22 Feb 18
Car Genie should be magic for Trakm8
The AA strategy update has set out an ambitious plan for the business to move into the future; taking it from “a company helping when you break down to one actually predicting when you might break down in the first place”, flagging game-changing growth drivers in the areas of Connected Car and insurance. The key element enabling this refocused strategy will be its Car Genie product (provided by Trakm8) and it is set to see an extended rollout to “tens of thousands” of existing clients. We thus see significant upside in Trakm8 forecasts from FY 2019 for additional AA orders.
12 Feb 18
Doubling and Delivering
PROACTIS’ interim trading statement provides the first opportunity to gauge performance since Perfect was consolidated. The overall picture looks healthy: revenue of £26.3m has more than doubled yoy and EBITDA of £8.5m is ahead our expectations (£8.0m). While customer activity is not quantified, it is described as strong, and the target of £5m in annualised synergies by the end of FY18 is confirmed. We believe PROACTIS can deliver £20m in EBITDA in FY18 and leave our forecasts unchanged.
21 Feb 18
Some signs of stability return
Since our last missive, we have continued to experience volatility but there have been some signs recently of increasing stabilisation, although some nervousness clearly still persists. We have a Spring Statement from the Chancellor of Exchequer on 13 March where he will respond to the forecasts from the Office for Budget Responsibility. We have the prospect of a rise in interest rates in the short run, with further increases likely over the medium term with negative implications for ‘defensives’. In Share News & Views, we comment on Hargreaves Services, RWS Holdings, Staffline and Synectics*.
Companies: APC BMS CRPR ECSC EUSP FDM GETB PCF SNX SPRP TCN W7L
16 Feb 18
Steve Brown to step down as CEO
Steve Brown is stepping down from the CEO role and will be replaced by Paul Noland, current President and CEO of the International Association of Amusement Parks and Attractions ("IAAPA”), when he joins the accesso Board on 9 April. Mr Noland has extensive industry experience having previously held senior leadership and operational roles at Walt Disney Parks and Resorts and Marriott International. While news of Mr Brown’s departure may disappoint the market initially given that he was viewed as a quality operator, his replacement’s extensive industry experience will be invaluable to accesso’s next phase of growth and global ambitions. Reassurance is also provided by the fact that Mr Brown will serve as an advisor to both Mr Noland and the Board throughout 2018.
Companies: Accesso Technology Group
21 Feb 18
Share buy-back signals strong visibility on capital generation
Quarterly results showed no changes in underlying operating trends. The symbolic share buy-back announcement signals management’s strong visibility on future excess capital generation in spite of pending regulatory impacts, potential residual litigation charges or future pension contributions.
Companies: Lloyds Banking Group
16 Feb 18
Proposed placing and interim results
CVS has this morning announced an intention to conduct a placing of up to 6.391m shares via an accelerated bookbuild. The proceeds will be used to pay down debt and create additional headroom to help fund a strong pipeline of future acquisitions. Management has an excellent consolidation and investment track record and we note that it successfully put to good use the Dec’16 fund raise in a timely manner. Today’s corporate news is accompanied with an inline set of interims. We put our forecasts under review and will publish updated numbers once the final outcome of the placing is confirmed.
Companies: CVS Group
19 Feb 18
Unique model continues to deliver results
Gleeson’s interims confirm another period of excellent progress, the highlight of which is the 31% growth in completions at Gleeson Homes. The Group is well on track for the full year with an increase in new site openings planned for the coming months as management puts the infrastructure in place to build towards its 2,000 home target. We increase our dividend forecasts by c.2% (with more potentially to come) noting a more generous dividend policy. EPS edges up by a similar amount (lower tax rate). Gleeson is in excellent shape with strong growth momentum, a highly impressive management team and income attractions (4%+ yield). It remains a Best Idea for 2018 and we are highly supportive of its unique affordable housing model.
Companies: MJ Gleeson
19 Feb 18
Trading Update - Material Earnings Upgrades
Dart Group has provided a trading update this morning, indicating that improving pricing dynamics are likely to see FY18 underlying PBT materially ahead of current market expectations (Bloomberg consensus: £95m). In addition, the Group highlights that FY19 trading performance is expected to be “broadly” inline with FY18.
