I'm a bit embarassed to admit that I've sold my EPWN for a modest profit. I'm a bit concerned that there is no sign of the management buying in, and the price has risen in advance of the dividend. I think that the forecasts are still too optimistic. Maybe I'll be back some time......
Quite. I'll stick around for the time being for the dividend. Not a great deal of confidence in the long term as I don't trust the management not to do the dirty on the shareholders. Costs up, outlook below expectations but dividend up, not a good long term formula. Paying out over £3M in interim dividends of which Kennedy will get a fair chunk, probably enough to cover his buying of & investing in Entu. We may as well have bought it & cut the dividend in the long term interest. But for now I'll take my cut, see how long they can hold it together.
Looking more at the earnings calculations, it might be safer to think about EPS running at around 8 to 9 pence this year and next. My reasoning is that the exceptionals in each year aren't actually that exceptional. You will always have bad debts and you will always have reorganisation in a market like this.
I don't like the management suggesting that they could gear the company up further. It's too risky and is likely to destroy value. They should reduce gearing.
It's a tangled web. Entu has been bought by Latium, owned by Brian Kennedy, former owner of Entu, who also owns 14% of the shares in Epwin. He's got a good deal, hopefully it's in his interests to see that Epwin do ok out of it but who knows. Let's hope the merry-go-round continues a while longer with a steady share price & regular decent divi's, but I won't be taking my eyes of this share & I can't say I'll be here longterm. Learn from the directors/owners, take the money & run when the time is right.
Note the update this morning. It doesn't say much, other than the likelihood that £4m of debtor has gone up in smoke. Lucky new owner of Entu, who presumably has a debt free business, and a pity that it's not Epwin.
In my view this is manageable for EPWN and doesn't alter my view that the business is still good value at this price. I take heart from good Redrow results yesterday, although general construction industry numbers aren't so good.
I came in here with the yield at 6% & it's only the recent falls that have made it 10%. The sentence in the trading statement "commenced a programme aimed at adjusting its capacity and cost base" sounds to me like there could be a review of the dividend whilst the other sentence "continuing our record of strong cash generation and our ability to offer an attractive dividend to shareholders." implies it will be maintained . We'll find out 13th Sept, I intend to hold, expecting an interim of between 2% & 3% of the current SP, hoping of course for a pleasant surprise & the maintaining of 2.2p.
I was just reading an article from Stockopedia about today's disastrous trading statement from Provident Financial and the way this company turned out to be a dividend trap following today's share price collapse. It might be instructive to compare the situation with Epwin as I am sure some may also be concerned that the same might happen with Epwin. By comparison, Epwin's net debt is only about one times earnings (Provident Financial's is about 5 times earnings) and unlike Provident Financial, Epwin is not in the middle of changing its operating model. Also, no part of Epwin's business is under investigation from regulatory authrorities, unlike that of Provident Financial. I would also argue that Epwin's business is simple as it produces stuff which it sells mainly to trade buyers, whereas Provident Financial's business model looks a good deal more complicated to me. On the other hand, Epwin's profit margins are a good deal less attractive than Provident Financial's. So all in all, I found this comparison reassuring but of course Epwin is a cyclical business so there is plenty of scope for further declines if the building/renovation sector goes downhill. However, I will hold through any further falls in the sector as I think Epwin is financially strong enough to come out the other side.
Edison has published their research on Epwin today and although the lack of profit growth is disappointing they describe the company as being in robust financial health and expect the dividend yield of around 10% to be maintained. Their projected figures tend to confirm this but remember this is paid for research.
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