10th April 2024
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 2023
Well placed after another
year of strong profit growth and strategic
delivery
Epwin Group Plc (AIM: EPWN) ("Epwin"
or the "Group"), the leading manufacturer of energy efficient and
low maintenance building products, with significant market shares,
supplying the Repair, Maintenance and Improvement ("RMI"), new
build and social housing sectors, announces its full year results
for the year ended 31 December 2023.
Financial highlights
£m
|
2023
|
2022
|
Revenue
|
345.4
|
355.8
|
Underlying operating
profit1
|
25.5
|
21.5
|
Underlying operating
margin1
|
7.4%
|
6.0%
|
Statutory operating
profit
|
20.7
|
16.9
|
Adjusted profit before
tax1
|
18.0
|
16.5
|
Profit before tax
|
13.2
|
11.9
|
Basic EPS
|
6.41p
|
5.78p
|
Adjusted EPS1
|
9.71p
|
8.95p
|
Dividend per share for the
year
|
4.80p
|
4.45p
|
Pre-tax operating cash
flow
|
39.7
|
38.6
|
Covenant net
debt2
|
14.4
|
17.9
|
Covenant net debt to adjusted
EBITDA2
|
0.5x
|
0.6x
|
Underlying operating cash
conversion3
|
156%
|
180%
|
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 are
pre-IFRS 16 measures.
3 Underlying operating cash conversion is pre-tax operating cash
flow as a percentage of underlying operating profit.
·
Strong trading performance, modestly ahead of
expectations:
o Underlying operating profit increased by 19%, as
margins return towards pre-pandemic levels, an
increase of 140 basis points over prior year
o Revenues slightly behind a strong 2022 comparative, following
lower volumes and surcharge reductions as inflated PVC input prices
reduced
o Strong cash generation continued with pre-tax operating cash
flow of £39.7 million (2022: £38.6 million)
·
Further strengthening of our already robust
financial position:
o Covenant net debt at year end less than 0.5x adjusted
EBITDA
o In
excess of £60 million headroom on banking facilities, maturity
extended to August 2026, to support the Group's growth and
development strategy
Shareholder returns: share buyback and
dividend
·
Share buyback programme commenced to boost
shareholder returns:
o Initial programme expected to complete today
o Intention to continue programme subject to AGM
approval
·
Dividend per share increased by 8%:
o Proposed final dividend of 2.80 pence per share, resulting in
a total dividend for 2023 of 4.80 pence per share (2022: 4.45 pence
per share)
o Increased dividend reflects the positive outlook for the Group
and its strong financial position
Operational and strategic highlights
·
Inflationary pressures easing, continue to be
actively managed:
o Raw
material cost inflation continued to ease, although PVC resin and
other raw material prices remain elevated
o Inflationary pressures in respect of energy and labour
continue to be managed carefully
·
Continued delivery of our strategy:
o Value-enhancing acquisitions:
§ Integration of 2022 acquisitions, progressing in line with
management expectations
§ Capital
investment programme to expand materials re-processing capacity and
margin at Poly-Pure completed
o New
product development:
§ Progress
being made on increasing the use of recycled materials within
extruded products as well as developing market opportunities for
reprocessed material
§ Focus on
wider product range extension continues, with new products added to
core ranges
o Operational improvement:
§ Consolidation of decking manufacturing to a single site
completed on time in H1 2023, with operational synergies being
realised
§ Implementation of single IT system across the distribution
network progressing well, with phased implementation from Q4 2023,
expected to complete in H1 2024
o Further progress on sustainability:
§ Sustainability-Linked Loan incorporated into Group's banking
facilities on renewal, with targets relating to energy intensity
and PVC recycling
§ Reporting
on climate-related risks and opportunities continues to develop,
including Year 1 reporting under TCFD
Current trading and outlook
·
The Group's range of low maintenance, energy
efficient and recyclable building products has shown resilience
against subdued markets and macroeconomic headwinds, which are
expected to continue throughout 2024
·
Current trading is in line with the Board's
expectations
·
Board remains confident of continuing to execute
the Group's strategy in 2024
·
Positive medium and long-term RMI market drivers
remain:
o Poorly maintained and ageing housing stock, underinvested
social housing and a shortage of housing supply
o Environmental concerns driving government policy focus on
decarbonising
the UK housing stock and improving the energy efficiency of
homes
Jon
Bednall, CEO of Epwin, commented:
"The Group has, once again,
delivered financial performance at, or ahead of, market consensus
expectations, with 2023 results significantly ahead of a strong
2022 comparative. This is testament to the
combined efforts of all my Epwin colleagues and I would like to
thank them for this and for the good progress we have continued to
make with both our strategic and sustainability targets.
Our diversified portfolio of
energy efficient and low maintenance building
products leaves us well positioned when end markets recover and to
benefit from longer-term structural drivers of demand.
We remain confident in the Group's
future prospects, despite the short-term macroeconomic headwinds
and expect to make further progress in 2024."
Contact information
Epwin Group Plc
Jon Bednall, Chief
Executive
Chris Empson, Group Finance
Director
|
078 3462
3818
|
Shore Capital (Nominated Advisor and Joint
Broker)
Corporate Advisory
Daniel Bush / Iain Sexton
Corporate Broking
Fiona Conroy
Zeus
Capital Limited (Joint Broker)
Dominic King / Nick Searle
|
0207 408 4090
0203 829
5000
|
MHP
Reg Hoare / Charlie Barker / Finn
Taylor
|
078 3462
3818
epwin@mhpgroup.com
|
Forthcoming dates:
Ex-dividend
date
9 May 2024
Dividend record
date
10 May 2024
Annual General
Meeting
21 May 2024
Dividend payment
date
5 June 2024
About Epwin
Epwin is the leading manufacturer of
energy efficient and 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
The Group successfully navigated a
challenging trading and macroeconomic environment to deliver an
excellent 2023 result that again meets profit expectations. This is testament to the
efforts and commitment of our hard-working employees across the
Group and I would again like to thank them, on behalf of the Board
and our shareholders, for their dedication. We were pleased to be
able to award a cost of living support payment to all employees,
with the exception of senior management, for a second year in
recognition of these efforts.
Strong performance
The Group once again met its revenue
and profit expectations, delivering a strong performance. Trading
remained steady through to the end of the year, albeit H2 revenues
reflected more subdued market conditions following a strong first
half. Full year revenue of £345.4 million (2022: £355.8 million)
represents a small decline, as expected, compared to the prior year
due to more subdued volumes in private housing RMI, a sluggish
housing market, and the impact of softening PVC prices and
consequent reductions in surcharges.
Underlying operating profit of £25.5
million (2022: £21.5 million) represents a 19% increase from a
strong comparative as margins returned towards pre-pandemic levels
and we maintained a sharp operational focus to control costs, with
statutory operating profit also ahead at £20.7 million (2022: £16.9
million).
