Half Year Results

RNS Number : 4693A

Epwin Group PLC

12 September 2018

 

12^th September 2018

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Epwin Group Plc

Half year results for the six months to 30 June 2018

Continued progress with our strategy in challenging conditions

Epwin Group Plc (AIM: EPWN) ("Epwin" or the "Group"), a leading manufacturer of low maintenance building products, supplying the Repair, Maintenance and Improvement ("RMI"), new build and social housing sectors, announces its half year results for the six months to 30 June 2018.

Financial highlights

£m	H1 2018	H1 2017
Revenue	142.4	149.9
Underlying operating profit 1	7.1	11.1
Underlying operating profit margin	5.0%	7.4%
Adjusted profit before tax 2	6.4	10.5
Profit before tax Adjusted EPS 3 Basic EPS	5.4 3.78p 3.08p	7.5 6.47p 4.36p
Dividend per share	1.70p	2.23p
Net debt	(28.6)	(28.2)
Underlying operating cash conversion 4	160.6%	75.7%

(1)   Underlying operating profit and margin is operating profit before amortisation of acquired other intangible assets, share-based payments and other non-underlying items.

(2)   Adjusted profit before tax is profit before tax before amortisation of acquired other intangible assets, share-based payments and other non-underlying items.

(3)   Adjusted EPS is calculated based on profit after tax adding back amortisation of acquired other intangible assets, share-based payments and other non-underlying items.

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

Financial headlines

·     Revenues better than anticipated in the first half year, despite the impact of adverse weather in early 2018 and demonstrating the Group's resilience after the previously reported loss of its two largest customers in the second half of 2017.

·     Materials and labour cost inflation continues to impact the industry. Price increases being implemented across the business to address this, albeit challenging in current market conditions.

·     Cash conversion strong at 161%, with net debt of £28.6m, representing less than one times 2017 adjusted EBITDA.

·     Modest delays in site consolidation and consequent operational inefficiencies impacting performance.

·     Interim dividend of 1.70 pence per share declared, in line with the previously announced dividend policy, to be paid on 19 October 2018 to shareholders on the register on 21 September 2018.

Delivering on our strategy

·     Ongoing progress with site consolidation programme designed to adjust cost base and further improve the efficiency of operations through 2019, including:

o  Former glass plant site and lease in Newton Abbot have now been successfully exited.

o  Closure of the Macclesfield extrusion facility is progressing for this year.

o  Plan initiated to exit the Cardiff fabrication plant in this year.

o  Significant new facility planned for Telford to consolidate warehousing and finishing activities, reducing operating sites and costs from H2 2019.

o  New warehousing facility in Scunthorpe operational, enhancing logistics capabilities and operational footprint now.

·     Acquisition of Amicus Building Products completed in March 2018 for £0.5m consideration, adding a further 15 building plastic distribution outlets.

·     Continued investment in new and existing products and materials to further develop the Group's long-term market position:

o  Continued strong sales growth from the Profile 22 Optima window system.

o  New decking ranges launched in both PVC and Wood-Plastic Composite.

o  Progress made towards the launch of additional fenestration products during 2019, further developing the Group's long-term market position.

Current trading

·     Medium-term drivers for the Group's products remain positive with underinvestment in existing UK housing stock and continuing demand for new homes.

·     Short-term market conditions, particularly in the key RMI market, remain lacklustre, with weak consumer confidence impacting demand for big ticket purchases and exacerbated by uncertainty around the UK's exit from the EU.

·     As reported in the AGM statement in May, there is expected to be a return to a more usual pattern of a greater weighting of profit towards the seasonally busier second half of the year than in more recent years.

·     The Board anticipates adjusted profit before tax for the full year to be in line with market expectations.

Jon Bednall, Chief Executive Officer, said:

"Trading in the first half year has been satisfactory, despite challenging market conditions and cost inflation.  The site consolidation and development programme which commenced in late 2017 is progressing and is expected to be completed in the second half of 2019. Alongside these programmes we have continued the work necessary to broaden our product portfolio and invest in our operations for future growth.

