TIDMEPWN
RNS Number : 5180V
Epwin Group PLC
15 April 2021
15(th) April 2021
This announcement contains inside information for the purposes
of Regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310 (as amended). Upon the publication of this
announcement via a Regulatory Information Service, this inside
information is now considered to be in the public domain.
Epwin Group Plc
Final results for the year ended 31 December 2020
Well positioned after strong H2 recovery
Epwin Group Plc (AIM: EPWN) ("Epwin" or the "Group"), the
leading manufacturer of low maintenance building products,
supplying the Repair, Maintenance and Improvement ("RMI"), new
build and social housing sectors, announces its full year results
for the year ended 31 December 2020.
2020 Financial highlights
GBPm 2020 2019
------------------------------------------ ------- -------
Revenue 241.0 282.1
Underlying operating profi t (1) 9.4 21.2
Underlying operating margin (1) 3.9% 7.5%
Statutory operating profit 6.3 17.2
Adjusted profit before tax (1) 5.0 16.4
Profit before tax 1.9 12.4
Adjusted EPS (1) 3.99p 10.29p
Basic EPS 1.82p 7.49p
Dividend per share 1.00p 1.75p
Covenant net debt (2) (18.5) (16.4)
Net debt (including IFRS 16: Leases) (96.9) (80.4)
Covenant net debt to adjusted EBITDA (2) 1.3x 0.6x
Underlying operating cash conversion (3) 252% 164%
------------------------------------------ ------- -------
(1) Adjusted for amortisation of acquired other intangible
assets, share-based payments expense and other non-underlying
items.
(2) Covenant net debt and covenant net debt to adjusted EBITDA
represent pre-IFRS 16 measures.
(3) Underlying operating cash conversion is pre-tax operating
cash flow as a percentage of underlying operating profit.
Financial headlines
-- Results impacted by COVID-19 closure in H1
-- Strong H2 performance, gaining momentum:
o Revenues up 4% on H2 2019
o H2 2020 underlying operating profit GBP11.2 million (H2 2019
GBP11.8 million)
-- RMI demand quicker to return and stronger than newbuild and social housing
-- Robust financial position maintained:
o Net debt 1.3x adjusted EBITDA
o Strong cash generation
o Significant headroom in banking facilities of over GBP50
million at the year end, facilities now extended to June 2024
o All pre-COVID banking covenants met with no variation or
waivers
o No additional funding has been sought from shareholders or
banks
-- Recommencement of dividend payments, with proposed final dividend of 1.00 penny per share
Operational and strategic headlines
-- Health and safety prioritised in response to the COVID-19 pandemic
-- Levels of demand were very high for extruded products in H2,
particularly window profile systems, where capacity was exceeded
for much of H2
-- GRP moulding and other new build activities slower to return
and at more modest levels. Now returning to pre-COVID levels
-- Positioned to exit 2021 with leaner operations:
o Ongoing development of operations to improve processes and
efficiency
o Investment in Telford logistics and finishing facility now
complete
-- Construction completed on budget with final receipt of GBP5.2
million received in Q1 2021 and project generating a pre-tax net
cash surplus of GBP10.0 million
-- Five warehousing and finishing facilities consolidating into
one
-- Houses new aluminium window system operations
-- Operating savings and aluminium contribution will offset
increase in rent, benefits from end of 2021
-- Enhanced product portfolio to augment UK market position
o Aluminium window system, Stellar, launched Q2 2019
o Aluminium decking product, Adek, launched Q1 2020
o PVC decking product launched in 2019
-- Acquisition of SBS in Q1 2021
o A leading and well-established regional distributor of plastic
building products, increasing access to the Group's product
offer
o 8 trade counters in Cumbria, Northumberland and Southern
Scotland
o 4x EBITDA multiple, including synergistic benefits
-- New ESG framework is being established
Current trading and outlook
-- H2 2020 recovery has continued into 2021 with stronger than
anticipated demand across most of the business in Q1 2021:
o Revenues in the first three months of the year ahead of 2020
and 2019
o Encouraging progress, gaining momentum with anticipated growth
from new products, which have been well received. Robust demand
from customers serving the RMI market (c.70% of Group revenues)
o New build market continues to improve following a slower
recovery from the initial pandemic lockdown, with some Local
Authorities and Housing Associations experiencing delays to
contract starts
-- Supply chains have been and continue to be under pressure as
a result of the pandemic and subsequent acceleration of demand
-- PVC raw materials supply remains under pressure with
shortages from global events driving up the price of resin
significantly to all-time highs. Steps are being taken to recover
these costs in the market in an equitable manner
-- COVID-19 period has stimulated demand for home, garden and
leisure space spending as it has highlighted the need for
improvements, addressing maintenance and more recently for creating
workspace. These trends seem set to continue. Medium and long-term
drivers for the RMI market remain positive:
o An ageing, underinvested and historically poorly maintained
housing stock
o Environmental and safety concerns driving legislation that
will require improvements to homes on a larger scale than just
basic maintenance
o New build is anticipated to grow through underlying demand and
government incentives
o Social new build is also likely to see growth
-- The Group is reviewing opportunities to accelerate capex
following the 'super deduction' announcement in the March 2021
budget
-- Potential M&A opportunities emerging
Jon Bednall, CEO of Epwin, commented:
"Our performance this year and the strong underlying demand from
our markets have been encouraging against the backdrop of the
disruption caused by the pandemic.
The Board is grateful for the hard work and continual effort of
all of our people in what has been a very difficult period for
everyone to adjust and cope with. Their combined efforts have
demonstrated the resilience of our business - from the closure of
operations and uncertainties of the second quarter through to the
supply chain challenges and unprecedented increases in demand for
our extruded products in the second half. Their health and safety,
along with that of our customers and suppliers, is and remains our
utmost priority.
Despite the continued uncertainties in the wider economy, we
look forward to a more positive 2021. With a strong balance sheet,
buoyant demand and robust operations supported by the medium and
long-term drivers of our markets, we will refocus our efforts on
delivering on our strategic priorities for the business and our
shareholders."
Contact information
Epwin Group Plc
Jon Bednall, Chief Executive
Chris Empson, Group Finance Director 0203 128 8168
Shore Capital Limited (Nominated Adviser
and Joint Broker)
Corporate Advisory
Edward Mansfield / Daniel Bush / Hugo 0207 408 4090
Masefield
Corporate Broking
Fiona Conroy
Zeus Capital Limited (Joint Broker)
John Goold / Dominic King 0203 829 5000
MHP Communications
Reg Hoare / Charlie Barker / Florence
Mayo / Pandora Yadgaroff 0203 128 8168
epwin@mhpc.com
Forthcoming dates:
Ex-dividend date 13 May 2021
Dividend record date 14 May 2021
Annual General Meeting 25 May 2021
Dividend payment date 7 June 2021
About Epwin
Epwin is the leading manufacturer of low maintenance building
products with significant market shares, supplying the Repair,
Maintenance and Improvement (" RMI"), new build and social housing
sectors.
The Company is incorporated, domiciled and operates principally
in the United Kingdom.
Information for investors can be accessed
www.epwin.co.uk/investors/
Chairman's Statement
People
Firstly, I would like to acknowledge and thank all of our
dedicated employees during what has been an unprecedented period.
Our employees were critical to the resilient performance of the
Group over the past year and their expertise and commitment are
what makes Epwin a market-leading business and will drive its
future success. Our overriding principle during the pandemic has
been to keep our employees and their families safe whilst
protecting the business and following the Government's
guidance.
