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Annual Report
and Accounts
For the year ended 31 December 2018
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26393 11 April 2019 4:26 pm Proof 7Epwin Group Plc is a leading vertically integrated manufacturer of low maintenance building products for the Repair, Maintenance and Improvement, social housing and new build markets in the UK. The business has significant market share in its core products and has continually invested in its operations to improve efficiency and the range of products available to its customers.IntroductionOur Investment CaseEstablished business model• B2B specialist provider of low maintenance building products• Leading UK market shares• Multiple brands and routes to market• Large and diverse customer baseRead about our business model on page 12Executing on strategy in a fragmented market• Investment in innovation and new products• Ongoing operational improvements and medium-term margin enhancement• Strong balance sheet• AcquisitionsRead about our strategy on page 13Long-term market drivers• Significant underinvestment in ageing UK housing stock• Growth drivers in new areas such as Glass Reinforced Plastic, Wood Plastic Composite and other materials• Strong new build demand cycle• Political impetus for renewed social housing activityRead about our marketplace on page 10Revenue (£m)£259.5m20152014£256.0m£293.2m2016£292.8m2017£281.1m2018Pre-tax operating cash flow (£m)£19.9m20152014£23.8m£30.8m2016£20.1m20172018£27.7mUnderlying operating profit (£m)£18.3m20152014£20.1m£25.6m2016£24.2m2017£18.7m2018Dividend per share (pence)4.24p201520146.37p6.60p4.90p20166.69p20172018Visit us online at: www.epwin.co.uk or investors.epwin.co.ukEpwin Group AR2018.indd 411/04/2019 16:26:54 26393 11 April 2019 4:26 pm Proof 7notes-heading-level-onenotes-heading-level-twonotes-heading-level-threenotes-heading-level-fourNOTES-STRAPLINEnotes-text-body• notes-list-bullet• notes-list-bespoke −notes-list-dashd. notes-list-alpha5. notes-list-numberi. notes-list-romanGroup OverviewStrategyBusiness ModelANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2018BUSINESS OVERVIEW01ContentsBusiness OverviewIntroduction and Investment CaseIFCHighlights2Group Overview4Chairman’s Statement6GovernanceDirectors and Advisers28Corporate Governance30Directors’ Report34Audit Committee Report36Remuneration Committee Report38Statement of Directors’ Responsibilities41Financial StatementsIndependent Auditor’s Report44Consolidated Income Statement52Consolidated Balance Sheet53Consolidated Statement of Changes in Equity54Consolidated Cash Flow Statement55Notes to the Accounts56Company Balance Sheet83Company Statement of Changes in Equity84Notes to the Company Accounts85Notice of the Annual General Meeting90Strategic ReportMarketplace10Business Model12Strategy13Key Performance Indicators14Operational Performance15Financial Review17Principal Risks and Uncertainties22Corporate and Social Responsibility24041312Epwin Group AR2018.indd 111/04/2019 16:26:59 www.epwin.co.uk
Stock code: EPWN
02
BUSINESS OVERVIEW
Highlights
• Epwin delivered a robust performance in 2018.
• Revenue impacted by the previously reported loss of the Group’s two
largest customers in the second half of 2017 (impact £27.4 million),
and the planned closure of the Cardiff plant (impact £7.3 million).
• Underlying and statutory operating profit impacted by the previously
reported loss of the Group’s two largest customers in the second half
of 2017 and some unrecovered material cost inflation.
• Significant progress made on exiting lower margin and unprofitable activities.
• Strong revenue growth and market share gains in all the Group’s key
product areas.
• Continued strong cash generation from operations.
• Robust balance sheet to support ongoing investment, leverage ratio less
than one-times adjusted EBITDA.2
• Group’s banking facilities extended to 2021.
• Proposed final dividend 3.20 pence per ordinary share, totalling 4.90 pence
for the year, in line with previously announced dividend policy.
Current trading
• Current trading is in line with the Board’s expectations.
• Progress in passing on price increases beginning to mitigate the significant
material cost inflation experienced during 2017–18.
• Market conditions in the Group’s key Repair, Maintenance and Improvement
(“RMI”) sector continue to indicate market growth is largely static.
• The Group expects to make progress with its strategy based on operational
improvements, enhancing the product portfolio, cross-selling, focusing on and
gaining market share in its higher margin activities, and selective acquisitions.
• Medium-term drivers remain positive:
− Underinvestment in existing UK housing stock becoming more acute as
repair and maintenance expenditure cannot be deferred indefinitely.
− Newbuild housing continues to see strong demand.
− Social Housing market is starting to show some signs of growth.
Key
stats:
£281.1m
£18.7m
6.7%
£14.8m
£13.3m
Revenue
2017: £292.8m
Underlying
operating
profit1
2017: £24.2m
Underlying
operating
margin1
2017: 8.3%
Operating
Profit
2017: £15.1m
Profit
before tax
2017: £13.9m
1 Underlying operating profit and margin is operating profit before amortisation of acquired other intangible assets, share-based payments expense,
other non-underlying items and discontinued operations.
2 Adjusted EBITDA is earnings before interest, taxation, depreciation, amortisation, share-based payment expenses, other non-underlying items and
discontinued operations.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
03
BUSINESS OVERVIEW
Delivering on our strategy
• Substantial progress with the Group’s site consolidation and
rationalisation programme:
− Macclesfield extrusion operations consolidated into Telford plant.
− Closure of the loss-making Cardiff window fabrication plant.
− Disposed of non-core glass-sealed unit manufacturing operation in
Northampton in early January 2019, with an associated non-cash asset
write-off of £3.6 million, which avoids significant cash restructuring costs
and ongoing property costs.
− New warehousing facility in Scunthorpe now fully operational, enhancing
logistic capabilities.
− Significant new facility planned in Telford to consolidate Window Systems
warehousing, finishing and aluminium operations into one location by early
2020, reducing seven sites to two.
• Continued investment in enhancing Epwin’s product portfolio to further
develop the Group’s long-term market position:
− Continued strong sales growth from the Profile 22 Optima window system.
− New decking ranges launched in both PVC and Wood Plastic Composite.
− Planned launch of a new aluminium window system in the second quarter
of 2019.
− Additional products added to existing ranges.
• Selective acquisitions completed in 2018 and 2019:
− Acquisition of Amicus, completed in March 2018, adding a further
15 building plastic distribution outlets.
− Acquisition of PVS, completed in January 2019. PVS is a decking installation
business and enhances our capabilities and routes to market whilst
establishing Epwin as the only end-to-end, vertically integrated supplier
in this market.
£13.3m
7.56p
4.90p
(£24.8m)
148%
Operating
Profit
2017: £15.1m
Profit
before tax
2017: £13.9m
Basic EPS
(continuing
operations)
2017: 8.13p
Dividend
per share
2017: 6.69p
Net debt
2017: (£25.1m)
Underlying
operating
cash
conversion3
2017: 83%
3 Underlying operating cash conversion is pre-tax operating cash flow as a percentage of underlying operating profit.
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04
BUSINESS OVERVIEW
www.epwin.co.uk
Stock code: EPWN
Group Overview
Business overview
and principal activities
Epwin is a leading vertically integrated, UK-based
manufacturer of low maintenance building
products, supplying products and services to the
Repair, Maintenance and Improvement (“RMI”),
new build and social housing sectors.
The Epwin business has grown and developed both
organically and by acquisition over the last 40 years
to become a leading manufacturer supplying a broad
range of PVC, Glass Reinforced Plastic (“GRP”) and
Wood Plastic Composite (“WPC”) low maintenance
building products and services in the UK.
The Group has developed and acquired a portfolio
of nationally recognised “B2B” brands, which are
used to maximise the sales opportunities presented
by the diverse markets that the Group serves.
The Board and senior management view the
Group as having two distinct business segments
that operate from a number of well-invested
facilities located across the UK.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
05
BUSINESS OVERVIEW
Fabrication and Distribution
The Fabrication and Distribution business services the
specialist requirements of social, trade and newbuild
customers with fabricated windows and doors from the
Group’s own profile systems. Added value services include
bespoke design, scheduling as well as plot and installation
management for social and newbuild housing projects.
The business also distributes the Group’s products
through a national network of distribution outlets,
complementing the Group’s commitment to its
independent distributor customers.
• Manufactures PVC window frames and GRP and
Thermoplastic door sets for social housing, trade
and newbuild customers.
• Operates from three window and door fabrication
sites in Paignton, Telford and Upton-upon-Severn.
• With the acquisition of Amicus Building Products Limited
in March 2018, the Group now operates a national
network of 73 building plastic trade distribution centres
and, separately, 13 Window Stores to service local demand
for the Group’s manufactured products alongside the
Group’s independent distribution customers.
Read more about Fabrication
and Distribution performance on page 18
Extrusion and Moulding
The Extrusion and Moulding business is the largest
manufacturer of extruded window profile, cellular roofline
and cladding, rainwater, drainage, decking systems and GRP
building components in the UK. These businesses include:
• Leading brands of PVC-ue extruded cellular roofline and
cladding systems for the replacement and installation of
fascias, soffits, barge boards and cladding. Epwin is the
market leader.
• Complementary range of PVC-u rainwater and drainage
products. There is considerable scope for volume and
market share growth in the coming years.
• Complete extruded PVC-u window profile systems for
fabricators of windows, doors, cavity closers and curtain
walling. Epwin is one of the leading UK manufacturers.
• GRP building components for the housebuilding industry
in the UK. The product range includes porches, dormers,
chimneys, bay window roofs, entrance canopies, copings
and other bespoke components. We plan to capitalise on
the opportunities for these products in the RMI and social
housing markets.
• WPC products, the current primary application being an
environmentally friendly hardwood substitute for balconies
and outdoor decking. We plan to expand the range of
products and use of these and other recycled materials
over the coming years.
• PVC-u decking products have been designed and launched
in 2018 to complement our existing Wood-Plastic
Composite decking. This provides Epwin with the product
range to address all parts of the market and with the PVS
acquisition enables us to provide a full end-to-end service
to customers.
• The business operates from extrusion and moulding
facilities in Telford, Tamworth, Wrexham and Scunthorpe.
Read more about Extrusion and
Moulding performance on page 18
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06
BUSINESS OVERVIEW
www.epwin.co.uk
Stock code: EPWN
Chairman’s Statement
The Group delivered a robust
performance in 2018 despite a depressed
market and has made substantial progress
with its ongoing site consolidation and
rationalisation programme.
Andrew Eastgate
Chairman
Robust performance
The Group delivered a robust performance in 2018 despite
a depressed market, continued input cost inflation as well as the loss
of its two major customers in 2017.
The Group has accelerated and made substantial progress with its
ongoing site consolidation and rationalisation programme which
has seen the Group exit non-core operations and continue to
consolidate manufacturing capacity into a more efficient footprint.
When these actions are completed during 2020 the Group will be
in a much stronger position, allowing it to focus on its well-invested
core operations where its has market leading positions and where
there are significant barriers to entry. Our strategy continues to be
based on operational improvement, broadening the product
portfolio and capabilities, selective acquisitions, cross-selling
and market share growth in key sectors to build a platform
for sustainable future growth as market conditions improve.
External challenges
Market conditions in the key RMI sector have remained challenging
in 2018. The continued macroeconomic uncertainty around Brexit
and the eventual form of the UK’s deal with the European Union
has caused a decline in consumer confidence. This, combined with
poor wage growth, has resulted in depressed demand for big-ticket
purchases. This has been exacerbated further as sterling remained
weak, significantly impacting on input costs.
In anticipation of the UK leaving the EU, the Group has been
working with its raw material suppliers and overseas customers to
mitigate, where possible, the potential short-term consequences of
a hard Brexit. Nonetheless, with continuing economic and political
uncertainty, market conditions are expected to remain challenging
in the near term, with the key RMI market anticipated by industry
sources to be flat to down during 2019.
Executing our strategy
Operational improvement
The Group has responded vigorously to these market conditions
by further progressing its programme of operational improvement
and site consolidation. During 2018, the Group completed both
the consolidation of its Macclesfield extrusion operations into
the Telford site and the move into a new warehousing facility in
Scunthorpe. The Group also took the decision to close its window
fabrication plant in Cardiff and exit the non-core glass-sealed unit
market with the disposal of the Northampton-based glass operation.
These actions have improved the footprint and operational
efficiency of the Group whilst reducing exposure to lower
margin and loss-making businesses.
In addition, the Group has planned a significant new facility
in Telford which will consolidate Window Systems warehousing
and finishing activities on one site in a more efficient location by
early 2020.
These steps, along with other consolidation and development
actions continuing into 2019, are allowing the Group to focus
and develop its core operations, targeting investment in areas
where it has significant market presence.
Product development
2018 saw the design and launch of the Group’s own PVC decking
product to complement our existing WPC decking. This provides
Epwin with the product range to address all parts of the decking
market. Combined with the acquisition of PVS in early 2019 this also
makes Epwin the only vertically integrated supplier in this market,
enabling us to provide a full end-to-end service to customers.
The Group plans to launch its new aluminium window system
in the second quarter of 2019 along with other selective range
enhancing products being planned.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
07
BUSINESS OVERVIEW
Acquisitions
As reported last year, in March 2018 the Group completed
the acquisition of Amicus Building Products Limited (“Amicus”)
for £0.5 million cash consideration. Amicus added a further
15 outlets to our existing plastic distribution business, taking
the total number of outlets to 86.
In February 2019, the Group acquired Premier Distribution
(Gt. Yarmouth) Limited, trading as PVS, a decking installation
business with strong relationships in the holiday park industry
for an initial cash consideration of £2.5 million. In its last financial
statements, PVS generated revenues of £3.5 million and an
EBITDA of £0.7 million. This acquisition enhances our capabilities
and routes to market whilst establishing Epwin as the only
end-to-end, vertically integrated supplier.
Corporate governance
As of 28 September 2018, companies listed on AIM were required
to formally adopt a corporate governance code as well as disclose
details of their compliance with that code and, where they depart
from the code, provide an explanation of the reasons for doing so.
The Board adopted the Quoted Companies Alliance Corporate
Governance Code (“the QCA Code”) on 25 September 2018.
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 this Annual Report as well as
on the corporate website.
Results
Underlying operating profit, which is before non-underlying items
and discontinued operations, was £18.7 million (2017 restated:
£24.2 million), a robust performance when allowing for the full-year
effect of the previously reported 2017 customer losses and significant
cost inflation. In addition to this the Group has incurred net other
non-underlying costs principally associated with its operational
improvement and site consolidation programmes of £2.0 million.
Operating profit was £14.8 million (2017 restated: £15.1 million).
Cash generation improved year on year, with pre-tax operating
cash flow increasing to £27.7 million from £20.1 million (restated),
as the Group focused on working capital improvement.
The Group finished the year with net debt of £24.8 million
(2017: £25.1 million), less than 1x adjusted EBITDA and well
within covenant levels.
In September 2018 the Group renewed its banking facilities
with Barclays Bank Plc. The facilities run for an initial three-year
term with the option of a further two years. The facilities comprise
a revolving credit facility of £37.5 million (up from £35.0 million),
an amortising term loan of £10.0 million and an incremental
amortising term loan facility of £7.5 million for acquisitions,
along with an overdraft of £5.0 million.
Dividends
In line with its previously announced policy, the Board is
recommending a final dividend of 3.20 pence per ordinary share
to be paid on 3 June 2019 to shareholders on the register on
10 May 2019. Along with the interim dividend of 1.70 pence
per ordinary share, paid in October 2018, this takes the full
year dividend to 4.90 pence per ordinary share. The payment is
in line with the Board’s dividend policy, which was set last year,
of a progressive dividend that is approximately twice covered
by adjusted after tax profits.
People
On behalf of the Board and our shareholders I would like to
welcome the employees of both Amicus and PVS to the Group,
and to thank all of our employees for the levels of commitment
shown to the Group during a year of significant change.
Combined with the support from shareholders, customers and
suppliers and the decisions taken by the Board, I believe we now
have a stronger business and a solid foundation for all stakeholders
to build on for the years ahead.
Summary and outlook
2018 continued a transitional period for the Group, as it reshapes
its footprint and operations as well as adding products and
capabilities for the future. The profit and operational cash flow
demonstrate the resilience of the Group’s business model, strategy
and investment decisions in the face of challenging external
market conditions. With economic and political uncertainty likely
to continue in the short-term, the Group’s approach to its markets
and operations is being conservatively managed.
Despite the external environment, the Board remains confident
that the actions it is taking to strengthen the Group’s position by
focusing it towards the higher margin extrusion and moulding
operations, which have technological and investment barriers to
entry, will deliver an improving financial performance. The Group
remains well placed in its markets with sound prospects for the
future, supported by the long-term drivers of the RMI market.
Overall, the Group has had an encouraging start to 2019,
with progress in passing on price increases beginning to mitigate
the significant material cost inflation experienced during 2018,
combined with continuing good volume growth in our core
products, and the initial benefits of our footprint reshaping.
Current trading is in line with the Board’s expectations and we look
forward to updating shareholders on our progress during the year.
Andrew Eastgate
Chairman
9 April 2019
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STRATEGIC
REPORT
10 Marketplace
12 Business Model
13 Strategy
14 Key Performance Indicators
15 Operational Performance
17 Financial Review
22 Principal Risks and Uncertainties
24 Corporate and Social Responsibility
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STRATEGIC REPORT
Marketplace
www.epwin.co.uk
Stock code: EPWN
Market overview and outlook
As anticipated, the RMI market remained subdued in 2018 with
continuing uncertainty around the shape of the UK’s exit from
the European Union, combined with inflation holding back real
wage growth and dampening consumer confidence. While this is
expected to continue through 2019, the Board remains confident
in the long-term growth opportunities of the RMI market as there
continues to be significant underinvestment by property owners
in the repair and maintenance of the UK’s housing stock, which
is becoming ever more acute.
Our low maintenance building products are primarily sold into
the private housing RMI market, but with sales also into the social
housing newbuild sector, social housing RMI contracts and the
new build housing market.
Private housing RMI market
The market in 2018 has remained lacklustre due to low consumer
confidence, particularly for big ticket purchases, exacerbated by
the continued uncertainty around the shape and timing of the UK’s
exit from the European Union. Inflation is holding back sustained
real wage growth and eroding disposable income, resulting in a
declining number of planning permissions and secondary housing
transactions in 2018.
The widespread forecasts for 2019 expect another similar year for
the private housing RMI market, with no growth being the most
likely outlook.
However, the longer-term opportunities are more favourable,
driven by the following:
• The UK’s existing housing stock is ageing and the
underinvestment in recent years is building up an increasing
backlog of properties that will require essential repairs and
maintenance in the future.
• Increasing population driving demand for new houses that
will require maintaining.
• The older demographic typically improve their homes more
than the younger demographic and thus the ageing population
should help this market.
• Environmental and safety concerns will continue to drive
legislation and initiatives that will require improvements
to homes on a larger scale than just essential maintenance.
The Committee on Climate Change has stated that it wants
the Government to treat renovating the UK’s housing
stock as a national infrastructure priority, with insulation
being key, the installation of new windows with better
thermal properties would support this goal.
Other construction markets
• Social Housing RMI: spending by the Government has been
depressed for several years, although this is expected to return
to growth in the medium-term as the pressure to improve social
housing stock increases.
Additionally, urgent remediation work following the Grenfell
Tower disaster may further increase the expenditure on social
RMI. However, the heightened regulatory landscape may delay
works being carried out in the short-term.
• Social Housing New build: spending should increase as
the Government responds to pressure to increase the supply
of affordable rented social housing.
• Private New Build Housing: this market continued to grow
in 2018 and is forecast to remain strong due to insufficient
housing stock to meet current demand.
Product markets
Further to the end user construction market, the following product
markets are of most significance to the Group.
Fenestration
Market reports suggest the average household replaces window
frames approximately every 50 years which is significantly longer
than the life expectancy of the products. This is particularly the case
for those manufactured before 2000 and thus will require replacing
soon, especially with increased energy prices and Government
initiatives.
Cellular roofline
Similar dynamics to Fenestration are true for the cellular roofline
business, although it is also believed that further growth potential
exists in this market as it has been estimated that cellular products
have only around 50% penetration into the residential property
market, with the balance still being largely installed with timber.
Replacement of cellular roofline products will also represent an
opportunity for rainwater product sales which are typically renewed
at the same time.
Wood Plastic Composite
The Wood Plastic Composite decking market is relatively new in the
UK and we believe will continue to demonstrate good growth.
Glass Reinforced Plastic
The Glass Reinforced Plastic canopy and dormer market,
whilst being more mature, has also grown impressively as new
housebuilders in particular look to improve efficiency by simplifying
the build process or moving to off-site manufacture.
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STRATEGIC REPORT
Other market factors
In addition to the market specific factors set out opposite,
the uncertainty around the method and timing of the UK’s exit
from the European Union also had, and continues to have,
wider implications for the Group:
• Exchange rate volatility has led to material cost price inflation
being considerably higher than construction output inflation
as a whole over the past 18 months.
• The eventual form of Brexit may increase materials and
operating costs further, through tariffs, as well as disrupting
supply chains which may cause operational issues, inefficiencies,
and company insolvencies.
In addition, following the Grenfell Tower disaster, there has
been a heightened regulatory environment in relation to
building regulations and building component standards.
This may increase manufacturing costs and disrupt
the market if current products do not meet new standards.
See Risk section on pages 22 to 23 for how the Group
is mitigating its exposure to these market factors.
Summary
The Group’s markets are expected to remain challenging
in 2019 but with significantly better long-term prospects as the
UK economic landscape becomes more certain and consumer
confidence returns. In response to this, the Board still believes its
strategy is the right one to ensure that the Group has the right
product offer and operations to take advantage when the market
improves.
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STRATEGIC REPORT
Business Model
www.epwin.co.uk
Stock code: EPWN
We utilise our key resources
Specialist facilities
and equipment
Robust financial
position
Knowledgeable
workforce
• Customer focus
• High barriers to entry
in core business
• Technical expertise
and key strengths
• National and local brands
• Economies of scale
• Large range of complementary
building products
to enable our key activities
• Vertically integrated
Extrusion and Moulding
Manufacture of market-leading window profile,
roofline, cladding, rainwater, drainage, decking
and GRP building components
Fabrication and Distribution
Fabrication of windows and doors along with
distribution of plastic building products through
a national network of stockist outlets
Specialist roofline distributors
Window and door fabricators
to sell to our first line customers
who provide to the end user
• Homeowners
• Installers
• Housebuilders
• Social housing providers
• Contractors
to deliver value to our stakeholders
Shareholders
• Sustainable dividend
• Strong cash generation
• Long-term capital growth
• Prudent acquisition strategy solidifies and
diversifies portfolio of products, services
and manufacturing technology
Customers
• Large range of complementary building products
• Focus on high quality product and service delivery
• Ability to match customer requirements
End users
• Quality products
• Products matched to the requirements of the end user
Employees
• Equal opportunities
• Training
• Career progression
• Reward
Suppliers
• Reliable partnership
• Ability to form long-term relationships
Read about our stakeholders
on page 24
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Strategy
13
STRATEGIC REPORT
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 Group’s financial position remains strong with net debt less than 1x adjusted EBITDA and with
significant funding headroom to continue to invest in the business.
