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RNS
Epwin Group PLC  -  EPWN   

Final Results

Released 07:00 06-Apr-2017

RNS Number : 7325B
Epwin Group PLC
06 April 2017
 

 

 

 

6 April 2017

 

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.  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

 

Final results for the year ended 31 December 2016

 

Another year of progress

 

Epwin Group Plc (AIM: EPWN) ("Epwin" or the "Group"), the vertically integrated manufacturer of low maintenance building products, supplying the Repair, Maintenance and Improvement ("RMI"), new build and social housing sectors, announces its final results for the year ended 31 December 2016.

Financial highlights

£m

 

2016

 

2015

 

Change

Revenue

293.2

256.0

+14.5%

Underlying operating profit 1

25.6

20.1

+27.4%

Underlying operating profit margin 1

8.7%

7.9%

+80bps

Profit before tax

Basic EPS

23.0

13.85p

18.6

11.32p

+23.7%

+22.3%

Dividend per share

6.60p

6.37p

+3.6%

Net debt

(20.6)

(14.4)

 

Operating cash conversion 2

120%

118%

 

 

 (1) Underlying operating profit and margin is operating profit before amortisation of acquired intangible fixed assets, acquisition expenses and share-based payments.

(2) Operating cash conversion is pre-tax operating cash flow as a percentage of underlying operating profit.

 

Financial headlines

 

·     Underlying operating profit up 27.4% to £25.6 million

·     Revenue up 14.5% at £293.2 million

·     Acquisition strategy benefitting performance

·     Continued improvement in operating margins, up 80 bps

·     Continued strong cash generation, operating cash conversion 120%

·     Balance sheet supports further investment in products, acquisitions and organic growth, leverage ratio at year end 0.6 times

·     Proposed final dividend 4.40 pence per ordinary share, totalling 6.60 pence for the year (3.6% increase)

 

 

Delivering on our strategy

 

·    Acquisitions made during the final quarter of 2015, Ecodek and Stormking, are integrating and performing well, both growing revenues and profits in the year

·     Launch of new, market leading window system, "Optima", in April 2016 on time and to budget. The award-winning system already has a strong market presence, reflected in the full conversion of the existing Profile 22 customer base as well as new customer wins

·    Acquisition of National Plastics in June 2016, significantly increasing the scale of Epwin's distribution operation and strengthening a route to market for the Group's expanding range of products.

·     Making good progress with material and product development that will benefit the Group in the medium term

·     Continued good performance in Extrusion and Moulding, like for like revenue up 2%

·  Continuing with actions to improve performance in the Fabrication business, improvement in underlying Distribution business

 

Current trading

 

·    Current trading in 2017 has been in line with the Group's expectations, however input costs have increased as a result of the weakening of sterling since June 2016 and the Group is passing the increases on to the market wherever possible

·     Acquired businesses continue to trade well

·    The Group continues to make progress with its strategy, focussed on operational improvement, broadening the product portfolio, selective acquisitions, cross selling and market share growth in key sectors. The Group is well positioned to benefit from its scale and market position, with its range of products, materials and routes to market providing a robust and flexible business model

 

Jon Bednall, Chief Executive Officer, said:

 

"We had another year of substantial progress having continued to deliver on our long-term strategy by investing in our product portfolio, completing a further acquisition in the year and continuing the drive to improve operational efficiency.  The two acquisitions completed in 2015 are substantially integrated and we are pleased with their contribution to the Group."

 

"Whilst the long-term impact of the EU referendum result on consumer confidence remains unclear, trading in the current year has been in line with management's expectations.  Input costs have increased sharply as a result of the weakening of sterling since June 2016. However, the Group is continuing its efforts to mitigate this and the Board remains confident in the long-term fundamentals of the Group and the markets it serves"

 

 

Enquiries:

 

Epwin Group Plc                                                                                  0203 128 8100

Jon Bednall, Chief Executive

Chris Empson, Group Finance Director

 

Zeus Capital Limited (Nomad and Joint Broker)

Nick Cowles / Jamie Peel

John Goold / Dominic King

 

 

0161 831 1512

0203 829 5000

 

Panmure Gordon (UK) Limited (Joint Broker)

Erik Anderson / Andrew Potts

 

MHP Communications

Jamie Ricketts / Charlie Barker / Rossina Garcia Izaguirre

0207 886 2500

 

 

0203 128 8100

 

 

 

 

Forthcoming dates:

Ex-dividend date                            11 May 2017

Dividend record date                    12 May 2017

Dividend payment date                5 June 2017

 

About Epwin

Epwin is a vertically integrated manufacturer of low maintenance building products, 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

Chairman's statement

 

Delivering on our strategy

2017 has been another year of substantial progress for the Group. In what have been challenging market conditions, underlying operating profit has risen to £25.6 million, an increase of 27.4%, demonstrating the strength and robustness of the Epwin model and the benefits of its diversification of products, materials and routes to market as well as our ability to execute accretive acquisitions.