On behalf of the Board and our shareholders, I would like to
thank all of our employees and their families for the commitment
and flexibility they have shown during these difficult times.
Impact of COVID-19
Following a strong start to 2020, with trading ahead of the
Board's expectations, the pace at which COVID-19 emerged from being
an issue on the other side of the world to one that would impact
our daily lives took everyone by surprise, including Governments,
businesses and wider communities.
In the third week of March, the Group suspended operations
following the Government's COVID-19 announcements, which also
resulted in a significant reduction in demand from the Group's
customers. The majority of operations remained suspended throughout
April, only starting to recommence during May.
During this period the Board took swift action to protect the
business and its balance sheet, fully drawing down on facilities
and engaging with suppliers, landlords and HMRC on a transparent
basis. The cash management measures taken meant that the Group was
able to maintain its strong balance sheet and significant headroom
on its banking facilities, without raising additional funds from
shareholders or other financial institutions. At 31 December 2020,
all payment deferrals, with the exception of the 31 March 2020 VAT
balance which all businesses have been allowed to defer by HMRC,
had been caught up. The VAT balance will be cleared by the end of
2021.
One of the most challenging aspects of the year was judging the
timing and phasing of the restart of the Group's operations. As a
capital-intensive manufacturing business with a significant
overhead base, there was a risk of restarting our operations too
early and incurring significant costs; however, restarting too late
could have led to an inability to service customers. Again, the
divisional management teams judged this well, helping the business
control costs whilst also attempting to meet the extraordinary
demand levels experienced in the second half of the year.
Resilient performance with strategic progress
As well as adapting to the trading and operational challenges
the COVID-19 pandemic posed, the Group has been able to continue to
progress its strategy of operational improvement, broadening the
product portfolio and capabilities, selective acquisitions,
cross-selling and market-share growth.
Operational improvement
The Group completed the construction of its new, purpose-built
warehousing and finishing facility in Telford on time and on
budget. The transfer and commencement of warehousing operations has
been delayed as a result of both the impact of the pandemic and the
extremely high levels of demand in our Window Systems business
during the second half of the year.
Having consolidated the window profile extrusion operations in
2018, all finishing, warehousing and logistics operations will now
also be consolidated on one site, reducing the Window Systems
footprint from seven sites to two. This new facility will further
enhance Group operations, with the benefits expected to start being
delivered from the second half of 2021.
Product development
The Group continues to invest in and broaden its product
portfolio with the launch of the Adek aluminium decking product in
Q1 2020, supplementing the 2019 launches of the Stellar aluminium
window system and the Dekboard PVC decking product.
The full impact of the Stellar aluminium window system was
affected by the inability to set up customers' factories to
fabricate the product during the pandemic, however this process
started to pick up pace in the second half of 2020 and demand grew
through Q4.
Dekboard volumes continued to grow year on year, up 22% despite
the pandemic, supported through the acquisition of the PVS decking
installation business in 2019.
Acquisitions
In line with the Group's strategic objectives, on 5 January 2021
the Group acquired the trade and related assets of SBS (Cumbria)
Limited ("SBS"), a leading and well-established distributor of
plastic building products operating across eight branches in
Cumbria and Southern Scotland.
SBS was acquired for GBP3.8 million on a cash and debt free
basis. In the year to February 2020, SBS revenues were around GBP6
million. Including synergistic benefits, we anticipate an EBITDA
multiple of four times, with the full benefits of the acquisition
being realised from the end of 2021. This acquisition further
increases the geographical coverage of the Group's plastic
distribution business and offers the opportunity for synergies and
wider expansion over time alongside the Group's key partnerships
with independent distributors.
Financing
The Group's banking facilities comprise of a revolving credit
facility of GBP65.0 million and an overdraft of GBP10.0 million,
recently extended through to June 2024. The strength of the Group's
balance sheet, available facilities and the cash management
measures implemented during the course of the pandemic have meant
that the Group has been able to manage within its funding headroom
and without the need to waive or vary its banking covenants, or
require to raise additional funds from debt providers or
shareholders. With covenant net debt to adjusted EBITDA of 1.3x at
31 December 2020, 0.7x based on the normalised FY19 audited
results, the Group has the facilities and significant flexibility
to continue to pursue its strategy during these unprecedented
times.
Results
Both revenues and profit were lower than their 2019 comparatives
due to the decision to close the business during April 2020 in
response to the pandemic. Revenue for the year to 31 December 2020
was GBP241.0 million (2019: GBP282.1 million) and underlying
operating profit was GBP9.4 million (2019: GBP21.2 million).
Statutory operating profit was GBP6.3 million (2019: GBP17.2
million).
The cash generation of the Group continued to be strong despite
the volume and profit impact of the pandemic. Pre-tax operating
cash flow was GBP23.7 million (2019: GBP34.8 million),
demonstrating the continued strong cash generation of the business,
with a cash conversion rate of 252% (2019: 164%). The Group
finished the year with covenant net debt of GBP18.5 million (2019:
GBP16.4 million), 1.3x adjusted EBITDA , and well within covenant
levels.
Dividends
As previously reported, the Board continues to be mindful of the
importance of dividends to shareholders. Based on the performance
for the year, cash generation of the business and year end net debt
position, as well as recognising that no final dividend was
declared in respect of the year ended 31 December 2019, the Board
intends to recommend a modest final dividend of 1.00 penny per
share in respect of the financial year ending 31 December 2020.
ESG
Launch of ESG framework
As detailed in the Strategic report, this year we have aligned
our operations with the United Nations (UN) Sustainable Development
Goals ("SDGs"), providing an ESG framework to benchmark our
operations against.
Sustainability
Minimising our impact on the environment is a priority for the
Group - in terms of compliance with relevant legislation and
accreditations, as well as working across our supply chain to
maximise production efficiency, recycle where possible and reduce
packaging, waste, power and water consumption and emissions.
The Group will continue to use its influence and resources to
challenge outdated industry attitudes to drive the move from high
maintenance unsustainable products to sustainable long-life
alternatives like Epwin's.
Corporate governance and AGM
The Board of Directors, including myself as Chairman,
acknowledges the importance of the ten principles set out in the
QCA Code and details of our compliance with the Code can be found
in the Corporate Governance section of the Annual Report as well as
on the corporate website.
We regret that current COVID-19 restrictions once again mean
that shareholders will not be able to attend the Company's AGM.
Further details (including in relation to shareholders' questions
and proxies) are set out in the Annual Report and Accounts.
Summary and outlook
The Group's trading performance during the second half of 2020
and the strategic progress it has made are extremely encouraging as
the business adapted to the unprecedented circumstances and trading
environment.
The Group completed a critical step in its site consolidation
and rationalisation programme. The completion of construction at
the new Telford site will streamline the Window Systems logistics
operations and improve customer service, whilst increasing capacity
and providing a base for our new aluminium operation. Completing
the consolidation and integration of Window Systems logistics
operations during 2021 will put the Group in a strong position;
allowing it to focus on servicing its customers from well invested
core operations where it has market-leading positions and benefits
from significant barriers to entry.
Our strategy continues to be based on operational improvement,
broadening the product portfolio and capabilities, selective
acquisitions, cross-selling and market share growth in key sectors
to build a sustainable, resilient business, prepared for growth as
market conditions improve and pent-up demand takes effect.
2021 has started well, with trading u p to the middle of March
slightly ahead of the Board's expectations despite the poor weather
experienced in January and early February. However, we are mindful
of uncertainties that remain, particularly the impact COVID-19 will
have on the economy and employment.
