Siemens released a stable set of figures for FY20, bolstered in part by a relatively stronger performance in Q4. While revenues and orders were slightly lower, FCF generation was robust. Additionally, the group is mulling over whether to pay a dividend of €3.50. Management also put forward its FY21 outlook and the path ahead for the group under a new leadership.
Companies: Siemens AG
Siemens Energy looks like an acceptable “fossil” servicing plus green proposition but the spin-off begs two equally important questions – is it being done to really create a leader in energy or is it an opportunistic attempt to derisk the parent entity?
Siemens’ Q3 results were strong and ahead of consensus in profitability and FCF generation. Management confirmed the 2020 outlook and announced an acceleration in DI’s cost savings, which will be fully completed in 2021 instead of 2023.
Management of Siemens Energy gave an introductory presentation providing an update on the spin-off process and some additional financial data. Management’s focus will be on the EBITA margin and cash generation. The transaction is on track with a listing confirmed for the end of September 2020.
Siemens reported soft Q2 results, partly due to the Coronavirus outbreak, while Digital Industries beat expectations despite the continuous hit in short-cycle business. Siemens is also accelerating its cost savings programme and has announced further savings for 2021. FY20 revenue guidance was revised downwards and the EPS target suspended.
Healthineer’s Q2 was characterised by Imaging’s continued strong performance, whereas Advanced Therapies’ strong top-line development did not emerge at the profitability level. Despite being under special supervision of the CEO, Diagnostic’s performance was slightly held back.
The reported figures were above our expectations and beat consensus (sales: €3,565m; adjusted EBIT: €563m).
Due to some seasonality, Q1 was weak. But benefits should come in H2 as the short-cycle business is expected to recover steadily over the year. The second half will also benefit from the restructuring plan Vision 2020+. Management confirmed its full-year guidance. Last night, it also confirmed BB’s rumours of being interested in buying the 8.1% Iberdrola stake in SGRE.
Siemens’ Q4 results beat expectations in all metrics and segments. The better-than-expected performance over the quarter has allowed the group to achieve fully its full-year guidance. The discrete businesses should remain under pressure in the coming months, though partly offset by software services. The company provided a cautious outlook for next year, with moderate revenue growth expectations, divisional margin split broadly in line with our estimates except for Gas and Power. Transformation still continuing, but Buy rating confirmed.
Siemens AG today announced that its new energy company will be called Siemens Energy. The name of this new entity is expected to take effect in April 2020, while the listing of the company is still expected by September 2020. This confirms that the spin-off as well as Siemens’ ambition to create a leading company in energy are both on track.
We had the opportunity to discuss again with Siemens about its current transformation at the Baader Investment Conference. Everything seems to be on track: i) the listing of Gas and Power is still expected for September 2020, with more details to come with the equity story, and ii) cost measure targets for 2021 and 2023 in all divisions are on the way to being achieved. The only downside that we see is linked to Digital Industries in the short term.
Siemens reported a mixed set of results. Q3 orders were strong and revenues were in line with expectations, while profits came in 12% below the street’s expectations. The miss was mainly attributable to Digital Industries which was impacted by the softer environment. FCF was also disappointing as it slumped by 51%, though it is expected to recover in the last quarter.
Siemens remains confident of its overall industrial businesses and, notably, its short-cycle businesses. We believe that the focus was not really on these results which came in broadly in line with expectations, though somewhat above on the bottom line, and a 2019 outlook that was confirmed, but more on what was announced during the CMD. Please look at our CMD feedback comments for further details.
Siemens announced on 7 May ahead of its CMD that it will spin off its Power Gas division, including the transfer of its 59% SGRE stake into the NewCo, which is expected to be listed in September 2020. The announcement makes sense, and we consider it should reduce the conglomerate discount as Siemens will focus on Industrial Core business (Digital Industries and Smart Infrastructure). All in all, the strategy is clear and the targets are ambitious. Siemens is on the right track.