 

Growing profit in uncertain times

As has been widely documented, 2016 was a challenging year for the sector and wider UK economy with the result of the referendum on leaving the European Union impacting consumer confidence and creating uncertainty going into the key summer trading months for the industry. During this period, the Board has reviewed and remains committed to its strategy of operational improvement, product development, selective acquisitions to broaden our product portfolio and capabilities, as well as cross-selling across our brands.

 

The businesses acquired during 2015, Stormking and Ecodek, have been substantially integrated and are performing well. Both have delivered year on year revenue and profit growth and will present further market and product development opportunities in the medium term.

 

In 2016 the Group completed the acquisition of National Plastics, a distributor of plastic building products to the trade. The acquisition increased the footprint of Epwin's own distribution network and will thus enable the more rapid commercial distribution of products from the Stormking and Ecodek acquisitions of 2015, as well as maintaining the historic balance between owned and independent distributors in the market.  Fundamentally, the Group remains committed to serving the independent distributor market with the consequent diversity and flexibility that this offers.

 

As well as the investment in acquisitions, the Group launched its award winning, market leading window system, "Optima". The roll-out of the system across the Group's fabrication customer base was executed on time and to budget, with the full conversion of our existing Profile 22 customer base and new customer wins.  I have been very impressed by the professionalism and commitment of the staff that have carried this project through and are now engaged in further product development initiatives for our customers.

 

Results

The Board's strategy has delivered another year of strong profit growth with a 27.4% increase in underlying operating profit to £25.6 million, driven mainly by acquisitions and continued operational improvements. Cash generation remained strong resulting in an operating cash flow before taxation of £30.8 million (2015: £23.8 million).  Net debt at the year-end was £20.6 million, (2015: £14.4 million), the increase principally as a result of the investment in the National Plastics acquisition and capital expenditure required for the Optima window system. 

 

Dividends

I am particularly pleased that Epwin continues to deliver on its promise to deliver strong shareholder returns.  In October 2016, we paid an interim dividend of 2.20 pence per ordinary share, and the Board is recommending a final dividend of 4.40 pence per ordinary share to be paid on 5 June 2017 to shareholders on the register on 12 May 2017. This takes the full year dividend to 6.60 pence per ordinary share, an increase of 3.6% on 2015.

 

As we move forward, the Board will continue to prioritise the long-term financial security of the Group whilst looking to be progressive in shareholder returns when the opportunity arises.

 

 

People

Last year I welcomed the employees of Ecodek and Stormking to the Group and have been delighted with how well they have integrated with and contributed to the Epwin Group. This year I would like to welcome the employees of National Plastics and look forward to their contribution to the Group.

 

On behalf of the Board and our shareholders I would like to thank all of our employees for the levels of commitment shown to the Group during the year. Combined with the support from shareholders and the investment decisions taken by the Board, I believe that there is a strong foundation for all stakeholders for the years ahead.

 

Summary and outlook

Market conditions are expected to remain challenging in 2017 and the long-term impact of the outcome of the EU Referendum on consumer confidence and demand remains unclear. However, the Board remains confident in the long-term market drivers for Epwin's products and considers that the Group's flexible business model, with its broad range of products, material technologies and routes to market, is an advantage during these uncertain times.

 

 

 

Andrew Eastgate

Chairman

6 April 2017

Business review

 

Strategic and operational review

During 2016 the Group has made substantial progress towards our strategic goals.  The acquisitions at the end of 2015 of Ecodek and Stormking have integrated well into the Group during the year, expanding our product range, materials knowledge and capabilities.  They have contributed well to our financial performance in the year and additional products and materials are being developed within those businesses with the aim of further broadening our product range and our market opportunities in the future.  The National Plastics acquisition in the middle of this year will support the development of new market opportunities for these earlier acquisitions, as well as giving opportunities to enhance the reach of our existing products.  We will also benefit from the economies of scale of setting this business alongside our existing distribution businesses and independent stockist customers. 