PVC resin prices will be a headwind, certainly in the short
term, following force majeure and planned plant maintenance at two
of the largest PVC resin producers with operations in Europe during
Q4. This has severely restricted supply in the final quarter of
2020 and continued to put pressure on resin availability and prices
during the first quarter of 2021. The Group's strong relationships
with PVC resin suppliers, and enhanced contracts, have enabled it
to secure material supply, however, the tightened market conditions
have driven the price of PVC to its highest ever levels. The Group
remains confident of its ability to work with customers to manage
cost inflation in an equitable manner.
In the longer term, the outlook remains favourable, driven by an
ageing and underinvested housing stock and environmental and safety
concerns driving legislation and initiatives that will require
improvements to homes on a larger scale than solely essential
maintenance.
Andrew Eastgate
Chairman
14 April 2021
Business review
Strategic and operational review
Trading was ahead of the Board's expectations up until the third
week of March 2020 when the Group suspended operations following
the Government's COVID-19 announcements, which also resulted in a
significant reduction in demand from the Group's customers.
Throughout the first lockdown the Group maintained a low level
of supply from inventories, where it was safe to do so, for those
customers that continued to operate. However, the majority of
operations remained suspended throughout April, only recommencing
during May; albeit at much reduced levels of activity and after the
implementation of enhanced health and safety procedures in line
with Government guidance. The Group scaled up operations in line
with increased market demand and by the end of June all operations
were active to varying degrees.
In order to protect the Group's balance sheet and maintain
liquidity, in response to the March 2020 lockdown, the Board
immediately drew down on the Group's GBP75.0 million of banking
facilities. The Group also sought to leverage its strong
relationship with its suppliers and landlords by engaging in
dialogue and agreeing payment deferrals, as opposed to a number of
other business and competitors that closed operations and
immediately stopped making supplier payments. This ensured that
when operations recommenced, the Group was in a strong position to
ensure continuity of supply from suppliers whose own supply chain
and stock levels would be under pressure. In line with the
arrangements made with suppliers, by the end of the year the Group
had ensured all accounts had been paid up to date, with the
exception of the Q1 2020 VAT balancing payment which HMRC has
allowed all taxpayers to defer through 2021.
During this period, with large parts of its operations closed,
the Group made use of the Government's Coronavirus Job Retention
Scheme ("CJRS") and other reliefs. The CJRS was invaluable as it
ensured, as far as possible, that the Group was able to retain its
committed and knowledgeable workforce, one of its key,
market-leading assets, during this uncertain time. The Group
continued to make use of the CJRS throughout the first lockdown and
continued to do so through some of H2, albeit at a much reduced
level. As of November 2020 the Group was no longer making use of
the scheme. Unfortunately, in parts of the business where volumes
have not returned to 2019 levels during H2, the business has had to
take a view on short to medium-term volumes and the efficiency of
operations and as a result some restructuring and redundancies were
required, particularly at those businesses servicing new build and
social housing markets.
The Group began the cautious restart of its operations in May.
Due to uncertainty around the returning level of activity in our
markets, the decisions made around the timing, order and scale of
the restart of operations was critical to the second half
performance and profit. The risk, as a large manufacturing business
which is expensive and time consuming to restart, was that
underlying demand may have deteriorated following the initial
pent-up volumes.
In this regard the Group took a cautious approach, our national
network of distribution operations acting as a good barometer of
the level of market activity, particularly in RMI and newbuild. Our
extrusion operations were able to initially supply from stock
before restarting the infrastructure feeding the extrusion lines.
The extrusion lines and other operations were then restarted in a
phased manner as demand built and was established to be underlying,
not just an initial burst of pent-up demand.
By the end of June 2020, all operations were back up and running
to varying degrees according to demand levels in the markets they
supply.
Demand levels in the RMI market were very high throughout H2, in
excess of 2019 levels. It is believed this was due to household
savings increasing as a result of being unable to spend on items
such as holidays and eating out, whilst at the same time people
were at home more and spending on repairs and maintenance, as well
as wanting to improve their home environment.
The levels of RMI demand during H2 put significant pressure on
our capacity and operations. Our market-leading cellular extrusion
operations were able to capitalise on their expertise, good stock
levels and strong relationship with suppliers to ensure operations
restarted smoothly with minimal disruption. This was particularly
an issue for businesses that use PVC due to instances of force
majeure and plant outages at a number of the main European PVC
suppliers. However, our relationships with these suppliers enabled
us to minimise the impact of the market-wide PVC resin shortage,
which was not the case for all of our competitors. The ability to
have stock on the shelves and our service offering enabled our
cellular extrusion businesses to meet these high levels of demand
and take market share during H2 as our competitors struggled to
restart their operations and then secure PVC resin supply.
Window profile extrusion had a more challenging H2, having not
had the seasonal H1 stock build, and off the back of our success in
recent years with the Optima window system and new customer wins,
demand, particularly from the RMI market, far outstripped capacity
and 2019 levels for a number of months following the restart of
operations. This was further compounded by the force majeure and
planned plant maintenance at the PVC resin suppliers, as well as
the continuing movement in market trend towards foiled profile,
which adds a further complexity to operations through an additional
production stage and the need to hold further stock. As a result,
as well as additional COVID-19 safe operating costs and processes,
operational inefficiencies crept into the Window Systems operations
as the business was challenged to keep up with significant
increases in customer demand levels.
Although the Group has been able to secure the material it
required during the industry-wide shortage of PVC resin, with the
risk around Brexit at the year end, during H2 the Group sought to
further enhance the supply arrangements it has in place. This has
enabled it to largely overcome the raw materials shortages faced by
the industry as market demand spiked in H2 2020, particularly for
the supply of PVC resin.
The new build market was slower to return following the first
lockdown and the phased restart of our Stormking GRP moulding
operation reflected this. Housebuilders looked to maximise
liquidity by selling plots nearing completion that required minimal
external works/components, as opposed to commencing the development
of new plots which utilise our externally fitted building
components. However, by Q4 volumes in our newbuild facing
businesses had returned to 2019 levels.
The social housing market continued at levels lower than 2019
throughout H2 with Local Authorities and Housing Associations
seeking to complete projects. However, new contracts are seeing
their commencement delayed.
Strategic progress
Construction of the Group's new logistics and product finishing
facility in Telford was completed on time and on budget in 2020,
realising a pre-tax net cash surplus of GBP10.0 million across the
development period. The facility commenced operations at the end of
the year. Full commissioning of this facility was delayed as a
result of the impact of the pandemic and then due to the extremely
high levels of demand in our Window Systems business during H2.
Having consolidated the window profile extrusion operations in
2018, all finishing, warehousing and logistics operations will now
also be consolidated on one site, reducing the Window Systems
footprint from seven sites to two. This new facility will further
enhance Group operations, with the benefits expected to be
delivered by the end of 2021.
On 5 January 2021, the Group acquired the trade and related
assets of SBS (Cumbria) Limited ("SBS"), a leading and
well-established distributor of plastic building products operating
across eight branches in Cumbria and Southern Scotland. SBS was
acquired for GBP3.8 million on a cash and debt free basis. In the
year to February 2020, SBS revenues were around GBP6 million.
Including synergistic benefits, we anticipate an EBITDA multiple of
four times, with the full benefits of the acquisition being
realised from the end of 2021. This acquisition further increases
the geographical coverage of the Group's plastic distribution
business, offers the opportunity for synergies and wider expansion
over time alongside the Group's key partnerships with independent
distributors.
