# Epwin Group COVID-19 update

- Link: https://www.directorstalkinterviews.com/epwin-group-covid-19-update/412809938
- Published: 2020-03-26T07:22:40+00:00
- Author: Amilia Stone

**Epwin Group PLC **(LON:EPWN) has announced that it will implement a controlled
shut down of its operating facilities for a temporary period in response to the 
anticipated reduction in demand. FY19 results, that had been scheduled to be released
on the 2^(nd) April, will now also be delayed as per guidance from the FCA that 
has been supported by the QCA. This is in line with many other companies. Epwin 
benefits from a strong balance sheet that has significant headroom and will come
through this difficult period in a strong position relative to competitors that 
have much weaker balance sheets.  Frustratingly trading in the new year had started
well and was ahead of budget.

**FY19 results as expected:** Whilst the actual results have been delayed in line
with FCA guidance, today’s statement does indicate headline numbers are in line 
with the pre close trading update in late January and marginally ahead of ZC forecasts.
Net debt reduced significantly from £24.8m to £16.4m as the business continued to
generate strong levels of FCF despite a difficult RMI market. In addition, the business
has made significant progress in the year with many of its strategic priorities,
particularly in broadening the product offering.

| **£m** | **2018A** | **2019E^** | **2019E** | **_% change_** | 
| Revenue | 281.1 | 282.1 | 281.3 | _0.3_ | 
| Adj. Operating Profit | 18.7 | 19.1 | 18.8 | _1.3_ | 
| _margin (%)_ | _6.7_ | _6.8_ | _6.7_ | _ _ | 
| Net (Debt)/Cash | (24.8) | (16.4) | (16.4) | _0.0_ |

_^FY19 forecasts updated for headline numbers provided in statement_

_Source: Company data, Zeus Capital estimates_

**Strong balance sheet with significant headroom: **Net debt at the year end of 
£16.4m equated to just 0.6x EBITDA. Management had renewed banking facilities in
the middle of last year. As a result, it has significant facilities of £75.0m in
place, £65.0m RCF and £10.0m overdraft, until June 2022. With a focus on preserving
cash the remainder of the RCF has been drawn down and cost cutting initiatives in
the form reduced capital expenditure have been implemented. Management will also
make use of additional commitments from government to support businesses, such as
the Coronavirus Job Retention Scheme, should it be appropriate. Epwin Group will
not pay the final dividend (ZC estimate 3.3p) for FY19, this is in line with most
businesses that have updated the market on COVID-19 as they attempt to preserve 
cash.

**Forecasts: **The pre close trading update, 23^(rd) January, in unison with today’s
statement provide an overview of the year end results for FY19. Revenue, EBIT and
net debt are all in line with expectations. Frustratingly, the new year had started
well and was ahead of budget until the current pandemic has forced the temporary
closure of sites. As with all peers in the sector, there will be an impact to forecasts
from the closure, but it is too early to quantify. ZC estimates for FY20 and FY21
are left unchanged at this juncture but will be updated as soon as we have greater
clarity on the potential impact.  .

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