategy, supported by the strength of
the medium and long-term drivers of our markets, despite the current
macroeconomic outlook.
Andrew Eastgate
Chairman
4 April 2023
Business review
Strategic and operational review
The Group continued to make good progress against our strategic objectives in
2022, while delivering a robust trading performance. The Group's focus
continues to be on operational efficiency, product and materials development,
identifying and completing value-enhancing acquisitions and building on the
Group's inherent ESG credentials. Despite well-documented inflationary
challenges and the resulting impact on consumer confidence and real incomes,
trading conditions remained robust during 2022.
The Group performed well, with revenues of £355.8 million, 8% ahead of a
strong 2021 comparative period that included the post-lockdown rapid recovery
of the RMI market, boosted by strong household savings and prioritisation of
home improvement expenditure in the absence of other big ticket spending
options.
Revenue growth was predominantly driven by selling price increases to recover
the continuing impact of inflation. Bolt-on acquisitions completed during 2021
and 2022 also contributed to the higher revenues. This was offset by a slight
decline in volumes from the exceptional levels of demand in 2021 as the market
showed signs of moderation through the second half of the year, as cost of
living challenges began to impact consumer confidence and spending. The Group
continued to experience some deferments to social housing contract start
dates. Due to the high levels of demand in 2021 and the first half of 2022,
combined with tight supply chains, we also exited certain customers and
contracts, where margins were below acceptable levels and we had been unable
to pass on adequate material price inflation, as we strive to allocate
resource effectively and strike the right balance between price and volume.
Raw material costs continued to increase during the first half of the year,
with PVC resin hitting an all-time high in April. Although this has since
plateaued, PVC prices remain significantly above pre-pandemic levels.
Inflation, including wage inflation, continues to put pressure on overheads
and the Group has been working with its customers to pass on these heightened
costs appropriately through price increases and surcharges. Labour retention
and recruitment remain challenges and measures have been put in place to
retain and attract the best people. During the year, we welcomed an increased
number of apprentices to the Group, along with our first graduate programme
cohort.
Underlying operating profit increased by 16% to £21.5 million, as price
increases, surcharges and other actions taken to mitigate the impact of input
cost inflation as well as efficiency improvements in manufacturing and
logistics began to drive a recovery in margin towards pre-pandemic levels.
Our Extrusion and Moulding segment, which has been particularly impacted by
raw material cost inflation, has seen improved margins due to pricing actions
to recover inflation. Trading conditions continued to be robust, with some
indications of softening demand in the second half of the year but also signs
that inflation may be easing. The Group continues to carefully manage its cost
base in the face of uncertain macroeconomic and market conditions, with
investment in strategic priorities protected.
The Fabrication and Distribution segment continued to perform well against
strong 2021 comparatives with recent acquisitions, which extended the
geographical coverage of the Group's distribution network, contributing in
line with expectations. Margins were impacted slightly as the material price
increases experienced by Extrusion and Moulding were passed on. The Group has
identified further opportunities for margin improvement, product synergies and
cross-selling within the segment, with the commencement of a project to
consolidate IT systems across the distribution network and a review of any
further opportunities for competitor product to be supplanted with the Group's
own ranges.
Our new build-facing operations continued to benefit from high levels of
activity in the housing market and have had a strong start to 2023, despite
housebuilders slowing the build of new homes. These operations have been
particularly affected by labour challenges and, as reported elsewhere, the
Group is taking action to support employee satisfaction and retention.
Issues around deferment of contract start dates, which we reported in 2021
were impacting our social housing-facing businesses, eased during the year.
The condition of social housing is becoming increasingly high profile, as the
country struggles to build enough homes and the condition of the existing
housing stock deteriorates, which could drive increased repair and maintenance
activity, albeit potentially constrained by challenging local authority
budgets.
Strategic progress
Value-enhancing acquisitions
The Group continued to prioritise the completion of selective, value-enhancing
acquisitions that help us to achieve our strategic objectives, with two
further acquisitions undertaken in 2022.
On 9 September 2022, the Group acquired Poly-Pure Limited ("Poly-Pure"), a
leading UK materials re-processor, recycling post-consumer and post-industrial
PVC building materials, including PVC window frames. The acquisition, for an
initial cash consideration, net of cash acquired, of £14.9 million and
further earnout capped in aggregate at £15 million, which, if achieved, would
equate to a 31 December 2025 adjusted EBITDA multiple after synergies of 3x.
The acquisition represents a major investment in the Group's recycling
capabilities and is a strong strategic fit with the Group:
· Growth opportunity - Poly-Pure has generated strong levels of revenue
and EBITDA growth since 2018, with a diverse and growing customer base and
with a programme to expand its processing capacity. There is increasing
industry focus on improving the use of recycled materials in manufacturing and
we believe there are a range of opportunities for Poly-Pure to continue to
execute its growth plan
· Cost synergies - Poly-Pure has the ability to provide the Group with
a further, cost effective, supply of recycled PVC, with the potential for
operational efficiencies and cost benefits
· Material sourcing - Poly-Pure has strong links within the industry
and a proven ability to source post-industrial and post-consumer recyclable
building plastics materials. The greater ability to re-process waste materials
provides Epwin with an additional source of raw material
· Value-enhancing acquisition - the acquisition helps the Group to
achieve its operational and sustainability objectives and is expected to be
margin accretive at the adjusted EBITDA level and immediately earnings
enhancing
· Sustainability - the acquisition aligns strongly with our
sustainability agenda; enabling us to contribute to a circular economy through
the recycling of post-consumer waste and improve the already strong
environmental credentials of our products through incorporating a greater
proportion of recycled PVC in our manufacturing process over time
The Group's focus for 2023 will be integrating Poly-Pure into the wider Group,
in particular ensuring the Group's recyclate requirements are serviced and
maximised.