 

We have invested substantially in the new Profile 22 window system, "Optima", which has been well received by both our existing Profile 22 customers and the wider market.  This all-new system has been designed as a basis for continued product development and innovation over the coming years, as we look to broaden and deepen the breadth of our fenestration product range and the services that we offer to our customers.  Alongside this, we have added further to our other product ranges to ensure that our market offer remains strong.

 

Additionally, we have continued to invest in our plant and equipment in order to maintain and improve the efficiency of our operations. Investment in maintaining and developing our capital base has been key to the Group's success to date and there are further opportunities identified which will enable us to continue to improve our overall operational performance and customer service.

 

We have further developed our warehousing and logistics operations in order to better serve our customers' requirements and will continue to review this area to ensure that we can meet the changing demands of the market, as well as making further investment in IT to support these operations and improve their efficiency.

 

Progress, too, has been made towards our goal of cross-selling more of our products into different market segments and across existing customers.  Again, there is scope for us to do more here as we grow our product ranges and capabilities, as well as continuing to adapt to the changing needs of the dynamic markets we serve.

 

The Group has considerable experience in developing and using recycled material and alternative material formulations and, alongside our materials development activities, we continue to utilise recycled material when it makes sense to do so and where we are confident that it does not compromise the quality or performance of our products or their compliance with relevant materials standards. 

 

Operationally we continue to share knowledge across our operations to improve labour efficiency, optimise our plant utilisation and maintain low scrap rates.  All of this is essential in maintaining the financial performance of the Group as the industry faces the challenges of rising input costs, funding the National Living Wage, Auto-Enrolment pension contributions, the Apprenticeship Levy and other similar costs.

 

The operational and investment decisions taken in 2015 to reduce costs and improve the efficiency of interaction between fabrication sites are progressing and will continue through 2017. As part of this, a significant programme of IT systems investment is being planned in order to enable greater site integration at both a functional and operational level.   The efficiency improvements implemented following the move of the door factory in 2015 are now being realised and operational focus has now moved to the window fabrication operations.

 

 

 

Acquisitions

Following on from the acquisitions of Stormking and Ecodek in 2015, the Group acquired Specialist Plastics Distribution Limited, which trades as "National Plastics", in June 2016.  National Plastics is a distributor of plastic building products operating a network of 30 plastics centres as well as an online presence.  The acquisition will enable the Group to develop new routes to market for Stormking and Ecodek products, as well as maintaining the historic balance between owned and independent distributors of the Group's products into the market.

 

Market overview and outlook

Against a backdrop of depressed household disposable incomes and the economic uncertainty in the wake of the European Referendum result, the RMI market has remained largely static year on year. 

 

Consequently, the backlog of private housing repair and maintenance expenditure continues to grow as the housing stock ages and significant underinvestment by property owners has continued.  Whilst this leads to lacklustre market performance in the short term, there remains strong potential future demand for the Group's products as this repair and maintenance expenditure eventually becomes unavoidable. Of the UK's housing stock, 77% was built before 1980 (ONS) and at the current rate of new house building, 80% of the domestic properties that the UK will have in 2050 have already been built (Green Building Council).  Very clearly the need to focus on the condition of the UK's housing stock is becoming pressing, more so with the need to insulate homes more efficiently to meet climate change commitments and combat rising energy prices.

Within the fenestration industry, figures indicate that around 4.3 million window frames are replaced each year, representing a replacement rate of less than 2% per annum. The Group believes that a replacement rate significantly above this is required to address the ageing population of fenestration products.  Today's products offer significant benefits over those produced even just a decade ago and most of the installed population predates this by some way.

Similar dynamics are true for the cellular roofline business although it is also believed that further growth potential exists in this market as it has been estimated that cellular products have only c.50% penetration into the residential property market, with the balance still being largely installed with timber.  Replacement of cellular roofline products will also represent an opportunity for rainwater product sales which are typically renewed at the same time.

 

The New Build sector continues to flourish and demonstrate strong demand from which the Group benefits, albeit this is a less significant market in volume terms for the Group's traditional products than the RMI market. Opportunities are also developing for our products with the growth of off-site construction which is beginning to supplement traditional New Build activities in meaningful numbers.  Additionally, whilst social housing construction has continued to be subdued in the year, there is now strong political impetus for a return to growth in this area during this parliament, offering further potential opportunities for the Group which has traditionally held a strong position in the social housing sector.

