Half year results
14/09/2022 07:00
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RNS Number : 3419Z Epwin Group PLC 14 September 2022
14 September 2022
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
Half year results for the six months to 30 June 2022
Good half year trading performance, confident of achieving expectations
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 unaudited half year results
for the six months to 30 June 2022 ("H1 2022").
Financial highlights
£m H1 2022
H1 2021
Revenue 178.0 157.8
Underlying operating profit (1) 10.7 9.4
Underlying operating margin 6.0% 6.0%
Adjusted profit before tax (1) 8.3 7.1
Profit before tax 7.9 6.6
Adjusted EPS (1) 4.68p 4.06p
Basic EPS 4.40p 3.72p
Dividend per share 1.90p 1.75p
Covenant net debt(2) 7.3 15.8
Covenant net debt to adjusted EBITDA(2) 0.3x 0.6x
Underlying operating cash conversion (3) 129.9% 158.5%
(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
· Good trading performance continued:
o Revenue 13% ahead of a strong 2021 comparative period
o Underlying operating profit 14% ahead of 2021 as margins maintained by
pricing action and surcharges
o Ongoing strong cash generation, with underlying operating cash conversion
of 130%
· Financial position continues to strengthen:
o Strong balance sheet to support achievement of strategic objectives
o Covenant net debt reduced to £7.3 million (HY21: £15.8 million; FY21:
£9.4 million); 0.3x adjusted EBITDA
o Significant headroom on banking facilities, in excess of £65 million at
the half year end
· Interim dividend of 1.90 pence per share declared, an increase of 9%
on H1 2021
Operational and strategic headlines
· Active management of operational and inflationary challenges
continues:
o Managing further input cost inflation and pressure on overheads
o Continuing to work with customers to pass-on heightened costs
appropriately
· Good progress delivering on our strategy:
o Operational improvement:
§ Further increased production capacity of powder coating facility for
Stellar aluminium window system
§ Full relocation of inventories to new Telford distribution and finishing
facility expected to complete, in line with guidance, in 2022 to allow full
realisation of consolidation benefits
o New product development:
§ Aluminium window profile and PVC decking sales building encouraging
momentum
o Value enhancing acquisitions:
§ Recently announced acquisition of Poly-Pure Ltd:
· A leading UK materials re-processer, recycling post-consumer and
post-industrial PVC building materials
· Highly synergistic acquisition providing further growth and
sustainability opportunities
· Initial cash consideration of £15 million on cash-free debt-free
basis representing a multiple of 6x FY22 adjusted EBITDA
· Three-year earnout capped at £15 million which if achieved would
equate to a multiple of 3x FY25 adjusted EBITDA after synergies
§ Successful integration of 2021 bolt-on acquisitions, with H1 2022
performance in line with management expectations
o Progress continues on ESG framework and targets, building on inherent
environmental and sustainability benefits of the Group's energy efficient,
recyclable and low maintenance products
Current trading and outlook
· The Board is confident in achieving a 2022 result in line with its
expectations, notwithstanding the macroeconomic and geopolitical environment
· Current trading is in-line with the Board's expectations, seeing good
demand following some moderation in June and July against historically high
comparatives
· Medium and long-term drivers for the RMI market remain positive
· The Group continues to execute its strategy and has a healthy
pipeline of further M&A opportunities
Jon Bednall, Chief Executive Officer, said:
"I am pleased to report a good trading performance in the first half and we
remain confident of meeting our expectations in 2022.
The need to improve the energy efficiency of the UK housing stock is growing
in urgency, given the UK's net zero commitments, the widely reported increase
in energy costs and the historic and longstanding backlog in housing
maintenance.
Whilst we are mindful of the current macroeconomic uncertainty, our diverse
customer base and end markets, as well as our longstanding trading
relationships and strong balance sheet, provide resilience against potential
short-term changes in market conditions.
The Group has therefore been able to invest towards our strategic objectives,
including operational improvement, new product development and the delivery of
value enhancing acquisitions.
We are, therefore, confident in the medium and long-term drivers of our end
markets and believe we are well positioned to deliver sustainable long-term
performance."
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
Forthcoming dates:
Ex-dividend date 22
September 2022
Dividend record date 23 September 2022
Dividend payment
date 14 October
2022
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.
www.epwin.co.uk (http://www.epwin.co.uk)
Group business review
Trading and results
The Group continued to make good progress against our strategic objectives in
H1 2022, while delivering a robust trading performance. The Group's focus
continues to be on operational efficiency, product and material development,
identifying and completing value-enhancing acquisitions and building on the
Group's inherent ESG credentials. Despite well-documented inflationary
challenges, trading conditions remained robust during the first half of 2022.