Product development activities also continued during the period
with the launch of the Adek aluminium decking product in Q1 2020,
supplementing the 2019 launches of the Stellar aluminium window
system and the Dekboard PVC decking product.
Health and safety
As a manufacturing business the Group is committed to ensuring a
safe, clean and healthy working environment for all of its
employees. The Group actively promotes health and safety and the
continuous improvement in health and safety standards across all
operations.
During the COVID-19 pandemic, the health, safety and wellbeing
of our employees, as well as their families, has been the primary
concern. Our overriding principle has been to follow the
Government's guidance whilst ensuring that the Group is protected
and can continue trading in order to secure employment for our
committed workforce.
As well as COVID-19 safe and compliant working practices and
social distancing, work from home measures were utilised where
feasible for the employee and business. Frequent communication from
the Chief Executive Officer updated all employees on the latest
situation, the measures being taken by the business and reconfirmed
the current Government guidance. The communications were also an
opportunity to provide practical guidance to employees during these
uncertain and stressful times, either through directing them to
Government and Local Authority guidance or the Group's own health
and wellbeing support.
Market overview and outlook
Government measures and the success of the vaccine rollout, as
well as the potential for new variants of the virus, may have a
significant impact on trading in 2021. Further increases in the
infection rate of the virus, or the introduction of new variants to
the UK, could require the Government to take stricter measures that
would require the closure of part or all of the Group's operations,
although this is considered unlikely as closure of construction and
manufacturing businesses has not been required under the last two
lockdowns. The end of the Government's CJRS grants and the
self-employed income support scheme could also result in a sharp
increase in unemployment that in turn could decrease consumer
confidence and consequently demand.
Having encouraged businesses in the construction and building
products sectors to continue trading, the more recent lockdowns of
November 2020 and January 2021 have more significantly impacted the
services, retail and hospitality sectors of the economy. Workers in
these sectors are typically a younger demographic, lower paid and
more likely to rent properties rather than own their own home. It
is likely that redundancies in this demographic will have less
impact on demand for the Group's products.
For homeowners who have retained their jobs, disposable incomes
and savings have increased due to decreased commuting and less
expenditure on holidays, eating out and leisure activities. In
addition, many of these households have had to spend significantly
more time in their properties due to working from home and lack of
availability of other leisure opportunities, which has meant more
of their funds have been redirected to repair and maintenance as
well as improving their homes.
It is possible that as the lockdown measures decrease towards
the second half of the year then consumers may switch their
spending priorities to holidays and leisure activities at the
expense of repair and maintenance.
The Construction Products Association winter forecast's main
assumption, assuming a V-shaped recovery, anticipates RMI to be up
13% in 2021 against 2020, albeit still being 11% behind 2019. The
latest Experian outlook anticipates RMI to be up 10% in 2021
against 2020 and 3% behind 2019.
There is a level of uncertainty that continues to impact
consumer confidence; however, current demand is strong,
particularly in the Group's core RMI market. Whether this continues
in the short term is unknown.
Private housing RMI
The Group experienced very high levels of RMI demand during the
second half of 2020 as a result of pent-up demand due to the first
national lockdown as well as households reprioritising spend from
holidays, eating out and other activities towards the repair,
maintenance and improvement of their properties. The Group was well
positioned to capitalise on this demand as competitors struggled to
restart operations and then suffered from material shortages.
The RMI market is expected to continue to recover during 2021,
albeit without the pent-up demand of 2020, and is expected to be
slightly below 2019 volume levels.
Social housing RMI
The social housing market continued at a steady, but lower than
2019, level throughout H2 2020 as Local Authorities and Housing
Associations sought to complete projects. However, new contracts
are seeing their commencement date delayed.
The current focus and prioritisation of public sector funding is
towards the replacement of cladding on high-rise buildings,
following Grenfell. Given the importance of these works, other
maintenance expenditure such as the replacement of windows and
doors is being deferred.
Private new build housing
New build was one of the worst-affected sectors during the
initial lockdown, and although transactions recovered quickly, the
housebuilders focused on plots nearing completion, as opposed to
commencing building on new plots that require our external building
components. However, after a slower ramp-up of operations following
the first lockdown, new build demand for our products had returned
to pre-COVID levels by Q4 2020. This level of demand is expected to
continue through the early part of 2021, before moderating, as
homebuyers and housebuilders take advantage of the Stamp Duty
holiday and Help to Buy. In the March 2021 budget, the Stamp Duty
holiday was extended to 30 June 2021, with a lower rate announced
through to 30 September 2021. The Help to Buy scheme has also been
extended until 31 May 2021.
Social Housing New Build
Spending could increase as the Government responds to pressure
and implements measures to increase the supply of affordable rented
and shared ownership social housing. Longer-term prospects are more
positive following the removal of constraints on local authority
borrowing in respect of housing delivery.
Brexit
As seen with previous Brexit deadlines, EU-based customers
ensured they stocked up in advance of the end to the transition
period on 31 December 2020. As a consequence, trade with our
EU-based customers started 2021 more slowly as these stock levels
are unwound and a more normal trading pattern resumed.
The agreement reached is tariff and quota free, however, the
administration and practical implementation of trading across
borders may have a significant impact on the time required and cost
to move goods. However, to date we have seen no significant impact
from Brexit.
Outlook
Up to the middle of March, trading was ahead of the Board's
expectations despite the poor weather experienced in January and
early February.
In the near term, there continues to be significant COVID-19
related uncertainty, n onetheless, we are more optimistic for
trading prospects and expect to make further gains in market share
and continue to make strategic progress, whilst continuing to
manage and adapt to the challenges that the pandemic presents.
PVC resin prices will be a headwind, certainly in the
short-term, following force majeure and planned plant maintenance
at two of the largest PVC resin producers with operations in Europe
during Q4. This has severely restricted supply in the final quarter
of 2020 and continues to put pressure on resin availability and
prices during the first quarter of 2021. The Group's strong
relationships with PVC resin suppliers, and enhanced contracts,
have enabled it to secure material supply, however, the tightened
market conditions have driven the price of PVC to its highest ever
levels with a resultant impact on margins. Prices are expected to
return to more normal levels once capacity has been restored in the
market.
The medium and long-term drivers for the RMI market remain
positive and the longer-term outlook remains favourable, driven by
the following:
-- The UK's existing housing stock is ageing and the
underinvestment in recent years is building up an increasing
backlog of properties that will require essential repairs and
maintenance in the future
-- Increasing UK population driving demand for new houses that will require maintaining
-- Environmental and safety concerns will continue to drive
legislation and initiatives that will require improvements to homes
on a larger scale than just essential maintenance. The Committee on
Climate Change has stated that it wants the Government to treat
renovating the UK's housing stock as a national infrastructure
priority. With insulation being key, the installation of new
windows with better thermal properties would support this goal
-- Changing structural trends with increased time spent at home,
including working from home, could lead to increased focus on RMI
spending
Jonathan Bednall
Chief Executive Officer
14 April 2021
Financial review
Financial review
Total revenue for the year ended 31 December 2020 was GBP241.0
million (2019: GBP282.1 million). The lower revenue was as a result
of the COVID-19 related business closure at the end of March 2020.
The closure of the business throughout April 2020 and then phased
restart and ramp-up of activity during May and June resulted in H1
2020 revenues being GBP46.7 million lower than the same period in
2021. Revenue in H2 2020 was 4% ahead of prior year driven by
strong demand, particularly in RMI.
As a result of the business closure during H1 2020, as well as
the increased costs of working in a COVID secure manner, underlying
operating profit was GBP9.4 million. The Group was also impacted by
operational inefficiencies during H2, particularly in the
Fenestration businesses, as they were unable to complete their
seasonal stock build in H1. RMI demand then significantly
outstripped plant capacity during H2.
