It is earnings season in UK fenestration and some of the biggest companies are dropping their financial results for H1 of 2021, and as was to be expected, Epwin Group’s H1 results are very healthy.

Here are the key findings from their report.

What you need to know

The table below is your brief overview as to the Epwin Group performance in H1 of 2021. It also shows this year’s results compared to 2020 and 2019. Last year was such a pointless year in which to make comparisons due to the disruption that many companies are also demonstrating their performance compared with 2019 as is it a more reliable comparison than 2020.

See the full report here:

Revenues were up massively in comparison to 2020 (69%) and still up significantly (13%) compared to 2019. This is to be expected as the industry is still operating under incredibly high demand. I expect H2 and full-year 2021 to be comfortably above 2019 levels.

Profit margins have returned to near-2019 levels and way above 2020 levels. Net debt has risen in H1 of this year which is in relation to their new facility at Telford.

Earnings per share have recovered almost to 2019 levels and dividends per share are also back to 2019 levels after no dividends in H1 of 2020.

Operational and strategic headlines:

  • Health and safety remains a priority
  • Continued strategic progress:

o Site consolidation and rationalisation programme:

  • Construction completed on new Telford distribution and finishing facility, with final payment of £5.2 million received during H1 2021
  • Full relocation of inventories to the new facility in 2022 after exceptionally high demand levels in 2021

o Value enhancing acquisitions ‐ SBS acquired in January 2021 and PBS in June 2021:

  • Both well‐established regional independent distributors of plastic building products, increasing access to the Group’s product offer
  • Adds 12 trade counters in Cumbria, Northumberland, Southern Scotland and Norfolk

o New product development:

  • Aluminium window profile and PVC decking sales building encouraging momentum
  • Ongoing development of ESG framework and sustainability agenda

Current Trading and Outlook:

  • Trading in line with analysts’ forecasts increased at the July 2021 trading update
  • Strong demand from customers serving the RMI market, which represents around 70% of historic Group revenues, is expected to continue for the foreseeable future
  • Continue to actively manage ongoing supply chains and logistics pressures:

o PVC raw materials in particular impacted, exacerbated by supplier plant issues restricting availability and driving up the price of resin

o Steps have been, and continue to be, taken to recover these costs in the market in an equitable manner

o Labour availability and wage inflation presenting some challenges

  • Medium and long‐term drivers for the RMI market remain positive
  • Further potential bolt‐on M&A opportunities continue to emerge
  • Well-positioned as operating conditions improve and pent‐up demand takes effect

CEO Comment:

This is what Epwin Group CEO Jon Bednall had to say in the statement:

“I would again like to recognise and thank all of our people for their continued effort and hard work during the ongoing pandemic disruption. Our trading performance during the first half has been encouraging and we have continued to make good strategic progress. This has been underpinned by ongoing strong demand from our key RMI markets, together with proactive management of raw material cost inflation and supply chain issues. We are optimistic for trading prospects in the second half and expect to make further gains in market share, whilst continuing to manage the challenges that the pandemic presents. Looking further ahead, we remain confident that we can take advantage of future opportunities, supported by the positive medium and long‐term drivers for the Group’s products.”

Future resin problems?

In what was overall a very positive report for Epwin Group, there was a paragraph in the report on page 4 which did catch my eye:

We expect supply chains to remain under pressure and high raw material costs to continue for the remainder of 2021 as businesses continue to experience very high demand and inventory levels recover from the closure of operations and exceptional demand seen since 2020. PVC resin prices, in particular, are expected to remain high for the remainder of 2021 as further force majeure events and planned plant maintenance at the large PVC resin producers continue to restrict capacity and supply. The restrictions on supply experienced in the final quarter of 2020 have continued throughout H1 2021. The Group’s strong relationships with the PVC resin suppliers have ensured it has been able to secure material supply; albeit the market price of PVC resin has increased by in excess of 80% from 2019 and early 2020 levels. The Group is passing on these increased costs to its customers in an equitable manner through price increases and surcharges and remains confident of its ability to continue to work with its customers to manage further cost inflation fairly.

They explain about the current supply chain pressure which we’re all fully aware of, but then go on to mention that there are other force majeure events in the pipeline as planned maintenance at resin plants are going to continue to restrict supply. We know glass is of particular concern right now, but I think there is also a risk that resin problems could be a real risk in the short to medium term as well.

This is a set of very good results, and I suspect most systems companies will also be looking at very healthy H1 results themselves. H2 and full-year results from all our major companies should be just as good. We will head into 2022 however with the same operational challenges we have now, and the task for 2022 will be to continue to perform and deliver for customers despite a wide and varied range of difficulties.

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