Strong cash generation continued
during the year, with pre-tax operating cash flow increasing to
£39.7 million (2022: £38.6 million) and covenant net debt at the
year end, better than expected, at £14.4 million (2022: £17.9
million). The strength of the Group's financial position and
significant headroom on banking facilities, in excess of £60
million at year end, provides ample capacity and flexibility to
drive our long-term strategy.
This performance demonstrates the
strength of our business model and the resilience of our customer
base and core markets.
Strategic progress
The Board considers that the Group's
core strategic objectives remain appropriate and, therefore, the
Group's operational strategy continues to focus on extending our
product portfolio, technical capability and channels to market,
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.
During the year, we made good
progress against our core operational objectives with a particular
focus on the integration of our 2022 acquisitions and consolidation
of activities across the Group, including:
·
Investment in plant to expand recycling capacity
and margins at Poly-Pure, acquired in 2022
·
Investment in co-extrusion tooling to enable
increased use of recycled PVC in place of virgin
material
·
Transition of third-party production to our own
facilities, following 2022 acquisitions
·
Consolidation of Group decking production to a
single site completed in H1 2023
·
Implementation of a single IT system covering our
distribution network, which went live on a phased basis in Q4 2023,
to complete in H1 2024
·
Realisation of additional cross-selling
opportunities presented through our distribution network
The Group continues to make progress
with developing a meaningful and positive sustainability framework
and targets, while delivering on our sustainability agenda in
support of our wider strategy. Our commitment to our sustainability
strategy is underlined by the formalisation of sustainability
metrics within our new Sustainability-Linked Loan facility with
existing lenders, Barclays and HSBC, where
modest adjustments to the margin are applied based on the Group's
achievement against annual targets relating to PVC recycling and
energy intensity ratio.
Our sustainability reporting
continues to develop. For the third year, we will be presenting an
integrated Sustainability
Report as part of our annual report and, this
year, we have adopted the recommendations of the Task Force on
Climate-Related Financial Disclosures ("TCFD") for the first
time.
Share buyback and dividends
In November 2023, the Group
announced the commencement of a share buyback programme for the
repurchase of up to 3 million ordinary shares for cancellation, as
our strong cash generation and balance sheet provided the
opportunity to take advantage of market conditions to repurchase
shares at attractive levels and return additional funds to
shareholders. The buyback is progressing well, and we anticipate
completing this initial programme in early Q2 2024. As at 31
December 2023, 0.4 million ordinary shares had been repurchased and
cancelled, at a total cost of £0.3 million. To the date of this
report, 3.0
million shares have been
repurchased, at a cost of £2.3 million. Additionally, the Group
repurchased 0.7 million shares following the post year end vesting
and exercise of options under the Group SAYE scheme.
Taking into account the outlook for
the Group, and our strong financial position, the Board declared an
interim dividend of 2.00 pence per share (2022: 1.90 pence per
share), which was paid to shareholders in October 2023. The Board
is recommending a final dividend for 2023 of 2.80 pence per share
(2022: 2.55 pence per share) to be paid on 5 June 2024 to
shareholders on the register on 10 May 2024. This full year
dividend of 4.80 pence per share (2022: 4.45 pence per share),
represents an increase of 8% over the prior year and is in line
with the Board's policy of a progressive dividend that is
approximately twice covered by adjusted profit after
tax.
The Group intends to continue returning capital
to shareholders both by way of our on-going dividend policy and the
buyback programme, alongside continued investment in the Group's
strategy.
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 2023 Annual Report and Accounts as well as on the corporate
website.
The Annual General Meeting ("AGM")
will be held at Squire Patton Boggs (UK)
LLP, Rutland House, 148 Edmund Street, Birmingham, B3 2JR
on Tuesday 21 May 2024 at 11.00
am.
Board changes
As part of our ongoing review of
board composition and in an effort to increase the breadth of
skills and experience across the Board, I am pleased to announce
that Kathy Callaghan will be appointed as Non-Executive Director
from 10 April 2024. Kathy brings a wealth of experience, most
recently from Rotork Plc where she was Group HR Director and a
member of the executive team and board ESG committee with
responsibility for global HR, communications and external
affairs.
After almost ten years as Chairman
of the Board, having been appointed as Chairman shortly after the
IPO in 2014, I gave notice of my intention to step down from this
position and retire from the Board following the forthcoming AGM.
The Board's succession planning means that I am delighted to
announce that Stephen Harrison has agreed to replace me as Chairman and I
wish him, the Board and the Group every success for the
future.
Summary and outlook
The Group's trading performance
during 2023 has been resilient, demonstrating the strength of our
multi-brand, multi-channel business model, and we have continued to
make good strategic progress, delivering strong operating profit
and cash flow in a challenging trading environment.
As we begin 2024, macroeconomic
headwinds continue in the form of economic uncertainty, continued
elevated inflation, heightened interest rates and a further
anticipated slowdown in the housing market according to recent
Construction Products Association forecasts. However, the Group's
broad product range, diverse customer base and operations,
longstanding supplier relationships and strong balance sheet
continue to provide a large measure of resilience against any
short-term changes in conditions.
The medium to long-term drivers of
the market remain positive, with the UK still facing a shortage of
new and affordable housing, an ageing and underinvested housing
stock and increasing concern about the quality of social housing.
Environmental concerns are driving legislation and initiatives that
will require improvements to homes on a larger scale than simply
essential maintenance, with the need to decarbonise the UK housing
stock and improve the energy efficiency of homes growing in urgency
given the UK's net zero commitments.
Despite the current
macroeconomic outlook, we
remain confident of executing our strategy, supported by the
strength of the medium and long-term drivers of our
markets.
Andrew Eastgate
Chairman
10 April 2024
Business Review
Strong trading performance
The Group delivered a strong
performance in 2023 and continued to make progress towards our
strategic objectives. Revenue declined slightly compared to the
prior year, as expected, by 3% to £345.4 million against a very
strong comparative (2022: £355.8 million). This was due to lower market
volumes, primarily in the second half of the year, and surcharge
reductions as PVC input prices reduced, offset by the full year
contribution of our 2022 acquisitions, which contributed £12.0
million of external revenue (2022: £3.8 million).
Underlying operating profit increased by 19% to
£25.5 million (2022: £21.5 million), as underlying operating margin
improved by 140 basis points to return towards pre-pandemic levels,
reflecting our strong operational focus and responsible approach to
materials price inflation in a competitive market.
The easing of raw material
inflation, which was a significant factor in 2021 and 2022, appears
to have plateaued, with prices remaining at elevated levels.
