Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Arkema. We currently have 15 research reports from 1 professional analysts.
Arkema has spent many quarters in the doldrums and it looks now as if the company could take full advantage of recent developments in the next quarters. The company is in a position to overcome adverse FX developments by higher positive organic growth, which looks to be a rare case in current reporting. Arkema’s figures were slightly above our expectations, but met consensus.
Arkema’s FY figures broadly met our expectations. Net income benefited more strongly from the US tax reform than expected. Profitability was stronger than sales, which was partly the result of good pricing power. Q4 looks slightly different with a lower margin, which might be a mix of seasonality and a slight delay in passing on higher raw material prices in some businesses. Consensus was beaten.
Arkema reported +10% (v: +4%; p: +7%; FX: -4%; portfolio: +3%) higher sales (to €2,019m) and the gross profit margin improved from 22.3% to 23.4% in Q3. EBITDA clearly rose +17% to €331m and net profit attributable to shareholders jumped +48% to €142m, additionally boosted by a lower tax rate. 9M operating CF rose by +14% to €658m due to the strong organic performance and despite higher NWC outflows (€-135m after €-86m). Investing CF (€-19% to €-274m) was helped by lower changes in fixed assets payables and capex. Financing CF swung by €833m to €754m the higher inflow from net gross debt issuance (€926m after €26m). For 2017, management’s marginally adjusted FY guidance still expects to achieve EBITDA in the €1,310m to €1,350m range, and now sees EBITDA to come in at the upper end of the range.
Q2 sales were clearly up by +13% (v: +2%, p: +7%; FX: +1%: portfolio: +3%) to €2,198m and the gross profit margin slightly improved by 40bp to 24.0%. EBITDA rose +9% to €383m and net profit attributable to shareholders came in at €160m after €147m. Operating CF strongly improved from €73m to €242m based on the good operating performance and additionally fuelled by lower NWC outflow (€-50m after €-179m). Due to lower expenditures (€-145m after €-114m), investing CF moved from €-121m to €-106m. Financing CF swung from €-94m to €748m predominantly pushed by €899m net gross debt proceeds despite higher dividends (€-155m after €-143m). For 2017, management has marginally lifted FY guidance, now expecting to achieve between €1,310m and €1,350m (previously: €1.3bn) EBITDA.
Arkema announced its 2023 targets at its investors day. Management aims to generate a REBIT margin of 11.5-12.5% (2016: 9.7%; 2014: 7.5%) and EBITDA (based on recurring EBIT!)/free cash conversion of 35% (2016: 36%). The financial frame consists of ROCE to be at least at 10%, a net debt/EBITDA of <2x and an investment grade rating (2016: S&P: BBB; Moody’s: Baa2).
Arkema was up +14% (v: +5%; p: +5%; portfolio: +3%) to €2,152m and the gross profit margin improved from 22.1% to 23.0% in Q1. EBITDA increased +17% to €340m and net profit attributable to shareholders came in at €137m (€98m). Operating CF (+20% to €73m) was driven by the better operating performance despite the higher NWC outflow (€-179m after €-151m) due to higher receivables against the seasonality backdrop. Investing CF was broadly unchanged (€-97m after €-101m) slightly lifted by divestment proceeds. Financing CF doubled (€-20m after €-10m) seeing a decrease in short-term debt. For 2017, management had already confirmed its guidance of €1.3bn in EBITDA.
Arkema reported +5% (v: +6%; price: +1%; FX: -1%; portfolio: -1%) higher sales (to €1,852m) and the gross profit margin clearly improved from 18.0% to 19.3% in Q4. EBITDA strongly rose +26% to €246m and net profit attributable to shareholders jumped +76% to €86m. Operating CF came down from €380m to €246m, despite the higher operating performance, but NWC inflow declined from €205m to €97m and D/A was also lower. Investing CF moved from €-19m to €-327m burdened by significantly higher acquisition costs (€-337m after €2m) due to the closing of the Den Braven takeover. Financing CF was €-177m (€-57m), which suffered from higher net gross debt repayments (€-147m after €-25m). Management proposes a €0.15 higher dividend of €2.05 (€1.90) per share at the AGM on 23 May 2017. For 2017, management confirmed the achievement of the 2014 target of €1.3bn EBITDA. We expect the publication of the annual report in the coming weeks.