We remain confident in the long-term prospects for the RMI market and are continuing to progress our strategy, focused on operational improvement, selective acquisitions, product range expansion and development.  We are confident in continuing our record of strong cash generation and our ability to offer an attractive return to shareholders."

Enquiries:

Epwin Group Plc Jon Bednall, Chief Executive Chris Empson, Group Finance Director	0203 128 8100
Zeus Capital Limited (Nomad and Joint Broker) Nick Cowles / Jamie Peel John Goold / Dominic King	0161 831 1512 0203 829 5000
Panmure Gordon (UK) Limited (Joint Broker) Erik Anderson / Andrew Potts MHP Communications Reg Hoare / Charlie Barker / Florence Mayo	0207 886 2500 0203 128 8100

Forthcoming dates:

Ex-dividend date	20 September 2018
Dividend record date	21 September 2018
Dividend payment date	19 October 2018

About Epwin

Epwin is a leading manufacturer of low maintenance building products, 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.

www.epwin.co.uk

Group Business Review

Results

				6 months ended	6 months ended
Key financials				30 June 2018 £m	30 June 2017 £m
Revenue				142.4	149.9
Underlying operating profit (*)				7.1	11.1
Amortisation of acquired other intangible assets				(0.6)	(0.5)
Other non-underlying items				-	(2.1)
Share-based payments expense				(0.4)	(0.4)
Operating profit				6.1	8.1
Underlying operating profit margin (*)				5.0%	7.4%
Operating profit margin				4.3%	5.4%

(*) Underlying operating profit and margin is operating profit before amortisation of acquired other intangible assets, share-based payments and other non-underlying items.

Half year revenue was slightly ahead, and underlying operating profit was in line with the Board's expectations.

Revenue of £142.4 million (2017: £149.9 million) was pleasing given the previously highlighted impact of the two significant customer issues suffered in H2 2017 and the subdued RMI market. The programme of site consolidation, rationalisation and development commenced in late 2017 has therefore been accelerated and extended in a programme running through to H2 2019.

The loss of the former SIG plastics distribution business, historically our largest customer, in Q4 2017, has resulted in a reduction in revenue of £7.5 million in comparison to the equivalent period in 2017.  The disposal of Indigo Products Limited, as a consequence of the Entu UK Plc administration, has also reduced revenues by £6.2 million in comparison to H1 2017. This has been partially offset by volumes generated as a result of the exclusive supply agreement for extruded products that was put in place with the new owner of Indigo Products at the time of the disposal.

Input costs, particularly materials prices, have continued to rise during the first half of 2018. The PVC price has increased by around 4% in comparison to H1 2017 and is anticipated to remain at this higher level for the remainder of the year. In response to this the Group has implemented price increases across both its fenestration and building component products ranges during H1 aimed at mitigating the input cost inflation, albeit with a delayed effect and mindful of the impact of this last year on customers.

In March 2018 the Group completed the acquisition of Amicus Building Products Limited and subsidiaries ("Amicus") for consideration of £0.5 million. Amicus represents a network of 15 plastic distribution outlets concentrated in northern England and Scotland and combines well with Epwin's own distribution business.

In the first half of 2018 the Group has also taken the decision to close its window fabrication operation in Cardiff. The actions taken to date will, collectively, have halved the operational footprint of the fabrication operation from four fabrication and two glass operations at June 2017 to two fabrication and one glass operation. A plan to consolidate warehousing for our Telford operations onto a purpose-built site in 2019 is also being progressed.

The Group continued to add new products to its range and broaden its materials capability. New ranges of decking products in both PVC and Wood-Plastic Composite materials have been developed and launched and significant design work has been completed in relation to aluminium fenestration products.

Included in the non-underlying items are £0.6 million of amortisation of acquired other intangible assets (2017: £0.5 million) and £0.4 million of share-based payments expense (2017: £0.4 million) in relation to SAYE and LTIP schemes.