On 1 December 2022, the Group acquired the Mayfield Group of companies
("Mayfield"), for an initial cash consideration, net of cash acquired, of
£2.9 million. The main trading entity is Hampton Decking Limited. Mayfield
supplies high-quality decking and related products to the holiday park
industry primarily under the Mayfield name. The acquisition further extends
the Group's operations in these markets, which have seen good growth over
recent years, offering the opportunity for synergies and increased
cross-selling of the Group's products.
New product development
We experienced strong demand for the Group's newest products, in particular
the aluminium window system, Stellar®, and the PVC decking product,
Dekboard®, which have continued to see demand ahead of management's
expectations.
We continue to upgrade and improve our existing products, where needed, to
improve their functionality and to ensure they meet regulatory requirements.
During the year, we developed a capped decking product which improves
durability and slip resistance and expanded the range of colours available for
our PVC window systems. In 2021, we reported that, reflecting both the need to
operate in an ever more environmentally sustainable manner and the current
highly inflated cost of raw materials, the Group commenced investment to
increase its ability to incorporate recycled materials in its PVC extrusion
operations. The Group has started to bring this new machinery on line during
the year, with further investment planned for 2023.
The acquisition of Poly-Pure during the year extends the Group's in-house
recycling capabilities and ability to source recycled material, which in
addition to our capital expenditure, will enable the Group to steadily
increase the proportion of recycled material in its products over the coming
years.
Progress with site consolidation and rationalisation programme
In 2021 it was reported that construction work on the purpose-built facilities
in Telford, to consolidate Window Systems warehousing and finishing
operations, had been successfully completed on time and on budget. The
relocation of inventories and logistics operations to the new facility is
progressing and, when complete, will allow the Group to start realising the
full consolidation and synergistic benefits. In 2022 the Group also commenced
a project to consolidate its decking production into a single site, realising
both operational and investment synergies, which is expected to complete
during the year.
Our Fabrication and Distribution segment has grown significantly through
acquisition in recent years and the Group continues to identify opportunities
for further synergies, particularly across our distribution network. We have
commenced a project to consolidate IT systems across our distribution network,
allowing for improved information flow, more streamlined reporting and
enabling key performance indicators to be monitored and compared across the
distribution businesses more readily. Alongside this we are investing in
upgrading and refurbishing our distribution outlets, to ensure they are
appealing to customers and to maximise their performance, with 36 branches
upgraded during the year and further redevelopments planned for 2023.
Health and safety
As a manufacturing business the Group is committed to ensuring a safe, clean
and healthy working environment for all its employees and promotes continuous
improvement in health and safety standards across all operations. Our
operational KPIs include health and safety metrics. There has been a
significant reduction in reportable injuries compared to the prior period,
which is a positive development, albeit the occurrence of any injury is always
disappointing. There has also been a slight increase in accident frequency
during the period. We believe this is driven primarily by increased reporting
of minor accidents as employees are encouraged to report all incidents, even
when minor, to ensure we have the most accurate picture possible and to
promote a culture where health and safety is continually improving. The KPIs
continue to be monitored closely by the main and divisional Boards to ensure
that appropriate and timely action is taken to maintain a safe operating
environment.
ESG
The Group continues to develop its reporting in relation to ESG as a matter of
increasing importance to investors and other key stakeholders. For the second
year, we have presented an integrated Sustainability Report bringing together
all reporting relevant to ESG issues. We continue to identify opportunities to
take action on carbon emissions and improve our resource and energy
efficiency, support our hard-working employees and ensure we maintain the
highest standards of governance.
Market overview and outlook
Trading conditions remained robust in 2022, with some signs of demand
moderation seen in the second half of the year, albeit from the historically
high levels seen in the second half of 2020 and throughout 2021.
