Final Results

RNS Number : 1214V

Epwin Group PLC

14 April 2016

 

14 April 2016

Epwin Group Plc

Final results for the year ended 31 December 2015

Good progress with our core strategy in 2015

Epwin Group Plc (AIM: EPWN) ("Epwin" or the "Group"), the vertically integrated manufacturer of low maintenance building products, supplying the Repair, Maintenance and Improvement ("RMI"), new build and social housing sectors, announces its final results for the year ended 31 December 2015.

Financial highlights

£m	2015	2014	Change
Revenue	256.0	259.5	(1.3)%
Underlying operating profit *	20.1	18.3	+9.8%
Underlying operating profit margin *	7.9%	7.1%	+80bps
Basic EPS (2014 restated for post IPO comparability)	11.32p	10.97p ***	+3.2%
Basic EPS	11.32p	11.56p	(2.1)%
Dividend per share	6.37p	4.24p	+50.2%
Net (debt) / cash	(14.4)	1.1
Operating cash conversion **	118.4%	108.7%

(*) Underlying operating profit and margin are before non-recurring costs, amortisation of intangible fixed assets, share-based payments and discontinued operations.

(**) Operating cash conversion is pre-tax operating cash flow as a percentage of underlying operating profit.

(***) Restated for consistency and comparability to the IPO capital structure of 135,000,000 ordinary shares.

Strategic highlights

·     Good progress with strategy

‒   Acquisition of Stormking and Ecodek, extending the product range, material technology and sales channels - developing broader "low maintenance building products" model

‒   Operational improvement supported by increase in capital expenditure

‒   Developing momentum for cross-selling across brands and channels

·     Strong performance in Extrusion, offsetting weaker result in Fabrication & Distribution

Financial highlights

·     Profit growth and margin improvement in challenging market conditions

·     Good cash performance

·     Robust balance sheet - renewed banking facilities available for investment and acquisitions

·     Total dividend for the year of 6.37 pence (2014: 4.24 pence)

Current trading

·     Current trading in 2016 has been in line with expectations

Jon Bednall, Chief Executive, said:

"We have made good progress with our core strategy of focusing on operational improvements, leveraging our capital assets and targeting acquisitions to broaden our product portfolio and capabilities.  Shareholder returns in our near two years since becoming a public company have been ahead of expectations at IPO and, whilst market conditions grew more challenging in the second half of 2015, we have a strong platform from which to progress and we expect to make further advances in 2016."

Enquiries:

Epwin Group Plc                                                                                              [phone]

Jon Bednall, Chief Executive

Chris Empson, Group Finance Director

Zeus Capital Limited (Nomad and Broker)                                           

Nick Cowles / Andrew Jones / Jamie Peel                                            [phone]       

John Goold / Dominic King                                                                          [phone]

MHP Communications                                                                                  [phone]

Jamie Ricketts / Tom Horsman

About Epwin

Epwin is a vertically integrated manufacturer of low maintenance building products, supplying the RMI, new build property and social housing sectors.

The Company is incorporated and domiciled in the United Kingdom. It operates principally in the United Kingdom.

www.epwin.co.uk

 

Chairman's Statement

Building for growth

A year ago, in our maiden financial results, I reported on a strong platform for long-term growth, based on operational improvements and investment alongside a strengthened management team.

I am pleased to announce another year of progress for Epwin in 2015.  This is a testament to the strength of our widening portfolio of low maintenance building products, and our market position in the RMI, new build and social housing sectors, as well as the scale of our operations.

A year of development

Since becoming a public company, we have made good progress with our strategy - focused on operational improvement, selective acquisitions to broaden our product portfolio and cross-selling across our brands. 

In 2015 Epwin completed two acquisitions, Ecodek and Stormking, for a total initial cost of £32.2 million.  This is an important strategic step, enhancing the range of low maintenance building products across our routes to market, and adding technical capabilities that we will look to use in new applications in the future. 

It is pleasing that we enter 2016 with a strong balance sheet, and with banking facilities renewed in the year, we have the resources to pursue further strategic acquisition opportunities as and when appropriate targets are identified.

The senior management team has continued in 2015 with rationalisation and operational improvement programmes of existing operations, as well as investment in new products - particularly the substantial plant and tooling capital expenditure ready for the launch of a brand new, market leading window system in 2016.