Focus
Strategic aim
2017 Developments
2018 Developments
• Consolidate operations.
• Further composite
• Acquisition of Amicus
decking products launched.
Building Products Limited.
• Consolidate markets.
• Broaden product portfolio.
• Widen materials and
technical capabilities.
• Aluminium door
products launched.
• Two part cill launched.
• New entrance door
range developed.
• National Plastics
integrating and selling
more Epwin product.
• Optima customer wins.
• Launch of PVC decking system.
• Design and investment for
aluminium window system.
• Optima window system
delivering further
customer wins.
• Disposal of glass-sealed unit
manufacturing operations.
• Utilise existing spare
• Two Glass sites consolidated.
capacity with added volumes
or site consolidations.
• Disposal of Walsall window
fabrication business.
• Closure of Cardiff window
• Focus on producing and
delivering more cost effectively.
• Further improvements in
reducing scrap rates and
improving productivity,
facilitated by site consolidation.
fabrication plant.
• Consolidation of Window
Systems extrusion onto
Telford site.
• Completed move into new
logistics facility in Scunthorpe.
• New facility planned to
consolidate Window Systems
warehousing and finishing
activities in Telford.
• Sell more existing and new
products to existing customers.
• Develop the use of
existing brands.
• ProCan trade range of
canopies developed for
distributors and fabricators.
• National Plastics transitioned
to Epwin product range.
• Significant proportion of
end-user sales redirected
to alternative stockists
following the sale of SIG’s
plastic distribution business
to a competitor.
Acquisitions,
product and
materials
development
Operational
leverage
Operational
efficiency
Cross-selling/
business
development
Read more about Performance
on pages 15 and 21
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14
STRATEGIC REPORT
www.epwin.co.uk
Stock code: EPWN
Key Performance Indicators
The Group has a range of performance indicators, both financial and non-financial, that allow
the Board to monitor the performance of the Group as well as manage the business.
The Group has financial KPIs that it monitors on a regular basis at board level and, where
relevant, at operational management meetings as follows:
Financial
m
5
.
9
5
2
£
m
0
.
6
5
2
£
m
2
.
3
9
2
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8
.
2
9
2
£
m
1
.
1
8
2
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3
.
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1
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.
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9
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.
0
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1
.
0
2
£
m
7
.
7
2
£
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014
2015
2016
2017 2018
2014
2015
2016
2017 2018
Revenue
(£m)
Underlying
operating profit
(£m)
Underlying
operating margin
(%)
Pre-tax operating
cash flow
(£m)
m
4
.
4
1
£
–
m
6
.
0
2
£
–
m
1
.
5
2
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–
m
8
.
4
2
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–
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1
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%
7
.
8
0
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4
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1
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1
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1
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m
0
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9
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m
0
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6
.
0
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.
0
8
.
0
9
.
0
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2015
2016
2017
2018
Underlying operating
cash conversion
Net (debt)/cash
(£m)
Capital expenditure
(£m)
Leverage ratio
(net debt/adjusted EBITDA)
Read more in the Financial
Review on pages 17 to 21
Operational KPIs
Operating KPIs are focused on the customer experience in terms of quality and service as well as key cost drivers
such as input prices and material and labour efficiency.
Epwin actively promotes health and safety and the continuous improvement in health and safety standards
across all operations.
The Group closely monitors health and safety KPIs, which include RIDDORs, accident frequency rates, injury types
and injury causes on a Group, divisional and business basis. Health and Safety statistics, initiatives and strategy
are the first agenda item at every divisional and corporate monthly board meeting.
Read more about health
and safety on page 24
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
15
STRATEGIC REPORT
Operational Performance
Strategic and operational review
2018 was a transitional year for the Group. In response to a
challenging RMI market, and with ongoing macroeconomic
uncertainty around Brexit, the Executive Team accelerated its
programme of site consolidations and rationalisation of its
operations to focus on higher margin operations where the
Group has significant and growing market shares.
The consolidation of the Macclesfield extrusion operations
into the Telford facility was completed in December 2018.
This consolidation will improve the operational efficiency of
the Window Systems operation by moving all production and
warehousing to Telford, whilst also improving its capacity.
In Q1 2018 the decision was taken to exit our newbuild
window fabrication operations, resulting in the closure of the
Group’s plant in Cardiff in June 2018. The Group believes this market
can be best served profitably via our third-party fabricator network,
supplemented by the Group’s other fabrication facilities.
Following the consolidation of the two glass-sealed unit
manufacturing facilities onto the Northampton site during 2017,
the market for glass-sealed units continued to deteriorate as a
result of significant over-capacity and excessive price competition.
In addition to this, increases in the cost and a restricted supply of float
glass made the Glass business unviable for the Group in the short to
medium-term. As a result, in Q4 2018 the decision was taken to exit
the manufacture of glass-sealed units and the Glass operation was
sold in January 2019 for consideration of £0.1 million. The disposal
resulted in a non-cash asset write-off of £3.6 million, but mitigated
the significant lease, dilapidation and redundancy costs required for
the closure of the Northampton site.
These actions, along with the disposal of the Walsall fabrication
plant at the end of 2017, have substantially reduced the operational
footprint of fabrication from seven sites in 2017 to just three
fabrication operations in 2019. Along with other actions continuing
into 2019, this strategy is bringing about a transformation of the
Group to a business focused on its core operations, where investment
has been concentrated in recent years, and where it has significant
market presence.
The Profile 22 Optima window system launched in 2016 continues
to make strong gains in the market, enabling the Epwin Window
Systems business to reinforce its leading position. The market
for window profile remains competitive, yet price increases were
again delivered in 2018. However, significant material cost inflation
continues to be a challenge across the Group, and it will take time to
fully pass on these cost increases in the current market conditions.
2018 also saw the move into our new logistics facility in Scunthorpe,
completed on time and to budget. A similar, more significant, project
is now underway in Telford which will see the Group consolidate
a number of its warehousing and finishing operations into one
purpose-built facility by early 2020. Both of these actions provide
the Group with capacity to grow its operations as well as delivering
operational efficiency improvements.
In March 2018 the Group completed the acquisition of Amicus,
a chain of 15 building plastic distribution outlets concentrated in
northern England and Scotland for cash consideration of £0.5 million.
This acquisition is complementary to the Group’s existing distribution
business and supports the supply of the Group’s products into the
market alongside our key independent distributor customers to whom
the Group remains committed for the diversity and flexibility that they
are able to offer end customers.
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16
STRATEGIC REPORT
www.epwin.co.uk
Stock code: EPWN
Operational Performance
CONTINUED
In February 2019 the Group acquired PVS. PVS supplies and installs
PVC decking and related products to the holiday park and park
home markets as well as to residential customers and local authorities.
The acquisition of PVS opens up further routes to market for Epwin’s
existing and new PVC decking products. Initial consideration was
£2.5 million with the potential to increase subject to the performance
of the business over a two-year earnout period.
2018 also saw the design and launch of our own PVC decking
product to complement our existing Wood Plastic Composite decking
range. This provides Epwin with the product range to address all parts
of the decking market and, combined with the acquisition of PVS,
makes Epwin the only vertically integrated supplier in this market,
enabling us to provide a full end-to-end service to customers.
The Group continues to enhance its product range. 2018 saw the
design and capital investment for the launch of an aluminium window
system scheduled for Q2 2019. Whilst a smaller market, than PVC
window systems, aluminium window systems are a growing part
of the market as customers seem more willing to spend on higher
cost products within the Improvement subsector of the RMI market.
These steps, along with the rationalisation and operational measures
continuing into 2019, are allowing the Group to focus on its core
operations leveraging and focusing investment in areas where it has
significant market presence. Our strategy continues to be based on
operational improvement, broadening the product portfolio and
capabilities, selective acquisitions, cross-selling and market share
growth in key sectors to build a platform for future growth and
maintaining a sustainable investment return. Reflecting this, the
Group has planned a significant new facility in Telford which will
consolidate window system warehousing and finishing activities
in one, more efficient, location and anticipates this being complete
in early 2020.
Health and safety
The Group is committed to ensuring a safe, clean and healthy
working environment for all of its employees. The Group actively
promotes health and safety and the continuous improvement in
health and safety standards across all operations.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Financial Review
17
STRATEGIC REPORT
Key financials
Total revenue for the year ended 31 December 2018 was £281.1 million (2017 restated: £292.8). The decrease was as a result of the
full year effect of the loss of the Group’s two largest customers in 2017, each representing c.5% of revenue, as well as the closure of the
Group’s newbuild fabrication operation in June 2018. This was partially offset by the acquisition of Amicus in March 2018, as well as market
share growth in core product areas through both share of wallet with existing customers and new customer wins, price increases and
increased volumes within the Distribution businesses.
Underlying operating profit was £18.7 million, down from £24.2 million in 2017 (restated) as a result of the customer issues highlighted
above and increases in material input costs caused by the continuing weakness of sterling against both the US dollar and euro. The cost of
PVC in particular, the Group’s primary material input, has remained at the high levels seen in H2 2017 throughout the year. It will take time
to fully pass this cost on to the market, although progress is being made on recovering this.
Key financials
Revenue
Adjusted EBITDA
Amortisation of computer software
Depreciation
Underlying operating profit*
Amortisation of acquired other intangible assets
Other non-underlying items
Share-based payments expense
Operating profit
Underlying operating margin*
Operating margin
Year ended
31 December
2018
£m
Year ended
31 December
2017
(restated)
£m
281.1
26.5
(0.3)
(7.5)
18.7
(1.2)
(2.0)
(0.7)
14.8
6.7%
5.3%
292.8
31.9
(0.2)
(7.5)
24.2
(1.1)
(7.4)
(0.6)
15.1
8.3%
5.2%
* Underlying operating profit and margin is operating profit before amortisation of acquired other intangible assets, share-based payments expense,
other non-underlying items and discontinued operations.
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STRATEGIC REPORT
Financial Review
CONTINUED
Reportable segments
Revenue
Extrusion and Moulding
Fabrication and Distribution
Total
Underlying segmental operating profit
Extrusion and Moulding
Fabrication and Distribution
Underlying segmental operating profit before corporate costs
Corporate costs
Underlying operating profit
Amortisation of acquired other intangible assets
Other non-underlying items
Share-based payments expense
Operating profit
www.epwin.co.uk
Stock code: EPWN
Year ended
31 December
2018
£m
Year ended
31 December
2017
(restated)
£m
177.4
103.7
281.1
17.5
2.9
20.4
(1.7)
18.7
(1.2)
(2.0)
(0.7)
14.8
183.6
109.2
292.8
21.5
4.3
25.8
(1.6)
24.2
(1.1)
(7.4)
(0.6)
15.1
Extrusion and Moulding
• Revenue decreased by £6.2 million to £177.4 million
Fabrication and Distribution
• Revenue decreased by £5.5 million to £103.7 million
(2017: £183.6 million) with higher sales of fenestration products,
driven by price increases, new customer wins and Profile 22
Optima window system growth offset by lower roofline sales
as a result of the sale by SIG Plc of their plastic distribution
business during H2 2017, and the acquisition of Amicus Building
Products Limited, an existing customer whose associated revenues
are now classified as internal, in March 2018.
(2017 restated: £109.2 million) mainly as a result of the site
rationalisation programme which saw the sale of the Walsall
fabrication plant at the end of 2017 following the administration
of Entu (UK) Plc, and the closure of the Cardiff fabrication plant
during 2018. This has been partially offset by higher revenues
in our distribution business, where we have taken market share,
along with the acquisition of Amicus Building Products Limited.
• The net effect of the loss of SIG and acquisition of Amicus was a
• The net effect of the Entu administration and Cardiff plant
£16.7 million reduction in revenue.
• Underlying segmental operating profit of £17.5 million was
£4.0 million lower than 2017 as a result of the lower revenues,
as explained above, and the impact of material cost inflation.
closure, offset by the acquisition of Amicus, was a £7.5 million
reduction in revenue.
• Underlying segmental operating profit decreased to £2.9 million
(2017 restated: £4.3 million), mainly as a result of lower revenues,
the impact of material cost inflation and the site rationalisation
actions highlighted above.
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FOR THE YEAR ENDED 31 DECEMBER 2018
19
STRATEGIC REPORT
Non-underlying items
The Group reports certain performance measures as underlying as it believes they provide better information on the ongoing trading
performance of the business. Items excluded from operating profit in arriving at underlying operating profit are non-cash items such
as amortisation of acquired other intangible assets and share-based payments expense, and significant one-off incomes or costs that
are not part of the underlying trading performance of the business.
To assist users of the financial statements to understand underlying trading performance, non-underlying items have been excluded from
operating profit in arriving at underlying operating profit. Non-underlying items include:
i. Amortisation of acquired other intangible assets
Amortisation of £1.2 million was charged during the year (2017: £1.1 million), relating to the brand and customer relationship intangible
assets recognised on acquisitions.
ii. Other non-underlying items
Other non-underlying items in 2018 included the onerous lease provision and redundancy costs associated with the closure of the Cardiff
window fabrication plant as well as other actions taken to right-size the business following the loss of the Group’s two largest customers
in H2 2017 and in light of the continuing political and economic uncertainties.
In 2017 other non-underlying items included the bad debt charge in connection with the Entu (UK) Plc administration and the associated
loss on disposal of Indigo Products Limited, the onerous lease provision and redundancy costs associated with the closure of the Newton
Abbot glass plant, and costs and provisions for the closure of the Macclesfield extrusion facility as well as production facilities associated
with a re-sizing of the Fabrication business. These costs were offset by the release of excess contingent consideration relating to the
2015 acquisition of Stormking Plastics Limited.
Entu (UK) Plc administration bad debt charge
Loss on disposal of Indigo Products Limited
Site consolidation and redundancy
Release of Stormking excess contingent consideration
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
–
–
2.0
–
2.0
3.9
0.4
4.9
(1.8)
7.4
iii. Share-based payments expense
Share-based payments include the IFRS 2: Share-based payments charge in respect of the Long-Term Incentive Plan and Save As You Earn
(“SAYE”) scheme.
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STRATEGIC REPORT
Financial Review
CONTINUED
Cash flow
Pre-tax operating cash flow
Tax paid
Acquisitions
Acquisition of other intangible assets
Net capital expenditure
Net interest paid
Dividends
Other
Discontinued operations
Decrease/(increase) in net debt
Opening net debt
Closing net debt
www.epwin.co.uk
Stock code: EPWN
Year ended
31 December
2018
£m
Year ended
31 December
2017
(restated)
£m
27.7
(2.6)
–
(0.5)
(12.0)
(1.3)
(8.8)
(0.3)
(1.9)
0.3
(25.1)
(24.8)
20.1
(2.7)
(3.9)
(0.7)
(4.6)
(1.0)
(9.5)
(0.2)
(2.0)
(4.5)
(20.6)
(25.1)
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
21
STRATEGIC REPORT
Pre-tax operating cash flow improved by £7.6 million to
£27.7 million (2017 restated: £20.1 million) and pre-tax
operating cash conversion was 148% (2017: 83%) as a result
of a reduction in working capital and timing of year end cash
receipts and payments.
Acquisitions
The cash flow of £nil represents the initial consideration
of £0.2 million net of £0.2 million cash acquired associated
with the Amicus acquisition.
The 2017 acquisition cash outflow of £3.9 million represents
the payment of the cash element of contingent consideration
in relation to the 2015 acquisitions of Ecodek (£2.3 million)
and Stormking Plastics (£1.6 million). No further contingent
consideration is due on these acquisitions.
Net capital expenditure
Capital expenditure of £12.0 million reflects the investment made
in the new warehousing facility in Scunthorpe, investment in the
consolidation of the Macclesfield extrusion operation onto the Telford
site and the investment made in the design, plant and equipment
required for the manufacture of aluminium window products.
Financing
The Group renewed its banking facilities in September 2018
for three years. The facilities comprise a revolving credit facility
of £37.5 million (up from £35.0 million), an amortising term
loan of £10.0 million and an incremental amortising term loan
facility of £7.5 million for acquisitions, along with an undrawn
overdraft of £5.0 million. As at 31 December 2018 the Group
had drawn down £30.0 million of these facilities (31 December
2017: £30.0 million). The terms are materially unchanged from
the previous facility. The Group operates well within facilities and
current banking covenants.
IFRS 16: Leases
IFRS 16: Leases is effective for accounting periods beginning
on or after 1 January 2019. The standard can be applied with
full retrospective effect, or the cumulative impact of initially
applying IFRS 16 can be adjusted into opening equity at the date
of initial application.
The Group intends to apply the modified retrospective approach
to adopting IFRS 16 with the cumulative effect of initially applying
the standard recognised at the date of initial application as an
adjustment to the opening balance of retained earnings.
The application of IFRS 16: Leases will have no effect on the
cash flows of the Group. However, it will have an impact on the
way the assets, liabilities and the income statement of the Group
are presented.
It is estimated the impact of the initial implementation of
IFRS 16 as at 1 January 2019 would be to increase property, plant
and equipment by approximately £55.0 million, recognise a financial
liability in respect of future lease commitments of approximately
£65.0 million and an adjustment to opening retained earnings of
approximately £4.0 million.
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22
STRATEGIC REPORT
www.epwin.co.uk
Stock code: EPWN
Principal Risks and Uncertainties
Epwin is affected by a number of risks and uncertainties, not all of which are wholly within its control,
which could have a material impact on the Group’s long-term performance.
The Board has identified several specific risks and uncertainties that potentially impact the ongoing
business including:
Area of risk Description of risk
Potential impact
Mitigation
Brexit
The basis of the UK’s future
relationship with the EU is
uncertain. The risk of a hard
Brexit is still a possibility and
the future trading relationship
is still to be negotiated.
UK
economy
Integration
of
acquisitions
One of the key risks to the
business is any deterioration
in the UK economy which may
impact consumer confidence
and expenditure on housing.
Factors such as wage growth,
interest rates and inflation are all
considered to have a potential
impact for the Group.
Acquisitions are an important
growth option for the Group.
However, they utilise the Group’s
capital and management
resources in order to complete
the transaction and then
successfully integrate into
the Group.
With continuing economic
and political uncertainties,
market conditions are expected
to remain challenging in the
near term. A hard Brexit could
result in a deterioration in market
conditions and the introduction
of hard border controls delaying
the movement of materials
from suppliers and products
to customers.
The position of the UK economy
determines the level of activity
in the RMI, new build and social
housing sectors, which has
a direct impact on the levels
of revenue, profitability and
cash generation.
The Group could overpay for an
acquisition or the realisation of
anticipated synergies may not
occur, or may take significant
time, resources and management
attention. Any acquisitions we
make may adversely affect our
operations and, if not properly
integrated, could disrupt our
business model and profitability.
The Group has been working with its raw
material suppliers and overseas customers
to mitigate, where possible, the potential
short-term consequences of a hard Brexit.
Both customers and suppliers have been
encouraged to hold increased levels of stock
ahead of the UK’s departure date.
Alternate transport routes avoiding the
main ports have been considered.
The Group has been ensuring it has the correct
licences and authorisations in place to facilitate
movement across borders.
The Group monitors the market closely and
takes action where possible in response to any
deterioration to ensure that the business is
aligned to market conditions.
The Group spends considerable time
assessing potential acquisitions and ensures
that appropriate due diligence procedures
are performed. There is significant experience
within the Group in corporate transactions
and the Group has a successful track record
of integrating acquisitions.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
23
STRATEGIC REPORT
Area of risk Description of risk
Potential impact
Mitigation
Key
customers
Our customers are
fundamental to the continued
success of our business.
The inability to service and
retain key customers or collect
our receivables may cause the
Group’s financial performance
to suffer.
Commodity
prices
The key material inputs into the
Group’s manufacturing processes
are commodities with market
driven prices.
Adverse movements in
commodity prices such as PVC
and power will impact profit
margins if the business is unable
to pass the costs onto customers.
Key
suppliers
The Group relies upon certain
key suppliers, particularly those
supplying raw materials such as
PVC resin.
Key
personnel
Our people are
fundamental to our operations
and business model.
Regulatory
change
Regulatory change is the
change to laws or regulations
that impact our operations,
products, customers, suppliers
and personnel.
A particular example would
be changes to building
regulations in the aftermath
of the Grenfell disaster.
Whilst alternative supply
sources could be identified,
the Group is exposed to a
number of risks, including the
risk of supply disruption, the risk
of key suppliers increasing prices
and the risk of key suppliers
suffering a quality issue which
impacts upon the quality of
the Group’s products.
If we fail to attract and retain
highly qualified key personnel,
our ability to execute our
business model and strategy
could be impaired.
The Group recognises that the
marketability of its products
could be impacted by changes
in regulation or government
policy that in turn could adversely
affect revenues and profitability.
The Group is not exposed to significant
large customers, with the largest customer
being less than 5% of revenue. The Group
focuses considerable effort on maintaining
relationships with customers and also on the
collection of receivables. The Group has a
credit insurance policy which adds robustness
to the credit process.
Epwin is a major UK consumer of commodities,
particularly PVC polymer. In some cases, the
Group is able to pass on commodity price
increases through agreed contractual terms.
Input prices have increased as a result of the
weakening of sterling. The Group has sought
to pass on these increases to customers where
market and contractual conditions permit.
The Group maintains good relationships with
key suppliers and would anticipate support if
there was supply disruption. Epwin endeavours
to source product from more than one supplier
to ensure security of supply, where possible.
However, in certain key areas, such as PVC
polymer supply, the Group has limited ability to
multi-source.
The Group seeks to reward employees
appropriately and has in place a number of
measures. To achieve this, Executive Directors
and certain senior management are members
of a Long-Term Incentive Plan which is settled in
equity, subject to various performance measures.
The Group monitors the political climate
and in turn can take measures to mitigate
and respond to any significant change.
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STRATEGIC REPORT
www.epwin.co.uk
Stock code: EPWN
Corporate and Social Responsibility
At Epwin, our relationships with stakeholders enable
us to create value and deliver our strategy. We aim
to maintain and develop these relationships to best
serve our customers, generate shareholder returns
and benefit wider society.