Private housing RMI
Market expectations
· Private housing RMI is now the third largest construction sector
having reached historic high levels after the post-pandemic boom in 2021
· The Construction Products Association ("CPA") Industry Forecasts
(published January 2023) suggest a fall of 9.0% in 2023 before stabilising in
2024, driven by falling disposable incomes and consumer spending, particularly
in the first half, and reduced activity in the housing market
Impact on the Group
· The short-term impact is likely to be detrimental to the Group, with
declining consumer confidence leading to reduced demand, however this is
already incorporated into our forecasts and plans
· Non-essential, smaller discretionary improvements are likely to be
most impacted. A majority of RMI activity relates to essential repairs that
cannot be delayed or maintenance work that can be postponed but not
indefinitely, providing a level of base activity for the Group
· Uncertainty around the length and depth of any potential economic
downturn, with signs consumer confidence may be stabilising and employment
levels remaining high
Response and outlook
· Proactive cost control in face of economic headwinds, including
careful management of stock levels and working capital to ensure
responsiveness
· Strong market position with high-quality, energy efficient products
and a national distribution network to service the market
· Continued investment in new product development to ensure our product
offer remains attractive to customers
· Cross-selling and business development, to identify further
opportunities to supplant competitor product in our distribution network
Private new build housing
Market expectations
· After two very strong years for housebuilders, the CPA expects
completions to fall by 11% in 2023 and 2% in 2024, driven by the end of Help
to Buy and other government schemes, house price contraction and increased
mortgage rates
Impact on the Group
· In the short term there is likely to be a contraction in demand for
the Group's new build-facing businesses, with several national housebuilders
reporting that, while they are forward sold into Q2 2023, they are now
experiencing a slowdown in orders and sales
· Housebuilders are likely to slow their build rate, focusing on
completing existing developments and be more selective about land acquisition
given the uncertainty
· Several of the indicators of housing market activity, such as
property transactions, are lagging indicators as mortgage deals are agreed in
advance. Therefore, the impact is not yet fully known and may be less severe
than feared
Response and outlook
· Our new build-facing businesses have had a strong start to the year,
with healthy order books to the end of H1
· There is more uncertainty around levels of demand during H2, with
management closely monitoring and ready to respond through disciplined cost
management and operational efficiencies
· Medium and long-term drivers remain strong as the chronic undersupply
of housing continues, with shortage of affordable housing and support for
first-time buyers remaining high profile politically
· Opportunities for our new build-facing businesses to sell into other
markets
Public housing RMI and new build
Market expectations
· Social housing RMI considered a priority, with providers focusing on
addressing legacy safety issues, increasingly high-profile quality issues and
decarbonisation of existing stock
· Growth limited by cost inflation and financially constrained local
authorities, CPA forecasting public housing RMI to remain flat in 2023 before
returning to growth in 2024
Impact on the Group
· Indicators remain that local authorities are prioritising cladding
remediation activity and other fire safety work at the expense of other
non-urgent general works on existing properties that can be delayed. In 2020
and 2021, our social housing-facing window fabricators saw the deferment of
some contract start dates, although this has eased during the year
· Issues relating to the quality of housing built and maintained by
social landlords, including damp, boiler faults and general disrepair are
becoming increasingly high profile. This could result in housing associations
and local authorities diverting more spending to basic repairs and
maintenance, which would benefit the Group
Response and outlook
· Pricing actions to recover input cost inflation provides tailwind
into 2023
· Long-term drivers remain strong, with underinvestment in the social
housing stock and concerns about quality of housing becoming higher profile
· ESG matters of particular importance to social housing providers and
local authorities, Epwin is well placed with strong sustainability credentials
Summary
The Group is cognisant of the macroeconomic headwinds of inflation, cost of
living challenges, house price softening and increased mortgage rates, with
the potential impact these have on consumer confidence. These headwinds
suggest some short-term uncertainty. However, early indications are that the
depth and length of any economic downturn may not be as severe as initially
forecast. Indeed, current trading is in line with the Board's expectations
with 2023 revenue to date ahead of a strong 2022 comparative. Core businesses
are operating well, with Window Systems resolving its operational challenges
and continuing to address margin pressures.
The medium to long-term underlying market drivers remain strong:
· The UK's existing housing stock is ageing and underinvested in recent
years, resulting in an increasing backlog of properties that will require
essential repairs and maintenance
· An increasing UK population and shortage of suitable new housing
· Increased demand for UK-based holidays, expected to drive growth in
the holiday park sector
· Environmental concerns that will continue to drive legislation and
initiatives requiring improvements, including in respect of energy efficiency,
to homes on a larger scale than just essential maintenance
· Changing structural trends with hybrid working increasing time spent
at home and supporting spend on home improvement, including on gardens and
outdoor spaces
Jonathan Bednall
Chief Executive Officer
4 April 2023
Financial Review
Total revenue for the year ended 31 December 2022 was £355.8 million (2021:
£329.6 million), 8% ahead of a strong comparative period that included the
rapid recovery of the RMI market following the pandemic and saw record levels
of activity across the construction industry. The increase in revenue over
2021 was largely driven by selling price increases to recover further
significant cost inflation in the first half of the year. As a result of these
significant levels of demand, as well as tight supply chains, during the
period we exited certain customers and contracts where the margins were below
acceptable levels and we had been unable to pass on adequate material price
inflation, as we strive to allocate resource effectively and strike the right
balance between price and volume.
The full-year impact of bolt-on acquisitions completed during 2021 also
contributed to the higher revenues, as well as the in-year acquisitions of
Poly-Pure and Mayfield which contributed £3.8 million of revenue. This was
partially offset by a decline in volumes as the market began to moderate
towards the middle of the year, with inflation and the rising cost of living
starting to impact consumer confidence and spending.
Raw material costs continued to increase during the first half of the year,
with PVC resin hitting an all-time high in April, with energy and labour costs
also increasing significantly. Although there are signs that inflation is
easing, the rate of inflation remains high. The Group continues to work with
its customers to pass on these heightened costs appropriately through price
increases and surcharges.