Segmental Results

	6 months ended	6 months ended
	30 June 2018	30 June 2017
	£m	£m
Revenue
Extrusion & Moulding	88.5	91.5
Fabrication & Distribution	53.9	58.4
Total	142.4	149.9
Underlying segmental operating profit
Extrusion & Moulding	7.7	10.9
Fabrication & Distribution	0.3	1.1
Underlying segmental operating profit before corporate costs	8.0	12.0
Corporate costs	(0.9)	(0.9)
Underlying operating profit (*)	7.1	11.1
Amortisation of acquired other intangible assets	(0.6)	(0.5)
Other non-underlying items	-	(2.1)
Share-based payments expense	(0.4)	(0.4)
Operating profit	6.1	8.1

(*) Underlying operating profit is operating profit before amortisation of acquired other intangible assets, share-based payments and other non-underlying items

Extrusion and Moulding

·     Revenue decreased mainly as a consequence of the loss of the SIG plastic distribution business in H2 2017, the impact of which is a reduction in segmental revenue of £6.8 million in comparison to the same period in 2017. This has been partially offset by the retention of some of this business through other channels, by the growth in sales of the Optima window system and a strong performance in our GRP mouldings business.

·     Underlying operating profit decreased to £7.7 million (2017: £10.9 million) primarily as a result of the above customer issue and material cost inflation. PVC prices in particular continue to increase, by around 4% in comparison to the first half of 2017.

·     In 2017 the Group commenced the closure of its extrusion site in Macclesfield and the consolidation of its operations into the Telford and Scunthorpe sites. This programme is progressing to plan with anticipated completion by Q4 2018.

·     Projects are being progressed to develop a new warehousing and finishing facility in Telford to combine existing operations and reduce costs, as well as developing additional fenestration products.

Fabrication and Distribution

·     Revenue decreased to £53.9 million (2017: £58.4 million) as a result of actions taken in 2017 to resize the fabrication business in response to subdued market conditions, particularly in the RMI sector of the market and focus on our core areas, as well as the effect of the loss of both the SIG plastic distribution business and Entu UK Plc customer, which entered administration in 2017.

·     This has been partially offset by the Distribution businesses which have performed well during the first half of the year, with like for like revenues increasing by 2% and the acquisition of Amicus Building Products contributing an additional £5.7 million of revenue and £0.1 million of underlying operating profit.

·     Operating profit declined to £0.3 million (2017: £1.1 million) as a result of the above factors, wage cost inflation due to National Living Wage, Apprenticeship Levy and Auto-enrolment, as well as operational inefficiencies arising from continued erratic market demand patterns within the fabrication businesses.

·     As previously noted, market conditions, particularly in the key RMI market, remain challenging and the Group is implementing a programme aimed at adjusting its cost base and strategic focus in this area over the coming year. In 2017, the Group implemented its plans for its two glass-sealed unit manufacturing businesses to be consolidated onto the Group's site in Northampton. In 2018, the Group has taken the decision to close its window fabrication plant in Cardiff. This will have effectively halved the footprint of the fabrication business since June 2017, resizing the business to its markets and improving overall operational leverage.

Cash flow

				6 months ended	6 months ended
				30 June 2018 £m	30 June 2017 £m
Pre-tax operating cash flow				11.4	8.4
Tax paid				(1.5)	(1.4)
Acquisitions				-	(3.9)
Capital expenditure				(6.3)	(3.7)
Net interest paid				(0.6)	(0.6)
Dividends				(6.4)	(6.3)
Other				(0.1)	(0.1)
Net increase in net debt				(3.5)	(7.6)
Opening net debt				(25.1)	(20.6)
Closing net debt				(28.6)	(28.2)

The Group generated a strong pre-tax operating cash inflow of £11.4 million (2017: £8.4 million), representing cash conversion of 160.6% (2017: 75.7%). In light of the reduced volumes the Group has ensured that working capital levels have been managed to reflect the level of activity.

Capital expenditure of £6.3 million reflects the investment made in the new warehousing facility in Scunthorpe, expenditure required to consolidate the Macclesfield extrusion operation onto the Telford and Scunthorpe sites and the costs associated with the design and plant required for the manufacture of aluminium window products.

Acquisition expenditure of £nil reflects the initial consideration paid of £0.2 million for the acquisition of Amicus Building Products Limited net of cash of £0.2 million acquired with the business.