Arkema’s Q3 sales dropped 6% to €1,838m, but the gross profit margin improved from 20.2% to 22.3%. EBITDA went up +5% to €284m and net profit attributable to shareholders rocketed +57% to €96m. 9M operating CF strongly grew (+20% to €575m) due to the higher operating performance, despite a strong increase in NWC outflow (€-86m after €-19m). Lacking the huge cash outflow for the Bostik acquisition, investing CF abated from €-1,616m to €-337m, seeing capex far below D/A. Financing CF swung from €428m to €-79m, primarily due to the strong decline in net gross debt issuance (€26m after €478m). Management lifted FY guidance again, now expecting EBITDA growth in the 9-10% (7-9%) range based on the assumption that energy costs, raw material costs and FX will be in line with current levels. This does not include the announced acquisition of Den Braven. Closing is still expected in Q4 16.
Arkema’s Q2 sales (-7% to €1,952m) suffered from lower prices (-5%) stemming from lower raw material prices, adverse FX developments (-3%) and divestments (-2%), which may have been partly offset by higher volumes (+3%). EBITDA saw a strong increase (+38% to €351m) and net profit attributable to shareholders was up +11% to €147m. Operating CF remained broadly unchanged at €259m after six months of 2016. The better operating performance was mostly absorbed by higher NWC outflows (€-186m after €-67m). Lacking the cash outflow for the Bostik acquisition (~€1.3bn) in the previous year’s period, investing CF declined from €-1,531m to €-222m. Financing CF swung from €484m to €-104m as net gross debt proceeds melted away (nil after €486m). Management lifted the FY guidance and now expects EBITDA growth in the 7-9% range based on the assumption that energy costs and FX will be in line with their current levels. This does not include the announced acquisition of Den Braven for which the close is still expected in Q4 2106.
Arkema plans to acquire Den Braven, a leader in sealants for insulation and construction in Europe, for an EV of €485m. As the deal is subject to anti-trust approvals, closing of the deal is expected to take place in Q4 16.
Q1 sales were slightly up (1% to €1,893m) seeing one month of Bostik and some divestments (portfolio: +5%) and higher volumes (+3%), but lower raw material prices and the low point of the acrylic cycle ate up 6%. The gross profit margin improved from 18.25% to 22.1% and EBITDA strongly rose +32% to €291m. Net profit attributable to shareholders more than doubled (€98m after €42m). Operating CF (€61m after €34m) reflected the stronger operating performance, which was partly offset by higher NWC outflow (€-151m after €-110m). In Q1 15, investing CF was characterised by the Bostik payment and CF came back to a more normal level (€-101m after €-1,415m). The same is true for the financing CF (€-10m after €489m), which saw very minimal financing activities. Management confirmed its previously given guidance, expecting EBITDA to grow based on the assumption that energy costs and FX will be in line with current levels.
Bostik was a game-changing acquisition and the figures are dominated by this effect. In Q4, sales clearly improved +23% to €1,760m and the gross profit margin strongly improved from 15.5% to 18.0%. EBITDA went up +23% to €195m and net income attributable to shareholders nearly doubled (€49m after €27m). Operating CF more than doubled (€380m after €162m), driven by higher D/A and, additionally, propelled by a stronger NWC inflow (€205m after €61m), helped by lower inventories and receivables as well as higher payables. Investing CF came up from €-288m to €-19m as the previous year’s quarter was impacted by acquisition costs. Financing CF swung from €907m to €-57m. In the previous year’s quarter, Arkema issued a hybrid bond as a first building block to finance the Bostik acquisition. Management proposes a slightly higher dividend (€1.90 after €1.85 per share) at the next AGM on 7 June 2016. The payout ratio drops from 73.1% to 49.1%. For FY 2016, management is confident it can increase EBITDA, based on the assumption that energy costs and FX will be in line with current levels. The annual report should be available within the next few weeks.
Arkema will receive €73.6m from Klesch Group as compensation for the majority of costs incurred in the arbitration procedure.