Inflation continues to put pressure on overheads, particularly
staff costs, driven by labour retention and living wage increases,
and power prices, which continue to be elevated. As a result, the
Group continues to implement pricing actions where needed to pass
on heightened operating costs appropriately. Recruitment challenges
have eased somewhat but remain a factor and we continue to develop
our pool of talent for the future, welcoming an increased number of apprentices to the Group during the
year, along with the second cohort of participants on our graduate
programme.
Operational highlights
Health and
safety
The safety and wellbeing of our
employees is our key operational priority and we strive for
continuous improvement in health and safety standards across all
operations. Health and safety related KPIs are closely monitored by
the main and divisional boards. Our accident frequency rate ("AFR")
has increased slightly to 4.4 per 100,000 hours worked (2022: 3.8),
but remains below industry benchmarks. This is again driven by
increased reporting of minor accidents, as lost time accidents
(resulting in one or more days unable to work) were lower than 2022
on a like-for-like basis. Employees are encouraged to report all incidents and
near-misses, even when minor, as part of a proactive approach to
risk management and to promote an open and blame-free culture where
health and safety is continually improving. There was also an
increase in the number of RIDDOR injuries to 11 (2022: 9). While
this remains low for a manufacturer of our size, the occurrence of
any injury is always disappointing, with all incidents thoroughly
investigated and appropriate actions taken.
A Group-wide exercise to reinforce
training and ensure safe process is adhered to, focussing on the
most common accident types, is again being undertaken. The
recording and reporting of accidents remains critical to
understanding the level of risk and adherence to process in our
operations and KPIs continue to be monitored closely by
management.
Production
With volumes in our core markets
softening compared to the prior year, particularly in the second
half of the year, we maintained a sharp focus on operational efficiency.
Across our key manufacturing locations, materials efficiency and
scrap rates are closely monitored and improved during the year,
from an already strong base, with scrap rates reducing to all-time
lows across the Group due to improved operational working
practices.
Recycling
Increasing the volume of PVC waste
recycled through our operations and increasing the use of recycled
material within our own products remain core areas of focus for the
Group. During the year, we invested in expanding the capacity and
margins of our recycling operation and in co-extrusion tooling,
which enables us to incorporate a greater proportion of recycled
material into our products. The capital investment plan committed
to on the acquisition of Poly-Pure was completed and operational by
the end of 2023, albeit behind schedule due to delays in the
delivery of plant. The business is now in a position to deliver on
the increased capacity, margin and synergies envisaged at
acquisition.
Strategic progress
The Group's focus continues to be on
operational efficiency, product and materials development,
cross-selling and business development, identifying and
completing value-enhancing acquisitions and building on the Group's
inherent sustainability credentials.
Value-enhancing
acquisitions
During 2022, the Group completed the
acquisition of Poly-Pure, a leading UK materials re-processor and
Mayfield, a supplier of decking and related products to the holiday
park industry. Integration of the 2022 acquisitions has been a
focus during the year and is progressing in line with management's
expectations.
The initial Poly-Pure integration is
well progressed. The business was impacted by increased prices for
recyclate, driven by an increase in market demand, and capital
investment plans to raise capacity and facilitate the production of
higher margin material were impacted by long lead times on plant.
However, the capital investment was completed by year end and the
business is building encouraging momentum for the future. The
acquisition has enabled the Group to accelerate delivery of its
sustainability agenda and contribute to a circular economy by
recycling post-consumer waste and developing the wider market for
recycled raw materials, and we remain optimistic about its
prospects.
Mayfield has expanded the
geographical coverage of the Group's growing decking operations and
outdoor products range and the transition of third-party production
to our own facilities is progressing. As a result, Mayfield has
delivered an encouraging performance against challenging conditions
in the holiday park and leisure market.
Product and materials
development
Broadening our product portfolio and
continually improving our products to ensure they remain at the
forefront of the market, continues
to be a priority for the Group. We work closely
with our customers so that our actions are informed by their
feedback. During the year we added further products to our core PVC
and aluminium ranges and enhanced the opportunities to both utilise
in house, and sell externally, reprocessed materials.
Progress with consolidation
and rationalisation of activities
As a diverse Group that has grown
significantly through acquisition, particularly in our decking
operations and distribution network, consolidation and
rationalisation of our activities has been a core focus in recent
years. The project, commenced in 2022, to consolidate decking
production into a single site was completed on time during the
first half of the year, enabling operational synergies to be
realised from the second half of 2023.
The project to consolidate IT
systems, as well as
finance and administrative functions, across our distribution
network is progressing with the system going live on a phased basis in Q4 2023 and
the roll-out across our branch network anticipated to complete in
H1 2024. The single system will result in improved information
flow, enabling more streamlined reporting and real-time monitoring
of KPIs.
Sustainability
The Group continues to focus on
sustainability in all respects, ensuring that our operations and
our products enable us to contribute to the UK's wider
sustainability goals alongside consistently delivering a financial
performance that makes us a sustainable investment and enables us
to pay a sustainable dividend to our shareholders.
Environmental targets remain most
relevant to the Group as an energy-intensive manufacturer of scale.
Our main focus continues to be on reducing the carbon footprint of
our operations, primarily through actions to reduce waste and
energy usage, and we will report that energy intensity per £m of
gross revenue improved again, reducing by 8% compared to 2022. We
are also focussing on reducing the carbon footprint of our
products, primarily through increased use of recycled raw
materials, and contributing to the circular economy through the
recycling of post-consumer and post-industrial waste. Our
commitment to sustainability is underlined by the formalisation of
sustainability metrics within the Group's new Sustainability-Linked
Loan facility with our existing lenders, Barclays and HSBC and
inclusion of sustainability-related KPIs in the 2023 Annual Report
and Accounts.
The Group continues to develop its
sustainability reporting and our 2023 Annual Report and Accounts
will include an integrated Sustainability Report for the third year
and reporting under TCFD requirements for the first time. We
recognise that there is more
work to do to better understand our Scope 3
emissions, develop meaningful targets and establish a viable
pathway to net zero for the Group. As a result, during the year,
the Group established a Sustainability Forum, chaired by the Group
Finance Director and including employees from across the business
with direct responsibility for sustainability matters. The Forum
will meet quarterly, report to the Board and work towards
formalising sustainability metrics and targets.
Market overview and outlook
The Group's core markets have been
impacted by the unhelpful macroeconomic environment during 2023,
with the CPA estimating an 11% fall in activity for private housing
RMI and a 19% fall in activity for private housing new build. Epwin
has outperformed the market to deliver a strong trading
performance, with revenue declining by just 3% overall compared to
2022 (5% on a like-for-like basis). This is due to our inherently
strong position as a manufacturer of scale and the market leader
for many of our products, as well as the resilience of our business
model. Our broad range of products and nationally recognised
brands, wide range of materials capabilities and diverse customer
base provides a number of routes to market, which has enabled the
Group to successfully navigate a period of varied demand across the
wider building products sector. The Group's commitment to
independent distributors, who are more agile and appear to have
weathered the softening market conditions better than larger
distributors, remains a strength.