Shareholders
It is essential the Group has fair and transparent communication
with investors. The Chief Executive Officer and Group Financial
Director meet regularly with major shareholders to discuss
the Group’s performance and strategic objectives to maximise
shareholder return. All shareholders are welcomed at the Annual
General Meeting, where questions can be asked of the Board.
Customers
Our customers are paramount to the success of the business in both
growing our revenues and optimising cashflow. We aim to exceed
customer expectations in terms of our products, service levels, and
marketing requirements by working closely and collaboratively
with them.
Providing sustainable and quality products to these customers
is imperative to our reputation and long-term success. We invest
in advancing technologies and rigorous testing to guarantee the
very best performance of our products with negligible maintenance
for our customers. We continue to work with installers to raise
standards across the industry by delivering an end-to-end high
standard customer experience.
Suppliers
Our suppliers are fundamental to our business model as they
enable us to meet the supply and demand of our operations
and customers with high quality and sustainable products.
Our supplier relationships and regular review procedures ensure
our products are responsibly sourced, complying with standards
and legislation, as well as meeting our ethical, quality and
sustainability expectations.
Employees
Our people are the foundation of our business and imperative to
its success. The Group promotes a positive working environment
for all employees with rigorous policies and procedures that protect,
develop and satisfy our existing and future employees.
Health and safety (“H&S”)
Providing a healthy and safe environment for people is an absolute
priority in our business. It is the first item on the agenda at Board
meetings where metrics are monitored. H&S is part of a continuous
training programme across the Group.
Employee satisfaction
We aim to recruit, develop and retain our employees by providing
training, engagement through local working groups, reviewing
reward, incentive and benefit programmes, whilst also recruiting
apprentices to build the pipeline of talent for the future.
Equality, diversity and inclusion
Equal opportunities for all existing and potential employees are
important to the Group. The Group continues to strive to improve
the balance of diversity by reviewing gender reporting and
introducing more flexible working patterns for employees.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
25
STRATEGIC REPORT
Wider society
The Group aims to have a positive impact on the local communities
in which we operate. The Group continues to empower each of its
businesses to support charities, local community projects and the
education sector.
Environmental sustainability
Minimising our impact on the environment is a priority for the
Group and our customers with many of our manufacturing
businesses having ISO accreditations. The Group has a dedicated
Environmental Manager to ensure compliance with legislation
through training, development, auditing and risk management.
As well as compliance, the Group works across the supply chain
to maximise production efficiency, recycle where possible and
reduce packaging, power and water consumption and emissions.
Our PVC and Wood Plastic Composite products can be recycled,
making these more sustainable, as well as more durable,
products than the alternative timber products that require
costly maintenance. Our leading decking product, ecodek®,
has been independently verified as being a carbon negative
manufacturing process, made from sustainably sourced wood
and recycled polyethylene. The Group will continue to use its
influence and resources to challenge outdated industry attitudes
to drive the move from high maintenance unsustainable products
to sustainable alternatives like ours.
Economic sustainability
The Group is focused on providing sustainable value creation
that enables the business to continue to successfully trade in the
longer-term. To meet this, the Group is selective about investment
and who we trade with, particularly to protect our reputation for
ethics and quality. The Group is continuously reviewing innovative
ways and technologies to increase profitability by manufacturing
more efficiently and sustainably.
The Group has policies and processes in place to ensure that
its operations, as customers and suppliers, not only adhere to
regulations and legal requirements but also achieve robustness and
longevity, including adequate business recovery plans, protection of
information and succession planning.
The Strategic Report has been approved by the Board of Directors
and has been signed on its behalf by:
Jonathan Bednall
Christopher Empson
Chief Executive Officer
Group Finance Director
9 April 2019
9 April 2019
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GOVERNANCE
28 Directors and Advisers
30 Corporate Governance
34 Directors’ Report
36 Audit Committee Report
38 Remuneration Committee Report
41 Statement of Directors’ Responsibilities
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28
GOVERNANCE
www.epwin.co.uk
Stock code: EPWN
Directors and Advisers
Andrew
Eastgate
NON-EXECUTIVE
CHAIRMAN
Appointment Date
14 July 2014
Committee Membership
Audit (Chairman)
Nomination (Chairman)
Remuneration
Skills and Experience
Andrew was formerly a Partner
at Pinsents where he practised
for more than 20 years and was
head of Pinsents’ corporate
practice in Birmingham.
Andrew has a broad experience
of advising quoted companies,
particularly in connection with
transactions and compliance
issues, and is currently a
non-executive director and
Chairman of the Remuneration
Committee of Headlam Group
Plc and a non-executive director
of Castings Plc. Andrew was
a director of the old Epwin
holding company between
2008 and 2012, and resigned
on the merger with the Latium
businesses. Andrew joined
the Board on admission to
AIM and became Chairman
in December 2014.
Jonathan
Bednall
CHIEF EXECUTIVE
OFFICER
Christopher
Empson
GROUP FINANCE
DIRECTOR
Shaun
Hanrahan
EXECUTIVE
DIRECTOR
Appointment Date
16 January 2012
Appointment Date
17 June 2014
Appointment Date
17 June 2014
Committee Membership
Executive
Committee Membership
Executive
Skills and Experience
Shaun has been with Epwin
since the Group acquired Swish
Building Products from Williams
Holdings in 2000. Shaun has
overseen the growth of Swish
Building Products to a position
of market strength. Prior to his
time at Swish, Shaun was a
Business Analyst at Baco, British
Alcan and Williams Holdings,
working on post-acquisition
projects in the UK and Europe.
Skills and Experience
Chris has been with Epwin since
2012, having joined to support
the business integration and
development post the Latium
merger. Before this, Chris was
a divisional Finance Director
within Rentokil Initial Plc, having
previously worked at BI Group
as Group Finance Director.
Chris also spent five years with
3i after qualifying as an ACA
at PricewaterhouseCoopers.
Chris has considerable group
management experience,
including corporate
transactions, financial
reporting, treasury and
corporate taxation.
Committee Membership:
Executive
Nomination
Skills and Experience
Jon joined Epwin Group in
2008, becoming Group Finance
Director in 2009 and was
appointed Chief Executive
Officer in 2013. Jon has
been responsible for the
significant restructuring of
Epwin in that time, as well
as devising and managing
the merger with Latium in
2012. Jon has considerable
group managerial experience,
including acquisitions and
disposals, having previously
spent ten years at BI Group,
a Kuwaiti owned engineering
group, becoming Group
Finance Director and then
Chief Operating Officer. Prior
to that Jon qualified as an
ACA at KPMG in Birmingham,
where he spent six years in
a number of roles.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
29
GOVERNANCE
Michael
O’Leary
NON-EXECUTIVE
DIRECTOR
Andrew
Rutter
COMPANY
SECRETARY
Appointment Date
2 March 2015
Appointment Date
1 June 2015
Committee Membership
N/A
Skills and Experience
Andrew joined Epwin in
August 2014, following the
IPO, and was appointed
Company Secretary in June
2015. Andrew was previously
a Senior Manager at KPMG,
where he was responsible for a
range of listed and non-listed
audit clients, gaining significant
financial reporting experience.
Committee Membership
Audit
Nomination
Remuneration (Chairman)
Skills and Experience
Mike was appointed to the
Board as a Non-Executive
Director in March 2015.
Mike was joint Chief Operating
Officer at Misys Plc between
1986 and 2000, running both
its UK Insurance Division and
US Healthcare Division. He was
then Chief Executive Officer
of Huon Corporation and
also Marlborough Stirling Plc.
Since 2005 he has undertaken
a number of non-executive
roles. He is currently Non-
Executive Chairman of
Emis Group Plc.
REGISTERED OFFICE
1b Stratford Court
Cranmore Boulevard
Solihull
B90 4QT
COMPANY NUMBER
07742256
AUDITORS
KPMG LLP
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
NOMINATED ADVISER
AND JOINT BROKER
Zeus Capital Limited
82 King Street
Manchester
M2 4WQ
JOINT BROKER
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
BANKERS
Barclays Bank Plc
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GN
REGISTRARS
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
BR3 4TU
FINANCIAL PR
MHP Communications
6 Agar Street
London
WC2N 4HN
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30
GOVERNANCE
www.epwin.co.uk
Stock code: EPWN
Chief Executive Officer
The Chief Executive Officer has day-to-day responsibility,
within the authority delegated by the Board, for implementing
the Group’s strategy and running the Group.
The Board is supported by the Company Secretary who,
under the direction of the Chairman, ensures good communication
and information flows within the Board, including between
Executive and Non-Executive Directors and between the
Board and its Committees.
The Board meets regularly to consider strategy, performance and
the framework of internal controls. To enable the Board to discharge
its duties, all Directors receive appropriate and timely information.
Briefing papers are distributed to all Directors in advance of Board
meetings. All Directors have access to the advice and services of the
Company Secretary, who is responsible for ensuring that the Board
procedures are followed, and that applicable rules and regulations
are complied with. In addition, procedures are in place to enable
the Directors to obtain independent professional advice in the
furtherance of their duties, if necessary, at the Company’s expense.
Board responsibilities
The Board of Directors is responsible to shareholders for
effective direction and control of the Group. This report
describes the framework for corporate governance and internal
control that the Directors have established to enable them to
carry out this responsibility.
Corporate Governance
The Board adopted the Quoted Companies Alliance Corporate
Governance Code (“the QCA Code”) on 25 September 2018.
The Board of Directors acknowledges the importance of the ten
principles set out in the QCA Code. The Board’s compliance with
the Code is set out in the disclosures in this Annual Report and
on the Corporate Governance section of the corporate website.
Board structure and composition
As at the date of this report, the Board comprised three Executive
and two Non-Executive Directors, each of whom brings a different
experience set and background. Andrew Eastgate is Chairman of
the Board of Directors and also Chairman of the Audit Committee
and Nomination Committee. Michael O’Leary is Chairman of the
Remuneration Committee.
Biographies of all the Directors at the date of this report are set
out on pages 28 and 29.
The Directors maintain their current knowledge through a
combination of reading of technical and market bulletins
and attendance at seminars. The Company Secretary has the
responsibility for bringing new legal and regulatory developments
to the attention of the Board.
Andrew Eastgate and Michael O’Leary are considered by the Board
to be “independent” Non-Executive Directors having taken into
consideration length of service, remuneration and shareholdings in
the Company. Neither Andrew Eastgate nor Michael O’Leary has any
connection with any customer, supplier or other major shareholder
of the Company or the Group.
Details of the terms of appointment and remuneration of both the
Executive and Non-Executive Directors are set out in the Directors’
Remuneration Report on pages 38 to 40.
Chairman
The Chairman is responsible for leadership of the Board, ensuring
its effectiveness, setting the Board’s agenda and ensuring that
adequate time is available for discussion of all agenda items.
The Chairman facilitates the effective contribution and performance
of all Board members whilst identifying any development needs
of the Board. He also ensures that there is sufficient and effective
communication with shareholders to understand their issues
and concerns.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
31
GOVERNANCE
During the period to 31 December 2018, the Audit Committee
met three times. Its activities included:
• Reviewing the Annual Report and full year announcement,
and meeting with auditors to consider audit findings,
for the year ended 31 December 2017;
• Reviewing the half-year announcement for the period
ended 30 June 2018; and
• Consideration of the audit plan for the year ended
31 December 2018.
Remuneration Committee
The Remuneration Committee comprised Michael O’Leary
(Chairman) and Andrew Eastgate.
The Committee’s principal responsibilities include:
• Setting the remuneration policy for Executive Directors; and
• Reviewing the level and structure of remuneration for senior
management.
Full details of the role, policies and activities of the Remuneration
Committee are set out in the Remuneration Committee Report
on pages 38 to 40.
During the period to 31 December 2018 the Remuneration
Committee met once to consider remuneration policies and
set Directors’ remuneration.
Nomination Committee
The Nomination Committee comprised Andrew Eastgate (Chairman),
Jonathan Bednall and Michael O’Leary.
The Committee’s principal responsibilities include:
• Keeping under review the structure, size and composition of the
Board and making recommendations to the Board with regard to
any changes;
• Identifying and nominating candidates to fill Board vacancies; and
• Considering succession planning for Directors and other senior
management.
The Committee meets as and when required and met once during
the year to review the structure, size and composition of the Board.
The Board’s main responsibilities are:
• Providing leadership of the Group within a framework
which enables risk to be assessed and managed
• Reviewing and approving the overall Group strategy and direction
• Approving communications to shareholders
• Reviewing operational and financial performance
• Determining, maintaining and overseeing controls,
audit processes and risk management policies
• Approving the year end and interim financial statements
• Approving the annual budget
• Approving material agreements and contracts
• Reviewing and approving acquisitions and disposals
• Reviewing the environmental and health and safety
performance of the Group
• Reviewing and approving remuneration policies
• Approving appointments to the Board
• Monitoring and maintaining the Group’s financing relationships
The Board is supplied in a timely manner with the appropriate
information to enable it to discharge its duties, including providing
constructive challenge to, and scrutiny of, management. Further
information is obtained by the Board from the Executive Directors
and other relevant senior executives as the Board, particularly its
Non-Executive members, considers appropriate.
Procedures are in place for Directors to take independent
professional advice, when necessary, at the Company’s expense.
No such advice was sought during the year under review.
If Directors have concerns that cannot be resolved regarding
the running of the Group or a proposed action, they are
encouraged to make their views known and these are recorded
in the Board minutes.
Board Committees
The Board is supported by Audit, Remuneration and Nomination
Committees. Their specific responsibilities are set out below.
Audit Committee
During the year, the Audit Committee comprised two independent
Non-Executive Directors: Andrew Eastgate (Chairman) and Michael
O’Leary. Christopher Empson attends Audit Committee meetings,
as necessary, by invitation.
The Committee’s principal responsibilities include:
• Reviewing and challenging the risk identification
and risk management processes across the business;
• Managing relations with the external auditors to ensure
the annual audit is effective, objective, independent
and of high quality; and
• Reviewing the Company’s corporate reporting.
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GOVERNANCE
www.epwin.co.uk
Stock code: EPWN
Corporate Governance
CONTINUED
Details of attendance at scheduled Board and Board Committee meetings during the period to 31 December 2018 are as follows:
Board
Number
Attended
Audit Committee
Number
Attended
Remuneration
Committee
Nomination
Committee
Number
Attended
Number
Attended
11
11
11
11
11
11
11
11
11
9
3
3
n/a
n/a
n/a
3
3
n/a
n/a
n/a
1
1
n/a
n/a
n/a
1
1
n/a
n/a
n/a
1
1
1
n/a
n/a
1
1
1
n/a
n/a
Andrew Eastgate
Michael O’Leary
Jonathan Bednall
Christopher Empson
Shaun Hanrahan
Board performance
The Chairman is responsible, with the assistance of the Nomination
Committee, for ensuring that the Company has an effective Board
with a suitable range of skills, expertise and experience.
Directors are required to notify the Company Secretary of any
additional conflict situation or if there is a material change in
a conflict situation previously notified, giving sufficient details
of the situation to allow the Board to make an informed decision
when considering authorisation.
The performance of Directors, as well as the performance
and composition of the Board as a whole, is evaluated on an
annual basis.
In 2018, an internal review of Board effectiveness was conducted
by the Chairman. This involved one-to-one interviews with all
members of the Board and a review of Board and Board Committee
papers and minutes. The key points raised were around reviewing
Board composition and Group succession planning.
Directors’ conflicts of interest
Under the Companies Act 2006 (“the Act”), a Director must avoid a
situation where he has, or can have, a direct or indirect interest that
conflicts, or possibly may conflict, with the Group’s interests. The
requirement is considered very broad and could apply, for example,
if a Director becomes a director of another company or a trustee of
another organisation. The Act allows directors of public companies
to authorise conflicts and potential conflicts, where appropriate,
provided that the articles of association contain a provision to this
effect. The Company’s articles of association authorise the Directors
to approve such situational conflicts.
There are safeguards which will apply when Directors decide
whether to authorise a conflict or potential conflict.
First, only Directors who have no interest in the matter being
considered will be able to take the relevant decision, and, second,
in taking the decision, the Directors must act in a way which they
consider, in good faith, will be most likely to promote the Group’s
success. The Directors will be able to impose limits or conditions
when giving authorisation if they think this is appropriate.
Internal controls
The Board is responsible for maintaining a sound internal control
environment to safeguard shareholders’ investments and the
Group’s assets. Such a system is designed to manage rather than
eliminate the risk of failure to achieve business objectives and can
provide only reasonable and not absolute assurance against material
misstatement or loss. The Board regularly reviews the effectiveness
of the systems of internal control and considers the major business
risks and the control environment.
Epwin is committed to conducting its business responsibly and
in accordance with all applicable laws and regulations. Employees
are encouraged to raise concerns about fraud, bribery and other
matters through a whistleblowing procedure.
Relations with shareholders
The Board is committed to maintaining good communications
with shareholders. The Chief Executive Officer and the Group
Finance Director are the Company’s principal contact for investors,
fund managers, the press and other interested parties. Other than
during close periods, the Chief Executive Officer and Group Finance
Director maintain a regular dialogue with institutional shareholders
and give presentations to institutional shareholders and analysts
immediately after the announcement of the Group’s half year
and full year results. The Group also encourages communications
with private shareholders throughout the year and welcomes their
participation at shareholder meetings.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
33
GOVERNANCE
The Chief Executive Officer and the Group Finance Director also
meet with the Group’s brokers during the year to ensure that they
are aware of the views of major shareholders. Additionally, at the
Annual General Meeting, investors are given the opportunity to
question the entire Board.
The Chairman offers to meet with major institutional shareholders
periodically in order to provide a channel of communication in
addition to that provided by the Executive Directors.
The Group maintains a corporate website (investors.epwin.
co.uk), which complies with AIM Rule 26 and contains a range
of information of interest to institutional and private investors,
including the Group’s annual and half year reports, trading
statements and all regulatory announcements relating to the Group.
The Board wishes to encourage the constructive use of
the Company’s AGM for shareholder communication.
The Chairman of the Board and the Chairmen of the Audit,
Remuneration and Nomination Committees will be available
to answer questions at the forthcoming AGM. Resolutions will
be proposed on each substantially separate issue and the level
of proxies cast for each resolution will be available at the AGM.
Corporate culture
Epwin’s corporate culture runs through all of its different business
units, many of which have been added to the Group through
acquisition, including one this year and a further one since the
year end. This culture is based on allowing each business unit to
thrive on its own initiative, whilst benefiting from being part of a
larger whole, buttressing Epwin’s routes to market by increasing
vertical integration. For example, local management teams
and employees are actively encouraged to suggest efficiency
improvements, as demonstrated by the site consolidations and
continuous improvements during the year. In addition, Epwin
employees are encouraged to suggest ways to improve the Group’s
product portfolio and build on their technical expertise. This has
led to the development of new products, including the aluminium
window system, which provides Epwin customers with a market
leading offer. The Group’s senior team holds regular meetings with
employees and spends time on manufacturing sites with key staff
to monitor this corporate culture.
Andrew Eastgate
Chairman
9 April 2019
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34
GOVERNANCE
www.epwin.co.uk
Stock code: EPWN
Directors’ Report
The Directors present their report together with the audited
financial statements for the year ended 31 December 2018.
Financial results and dividends
The audited accounts for the Group and Company for the
year ended 31 December 2018 are set out on pages 52 to 89.
The Group profit for the year was £5.8 million (2017: £10.1
million). The Board recommends the payment of a final dividend
of 3.20 pence per ordinary share. If approved, the final dividend
will be paid on 3 June 2019 to shareholders on the register
at the close of business on 10 May 2019.
Directors and Directors’ interests
The Directors who held office during the year and to the date
of this report were as follows:
A K Eastgate
J A Bednall
C A Empson
S P Hanrahan
M K O’Leary
Full biographical details of the Company’s Directors as at the
date of this report are given on pages 28 and 29.
The Directors’ remuneration and their interests in the share
capital of the Company are detailed on pages 38 to 40.
Directors’ and officers’ liability insurance
The Company has purchased insurance to cover its Directors and
officers against costs of defending themselves in legal proceedings
taken against them in that capacity and in respect of any damages
resulting from those proceedings. The insurance does not provide
cover where the Director has acted fraudulently or dishonestly.
Supplier payment policy
The Group agrees payment terms with its suppliers when it enters
into binding purchase contracts. The Group seeks to abide by the
payment terms agreed whenever it is satisfied that the supplier
has provided the goods or services in accordance with the agreed
terms and conditions. The Group seeks to treat all suppliers fairly,
but it does not have a Group-wide standard or code of practice
that deals specifically with payments to suppliers. Trade payables
at 31 December 2018 represented on average 77 days’ credit,
based on actual invoices received (2017: 60 days’ credit).
Share capital
The issued share capital of the Company at 31 December 2018
was £71,463, comprising 142,925,173 ordinary shares of
0.05 pence each.
The Directors will be seeking authority at the forthcoming Annual
General Meeting to renew their authority to allot and repurchase
shares. Full details of these resolutions, together with explanatory
notes, are contained in the Notice of the Annual General Meeting
on pages 90 to 94.
Substantial shareholdings
As at 31 March 2019, the Company had the following substantial
shareholdings:
AJ Rawson
C Kennedy
Ruffer LLP
Unicorn Asset Management
Premier Asset Management
Janus Henderson Investors
Otus Capital Management
Chelverton Asset Management
AXA Investment Managers
% of issued
share capital
Number of
shares
14.17
14.17
9.37
6.79
6.65
4.70
3.94
3.67
3.22
20,250,000
20,250,000
13,398,711
9,698,201
9,500,000
6,721,822
5,626,195
5,250,000
4,600,000
Extracted from share register maintained by Link Asset Services.
Charitable and political donations
The Group made no charitable or political donations during the year.
Going concern
As highlighted in note 1 to the Accounts, the Group meets
its day-to-day working capital requirements through an overdraft,
term loan and revolving credit facility, which were renewed in
September 2018 for an initial three-year term with the option of
a further two years.
Further information on the Group’s business activities, together
with the factors likely to affect its future development, performance
and position, is set out in the Strategic Report on pages 10 to 25.
In addition, note 25 to the Accounts details the Group’s objectives,
policies and processes for managing its capital and its exposures to
credit risk and liquidity risk.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
35
GOVERNANCE
We take measures to ensure good working conditions.
Employees are expected at all times to act honestly, respectfully
and in accordance with our Company policies. The Company
does not tolerate misconduct or harassment in any form and will
diligently investigate and, where necessary, take action following
any complaints, including those of confidential ‘whistleblowers’.
The Group keeps its employees informed of matters affecting
them as employees through regular team briefings throughout
the year. We value employees’ opinions and seek to actively
consult them in the decision-making process and keep them
appraised of Company news.
