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Epwin Group deliver resilient performance ahead of expectations

Epwin Group plc (LON:EPWN), the leading manufacturer of low maintenance building products, supplying the Repair, Maintenance and Improvement, new build and social housing sectors, has announced its half year results for the six months to the 30th June 2020.

Financial highlights

 H1 2020H1 2019
Underlying operating (loss)/profit 1-1.89.4
Underlying operating margin6.70%
Adjusted (loss)/profit before tax 1-4.17.3
(Loss)/Profit before tax-4.86.7
Adjusted EPS 2(2.24p)4.20p
Basic EPS – continuing(2.73p)3.78p
Dividend per share1.75p
Net debt-81.7-88.4
Net debt (excluding IFRS 16)-21.3-29.2
Net debt to adjusted EBITDA 30.8x1.0x

(1)   Stated before amortisation of acquired other intangible assets, share-based payments and other non-underlying items.

(2)   Adjusted EPS is calculated based on continuing profit after tax adding back amortisation of acquired other intangible assets, share-based payments and other non-underlying items.

(3)   Adjusted EBITDA based on the FY19 audited results.

Financial headlines

·    Trading was ahead of Board’s revised expectations. Q2 2020 significantly affected by COVID-19 pandemic following a strong period up to the third week of March, with H1 performance impacted accordingly.

·    Financial position remains strong:

o  Net debt (excluding IFRS 16) 0.8x adjusted EBITDA based on the FY19 audited results, reduced to £21.3 million (HY19: £29.2 million).

o  Significant headroom on banking facilities with c.£60 million of headroom at the half year, supported by management actions taken to conserve cash.

o  Banking covenants met as at half year end; management do not anticipate the need to seek a variation or waiver to its covenants. No additional funding has been required.

·    The Board recognises the importance of dividends for shareholders:

o  Given the disruption and uncertainty caused by COVID-19, the Board is not recommending an interim dividend for 2020.

o  The Board intends to recommence dividend payments as soon as practical, subject to full year financial performance and greater visibility of prospects for 2021.

Operational headlines

·    Majority of operations restarted in May, with additional safe working practices implemented (having closed all operations on 25 March 2020 in response to the COVID-19 pandemic).

·    Significant progress made on Group’s site consolidation programme despite lockdown delays:

o  Construction largely complete on new Telford distribution and finishing facility, expected to be fully operational by the end of 2020.

o  This industry-leading facility will deliver operational efficiencies from 2021 with higher levels of automation supporting the growth of both our existing and planned new products.

·    Continued product development activities during the period with the launch of the Adek aluminium decking product in Q1 2020, supplementing the 2019 launches of the Stellar aluminium window system and the Dekboard PVC decking product.

Current Trading and Outlook

·    Demand stronger than anticipated from customers serving the RMI market, which represents around 70% of historic Group revenues.

·    Overall Group revenue on like for like sales for the month:

o  July up 2%

o  August up 3%

·    Strong bounce back in the window systems and cellular extrusions businesses, which form part of the Extrusion and Moulding segment of the Group. Like for like sales for the month on the prior year:

o  July up 12%

o  August up 7%

·    Capacity continues to be reviewed and adjusted to meet changing levels of demand across the Group’s operations.

·    Demand for window systems extrusions has been particularly strong and sustained, such that lead times have increased significantly and materials supply chains are now under pressure.

·    New build and Social Housing sectors’ demand was initially slower to return, but call-offs now increasing steadily as build programmes and refurbishment schemes are re-established.

·    As previously stated, the impact of COVID-19 will inevitably have a material impact on trading for the current year as a whole, however, at this stage the effect is anticipated to be less than the initially expected, with the Board expecting significantly improved performance in H2.

·    Medium-term drivers for the RMI market remain positive.

Jon Bednall, Epwin Group Chief Executive Officer, said:

“It has been encouraging to see the resilience of the underlying demand for our products, particularly with the UK RMI sector performing strongly since June.  Demand in this sector is sustaining at much higher levels than anticipated and, with other markets also picking up, we continue to ramp up our activities and work with our supply chain partners to meet this demand.   

“Whilst we remain in unprecedented times and must continue to manage its challenges, we are optimistic for trading prospects in the second half of the year and expect to make further strategic progress by concluding our current site consolidation and rationalisation programme as well as continuing with our product development and other strategic initiatives. 

“Looking further ahead, the medium and long-term drivers for our markets remain positive, and we are confident that we will emerge from this period with the financial strength and operational flexibility to continue to take advantage of the opportunities that will be presented.

“The Group has a strong track record of making dividend payments and, whilst these remain suspended due to the current levels of uncertainty, the Board is mindful of the importance of dividends to our shareholders and will review the position when it has visibility of the full year.”

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