The outlook for the markets we have entered via recent acquisitions is positive.  The Wood Plastic Composite decking market is relatively new in the UK and we believe will demonstrate good growth.  The Glass Reinforced Plastic canopy and dormer market, whilst being more mature, has also grown impressively as new housebuilders in particular look to improve efficiency via off-site manufacture.

One of the immediate consequences of the vote to leave the European Union has been the significant raw materials cost inflation that the sector has experienced as a result of the weakening of Sterling.  We continue to work hard to mitigate the impact of this to the bottom line of the Group and to our customers by identifying cost base and operational improvements where we can. However, as is the case with many construction materials, price increases have been unavoidable in order to address this issue fully in the market.

 

Whilst the full impact of the EU referendum will remain unclear for the medium term, the board is confident in the long-term fundamentals of the Group and the opportunities from the markets in which it operates.

 

Consequently, the Group's strategy continues to be 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.  We remain confident of our ability to progress these areas even in the immediate challenging market conditions.

 

 

 

Jonathan Bednall

Chief Executive Officer

6 April 2017

Financial Review

Total revenue for the year ended 31 December 2016 increased to £293.2 million (2015: £256.0 million), mainly as a consequence of the full year impact of the 2015 acquisitions of Stormking and Ecodek as well as the June 2016 acquisition of National Plastics.

 

Underlying operating profit was £25.6 million (2015: £20.1 million), representing growth of 27.4%, as a result of the full year effect of the acquisitions made in 2015 and ongoing cost savings and operational improvements from synergy and rationalisation projects. 

 

PVC polymer prices, which had started to increase in the second half of 2015, remained stable at this level during H1 2016. Post the UK referendum on membership of the EU, polymer prices increased sharply as suppliers implemented price increases in response to the weakening of sterling against both the US Dollar and Euro. The Group sought to mitigate the increasing polymer price in H2 by implementing price increases where market conditions would permit.

 

Operating profit increased to £24.0 million (2015: £19.1 million).

 

 

 

Year ended

Year ended

 

31 December 2016

31 December 2015

 

£m

£m

Revenue

 

 

Extrusion and Moulding

181.9

146.6

Fabrication and Distribution

111.3

109.4

Total

293.2

256.0

 

 

 

Underlying segmental operating profit

 

 

Extrusion and Moulding

24.5

17.7

Fabrication and Distribution

2.9

4.2

Underlying segmental operating profit before corporate costs

27.4

21.9

Corporate costs

(1.8)

(1.8)

Underlying operating profit

25.6

20.1

Amortisation of acquired intangible fixed assets

(1.1)

-

Acquisition expenses

(0.2)

(0.6)

Share-based payments

(0.3)

(0.4)

Operating profit

24.0

19.1

 

Extrusion and Moulding

·     Revenue increased by 24% to £181.9 million (2015: £146.6 million) during the year and underlying operating profit increased to £24.5 million from £17.7 million.

·     On a like for like basis, revenue before the 2015 acquisitions increased by 2%.

·     Operating margins improved to 13.5% compared to 12.1% in 2015, principally due to the higher margin products associated with the acquisitions made in 2015.  

 

Fabrication and Distribution

·     Revenue increased to £111.3 million (2015: £109.4 million).

·   On a like for like basis, before the 2016 acquisition and new branches, the Distribution businesses revenue increased by 1%. The Fabrication business revenue was down by 13% due to a depressed trade sector, operational issues in new build fabrication which have now been addressed and contract delays in social housing.

·     Consequently, underlying operating profit of £2.9 million was down from £4.2 million in 2015, reflecting the above issues, continuing operational inefficiencies in the Fabrication businesses as well as the costs of remedial action.

 

Cash flow

 

Year ended 31 December 2016

Year ended 31 December 2015

 

£m

£m

 

 

 

Pre-tax operating cash flow

30.8

23.8

 

 

 

Tax paid

(3.8)

(2.3)

Acquisitions

(10.2)

(20.9)

Acquisition of intangible fixed assets

(1.1)

-

Net capital expenditure

(11.6)

(9.0)

Finance leases

(0.2)

(0.2)

Net interest paid

(1.0)

(0.5)

Facility arrangement fee

-

0.3

Dividends

(9.1)

(6.7)

 

 

 

Net increase in net debt

(6.2)

(15.5)

 

 

 

Opening net (debt) / funds

(14.4)

1.1

 

 

 

Closing net debt

(20.6)

(14.4)

 

Pre-tax operating cash flow increased by 29.4% to £30.8 million (2015: £23.8 million) demonstrating the strong cash generative characteristics of the business.