Companies: Dart Group
20 Feb 18
Strong 2017 sets foundation for future years
Although the macro scenario is still positive, more than 40% of LNGC projects under construction is behind schedule or slowing down, which has reduced GTT’s expected orders from 52 to 37 by 2022. As a reminder, LNG carriers remain GTT’s main activity, contributing 83% to sales in 2017.
Companies: Veltyco Group
22 Feb 18
Strong 2017 Results, Well Positioned For 2018
Lloyds Banking Group (LBG) has reported very solid 2017 results with all key metrics moving in the right direction, so the positive momentum from the first three quarters of 2017 carried forward into Q4. The outlook for 2018 is also positive, with key ratios all likely to improve further. We reiterate our Buy recommendation with 80p target price.
Companies: Lloyds Banking Group
19 Feb 18
Forecast update pre tomorrow’s CMD - minor EBITDA upgrades
We have updated forecasts ahead of tomorrow’s Capital Markets Day, which we expect to provide a comprehensive update on innovation strategy, R&D plans and commercial progress. We continue to argue that the market’s negative reaction on the Trading Update on 1st February, which highlighted FY2017 EBITDA in line with our forecast, represented an overreaction. We reiterate our Buy recommendation with a revised target price of 230p (from 250p).
Companies: Horizon Discovery Group
17 Jan 18
Taptica has taken advantage of investor demand following the recent positive trading update to raise $30m in an oversubscribed placing in order to reduce its debt. It has issued 4.85m new shares at 450p; approximately 7.7% dilution excluding dormant shares. Furthermore CEO Hagai Tal has sold 1.65m shares (a further $10m) to pay a CGT liability due on the reorganisation of his holding in 2016. Founder Ehud Levy has also taken the opportunity of strong institutional demand to reduce his exposure to the business through the sale of 2.0m shares. Although there will be some dilution, the placing will strengthen the balance sheet and better position the Taptica for prospective M&A opportunities.
Companies: Taptica International
15 Feb 18
Interims results – confident outlook
Interim results to 31 December were in line with the 19 January trading statement, with revenues rising 31% to £4.2m, resulting in a pre-tax loss of £30k and period-end cash of £2.0m. A positive outlook statement, supported by strong post-period end growth data for Skinny Tan and Roots, should provide the comfort that investors are looking for and justify H2 seasonality, which is expected to account for 69% of FY revenues (vs. c.65% in the past two years); driven by product line extensions, increasing retail shelf space and geographic expansion. Minor changes to forecasts (<5%), -2% EPS (offset by lower tax charge) are made with better year-end cash. We retain our target price of 400p, which implies a 2019 P/E, EV/EBIT and EV/Sales of 19.3x, 17.0x and 3.1x, respectively, underpinned by rising ROCE and free cash flow yield.
20 Feb 18
Wider WS losses short term, but no change to longer term opportunity
Interims are a slight miss due to costs, and increased cost guidance, especially WS losses, points to downgrades of c4% this morning, which is disappointing so soon after the pre-close. The dividend was better than expected though driven by confidence in the future potential, which hasn’t changed, and cash generative dynamics. Significant investment in the last 2-3 years, incl. areas with rapid payback, and a low-ticket bias (£30 ATV), mean DNLM isn’t reliant on the backdrop. In particular, integration benefits from WorldStores have turbo-charged its online and category capability, further distancing it from the discounters. Key to today is a positive update on strategic growth initiatives, and reassurance on reversing H1 gross margin mix dilution (H2 margin expected to be c+100bps). But the additional costs/losses at WS are a disappointment. Whilst the previous lack of clarity about the growth strategy has been addressed (CMD, 11 Oct), recovering confidence in Dunelm’s potential and online growth may be set-back today, albeit temporary. Weakness in the shares, should it materialise, would present an opportunity.