The Group performed well, with revenues of £178.0 million, 13% 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.
H1 2022 revenue growth was predominantly driven by selling price increases to
recover further input cost inflation. The three bolt-on acquisitions completed
during 2021 also contributed to the higher revenues. This was offset by a
slight decline in volumes from a record high in 2021 as the market began to
moderate towards the end of the first half, as cost of living increases began
to impact consumer spending and some of the Group's customers began to reduce
stock levels in response to improved supply chain resilience. There were also
some deferments to social housing contract start dates. During the period we
exited select 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.
Raw materials costs continued to increase in H1 2022, with PVC resin hitting
an all-time high in April, although this has currently plateaued. Inflation,
including wage inflation, has put pressure on overheads. The Group continues
to work with its customers to pass on heightened costs appropriately through
price increases and surcharges. Despite disruption to supply chains in the
wider market, the Group has been able to secure sufficient raw materials to
meet demand and expects to be able to continue to do so. Labour retention and
recruitment remain challenges and measures have been put in place to retain
and attract the best people.
Underlying operating profit increased by 14% to £10.7 million (HY21: £9.4
million), as price increases, surcharges and other actions taken to mitigate
the impact of input cost inflation begin to drive a recovery in margin, albeit
not yet to pre-pandemic levels, offset by continued inflationary pressures on
overheads.
Key financials
6 months ended 6 months ended
30 June 2022 30 June 2021
£m £m
Revenue 178.0 157.8
Underlying operating profit 10.7 9.4
Amortisation of acquired other intangible assets (0.1) (0.2)
Other non-underlying items - (0.1)
Share-based payments expense (0.3) (0.2)
Operating profit 10.3 8.9
Underlying operating margin 6.0% 6.0%
Operating margin 5.8% 5.6%
Segmental results
6 months ended 6 months ended
30 June 2022 30 June 2021
£m £m
Revenue
Extrusion and moulding 111.3 97.0
Fabrication and distribution 66.7 60.8
Total 178.0 157.8
Underlying segmental operating profit
Extrusion and moulding 8.0 6.4
Fabrication and distribution 4.0 4.0
Underlying segmental operating profit 12.0 10.4
Corporate costs (1.3) (1.0)
Underlying operating profit 10.7 9.4
Amortisation of acquired other intangible assets (0.1) (0.2)
Other non-underlying items - (0.1)
Share-based payments expense (0.3) (0.2)
Operating profit 10.3 8.9
Extrusion and moulding
· Revenue increased by 15% in comparison to H1 2021 to £111.3 million,
primarily due to selling price increases to recover input cost inflation
· During 2021, the Extrusion and Moulding segment bore the majority of
the impact of the market-wide supply chain disruption and raw material cost
increases
· Steps taken by the business, during 2021 and continuing in 2022, to
mitigate these appropriately through price increases, surcharges and other
measures have resulted in a recovery in underlying operating margin to 7.2%
(HY21: 6.6%); albeit not yet to pre-pandemic levels
Fabrication and distribution
· Revenue increased by 10% in comparison to a strong H1 2021 to £66.7
million, of which 6% is through additional revenue from acquisitions completed
in 2021, with the balance due to selling price increases, offset by lower
volume
· RMI market demand remained robust in H1 2022, albeit with some
moderation in June from historically strong comparatives whilst the Group's
fabricators supplying the social housing market continued to see the deferment
of some contract start dates
· Underlying operating profit margin continues to be ahead of
medium-term expectations for the segment with the impact of the site
consolidation and rationalisation activities of recent years continuing to
drive improvement
New product development
The Group has continued to see strong demand for products launched during 2019
and 2020, in particular the aluminium window system, Stellar, and the PVC
decking product, Dekboard. Upgrades have been completed to the Stellar
aluminium window system powder coating facility in Telford to further increase
capacity as a result of strong demand for the product since its launch in
2019.
Progress with site consolidation and rationalisation programme
Construction work on the purpose-built facilities in Telford, to consolidate
window systems warehousing and finishing operations, was successfully
completed, and final payment received, in 2021. Full relocation of inventories
and logistics operations to the new facility is well underway, and is expected
to complete in 2022, which will allow the Group to start realising the full
consolidation and synergistic benefits of the new facility.
