The group remained highly impacted by the low level of prices over Q4 20, resulting in a c.30% drop in the full-year operating profit (excluding Uniper). However, on the back of the particularly cold seasonal temperatures, prices are back to normal levels in the first months of the year. We confirm our negative recommendation.
Companies: Fortum Oyj
EBITDA came in at €512m and operating profit at €207m, both below expectations. This is mainly due to the particularly low electricity prices in Q2 20, due to weather conditions – but the group was partly protected by its hedging strategy. This confirms that keeping its financial strength (with a minimum BBB rate) is the first short-term target. A FY20 guidance has still not been mentioned (due to the consolidation of Uniper and the COVID-19-related uncertainties).
Comparable EBITDA was flat at €543m, and comparable operating profit was down by 4% to €393m. According to the group, COVID-19 had only a limited immediate impact on figures. The pay-out target of 50-80% is maintained, however, due to its M&A with Uniper, the group has not yet provided a full-year guidance, but it is pretty well hedged to the low electricity prices.
Adj. EBITDA increased by 17% to €552m, and adj. operating profit by 20% to €389m, both above the consensus and our expectations. This good operating result was mainly due to the Generation division (EBITDA was up 23% to €278m q-o-q), after favorable hydro conditions. The positive impact of the settlement of futures contracts helped to reduce the debt level. The dividend is €1.1, implying an attractive yield of c.5%. Positive view confirmed.
Satisfying Q3. Hydro conditions were back to average, thus generation was the main growth driver. On the other hand, City Solutions’ earnings were particularly disappointing, but hopefully had only a limited impact at the group level. The group escaped the drop in the Nordic electricity price thanks to its good hedging strategy, but the coming years look less positive. Moreover, the low current level of hydro reserves is not a good sign for Q4.
After weak Q1 figures, Fortum released a solid set of results for Q2, beating our estimates and the market’s expectations. Results increased in all divisions and higher achieved prices and good hydro and nuclear volumes were the two major growth contributors. Thanks to strong cash flow generation, the group was able to reduce its debt ratio and to reiterate its ambitions to strengthen its balance sheet.
Fortum released a weak set of Q1 results. The poor hydro production (-25% to 4.8TWh yoy) due to low reservoir levels at the beginning of the year almost entirely offset the positive effect of the higher achieved price during the quarter. Consequently, Generation’s EBITDA (half of the group’s EBITDA), remained broadly flat and, therefore, the group’s EBITDA as well, missing the consensus.
Fortum released a good set of Q4 results, marked by the positive impact from higher power prices in the Nordics, although partly offset by currency headwinds in Russia and continued low inflows and low reservoir levels in the Hydro generation business.
Fortum released a rather weak set of Q3 results, marked by the lower production of the group’s hydro-power plants following the dry weather, which was only partly offset by higher achieved prices.
Fortum released a mixed set of Q2 results, marked by the consolidation of Hafslund and the strong performance of the Generation division, which was helped by higher achieved power prices, although partly offset by weaker results in the City Solutions and Russian divisions due to unfavourable weather effects, weaker waste activities and currency headwinds in Russia.
Fortum released a robust set of Q1 results, driven by the consolidation of Hafslund’s retail business as well as stronger Generation on a higher achieved power price (+€1) and hydro volumes while the weather was favourable with cold and dry weather supporting power prices. The group expects to close the Uniper deal by mid-2018.
• Higher than average water levels support Q4 results
• Improvements in electricity and CO2 prices also positives
• Uniper transaction should conclude the capital redeployment process
The Q3 results showed improvements as expected with adjusted EBITDA reaching €210m (+39%) and operating profit reaching (+62%). In addition, the group profited from a sales gain from the Hafslund restructuring transaction with the City of Oslo, which improved reported profits to €387m and a reported EPS of €0.40/share. Adjusted for this, EPS in Q3 17 reached €0.04/share.
Along the same lines, operating cash flows in the third quarter improved by 83% to €185m as the group has benefited from the improvement in electricity prices and higher hydro volumes. Russia continues on its upward trend due to higher CSA payments which is also a positive.
Fortum continues with the process for the purchase of E.On’s Uniper stake at €22/share, as it has received the approval from US competition authorities and has submitted the offer documents to the German Financial authority (BaFin).
The group has reported an EBITDA that has increased by 13% to €642m, but this is short of expectations as earnings in the second quarter were weak. As a result, net income was negative for the second quarter at €-70m due to higher income taxes paid. This has pushed the first half net profit to far below expectations to €271m (€0.30/share). Adjusted EPS is below forecasts at €0.33/share.