The main challenges during the year
have been in relation to consumer confidence and spending and the
housing market slowdown. Increases in the Bank of England base rate
to combat inflation has had a twofold effect in the market,
reducing demand for new build properties and reducing the number of
transactions across all property types. This, in turn, impacts the
level of improvement activity in the RMI sector, as improvements
often take place soon after a property is purchased. The impact of
the cost of living crisis and higher mortgage rates on disposable
incomes and consumer confidence, has resulted in reduced demand and
lower activity in the RMI market, with non-essential improvement
works again most affected.
Private housing
RMI
Market expectations
Private housing RMI is now the
second largest construction sector having reached historic high
levels at the end of 2021 and in early 2022. The CPA forecasts a
fall of 4% in 2024 before returning to modest growth in 2025,
driven by a sluggish housing market, consumer confidence and
spending and the impact of interest rates on household finances.
Spending on non-essential, smaller discretionary improvements is
likely to be the most impacted. A majority of RMI activity relates
to repairs and maintenance work that cannot be postponed
indefinitely, providing a level of base activity for the Group.
Though there are early signs that consumer confidence is improving
with growth in real wages and employment levels remaining high, in
the short term, conditions are likely to remain
challenging.
Response and longer-term outlook
·
Continued operational focus to protect profit
margins
·
Strong market positions with high-quality, energy
efficient products and a national distribution network to service
the market effectively
·
Multi-brand, multi-channel market approach
maximises trading opportunities
·
Diverse product range and customer base provides
resilience, as demonstrated by strong 2023 performance
·
Continued investment in new product development to
ensure our product offer remains attractive to customers
Private new build
housing
Market expectations
The CPA expects private housing
starts and completions to fall by 4% in 2024, following a
challenging year for housebuilders, which saw double-digit declines
in both, before returning to growth in 2025, driven by a sluggish
housing market and increased mortgage rates impacting demand, as
well as a challenging planning environment. Our new build-facing
businesses benefitted from housebuilders' increased focus on
completing existing plots during the first part of 2023, driving
demand for products such as our GRP porches, dormers and chimneys.
With fewer plots commenced in 2023, and as housebuilders continue
to slow their build rates and report reduced order books going into
2024, we are likely to see a short-term contraction in demand.
Easing mortgage rates, demand for affordable housing and
anticipated cuts to interest rates provide upside
potential.
Response and longer-term outlook
·
Strong position as the market leader in GRP
building components providing benefits to housebuilders
·
Progress on operational efficiencies during 2022
and 2023 means businesses are well placed to respond to changing
levels of demand
·
Opportunities for our new build-facing businesses
to sell into other markets
·
Medium and long-term drivers remain strong as the
chronic undersupply of housing continues, with targets for new
homes still not being met
Public housing RMI and new
build
Market expectations
Social housing RMI is increasingly
considered to be a priority and there is a growing focus on
decarbonisation and need for urgent improvements to the general condition
of the existing public housing stock. Issues relating to the quality of housing built and maintained
by social landlords, including damp and general disrepair, are
becoming increasingly high profile and
there remains a national shortage of suitable housing. This should
result in housing associations and local authorities diverting more
spending to basic repairs and maintenance, which would benefit the
Group. With growth limited by financially constrained local
authorities and housing associations, the CPA is forecasting modest
growth of 2% in public housing RMI in 2024 and 2025.
Response and longer-term outlook
·
Encouraging start to the year for our social
housing-facing businesses
·
Long-term drivers remain strong, with
underinvestment in the social housing stock, much of which does not
yet meet minimum EPC requirements
·
Sustainability matters of particular importance to
social housing providers and local authorities, Epwin is well
placed with strong environmental and sustainability
credentials
Summary
In 2023, the Group demonstrated its
resilience and ability to deliver against an unhelpful market
backdrop. Looking ahead to 2024, short-term uncertainty remains and
expectations are that markets will continue to be challenging.
However, our strategic priorities remain unchanged. Our focus will
continue to be on operational efficiency, completion and
integration of value-enhancing acquisitions, product and materials
development and cross-selling and business development, alongside
continued commitment to our sustainability goals. We are confident
in the medium and long-term prospects for the Group and our ability
to navigate the anticipated short-term uncertainty.
Jonathan Bednall
Chief Executive Officer
10 April 2024
Financial Review
·
Strong
performance, ahead of market expectations, despite unhelpful
economic backdrop
·
Bank facility
renewed and maturity extended to 2026
·
Strong cash
generation and robust balance sheet
·
4.80 pence full
year dividend and share buyback programme
commenced
Key
financials
|
Year ended
31 December
2023
£m
|
Year ended
31 December
2022
£m
|
Revenue
|
345.4
|
355.8
|
|
|
|
Underlying operating profit
|
25.5
|
21.5
|
Acquisition-related costs
|
-
|
(0.7)
|
Share-based payments
expense
|
(0.7)
|
(0.6)
|
Amortisation of acquired other
intangible assets
|
(1.0)
|
(0.3)
|
Goodwill impairment
|
(4.2)
|
(3.0)
|
Contingent consideration
adjustment
|
1.1
|
-
|
|
|
|
Operating profit
|
20.7
|
16.9
|
Underlying operating margin
|
7.4%
|
6.0%
|
Operating margin
|
6.0%
|
4.7%
|
Total revenue for the year ended 31
December 2023 was £345.4
million (2022: £355.8 million), 3% lower than an
exceptionally strong comparative period and representing a
resilient performance in unhelpful market conditions. As
anticipated, the second half of the year saw a softening of demand
in some of the Group's core markets, in particular private housing
RMI and new build. The overall decrease in revenue was largely
driven by reduced volumes and the impact of surcharge reductions as
PVC input prices reduced, offset by the full year impact of 2022
acquisitions, which contributed £12.0 million of external revenue
(2022: £3.8 million).
Underlying operating profit
increased by 19% to £25.5 million in the period (2022: £21.5
million) as we continued to balance pricing and volumes in a
competitive market environment, whilst also maintaining a sharp
operational focus to control costs and recover our margin towards
pre-pandemic levels. The underlying operating margin for the year
of 7.4% (2022: 6.0%) represents an improvement of 140 basis points
over the prior year. Significant price inflation in respect of our
key raw materials, which has been a major theme in recent years,
eased during the year although pay and other inflation continued to
place pressure on overheads.
Operating profit for the year was
£20.7 million (2022: £16.9 million), ahead of prior year, but was
impacted by a small increase in non-underlying costs.