Underlying operating profit increased by 16% to £21.5 million in the period
(2021: £18.5 million), as we continue to recover our margin towards
pre-pandemic levels, offset by inflationary pressures on overheads. Operating
profit for the year was £16.9 million (2021: £17.7 million) impacted by
increased non-underlying costs primarily related to in-year acquisitions and
goodwill impairment.
Key financials Year ended Year ended
31 December 2022 31 December 2021
£m £m
Revenue 355.8 329.6
Underlying operating profit 21.5 18.5
Amortisation of acquired other intangible assets (0.3) (0.3)
Share-based payments expense (0.6) (0.4)
Acquisition-related costs (0.7) (0.1)
Goodwill impairment (3.0) -
Operating profit 16.9 17.7
Underlying operating margin 6.0% 5.6%
Operating margin 4.7% 5.4%
Year ended
Year ended 31 December 2021
31 December 2022
Reportable segments
£m £m
Revenue
Extrusion and Moulding 221.1 202.3
Fabrication and Distribution 134.7 127.3
Total 355.8 329.6
Underlying segmental operating profit
Extrusion and Moulding 16.8 12.2
Fabrication and Distribution 7.5 8.4
Underlying segmental operating profit before corporate costs 24.3 20.6
Corporate costs (2.8) (2.1)
Underlying operating profit 21.5 18.5
Non-underlying items (4.6) (0.8)
Operating profit 16.9 17.7
Extrusion and Moulding
· Revenue increased by 9.3% in comparison to 2021, predominantly due to
the continued successful implementation of selling price increases and
surcharges to recover material cost inflation, of which 1.7% is due to the
contribution of Poly-Pure during the period following the acquisition in
September
· Steps taken by the business, during 2021 and continuing in 2022, on
pricing and operational efficiency have resulted in an improvement in
underlying operating margin to 7.6% (2021: 6.0%); albeit not yet to
pre-pandemic levels
Fabrication and Distribution
· Revenue increased by 5.8% in comparison to a strong 2021,
predominantly due to selling price increases with a small contribution from
Mayfield, which was acquired in December 2022
· Underlying Fabrication and Distribution segmental operating profit
was down slightly compared to an exceptionally strong 2021 due to the impact
of continued input cost inflation passed on by the Extrusion and Moulding
segment, as well as external suppliers, and reflecting the impact of the
softening in RMI demand seen towards the end of the year
Corporate costs
· Corporate costs increased in comparison to 2021, primarily due to
additional investment in the Group's cybersecurity capabilities and training
and measures to support employee recruitment and retention, including a cost
of living support payment to Groupwide employees and the implementation of a
graduate scheme
Non-underlying items
To assist users of the financial statements, the Group reports certain
performance measures as underlying as it believes they provide better
information on the ongoing trading performance of the business. 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 as well as significant one-off incomes or costs that are not
part of the underlying trading performance of the business.
Non-underlying items excluded from operating profit in arriving at underlying
operating profit include:
Year ended Year ended
31 December 31 December
2022 2021
£m £m
Amortisation of acquired other intangible assets (0.3) (0.3)
Share-based payments expense (0.6) (0.4)
Acquisition-related costs (0.7) (0.1)
Goodwill impairment (3.0) -
Non-underlying items (4.6) (0.8)
i. Amortisation of acquired other intangible assets
Amortisation of £0.3 million was charged
during the year (2021: £0.3 million), relating to the brand and customer
relationship intangible assets recognised on acquisitions.
ii. Share-based payments expense
Share-based payments include the IFRS 2:
Share-based payments charge in respect of the Long-Term Incentive Plan
("LTIP") and Save As You Earn ("SAYE") scheme. There were further issues of
options under both schemes during the period.
iii. Acquisition-related costs
Acquisition-related costs of £0.7 million
(2021: £0.1 million) are the legal and professional fees associated with
the acquisitions of Poly-Pure and Mayfield during the year.
iv. Goodwill impairment
The goodwill impairment charge arose in
relation to the Ecodek CGU. Changes to regulations relating to the fire
resistance of materials used on the exterior of high-rise buildings, following
the Grenfell Tower fire in 2017, resulted in the
business losing a core market for its wood-plastic composite decking.
Since then, increased uncertainty regarding future cash flows has
resulted in a reduction in the value in use of the
CGU. This has resulted in a partial impairment charge of £3.0 million in the
year to reflect the fact that the discounted present value
of future cash flows did not support the full carrying value of the
asset.
