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Epwin overtaken by external factors

The group has been hit by a range of unfortunate turns
April 11, 2018

Management at Epwin (EPWN) will be hoping that sterling's recent appreciation against the US dollar and euro gathers momentum through 2018. The building products manufacturer saw top-line growth on the back of new product launches (and a full-year contribution from its National Plastics acquisition), but profitability was constrained due to currency-linked cost inflation, together with a £7.1m increase in administration expenses. Even on an adjusted basis, operating profit was down 12.9 per cent to £22.3m, but other factors beyond management's control undermined financial performance and investor sentiment.

IC TIP: Hold at 78p

The group took a £3.9m debt charge when one of its two largest customers, Entu (UK), entered administration, while the impact of the decision by another key customer – FTSE 250 constituent SIG (SHI) – to sell its plastics distribution business to a competitor is as yet unquantified. 

To improve efficiencies and margins, management is consolidating operations, and has closed one of the glass production plants, while hiving off a subsidiary that primarily served now-defunct customer Entu. Although rationalisation measures will continue through 2018, management has also made plans to develop new warehousing facilities in Telford.

Analysts at Panmure Gordon are forecasting a drop in adjusted pre-tax profit to £18.4m in 2018, giving EPS of 10.5p (from £21.1m and 11.8p in 2017).

EPWIN (EPWN)   
ORD PRICE:78pMARKET VALUE:£111m
TOUCH:75-78p12-MONTH HIGH:130pLOW: 65p
DIVIDEND YIELD:8.6%PE RATIO:11
NET ASSET VALUE:66p*NET DEBT:27%
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013**2647.71.7na
201426018.611.84.24
201525618.611.36.37
201629323.013.96.60
201729812.07.086.69
% change+2-48-49+1
Ex-div:10 May   
Payment:4 Jun   
*Includes intangible assets of £69.6m, or 49p a share **Pre-IPO figures