The average number of employees within the Group is shown
in note 8 to the Accounts on page 66.
By order of the Board
Christopher Empson
Group Finance Director
9 April 2019
The Group’s forecasts and projections, taking account of possible
changes in trading performance, show that the Group should be
able to operate within the level of its current facilities.
After making enquiries, the Board has a reasonable expectation
that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, the Board continue to adopt the going concern basis
in preparing the Annual Report and Accounts.
Annual General Meeting
The Annual General Meeting of the Company will be held on
21 May 2019 at Eversheds Sutherland (International) LLP, 115
Colmore Row, Birmingham B3 3AL. The Notice setting out details
of the business to be considered at the meeting is included on
pages 90 to 94.
Auditor reappointment
KPMG LLP have expressed their willingness to continue in office
as auditors and a resolution proposing their reappointment will
be proposed at the forthcoming Annual General Meeting.
Disclosure of information to the auditors
As required by Section 418 of the Companies Act 2006, each
Director serving at the date of approval of the financial statements
confirms that:
• to the best of his knowledge and belief, there is no information
relevant to the preparation of their report of which the
Company’s auditors are unaware; and
• each Director has taken all the steps a director might reasonably
be expected to have taken to be aware of relevant audit
information and to establish that the Company’s auditors are
aware of that information.
Words and phrases used in this confirmation should be interpreted
in accordance with Section 418 of the Companies Act 2006.
Employees
Our employment policies, including a commitment to equal
opportunity, are designed to attract and retain high calibre
individuals, regardless of age, sex, religion, disability, marital status,
race, ethnicity, nationality or sexual orientation. Applications for
employment by disabled persons are given full and fair consideration
for all vacancies in accordance with their particular aptitudes and
abilities. In the event of employees becoming disabled, every effort
is made to retain them in order that their employment with the
Group may continue.
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GOVERNANCE
www.epwin.co.uk
Stock code: EPWN
Audit Committee Report
The Audit Committee has primary responsibility for monitoring
the quality of internal financial controls, ensuring that the financial
performance of the Group is properly measured and reported
on and reviewing the work of and reports from the Group’s auditors
relating to the Group’s accounting and internal controls, in all cases
having due regard to the interests of shareholders. During 2018,
the Audit Committee met three times.
Internal financial controls
The Group’s financial reporting processes are detailed and regularly
reviewed. The detailed reporting is reviewed at least at each month-
end by the members of the Group finance team, highlighting areas
of concern and checking/confirming that the reasons for variations
are valid. Quarterly reviews of each of the businesses are performed
by the Executive Directors, covering both historic and forthcoming
financial and business performance as well as anticipating key
future events.
In addition, each business unit is required to submit a quarterly
controls checklist which is signed locally to say that controls and
reviews have been carried out both during the quarter and as part
of each month-end close. These reports are also used to follow
up on any non-compliance points identified and are reviewed by
the relevant Divisional Financial Directors as well as the Group
finance team.
At this stage, the Audit Committee and Board do not consider
an internal audit function to be a cost-effective source of additional
assurance over the control environment but will keep this matter
under annual review.
Financial reporting
The Committee pays particular attention to matters it considers
to be important by virtue of their impact on the Group’s results,
or the level of complexity, judgement or estimation involved
in their application to the Group’s financial statements.
The significant financial risks considered by the Committee
in relation to the 2018 financial statements are outlined below.
Revenue recognition and related
contract support provisions
Revenues are recognised at the fair value of goods sold to external
customers, net of value added tax, discounts, rebates and other
sales taxes or duty. Contract support is a pre-determined sales
incentive for certain branded products that falls due when the
Group’s customer sells the relevant products to a specified end-user.
A deduction is made from revenue and a provision booked relating
to relevant products sold to customers for which contract support
has yet to be claimed. This deduction includes an estimate of the
proportion of sales that are expected to be sold to specified end-
users and that will result in a contract support claim.
The Audit Committee considered the basis, consistency of
application and adequacy of the contract support provision and
concluded that the provision, as well as the value and timing of
revenues recognised were appropriate.
Inventory
As a manufacturer, inventory is one the most significant items
on the balance sheet. There is a potential risk that the value of
inventory may be in excess of its net realisable value. A deduction
is made from inventory for obsolete and slow-moving lines of
inventory. This deduction includes judgement in identifying
slow-moving and obsolete lines as well as an estimate of
the recoverable amount.
The Audit Committee considered the basis, consistency of
application and adequacy of the slow moving and obsolete
inventory provision and concluded that the provision was
adequate to ensure inventories are held at the lower of
cost and net realisable value.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
37
GOVERNANCE
Goodwill and parent Company investments
As an acquisitive Group, the balance sheet of the Group
includes a significant value of goodwill. Similarly, the parent
Company balance sheet includes a significant balance relating
to the investments it holds in subsidiary undertakings.
There is the potential risk that the carrying value of these
assets is not recoverable.
The goodwill and parent Company investments are assessed for
impairment when there is an indicator of impairment or at least
annually. This assessment involves calculating the value in use of
each Cash Generating Unit (“CGU”) and comparing this to the
goodwill allocated to that CGU. The value in use calculation includes
a number of estimates, including cashflow forecasts for each CGU,
the growth rate into perpetuity beyond this period and the discount
rate, which depend on future expectations of the company and
its markets.
The Audit Committee was satisfied that the assumptions used in the
impairment testing were appropriate and that there was sufficient
headroom in the calculations to conclude no impairment is required.
New accounting standards
The Audit Committee considered the impact of new accounting
standards that came into effect at 1 January 2017 and were
adopted by the Group during the year, being IFRS 9: Financial
Instruments and IFRS 15: Revenue from Contracts with Customers.
The amended accounting policies and impact on the financial
statements are disclosed on note 1 to the Accounts. The Audit
Committee also considered the impact of IFRS 16: Leases which
came into effect on 1 January 2019. Disclosure on the anticipated
impact of IFRS 16 is included in note 1 to the Accounts.
External audit effectiveness
A key responsibility of the Audit Committee is evaluating the
performance and ensuring the continued effectiveness of the
external audit.
Following the completion of the Group audit, both the Group
and divisional finance teams are asked to provide feedback on
the performance of the external auditors, including audit approach,
quality of staff, work performed and feedback, and understanding
of the business. Following presentation and evaluation of the
feedback by the Audit Committee it was determined that KPMG
LLP continue to provide an effective audit and recommended
they should be reappointed.
Auditor independence
The Audit Committee and the Board place great emphasis
on the objectivity of the external auditor in their reporting
to shareholders. The audit partner and senior manager are
present at Audit Committee meetings as required to ensure
full communication of matters relating to the audit. The overall
performance of the auditors is reviewed annually by the Audit
Committee, taking into account the views of management, and
feedback is provided when necessary to senior members of KPMG
unrelated to the audit. This activity also forms part of KPMG’s
own system of quality control. The Audit Committee also has
discussions with the auditors on the adequacy of controls and on
any judgemental areas. These discussions have proved satisfactory
to date. The scope of the forthcoming year’s audit is discussed in
advance by the Audit Committee. Audit fees are approved by the
Audit Committee after discussions between the Group Finance
Director and KPMG.
Rotation of the audit partner’s responsibilities within KPMG is
required by their profession’s ethical standards. There will be
rotation of the audit partner and key members within the audit
team as appropriate.
Assignments of non-audit work have been and are subject to
controls by management that have been agreed by the Audit
Committee so that auditor independence is not compromised.
Other than audit, the Board is required to give prior approval of
work carried out by KPMG and its associates in excess of £20,000.
Part of this review is to determine that other potential providers
of the services have been adequately considered. These controls
provide the Audit Committee with confidence in the independence
of KPMG in their reporting on the financial statements and audit
of the Group.
Andrew Eastgate
Chairman of the Audit Committee
9 April 2019
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38
GOVERNANCE
www.epwin.co.uk
Stock code: EPWN
Remuneration Committee Report
The Remuneration Committee reviews the Group’s policy
on the remuneration and terms of engagement of the Executive
Directors and senior management team. Executive Directors
attend by invitation only when appropriate and are not present
when decisions are taken on their own remuneration.
The members of the Remuneration Committee and details
of attendance at the meetings are disclosed in the Corporate
Governance Report on page 32.
The Committee members have no personal financial interest,
other than as shareholders, in the matters to be decided.
They have no conflicts of interest arising from cross-directorships
or from being involved in the day-to-day business of the Group.
The Committee members do not participate in any bonus,
share awards or pension arrangements.
Remuneration policy
The Group operates in a highly competitive environment.
The Board and Remuneration Committee of Epwin aim to ensure
the Group has the best possible team to drive continued success
and creation of shareholder value. For the Group to continue to
compete successfully, it is essential that the level of remuneration
and benefits offered achieves the objectives of attracting, retaining,
motivating and rewarding the necessary high calibre of individuals
at all levels across the Group.
The Group therefore sets out to provide competitive remuneration
to all its employees, appropriate to the business environment in
the market in which it operates. To achieve this, the remuneration
package is based upon the following principles:
• total rewards should be set to provide a fair and attractive
remuneration package;
• appropriate elements of the remuneration package should
be designed to reinforce the link between performance
and reward; and
• Executive Directors’ incentives should be aligned with
the interests of shareholders.
Remuneration of Executive Directors
Elements of remuneration
The Group’s remuneration policy contains the following
remuneration components:
Fixed remuneration components
Fixed remuneration components play a key role in attracting,
retaining and motivating high calibre and higher performing
executives. Fixed remuneration consists of three components:
Basic salary or fees
Basic salaries or fees are approved by the Remuneration Committee
on an annual basis after taking into consideration the performance
of the individuals, their levels of responsibility and rate of salary or
fees for similar positions in comparator companies.
Pensions
The Group makes defined contributions on behalf of the Directors
into their individual pension plans based on percentage of basic
salary or payment in lieu of these benefits net of employer’s national
insurance contributions and are at no additional cost to the Group.
Other taxable benefits
These principally comprise car benefits, life assurance and
membership of the Group’s healthcare insurance scheme or
payment in lieu of these benefits. These benefits do not form
part of pensionable earnings.
Variable remuneration components
Variable remuneration components directly link an individual’s
reward, over both the short and the long-term, to their
contributions to the success of the Group. The schemes
ensure that only high performance is rewarded with high
reward and that failure is not rewarded.
Annual performance-related bonuses
Performance-related bonuses for the Executive Directors
are contractual and are primarily determined by reference
to performance targets based on the Group’s financial results
set at the beginning of the financial year. Awards are capped
at a maximum of 100% of the individual’s basic pay. Terms
and conditions are based on the recommendations of the
Remuneration Committee.
Long-term incentive arrangements
The Group strongly believes that employee share ownership
strengthens the link between employees’ personal interests and
those of the Group and its shareholders, as well as strengthening
employee retention and motivation. With the aim of linking an
individual’s remuneration to Company performance over the longer-
term, the Group currently operates two long-term share-based
incentive plans.
In July 2015, the Group launched a Save As You Earn (“SAYE”)
scheme available to all employees of the Company, including
the Executive Directors.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
39
GOVERNANCE
In 2017 the Group launched a new Long-Term Incentive Plan (“LTIP”) for Executive Directors and certain senior employees. Under the
LTIP employees will be able to earn up to a fixed value in shares based on the Group’s and individual’s performance over three years.
The maximum value awardable to Executive Directors and all members of the scheme under the LTIP is £3.7 million; of this, £1.4 million
is potentially awardable to the Executive Directors.
Details of all schemes are provided on page 67.
Non-Executive Directors’ remuneration
The Non-Executive Directors receive fees set at a level commensurate with their experience and ability to make a contribution to the Group’s
affairs and are set by the Board as a whole. No other incentives, pensions or other benefits are available to the Non-Executive Directors.
Details of the Directors’ emoluments, share awards and shareholdings are given below and form part of the audited financial statements.
Executive
J A Bednall
C A Empson
S P Hanrahan
Non-Executive
A K Eastgate
M K O’Leary
Total
Salary and
fees
2018
£000
Other
taxable
benefits
2018
£000
Bonus
2018
£000
Pension
contributions
2018
£000
250
170
190
65
40
715
9
14
23
–
–
46
125
85
95
–
–
305
26
18
34
–
–
78
Total
2018
£000
410
287
342
65
40
1,144
Total
2017
£000
311
220
280
65
40
916
Long-term incentives vested
during the financial year
JA Bednall, CA Empson, SP Hanrahan and a number of other
senior employees hold awards under the Long-Term Incentive Plan.
Under the Long-Term Incentive Plan, vesting of the awards is
conditional on service and the Group achieving certain annual
earnings and cash targets over each of the three years to
31 December 2019. At each anniversary of the scheme an
assessment is made on whether the earnings and cash targets
have been achieved. If annual targets have been met a value
of ordinary shares in Epwin Group Plc will be awarded to the
employee at the end of the three-year scheme, provided the holder
remains in the employment of the Group. As the number of shares
awarded is variable, based on the share price on vesting, it is not
possible to quantify the number of awards to be granted to each
Executive Director.
Directors’ service agreements
The service agreements of the Executive Directors entitle them
on termination to payments in lieu of notice equal to salary,
benefits and pension contributions for a period of 12 months,
or less if the Director finds alternative full-time employment.
There will be no compensation for loss of office due to
misconduct or resignation by the Director.
Non-Executive Directors are appointed for an initial period of
three years, subject to reappointment at the following AGM.
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GOVERNANCE
www.epwin.co.uk
Stock code: EPWN
Remuneration Committee Report
CONTINUED
Directors’ shareholdings
The interests of the Directors who held office at 31 December 2018
in the ordinary share capital of the Company are as shown in the
table below.
As at 31
December
2018
Number of
shares
As at 31
December
2017
Number of
shares
578,500
578,500
39,200
42,414
5,000
1,000
39,200
42,414
5,000
1,000
Executive
Jonathan Bednall
Christopher Empson
Shaun Hanrahan
Non-Executive
Andrew Eastgate
Michael O’Leary
This report has been approved by the Remuneration Committee and
has been signed on its behalf by:
Michael O’Leary
Chairman of the Remuneration Committee
9 April 2019
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
41
GOVERNANCE
Statement of Directors’ Responsibilities
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the parent Company and enable
them to ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such internal control
as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due
to fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report and a Directors’ Report
that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions
The directors are responsible for preparing the Annual Report and
the Group and parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare Group and parent
Company financial statements for each financial year. Under
the AIM Rules of the London Stock Exchange they are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and applicable law
and they have elected to prepare the parent Company financial
statements in accordance with UK accounting standards and
applicable law (UK Generally Accepted Accounting Practice),
including FRS 101 Reduced Disclosure Framework.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent Company
and of their profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable, relevant,
reliable and prudent;
• for the Group financial statements, state whether they have been
prepared in accordance with IFRSs as adopted by the EU;
• for the parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
• assess the Group and parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
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FINANCIAL
STATEMENTS
44 Independent Auditor’s Report
52 Consolidated Income Statement
53 Consolidated Balance Sheet
54 Consolidated Statement
of Changes in Equity
55 Consolidated Cash Flow Statement
56 Notes to the Accounts
83 Company Balance Sheet
84 Company Statement of Changes in Equity
85 Notes to the Company Accounts
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44
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Independent Auditor’s Report
to the members of Epwin Group Plc
FOR THE YEAR ENDED 31 DECEMBER 2018
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We have fulfilled our
ethical responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
1 Our opinion is unmodified
We have audited the financial statements of Epwin Group plc (“the
Company”) for the year ended 31 December 2018 which comprise
the Consolidated Income Statement and Other Comprehensive
Income, Consolidated Balance Sheet, Consolidated Statement of
Changes in Equity, Consolidated Cash Flow Statement, Company
Balance Sheet, Company Statement of Changes in Equity and the
related notes, including the accounting policies in note 1.
In our opinion:
• the financial statements give a true and fair view of the state
of the Group’s and of the parent Company’s affairs as at 31
December 2018 and of the Group’s profit for the year then
ended;
• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
• the parent Company financial statements have been properly
prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
45
FINANCIAL STATEMENTS
2 Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
The Risk
Our response
The impact of
uncertainties due to
the UK exiting the
European Union on
our audit
Refer to page 22
(principal risks), page
36 (Audit Committee
Report), page 56
(accounting policy)
and pages 61 to 82
(financial disclosures)
Unprecedented levels of uncertainty
All audits assess and challenge the reasonableness of
estimates, in particular as described in recoverability
of Goodwill and parent Company Investments below,
and related disclosures and the appropriateness of the
going concern basis of preparation of the financial
statements (see below). All of these depend on
assessments of the future economic environment and
the Group’s future prospects and performance.
In addition, we are required to consider the other
information presented in the Annual Report including
the principal risks disclosure.
Brexit is one of the most significant economic events
for the UK and at the date of this report its effects
are subject to unprecedented levels of uncertainty
of outcomes, with the full range of possible effects
unknown.
We developed a standardised firm-wide approach to
the consideration of the uncertainties arising from
Brexit in planning and performing our audits. Our
procedures included:
• Our Brexit knowledge: We considered the
directors’ assessment of Brexit-related sources of
risk for the Group’s business and financial resources
compared with our own understanding of the risks.
We considered the directors’ plans to take action to
mitigate the risks.
• Sensitivity analysis: When addressing recoverability
of Goodwill and parent Company Investments and
other areas that depend on forecasts, we compared
the directors’ analysis to our assessment of the full
range of reasonably possible scenarios resulting from
Brexit uncertainty and, where forecast cash flows are
required to be discounted, considered adjustments
to discount rates for the level of remaining
uncertainty.
• Assessing transparency: As well as assessing
individual disclosures as part of our procedures on
recoverability of Goodwill and parent Company
Investments we considered all of the Brexit related
disclosures together, including those in the strategic
report, comparing the overall picture against our
understanding of the risks.
However, no audit should be expected to predict the
unknowable factors or all possible future implications
for a company and this is particularly the case in
relation to Brexit.
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46
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Independent Auditor’s Report
to the members of Epwin Group Plc
FOR THE YEAR ENDED 31 DECEMBER 2018
Going concern
Disclosure quality
The Risk
Our response
Our procedures included:
Refer to page 34
for the going concern
disclosures
The financial statements explain how the Board has
formed a judgement that it is appropriate to adopt the
going concern basis of preparation for the Group and
parent Company.
That judgement is based on an evaluation of the
inherent risks to the Group’s and Company’s business
model and how those risks might affect the Group’s
and Company’s financial resources or ability to continue
operations over a period of at least a year from the
date of approval of the financial statements.
The risks most likely to adversely affect the Group’s and
Company’s available financial resources over this period
were :
− Brexit
− Deferral of proceeds from a planned sale and
leaseback of a property
The risk for our audit was whether or not those
risks were such that they amounted to a material
uncertainty that may have cast significant doubt about
the ability to continue as a going concern. Had they
been such, then that fact would have been required to
have been disclosed.
• Funding assessment: We agreed current facilities
available to the relevant facility agreements.
We inspected the loan agreements in order to
determine the covenants attached to the loans and
assessed the evidence available to support that they
will be met.
• Historical comparisons: We assessed historical
accuracy of management forecasting by comparing
the actual cash flows for the year ended
31 December 2018 to the forecast cashflows over
the same period.
• Key dependency assessment: We assessed the
impact of assumptions underpinning the cash flow
forecasts in order to identify the key dependencies
within the forecasts.
• Sensitivity analysis: We considered sensitivities
over the level of available financial resources
indicated by the Group’s financial forecasts taking
account of reasonably possible (but not unrealistic)
adverse effects that could arise from these risks
individually and collectively. In particular, we assessed
the Group’s downside forecasts based on the risks
resulting from Brexit and the deferral of proceeds
from a planned sale and leaseback of a property.
• Benchmarking assumptions: We compared the
assumptions behind the Group’s cashflow forecasts
to externally derived data including market forecasts
and projected growth and cost inflation
• Evaluating directors’ intent: We evaluated the
achievability of the actions the Directors consider
they would take to improve the position should the
risks materialize. We considered the extent to which
the intent and ability of the directors to pursue
mitigating actions should such be required were
realistic.
• Assessing transparency: We assessed the
completeness and accuracy of the matters covered in
the going concern disclosure by considering whether
they accurately reflected the Group’s financing
arrangements and the risks associated with the
Group’s ability to continue as a going concern.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
47
FINANCIAL STATEMENTS
Revenue including
contract support
£30.7 million
(2017: £37.5 million)
Refer to page 60
(accounting policy)
and page 73 (financial
disclosures)
The Risk
Subjective estimate
Our response
Our procedures included:
• Historical comparisons: We compared the level
of actual claims during FY18 to the FY17 contract
support provision to assess historical accuracy of the
provision.
• Methodology choice: We challenged the
appropriateness of the methodology applied in
determining contract support amount by comparing
it to relevant accounting standards and industry
practice.
• Tests of detail: For a sample of contract support
amounts we compared the claim rate to customer
contracts, current year sales and historical claims.
• Tests of detail: We compared a sample of individual
contract support amounts to after date credit notes.
The Group provides contract support sales incentive to
its distribution customers for certain branded products.
These result in a revenue amount that can vary due
to subsequent onward sales made by the distributor.
When cash has been received for the retail price, the
Group issues credit notes for eligible claims received.
There can be a substantial time delay between the
distributor’s sale and their claim, or even no claim at
all. As such, the amount of contract support includes
an element of estimation on the proportion of sales
that result in a subsequent claim. This estimate is
based on an historical percentage per customer on
sales of products for which contract support has
been reclaimed.
The effect of these matters is that, as part of our risk
assessment, we determined that estimation of contract
support has a high degree of estimation uncertainty,
with a potential range of reasonable outcomes greater
than our materiality for the financial statements
as a whole and possibly many times that amount.
The financial statements (note 2) disclose the sensitivity
estimated by the Group.
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Independent Auditor’s Report
to the members of Epwin Group Plc
FOR THE YEAR ENDED 31 DECEMBER 2018
Recoverability
of Goodwill and
parent Company
Investments in
subsidiaries
(Group:
(£70.2 million;
2017: £65.7 million))
(Parent:
(£69.6 million:
2017: £68.9 million))
Refer to page 60
(accounting policy)
and page 70 (financial
disclosures)
The Risk
Subjective estimate
Our response
Our procedures included:
Goodwill in the Group and the carrying amount of
the parent Company’s investments in subsidiaries are
the most quantitatively significant items on the Group
and parent Company balance sheet respectively.
The decreasing share price and profit levels were an
indication that these assets may be impaired.
Impairment is assessed for each Cash Generating Unit
(“CGU”). The company’s assessment of impairment
depends on several subjective assumptions including
five-year cashflow forecasts for each CGU, the growth
rate into perpetuity and discount rate for each CGU
which depend on future expectations of the market
and the company’s performance.