Value enhancing acquisitions
A key aspect of the Group's strategy is to execute value enhancing
acquisitions.
Poly-Pure acquisition
On 9 September 2022, the Group completed the acquisition of Poly-Pure Ltd, a
leading UK materials re-processor, recycling post-consumer and post-industrial
PVC building materials, including UPVC window frames.
The acquisition presents a strong strategic rational for the Group:
· Growth opportunity: Poly-Pure has generated strong levels of revenue
and EBITDA growth since establishment, 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 reprocessed materials in
manufacturing and Epwin believes 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 Epwin with a
further, cost effective, supply of recycled PVC, with the potential for
operational efficiencies and cost benefits;
· Sustainability: The acquisition, alongside Epwin's existing capital
expenditure programme, accelerates the Group's ambitions to integrate an even
greater proportion of recycled materials into its products.
· 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.
In Poly-Pure's financial year ended 31 July 2022, it expects to report
revenues of c.£10 million and adjusted EBITDA of c.£2.5 million. Poly-Pure
has net assets on acquisition of approximately £3m. The acquisition of
Poly-Pure is expected to be margin accretive for Epwin at the adjusted EBITDA
level and is expected to be immediately earnings enhancing.
The initial cash consideration of £15 million on a cash-free debt-free basis
represents a multiple of 6x estimated 2022 EBITDA and is funded using existing
Group facilities. Further deferred consideration may become payable, subject
to an earnout mechanism, based upon the adjusted EBITDA 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 which, if achieved,
would equate to a 31 December 2025 adjusted EBITDA multiple after synergies of
3x.
The three bolt-on acquisitions completed during 2021, which further increased
the geographical coverage of the Group's plastic distribution business, have
been successfully integrated and are performing in line with management's
expectations.
Completion of selective, value enhancing acquisitions remains a core part of
the Group's strategy and there continues to be a healthy pipeline of potential
further acquisitions that the Group is seeking to progress.
ESG
The Group continues to make progress with developing its ESG framework and
targets, while delivering on its sustainability agenda in support of its wider
strategy.
Progress continues on the capital expenditure programme, approved during 2021,
to facilitate the increased use of recycled material within the Group's PVC
extrusion operations, and ESG considerations are central to the planning and
approval of future capital expenditure. The recently completed acquisition of
Poly-Pure Ltd, a leading UK materials re-processor, will further bolster the
recycling capabilities of the Group and enable us to accelerate this
programme, improving the already strong environmental credentials of our
products. Initiatives to improve fleet efficiency and reduce plant energy and
water consumption continue as part of an ongoing focus on maximising the
efficiency of our operations.
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. In addition to
our energy efficient windows and doors, our PVC, wood plastic composite and
aluminium low maintenance building products are designed and manufactured to
be longer life than traditional alternatives and are typically recyclable,
contributing to a circular economy and reducing landfill waste.
Our people are central to the success of the Group and the welfare of our
staff is of paramount importance. The Group continues to be committed to
providing high-quality training, learning and development opportunities for
all employees, providing support wherever it is needed, as well as striving
for the highest standards of governance.
Cash flow
6 months ended 30 June 2022 6 months ended 30 June 2021
£m
£m
Pre-tax operating cash flow 13.9 14.9
Tax paid (1.0) -
Acquisitions - (4.6)
Net capital expenditure (3.6) (2.8)
Net site development cash flow - 5.0
Interest on borrowings (0.7) (0.6)
Net (repayment)/drawdown of borrowings (0.5) 2.7
Lease payments (3.5) (6.7)
Net proceeds of share issues/repurchases - 0.1
Dividends (3.4) (1.5)
Increase in cash and cash equivalents 1.2 6.5
Opening cash and cash equivalents 9.8 2.2
Closing cash and cash equivalents 11.0 8.7
Borrowings (14.7) (20.0)
Lease assets 4.6 2.3
Lease liabilities (84.2) (83.1)
Net debt (83.3) (92.1)
Covenant net debt (7.3) (15.8)
The Group remains highly cash generative, achieving a pre-tax operating cash
flow of £13.9 million (HY21: £14.9 million), broadly consistent with a
strong comparative period and representing cash conversion of 130%.
Capital expenditure has increased compared to H1 2021, as the Group continues
to invest in line with its strategic objectives of operational improvement,
efficiency and sustainability.