Companies: Dunelm Group
07 Feb 18
Initiating coverage with a Buy rating & 107% upside
CloudCall is a cloud-based unified communications provider. We believe deepening channel partnerships, a new unified platform roll-out and the recent equity placement have positioned CloudCall for a substantial acceleration that is yet to be fully appreciated by investors. Our forecasts expect short-term sales growth of c.33% FY17-20E to outpace the market. We initiate coverage with a Buy rating and a PT of 300p, implying 107% upside potential, based on the peer group’s trading multiples. Our cost analysis and the board’s experience with similar, highly successful companies (dotdigital, AIM: DOTD) underpin our conviction. In our view, the shares could reach 400p under more bullish scenarios.
Companies: Cloudcall Group
23 Feb 18
Bookie friendly Q4 sweetens FY17 results
William hill released a mixed set of full-year results, marked by a strong performance in Online, due to higher stakes and gross win margins, in the US, and lower growth in Retail and Australia.
Companies: William Hill
23 Feb 18
Refining production ramp-up
Q4 adjusted EBITDA came in at €170m (-21% yoy), slightly below the consensus expectations. The figures are mainly due to the benchmark margin sliding from its peak level (Q3 17) based on rising oil prices. FY operating cash flow (adjusted EBITDA – capex) was €625m (+3% yoy), and net debt remained at €1.8bn FY 17 capex amounted to €209m, mainly for refining maintenance. Capex for 2018 is expected to be €175m, which should be used to focus on growth project opportunities. Management has decided to pay a final dividend of €0.25/share, which corresponds to a FY 17 DPS of €0.40/share (vs. €0.20/share in 2016).
Companies: HELLENIC PETROLEUM
23 Feb 18
FY17: solid organic growth, but operating leverage and EBITDA conversion rate into FCF disappoint us
Reported figures are strong, but management reported a slightly negative price/cost spread in the operating income. Also, the operating leverage disappoints. The FY18 guidance seems challenging but achievable, in our opinion. The reduction in the number of shares was less than expected and the net impact of the group’s savings plan and stock options should be retreated as operating cash flow. There was an astonishing 8.9% actual return on plan assets. The EBITDA conversion rate into FCF was still very low. Pont-à-Mousson and Lapeyre continued to disappoint.
Companies: Compagnie De St-Gobain
23 Feb 18
Improved results in 2018 expected
FY revenue was €1.5bn (-16% yoy on a comparable basis), with a low single-digit loss in Q4. EBIT came in at €-32m, which is around 15% below consensus expectations. The lower figures are mainly due to the continued price pressure in the Marine division and the lower activity level at Seabed Geosolutions. Net cash from operations was €24m and net investment was €75m, resulting in a negative cash flow of €-50.5m. Net debt increased from €351m to €430m, mainly driven by negative cash flow and a negative FX impact. 2018 outlook: Fugro expects an improving EBIT margin for 2018 and is targeting positive cash flow from operating activities after investments. Capex is expected to be around €80m.
Companies: FUGRO NV-CVA
23 Feb 18
Better equipped to face market evolution than competitors
IAG reported quite good FY results with revenues and EBIT before exceptional items meeting expectations. Profit after tax rose by 13% and also beat estimates. The group was able to report good figures thanks to decreasing passenger revenue per RPK (-2.1%) more than compensated by the decreasing total cost per ASK (-2.9%). The group announced a FY dividend growing by 15% to €0.27/share and a share buy-back programme of €500m. The outlook shows an operating profit which is expected to increase yoy in 2018.
Companies: International Consolidated Airlns Grp
23 Feb 18
Harder-than-previously announced road to salvation
Although underlying quarterly operating trends were in line with expectations, enabling management to globally confirm its 2020 financial objectives, the latter warned that the way will not be straightforward with ongoing litigation charges (beyond the never-ending US RMBS story) and inflated restructuring charges.
Companies: Royal Bank Of Scotland Group
23 Feb 18
FY17: not there yet
SES reported a rather weak set of full-year results, marked by the lowering and widening of the group’s 2018 targets, lower growth at SES Networks and a much needed c.40% cut in dividends.
23 Feb 18
Robust TAV brightens unsurprising underlying results in Q4 17
ADP released a mixed set of full-year results, marked by TAV Airports’ robust performance, strong growth in Paris Aéroport traffic and relatively weak Retail & Services due to stagnating sales per pax. The group announced a set of 2018 objectives broadly in line with our expectations and proposed a €3.46 dividend.