Results

These initiatives have delivered a second successive year of profit growth since Epwin's IPO in 2014, in spite of a challenging year for the RMI market in 2015 which resulted in broadly flat revenues at £256.0 million (2014: £259.5 million). 

I am very pleased to report a 9.8% increase in underlying operating profit to £20.1 million, driven by continued operational improvements and management of input prices around the Group's key costs of raw materials, power and labour. Continued strong cash conversion resulted in an operating cash flow before taxation of £23.8 million (2014: £19.9 million).  Net debt at the year end was £14.4 million (2014: net funds of £1.1 million) following investment on acquisitions and capital expenditure of £20.9 million and £9.0 million respectively. 

Dividends

I am particularly pleased that Epwin has delivered on its promise to generate strong shareholder returns.  In October 2015 we paid an interim dividend of 2.12 pence per ordinary share, and the Board is recommending a final dividend of 4.25 pence per ordinary share to be paid on 6 June 2016 to shareholders on the register on 13 May 2016.  This gives a full year dividend of 6.37 pence per ordinary share, in line with the commitments made on IPO.

As we move forward, the Board will prioritise the financial security of the Group whilst looking to be progressive with long-term shareholder returns when the opportunity arises.

People

2015 saw the launch of the Epwin Save As You Earn ("SAYE") scheme. The Board was encouraged by the take-up across all levels of the business, with employees demonstrably aligning their interests with shareholders and everyone benefiting from the opportunity that a listing of the stock provides.

On behalf of the Board and our shareholders I would like to welcome the employees of Ecodek and Stormking to Epwin Group and to thank all our employees for the levels of commitment shown to the Group during the year. Combined with the support from shareholders and the investment decisions taken by the Board, I believe that there is a strong foundation for all stakeholders for the years ahead.

Summary and outlook

Whilst market conditions were more challenging in the second half of 2015, we have delivered a strong performance and made good progress with our strategy. 

We have a strong platform from which to build thanks to our scale and market position across the RMI, new build and social housing sectors, and we expect to make further progress in 2016.

Andrew Eastgate

Chairman

14 April 2016

Business Review

Strategic and operational review

2015 was a year of progress for the Group, with investment in acquisitions that we expect to be earnings accretive and enhance the Group's range of low maintenance building products as we build a platform for long-term growth.

Extrusion and Moulding

The Extrusion and Moulding business continued to perform strongly in 2015 with revenues increasing by 2.6% to £146.6 million, principally driven by sales of cellular profile and rainwater products.  Specification sales of cellular profile were strong in the year, assisted by the buoyant performance of housebuilders.  Trade sales also performed well.  Encouragingly, sales of rainwater products grew year on year and this remains an area of focus for the business, as too is the growth of drainage products. 

In the first quarter of 2016 the Swish Building Products cellular business consolidated its distribution activity into a new purpose built distribution centre in Tamworth.  The move allowed warehousing to be consolidated and also improved customer service through more frequent deliveries.

Window profile systems revenues were flat during the year reflecting the overall RMI market. As previously highlighted, 2016 will see the launch of an entirely new, market leading window profile system, "Optima". This project has seen investment in new plant, innovative tooling and inventory levels during 2015 in preparation for the launch of the system in 2016.   

Fabrication and Distribution

The Fabrication and Distribution business has had a more challenging year. Revenues decreased from £116.6 million to £109.4 million in the year as market conditions softened across RMI and social housing through 2015. Some sectors within the RMI market proved to be erratic, which had a consequent impact on operational efficiency.  Operationally, whilst the majority of actions were taken in 2014, the restructuring and rationalisation programme continued into 2015.  Further changes to the management team were made in 2015 and a new structure is now in place.  The impact of the door factory move in 2014 provided operational challenges which continued into 2015, which in turn delayed efficiency improvement.  The key changes are now complete, with benefits expected in 2016 and beyond.

The Group has opted to retain fabrication capacity whilst taking steps to reduce costs and improve the efficiency of interaction between its fabrication sites. A number of operational and investment decisions have been taken which will be implemented in 2016 and 2017 to enhance these operations.

