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Augean has reported interims to 30 June 2020. With the first half bearing the full impact of Covid-19, adjusted PBT decreased by 11% to £8.5m, which is in line with our expectation. With radioactive wastes, biomass for EfW and construction impacted by lockdown and depressed activity levels in its North Sea services, due to the low oil price, the results demonstrate the resilience of the Group and also the benefit of its key position in its markets with strategically located hazardous waste treatment and disposal facilities in the UK. Whilst the statement highlights that full year results are expected to be broadly in-line with market expectations, we have conservatively reduced forecasts. Nevertheless, with strong cash generation and sustained growth EV/EBITDA falls to 5.3x and 4.1x for FY21E and FY22E, a level that is substantially below sector constituents and transaction valuations.
Companies: Augean Plc
Avingtrans has issued a brief trading update and confirmed that the Group’s preliminary results to 31st May 2020 will be published on 30th September. The trading update is reassuring, highlighting a Q1FY2021E order in-take in-line with management expectations. The statement also highlights two further contract wins in the nuclear sector for US$2.8m in South Korea to provide spare parts for essential water service pumps and a £1.5m UK contract for replacement valves. The previous update in early July has already confirmed that the Group expects to report revenue of £114m, EBITDA of at least £11.5m and net debt (excluding IFRS16 lease liabilities) of £7.5m, which is incorporated into our FY2020E forecasts. It would seem likely that the Group will wish to re-instate forward guidance at the time of the results and to this end we would expect management to indicate a year of solid progress in EBITDA for FY2021E. Over the first quarter the Group has demonstrated good resilience, operating at close to normal levels, with the exception of Oil & Gas (where there is fairly limited exposure) and HVAC activities at Ormandy, supported by exposure to multiple markets and a strong customer base that includes governments and their agents.
Companies: Avingtrans Plc
Inspiration Healthcare has announced it has completed its final delivery of ventilators to the NHS in response to the COVID-19 outbreak, which were announced in March 2020. In total the company has now shipped ~£7m of ventilators, of which £5m relate to Inspiration Healthcare's direct contracts and ~£2m relate to orders to S.L.E., which was acquired in July of this year. These £7m of orders do not include revenues associated with the ventilator support service or ancillary orders received since March. We maintain our Buy recommendation.
Companies: Inspiration Healthcare Group Plc
SMS reported solid interim results demonstrating the resilience of the business during a very uncertain period. 1H/20 revenue was flat at £54.2m with underlying PBT up 96.9% to £9.1m. We believe SMS remains substantially undervalued given: i) Base case DCF valuation of 1,058p; ii) Base case DDM valuation of 1,176p; iii) visible growth to mid-2025 with secured 2m meter order book and substantial CaRe asset potential; iv) attractive dividend with committed 10% p.a. growth to 2024; iv) balance sheet headroom with £44.5m net cash and £300m RCF; v) strong ESG credentials with long term sustainable and carbon reducing assets. Our base DCF and DDM valuations of 1,058p and 1,176p respectively are supported by the 16.4x net ILARR asset sale during 1H/20.
Companies: Smart Metering Systems Plc
Brickability has delivered on its promises with inaugural full year (to Mar-20) results that demonstrate EBITDA and profits growth, establish a base level of dividend, show good cash generation and of course its ability to make acquisitions and build a future pipeline. The impact of COVID-19 will be fully felt in the current year, inevitably setting earnings back although it has traded profitably at EBITA level in every month since April reflecting progressive sales recovery (June -17%, July +1.6%) and the low fixed cost base. The group is not yet ready to offer formal guidance for FY21 however the strategy outlined at IPO is very much intact and deliverable. With the shares over 40% below their post-IPO ‘high' yielding an historic 4.4% plus an EV/EBITDA of 5.3x and PE of c8x, both of which are re-attainable 2-3 years out, the valuation simply looks too cheap to ignore, especially versus its peers.