The effect of these matters is that, as part of our
risk assessment for audit planning purposes, we
determined that the value in use had a high degree
of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for
the financial statements as a whole. In conducting
our final audit work, we reassessed the degree of
estimation uncertainty to be less than that materiality.
• Historical comparisons: We compared the
actual results achieved compared to budget in FY18
to assess reasonableness in forecasting.
• Benchmarking assumptions: We compared
the Group’s assumptions to externally derived
and historical data in particular the growth rates
and discount rates.
• Sensitivity analysis: We performed breakeven
analysis on the key assumptions noted above
to assess whether a reasonably possible
change in these assumptions could trigger an
impairment charge.
• Comparing valuations: We compared the sum
of the discounted cash flows to the Group’s market
capitalisation to assess the reasonableness of those
cash flows.
• Assessing transparency: We assessed whether
the Group’s disclosures about the sensitivity of
the outcome of impairment assessment to changes
in key assumptions reflected the risks inherent in
the valuation.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
49
FINANCIAL STATEMENTS
Carrying amount
of Inventory
(£29.2 million;
2017: £29.6 million)
Refer to page 60
(accounting policy)
and page 73 (financial
disclosures)
The Risk
Subjective Estimate
Our response
Our procedures included:
Inventory is one the most significant items on
the balance sheet and is required to be measured
at the lower of cost and net realisable value.
The company’s estimate is based on comparing
the amount of inventory to historical sales.
There is a risk that changing customer taste leads
to slow-moving inventory.
• Methodology choice: We challenged the
appropriateness of the methodology applied in
determining net realisable value by assessing the
evidence for the formulaic provision based on
historical sales levels compared to year end inventory
value by product.
• Historical comparisons: We compared the actual
sales prices achieved in 2018, scrapping during 2018
and unsold items to the prior year provision to assess
the historical accuracy of the provision.
• Test of detail: We checked the appropriateness of
the sales data used in the inventory usage report by
testing a sample to sales invoices.
• Tests of detail: We compared a sample of unit costs
of stock items to prices set out in after date sales
invoices.
• Test of detail: We considered the provision for any
discontinued or uncertified products.
• Assessing transparency: We considered the
adequacy of the Group’s disclosures in respect of the
degree of estimation related to inventory.
3 Our application of materiality and an overview of the scope of our audit
The materiality for the financial statements as a whole was set at £0.7 million (2017: £0.9 million). This has been determined with reference
to a benchmark of normalised Group profit before tax from continuing operations (being Group profit before tax on continuing operations
before the other non-underlying items of £2.0 million, (2017 £7.4 million)) of £15.1 million (2017: £19.4 million), of which it represents 4.75%
(2017: 4.6%).
Materiality for the parent Company financial statements as a whole was set at £0.7 million (2017: £0.8 million), determined with reference to a
benchmark of net assets and chosen to be lower than materiality for the group financial statements as a whole. It represents 1.7% (2017: 1.2%)
of the stated benchmark.
We agreed to report to the Audit Committee any corrected or uncorrected misstatements exceeding £0.04 million (2017: £0.05 million), in
addition to other reporting on qualitative grounds.
Of the Group’s 17 (2017: 19) reporting components, we subjected 8 (2017: 9) to full scope audits for Group purposes and 9 (2017: 3) to
specified risk-focused audit procedures. The latter were not individually financially significant enough to require a full scope audit for Group
purposes, but did present specific individual risks that needed to be addressed.
The components within the scope of our work accounted for 92% Group revenue, 87% Group profit before tax and 95% total Group assets.
The remaining 8% of total Group revenue, 13% of Group profit before tax and 5% of total Group assets is represented by five reporting
components, none of which individually represented more than 7% of any of total Group revenue, Group profit before tax or total Group
assets. For these residual components, we performed analysis at an aggregated Group level to re-examine our assessment that there were no
significant risks of material misstatement within.
The Group audit team approved the range of component materialities of £0.05 million to £0.7 million (2017: £0.1 million to £0.7 million),
having regard to the mix of size and risk profile of the Group across the components. The Group audit team performed all of the audit work in
relation to the 17 components (2017: 19 components).
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50
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Independent Auditor’s Report
to the members of Epwin Group Plc
FOR THE YEAR ENDED 31 DECEMBER 2018
4 We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or
the Group or to cease their operations, and as they have concluded
that the Company’s and the Group’s financial position means that
this is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor’s report is not a guarantee that the Group or the parent
Company will continue in operation.
We identified going concern as a key audit matter (see section 2
of this report). Based on this work, we are required to report to
you if we have concluded that the use of the going concern basis
of accounting is inappropriate or there is an undisclosed material
uncertainty that may cast significant doubt over the use of that
basis for a period of at least a year from the date of approval of the
financial statements.
We have nothing to report in these respects.
5 We have nothing to report on the other
information in the Annual Report
The directors are responsible for the other information presented
in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the
financial statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in the other
information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic
report and the directors’ report;
• in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
6 We have nothing to report on the other matters
on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
• adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent Company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
51
FINANCIAL STATEMENTS
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 41,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group
and parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
8 The purpose of our audit work and
to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
John Leech (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
9 April 2019
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Consolidated Income Statement
and Other Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2018
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Underlying operating profit
Amortisation of acquired other intangible assets
Other non-underlying items
Share-based payments expense
Operating profit
Finance costs
Profit before tax
Taxation
Profit from continuing operations
Loss from discontinued operations net of tax
Profit for the year and total comprehensive income
Earnings per share
Basic
Basic – continuing operations
Basic – discontinued operations
Diluted
Diluted – continuing operations
Diluted – discontinued operations
Note
3
7
7
7, 9
10
11
6
12
12
12
12
12
12
2018
£m
281.1
(196.3)
84.8
(34.4)
(35.6)
18.7
(1.2)
(2.0)
(0.7)
14.8
(1.5)
13.3
(2.5)
10.8
(5.0)
5.8
pence
4.06
7.56
(3.50)
4.05
7.54
(3.49)
2017*
£m
292.8
(201.5)
91.3
(32.7)
(43.5)
24.2
(1.1)
(7.4)
(0.6)
15.1
(1.2)
13.9
(2.3)
11.6
(1.5)
10.1
pence
7.08
8.13
(1.05)
7.08
8.13
(1.05)
There are no recognised gains and losses other than those included above and therefore no separate statement of other comprehensive
income has been presented.
*Reclassified, see note 1.22, and restated, see note 6.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
53
FINANCIAL STATEMENTS
Consolidated Balance Sheet
AS AT 31 DECEMBER 2018
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Assets held for resale
Deferred tax
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Deferred consideration
Income tax payable
Provisions
Non-current liabilities
Other interest-bearing loans and borrowings
Provisions
Total liabilities
Net assets
Equity
Ordinary share capital
Share premium
Merger reserve
Retained earnings
Total equity
Note
2018
£m
2017
£m
14
15
16
6
23
17
18
19
21
20
5
22
21
22
24
24
24
70.2
3.5
37.2
0.1
0.7
65.7
3.9
36.0
–
0.6
111.7
106.2
29.2
40.4
6.1
75.7
29.6
45.3
7.3
82.2
187.4
188.4
5.6
61.3
0.3
0.6
1.5
69.3
25.3
2.8
28.1
97.4
90.0
0.1
12.5
25.5
51.9
90.0
21.0
54.7
–
1.4
2.1
79.2
11.4
4.1
15.5
94.7
93.7
0.1
12.5
25.5
55.6
93.7
The financial statements were approved by the Board of Directors and authorised for issue on 9 April 2019.
They were signed on its behalf by:
Jonathan Bednall
Christopher Empson
Company number:
Chief Executive Officer
Group Finance Director
07742256
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2018
Balance as at 31 December 2016
Comprehensive income:
Profit for the year
Total comprehensive income:
Transactions with owners recorded
directly in equity:
Issue of shares
Share-based payments expense
Dividends
Total transactions with owners
Balance as at 31 December 2017
IFRS 9 adoption
Balance as at 31 December 2017 (restated)
Comprehensive income:
Profit for the year
Total comprehensive income:
Transactions with owners recorded
directly in equity:
Issue of shares
Share-based payments expense
Dividends
Total transactions with owners
Share
capital
£m
0.1
Share
premium
£m
12.5
Merger
reserve
£m
23.9
Retained
earnings
£m
54.4
–
–
–
–
–
–
0.1
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
12.5
–
12.5
–
–
–
–
–
–
–
–
1.6
–
–
1.6
25.5
–
25.5
–
–
–
–
–
–
10.1
10.1
–
0.6
(9.5)
(8.9)
55.6
(1.4)
54.2
5.8
5.8
–
0.7
(8.8)
(8.1)
Total
£m
90.9
10.1
10.1
1.6
0.6
(9.5)
(7.3)
93.7
(1.4)
92.3
5.8
5.8
–
0.7
(8.8)
(8.1)
Balance as at 31 December 2018
0.1
12.5
25.5
51.9
90.0
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
55
FINANCIAL STATEMENTS
Consolidated Cash Flow Statement
FOR THE YEAR ENDED 31 DECEMBER 2018
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation and amortisation
Loss on disposal of property, plant and equipment
Loss on disposal of subsidiary
Finance costs
Taxation
Share-based payments expense
Loss from discontinued operations net of tax
Operating cash flow before movement in working capital
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
(Decrease)/increase in provisions
Pre-tax operating cash flow
Tax paid
Net cash inflow from operating activities
Cash flow from investing activities
Acquisition of subsidiary, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of other intangible assets
Net cash outflow from investing activities
Cash flow from financing activities
Interest paid
Facility arrangement fee
Repayment of borrowings
Capital element of finance lease rental payments
Dividends paid
Net cash outflow from financing activities
Net cash outflow from discontinued operations
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at end of year
Secured bank loans
Finance lease liabilities
Net debt
Note
2018
£m
2017
(restated,
see note 6)
£m
15, 16
5
10
11
9
6
5
16
15
13
19
21
21
5.8
9.0
0.3
–
1.5
2.5
0.7
5.0
24.8
1.6
0.7
2.8
(2.2)
27.7
(2.6)
25.1
–
(12.0)
(0.5)
(12.5)
(1.3)
(0.4)
(0.3)
(1.1)
(8.8)
(11.9)
(1.9)
(1.2)
7.3
6.1
(29.6)
(1.3)
(24.8)
10.1
8.8
0.2
0.4
1.2
2.3
0.6
1.5
25.1
(1.8)
(5.2)
–
2.0
20.1
(2.7)
17.4
(3.9)
(4.6)
(0.7)
(9.2)
(1.0)
–
–
(1.4)
(9.5)
(11.9)
(2.0)
(5.7)
13.0
7.3
(29.8)
(2.6)
(25.1)
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56
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts
FOR THE YEAR ENDED 31 DECEMBER 2018
1. Accounting policies
1.1 Basis of preparation
Epwin Group Plc (the “Company”) is a company incorporated
and domiciled in the United Kingdom.
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the “Group”).
The Group financial statements have been prepared and approved
by the Directors in accordance with International Financial Reporting
Standards as adopted by the EU (“Adopted IFRSs”).
The financial statements of the parent Company have been
prepared in accordance with Financial Reporting Standard 101:
Reduced Disclosure Framework (“FRS 101”) and presented from
page 83.
The accounting policies set out below have, unless otherwise stated,
been applied consistently to all periods presented in these Group
financial statements.
Judgements made by the Directors in the application of these
accounting policies, that have a significant effect on the financial
statements and estimates with a significant risk of material
adjustment in both the current year and subsequent year,
are discussed in note 2.
The financial statements are prepared on the historical cost basis
except where Adopted IFRSs require an alternative treatment.
1.2 Going concern
The Group financial statements are prepared on a going concern
basis as the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for
the foreseeable future. The Group has considered its financial
resources, together with the ongoing trading performance and
cash generation. The bank facilities are available until September
2021. The Group has prepared a detailed business plan, including
cash projections, for the period to 30 June 2020 and has applied
a reasonably possible down-side scenario forecast, considering the
impact of a no deal Brexit and taking into account mitigating actions
which are under the Directors’ control. The downside scenario
forecast positive headroom and covenant compliance throughout
the forecast period.
1.3 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. In assessing
control, the Group takes into consideration potential voting
rights that are currently exercisable. The acquisition date is the
date on which control is transferred to the acquirer. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control commences
until the date that control ceases.
1.4 Foreign currencies
Transactions in foreign currencies are translated to the respective
functional currency of the Group at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
retranslated to the functional currency at the foreign exchange
rate ruling at that date. Foreign exchange differences arising on
translation are recognised in the consolidated income statement.
1.5 Classification of financial instruments issued
by the Group
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions:
a. they include no contractual obligations upon the Group
to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under
conditions that are potentially unfavourable to the Group; and
b. where the instrument will or may be settled in the Company’s
own equity instruments, it is either a non-derivative that
includes no obligation to deliver a variable number of the
Company’s own equity instruments or is a derivative that will
be settled by the Company’s exchanging a fixed amount of
cash or other financial assets for a fixed number of its own
equity instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Company’s own shares,
the amounts presented in these financial statements for called
up share capital exclude amounts in relation to those shares.
Where a financial instrument that contains both equity and
financial liability components exists, these components are
separated and accounted for individually under the above policy.
1.6 Financial instruments
Financial assets
The Group’s financial assets include cash and cash equivalents
and trade and other receivables. All financial assets are recognised
when the Group becomes party to the contractual provisions
of the instrument.
i. Trade receivables
Trade receivables are recognised and carried at amortised cost.
A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be
able to collect all amounts due according to the original terms
of receivables. The amount of the provision is determined
as the difference between the asset’s carrying amount
and the present value of estimated future cash flows,
and is recognised in the consolidated income statement
in administrative expenses.
ii. Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and
deposits held at call with banks. For the purpose of the
consolidated cash flow statement, cash and cash equivalents
includes bank overdrafts in addition to the definition above.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
57
FINANCIAL STATEMENTS
Financial liabilities
Financial liabilities and equity instruments are classified according
to the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its liabilities.
The Group’s financial liabilities comprise trade and other payables,
contingent consideration and borrowings.
i. Bank borrowings
All loans and borrowings are initially recognised at the
fair value of the consideration received net of issue costs
associated with the borrowing. Borrowings are subsequently
stated at amortised cost; any difference between the
proceeds (net of transaction costs) and the redemption value
is recognised in the income statement over the period of the
borrowings using the effective interest method.
Financial expenses comprise interest expense on borrowings.
ii. Trade payables
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
iii. Contingent consideration
Contingent consideration is measured at fair value.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
of property, plant and equipment.
Leases in which the Group assumes substantially all the risks and
rewards of ownership of the leased asset are classified as finance
leases. Leased assets acquired by way of finance lease are stated
at an amount equal to the lower of their fair value and the present
value of the minimum lease payments at inception of the lease,
less accumulated depreciation and less accumulated impairment
losses. Lease payments are accounted for as described below.
Depreciation is charged to the consolidated income statement
on a straight-line basis over the estimated useful lives of each
item of property, plant and equipment. The estimated useful
lives are as follows:
Land and buildings
in line with lease term
Plant, fixtures and equipment
3-15 years
Motor vehicles
4 years
Depreciation methods, useful lives and residual values are reviewed
at each balance sheet date.
1.8 Business combinations
Business combinations are accounted for using the acquisition
method at the acquisition date, which is the date on which control
is transferred to the Group.
The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the fair value of any deferred or contingent consideration; plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable
assets acquired and liabilities assumed.
Costs relating to the acquisition, other than those associated with
the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value
at the acquisition date. If the contingent consideration is classified
as equity, it is not remeasured and settlement is accounted for
within equity. Otherwise, subsequent changes to the fair value
of the contingent consideration, outside of the measurement
period, are recognised in the consolidated income statement.
1.9 Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is allocated to cash-generating units and is not amortised
but tested annually for impairment.
Other intangible assets
Other intangible assets that are acquired by the Group are
stated at cost less accumulated amortisation and accumulated
impairment losses.
Amortisation
Amortisation is charged to the consolidated income statement
on a straight-line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Intangible assets with
an indefinite useful life and goodwill are systematically tested
for impairment at each balance sheet date. Other intangible
assets are amortised from the date they are available for use.
The estimated useful lives are as follows:
Brand
Customer relationships
Computer software
10 years
3 years
8 years
1.10 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is based on the first in, first out (FIFO) principle and includes
expenditure incurred in acquiring the inventories, production
or conversion costs and other costs in bringing them to their
existing location and condition. In the case of manufactured
inventories and work in progress, cost includes an appropriate
share of overheads based on normal operating capacity.
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
1.11 Impairment excluding inventories
and deferred tax assets
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss
is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the
loss event has a negative effect on the estimated future cash
flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured
at amortised cost is calculated as the difference between its
carrying amount and the present value of the estimated future
cash flows discounted at the asset’s original effective interest
rate. Interest on the impaired asset continues to be recognised
through the unwinding of the discount. When a subsequent event
causes the amount of impairment loss to decrease, the decrease
in impairment loss is reversed through the income statement.
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.
For trade receivables, the Group recognises expected lifetime losses
at initial recognition of the receivables. To measure the expected
credit losses, trade receivables have been grouped based on days
past due. Payment profiles of sales over a six-year period before 31
December 2018 and their historical credit losses experienced are
used to estimate the expected credit losses.
The impact of adopting IFRS 9 on the Group’s balance sheet as at 1
January 2018 is a £1.4 million increase in the trade receivables loss
allowance, (see note 25), with a corresponding reduction in retained
earnings.
Non-financial assets
The carrying amounts of the Group’s non-financial assets,
other than inventories and deferred tax assets, are reviewed at
each reporting date to determine whether there is any indication
of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. For goodwill and intangible assets
that have indefinite useful lives or that are not yet available for use,
the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and
the risks specific to the asset. For the purpose of impairment testing,
assets that cannot be tested individually are grouped together
into the smallest group of assets that generate cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or groups of assets (the “cash-generating unit”). The
goodwill acquired in a business combination, for the purpose of
impairment testing, is allocated to cash-generating units (“CGUs”).
Subject to an operating segment ceiling test, for the purposes of
goodwill impairment testing, CGUs to which goodwill has been
allocated are aggregated so that the level at which impairment
is tested reflects the lowest level at which goodwill is monitored
for internal reporting purposes. Goodwill acquired in a business
combination is allocated to groups of CGUs that are expected to
benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset
or its CGU exceeds its estimated recoverable amount. Impairment
losses are recognised in the consolidated income statement.
Impairment losses recognised in respect of CGUs are allocated first
to reduce the carrying amount of any goodwill allocated to the
units, and then to reduce the carrying amounts of the other assets
in the units on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect
of other assets, impairment losses recognised in prior periods are
assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
1.12 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan
under which the Company pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution
pension plans are recognised as an expense in the consolidated
income statement in the periods during which services are
rendered by employees.
Share-based payments expense
The Group grants share options to certain employees, which may,
if certain performance criteria are met, allow these employees to
acquire shares in the Company. The specific schemes are detailed
in note 9 to the accounts.
The share options are measured at fair value at the date of grant
and recognised as an employee expense, with a corresponding
increase in equity, on a straight-line basis over the vesting period.
The fair value of the options granted is measured using an option
pricing model, taking into account the terms and conditions upon
which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options
that vest except where variations are due only to share prices
not achieving the threshold for vesting.
Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognised for the amount expected to be
paid under short-term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and
the obligation can be estimated reliably.
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59
FINANCIAL STATEMENTS
1.13 Provisions
A provision is recognised in the balance sheet when the Group has
a present legal or constructive obligation, as a result of a past event,
that can be reliably measured and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions
are determined by discounting, where material, the expected future
cash flows at a pre-tax rate that reflects risks specific to the liability.
1.14 Revenue recognition
IFRS 15 – Revenue from Contracts with Customers became
effective on 1 January 2018.
Under IFRS 15 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.
On adoption of IFRS 15, performance obligations for the supply
and installation of the Group’s products have been separated and
revenue allocated to each element. 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.
Variable consideration is now recognised only to the extent it is
highly improbable to reverse.
Services comprise the installation of windows and doors.
Revenue from the installation of windows and doors is recognised
separately when the Group has fulfilled all its performance
obligations under the installation contract. The Group has assessed
its warranty to be of an assurance type.
The adoption of this standard has not had a material impact on the
financial statements.
1.15 Finance lease payments
Minimum lease payments are apportioned between the finance
charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as
to produce a constant periodic rate of interest on the remaining
balance of the liability.
1.16 Operating lease payments
Payments made under operating leases are recognised in
the consolidated income statement on a straight-line basis
over the term of the lease. Lease incentives received are
recognised in the consolidated income statement as an
integral part of the total lease expense.
1.17 Financial income and expense
Financial expenses comprise interest payable and the
unwinding of the discount on provisions. Financial income
comprises interest receivable on funds invested.
Interest income and interest payable are recognised in the
consolidated income statement as they accrue, using the
effective interest method.
1.18 Taxation
Tax on the profit or loss for the period comprises current
and deferred tax. Tax is recognised in the consolidated income
statement except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the period, using tax rates enacted
or substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities
that affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments
in subsidiaries to the extent that they will probably not reverse
in the foreseeable future. The amount of deferred tax provided
is based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it
is probable that future profits will be available against which
the temporary difference can be utilised.
1.19 Alternative performance measures
The Group uses a range of performance measures which are
non-IFRS measures to monitor the performance of the business.
The Group believes these KPIs provide better information on
the ongoing trading of the business to help investors and other
stakeholders evaluate the performance of the business and are
measures commonly used by certain investors for evaluating the
performance of the Group. In particular, the Group uses KPIs which
reflect the underlying performance on the basis that this provides a
more relevant focus on the core business performance of the Group.
The Group uses the following financial KPIs on a consistent
basis and they are defined and reconciled as follows:
Adjusted EBITDA – adjusted EBITDA is underlying operating
profit before interest, taxation, depreciation and amortisation.
Adjusted EPS − adjusted EPS is calculated based on profit after tax
adding back amortisation of acquired other intangible assets, share-
based payments expense other non-underlying items, divided by the
basic weighted average number of ordinary shares.
Dividend per share – dividend per share is defined as the
interim dividend per share plus the proposed final dividend
per share for a given period.
Leverage ratio – the leverage ratio is the ratio of net debt
to adjusted EBITDA.
Operating margin – operating margin is operating profit
as a percentage of revenue.
The Group reports certain performance measures as underlying as
it believes they provide better information on the ongoing trading
performance of the business. Items excluded from underlying
measures are non-cash items such as amortisation of acquired other
intangible assets and share-based payments expense, and significant
one-off incomes or costs that are not part of the underlying trading
performance of the business.
