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14 Oct 16
Post Brexit, share price volatility has been a particular feature for the house-building sector. While central London residential property transactions have been muted, the tone outside London has been more balanced. Given the group’s expanding land bank, Inland is at least well positioned to increase production and unit sales and behind this ambition, the dynamics of housing supply and demand still remain favourable. Share price is underpinned by assets, and therefore defensive.
Safe as houses
17 Oct 16
Telford Homes is in as strong a position as it has ever been in the 15 years since flotation. The company has a strong balance sheet, with an expanded equity base and significant headroom on its banking facilities, a large development pipeline and impressive forward sales position, and good levels of demand for its product and geography from a diverse group of buyers.
A strong FY 2016
17 Oct 16
Full-year results were ahead of July’s trading update, boosted by a year-end Fx benefit and stronger than expected gross margins. Revenue growth of 12% was driven by overseas markets (+22%) and assisted by a stronger UK performance in the second half. A broader and deeper strategy for the US market, including the registration of surface and water disinfectants with the EPA, is now being pursued, with expected launches in FY 2019. We have increased our target price to 150p to reflect a 6% EPS upgrade to 2017 earnings and introduced a 2018 forecast, calling for EPS of 7.0p.
17 Oct 16
Avacta* (AVCT): Act now (CORP) | Tristel* (TSTL): A strong FY 2016 (CORP) | Bioventix* (BVXP): FY 2016 results (CORP) | Elecosoft* (ELCO): SaaS model strengthened through acquisition (CORP) | Lok’nStore* (LOK): NAV up 28% (CORP) | Omega Diagnostics* (ODX): Mid year trading update (CORP) | Mortice* (MORT): Positive trading update (CORP)
12 Oct 16
Proactis has delivered prelims for the year to July 2016 in line with August trading update, delivering EBITDA of £5.3m from revenue of £19.4m, in line with expectations. With beneficial working capital movement, cash generation was better than expected, leaving net debt of £-0.5m compared with £-1.6mE. All the KPIs are positive, showing 18% growth in the total number of new deals, including 45% growth in subscription deals and 16% growth in upsell deals. 6.6% organic revenue growth was boosted further by the February acquisition of Due North, while the multi-year contracted order book grew 32%, with £26.1m visibility extending to up to five years. Annualised recurring revenue (+23%) is currently running at £17.6m, covering 76% of FY17 revenue expectations. With all execution targets on track, momentum remains strong: target lifted to 220p (200p).
N+1 Singer - PROACTIS Holdings - Strong underlying growth in recurring revenue
12 Oct 16
PROACTIS has delivered a strong set of full year results, in line with our expectations and the 11 August trading update. Key highlights include 12% underling organic growth in annualised recurring revenue (up 23% to £16.9m), 46 new name deals (20 subscription) plus 17 from Due North (all subscription), and the receipt of first (albeit nominal) revenues from the supplier commerce opportunity. We remain highly excited by prospects for this business given encouraging growth in the core business and the potential for the supply-side strategy to transform the top line. We have left our headline FY 2017 and FY 2018 estimates essentially unchanged, introduced a new set of forecasts for FY 2019 and increased our target price from 153p to 179p to reflect the roll forward of our valuation year and higher peer multiples.
An integrated European media powerhouse dies before being born
21 Oct 16
Once upon a time (say about 6 months ago), Mediaset and Vivendi concluded a splendid strategic alliance: the French group was to acquire 100% of Mediaset Premium, while each entity would be taking a 3.5% stake in the other on the occasion. The ambition was to build a pan-European OTT platform and to create a southern European content and VOD powerhouse… The announced wedding has since moved to the divorce legal battlefield, maybe paving the way for a ménage à trois.
Nvidia opens doors, weak PNDs slam them
21 Oct 16
TomTom reported Q3 revenues of €239.3m, down 5.9% yoy and 9.8% sequentially. Consumer decreased by 15% yoy to €137.1m, representing the biggest down-mover. Automotive’s top-line grew by 20.4% to €31.3m, Telematics by 14.8% to €36.5m, while Licensing showed some weakness (€34.4m, -2.3%). The gross margin came in at 60.4%, up 730bp yoy, while the EBIT margin lost 150bp to 0.4% (€1m). EPS came in at zero and adjusted EPS at €0.05. Despite the weak market conditions in Consumer, the company re-iterated its adjusted EPS guidance for FY16 of around €0.23, while the revenues are now estimated to be around €980m, down from €1,050m.