PVC prices remained relatively benign for most of 2020 until the
final quarter when a force majeure and planned plant maintenance at
two of the largest PVC resin producers with operations in Europe
severely restricted supply. Though the Group's strong relationship
with these suppliers has enabled it to secure material supply, the
tightened market conditions have driven the price of PVC to its
highest ever levels.
Key financials H1 20 H2 20 FY 20 H1 19 H2 19 FY 19
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------- ------ ------ ------ ------ ------
Revenue 93.3 147.7 241.0 140.0 142.1 282.1
------------------------------ ------- ------ ------ ------ ------ ------
Underlying operating profit (1.8) 11.2 9.4 9.4 11.8 21.2
Amortisation of acquired
intangible assets (0.2) (0.1) (0.3) (0.1) (0.2) (0.3)
Other non-underlying items (0.5) (2.3) (2.8) (0.1) (2.2) (2.3)
Share-based payments expense - - - (0.4) (1.0) (1.4)
Operating profit (2.5) 8.8 6.3 8.8 8.4 17.2
------------------------------ ------- ------ ------ ------ ------ ------
Underlying operating margin
(*) (1.9)% 7.6% 3.9% 6.7% 8.3% 7.5%
Operating margin (2.7)% 6.0% 2.6% 6.3% 5.9% 6.1%
------------------------------ ------- ------ ------ ------ ------ ------
(*) Underlying operating profit and margin are before
amortisation of acquired other intangible assets, share-based
payments expense and other non-underlying items.
Reportable segments
H1 20 H2 20 FY 20 H1 19 H2 19 FY 19
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------ ------ ------ ------ ------ ------
Revenue
-------------------------------- ------ ------ ------ ------ ------ ------
Extrusion and Moulding 60.7 93.6 154.3 87.8 89.8 177.6
Fabrication and Distribution 32.6 54.1 86.7 52.2 52.3 104.5
-------------------------------- ------ ------ ------ ------ ------ ------
Total 93.3 147.7 241.0 140.0 142.1 282.1
-------------------------------- ------ ------ ------ ------ ------ ------
Underlying segmental operating
profit
Extrusion and Moulding (0.3) 8.6 8.3 8.6 10.1 18.7
Fabrication and Distribution (0.4) 3.6 3.2 1.8 2.8 4.6
-------------------------------- ------ ------ ------ ------ ------ ------
Underlying segmental operating
profit before corporate costs (0.7) 12.2 11.5 10.4 12.9 23.3
Corporate costs (1.1) (1.0) (2.1) (1.0) (1.1) (2.1)
-------------------------------- ------ ------ ------ ------ ------ ------
Underlying operating profit (1.8) 11.2 9.4 9.4 11.8 21.2
Amortisation of acquired other
intangible assets (0.2) (0.1) (0.3) (0.1) (0.2) (0.3)
Other non-underlying items (0.5) (2.3) (2.8) (0.1) (2.2) (2.3)
Share-based payments expense - - - (0.4) (1.0) (1.4)
-------------------------------- ------ ------ ------ ------ ------ ------
Operating profit (2.5) 8.8 6.3 8.8 8.4 17.2
-------------------------------- ------ ------ ------ ------ ------ ------
Extrusion and Moulding
-- Revenue decreased to GBP154.3 million (2019: GBP177.6
million) as a consequence of the volumes lost as a result of the
COVID-19 enforced closure of the business during H1 2020.
-- H2 revenues of GBP93.6 million, 4.2% higher than the
equivalent period in 2019, reflecting the significant spike in
demand from the RMI sector following lockdown, offset by a slower
return in the new build housing market.
-- Underlying segmental operating profit of GBP8.3 million was
mainly impacted by the reduction in volumes as a result of the
business closure during H1 2020 as well as increased costs of
working and operational inefficiencies meeting extraordinary demand
on parts of the business during H2.
Fabrication and Distribution
-- Revenues decreased to GBP86.7 million (2019: GBP104.5
million) as a consequence of the volumes lost as a result of the
COVID-19 enforced closure of the business during H1 2020.
-- H2 revenues of GBP54.1 million, 3.4% higher than the
equivalent period in 2019, reflecting the significant demand from
the RMI sector following lockdown.
-- Underlying segmental operating profit of GBP3.2 million was
mainly impacted by the reduction in volumes as a result of the
business closure during H1 2020 as well as increased costs of
working during H2, although profit in H2 was higher than the
comparative period, mainly due to strong trade demand.
Non-underlying items
To assist users of the financial statements, the Group reports
certain performance measures as underlying as it believes they
provide better information on the ongoing trading performance of
the business. Items excluded from operating profit in arriving at
underlying operating profit are non-cash items such as amortisation
of acquired other intangible assets and share-based payments
expense, and significant one-off incomes or costs that are not part
of the underlying trading performance of the business.
Non-underlying items that have been excluded from operating
profit in arriving at underlying operating profit include:
i. Amortisation of acquired other intangible assets
Amortisation of GBP0.3 million was charged during the year
(2019: GBP0.3 million), relating to the brand and customer
relationship intangible assets recognised on acquisitions.
ii. Other non-underlying items
Other non-underlying items in 2020 relate to business
reorganisation costs as a result of COVID-19 and the consolidation
of Window Systems warehousing and finishing operations into the new
Telford development. These costs are partially offset by a further
profit on the sale and leaseback transaction undertaken in 2019,
which completed in 2020. As a consequence the associated asset
under construction was disposed, deferred income released and a
right of use asset and lease liability recognised.
The COVID-19 related redundancies were as a consequence of lower
volumes in parts of the business, particularly those supplying new
build, where activity was slower to return following the first
lockdown.
The business reorganisation costs relating to the new Telford
development comprise the write-off of leasehold improvements and
fixtures and fittings associated with sites exited as part of the
consolidation of operations, as well as provision for ongoing
onerous costs associated with these properties.
Other non-underlying items in 2019 included the profit
recognised on the sale and leaseback of the new warehousing and
finishing facility in Telford. Site consolidation and redundancy
costs comprise onerous lease provisions associated with sites
exited as operations are consolidated into the new facility.
Year ended Year ended
31 December 31 December
2020 2019
GBPm GBPm
----------------------------------- ------------- -------------
Acquisition costs - (0.1)
Profit on sale and leaseback 1.1 0.6
Site consolidation and redundancy (3.9) (2.8)
----------------------------------- ------------- -------------
Other non-underlying expense (2.8) (2.3)
----------------------------------- ------------- -------------
iii. Share-based payments expense
Share-based payments include the IFRS 2: Share-based payments
charge in respect of the Long-Term Incentive Plan and Save As You
Earn ("SAYE") scheme. The charge for the year was GBPnil as a
result of the expiry of the Long-Term Incentive Plan in 2019.
Cash flow
Year ended Year ended
31 December 31 December
2020 2019
GBPm GBPm
-------------------------------- ------------- -------------
Pre-tax operating cash flow 23.7 34.8
Tax paid (0.8) (3.3)
Acquisitions - (2.2)
Net capital expenditure (3.2) (8.6)
Net site development cash flow (4.8) 10.1
Net interest paid (1.4) (1.6)
Borrowings (15.1) 1.3
Lease payments (13.4) (12.3)
Dividends - (7.1)
(Decrease)/increase in cash (15.0) 11.1
-------------------------------- ------------- -------------
Opening cash 17.2 6.1
-------------------------------- ------------- -------------
Closing cash 2.2 17.2
Borrowings (17.3) (32.3)
Lease assets 2.4 5.7
Lease liabilities (84.2) (71.0)
-------------------------------- ------------- -------------
Closing net debt (96.9) (80.4)
-------------------------------- ------------- -------------
Covenant net debt* (18.5) (16.4)
-------------------------------- ------------- -------------
(*) Covenant net debt represents a pre-IFRS 16 measure.