Underlying operating cash conversion – operating cash
conversion is pre-tax operating cash flow as a percentage of
underlying operating profit.
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
Underlying operating margin – underlying operating margin is
defined as underlying operating profit as a percentage of revenue.
Underlying operating profit – underlying operating profit is
a key measure used by management to monitor the underlying
performance of the business and is defined as operating
profit before amortisation of acquired other intangible assets,
share-based payments and other non-underlying items.
1.20 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 (see note 1.11);
• IFRS 15 – Revenue from Contracts with Customers
(see note 1.14); and
• Annual improvements to IFRS 2014-2016 cycle.
1.21 Adopted IFRS not yet applied
At the date of approval of these financial statements the following
standards/improvements have been published and endorsed by the
EU, but have not yet been applied by the Group in these financial
statements:
• IFRS 16: Leases
IFRS 16: Leases is effective for accounting periods beginning on
or after 1 January 2019. The standard can be applied with full
retrospective effect, or the cumulative impact of initially applying
IFRS 16 can be adjusted into opening equity at the date of initial
application.
The Group intends to apply IFRS 16: Leases initially on 1 January
2019 using the modified retrospective approach with the cumulative
effect of initially applying the standard recognised at the date
of initial application as an adjustment to the opening balance of
retained earnings.
The Group plans to apply the practical expedient to grandfather
the definition of a lease on transition applying IFRS 16: Leases to
all contracts entered into before 1 January 2019 that meet the
definition of a lease in accordance with the previously applied
standard, IAS 17: Leases.
The Group will also apply the practical expedient in relation to short-
term leases and leases of low-value items recognising the remaining
lease rental payments on a straight-line basis over the remaining
terms of the lease.
It is estimated the impact of the initial implementation of IFRS 16
as at 1 January 2019 would be to increase property, plant and
equipment by approximately £55.0 million, recognise a financial
liability in respect of future lease commitments of approximately
£65.0 million and an adjustment to opening retained earnings of
approximately £4.0 million.
1.22 Reclassification of distribution costs
The presentation of £3.1 million of administrative expenses in
the year ended 31 December 2017 have been reclassified as
distribution costs following an exercise to better reflect the nature
of expenditure.
2. Critical judgements and
estimations in applying the
Group’s accounting policies
The preparation of the consolidated financial statements requires
the Directors to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future periods impacted.
The key judgements and estimates employed in the financial
statements are considered below.
Significant estimates
Revenue recognition and related contract support
Revenues are recognised at the fair value of goods sold to external
customers, net of value added tax, discounts, rebates and other
sales taxes or duty. Contract support is a pre-determined sales
incentive for certain branded products that falls due when the
Group’s customer sells the relevant products to a specified end-user.
A deduction is made from revenue relating to relevant products
sold to customers for which contract support has yet to be claimed.
This deduction includes an estimate of the proportion of sales that
are expected to be sold to specified end-users and that will result
in a contract support claim. If the level of contract supported sales
was to change by a reasonably possible 5% then this would have
a material impact on the amount of contract support.
Judgements
Deferred tax assets
The Group has not recognised certain deferred tax assets in relation
to tax losses as their recovery is improbable. If the Group had
determined that the utilisation of these tax losses was more certain
then a further deferred tax asset of £1.6 million could be recognised.
Other estimates
Allowances against the carrying
amount of inventories
The Group provides against the carrying amount of inventories
based on expected demand for its products to ensure that
inventory is stated at the lower of cost and net realisable value.
The inventory provision held at 31 December 2018 is £4.1 million
(2017: £4.0 million) and is sensitive to changes in customer demand.
Impairment of goodwill and other intangible assets
On an annual basis, the Group is required to perform an impairment
review to assess whether the carrying value of goodwill and other
intangible assets is less than its recoverable amount. Recoverable
amount is based on a calculation of expected future cash
flows, which include estimates of future performance. Details
of assumptions used in the impairment of goodwill and other
intangible fixed assets are detailed in notes 14 and 15.
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61
FINANCIAL STATEMENTS
3. 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 window profile systems, PVC 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, cellular roofline, cladding,
rainwater and drainage products.
Revenue from external customers
Extrusion and Moulding – total revenue
Inter-segment revenue
Extrusion and Moulding – external revenue
Fabrication and Distribution – total revenue
Inter-segment revenue
Fabrication and Distribution – external revenue
Total revenue from external customers
Segmental operating profit
Extrusion and Moulding
Fabrication and Distribution
Segmental operating profit before corporate costs
Corporate costs
Underlying operating profit
Amortisation of acquired other intangible assets
Other non-underlying items
Share-based payments expense
Operating profit
Finance costs
Profit before tax
2018
£m
210.4
(33.0)
177.4
104.0
(0.3)
103.7
281.1
17.5
2.9
20.4
(1.7)
18.7
(1.2)
(2.0)
(0.7)
14.8
(1.5)
13.3
2017
(restated)
£m
211.3
(27.7)
183.6
109.3
(0.1)
109.2
292.8
21.5
4.3
25.8
(1.6)
24.2
(1.1)
(7.4)
(0.6)
15.1
(1.2)
13.9
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
3. Segmental reporting continued
Balance sheet 2018
Total assets
Total liabilities
Segment assets
Group and other balances
Net assets
Balance sheet 2017
Total assets
Total liabilities
Segment assets
Group and other balances
Net assets
Other material items 2018
Capital expenditure
Depreciation
Other material items 2017
Capital expenditure
Depreciation
Extrusion and
Moulding
£m
Fabrication
and
Distribution
£m
140.9
(43.1)
97.8
36.9
(16.0)
20.9
Extrusion and
Moulding
£m
Fabrication
and
Distribution
£m
137.3
(42.2)
95.1
43.2
(17.2)
26.0
Extrusion and
Moulding
£m
Fabrication
and
Distribution
£m
Group
and
other costs
£m
11.5
6.7
0.7
1.3
–
–
Extrusion and
Moulding
£m
Fabrication
and
Distribution
£m
Group
and
other costs
£m
4.4
6.7
2.0
1.1
–
–
Total
£m
177.8
(59.1)
118.7
(28.7)
90.0
Total
£m
180.5
(59.4)
121.1
(27.4)
93.7
Total
£m
12.2
8.0
Total
£m
6.4
7.8
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63
FINANCIAL STATEMENTS
3. Segmental reporting continued
Geographical information
Revenue from external customers
UK
Europe
Rest of World
There are no customers which individually account for more than 5% of the Group’s revenues.
Revenue from external customers
Sale of goods
Variable consideration
Fitting and installation
Total financial assets
4. Operating profit
Operating profit is stated after charging:
Amortisation of other intangible assets
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on disposal of subsidiary
Operating lease rentals
The analysis of auditors’ remuneration is as follows:
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Non-audit fees:
All other services
Non-audit fees
2018
£m
265.0
14.5
1.6
281.1
2018
£m
245.4
30.7
5.0
281.1
2018
£m
1.5
7.5
0.3
–
2017
£m
276.5
14.4
1.9
292.8
2017
£m
250.1
37.5
5.2
292.8
2017
£m
1.3
7.5
0.2
0.4
10.6
11.1
2018
£000
50
175
225
–
–
225
2017
£000
45
144
189
–
–
189
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64
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
5. Acquisition and disposal of subsidiaries
Acquisitions in the year ended 31 December 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
£m
Recognised amounts of identifiable assets acquired and liabilities:
Acquired intangibles - brand
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalent
Other interest-bearing loans and borrowings
Trade and other payables (including £4.9 million due to the Group)
Income tax payable
Provisions
Deferred tax liability
Goodwill
Cash consideration
Initial consideration
Deferred consideration
Cash consideration
0.6
0.6
1.6
1.7
0.2
(0.3)
(7.9)
(0.1)
(0.3)
(0.1)
(4.0)
4.5
0.5
0.2
0.3
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, other intangible 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.
Disposal in the year ended 31 December 2017
On 31 December 2017 the Group disposed of its entire shareholding in Indigo Products Limited (“Indigo”) for consideration of £1.
Indigo was primarily engaged in fabricating window frames for Entu (UK) Plc. Following the administration of Entu (UK) Plc and the
resulting significant bad debt, management no longer considered it viable to continue investing in the Indigo operation.
The acquirer, Indigo Acquisitions Limited, is wholly owned by Brian Kennedy, who is also a shareholder of Epwin Group Plc.
During the year to 31 December 2017, the Indigo operation contributed revenues of £14.4 million and an operating loss of £3.3 million.
A loss of £0.4 million arose on the disposal of Indigo, included in the income statement within non-underlying items, see note 7.
Settlement of contingent consideration in the year ended 31 December 2017
During the year to 31 December 2017 the Group settled contingent consideration payable in relation to the 2015 acquisitions of
Vannplastic Limited (“Ecodek”) and Stormking Plastics Limited (“Stormking”).
The contingent consideration on Ecodek was settled in line with the contingent consideration provision as at 31 December 2016 being
£3.3 million, split £2.3 million cash and £1.0 million shares.
The contingent consideration on Stormking was £2.2 million, split £1.6 million cash and £0.6 million shares. The settlement amount
was £1.8 million less than the contingent consideration provision at 31 December 2016, resulting in a credit to the income statement,
within non-underlying items, of this amount, see note 7.
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65
FINANCIAL STATEMENTS
6. Discontinued operations
On 7 January 2019 the Group disposed of the trade and certain assets and liabilities of its glass-sealed unit manufacturing business in
Northampton for cash consideration of £0.1 million. As a result of the disposal, an impairment charge of £3.6 million has been recognised in
the year to 31 December 2018 to write down property, plant and equipment and inventories to their recoverable amount. This decision exits
the Group from the glass-sealed unit market
Revenue
Operating expenses
Impairment charge
Loss before tax
Taxation
Loss after tax from discontinued operations
2018
£m
4.5
(6.9)
(3.6)
(6.0)
1.0
(5.0)
2017
£m
5.5
(7.4)
–
(1.9)
0.4
(1.5)
The trading results of the glass-sealed unit manufacturing business have been presented under discontinued operations and the assets and
liabilities associated with the business classified as held for sale.
The income statement for the year ended 31 December 2017 has been restated to reclassify the trading results of the glass-sealed unit
manufacturing business as discontinued operations.
7. Non-underlying items
Non-underlying items included within operating profit include:
Amortisation of acquired other intangible assets
Other non-underlying items
Share-based payments expense
Expense
2018
£m
1.2
2.0
0.7
3.9
2017
£m
1.1
7.4
0.6
9.1
Amortisation of acquired other intangible assets
£1.2 million (2017: £1.1 million) amortisation of brand and customer contract intangible assets acquired through business combinations.
Other non-underlying items
Other non-underlying items are significant one-off incomes or costs that are not part of the underlying trading performance.
Other non-underlying items include:
Entu (UK) Plc administration bad debt charge
Loss on disposal of Indigo Products Limited
Site consolidation and redundancy
Release of Stormking excess contingent consideration
Profit on exit of lease
2018
£m
–
–
2.8
–
(0.8)
2.0
2017
£m
3.9
0.4
4.9
(1.8)
–
7.4
Share-based payments expense
The share-based payment expense of £0.7 million (2017: £0.6 million) comprises IFRS 2: Share-based payments charges in respect of the:
Long-Term Incentive Plan £0.6 million (£2017: £0.5 million) and SAYE schemes of £0.1 million (2017: 0.1 million).
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
8. Staff costs
Average number of employees
Production and distribution
Marketing and administration
Aggregate payroll costs
Wages and salaries
Social security costs
Contributions to defined contribution plans
Share-based payments
2018
Number
2017
Number
1,757
547
2,304
2018
£m
61.9
5.6
1.4
0.7
69.6
1,954
588
2,542
2017
£m
65.6
6.0
1.2
0.6
73.4
Key management personnel have been identified as the Corporate and Operations Boards. Remuneration of key management personnel is as
follows:
Key management personnel costs
Short-term employee benefits
Post-employment benefits
Share-based payment charges
The remuneration of individual Non-Executive and Executive Directors is detailed in the table on page 39.
2018
£m
2017
£m
1.4
0.1
0.4
1.9
1.2
0.1
0.4
1.7
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FOR THE YEAR ENDED 31 DECEMBER 2018
67
FINANCIAL STATEMENTS
9. Share-based payments expense
The Group operates a Long-Term Incentive Plan for Executive Directors and certain senior management, the terms of which are disclosed
in the Directors’ Remuneration Report, as well as a Save As You Earn (“SAYE”) scheme available to all employees.
In 2017 the Group established a Long-Term Incentive Plan for Directors and senior management. Awards issued under the equity-based
Long-Term Incentive Plan vest three years from the date of the grant based on service and certain non-market performance criteria
being met. Awards are settled in equity. The number of shares to be awarded is variable based on the employee meeting performance
criteria in each year of the scheme. As the number of shares to be awarded is variable, dependent upon performance, it is not possible
to quantify the number of options awarded. The maximum value awardable under the LTIP is £3.7 million.
On 1 July 2015, the Group launched an SAYE scheme for UK employees who were employed prior to 16 March 2015 that provides for
an exercise price equal to 80% of the quoted market price on 17 April 2015.
Further tranches were granted on 5 June 2017 and 14 November 2017. The options can be exercised during a six-month period following
the completion of a three-year savings period.
The 1 July 2015 tranche of the SAYE scheme matured on 30 June 2018. As the share price on that date and for the following six months
was below the exercise price, no options were exercised, aside from options exercised by good leavers, and, as a result, lapsed on
31 December 2018.
In July 2014 the Group also issued warrants to Zeus Capital for services related to the IPO. The warrant is for 3% of the share capital of
the company at IPO. The warrant is exercisable any time between the first and tenth anniversary of admission to AIM. The fair value of
the warrant has been determined by reference to the estimated value of services provided using a Black Scholes valuation model and was
charged in full as an IPO expense in the year ended 31 December 2014.
Date of grant
1 July 2015
5 June 2017 14 November 2017
Earliest year in which options are exercisable
2018
2020
2020
SAYE Scheme
Option pricing model used
Number of options granted
Aggregate fair value of options granted at date of grant
Expected volatility
Risk free interest rate
Exercise price (per share)
Expected dividend yield
Expected term (years)
Expected departures
Settlement
Black–Scholes
Black–Scholes
Black–Scholes
1,572,500
893,408
1,608,545
£0.4m
35.0%
1.96%
£0.3m
39.0%
1.30%
£0.3m
40.0%
1.38%
86.4 pence
96.6 pence
64.0 pence
6.0%
3 years
–
Equity
6.0%
3 years
–
Equity
The total expense recognised in the income statement for each of these schemes was as follows:
Long-Term Incentive Plan
SAYE
2018
£m
0.6
0.1
0.7
6.0%
3 years
–
Equity
2017
£m
0.5
0.1
0.6
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68
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
Number of options at 1 January
Options granted
Options lapsed
Options exercised
Number of options at 31 December
10. Finance costs
Interest expense on borrowings
Total finance costs
11. Taxation
Current tax expense
Current period
Prior period
Total current tax charge
Deferred tax expense
Current period
Prior period
Total deferred tax charge
Total tax expense
Analysed as:
Continuing operations
Discontinued operations
Total tax expense
UK corporation tax is calculated at 19.00% (2017: 19.25%) of the estimated assessable profit for the year.
2018
No.
2017
No.
2,640,871
1,239,833
–
2,501,953
(1,066,553)
(1,078,578)
(3,749)
(22,337)
1,570,569
2,640,871
2018
£m
1.5
1.5
2018
£m
1.8
(0.1)
1.7
(0.2)
–
(0.2)
1.5
2018
£m
2.5
(1.0)
1.5
2017
£m
1.2
1.2
2017
£m
2.6
(0.5)
2.1
(0.4)
0.2
(0.2)
1.9
2017
£m
2.3
(0.4)
1.9
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FOR THE YEAR ENDED 31 DECEMBER 2018
69
FINANCIAL STATEMENTS
The Group’s total income tax charge is reconciled with the standard rates of UK corporation tax for the year of 19.00% (2017: 19.25%)
as follows:
Profit before tax
Tax at standard UK corporation tax rate of 19.00% (2017: 19.25%)
Factors affecting the charge for the period:
Expenses not deductible
Non-taxable income
Losses utilised for which no deferred tax previously recognised
Difference in tax rate
Prior period
2018
£m
13.3
2.5
0.2
(0.2)
–
0.1
(0.1)
2.5
2017
£m
13.9
2.7
0.3
(0.4)
(0.2)
0.2
(0.3)
2.3
Factors that may affect future current and total tax charges
The UK corporation tax rate reduced from 20% to 19% effective from 1 April 2017. A further reduction to 17% effective from 1 April 2020
was substantively enacted on 6 September 2016. This will reduce the Company’s future current tax charge accordingly. The deferred tax asset
at 31 December 2018 has been calculated based on these rates.
12. 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.
EPS summary
Basic EPS
Basic
Basic – continuing operations
Basic – discontinued operations
Diluted EPS
Diluted
Diluted – continuing operations
Diluted – discontinued operations
Number of shares
Weighted average number of ordinary shares (basic)
Effect of share options in issue
Weighted average number of ordinary shares (diluted)
2018
Pence
2017
Pence
4.06
7.56
(3.50)
4.05
7.54
(3.49)
7.08
8.13
(1.05)
7.08
8.13
(1.05)
2018
No.
2017
No.
142,922,704
142,573,041
265,861
105,352
143,188,565
142,678,393
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70
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
13. Dividends
Previous year final dividend
Current year interim dividend
14. Goodwill
Cost
At 31 December 2016 and 2017
Acquisitions through business combinations in 2018
At 31 December 2018
Accumulated impairment losses
At 31 December 2016, 2017 and 2018
Net book value
At 31 December 2018
At 31 December 2017
2018
£m
2018
Pence per share
2017
£m
2017
Pence per share
6.4
2.4
8.8
4.46
1.70
6.3
3.2
9.5
4.40
2.23
Goodwill
£m
65.7
4.5
70.2
–
70.2
65.7
Impairment testing
The Goodwill of £70.2 million arose on the merger between the Epwin Group and the Latium group of companies (£24.5 million) in 2012,
the acquisitions of Ecodek (£7.2 million) and Stormking (£24.4 million) in 2015, the acquisition of National Plastics (£9.6 million) in 2016
and the acquisition of Amicus Building Products Limited (£4.5 million) in 2018. This is allocated to the Group’s two reportable segments:
Extrusion and Moulding and Fabrication and Distribution, being the lowest level within the entity at which goodwill is monitored for internal
management purposes in line with IFRS 3: Business Combinations.
At 31 December 2018, £58.5 million (2017: £55.3 million) of goodwill was allocated to Extrusion and Moulding and £11.7 million
(2017: £10.4 million) to Fabrication and Distribution.
Goodwill is not amortised but tested annually for impairment on the basis of value in use calculations using discounted cash flows. The value
in use exceeded the carrying value for each of the cash-generating units (“CGUs”). Therefore, no impairment loss was recognised in any of
the periods.
In assessing the value in use, the 2019 budgets and five year forecast were used to provide cash flow projections for the period ended
31 December 2023. For periods after 31 December 2023, an annual growth rate of 1.00% was used to determine the projected cash
flows through to 2038 and a terminal value.
The impairment calculations are subject to key assumptions in respect of cash flows, discount rates and growth rates. The table below sets
out the key assumptions and the stress required to these assumptions to trigger an impairment of each of the CGUs:
Goodwill
Pre-tax discount rate
Growth rate
Stress testing
In order to trigger an impairment, the key assumptions would need to be stressed as follows:
Cash flow reduction required to trigger impairment
Growth rate required to trigger an impairment
Discount rate required to trigger an impairment
Extrusion and
Moulding
Fabrication
and
Distribution
£58.5m
£11.7m
13.3%
1.0%
11.1%
1.0%
-29.2%
-21.6%
-6.7%
20.8%
-3.2%
15.4%
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FOR THE YEAR ENDED 31 DECEMBER 2018
71
FINANCIAL STATEMENTS
15. Other intangible assets
Cost
At 31 December 2016
Additions
At 31 December 2017
On acquisition (see note 5)
Additions
At 31 December 2018
Accumulated amortisation
At 31 December 2016
Charge for the year
At 31 December 2017
Charge for the year
At 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
Net book value at 31 December 2016
Amortisation
Amortisation is recognised in administrative expenses in the consolidated income statement:
Customer relationships
Brands
Computer software
Amortisation
Customer
relationships
£m
Brands
£m
Computer
software
£m
7.7
–
7.7
–
–
7.7
5.9
0.9
6.8
0.9
7.7
–
0.9
1.8
2.0
–
2.0
0.6
–
2.6
0.3
0.2
0.5
0.3
0.8
1.8
1.5
1.7
Total
£m
10.8
0.7
11.5
0.6
0.5
12.6
6.3
1.3
7.6
1.5
9.1
3.5
3.9
4.5
2017
£m
0.9
0.2
0.2
1.3
1.1
0.7
1.8
–
0.5
2.3
0.1
0.2
0.3
0.3
0.6
1.7
1.5
1.0
2018
£m
0.9
0.3
0.3
1.5
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72
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
16. Property, plant and equipment
Cost
At 31 December 2016
Additions
Disposals
At 31 December 2017
On acquisition
Additions
Disposals
Transfer to assets held for sale
At 31 December 2018
Accumulated depreciation
At 31 December 2016
Charge for the year
Disposals
At 31 December 2017
Charge for the year
Impairment
Disposals
Transfer to assets held for sale
At 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
Net book value at 31 December 2016
Land
and
buildings
£m
Plant,
fixtures and
equipment
£m
Motor
vehicles
£m
–
–
–
–
0.4
1.4
(0.3)
–
1.5
–
–
–
–
–
–
–
–
–
1.5
–
–
65.6
6.4
(4.3)
67.7
0.2
10.8
(1.3)
(9.6)
67.8
27.9
7.7
(3.8)
31.8
8.0
3.3
(1.3)
(9.6)
32.2
35.6
35.9
37.7
0.2
–
–
0.2
–
–
–
–
0.2
–
0.1
–
0.1
–
–
–
–
0.1
0.1
0.1
0.2
Total
£m
65.8
6.4
(4.3)
67.9
0.6
12.2
(1.6)
(9.6)
69.5
27.9
7.8
(3.8)
31.9
8.0
3.3
(1.3)
(9.6)
32.3
37.2
36.0
37.9
At 31 December 2018, the net book value of property, plant and equipment held under finance leases was £3.5 million (2017: £4.6 million).
The depreciation charge in respect of these assets was £0.4 million (2017: £0.6 million). The lease obligations are secured on the leased assets.