The Q1 19 results have been a bit disappointing, with mixed performances amongst the divisions. Management stated that 2018 was particularly strong, while growth in 2019 should be more limited. Indeed, Q1 has been impacted by a tough comparison basis: i) the sale of OSRAM shares for €645m (post tax), and ii) a positive effect from the US tax reform last year (+€437m). We prefer to remain cautious on the stock as 2019 would continue to be impacted by a tough comparison basis.
Q3 key highlights:
Q4 results were overall in line with consensus
The Power and Gas (P&G) division weighed negatively on profits (as expected)
Strong FCF, from €2.8bn to €3.2bn (yoy)
Dividend per share raised by €0.1 to €3.8
New share buy-backs announced, up to €3bn until November 2021
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The group’s year-end update points to stronger than expected Q4 trading, boosted by robust sales in North America that translated efficiently to upside on profitability expectations. Cash performance has once again been stellar, resulting in net cash of $35m, considerably higher than forecast, partly profit drop-through and partly from tight working capital management. We are therefore upgrading our FY 2020 EPS by 25% to 33.2ȼ. The strong cash position also results in a boost to the total dividend, giving a dividend yield of 6.7%. We raise our price target from 285p to 435p, based on a target P/E of 17.0x offering upside to the current P/E of 13.8x.
Companies: Somero Enterprises, Inc.
Today’s update confirms a strong recovery in H2 FY2020E as expected and a full year adjusted PBT at least in line with FY2019, despite a material impact from Covid and the depressed oil price resulting in a decline in Augean’s North Sea Services business. The FY2020E outturn demonstrates the resilience of the Group and the strong attractions of its growing EfW activities that now account for c.70% of Group profit. Augean is very well positioned in the EfW residue market and with c.40% of the UK’s hazardous landfill capacity. We forecast Group earnings growth of 15% and 21% for FY2021E and FY2022E, and expect further strong cash generation. EV/EBITDAs for FY2021E and FY2022E are 5.7x and 4.5x respectively, substantially below sector constituents and transaction multiples.
Companies: Augean PLC
Augean has proven to be resilient throughout the pandemic. In particular, the growth in processing incinerator ash residues from energy from waste (EfW) facilities continues unabated and additional new contract wins should drive improved returns in FY21. Management expects FY20 adjusted PBT to be slightly ahead of last year and we have marginally reduced our FY20 adjusted PBT and EPS estimates by 1%. Our FY21 estimates are maintained. Cash flow has been stronger than we expected, underpinning the indication that dividends should resume in FY21.
Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
Companies: AVO ARBB ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
XPD is a well-established pan-European freight management and logistics operator. We have selected the Group as one of our Top Picks for 20211. The Group is based in the UK and focused primarily on providing integrated supply chain solutions for customers operating in the UK and Central & Eastern Europe (“CEE”). Trading has been resilient through the Covid crisis, and the benefits of acquisition integration and recent cost reductions are now coming through. Management has guided to an 18% y-o-y improvement in profit for 2020e. The balance sheet is strong with £4.3m of net cash reported at H1.
Companies: Xpediator Plc
Foresight Group , the award-winning infrastructure and private equity investment manager to IPO on the Main Market (premium). The Offer will primarily comprise a sale of shares by existing shareholders (c.80% of the Offer) with a smaller offering of new shares (c.20% of the Offer) to be issued by the Company. Details TBA. Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: TYM W7L BEG CRPR EUZ IRR CMCL FARN KETL AUG
Capital Limited has released its Q4 and FY2020 trading statement this morning. Overall it shows 2020 was a strong year for the company with revenue growing 18% and most other operating metrics growing positively with it – see Fig 1. We have adjusted our forecasts accordingly and also to take into account the mining services contract for the Sukari Mine which the company won late last year. The latter is a game changer for Capital and its investment case in our view; turbo charging revenue growth, enhancing margins and diversifying cashflow all of which should lead to materially higher valuation multiples. We raise our PT to 127p.
