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PUMA ended the year with both the top line and profitability in line with consensus expectations. The beginning of FY22 continues to be impacted by the disrupted supply chain, inflationary pressure and geopolitical uncertainties, which led the group to release a cautious outlook for FY22. In particular, the “boycott” situation and resurgence of COVID-19 in China continue to weigh on the group’s activity in the country.
Companies: PUMA SE
AlphaValue
PUMA experienced a better-than-expected Q3 21. The strong demand in the Americas, favourable channel mix and less promotional activity have limited the impact of supply-chain challenges and ongoing COVID-19-related restrictions in Asia. The ongoing industry-wide supply-chain disruptions and the continued challenging trading environment in China have led the group to upgrade conservatively its FY 21 outlook. The current market expectations were already broadly in line with the updated guidance.
PUMA has published its Q2 21 results, in line with the preliminary release. The robust growth in North America and gradual recovery in EMEA have led the top line to exceed the 2019 level. The trading performance in China has been affected by the “boycott over Xinjiang cotton”, sales slid 5% yoy. The gross margin has significantly improved from last year, despite supply chain constraints. However, on the back of the strong quarter, the conservative guidance for FY21 leaves some shadow.
Puma recorded a strong start to the year. Encouraging sales growth across all régions and all segments confirmed the pandemic-led surge in the consciousness for healthy living and a rekindled trend in athleisure. However, the group’s very cautious view on the trading environment for the rest of the year, highlighting the “boycott on Xinjiang cotton issue” in China has started to weigh visibly on the group’s business since the end of March.
Despite the second wave of lockdowns and re-imposed anti-pandemic measures keeping some stores shut, the group achieved top-line and profitability growth in Q4 20. The group expects the ongoing lockdowns in Europe and uncertainty related to the pandemic to continue to weigh on the group’s business until the end of Q2 21, followed by a strong recovery in H2 21.
The Q2 figures were a little disappointing. Both sales and profitability were hit heavier than expected by the pandemic. In particular, the higher than expected discounts and piling up of seasonal inventory will continue to put pressure on the margin. However, the trading trend since June is very encouraging, which confirms our confidence that the group is in a good position to benefit from the business recovery after the pandemic crisis is over.
The Q1 20 results have been unsurprisingly impacted by the COVID-19 crisis. With over 50% of the group’s stores closed around the world at present, the group’s business will be even more affected in Q2 20. However, the group’s sales contraction was less than peers which shows its business has the greater resilience. The pandemic is increasing people’s focus on sports, especially in Asia. The outlook post-COVID-19 remains encouraging.
Puma delivered formidable numbers for 2019. Some of this is supported by the stronger currency tailwind, but the currency-adjusted revenue growth rate also accelerated from +16.7% in 9M19 to +17.0%. On a reported basis, the growth rate accelerated from 17.6% to 20.6%. However, as purchase prices are typically denominated in US dollars, the gross profit margin was up by ‘only’ 0.2pp in Q4 compared to 0.6pp through to September last year.
Puma’s revenue growth continued at full speed in Q3 but the profit margin improvement moderated considerably. The group’s full-year profit outlook suggests that our current projections are too optimistic. The reasons for the moderate outlook are, among other things, new tariffs imposed by the USA on imports from China.
Although sourcing costs are typically denominated in US dollars and as the dollar has appreciated against the euro, Puma has been able to increase the gross margin by 0.7pp to 49.3% in the last quarter and by 0.8pp to 49.2% in H1 19. According to management, a higher share of in-house retail sales, a better product mix, less discounts, and a positive currency impact have all contributed to this very favourable development.
Revenue growth of 16.6% (currency-adjusted +15.3%) and much stronger profit growth has not allowed management to increase its full-year guidance. It continues to see revenue increasing by about 10% (currency-adjusted) and EBIT coming somewhere between €395m and €415m.
Puma replaces Nike and is believed to pay some €750m over a period of ten years. Assuming this speculation is correct, the annual payments represent approximately 1.5% of Puma’s annual turnover of the next years. Adidas had signed a similar contract with Manchester United in 2014 and that contract was believed to be worth €1bn over a ten-year period. However, this annual amount represents ‘only’ 0.4% of the peer’s annual revenue number. Puma’s strategy over the last years has been to strengthe
2018 consolidated revenue was up by 12% to €4.65bn (+18% currency-adjusted). Simultaneously, EBIT and net earnings both increased by 38% to €337m and €187m, respectively. Management proposes a dividend of €3.50 for the last fiscal year, whereas we had expected €3.00. Our sales and profit projections had been €4.55bn, €349m, and €203m, respectively.