 

Acquisitions

In 2016 the Group acquired National Plastics for total consideration of £10.0 million, net of cash acquired. No further consideration is due on this acquisition.

 

In 2015 cash consideration, net of cash acquired, of £20.9 million was paid in relation to the acquisitions of Ecodek (£3.2 million) and Stormking (£17.7 million).

 

Financing

The Group's banking facilities comprise a £20 million term loan, £35 million revolving credit facility and £5 million overdraft. The term loan and revolving credit facility are for a term of four years ending December 2019. As at 31 December 2016 the Group had drawn down £30.0 million of these facilities (31 December 2015: £35.0 million).

 

Dividends

In October 2016, we paid an interim dividend of 2.20 pence per ordinary share. The Board is recommending a final dividend of 4.40 pence per ordinary share to be paid on 5 June 2017 to shareholders on the register on 12 May 2016. This gives a full year dividend of 6.60 pence per ordinary share.

 

 

Christopher Empson

Group Finance Director

6 April 2017

 

Consolidated income statement for the year ended 31 December 2016

 

 

 

 

 

 

2016

2015

 

 

Note

 

£m

£m

 

 

 

 

 

 

 

Group revenue

2

 

293.2

256.0

 

Cost of sales

 

 

(200.6)

(178.6)

 

Gross profit

 

 

92.6

77.4

 

Distribution expenses

 

 

(27.8)

(24.3)

 

Administrative expenses

 

 

(40.8)

(34.0)

 

 

 

 

 

 

 

Underlying operating profit

 

25.6

20.1

 

 

 

 

 

 

 

Amortisation of acquired intangible assets

4

 

(1.1)

-

 

Acquisition expenses

4

 

(0.2)

(0.6)

 

Share-based payments

4

 

(0.3)

(0.4)

 

 

 

 

 

 

 

Operating profit

 

 

24.0

19.1

 

Net finance costs

 

 

(1.0)

(0.5)

 

Profit before tax

 

23.0

18.6

 

Taxation

5

 

(3.4)

(3.3)

 

Profit for the year and total comprehensive income

 

19.6

15.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

pence

pence

 

Basic

6

 

13.85

11.32

 

 

 

 

 

 

 

Diluted

6

 

13.77

11.23

 

 

 

 

Consolidated balance sheet as at 31 December 2016

 

 

 

2016

£m

2015*

£m

Assets

 

 

 

 

Non-current assets

 

 

 

 

Goodwill

 

 

65.7

56.1

Other intangible assets

 

 

4.5

3.6

Property, plant and equipment

 

 

37.9

33.1

Deferred tax

 

 

0.4

0.7

 

 

108.5

93.5

Current assets

 

 

 

Inventories

 

 

28.2

23.6

Trade and other receivables

 

 

41.4

41.5

Cash and cash equivalents

 

 

13.0

22.1

 

 

82.6

87.2

 

 

 

 

 

Total assets

 

 

191.1

180.7

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Other interest bearing loans and borrowings

 

 

16.3

15.6

Trade and other payables

 

 

53.1

50.0

Contingent consideration

 

 

7.3

-

Income tax payable

 

 

2.0

2.6

Provisions

 

 

0.5

0.6

 

 

 

79.2

68.8

Non-current liabilities

 

 

 

 

Other interest bearing loans and borrowings

 

 

17.3

20.9

Contingent consideration

 

 

-

7.3

Provisions

 

 

3.7

3.6

 

 

 

21.0

31.8

 

 

 

 

 

Total liabilities

 

 

100.2

100.6

 

 

 

 

Net assets

 

90.9

80.1

 

 

 

 

 

Equity

 

 

 

 

Ordinary share capital

 

 

0.1

0.1

Share premium

 

 

12.5

12.5

Merger reserve

 

 

23.9

23.9

Retained earnings

 

 

54.4

43.6

Total equity

 

90.9

80.1

 

·                                              

* restated, see note 3

 

 

 

 

Consolidated statement of changes in equity for the year ended 31 December 2016

 

 

 

 

Share capital

Share premium

Merger reserve

Retained earnings

Total

 

 