The Fenestration Self Assessment Scheme (FENSA) statistics for the year to 31 December 2015 indicate that certified installations of windows and doors were down by 8% against 2014. Whilst 2015 was undoubtedly a difficult year, the Group believes the market fundamentals remain strong.

Acquisitions

Vannplastic Limited (Ecodek)

On 30 October 2015 the Group completed the acquisition of Vannplastic Limited, trading as Ecodek, a Wrexham-based manufacturer of Wood Plastic Composite ("WPC") primarily used as a hardwood substitute for balconies and outdoor decking.  Ecodek is a leading supplier of WPC products manufactured from recovered and recycled materials.  Products are over 90% recycled and 100% recyclable. The business currently supplies customers in new build housing, social housing and some trade and has a knowledgeable and technically capable workforce.  It will operate as part of Epwin's Extrusion and Moulding business, with the management team who formed the business continuing to oversee its growth and development.

For the year ended 31 December 2014, Ecodek had turnover of £4.1 million, and an operating profit of £0.6 million. The acquisition did not have a material effect on the Group's earnings in the year to 31 December 2015 and has traded in line with the Board's expectations post acquisition.

The initial consideration of £5.2 million, comprised £3.6 million in cash and £1.6 million in the form of 1,116,817 Epwin shares.  The earn-out consideration of up to £3.3 million will be dependent on Ecodek's performance in the year to 31 December 2016 and will be settled in the same ratio of cash to shares as the initial consideration. Both the initial and earn-out consideration will be at a multiple of five times EBITDA.

Stormking Plastics Limited

On 31 December 2015 the Group completed the acquisition of Stormking Plastics Limited.

Stormking is the leading supplier of moulded Glass Reinforced Plastic ("GRP") building components to housebuilding in the UK.  The product range includes porches, dormers, chimneys, bay window roofs, entrance canopies, copings and support brackets, as well as other time-saving, bespoke components for the housebuilding and construction sector.  Stormking will operate as part of Epwin's Extrusion and Moulding business.

Stormking's manufacturing is based in Tamworth, where the company employs in excess of 300 full time staff.  Stormking has a strong track record of developing innovative new products and giving customers better choice and efficiency on construction sites by simplifying the build process and removing complexity.

The business has developed a significant amount of know-how and technical expertise in the formulation and use of GRP materials and is developing plans to expand the use of these materials in additional applications and market sectors. The Group believes that it is well placed to assist this process.

In the financial year ended 28 February 2015, Stormking reported turnover of £22.8 million and underlying EBITDA of £3.0 million. The acquisition is expected to be earnings enhancing for the Group in the financial year to 31 December 2016 and has traded in line with the Board's expectations post acquisition.

Total initial consideration of £27.0 million was based upon a six times multiple of the 2016 forecast EBITDA with the initial cash consideration of £20.3 million payable at completion, plus 5,348,804 Epwin shares.  Further consideration of up to £8.0 million is dependent upon Stormking's performance in the year to 28 February 2017 and will be settled in the same ratio of cash to shares as the initial consideration. Both the initial and deferred consideration will deliver the acquisition on a multiple of six times EBITDA for the relevant period.

Market outlook

There continues to be significant underinvestment by property owners in the repair and maintenance of the UK's housing stock. The Office for National Statistics figures indicate that there are 27.8 million homes across the country and only 40% of these are maintained to a satisfactory level. 

Recent industry figures indicate that around 4.3 million window frames are replaced each year, representing a replacement rate of less than 2% per annum. The Group believes that a replacement rate significantly above this is required to address the ageing population of fenestration products and, due to the recent and continuing history of underinvestment in UK housing stock, there is significant pent up demand within the RMI space.

Similar dynamics are true for the cellular roofline business, which has demonstrated growth, and further opportunities are believed to exist to grow given that it is estimated that cellular roofline is only 50% penetrated into the residential property market, with the remaining still being largely timber.

The outlook for the Group's acquisitions is positive.  The Wood Plastic Composite decking market is relatively new in the UK and we believe will demonstrate good growth.  The Glass Reinforced Plastic moulding market, whilst being more mature, has also grown impressively as new housebuilders in particular look to improve efficiency via off-site manufacture.