Reportable segments
|
|
|
|
Year ended
31 December
2023
|
Year ended
31 December
2022
|
|
£m
|
£m
|
Revenue
|
|
|
Extrusion and Moulding
|
210.3
|
221.1
|
Fabrication and
Distribution
|
135.1
|
134.7
|
Total
|
345.4
|
355.8
|
|
|
|
Underlying segmental operating profit
|
|
|
Extrusion and Moulding
|
21.6
|
16.8
|
Fabrication and
Distribution
|
7.4
|
7.5
|
Underlying segmental operating profit before corporate
costs
|
29.0
|
24.3
|
Corporate costs
|
(3.5)
|
(2.8)
|
Underlying operating profit
|
25.5
|
21.5
|
Non-underlying items
|
(4.8)
|
(4.6)
|
Operating profit
|
20.7
|
16.9
|
Extrusion and
Moulding
·
Revenue decreased by 5% in comparison to 2022,
predominantly due to the impact of softening PVC input prices on
levied surcharges, offset by the full year impact of Poly-Pure,
which contributed £7.2 million of external revenue (2022: £3.4
million)
·
Steps taken by the business, during 2022 and
continuing in 2023, on pricing and operational efficiency, as well
as the impact of lower surcharges, have resulted in an improvement
in underlying operating margin to 10.3% (2022: 7.6%), towards
pre-pandemic levels
Fabrication and
Distribution
·
Revenue was broadly flat against a strong 2022,
predominantly due to reduced volumes against a challenging market
backdrop and the softening in RMI demand seen particularly in our
distribution network, often a barometer for the overall building
products and construction market, during the second half of the
year. This was offset by the acquisition of Mayfield which
contributed £4.8 million of external revenue (2022: £0.4
million)
·
Underlying operating margin remained broadly in
line with the previous year at 5.5% (2022: 5.6%), reflecting the
Group's responsible approach to pricing in a competitive market
environment and the steps taken to consolidate activities across
the segment
Corporate
costs
·
Corporate costs increased in comparison to 2022,
primarily due to increased payroll costs caused by salary and wage
inflation and an expansion of the Group's graduate scheme,
increased insurance premiums and professional fees, particularly in
respect of audit, and further investment in IT security
Non-underlying
items
Non-underlying items of £4.8 million
(2022: £4.6 million) were excluded from operating profit in
arriving at underlying operating profit. Non-underlying items
included; £1.0 million (2022: £0.3 million) relating to the
amortisation of brand and customer relationship intangible assets
recognised on acquisitions, the increase as a result of the
acquisitions in the final quarter of 2022; share-based payments
expense of £0.7 million (2022: £0.6 million) in respect of the
Long-Term Incentive Plan ("LTIP") and Save As You Earn ("SAYE") schemes;
acquisition-related costs of £nil (2022: £0.7 million); an
adjustment to contingent consideration of £1.1 million (2022: £nil)
and a goodwill impairment charge of £4.2 million (2022: £3.0
million).
The contingent consideration
adjustment of £1.1 million (2022: £nil) related to the contingent
consideration payable in respect of the Poly-Pure acquisition.
During 2023, Poly-Pure was impacted by delays in the delivery and
installation of capital investment to improve capacity and margins,
as a consequence no contingent consideration was payable in respect
of the year ended 31 December 2023, resulting in a reduction in the
fair value of contingent consideration recognised compared to the
prior year.
The goodwill impairment charge
arises in relation to an assessment of the carrying value of the
goodwill associated with the Ecodek CGU. As disclosed in the prior
year, changes to regulations relating to the fire resistance of
materials used on the exterior
of high-rise buildings, following the Grenfell
Tower fire in 2017, resulted in the business losing a core market
for its wood-plastic composite decking. Continued uncertainty
regarding future cash flows, as it continues to develop new markets
and opportunities, has resulted in a further impairment charge of
£4.2 million in the year.
Cash
flow
|
Year ended
31 December
2023
|
Year ended
31 December
2022
|
|
£m
|
£m
|
Pre-tax operating cash flow
|
39.7
|
38.6
|
|
|
|
Tax paid
|
(2.1)
|
(2.2)
|
Acquisitions, net of cash
acquired
|
-
|
(17.8)
|
Payment of deferred and contingent
consideration
|
(1.8)
|
(0.3)
|
Net capital expenditure
|
(8.6)
|
(9.1)
|
Interest on borrowings
|
(3.1)
|
(1.6)
|
Net (repayment)/drawdown of
borrowings
|
(5.5)
|
14.5
|
Lease payments
|
(14.3)
|
(10.6)
|
Purchase of own shares
|
(0.3)
|
-
|
Dividends
|
(6.6)
|
(6.2)
|
|
|
|
(Decrease)/increase in cash and cash
equivalents
|
(2.6)
|
5.3
|
Opening cash and cash
equivalents
|
15.1
|
9.8
|
Closing cash and cash equivalents
|
12.5
|
15.1
|
Borrowings
|
(24.6)
|
(29.8)
|
Lease assets
|
5.2
|
5.7
|
Lease liabilities
|
(92.5)
|
(92.6)
|
Closing net debt
|
(99.4)
|
(101.6)
|
Covenant net debt1
|
(14.4)
|
(17.9)
|
1 Covenant net debt represents a pre-IFRS 16 measure.
Cash flow
The Group remained strongly cash
generative, with a pre-tax operating cash flow of £39.7 million
(2022: £38.6 million). This included a net outflow from working
capital for 2023 of £5.3 million, compared to a net inflow of £1.4
million in the prior year. Tax payments during the year of £2.1
million (2022: £2.2 million) were broadly consistent with those in
the prior year. During the year, payments totalling £1.8 million
(2022: £0.3 million) were made in respect of deferred and
contingent consideration, with £1.0 million being the final
contingent consideration relating to the acquisition of PVS in 2019
and £0.8 million representing the remaining deferred consideration
in respect of Mayfield. Net capital
expenditure was £8.6 million (2022: £9.1 million) as the Group
continues to invest in line with its strategic objectives alongside
ongoing replacement of plant and machinery as needed. Lease
payments of £14.3 million (2022: £10.6 million) were higher than
during 2022 due to the impact of rent reviews and lease renewals
during 2022 and 2023, and the receipt of a lease incentive in the
prior year. Net interest paid for the
period of £3.1 million (2022: £1.6 million) was higher than during
2022 due to the impact of interest rates, which were heightened
throughout 2023 due to increases in the Bank of England base rate.
During the year, there was an outflow of £5.5 million (2022: £14.5
million inflow) in respect of borrowings, due to the payment of
£0.5 million in fees relating to the renewal of the Group's banking
facilities and as we reduced the level of borrowings by £5.0
million.
Net
debt
Covenant net debt reduced to £14.4
million as at 31 December 2023 (2022: £17.9 million), ahead of our
expectations and representing a covenant net debt to adjusted
EBITDA ratio of less than 0.5x.