Companies: Capital Limited
Today’s positive trading update provides further encouragement for investors. The shares have been appreciating steadily on the back of last month’s fund raise and acquisition, followed by a major contract win and the £2.5m sale of the remaining RTLS stake, which had previously been largely written off. Both FY20 revenue and adj. LBITDA are better than forecast and YE net cash is particularly healthy. The integration of OSPi is underway, with all staff already transferred. We adjust FY20 forecasts and reiterate future forecasts. Future cash expectations are lifted by the higher YE balance as well as the sale of the remaining RTLS holding.
Companies: IQGeo Group PLC
Velocys has announced a change in the partnership developing the Altalto sustainable aviation fuel project with Shell moving on and Velocys now splitting the project 50/50 with British Airways. Despite being no longer formally involved, Shell remains supportive of the project in broad terms. British Airways continues to view the project as vital to its net zero target.
Companies: Velocys plc
Directa Plus has had its contract with OMV Petrom extended and increased. The contract, initially awarded in July 2019, was for the provision of decontamination and oil recovery services using the Company's proprietary Grafysorber® technology. The initial value of the contract was €150k (of which €75k was delivered and invoiced in 2020) and this has now been increased to €410k, the balance of which is expected to be fulfilled by June 2021.
Companies: Directa Plus Plc
The group has announced an extremely positive trading update as it completes its first half. Following a positive Q1, Q2 has maintained momentum resulting in a record profit for the half year, significantly more than we had forecast for H1 and almost achieving the full-year expectation. Restructuring cost savings have also assisted gaining double-digit RoS. It also signalled a return to the group’s previous dividend policy. As a result, we upgrade our FY21 forecast with a 39% in in EPS to 19.9p. We also raise our PT from 130p to 178p, in line with the uplift in EPS, which remains a conservative target P/E of 9.0x. ALU is currently one of the lowest rated in the sector, offering a currently very attractive 4.4% dividend yield.
Companies: Alumasc Group plc
Volex has reported interim results that are in-line with expectations following a strong trading update in mid-October. Of far greater significance is today’s announcement of the proposed acquisition of DEKA for a consideration of up to €61.8m on a debt free basis. DEKA is a leading and highly profitable power cord manufacturer, strategically located in Turkey, that serves leading European white goods manufacturers. The acquisition should close in early CY2021, subject to expected Turkish Competition Authority approval. We foresee 15% earnings enhancement in FY2022E with further opportunities for revenue synergies with Volex in the Far East as its operations also vertically integrate, production efficiencies increase and the cost of production falls. The statement highlights that pro forma net debt/EBITDA remains under 0.4x and this provides scope for further bolt-on acquisitions alongside a new $70m RCF and $30m accordion, also announced with the interims.
Companies: Volex plc
A £10m fundraising expedites the Protos project and opens the way for the £10.2m Peel warrant exercise in the current year. The funding will also give the company additional resources to pursue international opportunities. Adjusting for the raise and some timing differences, our UK only base valuation rises from 5.0p to the raise price of 5.5p and we see existing international opportunities taking this to 7.5p (from 6.9p) and including opportunities in Europe this could rise to 12.1p (from 11.2p).
Companies: Powerhouse Energy Group PLC
2020 ended with two positive moves for carbon capture and storage (CCS) which should benefit Velocys clients. In the US, the signing of the COVID 19 stimulus bill extends and adds support for CCS in the US where the Bayou project is working with CO2 offtaker Occidental to deliver a negative emissions project. The UK government has also published guidance on CCS funding making this option an additional opportunity for the Altalto project. Velocys remains one of the very few opportunities for investors to play negative emission technology. We see both these moves improving the operating environment for the company’s clients and their projects, stimulating demand for the Velocys technology.
Journeo is a specialist provider of information systems and technical services to the transportation sector. This morning, the group has announced that under its existing Transforming Cities Fund framework contracts, it has received further orders for its advanced public transport information systems.
Companies: Journeo plc