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FOR THE YEAR ENDED 31 DECEMBER 2018
73
FINANCIAL STATEMENTS
17. Inventories
Raw materials
Work in progress
Finished goods
2018
£m
6.7
0.6
21.9
29.2
Inventory purchased in the period recognised as an expense was £156.2 million (2017: £141.0 million).
At 31 December 2018 there was an inventory provision of £4.1 million (2017: £4.0 million). During 2018, inventories with a value of
£0.9 million were written off against the provision, £0.8 million was created, with a corresponding charge to the income statement,
and £0.2 million was acquired.
18. Trade and other receivables
Trade receivables
Less: provision for doubtful trade receivables
Trade receivables net of provision
Prepayments and accrued income
Other receivables
Trade and other receivables
19. Cash and cash equivalents
Cash at bank and in hand
20. Trade and other payables
Current
Trade payables
Other taxation and social security
Other payables
Accruals
Trade and other payables
2018
£m
37.5
(2.5)
35.0
4.6
0.8
40.4
2018
£m
6.1
2018
£m
43.8
4.3
2.1
11.1
61.3
2017
£m
8.7
0.8
20.1
29.6
2017
£m
39.9
(1.2)
38.7
3.8
2.8
45.3
2017
£m
7.3
2017
£m
38.6
4.6
2.1
9.4
54.7
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74
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
21. Other interest-bearing loans and borrowings
Non-current
Secured bank loans
Finance lease liabilities
Current
Secured bank loans
Finance lease liabilities
2018
£m
24.7
0.6
25.3
4.9
0.7
5.6
2017
£m
9.9
1.5
11.4
19.9
1.1
21.0
The facilities available to the Group at 31 December 2018 were a £10.0 million amortising term loan (extendable to £17.5m),
a £37.5 million revolving credit facility and a £5.0 million overdraft, secured on the assets of the Group. The term of the loan
and revolving credit facility is for three years ending September 2021 with the options to extend for a further two years.
Facility arrangement costs of £0.4 million (2017: £0.2 million) are set-off against the amount owing at year end.
The term loan and revolving credit facility carry an interest rate of 2.10% above LIBOR.
The margin above LIBOR is dependent on the level of borrowings relative to EBITDA.
Term loan
Revolving credit facility
2018
2017
Year of
maturity
Face value
£m
Carrying
amount
£m
Face value
£m
2021
2021
10.0
20.0
30.0
10.0
20.0
30.0
15.0
15.0
30.0
Carrying
amount
£m
15.0
15.0
30.0
The Group had the following undrawn committed borrowing facilities available at each balance sheet date in respect of which all conditions
precedent have been met:
Expiring within one year
Expiring between one and two years
Expiring between two and five years
Finance lease liabilities are payable as follows:
Within one year
In the second to fifth years
2018
£m
5.0
–
25.0
30.0
2018
£m
0.7
0.6
1.3
2017
£m
5.0
20.0
–
25.0
2017
£m
1.1
1.5
2.6
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FOR THE YEAR ENDED 31 DECEMBER 2018
75
FINANCIAL STATEMENTS
Net debt reconciliation
Cash and cash equivalents
Secured bank loans
Finance lease liabilities
Net debt
22. Provisions
At 1 January 2018
Acquired during the year
Utilised during the year
Created / (released) during the year
At 31 December 2018
Non-current
Current
At 31 December 2018
At 1 January 2017
Created during the year
Utilised during the year
At 31 December 2017
Non-current
Current
At 31 December 2017
At
1 January
2018
£m
Cash
movements
£m
Non-cash
movements
£m
At 31
December
2018
£m
(7.3)
29.8
2.6
25.1
1.2
(0.3)
(1.1)
(0.2)
–
0.1
(0.2)
(0.1)
Leasehold
dilapidations
£m
Warranties
£m
Site
consolidation
£m
2.3
0.2
(0.1)
(0.6)
1.8
1.2
–
(0.2)
0.5
1.5
2.7
0.1
(1.4)
(0.4)
1.0
Leasehold
dilapidations
£m
Warranties
£m
Site
consolidation
£m
1.4
0.4
1.8
1.1
0.4
1.5
0.3
0.7
1.0
Leasehold
dilapidations
£m
Warranties
£m
Site
consolidation
£m
2.6
–
(0.3)
2.3
1.6
–
(0.4)
1.2
–
2.7
–
2.7
Leasehold
dilapidations
£m
Warranties
£m
Site
consolidation
£m
2.0
0.3
2.3
0.9
0.3
1.2
1.2
1.5
2.7
(6.1)
29.6
1.3
24.8
Total
£m
6.2
0.3
(1.7)
(0.5)
4.3
Total
£m
2.8
1.5
4.3
Total
£m
4.2
2.7
(0.7)
6.2
Total
£m
4.1
2.1
6.2
Leasehold dilapidations
The Group leases a number of properties with terms of up to 17 years remaining. Under the terms of these leases, Group companies,
as tenants, are required to return the property to its original condition prior to the termination of the lease. As a contractual obligation exists,
the Group provides for the dilapidation costs based on management’s experience of historical dilapidation settlements.
Warranties
Group companies offer warranties, typically of between five and ten years, on certain products. As such, a provision is estimated to cover
the cost of any future replacement and reinstallation on these products based on the Directors’ best estimate of the average warranty period,
failure rates and remediation costs.
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76
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
Site consolidation and rationalisation
Site consolidation and rationalisation provisions comprise onerous lease and redundancy cost provisions relating to sites the Group
has closed, or committed to close, as at 31 December 2018. Cash outflows are expected over the next two years.
23. Deferred tax
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Intangible assets
Other timing differences
Tax value of loss carry-forwards
Deferred tax assets/(liabilities)
Net of deferred tax (liabilities)/assets
Net deferred tax asset
Movement in deferred tax during the periods:
Property, plant and equipment
Intangible assets
Other timing differences
Tax value of loss carry-forwards
Property, plant and equipment
Intangible assets
Other timing differences
Tax value of loss carry-forwards
2018
2017
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
(0.4)
(0.3)
–
–
(0.7)
–
–
0.5
0.9
1.4
(0.7)
0.7
–
–
0.2
1.7
1.9
(1.3)
0.6
(0.9)
(0.4)
–
–
(1.3)
At 1 January
2018
£m
Recognised in
comprehensive
income
£m
On
acquisition
£m
At
31 December
2018
£m
(0.9)
(0.4)
0.2
1.7
0.6
0.5
0.2
0.3
(0.8)
0.2
–
(0.1)
–
–
(0.1)
(0.4)
(0.3)
0.5
0.9
0.7
At 1 January
2017
£m
Recognised in
comprehensive
income
£m
On
acquisition
£m
At
31 December
2017
£m
(1.4)
(0.6)
0.1
2.3
0.4
0.5
0.2
0.1
(0.6)
0.2
–
–
–
–
–
(0.9)
(0.4)
0.2
1.7
0.6
Deferred tax assets have not been recognised in respect of the following items:
Tax losses
2018
£m
9.5
2017
£m
9.0
As at 31 December 2018, of the potential net deferred tax asset of £2.3 million, the Group has recognised a net deferred tax asset of
£0.7 million. This is because the Group has £15.1 million of tax losses that are potentially restricted in their use. On reviewing business
forecasts, the Directors have concluded that it is only probable that future taxable profit will be available to utilise £5.6 million of these losses.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
77
FINANCIAL STATEMENTS
24. Share capital and reserves
Allotted and called up:
Ordinary shares of 0.05p each
2018
2017
Number of
shares
£
Number of
shares
142,925,173
71,463
142,921,424
71,463
£
71,461
71,461
2018
On 6 August 2018, the Company issued 2,187 ordinary shares of 0.05p each to a former employee who had elected to exercise his options
pursuant to the Group’s Save As You Earn (“SAYE”) employee share scheme.
On 10 August 2018, the Company issued 1,562 ordinary shares of 0.05p each to a former employee who had elected to exercise his options
pursuant to the Group’s SAYE employee share scheme.
2017
On 13 January 2017, the Company issued 10,416 ordinary shares of 0.05p each to a former employee who had elected to exercise his
options pursuant to the Group’s SAYE employee share scheme.
On 21 February 2017 the Company issued 917,082 ordinary shares of 0.05p each as contingent consideration due in connection with the
acquisition of Vannplastic Limited (“Ecodek”) in October 2015.
On 14 March 2017, the Company issued 9,259 ordinary shares of 0.05p each to a former employee who had elected to exercise his options
pursuant to the Group’s SAYE employee share scheme.
On 22 June 2017 the Company issued 460,019 ordinary shares of 0.05p each as contingent consideration due in connection with the
acquisition of Stormking Plastics Limited in December 2015.
On 28 June 2017, the Company issued 2,662 ordinary shares of 0.05p each to a former employee who had elected to exercise his options
pursuant to the Group’s SAYE employee share scheme.
Share premium
The share premium arose on the issue of the Company’s shares at a premium to the nominal value of the shares, less any expenses of issue
incurred in issuing equity.
Merger reserve
The merger reserve arose on the share for share exchange on the acquisition of subsidiaries and settlement of deferred contingent
consideration.
Outstanding options
Outstanding options have been granted to the Directors and employees of the Group under the Long-Term Incentive Plan and SAYE scheme.
Further details are included within note 9.
Share warrants for 3% of the fully diluted share capital of the Company were issued to Zeus Capital for services related to the IPO in 2014.
The warrant is exercisable, at the IPO share price, any time between the first and tenth anniversary of admission to AIM.
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78
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
25. Financial instruments and related disclosures
Financial risk management
The Directors have overall responsibility for the oversight of the Group’s risk management framework. A formal process for reviewing and
managing risk in the business has been developed. A register of strategic and operational risks is maintained and reviewed by the Directors,
who also monitor the status of agreed actions to mitigate key risks.
Credit risk
Credit risk is the risk of financial loss to the Group if counterparties to a financial instrument fail to meet contractual obligations, and arises
principally from the Group’s receivables from customers.
As the principal business of the Group is credit sales, the Group trade receivables are large and therefore contain exposure to credit risk.
The carrying amount of trade receivables recorded in the financial statements represents the Group’s principal exposure to credit risk other
than cash and cash equivalents held with financial institutions.
The concentration of credit risk for trade receivables at the balance sheet date by geographic region was:
UK
Europe
Rest of World
2018
£m
35.8
1.4
0.3
37.5
2017
£m
37.7
1.9
0.3
39.9
Credit quality of financial assets and impairment losses
The ageing of trade receivables at the balance sheet date was:
2018
2017
Not past due
Past due 0-30 days
Past due 31-120 days
More than 120 days
Gross
£m
24.0
9.1
3.2
1.2
37.5
Impairment
£m
1.0
0.5
0.2
0.8
2.5
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1 January under IAS 39
IFRS 9 adoption
Balance at 1 January under IFRS 9
On acquisition
Impairment loss recognised
Impairment loss utilised
Balance at 31 December
Gross
£m
25.6
9.4
3.3
1.6
39.9
2018
£m
1.2
1.4
2.6
0.1
0.4
(0.6)
2.5
Impairment
£m
0.1
0.1
0.1
0.9
1.2
2017
£m
1.2
–
1.2
–
4.3
(4.3)
1.2
For the purpose of IFRS 15: Revenues, trade receivables are considered to be the only asset or liability related to contracts with customers.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
79
FINANCIAL STATEMENTS
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures that it has
sufficient cash or loan facilities to meet all its commitments when they fall due by ensuring that there are sufficient cash or working capital
facilities to meet the liquidity requirements of the Group.
The risk is measured by review of forecast cash flows each month to determine whether there are sufficient credit facilities to meet forecast
requirements and by monitoring covenants on a regular basis to ensure there are no expected significant breaches. Cash flow forecasts
are submitted monthly to the Directors. These continue to demonstrate the strong cash-generating ability of the business and its ability
to operate within existing agreed banking facilities. There have been no breaches of covenants during the reported periods.
The Group has a £5.0 million overdraft, a £37.5 million revolving credit facility and a £10.0 million amortising term loan
(extendable to £17.5m) to support short and medium-term liquidity.
Contractual cash flows
The contractual maturity of other interest-bearing loans and borrowings is shown below:
Due in less than one year
Expiring between one and two years
Expiring between two and five years
Expiring after five years
Contractual cash flows
Borrowing costs
Carrying amount
2018
£m
5.7
5.6
20.0
–
31.3
(0.4)
30.9
2017
£m
21.1
10.9
0.6
–
32.6
(0.2)
32.4
Included in the above maturity analysis is £1.3 million of finance lease liabilities, £0.7 million falling due within one year and £0.6 million
falling due between one and two years.
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income.
Foreign currency risk
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date
is as follows:
Trade and other receivables
Cash and cash equivalents
Interest-bearing loans and borrowings
Tax payable
Trade and other payables
2018
US dollar
£m
–
0.1
–
–
(0.1)
–
Euro
£m
1.0
0.9
–
–
(0.5)
1.4
GBP
£m
39.4
5.1
(30.9)
(0.6)
(60.7)
(47.7)
2017
US dollar
£m
0.1
0.2
–
–
(0.1)
0.2
Euro
£m
1.4
2.1
–
–
(0.6)
2.9
GBP
£m
43.8
5.0
(32.4)
(1.4)
(54.0)
(39.0)
Interest rate risk
The Group’s bank borrowings incur variable interest rate charges linked to LIBOR plus a margin. The Group’s policy aims to manage the
interest cost within the constraints of its financial covenants and forecasts.
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to optimise returns
to its shareholders. The Group views its capital as share capital, term loans, revolving credit facility, overdraft, finance leases and operating
cash flow. The Board’s policy is to retain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future growth. The Directors regularly monitor the level of capital in the Group to ensure that this can be achieved.
25. Financial instruments and related disclosures continued
Fair value disclosures
The fair values of financial assets and liabilities are as follows:
Cash and cash equivalents
Trade and other receivables
Total financial assets
Trade and other payables
Borrowings at amortised cost
Contingent consideration
Total financial liabilities
2018
£m
6.1
40.4
46.5
2018
£m
61.3
30.9
0.3
92.5
2017
£m
7.3
45.3
52.6
2017
£m
54.7
32.4
–
87.1
The fair value of each class of financial assets and liabilities is the carrying amount, based on the following assumptions:
Trade receivables, trade payables and short-term borrowings
Long-term borrowings
Fair value hierarchy
The fair value approximates to the carrying value
because of the short maturity of these instruments.
The fair value of bank loans and other loans approximates
to the carrying value reported in the balance sheet.
Financial instruments carried at fair value should be measured with reference to the following levels:
• Level 1: quoted prices in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The contingent consideration of £7.3 million at 1 January 2017 created on the acquisition of Stormking Plastics Limited and Vannplastic
Limited was carried at fair value measured using a Level 3 valuation method based on a contractual multiple of the forecast EBITDA
of the respective business during a 12-month post-acquisition period.
Balance at 1 January
Created on acquisition
Settled in year
Credited to income statement
Balance at 31 December
2018
£m
–
0.3
–
–
0.3
2017
£m
7.3
–
(5.5)
(1.8)
–
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FOR THE YEAR ENDED 31 DECEMBER 2018
81
FINANCIAL STATEMENTS
Interest rate sensitivity analysis
The table below shows the Group’s sensitivity to interest rates on floating rate borrowings (i.e. cash and cash equivalents and bank
borrowings which attract interest at floating rates) if interest rates were to change by +/- 1%. The impact on the result in the income
statement would be:
+1 percentage point movement in interest rates
-1 percentage point movement in interest rates
2018
Impact
on profit
before tax
£m
(0.5)
0.6
2017
Impact on
profit
before tax
£m
(0.4)
0.4
Foreign exchange rate sensitivity analysis
The table below shows the Group’s sensitivity to foreign exchange rates for its euro financial instruments, the major non-sterling currency
in which the Group’s receivables are denominated:
+10 percentage points appreciation of the euro
-10 percentage points depreciation of the euro
2018
Increase/
(decrease)
in equity
£m
0.2
(0.1)
2017
Increase/
(decrease)
in equity
£m
0.2
(0.1)
A strengthening/weakening of sterling, as indicated, against the euro at each period end would have increased/(decreased) the profit
and loss by the amounts shown above. This analysis is based on foreign currency exchange rate variances that the Group considered
to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates,
remain constant.
26. Commitments
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Land and buildings
Other
2018
£m
6.6
22.3
37.0
65.9
2017
£m
6.6
22.0
42.7
71.3
2018
£m
3.7
7.9
0.5
12.1
2017
£m
3.1
4.6
0.2
7.9
27. Related party transactions
All transactions with Directors are included in the Directors’ Remuneration Report on pages 38 to 40.
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FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
28. Post balance sheet event
On 7 January 2019 the Group disposed of the trade and certain assets and liabilities of the glass-sealed unit manufacturing
business for consideration of £0.1m. As part of the transaction the buyer has sublet and guaranteed the property lease costs of the
Northampton site for the remaining 14 years of the lease.
An impairment charge of £3.6 million, writing down the value of the net assets sold to their recoverable amount,
has been booked in the income statement, as discontinued operations, in the year to 31 December 2018.
On 1 February 2019 the Group acquired 100% of the share capital of Premier Distribution (Gt Yarmouth) Ltd (“PVS”).
PVS supplies and installs PVC decking and related products to the holiday park and park home markets as well as to residential customers
and local authorities. The acquisition of PVS opens up further routes to market for Epwin’s existing and new PVC decking products.
Initial consideration was £2.5 million with the potential to increase subject to the performance of the business over a two-year earnout
period.
Fair value calculations have not been completed due to the proximity of the acquisition to the publication of these accounts.
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83
FINANCIAL STATEMENTS
Company Balance Sheet
AS AT 31 DECEMBER 2018
Non-current assets
Investments in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Net current assets
Total assets less current liabilities
Non-current liabilities
Trade and other payables
Net assets
Equity
Ordinary share capital
Share premium
Merger reserve
Retained earnings
Equity shareholders’ funds
Note
4
5
6
7
2018
£m
69.6
69.6
31.6
–
31.6
(5.9)
25.7
95.3
(24.7)
70.6
0.1
12.5
25.5
32.5
70.6
2017
£m
68.9
68.9
33.1
–
33.1
(27.9)
5.2
74.1
(9.9)
64.2
0.1
12.5
25.5
26.1
64.2
The Company profit for the year ended 31 December 2018 was £14.5 million (2017: £14.7 million).
The financial statements were approved by the Board of Directors and authorised for issue on 9 April 2019.
They were signed on its behalf by:
Jonathan Bednall
Christopher Empson
Company number:
Chief Executive Officer
Group Finance Director
07742256
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84
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Company Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2018
At 31 December 2016
Comprehensive income:
Profit for the year
Total comprehensive income
Transactions with owners recorded directly in equity:
Issue of shares
Share-based payments
Dividends
Total transactions with owners
At 31 December 2017
Comprehensive income:
Profit for the year
Total comprehensive income
Transactions with owners recorded directly in equity:
Share-based payments
Dividends
Total transactions with owners
At 31 December 2018
Share
capital
£m
0.1
Share
premium
account
£m
12.5
Merger
reserve
£m
24.0
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
12.5
–
–
–
–
–
–
–
1.5
–
–
1.5
25.5
–
–
–
–
–
0.1
12.5
25.5
Retained
earnings
£m
20.3
14.7
14.7
–
0.6
(9.5)
(8.9)
26.1
14.5
14.5
0.7
(8.8)
(8.1)
32.5
Total
£m
56.9
14.7
14.7
1.5
0.6
(9.5)
(7.4)
64.2
14.5
14.5
0.7
(8.8)
(8.1)
70.6
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85
FINANCIAL STATEMENTS
Notes to the Company Accounts
FOR THE YEAR ENDED 31 DECEMBER 2018
The following accounting policies have been applied consistently
in dealing with items which are considered material in relation to the
Company’s financial statements.
1. Basis of preparation
Epwin Group Plc (the “Company”) is a company incorporated
and domiciled in the UK.
These financial statements were prepared in accordance with
Financial Reporting Standard 101: Reduced Disclosure Framework
(“FRS 101”).
In preparing these financial statements, the Company applies
the recognition, measurement and disclosure requirements of
International Financial Reporting Standards as adopted by the EU
(“Adopted IFRSs”), but makes amendments where necessary in
order to comply with the Companies Act 2006 and has set out
below where advantage of the FRS 101 disclosure exemptions
has been taken.
Under Section 408 of the Companies Act 2006, the Company
is exempt from the requirement to present its own profit and
loss account and related notes.
In these financial statements, the Company has applied
the exemptions available under FRS 101 in respect of the
following disclosures:
• Cash flow statement and related notes;
• Comparative period reconciliations for share capital;
• Disclosures in respect of transactions with wholly
owned subsidiaries;
• Disclosures in respect of capital management; and
• The effects of new but not yet effective IFRSs.
As the consolidated financial statements of Epwin Group Plc
include the equivalent disclosures, the Company has also
taken the exemption under FRS 101 available in respect of
the following disclosures:
• IFRS 2: Share-based payments in respect of Group-settled
share-based payments
• IFRS 7: Financial Instruments: Disclosures
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in
these financial statements.
1.1 Measurement convention
The financial statements are prepared on the historical cost basis.
1.2 Going concern
As highlighted in note 25 of the Group’s financial statements, the
Group meets its day-to-day working capital requirements through an
overdraft, a revolving credit facility and a term loan which are due
for renewal in September 2021.
Further information on the Group’s business activities, together with
the factors likely to affect its future development, performance and
position is set out in the Strategic Report on pages 10 to 25. Further
information on the financial position of the Group, its cash flow,
liquidity position and borrowing facilities is described in this review.
In addition, note 25 to the Group’s financial statements includes the
Group’s objectives, policies and processes for managing its capital
and its exposures to credit risk and liquidity risk.
The Group’s forecasts and projections, taking account of reasonably
possible changes in trading performance, show that the Group
should be able to operate within the level of its current facility.
After making enquiries, the Board has a reasonable expectation that
the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future. Accordingly, it
continues to adopt the going concern basis in preparing the Annual
Report and Accounts.
1.3 Investments
Investments in subsidiary undertakings are stated at cost less any
provision for impairment where, in the opinion of the Directors,
there has been a diminution in the value of the investment.
1.4 Operating leases
Rentals payable under operating leases are recognised in the
profit and loss account on a straight-line basis over the periods
of the leases.
1.5 Bank borrowings and financing costs
Interest-bearing bank loans and overdrafts are stated at the
amount of the proceeds received, net of financing costs,
where the intention is to hold the debt instrument to maturity.
Financing costs are amortised over the expected term of the loan
so as to produce a constant rate of return over the period to the
date of expected redemption.