£m

£m

£m

£m

£m

Balance as at 31 December 2014

 

0.1

12.5

15.6

34.6

62.8

 

Comprehensive income:

 

 

 

 

 

 

Profit for the year

 

-

-

-

15.3

15.3

Total comprehensive income:

 

-

-

15.3

15.3

 

Transactions with owners recorded directly in equity:

 

 

 

 

 

 

Issue of shares

 

-

-

8.3

-

8.3

Share-based payments

 

-

-

-

0.4

0.4

Dividends

 

-

-

-

(6.7)

(6.7)

Total transactions with owners

 

-

8.3

(6.3)

2.0

 

 

 

 

 

 

 

Balance as at 31 December 2015

 

0.1

12.5

23.9

43.6

80.1

 

Comprehensive income:

 

 

 

 

 

 

Profit for the year

 

-

-

-

19.6

19.6

Total comprehensive income:

 

-

-

19.6

19.6

 

Transactions with owners recorded directly in equity:

 

 

 

 

 

 

Issue of shares

 

-

-

-

-

-

Share-based payments

 

-

-

-

0.3

0.3

Dividends

 

-

-

-

(9.1)

(9.1)

Total transactions with owners

 

-

-

(8.8)

(8.8)

 

 

 

 

 

 

Balance as at 31 December 2016

 

0.1

12.5

23.9

54.4

90.9

 

 

 

Consolidated cash flow statement for the year ended 31 December 2016

 

 

 

 

2016

2015

 

Note

 

£m

£m

Cash flows from operating activities

 

 

 

 

Profit for the year

 

 

19.6

15.3

Adjustments for:

 

 

 

 

Depreciation and amortisation

 

 

8.8

5.5

Net finance costs

 

 

1.0

0.5

Taxation

 

 

3.4

3.3

Share-based payments

 

 

0.3

0.4

Operating cash flow before movement in working capital

 

 

33.1

25.0

(Increase)/decrease in inventories

 

 

(2.4)

0.1

Decrease in trade and other receivables

 

 

1.4

0.3

(Decrease) in trade and other payables

 

 

(1.0)

(1.1)

(Decrease) in provisions

 

 

(0.3)

(0.5)

Pre-tax operating cash flow

 

 

30.8

23.8

Tax paid

 

 

(3.8)

(2.3)

Net cash inflow from operating activities

 

 

27.0

21.5

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Acquisition of subsidiary, net of cash acquired

3

 

(10.2)

(20.9)

Acquisition of property, plant and equipment

 

 

(11.6)

(9.0)

Acquisition of intangible assets

 

 

(1.1)

-

Net cash (outflow) from investing activities

 

 

(22.9)

(29.9)

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

Interest paid

 

 

(1.0)

(0.5)

(Repayment of borrowings) / new loans raised

 

 

(5.0)

35.0

Capital element of finance lease rental payments

 

 

1.9

0.4

Dividends paid

7

 

(9.1)

(6.7)

Net cash (outflow)/inflow from financing activities

 

 

(13.2)

28.2

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

 

(9.1)

19.8

Cash and cash equivalents at the beginning of year

 

 

22.1

2.3

Cash and cash equivalents at end of year

 

 

13.0

22.1

Secured bank loans

 

 

(29.7)

(34.7)

Finance lease liabilities

 

 

(3.9)

(1.8)

Net debt

 

 

(20.6)

(14.4)

1.    Basis of preparation

Whilst the financial information included in this Preliminary Announcement has been prepared on the basis of the requirements of International Financial Reporting Standards (IFRSs) in issue, as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRSs.

 

The Group expects to publish full Consolidated Financial Statements in April 2017. The financial information set out in this Preliminary Announcement does not constitute the Group's Consolidated Financial Statements for the years ended 31 December 2016 or 2015, but is derived from those Financial Statements which were approved by the Board of Directors on 5 April 2017. The auditor, KPMG 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 2016 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 have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs").

 

The Group's accounting policies are set out in the 2015 Annual Report and Accounts and have been applied consistently in 2016.

 

The financial statements are prepared on the historical cost basis except where Adopted IFRSs require an alternative treatment.

 

Going concern

The Group financial statements are prepared on a 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. The Group has considered its financial resources, together with the strong ongoing trading performance and cash generation. The bank facilities are available until December 2019. The Group has prepared a detailed business plan, including cash projections, for the period to 31 December 2017 and has applied sensitivities to these plans. These plans, and sensitised forecasts, demonstrate that the Group's current facilities provide adequate headroom for its current and future anticipated cash requirements.
 