Financing
The Group has maintained in excess of £65 million headroom on its existing
banking facilities which comprise a £65 million revolving facility through to
June 2024 and a £10 million overdraft facility. Covenant net debt has reduced
from £15.8 million as at 30 June 2021, and £9.4m at 31 December 2021, to
£7.3 million as at 30 June 2022. The decrease in net debt (including IFRS 16)
compared to the previous period is primarily driven by continued strong cash
generation resulting in reduced borrowings.
Finance costs for the period comprise £0.7 million interest paid on
borrowings, £0.1 million amortisation of facility arrangement fees and £1.6
million of interest on IFRS 16 lease liabilities.
Lease payments of £3.5 million (HY21: £6.7 million) are net of a £2.7
million premium on renewal of the lease for the Group's core cellular
extrusion operation in Tamworth.
Dividend
The Board intends to declare an interim dividend of 1.90 pence per share
(HY21: 1.75 pence), representing an increase on the prior period of 9%. The
dividend will be paid on 14 October 2022 to shareholders on the register on 23
September 2022.
Outlook
The Group's trading performance during the first half of 2022 has been
encouraging, with continued good strategic progress despite a trading
environment that presents a number of well-reported challenges.
Continued demand for home, garden and leisure space improvements, stimulated
by the pandemic and the resulting changes in working patterns, as well as a
high level of planning applications during 2021, means there continues to be a
market pipeline of projects going into the second half of the year.
We expect historically high raw material costs to continue for the remainder
of 2022, although indications are that the price of PVC resin has currently
plateaued. The impact of the war in Ukraine on power prices is being closely
monitored and has the potential to cause a further increase in raw material
processing costs and prices. The continued impact of inflation on overheads,
including wage inflation, and other key input costs will mean that we will
continue to work with customers to pass on increased costs as needed in a fair
and reasonable manner.
Customer demand from the RMI sector, the Group's core end market, moderated in
June and July from a historical high, with August and current trading in line
with Board expectations. Recent forecasts from the Construction Products
Association (CPA) suggest a contraction of the RMI market for 2022 and 2023,
before picking up in 2024. Clearly there is much uncertainty in this outlook,
in particular because a majority of RMI activity relates to essential repairs
that cannot be delayed or to non-essential maintenance work that can be
postponed but not indefinitely, making demand in this market less volatile
than other segments of the economy. Similarly, the drive to improve the energy
efficiency of UK domestic properties is gathering momentum and is likely to be
beneficial to the Group.
Our housebuilder-facing businesses continue to see strong demand with many
housebuilders reporting that they have forward sold their full 2022 builds and
forecasting further growth for 2023, resulting in healthy order books and
inquiries. The Social housing businesses have continued to see the deferment
of some contract start dates, however, despite this we anticipate continued
stable demand from this market.
Whilst mindful of the current macroeconomic uncertainty, our diverse customer
base, covering a number of markets within the construction industry,
longstanding supplier relationships and strong balance sheet provide
resilience against short-term changes in market conditions.
Despite the short-term uncertainty, the medium to long-term drivers for the
market remain positive. The UK faces a shortage of new and affordable housing
and an ageing and underinvested housing stock, with a significant backlog of
maintenance and improvement work on private housing and public sector assets.
Environmental and safety 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 widely reported
increase in energy costs and the UK's net zero commitments.
Our strategy continues to be based on operational improvement, broadening the
product portfolio and capabilities, selective acquisitions, cross-selling and
market share growth in key sectors to build a sustainable, resilient business.
Investment has continued against these strategic objectives, including capital
expenditure to ensure the Group's plant and machinery is market-leading and to
improve the sustainability and efficiency of our operations.
Whilst mindful of the wider macroeconomic and geopolitical uncertainty, the
Board remains confident of achieving its expectations in 2022 and believes
that the Group is well positioned going into the second half of the year. We
are confident in our business model, the resilience of our core markets and
the diversity of our customer base, and that the medium- and long-term drivers
of our end markets leave us well positioned to deliver sustainable long-term
growth.