Cash flow Year ended Year ended
31 December 31 December
2022 2021
£m £m
Pre-tax operating cash flow 38.6 34.9
Tax paid (2.2) (0.5)
Acquisitions, net of cash acquired (17.8) (5.3)
Payment of deferred consideration (0.3) -
Net capital expenditure (9.1) (5.4)
Net site development cash flow - 4.8
Interest on borrowings (1.6) (1.5)
Net drawdown/(repayment) of borrowings 14.5 (2.1)
Lease payments (10.6) (13.4)
Issue/purchase of shares - 0.1
Dividends (6.2) (4.0)
Increase in cash and cash equivalents 5.3 7.6
Opening cash and cash equivalents 9.8 2.2
Closing cash and cash equivalents 15.1 9.8
Borrowings (29.8) (15.1)
Lease assets 5.7 2.2
Lease liabilities (92.6) (81.6)
Closing net debt (101.6) (84.7)
Covenant net debt* (17.9) (9.4)
(*) Covenant net debt represents a pre-IFRS 16 measure
Covenant net debt increased to £17.9 million as at 31 December 2022 (2021:
£9.4 million), representing a covenant net debt to adjusted EBITDA ratio of
0.6x, as a result of the use of the Group's existing facilities to fund the
initial cash cost of acquisitions of £17.8 million, offset by strong cash
generation during the period. The Group comfortably complied with covenants at
all times during the year. Pre-tax operating cash flow increased by 11% to
£38.6 million through improved profitability and working capital management.
The movement in working capital compared to 2021 was driven by strong cash
collection resulting in a lower level of trade receivables, partially offset
by a decrease in trade payables.
Tax paid
Tax payments during the year of £2.2 million (2021: £0.5 million) increased
due to the higher level of profits achieved.
Net capital expenditure
Net capital expenditure increased to £9.1 million as the Group continues to
invest in line with its strategic objectives of operational improvement,
efficiency and sustainability alongside ongoing replacement of plant and
machinery as needed. The higher level of investment is as a result of lower
levels of capital expenditure in recent years, as well as the long lead times
on plant due to the impact of the pandemic on supply chains.
Lease payments
Lease payments of £10.6 million were £2.8 million lower than 2021 (2021:
£13.4 million) as a result of a lease incentive received in relation to a
lease renewal in the period.
Financing
The Group has banking facilities on a two bank, syndicated basis with Barclays
and HSBC through to June 2024. The facilities comprise a revolving credit
facility of £65.0 million and an overdraft of £10.0 million. The Group has
in excess of £60 million headroom at 31 December 2022 providing the Group
with the facilities to pursue its strategy.
Net interest paid for the period comprises £1.6 million interest payments on
borrowings (2021: £1.5 million).
Acquisitions
The acquisition of Poly-Pure and Mayfield during the period resulted in the
recognition of £20.7 million of goodwill and £8.7 million of deferred and
contingent consideration, of which £0.3 million was settled before the year
end, see note 3 for further detail.
Christopher Empson
Group Finance Director
4 April 2023
Consolidated Income Statement and Other Comprehensive Income
for the year ended 31 December 2022
2022 2021
Note £m £m
Revenue 2 355.8 329.6
Cost of sales (250.5) (236.9)
Gross profit 105.3 92.7
Distribution expenses (40.1) (38.7)
Administrative expenses (48.3) (36.3)
Underlying operating profit 21.5 18.5
Amortisation of acquired other intangible assets 4 (0.3) (0.3)
Share-based payments expense 4 (0.6) (0.4)
Acquisition-related costs 4 (0.7) (0.1)
Goodwill impairment 4 (3.0) -
Operating profit 16.9 17.7
Finance costs 5 (5.0) (4.8)
Profit before tax 11.9 12.9
Taxation 6 (3.5) (0.4)
Profit for the year and total comprehensive income 8.4 12.5
Earnings per share pence pence
Basic 7 5.78 8.61
Diluted 7 5.71 8.52
Consolidated Balance Sheet
as at 31 December 2022
Note 2022 2021
£m £m
Assets
Non-current assets
Goodwill 9 93.2 75.5
Other intangible assets 6.3 2.4
Property, plant and equipment 34.3 28.5
Right of use assets 70.0 64.0
Lease assets 5.3 2.0
Deferred tax 0.8 4.6
209.9 177.0
Current assets
Inventories 41.1 41.0
Trade and other receivables 40.5 43.6
Lease assets 0.4 0.2
Income tax receivable 0.5 -
Cash and cash equivalents 15.1 9.8
97.6 94.6
Total assets 307.5 271.6
Liabilities
Current liabilities
Other interest-bearing loans and borrowings - 0.5
Lease liabilities 9.7 9.4
Trade and other payables 70.6 71.5
Deferred and contingent consideration 1.9 -
Income tax payable - 0.4
Provisions 1.7 1.2
83.9 83.0
Non-current liabilities
Other interest-bearing loans and borrowings 29.8 14.6
Lease liabilities 82.9 72.2
Deferred and contingent consideration 7.6 1.1
Provisions 2.2 2.4
122.5 90.3
Total liabilities 206.4 173.3
Net assets 101.1 98.3
Equity
Ordinary share capital 0.1 0.1
Share premium 13.0 13.0
Merger reserve 25.5 25.5
Retained earnings 62.5 59.7
Total equity 101.1 98.3
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Share capital Share premium Merger reserve Retained earnings Total
£m £m £m £m £m
Balance as at 1 January 2021 0.1 12.5 25.5 51.2 89.3
Comprehensive income
Profit for the year - - - 12.5 12.5
Total comprehensive income - - - 12.5 12.5
Transactions with owners recorded directly in equity
Issue of shares - 0.5 - - 0.5
Acquisition of treasury shares - - - (0.4) (0.4)
Share-based payments expense - - - 0.4 0.4
Dividends - - - (4.0) (4.0)
Total transactions with owners - 0.5 - (4.0) (3.5)
Balance as at 31 December 2021 and 1 January 2022 0.1 13.0 25.5 59.7 98.3