The group maintains its outlook that demand will grow 0.5% on average for the Nordic region. The group has hedged 45% at €30MWh for 2017 and 45% at €28/MWh for 2018. This is a positive as it has increased its hedging price by €1/MWh, which improves profitability.
Fortum has published a good start of the year with Q1 results confirming the expected recovery as revenues increased by 24.5% to reach €1,232m. Following the same path, adjusted EBITDA increased by 18.5% and operating profit by 13.8%. However, a lower minority interest and higher taxes pushed net profit to a 2.7% increase and an EPS of €0.38/share.
Operating cash flows on the other hand decreased by 24.8%, mainly due to €58m foreign exchange losses in hedging contracts to Russian and Swedish subsidiaries (compared to a €128m gain in the last quarter).
The operating profit target in Russia of RUB18.2bn, which was expected to be reached in 2017-18, has already been reached in the last 12 months, which is a positive as this is ahead of expectations.
The company maintains its guidance of 0.5% growth in demand. Production has been hedged 55% at €29/MWh for 2017 and 45% at €27/MWh for 2018.
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Volex’s y/e update points to revenue and adj. operating profit of over $440m and $41m, 9% and 5% ahead of our expectation. Results have benefited from 187% revenue growth in EVs and strong consumer electronics demand. Operating margins grew to 9.3% (FY20: 8.1%) and, absent higher margin acquisitions, we now expect gradual progress towards management’s 10% target, as an appropriate balance is struck between revenue growth and profitability. The drive to be the lowest cost producer of quality product, leveraging the Group’s global platform, is a core objective underpinning growth ambitions. Our updated adj. EPS growth - 14% for FY22E and 9% for FY23E - is cautiously framed in the context of the increased investment now being committed to drive revenue growth. The recent DE-KA acquisition is performing strongly and alongside further accretive moves, Volex should continue to deliver.
Companies: Volex plc
Clean FY20 EPS beat our expectations by 5%, but the real story of these results is that EBITDA came in ahead of our November 2019 forecast. EBITDA rose 64% through acquisitions, but management has extended its record of improving the returns of acquired businesses. We raise our EBITDA forecasts by c.10% across the forecast period to reflect only the recent Belgian transactions. We raise our target price to 92p per share, set at 10x EV/EBITDA. With these acquisitions now in place, the group has reached critical mass with four platforms and strong enough cash flows to self-fund acquisitions and other opportunities.
Companies: SigmaRoc Plc
Capital Limited (LSE: CAPD) this morning provided its Q1 2021 trading update. Q1 revenue is the strongest since the company's inception and is in line with our estimates, as are the other operational metrics.
Companies: Capital Limited
Xpediator delivered a solid performance in FY20A, with +3.7% revenue growth and Adj PBT of £7.2m (+41% YoY) in line with our forecasts. After an initial slowdown in activity in the early stages of the pandemic, trading recovered strongly towards the end of FY20A, which has continued into FY21E. With Xpediator confirming it remains in line with expectations for FY21E, we leave these largely unchanged (Adj PBT remains at £7.7m). We release new forecasts for FY22E (Adj PBT £8.5m), which reflects continued growth in the business. With the stock trading on a FY21E EV/EBITDA of c5.8x, we reaffirm our Buy rating.
Companies: Xpediator Plc
In this report we provide an update on the developing customer interest for Ilika solid-state micro-batteries for medical devices and smart machinery sensors and the valuable IP it is building in Goliath cells for future EVs and cordless appliances. We illustrate there are few rivals for its millimetre sized batteries and few with a longer history in larger cells. We ascribe a higher value now to Goliath following recent progress in EV markets and validation for solid-state from leading car makers VW and Toyota and the much higher market capitalisation commanded by QuantumScape. TP now 320p (c£450m market cap).