Condensed consolidated income statement
for the six months ended 30 June 2022
6 months ended 6 months ended Year ended 31 December 2021
30 June 2022 30 June 2021
(unaudited) (unaudited) (audited)
Note £m £m £m
Group revenue 2 178.0 157.8 329.6
Cost of sales (127.6) (112.5) (236.9)
Gross profit 50.4 45.3 92.7
Distribution expenses (20.5) (18.8) (38.7)
Administrative expenses (19.6) (17.6) (36.3)
Underlying operating profit 10.7 9.4 18.5
Amortisation of acquired other intangible assets 3 (0.1) (0.2) (0.3)
Other non-underlying items 3 - (0.1) (0.1)
Share-based payments expense 3 (0.3) (0.2) (0.4)
Operating profit 10.3 8.9 17.7
Finance costs (2.4) (2.3) (4.8)
Profit before tax 7.9 6.6 12.9
Taxation 4 (1.5) (1.2) (0.4)
Profit for the period 6.4 5.4 12.5
Pence Pence Pence
Basic earnings per share 5 4.40 3.72 8.61
Diluted earnings per share 5 4.35 3.69 8.52
Condensed consolidated balance sheet
as at 30 June 2022
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Note £m £m £m
Assets
Non-current assets
Goodwill 75.5 74.8 75.5
Other intangible assets 2.1 2.8 2.4
Property, plant and equipment 28.8 29.9 28.5
Right of use assets 62.4 65.7 64.0
Lease assets 7 4.4 2.1 2.0
Deferred tax asset 4.6 3.9 4.6
177.8 179.2 177.0
Current assets
Inventories 45.5 34.8 41.0
Trade and other receivables 50.5 48.2 43.6
Lease assets 7 0.2 0.2 0.2
Cash and cash equivalents (excluding bank overdrafts) 7 22.1 15.8 9.8
118.3 99.0 94.6
Total assets 296.1 278.2 271.6
Liabilities
Current liabilities
Bank overdrafts 7 11.1 7.1 -
Other interest-bearing loans and borrowings 7 - - 0.5
Lease liabilities 7 9.7 9.7 9.4
Trade and other payables 79.3 68.2 71.5
Income tax payable 0.9 0.8 0.4
Provisions 0.8 1.3 1.2
101.8 87.1 83.0
Non-current liabilities
Other interest-bearing loans and borrowings 7 14.7 20.0 14.6
Lease liabilities 7 74.5 73.4 72.2
Deferred and contingent consideration 1.1 1.2 1.1
Provisions 2.4 3.0 2.4
92.7 97.6 90.3
Total liabilities 194.5 184.7 173.3
Net assets 101.6 93.5 98.3
Equity
Ordinary share capital 0.1 0.1 0.1
Share premium 13.0 12.6 13.0
Merger reserve 25.5 25.5 25.5
Retained earnings 63.0 55.3 59.7
Total equity 101.6 93.5 98.3
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2022
6 months ended 6 months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Note £m £m £m
Balance at the start of the period 98.3 89.3 89.3
Profit for the period 6.4 5.4 12.5
Issue of shares - 0.5 0.5
Acquisition of treasury shares - (0.4) (0.4)
Settlement of share-based payments - - -
Share-based payments expense 0.3 0.2 0.4
Dividends 6 (3.4) (1.5) (4.0)
Balance at the end of the period 101.6 93.5 98.3
Consolidated cash flow statement
for the six months ended 30 June 2022
6 months ended 6 months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Note £m £m £m
Cash flows from operating activities
Profit for the period 6.4 5.4 12.5
Adjustments for:
Depreciation and amortisation 7.8 8.4 17.8
Loss on disposal of fixed assets - - 0.4
Net finance costs 2.4 2.3 4.8
Taxation 4 1.5 1.2 0.4
Share-based payments 0.3 0.2 0.4
18.4 17.5 36.3
(Increase) in inventories (4.5) (3.9) (10.0)
(Increase) in trade and other receivables (6.9) (7.9) (2.9)
Increase in trade and other payables 7.3 9.5 12.4
(Decrease) in provisions (0.4) (0.3) (0.9)
Pre-tax operating cash flow 13.9 14.9 34.9
Tax paid (1.0) - (0.5)
Net cash flow from operating activities 12.9 14.9 34.4
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired - (4.6) (5.3)
Acquisition of property, plant and equipment (3.6) (2.8) (5.5)
Proceeds on sale and leaseback, net of development costs - 5.0 4.8
Proceeds on disposal of property, plant and equipment - - 0.1
Net cash flow from investing activities (3.6) (2.4) (5.9)
Cash flows from financing activities
Interest on borrowings (0.7) (0.6) (1.5)
Net (repayment)/drawdown of borrowings (0.5) 2.7 (2.1)
Interest on lease liabilities (1.6) (1.7) (3.5)
Repayment of lease liabilities (1.9) (5.0) (9.9)
Net proceeds of share issue - 0.1 0.1
Dividends paid 6 (3.4) (1.5) (4.0)
Net cash flow from financing activities (8.1) (6.0) (20.9)
Net increase in cash and cash equivalents 1.2 6.5 7.6
Cash and cash equivalents at the beginning of the period 9.8 2.2 2.2
Cash and cash equivalents at the end of the period 7 11.0 8.7 9.8
Notes to the condensed consolidated financial statements
for the six months ended 30 June 2022
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 2022. These
are in accordance with the accounting policies as set out in the Group's
consolidated financial statements for the year ended 31 December 2021.