Fundamentally, the long-term drivers of the RMI market remain positive.  In the short to medium term, the outlook is less predictable and in February 2016 the UK Construction Industry fell to a 10 month low. In new build, the number of new house registrations increased by 8% in 2015, according to NHBC, although there was some slowing in the rate of growth in the latter part of the year.  Although the new build market is also impacted by general consumer confidence, it is still likely to grow due to the fundamental mismatch between supply and demand.

Growth in real wages has slowed and there is still some way to go before economic growth increases confidence among the employed.  The impact of the outcome of the referendum on continued membership of the European Union is unknown.

Government policy should assist the business with the Affordable Homes Programme continuing to 2020.

As previously reported, the Group's strategy does not in the near term anticipate improving markets, or beneficial government policy, but prioritises operational improvement, selective capital investment and acquisitions.

The Directors believe that the Group will benefit from the UK economic upturn in the RMI market, as well as the drive towards improved energy efficiency in buildings over the medium term.

Jonathan Bednall

Chief Executive Officer

14 April 2016

Financial Review

Total revenue for the year ended 31 December 2015 remained broadly in line with prior year at £256.0 million (2014: £259.5 million), in what was generally a static market for our products.

Underlying operating profit was £20.1 million (2014: £18.3 million), representing growth of 9.8%, as a result of cost savings from synergy and rationalisation projects, stable input prices and higher extruded products volumes. 

Polymer prices, whilst lower than expected for the Group in the first quarter, rose during the middle part of the year to expected levels. Overall, polymer prices were better than forecast for the year as a whole. However, the benefit of this was negated by relatively static market demand.

Operating profit was £19.1 million (2014: £19.3 million) after a number of one-off exceptional profits in 2014.

	Year ended	Year ended
	31 December 2015	31 December 2014
	£m	£m
Revenue (excluding discontinued operations)
Extrusion and Moulding	146.6	142.9
Fabrication and Distribution	109.4	116.6
Total	256.0	259.5
Underlying segmental operating profit
Extrusion and Moulding	17.7	16.6
Fabrication and Distribution	4.2	4.5
Underlying segmental operating profit before corporate and other costs	21.9	21.1
Corporate and other costs	(1.8)	(2.8)
Underlying operating profit	20.1	18.3
Amortisation of acquired intangible fixed assets	-	(1.7)
Business reorganisation	-	3.5
Acquisition expenses	(0.6)	-
Share-based payments	(0.4)	(0.8)
Operating profit	19.1	19.3

Extrusion and Moulding

·     Revenue increased by 2.6% to £146.6 million (2014: £142.9 million) during the year and underlying operating profit increased to £17.7 million from £16.6 million.

·     Operating margins improved to 12.1% compared to 11.6% in the same period in 2014, principally due to volume increases and site integration savings, also helped by stable input prices.  

Fabrication and Distribution

·     Revenue decreased to £109.4 million (2014: £116.6 million).

·     Operating profit of £4.2 million, down from £4.5 million in 2014 principally due to lower and erratic sales volumes.

Acquisition expenses

During 2015 the Group incurred professional fees and stamp duty of £0.6 million (2014: £nil) associated with the acquisitions of Vannplastic Limited and Stormking Plastics Limited.

Cash flow

	Year ended 31 December 2015	Year ended 31 December 2014
	£m	£m
Pre-tax operating cash flow	23.8	19.9
Tax paid	(2.3)	(1.7)
Acquisitions	(20.9)	-
Net capital expenditure	(9.0)	(5.6)
Net interest paid	(0.5)	(0.7)
Proceeds of IPO	-	10.0
Finance leases	(0.2)	(0.1)
Dividends	(6.7)	(1.9)
Discontinued operations	-	(0.1)
Facility arrangement fee	0.3	-
Net (increase) / decrease in net debt	(15.5)	19.8
Opening net funds / (debt)	1.1	(18.7)
Closing net (debt) / funds	(14.4)	1.1

Pre-tax operating cash flow increased by 19.6% to £23.8 million (2014: £19.9 million) demonstrating the strong cash generative characteristics of the business.

Acquisitions

Cash consideration, net of cash acquired, of £20.9 million was paid in relation to the acquisitions of Vannplastic Limited (£3.2 million) and Stormking Plastics Limited (£17.7 million).