Companies: Ilika plc
XPD is a profitable and well-established pan-European freight management and logistics operator. We selected the Group as one of our Top Picks for 20211. XPD has reported 2020a adjusted PBT up nearly 40% y-o-y. Margins expanded to 3.3% from 2.4%, driven by better trading, particularly in freight forwarding in Q4, and with cost savings from restructuring. XPD has rebuilt its senior management team, completed recently by Michael Williamson joining as CFO. The fundamentals are sound with £6.8m of net cash. Q1 2021e trading is reportedly ahead of management expectations but at this stage our estimates assume cautious growth through the year. More strategically, as Covid-19 disruption clears, we think UK and European customers will refocus on supply chain resilience, and Central & Eastern European (CEE) countries will become even more attractive as manufacturing venues. This strongly favours XPD’s capacity and expertise. Generally, as an experienced pan-European operator, XPD has plenty of opportunities to accelerate growth. Organically in forwarding, pallet networks and support services for haulage sub-contractors, and through selected acquisitions. Reflecting a more positive outlook for earnings, our valuation is lifted from 45p to 70p, c.20% upside to the current share price. XPD also offers an attractive dividend.
This morning Avon released its post-close trading statement for H121, which shows strong top-line growth and order intake. Trading continued to show progress, in line with management expectations for Q221, continuing the Q121 performance noted at the AGM. Management expects to meet FY21 consensus expectations, with growing momentum during H221 as new contract volumes build. We trim our above-consensus FY21 EPS estimate by 4% and maintain FY22, which are reported in US$ from the current year. Avon’s shares trade at a healthy premium to UK defence peers, warranted by top-line growth, high returns and strong cash flows.
Companies: Avon Rubber p.l.c.
AfriTin* (ATM LN) – By-product potential at the Uis tin mine
Alba Mineral Resources (ALBA LN) – Phase 2 drilling underway at the Clogau St David's mine
ITM Power (ITM LN) - First Green Hydrogen for Glasgow Project planned capacity doubled to 20MW
Companies: ATM ALBA ITM
Billington provides structural steel and safety solutions to the construction industry. Against the backdrop of pandemic induced disruption through 2020, and set against the record performance of 2019, Billington has reported a solid and profitable performance in FY2020. Set against a record high comparative period, Group revenue decreased 37% to £66.0m with adj. profit before tax reducing to £1.7m (FY2019: £5.9m). Adj. EPS fell commensurately to 11.3p (FY2019: 39.8p) and, as a mark of confidence, Billington reintroduced a final dividend of 4.25p, covered 2.7x (in line with historic cover). Our newly introduced FY2021E estimates (adj. PBT £2.2m) reflect the duality of a relatively robust opening order book (75% higher YoY), but set against caution with respect to margin pressure given cost inflation in the supply chain. The medium term outlook is likely to be buoyed by infrastructure investment in key markets BILN serves, albeit pricing volatility is a key risk. Billington's cash rich balance sheet positions it well to weather potential future uncertainties, whilst others likely fall by the wayside. We see fair value at 375p.
Companies: Billington Holdings Plc
The UK market showed a continued recovery in the first quarter albeit the indices are still well short of their all-time peaks, unlike many of their international peers. The FTSE 100 has risen by 1,186 points (21.4%) since the end of October and the FTSE 250 by 4,304 points (25.0%). The comparable performance since the start of the year is less spectacular- the FTSE 100 has risen by 253 points (3.9%) and the FTSE 250 has risen by 1,070 points (5.0%). The factors behind the sustained rally are familiar. The belief that the roll-out of the vaccine and some relaxation of lockdown limitations will lead to a significant economic recovery, compared to the collapse seen in the first half of 2020, due to lockdowns. Indeed, the recent economic picture is becoming more optimistic than previous expectations. According to the ONS, the economy grew a little more than initially estimated in Q4 last year. This means GDP for 2020 as a whole contracted by 9.8%, revised up marginally but still the worst contraction on record. Markets, in general, have focused upon the potential scope and extent of the recovery. The sectors and stocks that have outperformed have been seen as ‘recovery’ plays with a rotation from stocks seen as ‘lockdown’ winners into those set to benefit from the ‘unlocking of society’ and/or exposed to the consumer. We expect 2021 will continue to be a “stock-picker’s” market. The sharp increase in the household savings ratio in Q4 highlights the scope for a recovery driven by expenditure. As further lockdown limitations are lifted, evidence of this growth will help to underpin the more optimistic outlook for Q2 and beyond.
Companies: AMYT ARBB BPC BAG BVC BEG BONH BLVN BRSD CML CWK CRPR EYE ECHO FDM FAR FA/ GPH GSF HUW INSE JDG KAPE KP2 MACF MPAC MNZS NESF NBI OTMP OBD PREM QFI RUA SCS SEN SOS SUR TON TOU TXP TGL TCN UEM VLS WYN
JMAT has introduced a new format called a ‘pre-close trading update’ just a few days after the financial year end. It looks like something between preliminary figures and consensus, strongly referring to the latter and being accompanied by some lengthy writing. We are still struggling with the point of it.