Companies: Brickability Group Plc
Billington is a leading structural steel and construction safety solutions specialist. The Group has this morning announced that its structural steel division, Billington Structures, has been awarded three contracts with a combined value of £21 million, the largest of which is for a UK power based project (Midlands) that will add significant visibility (at good margin) to FY 2021E. The other two contracts, in the manufacturing and commercial office sectors, are for delivery in Q4 2020 and through 2021 respectively.
Companies: Billington Holdings Plc
Who would have thought when reporting pre-tax losses of £10m after the first half to end June that Breedon would emerge so strongly from lockdown to trade through July-August (and into September) with LFL revenues ahead of comparative 2019 and expected H2 EBIT broadly in line with the equivalent 2019, resulting in a reinstatement of guidance ahead of current FY20 consensus. That is a mark of confidence as much in the group's operating capabilities as market recovery itself – a feature of Breedon's management quality over a consistent period of time. Investors will be impressed by the short-term recovery but also encouraged that the longer-term outlook remains positive with an emphasis to infrastructure markets in GB and Ireland plus, of course, its unrivalled ability to utilise its asset base very efficiently and to add to that platform with accretive acquisitions. The shares hit a COVID ‘low' of 63p but were trading as high as 100p in February. We would see that upper level as the more likely direction of travel for the shares with 90p justified by a forward 2022E rating of 7.5x EV/EBITDA, c14x PE, commencement of dividends and significant deleveraging through high net cash flow generation.
Companies: Breedon Group Plc
A strong start to the year was offset by global lockdowns, which significantly impacted trading. Subsequently, the gradual reopening of economies has meant that Filta has seen a month-on-month improvement in trading since April, and now expects to reach run-rate revenues at c70% of prior year levels by the end of FY20E. The strength of Filta's model has enabled it to withstand a severe shock to the business, and emerge with its operations and balance sheet intact, positioning it well to capitalise on growth opportunities as conditions normalise. Due to continued Covid-related uncertainty, we maintain our Hold recommendation, and are not re-instating forecasts at this stage.
Companies: Filta Group Holdings Plc
Overall performance shows resilience to the impact of COVID-19, with comprehensive restructuring and a focus on recurring, software-driven, revenue streams. H1’21 revenue grew 2.3%YoY (normalised basis) to £6.4m. Checkit UK, acquired on 24 May 2019, contributed 2.5 months of earnings, in H1’20 equivalent to £6.2m on an annualised basis. Notably, gross profitability improved significantly from 21.9% at July 2019 to 35.9% by July 2020. Checkit reorganised into two divisions: Checkit Connect, providing workflow management (CWM), automated monitoring (CAM), and building management services (CBM); and Checkit BEMS, responsible for building installation and maintenance projects. Checkit Connect contributed 53% of H1’21 revenue, growing 15%YoY (normalised), of which 68% was recurring, growing 23%YoY. Checkit Connect is the focus of a SaaS-based products and services business model; its recurring revenue base contributed almost 100% of divisional growth, driven by firmed pricing and a major contract. Checkit BEMS revenue declined 9%YoY (normalised) reflecting the impact of COVID-19 in limiting on-site access. Checkit’s operating loss was reduced from £2.9m in H1’20 to £1.5m, or £2.0m inclusive of exceptional items (H1’20: £3.1m loss). Investment in development was maintained, at £1.0m in H1’21 compared to £1.2m a year earlier. Elektron Eye Technology (EET) was sold in July for £0.9m, paid over 24 months. The cash position as of 31 July was £13.4m, compared to £14.3m on 31 January.
Companies: Checkit Plc
DX has reported good progress in FY 2020 given the impact of COVID-19. Sales were up +2% (H1 +8%, H2 -4%) and adj. PBT increased from a loss of -£0.2m in FY 2019 to a profit of £1.8m (IAS 17) or £0.3m (IFRS 16). This is a better result than our forecast of a loss of -£0.9m (IFRS 16) and was backed by strong cash flow resulting in net cash of £12.3m at June 2020. The outlook is positive, with management highlighting volumes are currently ahead of pre COVID-19 expectations, and the group is in a strong position to rebuild profitability, by improving efficiency, productivity and margins. We have upgraded FY 2021 EPS by 124%, FY 2022 by 63% and raised our target price from 18p to 29p.