Refinancing

In December 2015 the Group renewed its existing banking facilities with Barclays. The new facility comprises a £20 million term loan, £35 million revolving credit facility and £5 million overdraft. The term loan and revolving credit facility are for a term of four years ending December 2019. As at 31 December 2015 the Group had drawn down £35.0 million of these facilities.

Dividends

In October 2015 we paid an interim dividend of 2.12 pence per ordinary share. In line with our stated dividend policy, the Board is recommending a final dividend of 4.25 pence per ordinary share to be paid on 6 June 2016 to shareholders on the register on 13 May 2016. This gives a full year dividend of 6.37 pence per ordinary share.

Christopher Empson

Group Finance Director

14 April 2016

Consolidated income statement for the year ended 31 December 2015

			2015	2014
	Note		£m	£m
Group revenue	2		256.0	259.5
Cost of sales			(178.6)	(186.7)
Gross profit			77.4	72.8
Distribution expenses			(24.3)	(23.3)
Administrative expenses			(34.0)	(30.2)
Underlying operating profit			20.1	18.3
Amortisation of acquired intangible assets	4		-	(1.7)
Acquisition expenses	4		(0.6)	-
Business reorganisation	4		-	3.5
Share-based payments			(0.4)	(0.8)
Operating profit from continuing operations			19.1	19.3
Net finance costs			(0.5)	(0.7)
Profit before tax			18.6	18.6
Taxation	5		(3.3)	(3.5)
Profit from continuing operations			15.3	15.1
Loss from discontinued operations net of tax			-	(0.3)
Profit for the year and total comprehensive income			15.3	14.8
Earnings per share			pence	pence
Basic	6		11.32	11.56
Basic - continuing operations	6		11.32	11.76
Basic - discontinued operations	6		-	(0.20)
Diluted	6		11.23	11.55
Diluted - continuing operations	6		11.23	11.75
Diluted - discontinued operations	6		-	(0.20)

Consolidated balance sheet as at 31 December 2015

			2015 £m	2014 £m
Assets
Non-current assets
Goodwill			54.3	24.5
Other intangible assets			3.6	0.2
Property, plant and equipment			33.1	26.2
Deferred tax			0.7	2.9
			91.7	53.8
Current assets
Inventories			23.6	22.4
Trade and other receivables			41.5	37.6
Cash and cash equivalents			22.1	2.3
			87.2	62.3
Total assets			178.9	116.1
Liabilities
Current liabilities
Other interest bearing loans and borrowings			15.6	0.4
Trade and other payables			50.0	45.6
Income tax payable			2.6	2.0
Provisions			0.6	1.0
			68.8	49.0
Non-current liabilities
Other interest bearing loans and borrowings			20.9	0.8
Contingent consideration			5.5	-
Provisions			3.6	3.5
			30.0	4.3
Total liabilities			98.8	53.3
Net assets			80.1	62.8
Equity
Ordinary share capital			0.1	0.1
Share premium			12.5	12.5
Merger reserve			23.9	15.6
Retained earnings			43.6	34.6
Total equity			80.1	62.8

Consolidated statement of changes in equity for the year ended 31 December 2015

		Share capital	Share premium	Merger reserve	Retained earnings	Total
		£m	£m	£m	£m	£m
Balance as at 31 December 2013		-	-	27.0	9.6	36.6
Comprehensive income:
Profit for the year		-	-	-	14.8	14.8
Total comprehensive income:		-	-	-	14.8	14.8
Transactions with owners recorded directly in equity:
Issue of shares (pre IPO)		-	2.5	-	-	2.5
Bonus issue of shares		11.4	-	(11.4)	-	-
Cancellation of shares		(11.3)	-	-	11.3	-
IPO share placing		-	10.0	-	-	10.0
Share-based payments		-	-	-	0.1	0.1
Share warrants issued on IPO		-	-	-	0.7	0.7
Dividends		-	-	-	(1.9)	(1.9)
Total transactions with owners		0.1	12.5	(11.4)	10.2	11.4
Balance as at 31 December 2014		0.1	12.5	15.6	34.6	62.8
Comprehensive income:
Profit for the year		-	-	-	15.3	15.3
Total comprehensive income:		-	-	-	15.3	15.3
Transactions with owners recorded directly in equity:
Issue of shares		-	-	8.3	-	8.3
Share-based payments		-	-	-	0.4	0.4
Dividends		-	-	-	(6.7)	(6.7)
Total transactions with owners		-	-	8.3	(6.3)	2.0
Balance as at 31 December 2015		0.1	12.5	23.9	43.6	80.1

