Epwin extends buyback programme

Shares in Epwin (EPWN) didn’t move much on the back of its full-year numbers, which is understandable given the company had spelled out what to expect in a January trading update.

Revenue at the PVC window and door maker came in slightly below consensus forecasts but underlying profit was slightly ahead, and at £25.5mn was up 19 per cent year on year – a creditable performance given conditions in the home improvement market. 

Net debt excluding leases fell to £14.4mn at the year-end, or less than half of its adjusted cash profit. And although the company makes a lot of adjustments (reported pre-tax profit has come in at around half of the underlying operating number for the past two years), it is generating a lot of cash. Net cash from operations increased by £1.2mn to £37.6mn, which has spurred management to extend a share buyback programme that began in November. It has so far spent £2.3mn hoovering up 3mn shares and now wants to buy back another 3mn. 

Epwin’s shares have gained 16 per cent over the past year and currently trade at a 12-month high, although they’re still 30 per cent below their post-pandemic peak and 45 per cent off their all-time high, so management clearly thinks this is a good use of cash. A more cautious investor may be concerned that if leases are factored in its balance sheet looks much less secure and the fact that most of its assets are intangibles. A valuation of eight times forecast earnings is below the five-year average of 10 times, but with end markets remaining soft the shares don’t seem like a screaming bargain. Hold.

Last IC view: Hold, 73p, 4 Apr 2023