At 30 June 2018 the Group had net debt of £28.6 million (31 December 2017: £25.1 million, 30 June 2017: £28.2 million), representing less than one times 2017 adjusted EBITDA.

Dividend

The Board is pleased to announce an interim dividend of 1.70 pence per ordinary share (2017: 2.23 pence), in line with the previously announced dividend policy, to be paid on 19 October 2018 to shareholders on the register on 21 September 2018

Outlook

Despite the challenging environment, the Board remains confident in the long-term drivers of the RMI market. There continues to be significant underinvestment by property owners in the repair and maintenance of the UK's housing stock.

In the near term, with continued and increasing uncertainty resulting from ongoing negotiations between the UK government and the EU following the decision to leave the EU, market conditions are expected to remain challenging as a consequence of low consumer confidence and delays in decision making across a number of sectors.

The Board anticipates adjusted profit before tax for the full year to be in line with market expectations. As reported in the AGM statement in May, there is expected to be a greater weighting of profit towards the seasonally busier second half of the year than in more recent years.

The Group's strategy remains focused on extending our product portfolio, technical capability and channels to market, both through investment in new products and acquisitions; operational improvement; cross-selling across our customer base; and leveraging the recognition and channels of our brands for the benefit of the Group.

The site rationalisation and consolidation programme that has been accelerated across the Group, but particularly focused on the Fabrication operations, will lead to improved operational efficiency and a tighter strategic focus of activities in this area. These projects will all be completed during 2019, with payback of around two years anticipated from each point of completion.

The Group's financial position remains strong with good cash generation in the half year and net debt of £28.6m representing less than one times 2017 adjusted EBITDA.  This gives the Group significant funding headroom to continue to invest in the business and progress with its strategy.

Condensed Consolidated Income Statement
for the six months ended 30 June 2018
		6 months ended  30 June 2018	6 months ended  30 June 2017	Year ended 31 December 2017
		(unaudited)	(unaudited)	(audited)
	Note	£m	£m	£m
Group revenue	2	142.4	149.9	298.3
Cost of sales		(100.9)	(104.9)	(207.5)
Gross profit		41.5	45.0	90.8
Distribution expenses		(15.3)	(14.3)	(29.7)
Administrative expenses		(20.1)	(22.6)	(47.9)
Underlying operating profit		7.1	11.1	22.3
Amortisation of acquired other intangible assets	3	(0.6)	(0.5)	(1.1)
Non-underlying items	3	-	(2.1)	(7.4)
Share-based payments expense	3	(0.4)	(0.4)	(0.6)
Operating profit		6.1	8.1	13.2
Net finance costs		(0.7)	(0.6)	(1.2)
Profit before tax		5.4	7.5	12.0
Taxation	5	(1.0)	(1.3)	(1.9)
Profit for the period and total comprehensive income		4.4	6.2	10.1
Basic earnings per share		Pence	Pence	Pence
Earnings per share	6	3.08	4.36	7.08
Diluted earnings per share
Earnings per share	6	3.07	4.34	7.08

Condensed Consolidated Balance Sheet as at 30 June 2018
		30 June 2018	30 June 2017	31 December 2017
		(unaudited)	(unaudited)	(audited)
	Note	£m	£m	£m
Assets
Non-current assets
Goodwill		70.2	65.7	65.7
Other intangible assets		4.1	4.3	3.9
Property, plant and equipment		38.7	37.3	36.0
Deferred tax asset		0.5	0.4	0.6
		113.5	107.7	106.2
Current assets
Inventories		29.1	31.0	29.6
Trade and other receivables		47.9	46.6	45.3
Cash and cash equivalents	8	5.8	7.3	7.3
		82.8	84.9	82.2
Total assets		196.3	192.6	188.4
Liabilities
Current liabilities
Other interest-bearing loans and borrowings	8	26.0	20.7	21.0
Trade and other payables		63.7	58.3	54.7
Contingent consideration		0.3	-	-
Tax payable		1.0	1.9	1.4
Provisions		3.0	0.5	2.1
		94.0	81.4	79.2
Non-current liabilities
Other interest-bearing loans and borrowings	8	8.4	14.8	11.4
Provisions		3.2	3.6	4.1
		11.6	18.4	15.5
Total liabilities		105.6	99.8	94.7
Net assets		90.7	92.8	93.7
Equity
Ordinary share capital		0.1	0.1	0.1
Share premium		12.5	12.5	12.5
Merger reserve		25.5	25.5	25.5
Retained earnings		52.6	54.7	55.6
Total equity		90.7	92.8	93.7

Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2018
		6 months ended  30 June 2018	6 months ended  30 June 2017		Year ended 31 December 2017
		(unaudited)	(unaudited)		(audited)
		£m	£m		£m
Balance at the start of the period		93.7	90.9		90.9
IFRS 9 adoption	1	(1.4)	-		-
Balance at the start of the period (restated)		92.3	90.9		90.9
Profit for the period		4.4	6.2		10.1
Issue of shares		-	1.6		1.6
Share-based payments		0.4	0.4		0.6
Dividends	7	(6.4)	(6.3)		(9.5)
Balance at the end of the period		90.7	92.8		93.7

	Consolidated Cash Flow Statement
	for the six months ended 30 June 2018
6 months ended 30 June 2018 6 months ended 30 June 2017 Year ended 31 December 2017 (unaudited) (unaudited) (audited)  Note £m £m £m Cash flows from operating activities Profit for the period 4.4 6.2 10.1 Adjustments for: Depreciation and amortisation 4.6 4.5 9.1 Loss on disposal of property, plant and equipment - - 0.2 Loss on disposal of subsidiary - - 0.4 Net finance costs 0.7 0.7 1.2 Taxation 1.0 1.3 1.9 Share-based payments 0.4 0.4 0.6 11.1 13.1 23.5 Decrease/(increase) in inventories 2.1 (2.8) (1.9) (Increase) in trade and other receivables (2.6) (5.2) (4.3) Increase in trade and other payables 1.1 3.4 0.6 (Decrease)/increase in provisions (0.3) (0.1) 2.0 Pre-tax operating cash flow 11.4 8.4 19.9 Tax paid (1.5) (1.4) (2.7) Net cash inflow from operating activities 9.9 7.0 17.2 Cash flows from investing activities Acquisition of subsidiary, net of cash acquired - (3.9) (3.9) Acquisition of intangible fixed assets (0.3) (0.4) (0.7) Acquisition of property, plant and equipment (6.0) (3.3) (6.4) Net cash outflow from investing activities (6.3) (7.6) (11.0) Cash flows from financing activities Net interest paid (0.6) (0.6) (1.0) Drawdown of borrowings 2.5 2.5 - Capital element of finance lease repayments (0.6) (0.7) (1.4) Dividends paid 7 (6.4) (6.3) (9.5) Net cash outflow from financing activities (5.1) (5.1) (11.9) Net decrease in cash and cash equivalents (1.5) (5.7) (5.7) Cash and cash equivalents at the beginning of period 7.3 13.0 13.0 Cash and cash equivalents at end of period 5.8 7.3 7.3 Bank Borrowings (32.4) (32.3) (29.8) Finance lease liabilities (2.0) (3.2) (2.6) Net debt 8 (28.6) (28.2) (25.1)

Notes to the Condensed Consolidated Financial Statements

for the six months ended 30 June 2018

1.   Basis of preparation

These financial statements have been prepared on the basis of the accounting policies expected to be adopted for the year ended 31 December 2018.  These are in accordance with the Group's accounting policies as set out in the Group's consolidated financial statements for the year ended 31 December 2017, except for the adoption of new and amended standards as set out below.

The recognition and measurement requirements of all International Financial Reporting Standards ('IFRSs'), International Accounting Standards ('IAS') and interpretations currently endorsed by the International Accounting Standards Board ('IASB') and its committees as adopted by the EU and as required to be adopted by AIM listed companies have been applied.  AIM listed companies are not required to comply with IAS 34 'Interim Financial Reporting' and accordingly the Company has taken advantage of this exemption.