Comprehensive income
Profit for the year - - - 8.4 8.4
Total comprehensive income - - - 8.4 8.4
Transactions with owners recorded directly in equity
Share-based payments expense - - - 0.6 0.6
Dividends - - - (6.2) (6.2)
Total transactions with owners - - - (5.6) (5.6)
Balance as at 31 December 2022 0.1 13.0 25.5 62.5 101.1
Consolidated Cash Flow Statement
for the year ended 31 December 2022
2022 2021
£m £m
Cash flows from operating activities
Profit for the year 8.4 12.5
Adjustments for:
Depreciation, amortisation and impairment 20.1 17.8
(Profit)/loss on disposal of fixed assets (0.4) 0.4
Net finance costs 5.0 4.8
Taxation 3.5 0.4
Share-based payments expense 0.6 0.4
Operating cash flow before movement in working capital 37.2 36.3
Decrease/(increase) in inventories 0.3 (10.0)
Decrease/(increase) in trade and other receivables 5.4 (2.9)
(Decrease)/increase in trade and other payables (4.4) 12.4
Increase/(decrease) in provisions 0.1 (0.9)
Pre-tax operating cash flow 38.6 34.9
Tax paid (2.2) (0.5)
Net cash inflow from operating activities 36.4 34.4
Cash flow from investing activities
Acquisition of subsidiary, net of cash acquired (17.8) (5.3)
Payment of deferred consideration (0.3) -
Acquisition of fixed assets (9.1) (5.5)
Proceeds on sale and leaseback, net of development costs - 4.8
Proceeds on disposal of fixed assets - 0.1
Net cash outflow from investing activities (27.2) (5.9)
Cash flow from financing activities
Interest on borrowings (1.6) (1.5)
Repayment of borrowings (10.5) (15.1)
Drawdown of borrowings 25.0 13.0
Net interest on lease liabilities (3.2) (3.5)
Net repayment of lease liabilities (7.4) (9.9)
Proceeds of share issue - 0.5
Acquisition of treasury shares - (0.4)
Dividends paid (6.2) (4.0)
Net cash outflow from financing activities (3.9) (20.9)
Net increase in cash and cash equivalents 5.3 7.6
Cash and cash equivalents at the beginning of year 9.8 2.2
Cash and cash equivalents at end of year 15.1 9.8
Secured bank loans (29.8) (15.1)
Lease assets 5.7 2.2
Lease liabilities (92.6) (81.6)
Net debt at end of year (101.6) (84.7)
1. Basis of preparation
Whilst the financial information included in this Preliminary Announcement has
been prepared on the basis of UK-adopted International Accounting Standards
("Adopted IFRSs"), this announcement does not itself contain sufficient
information to comply with Adopted IFRSs.
The Group expects to publish full Consolidated Financial Statements in April
2023. The financial information set out in this Preliminary Announcement does
not constitute the Group's Consolidated Financial Statements for the years
ended 31 December 2022 or 2021 but is derived from those Financial Statements
which were approved by the Board of Directors on 4 April 2023. The auditor,
RSM UK Audit LLP, has reported on the Group's Consolidated Financial
Statements and the report was unqualified and did not contain a statement
under section 498 (2) or 498 (3) of the Companies Act 2006.
The statutory financial statements for the year ended 31 December 2022 have
not yet been delivered to the Registrar of Companies and will be delivered
following the Company's Annual General Meeting.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group"). The Group financial
statements are prepared on the historical cost basis except where UK-adopted
International Accounting Standards require an alternative treatment.
The Group financial statements have been prepared and approved by the
directors in accordance with UK-adopted International Accounting Standards.
The Group's accounting policies are set out in the 2021 Annual Report and
Accounts and have been applied consistently in 2022.
Going concern
The Directors have prepared cash flow forecasts for a period of at least 12
months from the date of approval of these financial statements which indicate
that, taking account of reasonably possible downsides including the ongoing
anticipated impact of current macroeconomic factors on the operations and its
financial resources, the Group and Parent Company will have sufficient funds
to meet their liabilities as they fall due for that period.
The Board continues to closely monitor the macroeconomic environment,
including wage, energy and raw material price inflation, labour availability
and Bank of England interest rate announcements. The Group balance sheet
remains robust with significant financial headroom on committed banking
facilities through to June 2024. The banking facilities comprise a £65
million Revolving Credit Facility and £10 million overdraft facility. The
Group has traded profitably throughout 2022, and to the date of this report,
and its financial position remains strong, with net debt better than
expectations at the year end and maintaining ongoing significant headroom on
its banking facilities and covenants.
The Group prepares, and the Board reviews, detailed budgets and forecasts
which it has confidence in achieving in a normal business environment. The
Directors have prepared cash flow, facility headroom and financial covenant
forecasts for a period of at least 12 months from the date of approval of
these financial statements. The Directors considered the financial resources
of the Group, as well as its forecasts and severe but plausible stress test
scenarios.
The Group starts 2023 with significant headroom on its banking facilities and
the forecasts show that there is sufficient liquidity and headroom to ensure
compliance with all covenants throughout the going concern period.
