Board changes accompany Interim results

Interim results are in line with the previous trading update, although the outlook statement now points to some slightly softer market conditions, particularly in Flowtech’s engineering-oriented business. The company has recently seen a delay for a customer contract in PMC, which is likely to result in the group trading marginally below expectations. Sean Fennon has also announced that he is retiring as CEO, with Bryce Brooks stepping up to the plate. We reduce our 2018 EPS forecast by 7.7% to 14.8p, with a 5.7% reduction also in 2019. Our TP also reduces by 7% from 215p to 200p.

FY 2018 results – Boots to range Skinny Tan

Full-year results were in broadly line with the 19 June trading statement, with revenues rising 21% to £10.7m (£0.3m shortfall attributed to timing and despatch of June sales into July), resulting in a pre-tax profit of £0.7m and year-end cash of £1.9m. Confirmation that Boots is to range Skinny Tan online and in 1,250 (50%) of its UK stores from February/March 2019 significantly expands the retail footprint to more than 2,000 stores (2.7x), whilst Roots should benefit from a 4x expansion to more than 1,600 stores by year-end. We retain a 220p target price, which implies a calendar-adjusted 2019 P/E, EV/EBIT and EV/Sales of 24x, 14.0x and 1.8x, respectively. Strong growth expectations justify these premia.

Growth in a critical global market

Water Intelligence has reported another strong set of results providing further evidence of the scale of the opportunity and ability of management to execute. H1 sales increased +39% on last year and adj. EPS +38%. The group is building a scaleable, technology-backed distribution platform for water solutions in a range of international markets. With the focus on reducing water leakage continuing globally, we see the recent share price weakness as an opportunity.

Morning Note – 20 September 2018

Cambridge Cognition - Interims – strong leading growth indicators and IFRS15

Interim results to 30 June 2018 showed like-for-like (IAS18) 13% revenue growth to £3.63m, which resulted in a reduced pre-tax loss of £0.22m (£0.39m). Period-end cash was £0.88m. The transition to IFRS 15 standards, in which software revenues will be recognised over the period of a contract rather than immediately, has proved to be more egregious than anticipated, resulting in IFRS15-based revenues of £2.75m. Consequently, we are reducing our FY 2018 and 2019 revenue and EBITDA forecasts by £1m and £0.9m, respectively. That said, the company is considered to be in a most interesting phase of commercialisation with clearly identified sales drivers and a raft of new products generating substantial interest from large pharma, as manifest in yesterday’s first contract for its voice biomarker cognition product, NeuroVocalix. A book to bill ratio of 1.77, strong order book (129% up on prior year) and watershed moment in mental health assessment underpins our belief in the investment case and, therefore, we maintain our 175p price target.

Iofina - Interim results – steady as she goes

Iofina’s interim results demonstrate encouraging progress towards its operational turnaround, with higher volumes, lower unit costs and better pricing all contributing to an improved bottom line. Moreover, the pace should accelerate in H2 now that the new IO#7 plant has ramped up. Our expectation for the timing of the next newbuild Iosorb plant has shifted slightly to the right, resulting in small adjustments to our forecasts. Nevertheless, this should not detract from the ongoing underlying improvements taking place within this business. Years of cost cutting and plant optimisation leave Iofina at the bottom of the cost curve and highly leveraged to the improving pricing environment. The restructuring of its debt is ongoing, but once concluded paves the way for Iofina to pursue additional growth plans – the performance of its IO#7 unit should give investors confidence in management’s ability to execute on its growth strategy.