Puma’s revenue growth was about unchanged in Q3 vs. H1, i.e. turnover was up by 10.7% to €1.24bn in the last quarter which brought the ytd number to 3.42bn, an increase of 10.5%. However, EBIT growth fell to 29% to €130m in Q3 which brought the 9M number to €300m, an increase of 40%. The respective net profit numbers were +25% to €78m and +32% to €176m.
Management’s strategy continued paying off in H1. At a glance, the group’s net cash has fallen considerably in H1 18, but this is exclusively the result of the exceptionally high and farewell dividend paid to all shareholders including Kering.
Research Tree provides access to ongoing research coverage, media content and regulatory news on PUMA SE. We currently have 27 research reports from 3 professional analysts.
AFC has made strong progress with products and its manufacturing strategy. Despite heavy investment, the cash position, at £27.4m, was slightly better than our estimate for £26.9m, demonstrating good discipline. The monthly cash burn rate (at c. £1.3m) is tracking in-line with our expectations. Generally, we maintain our estimates for significantly increased sales in FY24e and FY25e, with the cash position unchanged. Recent news on commercial progress has been positive. The 30kW H-Power Generato
Companies: AFC Energy plc
Zeus Capital
Spectra Systems (SPSY) has an excellent record in growing profits through its highly regarded technology and relationships with key clients, which include a prominent global central bank. Now, the company is ready for the next stage, and we see the acquisition of Cartor Security Printers as a game-changer in enhancing its ability to continue, and potentially accelerate, this momentum, even as it continues to benefit from a near-term, multi-million-dollar sensor refresh programme with a long-term
Companies: Spectra Systems Corporation
WHIreland
The group’s year-end update flags trading ahead of expectations, achieved by strong growth in its Systems division, with the earlier than expected delivery of a NATO contract just prior to the year-end that pulls forward profit into FY24 making it a record year. Components continue to see a normalisation of orders and slower demand as previously flagged. Order cover is strong and further opportunities in the defence/security sector are leading to investment in Integrated Systems capabilities. Re
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Cavendish
Today’s trading update confirms FY24E profitability above the top end of previously guided range, with positive trading momentum building into FY25.
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2023 was a challenging year for Tandem, with cost-of-living pressures impacting demand for many of the group’s products. This led us to downgrade our forecasts several times during the year (including in December), and today’s results are largely in line with those revised projections – revenue -17% YoY to £22.2m and an adj. LAT of -£1.0m (our forecast of -£0.9m). FY24E looks more positive, however: economic pressures are easing for consumers (inflation is falling, interest rate cuts are expecte
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Solid State is a specialist value added component supplier and design-in manufacturer of computing, power and communications products. This morning, the group has provided a trading update for the year ended 31 March 2024, reporting the earlier than expected delivery of specific contracts within its Systems division and resulting in the group's FY 2024E revenue and PBT outturn anticipated ahead of our forecasts, with a commensurate decrease in our FY 2025E estimates. The delivery of these contr
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Encouraging FY23 results from SPSY this morning show profits and cash a touch ahead of expectation and position the company well for a year of strong growth in FY24E. SPSY leads the market in machine-readable high speed banknote authentication, brand protection technologies and gaming security software. The company grew the business robustly in FY23 (PBTA +6%, EPS pared by increased tax payments, progressive DPS), building on a decade of double digit CAGR; and closed the year with the transfor
Liberum
Companies: LPA SOLI NANO QTX
Finals from the leader in machine-readable high-speed bank note authentication, brand protection technologies, security printing, and gaming software, in line. FY23’s stand-out feature was December’s acquisition of Cartor Holdings, the security printing business. As discussed at the time, this has moved Spectra’s Fusion polymer substrate proposition substantially forward, strengthens its competitive position and provides access to state of the art manufacturing facilities. Extending up the suppl
Allenby Capital
While revenue fell short of expectations due mainly to self-tan weakness, progress on margins, cost synergies and efficiency enabled BAR to deliver a reduction in H1 losses. While growth and profitability in other high margin brands has progressed, Skinny Tan trading is not expected to improve until next year. With synergy benefits having mostly annualised, lower sales forecasts impact the timing of the inflection to profit. We now assume losses both this and next year, albeit net cash is mostly
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Singer Capital Markets
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Shore Capital
Dowlais Group’s first set of results were ahead of our expectations, with positive cash generation a highlight despite restructuring and demerger costs. Softer automotive markets will limit margin progress in FY24 towards the double-digit target. Despite this, margins of c 6.5% are still ahead of automotive peers, although the shares trade at a significant discount to our implied generic peer-based valuation.
Companies: Dowlais Group PLC
Edison
Companies: IG Design Group plc
Canaccord Genuity
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