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 2022 and should be read in
conjunction with the Group's consolidated financial statements for the year
ended 31 December 2021 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
2022 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 14 September 2022.
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 FY21 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 2022 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 balance sheet remains robust with significant headroom on committed
banking facilities through to June 2024. The bank facilities available to the
Group comprise a £65 million Revolving Credit Facility and a £10 million
overdraft facility. At 30 June 2022 the Group had in excess of £65 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.
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
2022 2021 2021
(unaudited) (unaudited) (audited)
£m £m £m
Revenue from external customers
Extrusion and moulding 111.3 97.0 202.3
Fabrication and distribution 66.7 60.8 127.3
Total 178.0 157.8 329.6
Segmental operating profit
Extrusion and moulding 8.0 6.4 12.2
Fabrication and distribution 4.0 4.0 8.4
Segmental operating profit before corporate and other costs 12.0 10.4 20.6
Corporate costs (1.3) (1.0) (2.1)
Underlying operating profit 10.7 9.4 18.5
Amortisation of acquired other intangible assets (0.1) (0.2) (0.3)
Other non-underlying items - (0.1) (0.1)
Share-based payments expense (0.3) (0.2) (0.4)
Operating profit 10.3 8.9 17.7
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 2021
30 June 2022 30 June 2021 (audited)
(unaudited) (unaudited)
£m £m £m
Amortisation of acquired other intangible assets (0.1) (0.2) (0.3)
Acquisition expenses - (0.1) (0.1)
Share-based payments (0.3) (0.2) (0.4)
Non-underlying expense (0.4) (0.5) (0.8)
Amortisation of acquired other intangible assets
£0.1 million (HY21: £0.2 million) amortisation of brand and customer
contract intangible assets acquired through business combinations.
Share-based payments expense
The share-based payment expense of £0.3 million (HY21: £0.2 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 were
further issues of options under both schemes.
4. Taxation
The tax charge for the six months to 30 June 2022 is based on the estimated
tax rate for continuing operations for the full year.
In the Budget held on 3 March 2021, the Government announced that the
corporation tax rate will increase to 25% from 1 April 2023. This change was
subsequently enacted on 10 June 2021. As at the 30 June 2022 balance sheet
date, the corporation tax rate was 19%, however the net deferred tax asset at
this date has been calculated using a blend of rates of 19% and 25% for
individual assets and liabilities, depending on when the relevant asset or
liability is expected to reverse.
5. Earnings per share (EPS)
6 months ended 6 months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited)
(unaudited)
(audited)
pence pence pence
EPS
Basic 4.40 3.72 8.61
Diluted 4.35 3.69 8.52
6 months ended 6 months ended Year ended
30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021
(audited)
No. No. No.
Number of shares
Weighted average number of shares used to calculate earnings per share
- Basic 145,305,993 145,167,949 145,237,438
- Diluted 147,008,926 146,373,787 146,788,087
6. Dividends
6 months ended 6 months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
£m £m £m
2020 final dividend of 1.0 pence per share - 1.5 1.5
2021 interim dividend of 1.75 pence per share - - 2.5
2021 final dividend of 2.35 pence per share 3.4 - -
3.4 1.5 4.0
7. Net debt
6 months ended 6 months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
£m £m £m
Cash and cash equivalents (excluding bank overdraft) 22.1 15.8 9.8
Bank overdraft (11.1) (7.1) -
Secured bank loans (14.7) (20.0) (15.1)
Lease assets 4.6 2.3 2.2
Lease liabilities (84.2) (83.1) (81.6)
Net debt (83.3) (92.1) (84.7)
Add back: lease liabilities 84.2 83.1 81.6
Deduct: lease assets (4.6) (2.3) (2.2)
Deduct: finance lease liabilities (3.6) (4.5) (4.1)
Covenant net debt (7.3) (15.8) (9.4)
The banking facilities available to the Group are a £65.0 million Revolving
Credit Facility and £10.0 million overdraft, secured on the assets of the
Group. The revolving credit facility has a term through to June 2024.
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 (http://www.epwin.co.uk)
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