Q3 figures remained dominated by the Bostik acquisition as sales strongly ramped up by +32% to €1,946m (volumes: -1%; prices: -4%; portfolio: +29%; FX: +7%) and the gross profit margin increased from 17.9% to 20.2%. EBITDA jumped +65% to €271m and net profit attributable to shareholders more than doubled (€61m after €24m). Operating CF (+31% to €224m) reflects the better operating performance and benefited from higher D/A. Investing CF (€-85m after €-111m) was helped by fixed assets payables (€79m after €-12m) despite higher capex (€-161m after €-107m). Financing CF swung from €128m to €-56m due to the lack of the previous year’s quarter inflow from short-term borrowings and the change of dividends to be paid (balance qoq: zero). In 2015, management expects EBITDA including Bostik in the range of €1,020-1,040m (previously: slightly above €1bn).
Q2 sales went up strongly by +39% (organic: -1%) to €2,106m and the gross profit margin improved from 18.1% to 20.3%. EBITDA ramped up by +35% to €254m and net income attributable to shareholders more than doubled (€133m after €50m). In H1, the operating CF benefited from the far higher operating performance coming in at €254m (€174m). Due to the Bostik acquisition, investing CF swelled from €-271m to €-1,531m, of which €-1,298m is attributable to the acquisition. Financing CF swung from €-107m to €484m due to the net gross debt issuance (€486m after €-25m). In 2015, management expects EBITDA including Bostik to be slightly above €1bn (previously: EBITDA to grow excluding the effect of the Bostik acquisition).
Research Tree provides access to ongoing research coverage, media content and regulatory news on Arkema. We currently have 15 research reports from 1 professional analysts.
We have refreshed our quality style screen for the second time and report on style performance since the last refresh in October. Performance has been very strong, outperforming the small-cap index by c.1600bps (weighted basis) and c.1000bps (unweighted). There has been volatility with the market and this style has yet to be tested in a concerted down market, but in a flat or rising market quality appears to be a successful investment style in small-caps. We have highlighted 11 focus stocks in the new screen and will report back again on performance when we next refresh the screen in about 5-6 months’ time.
Companies: LIO GHT AMO CHH ZYT DOTD GTLY RIV FCRM TAM PAM
Last Friday we hosted our second Listed Law conference, London’s only investor event focussed on the business of law in a listed context. We are fascinated that a sector involving many hundreds of billions of dollars of activity each year in high added-value services only offers public market investors fewer than a dozen equity market investment opportunities globally, with an aggregate market cap of only £4.3bn (of which Burford Capital is £3.3bn). With high costs driving change in the way legal services are bought and sold, our speakers offered fascinating insights on emerging business models. These require capital and talent to function fully and our conference theme paid particular attention to how that talent is attracted, deployed and retained. We conclude that more public investment opportunities are likely. A video of each presentation is embedded on each company profile herein and the slide packs themselves are available on e-mail by request.
Companies: BUR GOR GTLY
Gateley have confirmed strong progress for FY18 with revenue growth of at least 8% and EBITDA growth over 7%. The group have also strengthened the property activities acquiring GCL creating one of the largest residential development teams in the UK legal market. The acquisition will drive meaningful cost and revenue synergies and we estimate will enhance earnings by 4% in FY19. Gateley shares offer investors access to an established business model set to directly benefit from the changing structure of the UK legal market; an opportunity-rich landscape for ambitious mid-tier firms. Results since the float have clearly demonstrated a quality earnings stream and we believe the positive year end trading update aligned with the earnings enhancement from GCL should provide a catalyst for re-rating.
Harvey Nash Group plc (HVN.L, 103p/£75.8m) Acquisition | Norman Broadbent plc (NBB.L, 11p/£5.8m) Final results to 31 December 2017 | Staffline Group plc (STAF.L, 970p/£270m) AGM Statement
Companies: HVN NBB STAF
SimplyBiz is a leading provider of compliance and business support services to over 3,400 UK directly authorised financial intermediary firms (Members). Regulation is a growth industry. SimplyBiz is perfectly positioned to support its members.
Water Intelligence has reported a strong set of FY 2017 results with adj. EPS up 30% and a continued strong outlook. Indeed, the recent Q1 2018E statement detailed sales were up +40% and PBT up 50%. We have updated our target price to 309p (previously 263p) and reiterate our view that Water Intelligence has a differentiated offering in a large, growing market that is supported by regulation, underpinning very significant growth prospects.