Consolidated cash flow statement for the year ended 31 December 2015

			2015	2014
	Note		£m	£m
Cash flows from operating activities
Profit for the year			15.3	14.8
Adjustments for:
Depreciation and amortisation			5.5	6.7
Net finance costs			0.5	0.7
(Profit) on disposal of property, plant and equipment			-	(0.1)
Taxation			3.3	3.5
Share-based payments			0.4	0.8
Loss from discontinued operations net of tax			-	0.3
Operating cash flow before movement in working capital			25.0	26.7
Decrease/(increase) in inventories			0.1	(0.9)
Decrease in trade and other receivables			0.3	2.4
(Decrease) in trade and other payables			(1.1)	(2.7)
(Decrease) in provisions			(0.5)	(5.6)
			23.8	19.9
Tax paid			(2.3)	(1.7)
Net cash inflow from operating activities			21.5	18.2
Cash flow from investing activities
Acquisition of subsidiary, net of cash acquired	3		(20.9)	-
Acquisition of property, plant and equipment			(9.0)	(5.7)
Receipts from disposal of property, plant and equipment			-	0.1
Net cash (outflow) from investing activities			(29.9)	(5.6)
Cash flow from financing activities
Interest paid			(0.5)	(0.7)
Proceeds from the issue of share capital			-	10.0
New loans raised/(repayment of borrowings)			35.0	(17.6)
Capital element of finance lease rental payments			0.4	(0.3)
Dividends paid	7		(6.7)	(1.9)
Net cash inflow/(outflow) from financing activities			28.2	(10.5)
Discontinued operations
Net cash flow from operating activities			-	(0.1)
Net cash (outflow) from discontinued operations			-	(0.1)
Net increase in cash and cash equivalents			19.8	2.0
Cash and cash equivalents at the beginning of year			2.3	0.3
Cash and cash equivalents at end of year			22.1	2.3
Secured bank loans			(34.7)	-
Finance lease liabilities			(1.8)	(1.2)
Net (debt)/cash			(14.4)	1.1

1.    Basis of preparation

Whilst the financial information included in this Preliminary Announcement has been prepared on the basis of the requirements of International Financial Reporting Standards (IFRSs) in issue, as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRSs.

The Group expects to publish full Consolidated Financial Statements in April 2016. The financial information set out in this Preliminary Announcement does not constitute the Group's Consolidated Financial Statements for the years ended 31 December 2015 or 2014, but is derived from those Financial Statements which were approved by the Board of Directors on 13 April 2016. 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 2015 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 Financial Reporting Standards as adopted by the EU ("Adopted IFRSs").

The Group's accounting policies are set out in the 2014 Annual Report and Accounts and have been applied consistently in 2015.

The financial statements are prepared on the historical cost basis except where Adopted IFRSs require an alternative treatment.

Going concern

The Group financial statements are prepared on a going concern basis as the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group has considered its financial resources, together with a strong ongoing trading performance. The bank facilities are available until December 2019. The Group has prepared a detailed business plan, including cash projections, for the period to 31 December 2018 and has applied sensitivities to these plans. These plans, and sensitised forecasts, demonstrate that the Group's current facilities provide adequate headroom for its current and future anticipated cash requirements.

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.

Reportable segments Operations

Extrusion and Moulding               Extrusion and marketing of PVC-U window profile systems, PVC-UE cellular roofline and cladding, rigid rainwater and drainage products and Wood Plastic Composite ("WPC") decking products.  Moulding of Glass Reinforced Plastic ("GRP") building components.

Fabrication and Distribution       Fabrication and marketing of windows and doors, distribution of cellular roofline, cladding, rainwater and drainage products, and manufacture of glass sealed units.