Looking up from interims
21 Oct 16
Datatec’s interims to August repeated the underlying detail revealed at the September trading update: the board looks to a sequentially and comparably stronger 2H17 and FY17, with revenue of $3.04bn showing a 7.6% decline vs 1H16 but at a gross margin of 13.8% (1H16: 13.1%), highlighting the challenges faced in a macro environment dominated by the effects of the strong dollar. The 1H dividend has reverted to match the unchanged existing dividend policy (exceeded since 2012) from 8 USc to 4.2 USc, to maintain a fixed three-times cover relative to underlying earnings. While FX has challenged the business momentum, it has benefited the sterling translation effect and therefore we retain our 400p target. Evidence of gentle LatAm recovery to the benefit of revenue, an improving product mix to the benefit of gross margin, and efficiency gains in opex due to the ERP, BPO and other initiatives, all lead to optimism for recovery for Datatec into 2H17 and FY18.
Concerns over French security of supply and carbon tax application
21 Oct 16
According to the press, the French government will most likely drop the current carbon tax plans. The government was planning to apply a carbon tax only to coal generation assets, but there are growing concerns over the measure being too complicated to implement given that it will be applied only to some assets. If implemented, it might be unconstitutional and not be accepted by the European Commission given that it can be considered state help for EDF in order to boost power prices and improve the profitability of lower emission assets. Moreover, EDF has been forced once again by the nuclear regulator (ASN) to close five additional nuclear reactors by the year-end to perform additional tests on the reactor vessel and steam generator of these reactors. With a third of the nuclear park already stopped in the country, there are increasing doubts over EDF’s ability to cover its supply needs over the winter and this has once again boosted wholesale prices across Europe. Driven by a spike in French wholesale electricity prices (as they are currently above the €70/MWh level) and an expected lower production from its nuclear fleet, EDF has demanded both the Minister of Economy and the Minister of the Environment and Energy to apply a temporary suspension of the ARENH mechanism (a regulated price given to competitors to buy nuclear electricity, set around €42/MWh). As a result, concerns over security of supply and a tight reserve margin for the coming winter have emerged and the output from coal and gas plants has more than doubled in recent weeks due to lower nuclear production. On the other hand, and despite the expected outages, EDF has maintained its nuclear production targets (which were already reduced twice in 2016) at 380-390TWh for 2016 and 390-400TWh for 2017. Moreover, EDF has finally provided the timeline for the five nuclear reactors outages that will be stopped for the additional testing demanded by the ASN: the period will be mainly (for four reactors) during the holiday season from 10 December 2016 to 15 January 2017, with one reactor stopped from 22 October 2016 to 19 December 2016.
Strong demand from mobility applications, cont’d.
21 Oct 16
Umicore’s number-less trading statement reported a +7% revenue increase mainly driven by Catalysis. Management confirmed recent 2016 guidance expecting recurring EBIT to be in the range of €345-365m including the FY contribution of Zinc Chemicals for the full year, but excludes the effect of the rescheduled shutdown of the Hoboken smelter at the end of the year.
Telia refocus on the Nordics
21 Oct 16
Q3 revenues in local currencies were perfectly in line with expectations: they have declined by 1.2% yoy, exactly as in H1. Note the whole segment region of Eurasia is reported as discontinued operations, as in H1 (the group having announced in September 2015 an orderly retreat from all its operations in this region to refocus on Europe), but Spain (9% of revenues) was still in the accounts despite the announcement of its sale to Masmovil at the end of June. However, EBITDA has decreased by 1.6% yoy at constant change, a poor performance compared to the 5% and 10% growth recorded in Q2 and Q1, but Telia had previously announced that H2 would be tougher than H1 especially in Sweden (which now represents more than 40% of Telia’s activities). In H1, the Swedish EBITDA increase was partly due to one-off fibre installation charges. The current performance in Sweden remains characterised by stable growth in the consumer segment, but pressure in parts of the enterprise area with significant price pressure in the large enterprise and public segments. The outlook for 2016 (to generate an EBITDA in line or slightly above the level in 2015) is, however, unchanged. Last but not least, Q3 was severely impacted by a SEK12.5bn provision related to the US and Dutch authorities settlement proposal, announced in September, as a consequence of Telia’s entry into and operations in Uzbekistan.