Bank facility renewal
In August 2023, the Group renewed
its revolving credit facility with the existing lenders, Barclays
and HSBC, on comparable terms. The new facility is a
Sustainability-Linked Loan facility of £65 million with an initial
term of three years and the option to extend for a further two
years, where modest adjustments to the margin are applied based on
the Group's achievement against annual targets relating to PVC
recycling and energy intensity ratio. In combination with the £10
million overdraft facility, the new borrowing facility maintains
the Group's significant financial headroom, which at 31 December
2023 was in excess of £60 million.
Share buyback and dividends
In November 2023, the Group
announced the commencement of a share buyback programme for the
repurchase of up to 3 million ordinary shares of 0.05 pence each
for cancellation, as our strong cash generation and balance sheet
provided the opportunity to take advantage of market conditions to
repurchase shares at attractive levels and return additional funds
to shareholders. The buyback is progressing well, and we anticipate
completing this initial programme in Q2 2024. As at 31 December
2023, 366,723 ordinary shares, representing 0.3% of the pre-buyback
issued share capital, had been repurchased and cancelled, at a
total cost of £0.3 million.
Taking into account the outlook for
the Group, and our strong financial position, the Board declared an
interim dividend of 2.00 pence per share (2022: 1.90 pence per
share), which was paid to shareholders in October 2023. The Board
is recommending a final dividend for 2023 of 2.80 pence per share
(2022: 2.55 pence per share) to be paid on 5 June 2024 to
shareholders on the register on 10 May 2024. This full year
dividend of 4.80 pence per share (2022: 4.45 pence per share),
represents an increase of 8% over the prior year and is in line
with the Board's policy of paying a progressive dividend that is
approximately twice covered by adjusted profit after
tax.
The Group intends to continue
returning capital to shareholders both by way of our ongoing
dividend policy and the buyback programme, alongside continued
investment in the Group's strategy.
Christopher Empson
Group Finance Director
10 April 2024
Consolidated Income Statement and Other Comprehensive
Income
for the year ended 31 December
2023
|
|
2023
|
2022
|
|
|
Note
|
£m
|
£m
|
|
Revenue
|
2
|
345.4
|
355.8
|
|
Cost of sales
|
|
(231.4)
|
(250.5)
|
|
Gross profit
|
|
114.0
|
105.3
|
|
Distribution expenses
|
|
(42.0)
|
(40.1)
|
|
Administrative expenses
|
|
(51.3)
|
(48.3)
|
|
|
|
|
|
|
Underlying operating profit
|
|
25.5
|
21.5
|
|
|
|
|
|
|
Acquisition-related costs
|
3
|
-
|
(0.7)
|
|
Share-based payments
expense
|
3
|
(0.7)
|
(0.6)
|
|
Amortisation of acquired other
intangible assets
|
3
|
(1.0)
|
(0.3)
|
|
Goodwill impairment
|
3
|
(4.2)
|
(3.0)
|
|
Contingent consideration
adjustment
|
3
|
1.1
|
-
|
|
|
|
|
|
|
Operating profit
|
|
20.7
|
16.9
|
|
Finance costs
|
4
|
(7.5)
|
(5.0)
|
|
Profit before tax
|
|
13.2
|
11.9
|
|
Taxation
|
5
|
(3.9)
|
(3.5)
|
|
Profit for the year and total comprehensive
income
|
|
9.3
|
8.4
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
pence
|
pence
|
|
Basic
|
6
|
6.41
|
5.78
|
|
Diluted
|
6
|
6.31
|
5.71
|
|
Consolidated Balance Sheet
|
|
|
|
Equity
|
|
|
|
Ordinary share capital
|
|
0.1
|
0.1
|
Share premium
|
|
13.0
|
13.0
|
Merger reserve
|
|
25.5
|
25.5
|
Retained earnings
|
|
63.5
|
62.5
|
Total equity
|
|
102.1
|
101.1
|
|
|
|
| |
as at 31 December 2023
|
Note
|
2023
£m
|
2022
£m
|
Assets
|
|
|
|
Non-current assets
|
|
|
|
Goodwill
|
8
|
89.0
|
93.2
|
Other intangible assets
|
|
5.9
|
6.3
|
Property, plant and
equipment
|
|
35.4
|
34.3
|
Right of use assets
|
|
68.8
|
70.0
|
Lease assets
|
|
4.7
|
5.3
|
Deferred tax asset
|
|
-
|
0.8
|
|
|
203.8
|
209.9
|
Current assets
|
|
|
|
Inventories
|
|
37.4
|
41.1
|
Trade and other
receivables
|
|
35.8
|
40.5
|
Lease assets
|
|
0.5
|
0.4
|
Income tax receivable
|
|
0.7
|
0.5
|
Cash and cash equivalents (excluding
bank overdraft)
|
|
13.1
|
15.1
|
|
|
87.5
|
97.6
|
Total assets
|
|
291.3
|
307.5
|
|
|
|
|
Liabilities
|
|
|
|
Current liabilities
|
|
|
|
Bank overdraft
|
|
0.6
|
-
|
Lease liabilities
|
|
10.7
|
9.7
|
Trade and other payables
|
|
59.4
|
70.6
|
Deferred and contingent
consideration
|
|
0.1
|
1.9
|
Provisions
|
|
1.1
|
1.7
|
|
|
71.9
|
83.9
|
Non-current liabilities
|
|
|
|
Other interest-bearing loans and
borrowings
|
|
24.6
|
29.8
|
Lease liabilities
|
|
81.8
|
82.9
|
Deferred and contingent
consideration
|
|
7.2
|
7.6
|
Provisions
|
|
2.5
|
2.2
|
Deferred tax liability
|
|
1.2
|
-
|
|
|
117.3
|
122.5
|
Total liabilities
|
|
189.2
|
206.4
|
|
|
|
|
Net
assets
|
|
102.1
|
101.1
|
·
Consolidated Statement of Changes in Equity
for the year ended 31 December
2023
|
|
|
|
Share capital
|
Share premium
|
Merger reserve
|
Retained earnings
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Balance as at 1 January 2022
|
|
0.1
|
13.0
|
25.5
|
59.7
|
98.3
|
Comprehensive income
|
|
|
|
|
|
|
Profit for the year
|
|
-
|
-
|
-
|
8.4
|
8.4
|
Total comprehensive income
|
|
-
|
-
|
-
|
8.4
|
8.4
|
Transactions with owners recorded directly in
equity
|
|
|
|
|
|
|
Share-based payments
expense
|
|
-
|
-
|
-
|
0.6
|
0.6
|
Dividends
|
|
-
|
-
|
-
|
(6.2)
|
(6.2)
|
Total transactions with owners
|
|
-
|
-
|
-
|
(5.6)
|
(5.6)
|
|
|
|
|
|
|
|
Balance as at 31 December 2022 and 1 January
2023
|
|
0.1
|
13.0
|
25.5
|
62.5
|
101.1
|
Comprehensive income
|
|
|
|
|
|
|
Profit for the year
|
|
-
|
-
|
-
|
9.3
|
9.3
|
Total comprehensive income
|
|
-
|
-
|
-
|
9.3
|
9.3
|
Transactions with owners recorded directly in
equity
|
|
|
|
|
|
|
Purchase of own shares
|
|
-
|
-
|
-
|
(2.4)
|
(2.4)
|
Share-based payments
expense
|
|
-
|
-
|
-
|
0.7
|
0.7
|
Dividends
|
|
-
|
-
|
-
|
(6.6)
|
(6.6)
|
Total transactions with owners
|
|
-
|
-
|
-
|
(8.3)
|
(8.3)
|
|
|
|
|
|
|
|
Balance as at 31 December 2023
|
|
0.1
|
13.0
|
25.5
|
63.5
|
102.1
|
Consolidated Cash Flow Statement
for the year ended 31 December
2023
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Cash
flows from operating activities
|
|
|
|
Profit for the year
|
|
9.3
|
8.4
|
Adjustments for:
|
|
|
|
Depreciation, amortisation and