 

 
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.

 

Reportable segments                    Operations

 

Extrusion and Moulding              Extrusion and marketing of PVC window profile systems, PVC cellular roofline and cladding, rigid rainwater and drainage products and Wood Plastic Composite ("WPC") decking products.  Moulding of Glass Reinforced Plastic ("GRP") building components.

 

Fabrication and Distribution       Fabrication and marketing of windows and doors, cellular roofline, cladding, rainwater and drainage products, and manufacture of glass sealed units.

 

 

 

 

2016

2015

 

 

£m

£m

 

 

 

 

Revenue from external customers

 

 

 

Extrusion and Moulding - total revenue

 

206.8

171.5

Inter-segment revenue

 

(24.9)

(24.9)

Extrusion and Moulding- external revenue

 

181.9

146.6

 

 

 

 

Fabrication and Distribution - total revenue

 

111.3

109.6

Inter-segment revenue

 

-

(0.2)

Fabrication and Distribution - external revenue

 

111.3

109.4

Total revenue from external customers

 

293.2

256.0

 

Segmental operating profit

 

 

 

Extrusion and Moulding

 

24.5

Fabrication and Distribution

 

2.9

4.2

Segmental operating profit before corporate costs 

 

27.4

21.9

Corporate costs

 

(1.8)

(1.8)

Underlying operating profit

 

25.6

20.1

Amortisation of acquired intangible fixed assets

 

(1.1)

Acquisition expenses

 

(0.2)

Share-based payments

 

(0.3)

(0.4)

Operating profit

 

24.0

19.1

Net finance costs

 

(1.0)

(0.5)

Profit before tax

 

23.0

18.6

 

 

 

 

3.    Acquisition of subsidiaries

Acquisitions in the year ended 31 December 2016

On 10 June 2016 the Group acquired the entire issued share capital of Specialist Plastics Distribution Limited and subsidiaries, together trading as National Plastics, for cash consideration of £10.0 million.

 

The following table summarises the consideration paid for Specialist Plastics Distribution Limited and the fair values of the assets and liabilities acquired at the acquisition date.

 

 

 

Specialist Plastics Distribution Limited

 

 

 

fair values on acquisition

£m

Recognised amounts of identifiable assets acquired and liabilities: assumed:

 

 

 

Acquired intangibles - brand

 

 

1.0

Property, plant and equipment

 

 

0.8

Inventories

 

 

2.2

Trade and other receivables

 

 

 

 

1.2

Cash and cash equivalent

 

 

-

Other interest bearing loans and borrowings

 

 

(0.2)

Trade and other payables

 

 

(3.9)

Income tax payable

 

 

(0.1)

Dilapidations provision

 

 

(0.3)

Deferred tax liability

 

 

(0.3)

Fair value of assets acquired

 

 

0.4

 

Goodwill

 

 

9.6

Total Consideration

 

 

10.0

 

 

 

 

Consideration

 

 

 

Cash consideration

 

 

10.0

Total Consideration

 

 

10.0

 

National Plastics is a chain of plastic distribution outlets with a network of depots across the UK.  National Plastics forms part of the Fabrication and Distribution segment.  In the period from acquisition to 31 December 2016 National Plastics contributed revenues of £11.8 million and £0.6 million profit before tax.  Had National Plastics been consolidated from 1 January 2016 the consolidated income statement would include revenues of £19.6 million and profit before tax of £1.0 million.

On acquisition, intangible fixed assets of £1.0m were recognised representing the National Plastics brand.  In addition to this a fair value adjustment of £0.3 million was made for property dilapidations.

The goodwill recognised of £9.6 million represents the collective local market knowledge of the workforce, plus the potential for cross selling and synergies that exist as a result of the larger scale of the Epwin Group.

 

 

Acquisitions in the year ended 31 December 2015

The following table summarises the adjustments made to the provisional acquisition accounting for the 2015 acquisitions of Vannplastic Limited, trading as Ecodek, and Stormking Plastics Limited. These are reflected as a restatement of the prior year balance sheet.