Companies: DX (Group) Plc
As legendary investor Warren Buffet succinctly puts it: “it is better to buy great companies at fair prices, rather than fair companies at great prices”. Today, we think Mpac has done exactly that by acquiring Ohio based Switchback Group, Inc. for a maximum of $15m in cash (£11.4m). Equivalent to modest takeover multiples of 7.1x EV/EBIT and 1.1x EV/sales – with $13m of the consideration paid upfront, and the rest structured as a $2m earnout depending on EBITDA performance over the next 24 months.
Companies: Mpac Group Plc
Interims to July are consistent with an earlier update and demonstrate a robust performance, with LFL sales +2% to £6.4m. Looking deeper, momentum continued into Q1, following a strong FY20, with 1Q21 LFL sales: +13%. Meanwhile, Covid’s impact was greater in Q2, as sales fell 11%. Notwithstanding, CKT’s SaaS division (‘Checkit Connect’) grew throughout H1: +15% to £3.4m, now 54%/sales. Management‘s response to macro uncertainties has been proactive and costs tightly managed. A lower adj. operating loss reflects this: £-1.5m (PY: £-2.9m) as does FCF: £-1.4m after strong working capital management. Closing net cash remains very strong at £13.4m. July‘s disposal of EET will add to cash resources – £0.9m consideration is due over 2 years. Despite costs receiving close attention, product development continues at pace and is driving opportunities, particularly within resilient sectors - we view ‘Healthcare‘ as one and is now a strategic focus for the Group. It is also positive to hear market activity is resuming in other sectors too, and a reintroduction of forecasts reflects our confidence. FY21E sales: £13.1m, so we anticipate modest sequential H1/H2 growth or +2% LFL for the full-year. FY21E AOP £-3.8m i.e. £-2.3mE in H2, as government support measures winddown. Closing cash should remain strong (£10.1mE), leaving significant resources for future periods. While early in the company’s transition (so full potential is hard to grasp) we continue to be impressed with progress to date: new product innovation has led to significant deals and in-turn has generated strong ‘recurring‘ growth. Meanwhile, we think CKT’s valuation (<2x EV/sales) reflects an overly cautious assessment of this progress and future opportunities.
Seeing Machines has announced plans to deliver a fully supported, integrated Driver Monitoring System (DMS) kit to the global automotive industry. This will be in the form of embedded software (e-DMS) for the Qualcomm® SnapdragonTM Automotive Development Platform (ADP) from Qualcomm Technologies. The kit is expected to be available before the end of this calendar year for use by select automotive Tier 1 suppliers and OEMs and will support a full stack Seeing Machines DMS solution on the Snapdragon™ ADP targeting integration into either infotainment or centralized ADAS systems, and includes an optimized DMS reference camera, ADP interface board and the company's FOVIO and Occula software.
Companies: Seeing Machines Ltd.
Drax has announced additional loan facilities which will reduce its all-in cost of borrowing to below 4% and we see this as helping to give Drax the firepower to expand its US-based biomass feedstock business efficiently. We see this business as having growing importance as several governments look towards biomass carbon capture and storage as a key component of the net zero tool kit.
Companies: Drax Group Plc
The global specialist in technologies to enhance the properties of plastic (and some non-plastic) products by making them biodegradable, and/or to provide protection against threats to health and safety, has announced HY June 2020 results. In line with the guidance given at the July trading update of 16 July, revenues were up 17% to £4.8m, and Symphony reported a return to net profitability with PBT swinging from an £86k loss to a profit of £18k.
Companies: Symphony Environmental Technologies Plc