impairment
|
|
24.6
|
20.1
|
Contingent consideration
adjustment
|
|
(1.1)
|
-
|
Loss/(profit) on disposal of fixed
assets
|
|
0.1
|
(0.4)
|
Net finance costs
|
|
7.5
|
5.0
|
Taxation
|
|
3.9
|
3.5
|
Share-based payments
expense
|
|
0.7
|
0.6
|
Operating cash flow before movement in working
capital
|
|
45.0
|
37.2
|
Decrease in inventories
|
|
3.7
|
0.3
|
Decrease in trade and other
receivables
|
|
4.7
|
5.4
|
(Decrease) in trade and other
payables
|
|
(13.4)
|
(4.4)
|
(Decrease)/increase in
provisions
|
|
(0.3)
|
0.1
|
Pre-tax operating cash flow
|
|
39.7
|
38.6
|
Tax paid
|
|
(2.1)
|
(2.2)
|
Net
cash inflow from operating activities
|
|
37.6
|
36.4
|
|
|
|
|
Cash
flow from investing activities
|
|
|
|
Acquisition of subsidiary, net of
cash acquired
|
|
-
|
(17.8)
|
Payment of deferred and contingent
consideration
|
|
(1.8)
|
(0.3)
|
Acquisition of fixed
assets
|
|
(8.6)
|
(9.1)
|
Net
cash outflow from investing activities
|
|
(10.4)
|
(27.2)
|
|
|
|
|
Cash
flow from financing activities
|
|
|
|
Interest on borrowings
|
|
(3.1)
|
(1.6)
|
Repayment of borrowings
|
|
(15.5)
|
(10.5)
|
Drawdown of borrowings
|
|
10.0
|
25.0
|
Net interest on lease
liabilities
|
|
(3.4)
|
(3.2)
|
Net repayment of lease
liabilities
|
|
(10.9)
|
(7.4)
|
Purchase of own shares
|
|
(0.3)
|
-
|
Dividends paid
|
|
(6.6)
|
(6.2)
|
Net
cash outflow from financing activities
|
|
(29.8)
|
(3.9)
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents
|
|
(2.6)
|
5.3
|
Cash and cash equivalents at the
beginning of year
|
|
15.1
|
9.8
|
Cash
and cash equivalents at end of year
|
|
12.5
|
15.1
|
Secured bank loans
|
|
(24.6)
|
(29.8)
|
Lease assets
|
|
5.2
|
5.7
|
Lease liabilities
|
|
(92.5)
|
(92.6)
|
Net
debt at end of year
|
|
(99.4)
|
(101.6)
|
1. Basis of preparation
Whilst the financial information
included in this Preliminary Announcement has been prepared on the
basis of UK-adopted International Accounting Standards ("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 April 2024. The financial
information set out in this Preliminary Announcement does not
constitute the Group's consolidated financial statements for
the years ended 31
December 2023 or 2022 but is derived from those financial
statements which were approved by the Board of Directors on 10
April 2024. The auditor, RSM UK Audit 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 2023 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 are prepared on the
historical cost basis except where UK-adopted International
Accounting Standards require an alternative treatment.
The Group financial statements have
been prepared and approved by the directors in accordance with
UK-adopted International Accounting Standards.
The Group's accounting policies are
set out in the 2022 Annual Report and Accounts and have been
applied consistently in 2023.
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 including the ongoing
anticipated impact of current macroeconomic factors on the
operations and its financial resources, the Group and Parent
Company will have sufficient funds to meet their liabilities as
they fall due for that period.
The Board continues to closely
monitor the macroeconomic environment, including housing market
activity, inflation and Bank of England interest rate
announcements. The Group balance sheet remains robust with
significant financial headroom on committed banking facilities,
which were renewed during the year through to August 2026 with an
option to extend for a further two years. The banking facilities
comprise a £65 million Revolving Credit Facility and £10 million
overdraft facility. The Group has traded profitably throughout
2023, and to the date of this announcement, and its financial
position remains strong, with net debt better than expectations at
the year end and maintaining ongoing significant headroom on its
banking facilities and covenants.
The Group prepares, and the Board
reviews, detailed budgets and forecasts, which it has confidence in
achieving in a normal business environment. 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. The Directors considered
the financial resources of the Group, as well as its forecasts and
severe but plausible stress test scenarios.
The Group starts 2024 with
significant headroom on its banking facilities and the forecasts
show that there is sufficient liquidity and headroom to ensure
compliance with all covenants throughout the going concern
period.
Consequently, the Directors
are confident that
the Group and Parent Company will have sufficient funds to continue
to meet their 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. Re-processing of
PVC building materials.
Fabrication and
Distribution Fabrication,
marketing and distribution of windows and doors, cellular roofline,
cladding, rainwater, drainage and decking products.
|
2023
|
2022
|
|
£m
|
£m
|
Revenue from external customers
|
|
|
Extrusion and Moulding - total
revenue
|
250.5
|
263.0
|
Inter-segment revenue
|
(40.2)
|
(41.9)
|
Extrusion and Moulding - external
revenue
|
210.3
|
221.1
|
|
|
|
Fabrication and Distribution - total
revenue
|
135.2
|
134.8
|
Inter-segment revenue
|
(0.1)
|
(0.1)
|
Fabrication and Distribution -
external revenue
|
135.1
|
134.7
|
Total revenue from external customers
|
345.4
|
355.8
|
Segmental operating profit
|
|
|
Extrusion and Moulding
|
21.6
|
16.8
|
Fabrication and
Distribution
|
7.4
|
7.5
|
Segmental operating profit before corporate
costs
|
29.0
|
24.3
|
Corporate costs
|
(3.5)
|
(2.8)
|
Underlying operating profit
|
25.5
|
21.5
|
Non-underlying items (see note
3)
|
(4.8)
|
(4.6)
|
Operating profit
|
20.7
|
16.9
|
3. Non-underlying items
Operating profit is stated after
charging/(crediting) the following non-underlying items:
|
2023
|
2022
|
|
£m
|
£m
|
Acquisition-related costs
|
-
|
0.7
|
Share-based payments
expense
|
0.7
|
0.6
|
Amortisation of acquired other
intangible assets
|
1.0
|
0.3
|
Goodwill impairment (see note
8)
|
4.2
|
3.0
|
Contingent consideration
adjustment
|
(1.1)
|
-
|
Non-underlying items
|
4.8
|
4.6
|
Acquisition-related costs
Non-underlying items
of £0.7 million in 2022 relate to legal and
professional fees associated with the acquisitions of Poly-Pure and
Mayfield during that year.
