Epwin Group Plc (AIM: EPWN), the vertically integrated manufacturer of extrusions, mouldings and fabricated low maintenance building products, supplying the Repair, Maintenance and Improvement, new build and social housing sectors, has told DirectorsTalk about the acquisition of Vannplastic Limited, (trading as “Ecodek”), for GBP5.2m of initial consideration.
Ecodek
Vannplastic Limited trades as Ecodek and was founded in 2002 as a manufacturer of Wood Plastic Composite (“WPC”), the primary application being a hardwood substitute for balconies and outdoor decking. Ecodek is the leading British supplier of WPC products which are manufactured from recovered hardwood fibres and high density recycled polyethylene. As a consequence, all products are over 90% recycled and 100% recyclable. The business is located in Wrexham, North Wales and has a broad customer base from new build housing, social housing and trade. The business has developed a significant amount of know-how in the formulation and use of WPC materials and plans to expand the use of these materials in additional applications.
The acquisition is in line with Epwin’s stated strategy to broaden its range of low maintenance building products. Ecodek’s product technology has potential for applications in other low maintenance building products and there is a high level of technical expertise within the business which, by working with Epwin’s own technical resource, will aim to develop new applications for the materials technology, as well as continuing Ecodek’s impressive rate of growth. Ecodek will operate as part of Epwin’s Extrusion business with the management team who formed the business continuing to oversee its growth and development.
For the year ended 31 December 2014, Ecodek had turnover of GBP4.1 million, producing an operating profit of GBP0.6 million. Net assets at the same date were GBP1.1 million. Current year performance is expected to deliver EBITDA of circa GBP1m. The acquisition will not have a material effect on the Group’s earnings in the year to 31 December 2015. The acquisition is expected to be earnings enhancing in the financial year to 31 December 2016.
The initial consideration of GBP5.2 million, is comprised of GBP3.64 million in cash and GBP1.56 million in the form of 1,166,817 Epwin shares (representing 0.86% of the enlarged share capital) at a price of 133.7 pence per share (the “Consideration Shares”). The earn-out consideration of up to GBP3.3 million is dependent on Ecodek’s performance in the year to 31 December 2016 and will be settled in the same ratio of cash to shares as the initial consideration. Both the initial and earn-out considerations are based on a multiple of 5 times the EBITDA of Ecodek for the relevant period.
The Consideration Shares have been credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of 0.05 pence each in the capital of the Company in issue, including the right to receive all dividends and other distributions declared, made or paid in respect of such shares after the date of issue of the shares. The Consideration Shares are subject to a lock-in arrangement under which the Company must agree to any sale of these shares prior to 31 December 2016.
Application will be made for the Consideration Shares to be admitted to trading on AIM and admission is expected to take place on or around 6 November 2015 (“Admission”).
On Admission, the Company’s issued share capital will consist of 136,166,817 ordinary shares. There are no ordinary shares held in treasury. Therefore, in accordance with the FCA’s Disclosure and Transparency Rule 5.6.1, the Company confirms that following Admission, the total number of voting rights in the Company will be 136,166,817.
Trading update
The Board announces that despite challenging market conditions, the Company’s profits for the year ended 31 December 2015 are anticipated to be in line with market expectations.
Jon Bednall, Chief Executive Officer, Epwin Group said: “I am delighted to announce the acquisition of Ecodek and welcome the team there to the Group. Ecodek adds to the Group’s range of low maintenance building products and brings exciting new materials technologies into the Group as well as real developmental expertise. The acquisition represents an important first step in the development of the Group and is expected to enhance earnings from 2016.”
Alex Collins, Managing Director of Vannplastic Ltd (trading as “Ecodek”), said: “Joining Epwin Group will enable us to develop and expand our product range and take full advantage of the exciting opportunities for our innovative materials.
We are proud of our product and dedicated workforce. Becoming part of Epwin Group is excellent news for our employees and customers alike and we look forward to the future with confidence and enthusiasm.”