However, the key message of the update was: 2020 was not so bad and figures should be expected at the upper end of market expectations. This would also be above our expectations.
Companies: Johnson Matthey Plc
Brickability is a leading supplier of bricks and other building materials to the UK construction industry, and is well-positioned to consolidate the fragmented UK building products supplier space. The company has undertaken four acquisitions since its IPO in 2019, which adds to some twelve acquisit
Companies: Brickability Group PLC
Anglo Asian Mining* (AAZ LN) - STRONG BUY – Quarterly production update and CY21 guidance
Botswana Diamonds (BOD LN) – Moving to a further stage of drilling at Thorny River
Capital Limited (CAPD LN) – Q1 2021 delivers strongest ever quarterly revenue
GoldStone Resources* (GRL LN) – Update paves way for production ramp-up at Homase
Kenmare Resources (KMR LN) - Q1 production rises on higher grade and production despite Covid-19 isolation for management and staff
Rainbow Rare Earths* (RBW LN) – Temporary suspension of REE concentrate exports
Serabi Gold* (SRB LN) –– Grade improvements drive higher Q1 gold production
Companies: CAPD AAZ BOD GRL KMR RBW SRB
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.
Wickes to demerge from Travis Perkins and list on the Main Market. Expected 28 April. Advance Energy to complete an RTO on AIM indirectly acquiring up to 50% of Carnarvon Petroleum Timor which holds a 100 per cent. working interest and is the contractor under the Buffalo PSC, offshore Timor-Leste. Carnarvon Petroleum Timor is a subsidiary of ASX listed company, Carnarvon Petroleum Limited. The net proceeds of the Placing of approximately £20.01m (approximately US$27.51mm) will be used to fund the Acquisition. Due 19 April. NFT Investments plc is an investment company that specialises in non-fungible tokens (NFT). Has applied for admission to the Access segment of the AQSE Growth Market. No funds being raised. Due 16 April. Thor Explorations (TSXV:THX) seeking a secondary listing on AIM. The Company is targeting Admission during Q2 2021. Segun Lawson, President & CEO, stated: “Thor Explorations has advanced significantly, in both project development and capitalisation since the acquisition of Segilola in 2016. This year, the Company is well positioned to achieve two major milestones with the commencement of gold production at Segilola in Nigeria and a maiden resource at Douta in Senegal, as well as continuing to progress our highly prospective Nigerian exploration portfolio on the Ilesha Schist belt.” MAST Energy Developments (MED) is to IPO on the Standard List on 14th April 2021 under the ticker MAST. The company has raised £5m giving a market capitalisation on listing of c. £23m. MED is currently a 100% subsidiary company of AIM quoted, Kibo Energy*. MED was established to acquire and develop a portfolio of flexible power plants in the UK and become a multi-asset operator in the rapidly growing Reserve Power market. PensionBee has confirmed its intention to float on the High Growth Segment of the Main Market of LSE. The online pension provider had approximately 130,000 Active Customers and £1.5bn of assets under administration, in each case as at 28 February 2021. The Offer will comprise new Shares raising gross proceeds of approximately £55m and existing Shares to be sold by certain existing small minority shareholders of up to £5m. None of the founders, directors or members of senior management of PensionBee are selling any existing Shares. Expected in April. Imperial X (AQSE:IMPP) to join the Main Market (standard). It is also proposed that on Admission to the Official List, the Company will change its name to Cloudbreak Discovery Plc. With effect from Admission, Imperial X will hold equity positions and royalties in a variety of projects in the natural resources sector across multiple jurisdictions, primarily in the Americas and Africa. The Company is proposing to raise up to £1.5m by way of placing of new Ordinary Shares to support further prospect acquisitions. Current Mkt cap £4.7m Expected April 2021. Proposed move to AIM from the main market (standard) by Emmerson (EML.L) to provide Emmerson with access to a market and environment which is more suited, in the Board's view, to the Company's current size and strategy ahead of pivotal period for the Company with the commencement of mine construction at the Khemisset Potash Project expected by end of 2021. Follows recent award of Mining Licence granting Emmerson exclusive right to develop and mine the potash deposit and £5.5m raise to fund ongoing project development work. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance.
Companies: ARG ADT UKOG PHAR UNG CYAN FA/ SNX VRE SHED