Companies: Water Intelligence
The FTSE 100 hit an all-time high earlier this week, surpassing the 7,800 mark as concerns over a US-China trade war receded. As Table 1 below shows, all indices have now moved firmly into positive territory for the year to date. We have continued to see significant M&A activity. With some exceptions, company results have been as anticipated, although the outlook in some sectors of the economy looks less promising than previously. In Share News & Views, we comment on Bloomsbury Publishing, Braemar Shipping*, DeepMatter*, GetBusy*, Location Sciences* PCF Group* and Sprue Aegis*.
Companies: APC BMS CRPR ECSC ESC EUSP FDM GETB PCF SNX SPRP TCN W7L
Sprue’s 2017 results are in line with the expectations in the January trading update, save for the £3.8m exceptional charge announced last week in the settlement with BRK. This mainly relates to an inventory write down/charge which has impacted cash flow and no final dividend has been declared. We have reinstated coverage with lower sales and profit forecasts than previously. However, with a strong product roadmap, we expect to see these recover in due course. We reinstate a Buy rating and a DCF-derived 170p target price.
Companies: Sprue Aegis
Two former AIM companies could be in the FTSE 100 index in the near future following the successful bids by Melrose Industries for GKN and GVC for Ladbrokes Coral. Melrose has been on the brink of the FTSE 100 for a while and if a constituent company of the FTSE 100 is acquired than it can be replaced by the acquirer when it is eligible. Melrose is already on the reserve list for inclusion in the FTSE 100, following the March 2018 quarterly review.
Companies: PTSG JDG TRCS SRB TAP KETL
We have completed another refresh of our value style screen, first established as of 12 May 2015. As usual the screen selected the 25 stocks exhibiting the most extreme value characteristics from our universe, and we have chosen 10 stocks to focus on. Since the last refresh, two days before the last general election, which resulted in a hung parliament, the screen has performed a little better than the small-cap index with our focus stocks outperforming by about 500bps. The weighting to UK consumer stocks noted last time detracted from performance, which came as little surprise given our cautious stance, much discussed in our other strategy work this year. One might have expected more consumer exposure in the refreshed screen given this year’s severe underperformance, but it appears forecasts have been similarly downgraded, keeping much of the sector outside our value criteria
Companies: AUG EHG GOAL MMH RTHM SDY TEF VANL
Prior to the financial crisis of 2008/09, it was widely believed in the stock market that certain sectors – most notably utilities, pharmaceuticals, food retailing and tobacco – were far less vulnerable to market downturns.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BNO BUR CMH CLIG COS DNL EVG GTLY GDR INL KOOV MCL MUR NSF OXB NIPT PHP RE/ REDX SCLP SCE SIXH TRX TON VAL
FY2018 results show revenues of £133.4m (-1.8%) and adj. PBT of £7.7m (+97%). Shipbroking has performed in line, despite weakness in the tanker market. The Financial division (including Braemar NAVES) has performed ahead of expectations. Technical has returned to profitability. The dividend has increased to 15p. Braemar continues to invest, for a better balance and a wider range of complementary skills. Given this investment, we have reduced FY2019E PBT by 9% to £9.5m, EPS of 25.5p, and dividend of 17p. Buy 400p TP.
Companies: Braemar Shipping Services
A customer in the Financial sector has experienced a downturn in activity in H1 which has offset strong progress in the Gaming sector. After a poor H1, Financials has seen an improvement in demand and a generally stronger H2 is expected. Exciting opportunities remain in Gaming and elsewhere, and with more normal Financial sales, the outlook remains positive. We have reduced our PBT forecast in FY18 from £5.6m to £5.2m and await updates as the year progresses. Year end net cash is expected to be £14.8m. Given the expected improvement in H2, an ex cash P/E of c.13x and a dividend yield of over 5% are still strong attractions.
Have you ever had the pleasure of cleaning a canteen kitchen, fast-food outlet or public toilet? If so, then you’ll know it’s not for the squeamish. The restaurant, facilities management and medical industries are faced with this challenge millions of times each day. Balancing on the one hand, stringent health & safety, hygiene and clinical requirements with cost, employee & customer pressures on the other.
Companies: Elektron Technology
According to media sources, the Commission will pass its reservations to the two companies in the next few days. These seem to be much more serious than initially thought as the merger will eventually lead to three dominant players in the European industrial gas market. As a result, these three (Linde/Praxair, Air Liquide, and Air Products) will have enormous pricing power.