Pre-tax operating cash flow was impacted by the loss in
contribution as a result of the COVID-19 related temporary closure
of the business, offset by working capital management measures
implemented to maximise facility headroom during this period of
uncertainty. The Group also made use of the Government's CJRS until
October 2020 as well as deferral of the March 2020 VAT liability to
2021.
In addition, the Board took measures including deferring
non-essential capital expenditure and suspending dividend payments
(GBP7.1m in 2019) in order to preserve cash and further increase
facility headroom during this period of COVID-19 related
uncertainty.
Net capital expenditure
Net capital expenditure of GBP3.2 million represents ongoing
replacement expenditure as well as investment in plant, fixtures
and fittings for the new warehousing and logistics facility in
Telford.
Site development
The net site development cash outflow of GBP4.8 million
represents costs for the completion of the construction of the new
warehousing and logistics facility in Telford. The final GBP5.2
million from the sale and leaseback has been received in the first
quarter of 2021.
Financing
The Group has banking facilities on a two bank, syndicated basis
with Barclays and HSBC which have recently been extended through to
June 2024. The facilities comprise a revolving credit facility of
GBP65.0 million and overdraft of GBP10.0 million. With covenant net
debt at 31 December 2020 of GBP18.5 million and covenant net debt
to EBITDA of 1.3x, 0.7x based on the normalised FY19 audited
results, these facilities provide the Group with significant
headroom to pursue its strategy.
Finance costs for the period comprise GBP1.5 million interest on
borrowings and arrangement fee amortisation as well as GBP2.9
million of discount unwind associated with IFRS 16 lease
liabilities. Interest costs decreased in comparison to the same
period in the prior year as, although the Board took the decision
to fully draw down its borrowing facilities as a precaution when
the impact of COVID-19 became apparent, the cost of borrowing was
lower due to the lower prevailing interest rates.
Lease assets and liabilities
Lease assets and liabilities represent IFRS 16: Leases balances
in respect of properties leased and properties sublet by the Group.
The decrease in lease assets is as a result of a tenant entering
administration. The increase in lease liabilities is predominantly
due to the completion of the construction of the warehousing and
logistics facility in Telford, and the consequent commencement of
the lease and recognition of the lease liability.
Christopher Empson
Group Finance Director
14 April 2021
Consolidated Income Statement and Other Comprehensive Income
for the year ended 31 December 2020
2020 2019
Note GBPm GBPm
---------------------------------- ----- -------- --------
Revenue 2 241.0 282.1
---------------------------------- ----- -------- --------
Cost of sales (168.8) (193.3)
---------------------------------- ----- -------- --------
Gross profit 72.2 88.8
Distribution expenses (30.7) (33.7)
Administrative expenses (35.2) (37.9)
Underlying operating profit 9.4 21.2
Amortisation of acquired other
intangible assets 3 (0.3) (0.3)
Other non-underlying items 3 (2.8) (2.3)
Share-based payments expense 3 - (1.4)
---------------------------------- ----- -------- --------
Operating profit 6.3 17.2
Net finance costs (1.5) (2.1)
IFRS 16 discount unwind on lease
liabilities (2.9) (2.7)
---------------------------------- ----- -------- --------
Profit before tax 1.9 12.4
Taxation 4 0.7 (1.7)
---------------------------------- ----- -------- --------
Profit for the year and total
comprehensive income 2.6 10.7
---------------------------------- ----- -------- --------
Earnings per share pence pence
Basic 5 1.82 7.49
Diluted 5 1.82 7.47
---------------------------------- ----- -------- --------
Consolidated Balance Sheet
as at 31 December 2020
2020 2019
GBPm GBPm
------------------------------- ------ ------
Assets
Non-current assets
Goodwill 72.2 72.2
Other intangible assets 2.8 3.5
Property, plant and equipment 29.5 46.1
Right of use assets 66.4 51.4
Lease assets 2.2 5.3
Deferred tax 3.8 3.8
-------------------------------- ------ ------
176.9 182.3
Current assets
Inventories 29.6 30.3
Trade and other receivables 44.3 43.6
Lease assets 0.2 0.4
Income tax receivable 0.5 -
Cash and cash equivalents 2.2 17.2
-------------------------------- ------ ------
76.8 91.5
Total assets 253.7 273.8
-------------------------------- ------ ------
Liabilities
Current liabilities
Other interest-bearing loans -
and borrowings -
Lease liabilities 9.3 9.0
Trade and other payables 57.6 75.2
Income tax payable - 1.0
Provisions 1.2 1.1
-------------------------------- ------ ------
68.1 86.3
Non-current liabilities
Other interest-bearing loans
and borrowings 17.3 32.3
Lease liabilities 74.9 62.0
Contingent consideration 1.0 1.0
Provisions 3.1 3.4
-------------------------------- ------ ------
96.3 98.7
Total liabilities 164.4 185.0
-------------------------------- ------ ------
Net assets 89.3 88.8
-------------------------------- ------ ------
Equity
Ordinary share capital 0.1 0.1
Share premium 12.5 12.5
Merger reserve 25.5 25.5
Retained earnings 51.2 50.7
-------------------------------- ------ ------
Total equity 89.3 88.8
-------------------------------- ------ ------
The financial statements were approved by the Board of Directors
and authorised for issue on 14 April 2021.