 

 

 

Stormking Plastics Limited fair values on acquisition

Vannplastic Limited fair values on acquisition

Provisional acquisition fair value of assets acquired

 

31.2

6.7 

Measurement period adjustment to goodwill

 

-

1.8

Fair value of assets acquired

 

31.2

8.5

 

 

 

 

Consideration

 

 

 

Cash consideration

 

20.3

3.6

Equity consideration - ordinary shares

 

6.7

1.6

Initial consideration

 

27.0

5.2

Contingent consideration paid in 2016

 

0.2

-

Contingent consideration due

 

4.0

3.3

Total consideration

 

31.2

8.5

 

During the measurement period, having had opportunity to review and reassess the forecasts prepared by the local management team and consider the range of possible settlements, the Group increased the provision for the contingent consideration payable in respect of the acquisition of Vannplastic Limited by £1.8 million, with a corresponding increase to goodwill, to reflect their best estimate of the amount payable under the earn-out agreement.

 

4.    Non-underlying items

 

 

 

2016

2015

 

 

 

£m

£m

Amortisation of acquired intangible assets

 

 

1.1

-

Acquisition expenses

 

 

0.2

0.6

Share-based payments

 

 

0.3

0.4

Expense

 

 

Non-underlying items included within operating profit include:

 

Amortisation of acquired intangible fixed assets

£1.1 million (2015: £Nil million) amortisation of brand and customer contract intangible fixed assets acquired through business combinations.

 

Acquisition costs

During 2016 the Group incurred professional fees and stamp duty of £0.2 million associated with the acquisition of Specialist Plastics Distribution Limited. In 2015 the Group incurred professional fees and stamp duty of £0.6 million associated with the acquisitions of Stormking Plastics Limited and Vannplastic Limited.

 

Share-based payments

The share-based payment expense of £0.3 million (2015: £0.4 million) comprises £0.2 million (2015: £0.3 million) in respect of the IFRS 2: Share-based payments charge for the Management Incentive Plan and £0.1 million (2015: 0.1 million) in respect of the SAYE scheme.

 

5.    Taxation

 

2016

2015

 

£m

£m

Current tax expense

 

 

Current period

3.9

3.0

Prior period

(0.5)

(1.0)

Total current tax charge

3.4

2.0

 

 

 

Deferred tax expense

 

 

Current period

(0.1)

1.2

Prior period

0.1

0.1

Total deferred tax charge

-

1.3

 

 

 

Total tax expense

3.4

3.3

 

UK corporation tax is calculated at 20.00% (2015: 20.25%) 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 20.00% (2015: 20.25%) as follows:

 

 

2016

2015

 

 

£m

£m

Profit before tax

 

23.0

18.6

Tax at standard UK corporation tax rate of 20.00% (2015: 20.25%)

 

4.6

3.8

 

 

 

 

Factors affecting the charge for the period:

 

 

 

Expenses not deductible

 

0.1

0.3

Losses utilised for which no deferred tax previously recognised

 

(0.6)

(0.2)

Difference in tax rate

 

(0.3)

0.3

Prior period

 

(0.4)

(0.9)

 

 

3.4

3.3

 

Factors that may affect future current and total tax charges

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Company's future current tax charge accordingly. The deferred tax asset at 31 December 2016 has been calculated based on these rates.

 

 

6.    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.

 

 

 

2016

2015

EPS summary

Pence

Pence

Basic EPS

 

 

Basic earnings per share

13.85      

11.32

 

 

 

Diluted EPS

 

 

Diluted earnings per share

13.77

11.23

 

 

 

       

 

 

Number of shares

 

 

 

 

2016

2015

 

 

 

 

 

No.

No.

Weighted average number of ordinary shares (basic)

 

 

141,518,595

135,198,199

Effect of share options in issue

 

 

 

 

829,487

1,061,378

Weighted average number of ordinary shares (diluted)

 

 

142,348,082

136,259,577

 

7.    Dividends
 

 

2016

2016

2015

2015

 

£m

Pence per share

£m

Pence per share

Previous year final dividend

6.0

4.25

3.8

2.83

Current year interim dividend

3.1

2.20

2.9

2.12

 

9.1

 

6.7

 

 

8.    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.

 

9.    Annual General Meeting

The Annual General Meeting of the Company will be held on 23 May 2017 at Eversheds Sutherland (International) LLP, 115 Colmore Row, Birmingham B3 3AL.

 

  

10.  Electronic communications

The full Annual Report and Accounts for the year ended 31 December 2016 are to be published on the Company's website, together with the Notice convening the Company's 2017 Annual General Meeting by 24 April 2017. 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. 

 


This information is provided by RNS
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