		2015	2014
		£m	£m
Revenue from external customers
Extrusion and Moulding - total revenue		171.5	170.2
Inter-segment revenue		(24.9)	(27.3)
Extrusion and Moulding- external revenue		146.6	142.9
Fabrication and Distribution - total revenue		109.6	116.7
Inter-segment revenue		(0.2)	(0.1)
Fabrication and Distribution - external revenue		109.4	116.6
Total revenue from external customers		256.0	259.5
Segmental operating profit
Extrusion and Moulding		17.7	16.6
Fabrication and Distribution		4.2	4.5
Segmental operating profit before corporate and other costs		21.9	21.1
Corporate and other costs		(1.8)	(2.8)
Underlying operating profit		20.1	18.3
Amortisation of acquired intangible fixed assets		-	(1.7)
Acquisition expenses		(0.6)	-
Business reorganisation		-	3.5
Share-based payments		(0.4)	(0.8)
Group operating profit		19.1	19.3
Net finance costs		(0.5)	(0.7)
Profit before tax		18.6	18.6

3.    Acquisition of subsidiaries

Acquisitions in the year ended 31 December 2015

The following table summarises the consideration paid for Stormking Plastics Limited and Vannplastic Limited and the provisional fair values of the assets and liabilities acquired at the acquisition date.

		Stormking Plastics Limited	Vannplastic Limited
		Provisional fair values on acquisition	Provisional fair values on acquisition
		£m	£m
Acquired intangibles - customer relationships and brands		3.1	0.3
Property, plant and equipment		2.3	1.1
Inventories		1.0	0.3
Trade and other receivables		3.9	0.6
Cash and cash equivalent Pr		2.6	0.4
Trade and other payables		(5.5)	(1.2)
Deferred tax liability		(0.6)	(0.2)
Fair value of assets acquired		6.8	1.3
Goodwill		24.4	5.4
Total consideration		31.2	6.7
Consideration
Cash consideration		20.3	3.6
Equity consideration - ordinary shares		6.7	1.6
Initial consideration		27.0	5.2
Contingent consideration		4.2	1.5
Total consideration		31.2	6.7

On 31 December 2015 the Group completed the acquisition of the entire share capital of Stormking Plastics Limited ("Stormking") for initial consideration of £27.0 million, representing 75% cash and 25% equity.  Total consideration is subject to an earn-out based on the EBITDA of Stormking in the year to 28 February 2017, capped at £8.0 million, to be settled in the same ratio of cash and equity as the initial consideration.

Stormking is a leading supplier of moulded Glass Reinforced Plastic ("GRP") building components to the home building and construction industry in the UK.  Stormking will form part of the Group's Extrusion and Moulding segment.  As the acquisition completed on the 31 December 2015, Stormking contributed no revenue or profit before tax to the Group's consolidated result.  Had Stormking been consolidated from 1 January 2015 the consolidated income statement would include £26.0 million of revenue and £4.2 million of profit before tax.

The goodwill of £24.4 million recognised on the acquisition of Stormking represents the collective know how, technical skills and market knowledge of the workforce, plus the potential for cross-selling and synergies that exist as a result of the larger scale of the Epwin Group.

On acquisition, intangible fixed assets representing brands, £0.6 million, and customer relationships, £2.5 million, were recognised.  In addition a fair value adjustment of £1.8m was made to fixed assets in respect of assets not previously recognised on the balance sheet.

On 30 October 2015 the Group acquired the entire share capital of Vannplastic Limited, trading as Ecodek, for initial consideration of £5.2 million representing 70% cash and 30% equity.  Total consideration is subject to an earn-out based on the EBITDA of Ecodek in the year to 31 December 2016, capped at £3.3 million and to be settled in the same ratio of cash to equity as the initial consideration.

Ecodek is a leading manufacturer and supplier of Wood Plastic Composite ("WPC") predominantly for balconies and outdoor decking.  Ecodek will form part of the Group's Extrusion and Moulding segment.

In the period from acquisition to 31 December 2015 Ecodek contributed £0.7 million of revenue and £0.1 million profit before tax.  Had Ecodek been consolidated from 1 January 2015 the consolidated income statement would include £5.2 million revenue and £0.9 million profit before tax.

On acquisition, intangible fixed assets representing brands, £0.1 million, and customer relationships, £0.2 million, were recognised as fair value adjustments. 