They were signed on its behalf by:
Jonathan Bednall Christopher Empson
Chief Executive Officer Group Finance Director Company number: 07742256
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
Share Share Merger Retained
capital premium reserve earnings Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------- --------- --------- ---------- ------
Balance as at 1 January
2019 0.1 12.5 25.5 45.7 83.8
--------------------------------- --------- --------- --------- ---------- ------
Comprehensive income:
Profit for the year - - - 10.7 10.7
--------------------------------- --------- --------- --------- ---------- ------
Total comprehensive income: - - - 10.7 10.7
--------------------------------- --------- --------- --------- ---------- ------
Transactions with owners
recorded directly in equity:
Issue of shares - - - - -
Share-based payments expense - - - 1.4 1.4
Dividends - - - (7.1) (7.1)
--------------------------------- --------- --------- --------- ---------- ------
Total transactions with
owners - - - (5.7) (5.7)
--------------------------------- --------- --------- --------- ---------- ------
Balance as at 31 December
2019 and 1 January 2020 0.1 12.5 25.5 50.7 88.8
--------------------------------- --------- --------- --------- ---------- ------
Comprehensive income:
Profit for the year - - - 2.6 2.6
--------------------------------- --------- --------- --------- ---------- ------
Total comprehensive income: - - - 2.6 2.6
--------------------------------- --------- --------- --------- ---------- ------
Transactions with owners
recorded directly in equity:
Settlement of share-based
payments - - - (2.1) (2.1)
Share-based payments expense - - - - -
Dividends - - - - -
-------------------------------- --------- --------- --------- ---------- ------
Total transactions with
owners - - - (2.1) (2.1)
--------------------------------- --------- --------- --------- ---------- ------
Balance as at 31 December
2020 0.1 12.5 25.5 51.2 89.3
--------------------------------- --------- --------- --------- ---------- ------
Consolidated Cash Flow Statement
2020 2019
GBPm GBPm
---------------------------------------------- ------- -------
Cash flows from operating activities
Profit for the year 2.6 10.7
Adjustments for:
Depreciation and amortisation 19.2 17.3
Loss on disposal of fixed assets 1.1 1.3
Exceptional gain on sale and leaseback (1.1) (0.6)
Net finance costs 4.4 4.8
Taxation (0.7) 1.7
Share-based payments expense - 1.4
------------------------------------------------ ------- -------
Operating cash flow before movement
in working capital 25.5 36.6
Decrease/(increase) in inventories 0.7 (0.9)
(Increase) in trade and other receivables (0.7) (4.8)
(Decrease)/increase in trade and other
payables (1.6) 3.3
(Decrease)/increase in provisions (0.2) 0.6
------------------------------------------------ ------- -------
Pre-tax operating cash flow 23.7 34.8
Tax paid (0.8) (3.3)
------------------------------------------------ ------- -------
Net cash inflow from operating activities 22.9 31.5
------------------------------------------------ ------- -------
Cash flow from investing activities
Acquisition of subsidiary, net of cash
acquired - (2.3)
Acquisition of property, plant and equipment (3.0) (8.2)
Acquisition of other intangible assets (0.2) (0.4)
Proceeds on sale and leaseback, net
of development costs (4.8) 10.1
Proceeds on disposal of subsidiary - 0.1
------------------------------------------------ ------- -------
Net cash outflow from investing activities (8.0) (0.7)
------------------------------------------------ ------- -------
Cash flow from financing activities
Interest on borrowings (1.4) (1.6)
(Repayment)/drawdown of borrowings (15.1) 1.3
Interest on lease liabilities (2.9) (2.7)
Repayment of lease liabilities (10.5) (9.6)
Dividends paid - (7.1)
------------------------------------------------ ------- -------
Net cash outflow from financing activities (29.9) (19.7)
------------------------------------------------ ------- -------
Net (decrease)/increase in cash and
cash equivalents (15.0) 11.1
Cash and cash equivalents at the beginning
of year 17.2 6.1
------------------------------------------------ ------- -------
Cash and cash equivalents at end of
year 2.2 17.2
------------------------------------------------ ------- -------
Secured bank loans (17.3) (32.3)
Lease assets 2.4 5.7
Lease liabilities (84.2) (71.0)
------------------------------------------------ ------- -------
Net debt at end of year (96.9) (80.4)
------------------------------------------------ ------- -------
for the year ended 31 December 2020
1. Basis of preparation
Whilst the financial information included in this Preliminary
Announcement has been prepared on the basis of international
accounting standards in conformity with the requirements of the
Companies Act 2006 ("Adopted IFRSs"), this announcement does not
itself contain sufficient information to comply with Adopted
IFRSs.
The Group expects to publish full Consolidated Financial
Statements in May 2021. The financial information set out in this
Preliminary Announcement does not constitute the Group's
Consolidated Financial Statements for the years ended 31 December
2020 or 2019, but is derived from those Financial Statements which
were approved by the Board of Directors on 14 April 2021. The
auditor, KPMG LLP, has reported on the Group's Consolidated
Financial Statements and the report was unqualified and did not
contain a statement under section 498 (2) or 498 (3) of the
Companies Act 2006.
The statutory financial statements for the year ended 31
December 2020 have not yet been delivered to the Registrar of
Companies and will be delivered following the Company's Annual
General Meeting.
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the "Group"). The
Group financial statements have been prepared and approved by the
directors in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
("Adopted IFRSs").
The Group's accounting policies are set out in the 2019 Annual
Report and Accounts and have been applied consistently in 2020. The
financial statements are prepared on the historical cost basis
except where Adopted IFRSs require an alternative treatment.
Going concern
The Directors have prepared cash flow forecasts for a period of
at least 12 months from the date of approval of these financial
statements which indicate that, taking account of reasonably
possible downsides and the anticipated impact of COVID-19 on the
operations and its financial resources, the Group and Company will
have sufficient funds to meet its liabilities as they fall due for
that period.
The Board continues to monitor the evolving status of the
COVID-19 pandemic. The Group balance sheet remains robust with
significant financial headroom on committed banking facilities
which have recently been extended through to June 2024. The banking
facilities comprise a GBP65 million Revolving Credit Facility and
GBP10 million overdraft facility. Notes 21 and 25 to the financial
statements set out more detail on the undrawn facility headroom and
financial covenants.
During 2020 the Group was able to not only remain within its
financial facilities but also maintain significant headroom on its
covenants following the first lockdown in March 2020, when all
operations were closed for the duration of April, and the further
lockdowns in November 2020 and January 2021. As a manufacturer
supplying the construction industry the Group's operations were
able to successfully continue during the second and third lockdowns
under COVID safe working practices.
The Group has made use of the Coronavirus Job Retention Scheme
("CJRS") grants during the period, but is no longer making any
claims under this scheme.
The Board prepares detailed budgets which it has confidence in
achieving in a normal business environment. The unprecedented
events are likely to continue to have an impact on the Group's
financial performance in the short to medium term, though are not
easily forecasted. With the roll out of a vaccine continuing, the
Board's view is that a further full lockdown with closure of
operations is highly unlikely, and therefore all scenarios prepared
assume the Group will be able to continue to operate through
further lockdowns. However, in the short-term there could be a
dampening of demand as the impact of the virus and the government's
measures on the economy, borrowing and jobs reduces consumer
confidence and discretionary spend.
The Group starts 2021 with a similar level of cash and
borrowings as 2020. The Directors have prepared cash flow, facility
headroom and financial covenant forecasts for a period of at least
12 months from the date of approval of these financial statements
and do not anticipate the disruption and resulting business closure
that occurred in 2020. The Directors considered the financial
resources of the Group, as well as its forecasts and COVID-19
stress test scenarios. In arriving at their conclusion, the
Directors have considered the following in the severe but plausible
downside forecasts:
-- The Group's revenue and cash flow forecasts for FY21 and FY22
taking into account:
o The impact of further COVID-19 restrictions, including
lockdowns, on the Group's operations, customers and revenues.
o Significant increases in raw material costs for an extended
duration, particularly PVC, combined with a limited ability to pass
on the full impact of these costs through selling price
increases.
o The impact of Brexit on the time required and costs of
importing supplies from and exporting products to the EU.
The forecasts show that there is sufficient liquidity and
sufficient headroom to ensure compliance with all covenants
throughout the going concern period.
The Group also considered the following mitigating actions that
could be taken, but concluded that none of these actions are
required, even in a severe but plausible scenario, in order for the
group to operate within its facilities and therefore these are not
included in the forecast scenarios: deferral of capital
expenditure, suspension of the dividend, and the impact of
recommencing usage of the Government support schemes such as the
COVID-19 Job Retention Scheme.
Consequently, the Directors are confident that the Group and
Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared
the financial statements on a going concern basis.
2. Segmental reporting
Segmental information is presented in respect of the Group's
reportable operating segments in line with IFRS 8: Operating
Segments, which requires segmental information to be disclosed on
the same basis as it is viewed internally by the Chief Operating
Decision Maker. The Chief Operating Decision Maker is considered to
be the Board of Directors.
Operating segments Operations
Extrusion and Moulding Extrusion and marketing of PVC and
aluminium window profile systems, PVC cellular roofline and
cladding, decking, rigid rainwater and drainage products as well as
Wood Plastic Composite ("WPC") and aluminium decking products.
