Zeus Industrials Round-Up - 9 May 2024

Economic and industrial data has started the second quarter on slightly weaker grounds than Q1 as Manufacturing PMI in the UK, Eurozone and US all reported April indexes below March levels. Cracks seem to be appearing as recent drops in new orders and rising input costs are quickly dampening confidence. Inflation did, however, fall MoM across the board with the exception of the US, where volatile energy prices caused a modest MoM increase in the inflation rate.

Billi drives top line growth

Positives emerged, particularly in H2, as the recovery commenced within the kettle controls market. Billi was the architect of the revenue improvement, with LAICA also delivering a double-digit increase in the top line. Margins improved, notwithstanding a change in the mix. Encouragingly, investor concerns on debt were allayed with the careful management of cash, and latterly as bankers raised the net debt/EBITDA covenant to 2.75x. With further emphasis on costs and cash conservation and a lik

Strix (KETL LN) - FY23 results, forecasts rebased

Strix has reported FY23 results to 31 December 2023 with adjusted PAT of £20.1m, in line with our updated forecast and company guidance provided in January. Revenue grew 35.2% to £144.6m, benefitting from the full year inclusion of the Billi acquisition, albeit slightly below our forecast of £151.0m. Its core Kettle Controls division also performed robustly, growing 2.7%, ahead of the broader market and indicating market share gain. Recent acquisitions have noticeably improved the Group’s growth

Strong H2 cash flow

There are several encouraging messages which jump out from Strix’s trading update released today, led crucially by the strong cash generation during H2. This has enabled the Group to come in below the year end banking covenant test, thereby removing significant risk from the rating. In addition, the strong performance of Billi and LAICA has largely offset the slower than expected recovery within the regulated kettle controls market, resulting in FY23 numbers modestly below expectations at the ad

Strix (KETL LN) - FY23 trading broadly in line, new CFO

Strix has released a pre-close trading update for its full year results to 31 December highlighting adj. PAT will be £20.1m on a reported basis and £20.6m at constant currency. This is broadly in line with Zeus estimates and company guidance of £21.0m. Importantly, the operational performance by the Group, particularly in H2, has resulted in year-end net debt of c. £83.7m (2.15x EBITDA). This is within its debt covenant agreement of 2.5x and better than the Zeus forecast (FY23: £86.9m). Whilst t

Temporary relaxation of covenants

Strix has issued a brief statement that should ease investors’ concerns in the short-term. The Group’s consortium of lenders has agreed to temporarily ease its key banking covenant (net debt/EBITDA) from 2.25x to 2.5x at the Q3 period end, reverting to 2.25x in December. The Board has also confirmed the timing of the payment of the interim dividend of 0.9p / share on 29 December. Finally, the announcement reported the wish of the CFO, Raudres Wong to retire from the Group, effective immediately.

Hybridan Small Cap Feast 27/10/2023

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Announced ITF 2 October: Adsure Services, the holding company for TIAA Limited, a specialist business assurance provider operating across the Housing, Healthcare, Government, Education, Charities, and other sectors in the UK, intends to join the Access Segment of the AQSE Growth Market. Admission expected on 30 October. Tekcapital announced intention to spin off and IPO on 2 October: MicroS

Strix (KETL LN) - Debt covenants relaxed, CFO stepping down

Strix has released a short statement today confirming its banking syndicate has agreed to ease its debt covenant to 2.5x net debt/EBITDA until December 2023 by which time it will revert to 2.25x

Recovery slow, new strategy in place

After early signs of green shoots during Q2, what is clear is that customers are mindful of conserving cash – ordering frequently but in lower volumes. As such and notwithstanding a very positive maiden H1 contribution from Billi, profitability has declined. The Board’s response includes a fine-tuning of strategy, focusing on the most promising new products, cross-selling between brands, distribution agreements in new territories, online product launches and adjustments to the Group’s capital al