On the basis of current financial projections and facilities available, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, accordingly, consider that it is appropriate to adopt the going concern basis in preparing these Interim Financial Statements.

The financial information in these financial statements does not constitute statutory accounts for the six months ended 30 June 2018 and should be read in conjunction with the Group's consolidated financial statements for the year ended 31 December 2017 which were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under sections 498(2) and (3) Companies Act 2006.

The condensed consolidated financial statements for the six months to 30 June 2018 have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

The condensed consolidated financial statements were approved by the Board of Directors on 11 September 2018.

New and amended standards adopted by the Group

A number of new standards or amendments to existing standards and interpretations became applicable for the current reporting period:

·     IFRS 9 - Financial Instruments;

·     IFRS 15 - Revenue from Contracts with Customers; and

·     Annual improvements to IFRS 2014-2016 cycle.

IFRS 9 - Financial Instruments

IFRS 9 - Financial Instruments became effective on 1 January 2018 under which trade receivables are subject to the new expected credit loss model. The Group has adopted the simplified approach to measuring expected credit losses. The impact of the change in methodology on the Group's balance sheet as at 1 January 2018 is a reduction of £1.4 million in retained earnings and net assets.

IFRS 15 - Revenue from Contracts with Customers

IFRS 15 - Revenue from Contracts with Customers became effective on 1 January 2018 which resulted in changes to the Group's accounting policy for revenue:

Revenue is recognised when the Group has satisfied its performance obligations to the customer and the customer has obtained control of the goods or services being transferred. Revenue is measured at the fair value of consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, rebates and value added tax. Services comprise the installation of windows and doors. Revenue from the installation of windows and doors is recognised when the Group has fulfilled all its performance obligations under the installation contract.

This standard and the resulting changes to accounting policies has not had a material impact on the financial statements.

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.

		6 months ended  30 June 2018	6 months ended  30 June 2017	Year ended  31 December 2017
		(unaudited)	(unaudited)	(audited)
		£m	£m	£m
Revenue from external customers
Extrusion & Moulding		88.5	91.5	183.6
Fabrication & Distribution		53.9	58.4	114.7
Total		142.4	149.9	298.3
Segmental operating profit
Extrusion & Moulding		7.7	10.9	21.5
Fabrication & Distribution		0.3	1.1	2.4
Segmental operating profit before corporate and other costs		8.0	12.0	23.9
Corporate and other costs		(0.9)	(0.9)	(1.6)
Underlying operating profit		7.1	11.1	22.3
Amortisation of acquired other intangible assets		(0.6)	(0.5)	(1.1)
Non-underlying items		-	(2.1)	(7.4)
Share-based payments expense		(0.4)	(0.4)	(0.6)
Group operating profit		6.1	8.1	13.2
Net finance costs		(0.7)	(0.6)	(1.2)
Profit before tax		5.4	7.5	12.0

3.   Underlying operating profit

'Underlying operating profit' is the key profit measure used by the Board to assess the underlying financial performance of the operating divisions and the Group as a whole. 'Underlying operating profit' is operating profit stated before items of non-underlying and non-recurring income and expense which include:  amortisation or impairment of acquired intangible assets, business reorganisation costs, acquisition expenses, share based payments and one-off exceptional items.

		6 months ended 30 June 2018	6 months ended 30 June 2017	Year ended 31 December 2017
		(unaudited)	(unaudited)	(audited)
		£m	£m	£m
Non-underlying expense
Amortisation of acquired intangible assets		(0.6)	(0.5)	(1.1)
Loss on disposal of Indigo Products Limited		-	-	(0.4)
Exceptional bad debt provision - Entu (UK) Plc		-	(3.9)	(3.9)
Site consolidation and redundancy		(0.7)	-	(4.9)
Gain on exit of property		0.7	-	-
Release of surplus contingent consideration		-	1.8	1.8
Share based payments		(0.4)	(0.4)	(0.6)

4.   Acquisitions

Acquisitions in the half year ended 30 June 2018

On 5 March 2018, the Group acquired Amicus Building Products Limited and subsidiaries ("Amicus"), for cash consideration of £0.5 million.