Share-based payments expense
The share-based payment expense of
£0.7 million (2022: £0.6 million) comprises IFRS 2: Share-based payment charges of
£0.4 million (2022: £0.3 million) in respect of the Long-Term
Incentive Plan and SAYE schemes of £0.3 million (2022: £0.3
million).
Amortisation of acquired other intangible
assets
Amortisation of brand and customer
relationship intangible assets of £1.0 million (2022: £0.3 million)
acquired through business
combinations.
Contingent consideration adjustment
The contingent consideration
adjustment of £1.1 million (2022: £nil) related to the contingent
consideration payable in respect of the Poly-Pure acquisition.
During 2023, Poly-Pure was impacted by delays in the delivery and
installation of capital investment to improve capacity and margins,
as a consequence no contingent consideration was payable in respect
of the year ended 31 December 2023, resulting in a reduction in the
fair value of contingent consideration recognised compared to the
prior year.
4. Finance costs
|
2023
|
2022
|
|
£m
|
£m
|
Interest expense on
borrowings
|
3.1
|
1.6
|
Amortisation of loan fees
|
0.3
|
0.2
|
Contingent consideration: Discount
unwind on liabilities
|
0.7
|
-
|
Net interest on lease
liabilities
|
3.4
|
3.2
|
Total finance costs
|
7.5
|
5.0
|
Amortisation of loan
fees includes the
write-off of £0.2 million remaining unamortised loan fees
associated with the previous loan facility.
5. Taxation
|
2023
|
2022
|
|
£m
|
£m
|
Current tax
|
|
|
Current period
|
2.5
|
1.6
|
Prior period
|
(0.6)
|
(0.5)
|
Total current tax charge
|
1.9
|
1.1
|
|
|
|
Deferred tax
|
|
|
Current period
|
1.8
|
1.4
|
Prior period
|
0.2
|
1.0
|
Total deferred tax charge
|
2.0
|
2.4
|
|
|
|
Total tax charge
|
3.9
|
3.5
|
UK corporation tax is calculated at
23.5% (2022: 19%) of the estimated assessable profit for the
year.
The Group's total
income tax charge is
reconciled with the weighted average rate of UK corporation tax for
the year of 23.5% (2022: 19%) as follows:
|
2023
|
2022
|
|
£m
|
£m
|
Profit before tax
|
13.2
|
11.9
|
Tax at standard UK corporation tax
rate of 23.5% (2022: 19%)
|
3.1
|
2.3
|
|
|
|
Factors affecting the charge for the
period:
|
|
|
Expenses not deductible
|
1.2
|
1.0
|
Super deduction benefit
|
-
|
(0.3)
|
Prior period
|
(0.4)
|
0.5
|
Total tax charge
|
3.9
|
3.5
|
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 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.
|
2023
|
2022
|
|
EPS
summary
|
pence
|
pence
|
|
Basic EPS
|
6.41
|
5.78
|
|
Diluted EPS
|
6.31
|
5.71
|
|
Number of shares
|
|
|
2023
No.
|
2022
No.
|
Weighted average number of ordinary
shares (basic)
|
145,142,133
|
145,305,993
|
Effect of share options in
issue
|
2,300,457
|
1,832,645
|
Weighted average number of ordinary shares
(diluted)
|
147,442,590
|
147,138,638
|
|
|
|
|
|
|
| |
7. Dividends
|
2023
|
2023
|
2022
|
2022
|
|
£m
|
pence per
share
|
£m
|
pence per
share
|
Previous year final
dividend
|
3.7
|
2.55
|
3.4
|
2.35
|
Current year interim
dividend
|
2.9
|
2.00
|
2.8
|
1.90
|
|
6.6
|
|
6.2
|
|
The Board is recommending a final
dividend of 2.80 pence per share in respect of the financial year
ended 31 December 2023.
8. Goodwill
|
|
|
|
Goodwill
|
|
|
|
|
£m
|
Cost
|
|
|
|
|
At 1 January 2022
|
|
|
|
75.5
|
Acquisitions through business
combinations in 2022
|
|
|
|
20.7
|
At 31 December 2022
|
|
|
|
96.2
|
Acquisitions through business
combinations in 2023
|
|
|
|
-
|
At
31 December 2023
|
|
|
|
96.2
|
|
|
|
|
|
Accumulated impairment losses
|
|
|
|
|
At 1 January 2022 and 31 December
2022
|
|
|
|
3.0
|
Impairment
|
|
|
|
4.2
|
At
31 December 2023
|
|
|
|
7.2
|
|
|
|
|
Net
book value
|
|
|
|
At
31 December 2023
|
|
|
89.0
|
At 31 December 2022
|
|
|
93.2
|
Impairment
Changes to
regulations relating to the fire resistance of materials used on
the exterior of high-rise buildings, following the Grenfell Tower
fire in 2017, resulted in Ecodek losing a core market for its
wood-plastic composite decking. Since then, increased
uncertainty regarding
future cash flows has resulted in a reduction in the value-in-use
of the CGU. In the prior year an impairment charge of £3.0 million
was recognised, the remaining goodwill of £4.2 million was fully
impaired in 2023 to reflect the fact that the discounted present
value of future cash flows did not support the carrying value of
the CGU.
9.
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.
10. Annual General
Meeting
The Annual General Meeting of the
Company will be held on 21 May 2024 at Squire Patton Boggs (UK)
LLP, Rutland House, 148 Edmund Street, Birmingham, B3
2JR.
If you wish to attend the AGM in
person, please pre-register your intention to do so by
emailing epwin@mhpc.com.
Please state 'Epwin Group Plc: AGM' in the subject line of
the email and include your full name and investor code (if
available), by no later than 10.30am on 17 May 2024.
To facilitate the answering of any
questions that shareholders have, or would normally raise, during
the course of the AGM, 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.
11. Electronic
communications
The full Annual Report and Accounts
for the year ended 31 December 2023 are to be published on the
Company's website,
together with the Notice convening the Company's 2023 Annual
General Meeting by 26 April 2024. 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.