Acquisition costs of £0.6m are included in administrative expenses and are considered to be non-recurring. 

4.    Non-underlying items

 

Non-underlying items

			2015	2014
			£m	£m
Amortisation of acquired intangible assets			-	1.7
Acquisition expenses			0.6	-
Business reorganisation			-	(3.5)
Share-based payments			0.4	0.8
Expense/(income)			1.0	(1.0)

Non-underlying items included within operating profit include:

Amortisation of acquired intangible fixed assets

£Nil million (2014: £1.7 million) amortisation of brand and customer contract intangible fixed assets created on the merger in 2012.

Acquisition costs

During 2015, the Group incurred professional fees and stamp duty of £0.6 million associated with the acquisitions of Vannplastic Limited and Stormking Plastics Limited.

Business re-organisation gains and costs

Business re-organisation gains of £3.5 million in 2014 comprised redundancy costs associated with rationalisation and synergy projects offset by gains made on the favourable settlement of a number of legacy onerous leases.

Share-based payments

The share-based payment expense of £0.4 million (2014: £0.8 million) comprises £0.3 million in respect of the IFRS 2: Share-based payments charge for the Management Incentive Plan and £0.1 million in respect of the SAYE scheme launched on 1 July 2015.

5.    Tax

	2015	2014
	£m	£m
Current tax expense
Current period	3.0	3.4
Prior period	(1.0)	(0.2)
Total current tax charge	2.0	3.2
Deferred tax expense
Current period	1.2	(0.4)
Prior period	0.1	0.7
Total deferred tax charge	1.3	0.3
Total tax expense	3.3	3.5

UK Corporation tax is calculated at 20.25% (2014: 21.5%) 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 20.25% (2014: 21.5%) as follows:

		2015	2014
		£m	£m
Profit before tax		18.6	18.6
Tax at standard UK corporation tax rate of 20.25% (2014: 21.5%)		3.8	4.0
Factors affecting the charge for the period:
Expenses not deductible		0.3	0.4
Non-taxable income		-	(0.8)
Losses utilised for which no deferred tax previously recognised		(0.2)	(0.6)
Difference in tax rate		0.3	-
Prior period		(0.9)	0.5
Total tax expense		3.3	3.5

Factors that may affect future current and total tax charges

The main rate of corporation tax was lowered from 21% to 20% with effect from 1 April 2015. Further reductions to 19% from 1 April 2017 and 18% from 1 April 2020 were enacted during 2015. In the March 2016 Budget, it was announced that the reduction from 1 April 2020 will be to 17% (instead of 18%) and it is anticipated that this will be enacted during 2016. This will reduce the Company's future current tax charge accordingly. The deferred tax assets at 31 December 2015 have been calculated based on the rate of 19 per cent substantively enacted at the balance sheet date (31 December 2014: 20 per cent.)

6.    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 issues and cancellations 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.

		2015	2014
EPS Summary		Pence	Pence
Basic earnings per share		11.32	11.56
Basic earnings per share - continuing operations	11.32		11.76
Basic earnings per share - discontinued operations		-	(0.20)
Diluted earnings per share		11.23	11.55
Diluted earnings per share - continuing operations		11.23	11.75
Diluted earnings per share - discontinued operations		-	(0.20)

Number of shares					2015	2014
					No.	No.
Weighted average number of ordinary shares (basic)					135,198,199	128,046,892
Effect of share options in issue					1,061,378	68,283
Weighted average number of ordinary shares (diluted)					136,259,577	128,115,175

7.    Dividends

	2015	2015	2014	2014
	£m	Pence per share	£m	Pence per share
Previous year final dividend	3.8	2.83	-	-
Current year interim dividend	2.9	2.12	1.9	1.41
	6.7		1.9

8.    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.

9.    Annual General Meeting

The Annual General Meeting of the Company will be held on 24 May 2016 at Eversheds LLP,  115 Colmore Row, Birmingham B3 3AL.

10.  Electronic communications

The full Annual Report and Accounts for the year ended 31 December 2015 are to be published on the Company's website, together with the Notice convening the Company's 2016 Annual General Meeting by 28 April 2016. 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 [e-mail]. 

 

END

 

 

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