Join our community of smart investors

Epwin fights back

Cost efficiences are expected to show through next year
September 13, 2018

Epwin (EPWN) coped reasonably well with significant headwinds in the six months to June. The loss of two important customers, input cost inflation and a subdued repair, maintenance and improvement market all served to trim profits from a year earlier.

IC TIP: Buy at 83.5p

However, the low maintenance building products manufacturer has taken steps to improve efficiency and reduce costs. These include closing the glass plant site in Newton Abbot, with the Macclesfield extrusion facility and the Cardiff fabrication plant both earmarked for closure in 2019. These will be replaced with a new facility planned for Telford, reducing operating sites and costs from the second half of 2019.

Input costs continued to rise, up around 4 per cent, and although selling prices have been increased, the benefits will take time to come through. Crucially, the business model remains highly cash generative, with the cash conversion rate doubling from a year earlier to 160.6 per cent. While turnover in extrusion, moulding and fabrication was lower, the distribution side performed well, pushing like-for-like revenue ahead by 2 per cent, and the acquisition of Amicus Building products contributed £5.7m.

A lack of market confidence suggests that trading conditions will remain tough, especially ahead of any Brexit deal. Turnover in the second half is expected to be higher than in the first half, while operational efficiencies will also start to show through.

Analysts at Panmure Gordon are forecasting adjusted pre-tax profit for the year to December 2018 of £17.8m and EPS of 10.1p (from £21.1m and 11.8p in 2017).

EPWIN (EPWN)   
ORD PRICE:83.5pMARKET VALUE:£119m
TOUCH:83-84p12-MONTH HIGH:91pLOW: 69p
DIVIDEND YIELD:7.4%PE RATIO:14
NET ASSET VALUE:63p*NET DEBT:32%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20171507.54.42.23
20181425.43.11.7
% change-5-28-29-24
Ex-div:20 Sep   
Payment:19 Oct   
*Includes intangible assets of £74.3m, or 52p a share