1.6 Share-based payments
The Company operates an equity-settled Management Incentive
Plan, a Long-Term Incentive Plan and a Save As You Earn (“SAYE”)
scheme and issued share warrants in 2014 as part of the IPO.
Where the Company grants options over its own shares to the
employees of its subsidiaries it recognises, in its individual financial
statements, an increase in the cost of investment in its subsidiaries
equivalent to the equity-settled share-based payment charge
recognised in its consolidated financial statements, with the
corresponding credit being recognised directly in equity.
The fair value of the share options, SAYE and warrants is measured
at grant date using an option pricing model, taking into account the
terms and conditions upon which the options were granted.
1.7 Taxation
The charge for taxation is based on the profit or loss for the year and
takes into account taxation deferred because of differences between
the treatment of certain items for taxation and accounting purposes.
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86
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Company Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
2. Critical judgements and estimations in applying
the parent Company’s accounting policies
The preparation of the Parent Company financial statements requires the Directors to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future periods impacted.
The key judgement and estimate employed in the financial statements is:
Impairment of investment in subsidiary companies
The subsidiary companies’ investment balances are held at cost less any impairment. An impairment exists when their recoverable amount
is less than the cost of investment held in the accounts. There are a number of factors which could impact the recoverable amount which
creates a risk of this recoverable amount being lower than the investment balance held. The discounted cashflows used align to those used
in testing goodwill, please see note 14 to the Group accounts for more detail.
3. Staff costs
Please see disclosures relating to the Group in note 8 to the consolidated financial statements.
Disclosure of individual Directors’ remuneration is included in the Remuneration Report on pages 38 to 40.
4. Non-current asset investments
Cost
At 1 January 2018
Additions
At 31 December 2018
Impairment
At 1 January 2018 and 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Fixed asset investments represent holdings in the ordinary share capital of wholly owned subsidiaries.
Shares in subsidiary
undertakings
£m
68.9
0.7
69.6
–
69.6
68.9
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
87
FINANCIAL STATEMENTS
The Group’s subsidiary undertakings are as follows:
Company name
Principal activity of the company
Held directly by the Company
Specialist Building Products Limited
The extrusion of PVC-u and PVC-ue, the
manufacturer of windows and doors, related
building materials and the retail, trade and
public sector sales of these products
Winep 62 Limited
Building Plastics Holdings Limited
Winep 60 Limited
The Entrance Fire Door Company Limited
Vannplastic Limited
Stormking Plastics Limited
Held indirectly by the Company
Holding company
Holding company
Holding company
Dormant
Dormant
Dormant
Specialist Building Distribution Limited
Supply of plastic building products
Winep 66 Limited
Manufacture of sealed glazed units
Crown Architectural Aluminium (UK) Limited
Non-trading
Magden Limited
Nu*Stock Limited
Saltire Trade Plastics Limited
UPVC Distributors Limited
Amicus Building Products Limited
Winep 61 Limited
Winep 63 Limited
Winep 67 Limited
Amazon Civils Limited
Celuform Building Products Limited
CET Glass Processors (Holdings) Limited
Churchley Bros. Limited
Churchley Builders Plastics Limited
Ecodek Limited
Epwin Glass Limited
Epwin Logistics Limited
Epwin Secretaries Limited
HIS Systems Limited
Kestrel BCE Limited
Masterglaze Limited
Non-trading
Non-trading
Non-trading
Non-trading
Holding Company
Holding Company
Holding Company
Holding Company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
National Plastics (Building Products) Limited
Dormant
Permadoor Limited
Dormant
Ownership
percentage by
the Group as at
31 December
2018
Country of
incorporation
100%
England
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
England
England
England
England
England
England
England
England
England
England
England
Scotland
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
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88
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notes to the Company Accounts continued
FOR THE YEAR ENDED 31 DECEMBER 2018
Company name
Plastal Commercial Limited
Profile 22 Systems Limited
Schnicks Limited
Silplas Building Products Limited
Spectus Systems (Dormant) Limited
Spectus Systems Limited
Swish Building Products Limited
TP Distribution Limited
Trade BP Limited
Trentham Logistics Limited
Venture Building Plastics Limited
Winep3 Limited
Winep 5 Limited
Winep 50 Limited
Winep 51 Limited
Winep 52 Limited
Winep 53 Limited
Winep 54 Limited
Winep 55 Limited
Winep 56 Limited
Winep 57 Limited
Winep 65 Limited
Winep 68 Limited
Winep 693 Limited
Wrekin Windows Limited
Principal activity of the company
Ownership
percentage by
the Group as at
31 December
2018
Country of
incorporation
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
All investments are in the ordinary share capital of the subsidiaries.
All subsidiaries are included in the consolidated results of the Group.
All subsidiaries, with the exception of TP Distribution Limited, Trade BP Limited and Saltire Trade Plastics Limited have the following registered
address: 1b Stratford Court, Cranmore Boulevard, Solihull, B90 4QT, United Kingdom. The registered address of TP Distribution Limited and
Trade BP Limited is Old Tin Works, Bridge Street, Abercarn, Newport, Wales NP11 4SL. The registered address of Saltire Trade Plastics Limited
is 3 Melville Street, Edinburgh, Scotland, EH3 7PE.
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ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
89
FINANCIAL STATEMENTS
5. Trade and other receivables
Amounts falling due within one year
Amounts due from subsidiary undertakings
6. Trade and other payables falling due within one year
Bank loans and overdraft
7. Trade and other payables falling due after more than one year
Bank loans and other borrowings
Analysis of bank loans and borrowings:
Repayable:
Within one year
Between one and two years
Between two and five years
Borrowing costs of £0.4 million (2017: £0.2 million) are set off against the amount owing at year end.
The terms of the bank loans and borrowings are disclosed in the consolidated accounts in note 21.
2018
£m
31.6
31.6
2018
£m
5.9
5.9
2018
£m
24.7
24.7
2018
£m
5.9
4.9
19.8
30.6
2017
£m
33.1
33.1
2017
£m
27.9
27.9
2017
£m
9.9
9.9
2017
£m
27.9
9.9
–
37.8
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90
FINANCIAL STATEMENTS
www.epwin.co.uk
Stock code: EPWN
Notice of the Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting
of Epwin Group Plc (“the Company”) will be held at Eversheds
Sutherland (International) LLP, 115 Colmore Row, Birmingham,
West Midlands, B3 3AL on Tuesday 21 May 2019 at 11.00 am
for the following purposes:
Ordinary business
To consider and, if thought fit, pass the following resolutions which
will be proposed as ordinary resolutions:
1. To receive and adopt the Company’s annual accounts for the
year ended 31 December 2018, together with the report of the
Directors and the auditors on those accounts.
2. To declare a final dividend of 3.20 pence per ordinary share in
respect of the financial year ended 31 December 2018.
3. To reappoint KPMG LLP as auditors of the Company, to hold
office from the conclusion of this meeting until the conclusion
of the next general meeting at which accounts are laid before
the Company.
4. To authorise the Directors to determine the remuneration of
the auditors of the Company.
5. To re-elect Jonathan Bednall, who retires by rotation, as a
Director.
6. To re-elect Christopher Empson, who retires by rotation, as a
Director.
Special business
As special business, to consider and, if thought fit, pass the
following resolutions which will be proposed as to resolution 7
as an ordinary resolution and as to resolutions 8 and 9 as special
resolutions:
7. That in accordance with Section 551 of the Companies Act
2006 (“the Act”), the Directors be generally and unconditionally
authorised to allot shares in the Company and to grant rights
to subscribe for or to convert any security into shares in
the Company:
a. up to an aggregate nominal amount of £47,641.72 (such
amount to be reduced by the nominal amount of any equity
securities allotted pursuant to the authority in paragraph (b)
below) in connection with an offer whether by way of a rights
issue, open offer or otherwise:
i. to holders of ordinary shares in the capital of the Company
in proportion (as nearly as may be practicable) to their
respective holdings; and
ii. to holders of other equity securities in the capital of the
Company as required by the rights of those securities or as
the Directors consider necessary, but subject to exclusions
or other arrangements as the Directors may deem necessary
or expedient in relation to treasury shares, fractional
entitlements, record dates, legal or practical problems in or
under the laws of any territory or the requirements of any
regulatory body or stock exchange; and
b. in any other case, up to a nominal amount of £23,820.86
(such amount to be reduced by the nominal amount of
any equity securities allotted pursuant to the authority in
paragraph (a) above in excess of £23,820.86).
Such authorities shall apply until the close of business on
30 June 2020 or, if earlier, the end of the next Annual General
Meeting of the Company, unless previously varied or revoked
by the Company in general meeting, save that, in each case,
the Company may make offers or agreements which would or
might require shares to be allotted or rights to subscribe for or
convert securities into shares to be granted after the authority
ends and the Directors may allot shares or grant rights to
subscribe for or convert securities into shares in pursuance of
any such offer or agreement as if the authority had not ended.
8. That, subject to the passing of resolution 7, pursuant to Section
570 of the Act, the Directors be and are hereby unconditionally
empowered to allot equity securities (within the meaning of
Section 560 of the Act) for cash pursuant to the authority
conferred by resolution 7 as if Section 561(1) of the Act did
not apply to such allotment, provided that such power shall
be limited to:
a. the allotment of equity securities in connection with an offer
(whether by way of a rights issue, open offer or otherwise)
to holders of ordinary shares in the capital of the Company
in proportion (as nearly as practicable) to the respective
numbers of ordinary shares held by them but subject to such
exclusions or other arrangements as the Directors may deem
necessary or expedient in relation to treasury shares, fractional
entitlements, record dates, legal or practical problems in or
under the laws of any territory or the requirements of any
regulatory body or stock exchange, and
b. the allotment of equity securities for cash (otherwise than
pursuant to paragraph (a) above) up to an aggregate nominal
amount of £3,573.13,
and (unless previously revoked, varied or renewed) shall expire
on 30 June 2020 or at the conclusion of the next Annual General
Meeting of the Company after the passing of this resolution,
whichever is the earlier, save that the Company may make an
offer or agreement before the expiry of this power which would
or might require equity securities to be allotted for cash after
such expiry and the Directors may allot equity securities for
cash pursuant to any such offer or agreement as if the power
conferred by this resolution had not expired.
9. That, pursuant to Section 701 of the Act, the Company be
and is generally and unconditionally authorised to make market
purchases (within the meaning of Section 693(4) of the Act)
of ordinary shares of 0.05 pence each in the capital of the
Company (the “shares”), provided that:
a. the maximum number of shares which may be purchased
is 14,292,517;
b. the minimum price (exclusive of expenses) that may be paid
for a share is 0.05 pence;
c. the maximum price (exclusive of expenses) which may
be paid for a share is an amount equal to the higher of:
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(i) 105% of the average of the middle market quotations
for the shares as derived from the Daily Official List for the five
business days immediately preceding the day on which the
purchase is made; and (ii) an amount equal to the higher of
the price of the last independent trade of an ordinary share
and the highest current independent bid for an ordinary share
as derived from the London Stock Exchange Trading System;
d. unless previously revoked, varied or renewed, this authority
shall expire on 30 June 2020 or at the conclusion of the next
Annual General Meeting of the Company, whichever is the
earlier; and
e. the Company may enter into a contract to purchase shares
before the expiry of this authority under which such purchase
will or may be completed or executed wholly or partly after
such expiry and may make a purchase of shares pursuant
to any such contract as if the authority conferred by this
resolution had not expired.
By Order of the Board
Andrew Rutter
Company Secretary
9 April 2019
Company Number: 07742256
Registered Office
1b Stratford Court
Cranmore Boulevard
Solihull
B90 4QT
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www.epwin.co.uk
Stock code: EPWN
Explanatory Notes to the Notice of Meeting
ORDINARY BUSINESS
Resolutions 1 to 4 will be proposed as ordinary resolutions,
and will be passed if more than 50% of shareholders’ votes cast
are in favour.
share capital of the Company as at 9 April 2019, the last practicable
date prior to the publication of this document. The resolution
would also give the Directors authority to allot equity securities in
connection with a rights issue up to an aggregate nominal amount
of £47,641.72.
Resolution 1: To receive the 2018
Report and Accounts
The Directors of the Company (“the Directors”) must present
their Annual Report and Accounts of the Company for the year
ended 31 December 2018 (the “Annual Report”) to shareholders.
Shareholders are invited to adopt the Annual Report and Accounts.
Resolution 2: To declare a final dividend
A final dividend of 3.20 pence per ordinary share is proposed. An
interim dividend of 1.70 pence per ordinary share was paid during
the year. If approved, the final dividend will be paid on 3 June 2019
to shareholders on the register at the close of business on 10 May
2019.
Resolutions 3 and 4: To reappoint the
auditors and also authorise the Board
to determine their remuneration
The Company is required to appoint auditors at each general
meeting at which accounts are laid before the Company, to hold
office until the conclusion of the next such meeting. The Audit
Committee has reviewed the effectiveness, independence and
objectivity of the external auditors, KPMG LLP, on behalf of the
Board.
Following the Audit Committee’s review of the effectiveness of the
external auditor referred to above, the Board has decided to put
KPMG LLP forward to be reappointed as auditors. Resolution 4 also
authorises the Directors, in accordance with standard practice, to
negotiate and agree the remuneration of the auditors.
Resolutions 5 and 6: To re-elect
Jonathan Bednall and Christopher
Empson as Directors of the Company
Jonathan Bednall and Christopher Empson were re-elected as
Directors of the Company at the AGM in 2017 and are proposed for
re-election at the forthcoming AGM.
SPECIAL BUSINESS
As well as the ordinary business of the meeting outlined above,
special matters will be dealt with at the Annual General Meeting.
Resolution 7 will be proposed as an ordinary resolution and
resolutions 8 and 9 will be proposed as special resolutions. For these
special resolutions to be passed, 75% or more of shareholders’
votes cast must be in favour.
Resolution 7: Directors’
authority to allot shares
This resolution would give the Directors authority to allot ordinary
shares, and grant rights to subscribe for or convert any security
into shares in the Company, up to an aggregate nominal value of
£23,820.86. This amount represents one third of the issued ordinary
The Directors have no present intention to allot new shares other
than in connection with employee share and incentive plans and
share warrants.
Resolution 8: Disapplication
of pre-emption rights
If directors of a company wish to allot shares in the company for
cash (other than in connection with an employee share scheme),
company law requires that these shares are offered first to
shareholders in proportion to their existing holdings.
The purpose of Resolution 8 is to authorise the Directors to allot
ordinary shares in the Company for cash (i) in connection with a
rights issue; and, otherwise, (ii) up to a nominal value of £3,573.13,
equivalent to 5% of the total issued ordinary share capital of
the Company as at 9 April 2019 without the shares first being
offered to existing shareholders in proportion to their existing
holdings. This level of authority is required in order to give the
Company flexibility in the event of acquisition opportunities and
major shareholders will be consulted in advance of the authority
being exercised.
Resolution 9: Authority to purchase
own shares
Under the Companies Act 2006 (“the Act”), the Company
requires authorisation from shareholders if it wishes to purchase
its own shares.
Resolution 9 specifies the maximum number of shares that may
be purchased (10% of the Company’s issued share capital) and
the highest and lowest prices at which they may be bought.
Under the Act, the Company can hold the shares which have
been repurchased as treasury shares and either resell them for cash,
cancel them, either immediately or at a point in the future, or use
them for the purposes of its employee share schemes. The Directors
believe that it is desirable for the Company to have this choice and
therefore intend to hold any shares purchased pursuant to this
authority as treasury shares. Holding the repurchased shares as
treasury shares will give the Company the ability to resell or transfer
them in the future, and so provide the Company with additional
flexibility in the management of its capital base. However, in order
to respond properly to the Company’s capital requirements and
prevailing market conditions, the Directors will need to reassess
at the time of any actual purchase whether to hold the shares in
treasury or cancel them.
The Directors have no present intention of exercising this authority.
The Directors intend to keep under review the Company’s potential
to buy back its shares, taking into account other investment
and funding opportunities. The authority will only be used if,
in the opinion of the Directors, this will result in an increase in
earnings per share or would otherwise be in the best interests
of shareholders generally.
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Notice of Meeting Notes:
1. To be entitled to attend and vote at the Meeting (and for the
purpose of the determination by the Company of the number
of votes they may cast), shareholders must be registered in the
Register of Members of the Company at close of trading on
17 May 2019. Changes to the Register of Members after the
relevant deadline shall be disregarded in determining the rights
of any person to attend and vote at the Meeting.
2. Shareholders, or their proxies, intending to attend the Meeting in
person are requested, if possible, to arrive at the Meeting venue
at least 20 minutes prior to the commencement of the Meeting
at 11.00am (UK time) on 21 May 2019 so that their shareholding
may be checked against the Company’s Register of Members
and attendances recorded.
3. Shareholders are entitled to appoint another person as a proxy to
exercise all or part of their rights to attend and to speak and vote
on their behalf at the Meeting. A shareholder may appoint more
than one proxy in relation to the Meeting provided that each
proxy is appointed to exercise the rights attached to a different
ordinary share or ordinary shares held by that shareholder.
A proxy need not be a shareholder of the Company.
4. In the case of joint holders, where more than one of the joint
holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is
determined by the order in which the names of the joint holders
appear in the Company’s Register of Members in respect of the
joint holding (the first named being the most senior).
5. A vote withheld is not a vote in law, which means that the vote
will not be counted in the calculation of votes for or against the
resolution. If no voting indication is given, your proxy will vote
or abstain from voting at his or her discretion. Your proxy will
vote (or abstain from voting) as he or she thinks fit in relation
to any other matter which is put before the Meeting.
6. You can vote either:
• by logging on to www.signalshares.com and following
the instructions;
• in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with
the procedures set out below.
• If you need help with voting online, please contact our
Registrars, Link Asset Services, on 0871 664 0300 from
the UK (calls cost 12p per minute plus network extras)
or +44 371 664 0300 from outside the UK (calls chargeable
at the applicable international rate) or email Link at
enquiries@linkgroup.co.uk
7. If you return more than one proxy appointment, the
appointment received last by the Registrar before the latest time
for the receipt of proxies will take precedence. You are advised
to read the terms and conditions of use carefully. Electronic
communication facilities are open to all shareholders and those
who use them will not be disadvantaged.
8. The return of a completed form of proxy, electronic filing or any
CREST Proxy Instruction (as described in note 11 below) will not
prevent a shareholder from attending the Meeting and voting in
person if he/she wishes to do so.
9. CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so for
the Meeting (and any adjournment of the Meeting) by using the
procedures described in the CREST Manual (available from www.
euroclear.com/site/public/EUI). CREST Personal Members or other
CREST sponsored members, and those CREST members who
have appointed a service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take
the appropriate action on their behalf.
10. In order for a proxy appointment or instruction made by
means of CREST to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly authenticated in
accordance with Euroclear UK & Ireland Limited’s specifications
and must contain the information required for such instructions,
as described in the CREST Manual. The message must be
transmitted so as to be received by the issuer’s agent (ID RA10)
by 11.00am on 17 May 2019. For this purpose, the time of
receipt will be taken to mean the time (as determined by the
timestamp applied to the message by the CREST application
host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by
CREST. After this time, any change of instructions to proxies
appointed through CREST should be communicated to the
appointee through other means.
11. CREST members and, where applicable, their CREST sponsors
or voting service providers should note that Euroclear UK &
Ireland Limited does not make available special procedures in
CREST for any particular message. Normal system timings and
limitations will, therefore, apply in relation to the input of CREST
Proxy Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed a voting
service provider(s), to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST
system by any particular time. In this connection, CREST
members and, where applicable, their CREST sponsors or voting
system providers are referred, in particular, to those sections of
the CREST Manual concerning practical limitations of the CREST
system and timings. The Company may treat as invalid a CREST
Proxy Instruction in the circumstances set out in Regulation 35(5)
(a) of the Uncertificated Securities Regulations 2001.
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Stock code: EPWN
12. Any corporation which is a shareholder can appoint one or
15. Any shareholder attending the Meeting has the right to ask
more corporate representatives who may exercise on its behalf
all of its powers as a shareholder provided that no more than
one corporate representative exercises powers in relation to
the same shares.
13. As at 9 April 2019 (being the latest practicable business day
prior to the publication of this Notice), the Company’s ordinary
issued share capital consists of 142,925,173 ordinary shares,
carrying one vote each. Therefore, the total voting rights in
the Company as at 9 April 2019 are 142,925,173.
14. Under Section 527 of the Companies Act 2006, shareholders
meeting the threshold requirements set out in that section have
the right to require the Company to publish on a website a
statement setting out any matter relating to: (i) the audit of the
Company’s financial statements (including the Auditor’s Report
and the conduct of the audit) that are to be laid before the
Meeting; or (ii) any circumstances connected with an auditor
of the Company ceasing to hold office since the previous
meeting at which annual financial statements and reports were
laid in accordance with Section 437 of the Companies Act 2006
(in each case) that the shareholders propose to raise at the
relevant meeting. The Company may not require the shareholders
requesting any such website publication to pay its expenses
in complying with Sections 527 or 528 of the Companies Act
2006. Where the Company is required to place a statement on a
website under Section 527 of the Companies Act 2006, it must
forward the statement to the Company’s auditor not later than
the time when it makes the statement available on the website.
The business which may be dealt with at the Meeting for the
relevant financial year includes any statement that the Company
has been required under Section 527 of the Companies Act 2006
to publish on a website.
questions. The Company must cause to be answered any such
question relating to the business being dealt with at the Meeting
but no such answer need be given if: (a) to do so would interfere
unduly with the preparation for the Meeting or involve the
disclosure of confidential information; (b) the answer has already
been given on a website in the form of an answer to a question;
or (c) it is undesirable in the interests of the Company or the
good order of the Meeting that the question be answered.
16. The following documents are available for inspection during
normal business hours at the registered office of the Company
on any business day from the date of this Notice until the time
of the Meeting and may also be inspected at the Meeting venue,
as specified in this Notice, from 10.45 am on the day of the
Meeting until the conclusion of the Meeting:
• copies of the Directors’ letters of appointment or service
contracts.
17. You may not use any electronic address (within the meaning
of Section 333(4) of the Companies Act 2006) provided in either
this Notice or any related documents (including the form of
proxy) to communicate with the Company for any purposes
other than those expressly stated.
A copy of this Notice, and other information required by
Section 311A of the Companies Act 2006, can be found
on the Company’s website at www.epwin.co.uk.
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1b Stratford Court
Solihull
Birmingham
B90 4QT
0121 746 3700
info@epwin.co.uk
www.epwin.co.uk
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Join us on social media and follow
twitter@EpwinGroup
Visit our permanent exhibition at
The Building Centre, London
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