Epwin Group today released their full H1 results for 2020. COVID-19 and the lockdown did of course have an enormous impact on the group’s performance in the first half of this year compared to last year, but as many are now finding, there are signs for optimism in the second half of the year which should help repair at least some of the damage done in H1.

Here are the main points from the report published today.

Signs of resilience

Here are the key financial highlights from the report:

Credit: Epwin Group

Revenue is down nearly £50m from the previous year. In any capacity that is massive. But not unexpected. When we are looking at company results for H1 over the coming months this is going to be the norm. Although large, against the backdrop of what is a year to write off, this is within what you might expect.

These are the financial headlines stated on the report:

Financial headlines

·    Trading was ahead of Board’s revised expectations. Q2 2020 significantly affected by COVID-19 pandemic following a strong period up to the third week of March, with H1 performance impacted accordingly.

·    Financial position remains strong:

Net debt (excluding IFRS 16) 0.8x adjusted EBITDA based on the FY19 audited results, reduced to £21.3 million (HY19: £29.2 million).

Significant headroom on banking facilities with c.£60 million of headroom at the half year, supported by management actions taken to conserve cash.

Banking covenants met as at half year end; management do not anticipate the need to seek a variation or waiver to its covenants. No additional funding has been required.

·    The Board recognises the importance of dividends for shareholders:

Given the disruption and uncertainty caused by COVID-19, the Board is not recommending an interim dividend for 2020.

The Board intends to recommence dividend payments as soon as practical, subject to full year financial performance and greater visibility of prospects for 2021.

So, as you would expect, no dividends for the foreseeable future until perhaps COVID is firmly in the rearview mirror and the economic outlook becomes a bit more stable. They have cash there if they need it, which may become useful as H2 still has some significant bumps in the road coming up.

Operational headlines:

·    Majority of operations restarted in May, with additional safe working practices implemented (having closed all operations on 25 March 2020 in response to the COVID-19 pandemic).

·    Significant progress made on Group’s site consolidation programme despite lockdown delays:

Construction largely complete on new Telford distribution and finishing facility, expected to be fully operational by the end of 2020.

This industry-leading facility will deliver operational efficiencies from 2021 with higher levels of automation supporting the growth of both our existing and planned new products.

·    Continued product development activities 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.

Current Trading and Outlook:

·    Demand stronger than anticipated from customers serving the RMI market, which represents around 70% of historic Group revenues.

·    Overall Group revenue on like for like sales for the month:

July up 2%

August up 3%

·    Strong bounce back in the window systems and cellular extrusions businesses, which form part of the Extrusion and Moulding segment of the Group. Like for like sales for the month on the prior year:

July up 12%

August up 7%

·    Capacity continues to be reviewed and adjusted to meet changing levels of demand across the Group’s operations.

·    Demand for window systems extrusions has been particularly strong and sustained, such that lead times have increased significantly and materials supply chains are now under pressure.

·    New build and Social Housing sectors’ demand was initially slower to return, but call-offs now increasing steadily as build programmes and refurbishment schemes are re-established.

·    As previously stated, the impact of COVID-19 will inevitably have a material impact on trading for the current year as a whole, however, at this stage the effect is anticipated to be less than the initially expected, with the Board expecting significantly improved performance in H2.

·    Medium-term drivers for the RMI market remain positive.

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The figures above show like-for-like growth in the first months of H2 compared to the period to last year. Whilst perhaps not as strong as other systems company bounces that have been reported, any growth right now is to be welcomed and is the foundation towards a more stable and profitable outlook.

This is what the CEO Jon Bednall said on the results:

It has been encouraging to see the resilience of the underlying demand for our products, particularly with the UK RMI sector performing strongly since June.  Demand in this sector is sustaining at much higher levels than anticipated and, with other markets also picking up, we continue to ramp up our activities and work with our supply chain partners to meet this demand.

“Whilst we remain in unprecedented times and must continue to manage its challenges, we are optimistic for trading prospects in the second half of the year and expect to make further strategic progress by concluding our current site consolidation and rationalisation programme as well as continuing with our product development and other strategic initiatives.

“Looking further ahead, the medium and long-term drivers for our markets remain positive, and we are confident that we will emerge from this period with the financial strength and operational flexibility to continue to take advantage of the opportunities that will be presented.

“The Group has a strong track record of making dividend payments and, whilst these remain suspended due to the current levels of uncertainty, the Board is mindful of the importance of dividends to our shareholders and will review the position when it has visibility of the full year.

The outlook in March and April for the sector was uncertain. We were, and still are, living and operating in a time no one in this industry has ever lived through. The fact our industry can now boast that it has almost too much work on is a position I don’t think we could have even dreamed about back then. As it is, that’s exactly where we are now. So, whilst these, and no doubt other H1 results from other businesses will look pretty ugly, H2 should provide some better reading when they start to land.

You can read the entire H1 breakdown here: http://otp.investis.com/clients/uk/epwin_group1/rns/regulatory-story.aspx?cid=910&newsid=1412500

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