The following table summarises the consideration paid for Amicus and the fair values of the assets and liabilities acquired at the acquisition date.

		Amicus Building Products Limited fair values on acquisition (unaudited)
		£m
Recognised amounts of identifiable assets acquired and liabilities:
Acquired intangibles - brand		0.6
Property, plant and equipment		0.6
Inventories		1.6
Trade and other receivables		1.7
Cash and cash equivalent		0.2
Other interest-bearing loans and borrowings		(0.3)
Trade and other payables		(7.9)
Income tax payable		(0.1)
Provisions		(0.3)
Deferred tax liability		(0.1)
Fair value of assets acquired		(4.0)
Goodwill		4.5
Total consideration		0.5
Consideration
Cash consideration		0.2
Deferred consideration		0.3
Total consideration		0.5

Amicus is a chain of plastic distribution outlets with a network of depots across the north of the UK.  Amicus forms part of the Fabrication and Distribution segment. 

On acquisition, intangible fixed assets of £0.6 million were recognised, representing the Amicus brands.  In addition to this, a fair value adjustment of £0.3 million was made for onerous lease and property dilapidation provisions.

The goodwill recognised of £4.5 million represents the collective local 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.

5.   Taxation

The tax charge for the six months to 30 June 2018 is based on the estimated tax rate for continuing operations for the full year.

The main rate of corporation tax was lowered from 20% to 19% from 1 April 2017, and to 17% from 1 April 2020 (both changes now enacted).  This will reduce the Company's future current tax charge accordingly.  The deferred tax assets at 30 June 2018 have been calculated based on the rate of 17% substantively enacted at the balance sheet date. 

6.   Earnings per share (EPS)

	6 months ended 30 June 2018 (unaudited)	6 months ended 30 June 2017 (unaudited)		Year ended 31 December 2017 (audited)
	pence	pence		Pence
Basic EPS
Basic earnings per share	3.08	4.36		7.08

	pence		pence		pence
Diluted EPS
Diluted earnings per share	3.07		4.34		7.08

		6 months ended 30 June 2018 (unaudited)	6 months ended 30 June 2017 (unaudited)	Year ended 31 December 2017 (audited)
		No.	No.	No.
Number of shares
Weighted average number of shares used to calculate earnings per share
-       Basic		142,921,424	142,218,883	142,573,041
-       Diluted		143,222,183	142,826,629	142,678,393

7.   Dividends

	6 months ended 30 June 2018 (unaudited)	6 months ended 30 June 2017 (unaudited)	Year ended 31 December 2017 (audited)
	£m	£m	£m
2016 final dividend of 4.40 pence per share	-	6.3	6.3
2017 interim dividend of 2.23 pence per share	-	-	3.2
2017 final dividend of 4.46 pence per share	6.4	-	-
	6.4	6.3	9.5

The Group will pay an interim dividend of 1.70 pence per ordinary share in respect of the six months to 30 June 2018 (30 June 2017: 2.23 pence) on 19 October 2018 to shareholders on the register on 21 September 2018.

8.   Net debt

		6 months ended 30 June 2018	6 months ended 30 June 2017	Year ended 31 December 2017
		(unaudited)	(unaudited)	(audited)
		£m	£m	£m
Cash and cash equivalents		5.8	7.3	7.3
Bank Borrowings		(32.4)	(32.3)	(29.8)
Finance lease liabilities		(2.0)	(3.2)	(2.6)
Net debt		(28.6)	(28.2)	(25.1)

The facilities available to the Group at 30 June 2018 were a £12.5 million amortising term loan, £35.0 million Revolving Credit Facility and £5.0 million overdraft, secured on the assets of the Group.  The term of the loan and revolving credit facility is for four years ending December 2019.

9.   Cautionary statement

This document contains certain forward-looking statements with respect of the financial condition, results, operations and businesses 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 document should be construed as a profit forecast.

10.  Copies of this half year report

Further copies of this half year report are available from the registered office: Epwin Group Plc, 1b Stratford Court, Cranmore Boulevard, Solihull, B90 4QT or on the Company's website www.epwin.co.uk

 

END

 

 

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