Companies: Aeroports de Paris
23 Feb 18
Weak FY2017 profit as expected but better renewals, dividend, share buy-back and Softbank
Net profit attributable to shareholders decreased by 91% to $331m for FY2017 compared to FY2016. Premiums earned rose by 1% to $33.2bn for FY2017 compared to FY2016. Total revenues were down by 3% to $42.5bn in FY2017. Claims increased by 33% to $16.7bn for FY2017. Total expenses were up by 7% to $41.4bn for FY2017. The group’s P&C combined ratio rose from 93.5% for 2016 to 111.5% in 2017 due to natural catastrophe losses of $4.7bn. Swiss Re’s return on investment (RoI) was 3.9% in 2017 compared to 3.4% in 2016. Shareholders’ equity was down by 3% to $33.4bn at the end of 2017 versus the end of 2016. The RoE after tax was 1.0% for FY2017 compared to 10.6% for FY2016. The regular dividend proposal per share increased from CHF4.85 for FY2016 to CHF5.00 for FY2016. Swiss Re announced another public share buy-back of up to CHF1.0bn. Swiss Re gave a better outlook regarding the January 2018 renewals. Swiss Re renewed $8.1bn of the $7.5bn premium volume up for renewal, representing an increase of 8%. Risk-adjusted price quality was up by two percentage points to 102%.
Companies: Swiss Re
23 Feb 18
Hellenic Petroleum - Q4 strong ops performance, weaker margins
Hellenic Petroleum reported Q4 adjusted EBITDA of €170m, a 20.9% decrease y-o-y, 7.7% below our Q417 estimates. This reduction was primarily due to lower benchmark margins partly offset by strong operational performance with refining utilisation at 111% (input over nominal capacity), exports (+12%) and a 14% increase in domestic marketing net sales driven by aviation and bunkering. FY17 adjusted EBITDA growth was strong at +14% with record production (15Mt) and sales (16.1Mt). Our last published valuation, using a mix of 2018e P/E, EV/EBITDA and DCF metrics, stands at €9.3/share.
Companies: HELLENIC PETROLEUM
23 Feb 18
Too weak perspectives
Ingenico reported FY17 results in line with market and our expectations with revenues up 9% yoy (+7% organic), while the EBITDA margin has slightly increased to 21% (vs 20.6% for FY16). The disappointment came from the bottom line as the net result rose by only 5%, mainly due to higher other operational charges and lower financial revenues. The group is able to distribute a €1.6/share dividend (+7% yoy) but offers weaker than expected 2018-20 perspectives.
Companies: Ingenico Group
23 Feb 18
Once again backed by strong performance in Europe
The company posted robust Q4 results, led by a strong performance in Europe, where accelerated digitalisation and the promising macro-economic situation were the key drivers. Brazil remained a mix bag as the favourable Fleet & Mobility segment was offset by the subdued Employee Benefit business. Our optimism on the company remains intact and is fuelled by management’s aggressive adoption of technology and vast untapped opportunities in Fleet & Mobility segment. We will revise our estimate upward; no change in the stock recommendation.