Consequently, the Directors are confident that the Group and Parent Company
will have sufficient funds to continue to meet their liabilities as they fall
due for at least 12 months from the date of approval of the financial
statements and therefore have prepared the financial statements on a going
concern basis.
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. The Chief Operating Decision
Maker is considered to be the Board of Directors.
Operating segments Operations
Extrusion and Moulding
Extrusion and marketing of PVC and aluminium
window profile systems, PVC
cellular roofline and cladding, decking, rigid rainwater and drainage products
as well as Wood Plastic Composite ("WPC") and
aluminium decking products.
Moulding of Glass Reinforced Plastic ("GRP") building components.
Re-
processing of PVC waste.
Fabrication and Distribution Fabrication, marketing and
distribution of windows and doors, cellular roofline, cladding, rainwater,
drainage and decking products.
2021
2022
£m £m
Revenue from external customers
Extrusion and Moulding - total revenue 263.0 240.8
Inter-segment revenue (41.9) (38.5)
Extrusion and Moulding - external revenue 221.1 202.3
Fabrication and Distribution - total revenue 134.8 127.3
Inter-segment revenue (0.1) -
Fabrication and Distribution - external revenue 134.7 127.3
Total revenue from external customers 355.8 329.6
Segmental operating profit
Extrusion and Moulding 16.8 12.2
Fabrication and Distribution 7.5 8.4
Segmental operating profit before corporate costs 24.3 20.6
Corporate costs (2.8) (2.1)
Underlying operating profit 21.5 18.5
Non-underlying items (see note 4) (4.6) (0.8)
Operating profit 16.9 17.7
3. Acquisitions
On 9 September 2022, the Group acquired the entire share capital of Poly-Pure
Limited ("Poly-Pure"), a UK-based materials re-processor, recycling
post-consumer and post-industrial PVC building materials, for initial
consideration of £14.9 million, net of cash acquired. Further contingent
consideration may become payable, subject to an annual earnout mechanism,
based upon the adjusted EBITDA after tax of Poly-Pure in the three calendar
years to 31 December 2023, 31 December 2024 and 31 December 2025 respectively,
capped in aggregate at a further £15 million in cash. The fair value of the
contingent consideration on acquisition and as at 31 December 2022 was
calculated to be £7.6 million. Poly-Pure Limited forms part of the Extrusion
and Moulding segment.
On 1 December 2022, the Group acquired the entire share capital of Hampton
Decking Holdings Limited, Hampton Decking Limited, Masterjoint Limited and The
Mayfield Group Limited (collectively "Mayfield") for initial consideration of
£2.9 million, net of cash acquired. Mayfield supplies decking and related
products, primarily to the holiday park and park home markets and forms part
of the Fabrication and Distribution segment.
The following table summarises the consideration paid for Poly-Pure and
Mayfield and the provisional fair values of the assets and liabilities
acquired at the acquisition date.
Fair values on acquisition
Poly-Pure Mayfield Total
£m £m £m
Recognised amounts of identifiable assets and liabilities acquired:
Acquired intangibles - brand 3.0 0.6 3.6
Acquired intangibles - customer relationships - 1.0 1.0
Property, plant and equipment 3.2 0.1 3.3
Right of use assets 3.6 0.9 4.5
Inventories 0.1 0.3 0.4
Trade and other receivables 1.6 0.7 2.3
Cash and cash equivalents 0.1 1.9 2.0
Lease liabilities (3.4) (0.9) (4.3)
Trade and other payables (2.3) (0.9) (3.2)
Corporation tax liability (0.1) (0.1) (0.2)
Deferred tax liability (1.0) (0.4) (1.4)
Dilapidations provisions (0.2) - (0.2)
Fair value of assets acquired 4.6 3.2 7.8
Goodwill 18.3 2.4 20.7
Total consideration 22.9 5.6 28.5
Consideration
Cash consideration 15.0 4.8 19.8
Deferred consideration 0.3 0.8 1.1
Contingent consideration 7.6 - 7.6
Total consideration 22.9 5.6 28.5
The deferred consideration of £0.3 million in respect of Poly-Pure was
settled during the year. The goodwill recognised of £20.7 million represents
the know-how of the workforce, plus the potential for cross-selling and
synergies that exist as a result of the vertical integration with, and the
larger scale of, the Epwin Group.
4. Non-underlying items
Non-underlying items included within operating profit include:
2022 2021
£m £m
Amortisation of acquired other intangible assets (0.3) (0.3)
Share-based payments expense (0.6) (0.4)
Acquisition-related costs (0.7) (0.1)
Goodwill impairment (see note 9) (3.0) -
Non-underlying items (4.6) (0.8)
Amortisation of acquired other intangible assets
Amortisation of £0.3 million was charged during the year (2021: £0.3
million), relating to the brand and customer relationship intangible assets
recognised on acquisitions.
Share-based payments expense
The share-based payment expense of £0.6 million (2021: £0.4 million)
comprises IFRS 2: Share-based payment charges of £0.3 million (2021: £0.1
million) in respect of the Long-Term Incentive Plan and SAYE schemes of £0.3
million (2021: £0.3 million).
