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Epwin Group Plc

Epwin Group PLC Q&A with Zeus Capital (LON:EPWN)

Epwin Group plc (LON:EPWN) is the topic of conversation when Zeus Capital’s Equity Research Director Andy Hanson caught up with DirectorsTalk for an exclusive interview.

Q1: Epwin Group, they’ve just provided a half-year update, can you talk us through the highlights?

A1: They really just flagged that trading in the first half of the year has been good, revenues in line with last year but importantly, like-for-like revenue growth is ahead of last year. I think this will correspond to a reasonable performance in terms of profitability relative to last year as well so in terms of trading, everything going along pretty well which is good in a difficult market.

The important thing today is the announcement of the sale & leaseback that they’ve entered on the new facility up in Telford, this will generate an £8 million in cash surplus net during the year which we then factor into our net debt forecast.

Q2: Just talking about forecast, have you had to adjust it then?

A2: The only big change today has been in net debt & we’ve reduced our net debt from £25 million down to £17 million for FY19 so a big reduction. This now leaves net debt at just 0.6 times EBITDA which is a very conservative level relative to most companies in the UK, mid-cap sector, at the moment.

In terms of P&L, we’ve not changed our P&L forecasts & we’re very happy as I say with the trading update in terms of the revenue performance & the profit performance which Epwin Group are very confident of achieving our FY forecasts.

Q3: How do you see the Epwin Group valuation in terms of an investment?

A3: The valuation does look very very compelling. On an EV/EBITDA basis, trading a little over 4 times which is very cheap, PE is sub 7 times & we have got a yield crossover in the fact the shares are on a perspective yield of over 7%.

So, the market, I think, is undervaluing the shares at the moment, I think that’s because the market is still focussing on the cost headwinds & the customer losses that the business experienced in FY17 & FY18.

I think the rating will improve once the company achieves its FY19 numbers so I’m still very confident on that front.