23 Feb 18
Value contingent on the solutions business
Recommendation and upside We are initiating coverage of Ocado Plc. (market cap. of £3.3bn and a float of c.67%) with an ‘Add’ recommendation and a target price of 570p (c.13% upside). Our upside is driven by the robust growth in both business segments. The solutions business is likely to take the driver’s seat as Ocado monetises the proprietary solution OSP by offering it to other retailers. Management’s recent success in forging two partnerships in France (traditionally inclined towards a network of ‘Drives’ vs home delivery in the UK) and North America is strong evidence of Ocado’s top-notch technology-driven proposition. We estimate the company will continue to forge similar partnerships in future, largely confined to the USA and Europe. The retail segment is also likely to sustain the ongoing momentum, due to: 1) expansion of the online grocery format in the UK – the fastest growing format (+53.8% by 2022 vs 15.4% for the overall UK grocery market), – underpinned by the ongoing structural shift in consumers’ buying preferences, 2) Ocado’s ability to gain market share, on the back of a best-in-class business model (among one of the few profitable online grocers across the globe), becoming more competitive by benchmarking the prices against Tesco and economies of scale – gradual increase in SKU count, increased delivery slots with higher geographical density and better routing. In 2014, investors lost faith in Ocado’s growth story after management failed to add new clients in its solutions business (although the retail business was growing satisfactorily). However, the stock price has more than doubled since November 2017 after the company announced two back-to-back deals in this segment (Casino and Sobeys in France and Canada, respectively). The company is likely to witness strong cash generation after the high investment phase (capex at c.10% of group revenue vs 2.4% for traditional UK grocers) in technology and new CFCs normalise in the out-years. Business and Trends Ocado is one of the most promising pure-play online grocers in the world. It relies on proprietary / best-in-class technology for online retailing, logistics and distribution of products (e.g. use of bots in fulfilment centres, routing software for efficient product delivery, artificial intelligence to engage customers). The UK-based retailer operates through two business segments, retail and solutions. The retail segment (14.6% CAGR during FY12-16) generates c.92% of total revenue, which includes sale of goods through ‘Ocado.com’ to an active customer base of over 580,000 (covers 70% of the UK population and 50% of total area). It sources the majority of the products from Waitrose and, hence, is perceived as offering good quality products but at slightly expensive prices. Although Ocado commands only a 1.3% share of the UK grocery market (worth £185bn), it ranks third (after Tesco and Sainsbury) in the online food segment with a market share of c.16%. The firm’s non-food business is still in the nascent stage and constitutes c.7% of total retail sales. It started in 2013 with launch of pet goods website (Fetch.co.uk), followed by kitchen goods website (Sizzle.co.uk) in the subsequent year. In 2016, the company launched a premium beauty destination site and flagship physical store, Fabled, in partnership with Marie Claire. The solutions business involves monetisation of Ocado’s proprietary solution ‘OSP’ (owns over 200 patents / patent applications) by offering it to other retailers. The solution presents a blend of automated warehousing and distribution capability, and physical fulfilment centres to assist the retailers to launch / expand their e-commerce business. The fulfilment assets are modular (can be built to almost any size) and scalable (can be built in multiple phases) and, in turn, help the business partners to operate in a capital-light manner. OSP tasted its first commercial success in 2013 by entering into a 25-year agreement with UK’s fourth largest grocer Morrisons – the task involved the launch and operation of the online business (Morrisons.com). The two companies formed a JV, with equal sharing capacity rights of Ocado’s Dordon customer fulfilment centre (CFC). Morrisons agreed to pay a combination of upfront cost, annual service cost, R&D expenditure and a share of the positive EBIT from the new business. However, the deal was renegotiated in 2016: 1) Ocado agreed to expand Morrisons’ delivery coverage by granting it additional capacity at Erith CFC (scheduled to open in 2018), 2) Ocado became free to forge partnerships with other UK retailers, excluding Tesco, Sainsbury’s, Asda, Aldi and Lidl, and 3) in return, Morrisons terminated the profit-sharing clause with Ocado for the next 15 years. Need to know As of FY16, Ocado’s retail business enjoyed slightly better profitability vs solutions (6.5% vs 5.5%) and accounts for c.90% of the group’s EBITDA. However, contribution of the solutions business should rise in the coming years as retailers across globe are shifting their focus to strengthen the e-commerce platform (triggered by Amazon’s big leap into grocery business with the acquisition of Whole Foods last year). Despite a mid single-digit EBITDA margin and negligible tax payments (benefiting from the accumulated tax losses), Ocado has failed to generate positive FCF (£-21m in FY16). This is largely due to the high capital expenditure (explained above) as the entity has invested heavily in the automated warehousing capability (D&A expense at c.5% of the group revenue is also almost double that of UK grocers). No wonder, the group has a depressed ROE (c.5%; turned positive in 2014) and ROCE (c.150bp below the 7.2% WACC). Upcoming triggers We expect the next major trigger for the company to be the onboarding of new clients in the solutions business. Moreover, a sustained top-line momentum in the retail segment (>10% yoy) and improving profit margins are also likely to nudge investors’ sentiment. Moreover, a takeover attempt by big retailers (to improve their e-com proposition in an increasingly competitive landscape) cannot be ruled out considering the c.67% free float for the stock. The grocer is a strategic fit especially for Amazon – the US retailer has more to lose if Ocado’s solutions business decides to bulk-up opponents such as Kroger and Wal-Mart.