Acquisition-related costs
Other non-underlying items of £0.7 million (2021: £0.1 million) relate to
legal and professional fees associated with the acquisitions of Poly-Pure and
Mayfield during the year.
5. Finance costs
2022 2021
£m £m
Interest expense on borrowings 1.6 1.1
Amortisation of loan fees 0.2 0.2
Net interest on lease liabilities 3.2 3.5
Total finance costs 5.0 4.8
6. Taxation
2022 2021
£m £m
Current tax expense
Current period 1.6 1.4
Prior period (0.5) (0.1)
Total current tax charge 1.1 1.3
Deferred tax expense
Current period 1.4 (0.5)
Prior period 1.0 (0.4)
Total deferred tax charge 2.4 (0.9)
Total tax expense 3.5 0.4
UK corporation tax is calculated at 19% (2021: 19%) of the estimated
assessable profit for the year.
The Group's total income tax charge is reconciled with the standard rates of
UK corporation tax for the year of 19% (2021: 19%) as follows:
2022 2021
£m £m
Profit before tax 11.9 12.9
Tax at standard UK corporation tax rate of 19% (2020: 19%) 2.3 2.4
Factors affecting the charge for the period:
Expenses not deductible 1.0 0.3
Losses utilised for which no deferred tax previously recognised - (0.5)
Difference in tax rate - (1.2)
Super deduction benefit (0.3) (0.2)
Prior period 0.5 (0.4)
Total tax expense 3.5 0.4
Factors that may affect future current and total tax charges
In the Spring Budget 2021, the UK Government announced that from 1 April 2023
the corporation tax rate would increase to 25% (rather than remaining at 19%,
as previously enacted). This new law was substantively enacted on 24 May
2021. Deferred taxes at the balance sheet date have been measured using these
enacted tax rates and reflected in the financial statements.
7. Earnings per share ("EPS")
Basic earnings per share are calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary shares in
issue during the period. The weighted average number of shares has been
adjusted for the issue and cancellation of shares during the period.
Diluted earnings per share are calculated by dividing the profit attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the period, plus the dilutive potential ordinary shares arising
from share options in issue at the end of the period.
2022 2021
EPS summary pence pence
Basic EPS 5.78 8.61
Diluted EPS 5.71 8.52
Number of shares 2022 2021
No. No.
Weighted average number of ordinary shares (basic) 145,305,993 145,237,438
Effect of share options in issue 1,832,645 1,550,649
Weighted average number of ordinary shares (diluted) 147,138,638 146,788,087
8. Dividends
2022 2022 2021 2021
£m pence per share £m pence per share
Previous year final dividend 3.4 2.35 1.5 1.00
Current year interim dividend 2.8 1.90 2.5 1.75
6.2 4.0
The Board is recommending a final dividend of 2.55 pence per share in respect
of the financial year ended 31 December 2022.
9. Goodwill
Goodwill
£m
Cost
At 1 January 2021 72.2
Acquisitions through business combinations in 2021 3.3
At 31 December 2021 75.5
Acquisitions through business combinations in 2022 20.7
At 31 December 2022 96.2
Accumulated impairment losses
At 1 January 2021 and 31 December 2021 -
Impairment 3.0
At 31 December 2022 3.0
Net book value
At 31 December 2022 93.2
At 31 December 2021 75.5
Impairment
Changes to regulations relating to the fire resistance of materials used on
the exterior of high-rise buildings, following the Grenfell Tower fire in
2017, resulted in Ecodek losing a core market for its wood-plastic composite
decking. Since then, increased uncertainty regarding future cash flows has
resulted in a reduction in the value in use of the CGU. This has resulted in a
partial impairment charge of £3.0 million in the year to reflect the fact
that the discounted present value of future cash flows did not support the
full carrying value of the goodwill.
10. Cautionary statement
This Report contains certain forward-looking statements with respect of the
financial condition, results, operations and business 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
Report should be construed as a profit forecast.
11. Annual General Meeting
The Annual General Meeting of the Company will be held on 23 May 2023 at 1b
Stratford Court, Cranmore Boulevard, Solihull, B90 4QT.
If you wish to attend the AGM in person, please pre-register your intention to
do so by emailing epwin@mhpc.com (mailto:epwin@mhpc.com) . Please state 'Epwin
Group Plc: AGM' in the subject line of the email and include your full name
and investor code (if available), by no later than 10.30am on 19 May 2023.
To facilitate the answering of any questions that shareholders have, or would
normally raise, during the course of the AGM, shareholders are requested to
submit any questions that they may have via email, in good time, ahead of the
meeting to epwin@mhpc.com (mailto:epwin@mhpc.com) . Please include a
Shareholder Reference Number in any correspondence.
12. Electronic communications
The full Annual Report and Accounts for the year ended 31 December 2022 are to
be published on the Company's website, together with the Notice convening the
Company's 2022 Annual General Meeting by 28 April 2023. Copies will also be
sent out to those shareholders who have elected to receive paper
communications. Copies can be requested by writing to the Company Secretary,
Epwin Group Plc, 1b Stratford Court, Cranmore Boulevard, Solihull, B90 4QT or
email to investors@epwin.co.uk.
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