Moulding of Glass Reinforced Plastic ("GRP") building
components.
Fabrication and Distribution Fabrication, marketing and
distribution of windows and doors, cellular roofline, cladding,
rainwater, drainage and decking products.
2020 2019
GBPm GBPm
---------------------------------------------- ------- -------
Revenue from external customers
---------------------------------------------- ------- -------
Extrusion and Moulding - total revenue 181.2 211.6
Inter-segment revenue (26.9) (34.0)
------- -------
Extrusion and Moulding - external revenue 154.3 177.6
Fabrication and Distribution - total revenue 86.7 104.5
Inter-segment revenue - -
------- -------
Fabrication and Distribution - external
revenue 86.7 104.5
----------------------------------------------- ------- -------
Total revenue from external customers 241.0 282.1
----------------------------------------------- ------- -------
Segmental operating profit
Extrusion and Moulding 8.3 18.7
Fabrication and Distribution 3.2 4.6
----------------------------------------------- ------- -------
Segmental operating profit before corporate
costs 11.5 23.3
Corporate costs (2.1) (2.1)
----------------------------------------------- ------- -------
Underlying operating profit 9.4 21.2
Amortisation of acquired other intangible
assets (0.3) (0.3)
Other non-underlying items (2.8) (2.3)
Share-based payments expense - (1.4)
----------------------------------------------- ------- -------
Operating profit 6.3 17.2
----------------------------------------------- ------- -------
3. Non-underlying items
Non-underlying items included within operating profit
include:
2020 2019
GBPm GBPm
-------------------------------- ------ ------
Amortisation of acquired other
intangible assets (0.3) (0.3)
Other non-underlying items (2.8) (2.3)
Share-based payments expense - (1.4)
--------------------------------- ------ ------
Non-underlying expense (3.1) (4.0)
--------------------------------- ------ ------
Amortisation of acquired other intangible assets
GBP0.3 million (2019: GBP0.3 million) amortisation of brand and
customer contract intangible assets acquired through business
combinations.
Other non-underlying items
Other non-underlying items are significant one-off incomes or
costs that are not part of the underlying trading performance of
the business.
Other non-underlying items include:
2020 2019
GBPm GBPm
------------------------------------------ ------ ------
Acquisition costs - (0.1)
Profit on sale and leaseback transaction 1.1 0.6
Site consolidation and redundancy (3.9) (2.8)
------------------------------------------- ------ ------
Other non-underlying items (2.8) (2.3)
------------------------------------------- ------ ------
Share-based payments expense
The share-based payment expense of GBPnil million (2019: GBP1.4
million) comprises IFRS 2: Share-based payment charges in respect
of the Long-Term Incentive Plan GBPnil million (2019: GBP1.3
million), which matured on 31 December 2019, and SAYE schemes of
GBPnil million (2019: 0.1 million).
4. Taxation
2020 2019
GBPm GBPm
--------------------------- ------ ------
Current tax expense
Current period - 3.8
Prior period (0.7) (0.3)
--------------------------- ------ ------
Total current tax charge (0.7) 3.5
Deferred tax expense
Current period (0.5) (1.2)
Prior period 0.5 (0.6)
--------------------------- ------ ------
Total deferred tax charge - (1.8)
Total tax expense (0.7) 1.7
--------------------------- ------ ------
UK corporation tax is calculated at 19.00% (2019: 19.00%) of the
estimated assessable profit for the year.
The Group's total income tax charge is reconciled with the
standard rates of UK corporation tax for the year of 19.00% (2019:
19.00%) as follows:
2020 2019
GBPm GBPm
---------------------------------------------- ------ ------
Profit before tax 1.9 12.4
---------------------------------------------- ------ ------
Tax at standard UK corporation tax rate of
19.00% (2019: 19.00%) 0.4 2.4
Factors affecting the charge for the period:
Expenses not deductible 0.2 0.1
Losses utilised for which no deferred tax
previously recognised (0.5) (0.1)
Difference in tax rate (0.6) 0.2
Prior period (0.2) (0.9)
---------------------------------------------- ------ ------
(0.7) 1.7
---------------------------------------------- ------ ------
Factors that may affect future current and total tax charges
In the Budget held on 3 March 2021, the Government announced
that the corporation tax rate will increase to 25% from 1 April
2023. However, this change has not yet been substantially enacted.
As at the 31 December 2020 balance sheet date, the corporation tax
rate was 19% and so the deferred tax asset/liability at this date
has been calculated using this rate (2019: 17%).
5. Earnings per share ("EPS")
Basic earnings per share are calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period. The weighted
average number of shares has been adjusted for the issue and
cancellation of shares during the period.
Diluted earnings per share are calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period, plus the
dilutive potential ordinary shares arising from share options in
issue at the end of the period.
2020 2019
EPS summary Pence Pence
------------- ------ ------
Basic EPS 1.82 7.49
Diluted EPS 1.82 7.47
2020 2019
Number of shares No. No.
------------------------------------- ------------ ------------
Weighted average number of ordinary
shares (basic) 143,004,710 142,925,173
Effect of share options
in issue 139,770 243,590
---------------------------------------- ------------ ------------
Weighted average number of ordinary
shares (diluted) 143,144,480 143,168,763
--------------------------------------- ------------ ------------
6. Dividends
2020 2020 2019 2019
GBPm Pence per GBPm Pence per
share share
---------------------- ------ ----------- ----- ----------
Previous year final
dividend - - 4.6 3.20
Current year interim
dividend - - 2.5 1.75
---------------------- ------ ----------- ----- ----------
- 7.1
------------------- --------------------- ----- ----------
The Board intends to recommend a final dividend of 1.00 penny
per share in respect of the financial year ending 31 December
2020.
7. Cautionary statement
This Report contains certain forward-looking statements with
respect of the financial condition, results, operations and
business of Epwin Group Plc. Whilst these statements are made in
good faith based on information available at the time of approval,
these statements and forecasts inherently involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause the actual result or developments to
differ materially from those expressed or implied by these
forward-looking statements and forecasts. Nothing in this Report
should be construed as a profit forecast.
8. Annual General Meeting
The Annual General Meeting of the Company will be held on 25 May
2021 at 1B Stratford Court, Cranmore Boulevard, Solihull, B90
4QT.
Under current COVID-19 restrictions, shareholders, proxies and
other attendees are not permitted to attend the AGM in person, and
will be refused entry. Shareholders are kindly urged to vote by
proxy.
To facilitate the answering of any questions that shareholders
have, or would normally raise, during the course of the AGM, a
designated questions and answers page has been created by the
Company, which can be found at investors.epwin.co.uk . Any
questions will be addressed in the normal way, pursuant to an
explanatory note in the notices. Shareholders are requested to
submit any questions that they may have via email, in good time,
ahead of the meeting to epwin@mhpc.com . Please include a
Shareholder Reference Number in any correspondence.
In the event that the arrangements for the AGM change due to the
evolving COVID-19 situation, the Company will issue a further
communication via the regulatory news service.
9. Electronic communications
The full Annual Report and Accounts for the year ended 31
December 2020 are to be published on the Company's website,
together with the Notice convening the Company's 2020 Annual
General Meeting by 23 April 2021. Copies will also be sent out to
those shareholders who have elected to receive paper
communications. Copies can be requested by writing to the Company
Secretary, Epwin Group Plc, 1B Stratford Court, Cranmore Boulevard,
Solihull, B90 4QT or email to investors@epwin.co.uk .
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END
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(END) Dow Jones Newswires
April 15, 2021 02:00 ET (06:00 GMT)
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