Bottom Line: Epwin gamble pays

HAVING an unbroken record of increased dividend payouts since 1987 is impressive. But for a small company in the business of making and selling plastic replacement windows, doing so through the worst housing slump since the Second World War is remarkable.

Epwin's 10 per cent increase in its 1993 dividend to 7.5p was its sixth in a row and, as usual, was well covered by earnings per share, 28 per cent higher at 15.2p. Pre-tax profits were 51 per cent better at pounds 4.7m, struck from an 18 per cent jump in sales from pounds 43m to pounds 50.9m. What surprised analysts yesterday was the speed with which Epwin's bold decision to carry on investing through the slump is feeding through to operating margins.

At the time of the one-for-four rights issue in the spring of 1992 the housing market cannot have looked bleaker, so starting a pounds 10m infrastructure expansion then required a deal of corporate nerve.

As did continued marketing spend when competitors were scaling theirs back. Increased market share of 7 per cent testifies to the success of that policy and 10 per cent seems a realistic target.

In part that is due to the success of Windowbuild, a move into the new building market rather than refurbishment, which accounted for 3 per cent of last year's sales and this year could account for twice as much.

Brokers are fast revamping their forecasts, having had their 1994 estimates met last year. This time, pounds 5.5m pre-tax looks likely, implying earnings per share of 17.5p and a prospective p/e at 315p of 18. Good value.