Strix (KETL LN) - Interim results & CMD

Strix has announced interim results for the six months to June showing revenue up 28.6% to £65.2m. The strong top line growth, driven by its 2022 acquisition of Billi, has resulted in gross profits rising 22.6% to £23.9m. Excluding Billi, revenue was down c. 14% yoy. Following updated guidance in today’s announcement, along with its Capital Markets Day, we adjust our forecasts to reflect the slower than anticipated economic recovery along with the impact rising interest rates have had on profita

OPG Power Ventures - Positive update for FY March 2024

OPG Power has released a positive trading update for the year ended 31 March 2024, and now expects to exceed previous market expectations at the EBITDA and revenue level. The company continued to benefit from a stronger revenue run-rate during H2/24 compared with FY23, reflecting greater availability of profitable supply contracts, which in turn have enabled OPG to run at higher levels of plant utilisation. We are raising our revenue forecast for FY24 by 22% to £162m, and our EBITDA by 34% to £1

AB Dynamics (ABDP LN) - Strategy on track but valuation full

Playing a bit of catch up, we lift our estimates for the recent acquisition of Venshure Test Services (VTS) and positive interim earnings. Cash generation and the net cash position remain healthy, and the outlook for earnings growth is generally positive.

LIBERUM: Luceco: Trading comfortably in line

Morning Note – 13 May 2024

Norcros (NXR LN) - Capital Markets Day – taking the next step

Norcros recently hosted a Capital Markets Day (CMD) signalling a change in how the business communicates with the market. In recent history it has focused on growing its share of the highly fragmented bathroom and kitchen product markets organically and through acquisition. This has resulted in a portfolio of businesses with varying degrees of capital intensity and profitability but created a Group of scale (c. £450m revenue) with strong positions in its end markets. Last week’s CMD was evidence

Invinity Energy Systems - Funded to Cash Generation and More

Re-issued to correct for typographical errors.Invinity’s major equity fundraising is targeting a minimum of £56m with £25m already committed by the UK Infrastructure Bank (UKIB). A second strategic investment of £3m has been committed by Korean Investment Partners.  The raise will see Invinity to net cash generation, with over £30m of the raise supporting the company’s scale up ahead of this year’s launch of the next generation Mistral flow battery. The raise will boost the balance sheet, reduci

LIBERUM: MPAC: Solid start to FY24, raising our TP to 550p

Strategy refresh targets growth accelerators

Market sentiment is rapidly re-focusing on earnings potential in an improving economic cycle. Norcros’ CMD was well-timed with this increasing willingness to consider mid-cycle earnings scenarios. Norcros is targeting accelerators to boost organic growth in core bathroom and kitchen product groups to be supplemented by M&A activity. The CMD reiterated the company’s four strategic pillars and added financial targets including organic, above market revenue growth and margin expansion. Leading mar

Water Intelligence Q1 Trading Update

Water Intelligence has reported a positive Q1 update which firmly underpins our FY24 estimates and we edge up our forecasts by +1% following the recent franchise reacquisition.

Mpac Group+ (MPAC, House Stock at 485p) - AGM, a positive trading update

LIBERUM: Currys: Improving momentum drives material beat and third consecutive upgrade

AGM statement: momentum maintained

In a statement to accompany today’s AGM, Mpac reports that the strong earnings momentum established in the second half of 2023 has continued into 2024. Accordingly, the Group is on track to meet FY24 market expectations, with the customary second-half earnings weighting. Following the AGM statement, our outlook is maintained. Our Fair Value of 530p/share is indicative of a FY24 EV/EBITDA multiple of 7.9x and PE of 13.9x. Compared to market cap weighted averages of 11.8x and 18.2x respectively f

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Strong foundations

SP Angel Spec Sits HERC.LN: Positive trading update

Hercules is likely to report growth in H1E of over 27% YoY. H1E is the seasonally weaker half and the reported likely outcome for revenues in H1E represents half of our FY24E revenue forecast. As the seasonally stronger half of the year progresses, upwards pressure could materialise on our forecasts. Together with a prospective lower interest rate environment and a potential re-rating of the infrastructure sector, we see share price upside ahead.