No fireman seems to be willing to extinguish the fire
21 Oct 16
Ericsson reported sales of SEK51.1bn, a decrease of 13.7% yoy, which was expected after the profit warning on 12 October. On a comparable basis (comparable units and currency), however, the decline was 7%. Every region but SE Asia displayed a decrease, the sharpest being once again in the Middle East (-25%). Networks fell by 19% yoy (SEK23.3bn), Global Services by 8.3% (SEK24.8bn) and Support Solutions by 10.9% (SEK2.9bn). The gross margin, excluding restructuring charges, decreased yoy by 490bp to 29.4%, due to an unfavourable mix. The operating margin was therefore negatively impacted yoy, losing 790bp at 0.7% (710bp excluding restructuring). The EPS came in at SEK-0.07, corresponding to a 106% decline yoy. As a consequence, the company announced an intensification of its restructuring effort in the short term as a way to offset the sales decline. However, the weak market conditions are expected to remain in the short term.
Higher operating margin despite Gardena
21 Oct 16
Husqvarna had a slightly disappointing Q3 16 below our expectations. This is tempered by the challenging basis of comparison last year at Gardena and the Construction business to a lesser extent. Q3 16 figures: Sales reached SEK7,349m (+1%). Organic sales were down 1% (vs flat on Q3 15) due to Gardena, -6% (vs +19% in Q3 15) and the Consumer Brands division, -10% (vs -18% in Q3 15). Conversely, Husqvarna performed well, +5% (vs +3% in Q3 15) and the Construction division grew slowly, +1% (vs +7% in Q3 15). The operating income increased to SEK431m, +6% and +2% at constant currency, and the operating margin improved to 5.9% of sales (+0.4pt). The currency effects were negative by SEK-60m (vs SEK-60m in Q3 15). The increase in group operating income was attributable to the Husqvarna division (SEK368m, +14%), the Construction division (SEK155m, +8%) and the Consumer Brands division which reduced its operating losses (SEK-80m vs SEK-119m in Q3 15). Conversely, the Gardena division had lower operating income, or SEK50m (vs SEK113m in Q3 15), due to the lower sales of the highly-profitable watering products. Group net profit was SEK206m (+5%) after a surge in net financial costs (+49% to SEK-124m including a negative currency effect) and a lower income tax rate (33.2%, -5.9pts) considering that there was a one-off tax item in Q3 15. On 9m 2016, the operating cash flow increased to SEK3.1bn (+22%) after a decrease in the change of WCR. FCF reached SEK2.1bn after net capex of SEK996m (+5%). On 30 September 2016, financial net debt (excluding the provision for pensions) was reduced to SEK3.8bn (-12%) and represented 27% of total equity (vs 32% on 30 September 2015).
In line with expectations but costs are out of control
21 Oct 16
The company reported third quarter results. Total revenues increased 7.8% to €5.38bn. Cloud subscription & support revenues grew 28.4% to €769m. We estimated an increase of 31.2% to €786m and the market around €787m. New cloud bookings (order entry) increased 24% to €265m. Software licence revenues grew 2% to €1.04bn (our estimate +3.5% to €1.04bn). Maintenance revenues increased surprisingly strong by 5.7% to €2.65bn (estimate: 2.2% to €2.56bn). EBIT, however, dropped by 9% to €1.1bn. We expected an EBIT increase of 10.5% to €1.3bn. Net income dropped 19% to €730m (estimate: +6.3% to €955m). Cloud subscription and support revenues grew 34% from €136m to €182m in the EMEA region, and were especially strong in Germany, France and the UK. In the Americas, cloud revenues increased 24% to €508m, and in Asia Pacific around 52% to €78m. In the third quarter, the company added 400 new SAP S/4 HANA customers (+40%). Around 4,100 customers are now using this cloud platform.