Companies: Ocado Group
23 Feb 18
Valuation not at risk!
Warnings of strikes – the same procedure At present, Deutsche Post DHL is facing several warnings of strikes in two German counties. The trade conflict between DHL and the trade union ver.di is gaining momentum. Ver.di is asking for a pay increase of around 6%. In addition, trade union members want to be allowed to use part of the pay increase in lieu of time off. Around 130,000 employees of DHL are members of trade unions. So far, we do not expect DHL’s management to agree to the pay increase which would increase personnel costs by around €300m, or 1.5%. In general, we expect DHL’s management to offer an inflationary compensation of 1.8% plus a pay increase of 1.2% (1.7% max.) for a period of at least two years. The higher wages will then be compensated by efficiency gains but also increases in product prices. The impact on the P&L should be limited. DHL well prepared for a ban on driving in cities The vehicle fleet delivering mail and parcels in Germany will change in the long term. Assuming the Federal Administrative Court in Leipzig will allow cities to ban diesel-driven cars from the city, the supply chain, especially for DHL, UPS, Fedex or Hermes, might be at risk. In reality, there will be exemptions for buses, craftsmen and the whole public transport fleet of vehicles (police, etc.). We believe Deutsche Post DHL is already well prepared for a possible ban on entering cities. The DHL group has a fleet of 92,328 vehicles worldwide (2016 statistics) of which 24% belongs to Euro 4 and lower, 62% to Euro 5 and 14% to Euro 6. In Germany around 13,000 vans and 34,000 cars deliver mail and parcels. Around 5,000 battery-driven StreetScooters are part of the van fleet of 13,000. The replacement process is running according to plan. Initially a production capacity of 10,000 StreetScooters per year had been planned in 2017 but this number already reached 15,000 in September 2017.
Companies: Deutsche Post
23 Feb 18
mVISE - Bullish 2020 guidance after strong 2017
mVISE has released preliminary 2017 results, showing a 78% increase in revenue (Gesamtleistung, which includes capitalised items) to €16.1m and an 82% increase in EBITDA to €2.0m, both 5% above consensus. Q4 revenues and EBITDA of €5.9m and €1.4m, respectively, reflected robust performances in managed services operations and at integration platform elastic.io, as well as the first-time inclusion of SHS Viveon’s consulting business, which added c €1.0m to EBITDA. The board expects strong incentives for German firms to invest in digital transformation to continue to sustain market growth. New 2020 revenue and EBIT margin targets of €35m and 15%, respectively, imply an organic revenue CAGR of 32% and a 15-20x increase in EBIT, based on 2017 consensus. In our view, upside from the SHS Viveon acquisition, the high operating leverage of the group’s SaaS businesses and the outlook for strong demand lend a high degree of credibility to these targets.
19 May 17
Leading UK fund manager, Gervais Williams, discusses investing, his outlook and two companies he's excited about
16 Jan 18
1pm (OPM) Interim results January 2018
24 Jan 18
Bango Strategy Day, 24th January 2018
16 Feb 17
Trifast - Trading update
22 Jan 18
Reabold - Company Overview
23 Jan 18
Boku - Trading Update
30 Jan 18
Filtronic - Company Overview
08 Sep 17
MiFID II & the private investor
05 Feb 18
AB Dynamics (ABDP) February 2018 update interview with Tim Rogers CEO
13 Dec 17
Research Tree's new investor tool - Watch our 3min "How to" guide here
25 Jan 18
Character Group - Toy Fair 2018
26 Jan 18
Cadence Minerals - Company update
02 Feb 18
Bushveld Minerals: An Emerging, Integrated Vanadium Producer
03 Jan 18
Executive interview - door2door
11 Jan 18