Building products manufacturer Epwin (EPWN) made clear in August that it was having trouble with two of its customers, so a drop in headline profit for the six months to June 2017 came as no surprise.
One customer, Entu (ENTU), appointed administrators, who sold its trade and assets to a new entity. Fortunately, the new owners wish to continue trading and are currently being supplied with products by Epwin on a cash basis. Worryingly, the other customer, which is principally supplied by Epwin, sold its plastics distribution business to the latter's competitor, and the position there has "yet to be fully clarified".
Profit has also been hit by a sharp rise in raw material costs as a result of sterling weakness, and it has been difficult to pass on these increased costs. A programme to reduce its cost base is expected to run up exceptional costs of around £2.5m in the current financial year. Consequently, full-year profit is now expected to be slightly lower than earlier expectations. And while demand from the new-build housing sector remains strong, the repair, maintenance and improvement market remained subdued.
Analysts at Zeus Capital are forecasting pre-tax profit for the year to December 2017 of £21.3m and EPS of 12.3p (from £24.6m and 14.8p in 2017).
| EPWIN (EPWN) | ||||
| ORD PRICE: | 70p | MARKET VALUE: | £100m | |
| TOUCH: | 69.75-70.25p | 12-MONTH HIGH: | 130p | LOW: 65p |
| DIVIDEND YIELD: | 9.5% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 65p* | NET DEBT: | 30% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 143 | 10.4 | 6.1 | 2.2 |
| 2017 | 149 | 7.5 | 4.4 | 2.23 |
| % change | +5 | -28 | -28 | +1 |
| Ex-div: | 21 Sep | |||
| Payment: | 20 Oct | |||
| *Includes intangible assets of £70m, or 49p a share | ||||
