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Positive update today, reporting that trading in FYJun21 has begun well. As a result – and also thanks to DOTD’s strong revenue visibility – revenue guidance is already being upgraded. Consequently, we lift FY21E sales by 6% to £53.0m, so now expecting +12% y/y growth. To put this into context, growth fell to +9% in 2H20. We find this rapid recovery to more typical growth levels highly encouraging. Guidance for profit and cash is reiterated, meaning we leave both profit and cash forecasts unchanged. Somewhat obviously, this requires us increasing our cost assumptions….and if these don’t fully materialise, provides upside risk. Cash continues to build, now £27.7m as at Q1 – we might expect this to be strategically deployed, to enhance what is impressively consistent organic growth.
Companies: dotDigital Group plc
Bioventix reported a strong set of full-year results, that were 8% above expectations, assisted in part by a c.£0.2m (+3%) FX benefit, which helped offset the obvious drag on performance in Q4 due to the impact of COVID-19 on routine testing in hospitals. A 53p special dividend was proposed, resulting in a full-year dividend of 141p, up 18%. Due to the COVID-19-related disruption to testing, which only exacerbates the poor visibility to customer royalty streams, we are withdrawing forecasts until normality returns. That said, the business remains in very good shape, with evidence that: (i) high sensitivity troponin is gaining momentum; (ii) physical antibody sales growth remains robust (+34%); and (iii) progress in its development pipeline (particularly pollution monitoring programme) is being made. The business is expected to remain cash generative, and with c.£8.1m of cash at 30 June, the company is a strong position to weather this period of disruption before returning to growth.
Companies: Bioventix Plc
This morning's announcement of another insurance client win caps a week of excellent newsflow from WATR. Since the company entered this colossal ($US13bn-plus) sector, strong insurance-derived growth has been achieved in this area, helped by WATR's status as the only national player to provide pinpoint services identifying water leaks while minimizing damage claims. Beyond this morning's announcement, this has been a week to remember for WATR, with a strong Q3 update on Oct. 14th generating c.8% '20 /'21 profit upgrades followed by the news at the start of the week of a successful fundraise delivering just shy of $US5m which can be put to work generating growth for the company and its shareholders. As the fifth such win, this morning's announcement is a reminder of the very good traction the company has achieved with the US insurance majors. Our 550p fair value estimate includes the annuity-style earnings stream from the franchise businesses in a Sum of the Parts structure. We note the company's conclusion that demand is high for its solutions and also the fact that WATR is an “essential service provider” in the Covid context. Beyond this morning's encouraging news, we also note the recent award of the Green Economy Mark from LSE and the company's consistent track record of 30%+ CAGR in recent years.
Companies: Water Intelligence plc
Driver Group’s year end update highlights an expected full year PBT outturn of £2.5m (£1.3m/£1.2m H1/H2) after adjusting for costs relating to the departure of Gordon Wilkinson. Whilst this represents a slight decrease on the prior year, given the impact of COVID-19, this is an impressive result. Geographic diversity continues to benefit the Group, with a strong performance in the UK and Europe offsetting a weaker result in the Middle East and APAC regions in FY20. Forecast guidance remains suspended given the uncertain near term outlook, but the Group continues to generate profit and cash. Strategic progress is also being made, with the Group taking opportunities to both hire new staff and further expand its geographic presence, not least opening a new office in New York and forming a strategic partnership in Africa. Management has also delivered a restructuring of the Middle East and APAC regions, in order to drive a more profitable business and provide a platform for younger talent to progress. The balance sheet remains robust, with net cash of £8.2m at the year end.
Companies: Driver Group Plc
Franchise Brands has provided a Q3 trading update with a strong rebound in trading across the Group. The B2B division has recovered from the lockdown impacted Q2 and system sales have grown by an average of +8% per month since June. In September, B2B system sales for the month were +9% higher than the same month in the prior year. The B2C brands have recovered at different speeds, driven by new franchisee recruitment. ChipsAway and Ovenclean (89% of B2C income in 2019) are trading at pre-CV19 levels. Franchise Brands remains in a strong position with a solid balance sheet and liquidity position. The Group is confident of meeting market expectations for FY2020.
Companies: Franchise Brands plc
ANGLE plc (AGL.L): Acceptance of FDA submission | Feedback plc (FDBK.L*): Partnership agreement | Open Orphan (ORPH.L): Human Challenge Study Model contract with UK Government
Companies: AGL FDBK ORPH
ORPH has signed a contract with the UK Government for the development of a COVID-19 human challenge model. This will involve manufacture of the challenge virus and a first-in-human characterisation study. The contract begins immediately and is likely to be worth c.£10m. The government has also reserved the first three slots to test vaccines using the challenge study at a total cost of £7.5m. We revise our forecasts and increase our SOTP target price to 28p (range 25-31p), reflecting ORPH’s world-leading position in traditional challenge models, and now COVID-19 challenge models, with additional upside from the potential development of new challenge models, the monetisation of valuable challenge model data and the potential sale of its non-core pharmaceutical assets.
Companies: Open Orphan Plc
Open Orphan has announced a contract with the UK Government to develop and perform the UK's first COVID-19 (COVID) human challenge studies. The multi-faceted agreement provides strong endorsement and validation of hVIVO's capabilities, with material revenues driving forecast upgrades and further upside risk to earnings as pipeline conversion continues and industry awareness and penetration of challenge studies accelerates.
Companies: OPORF ORPH CRO VENN
Avacta (AVCT.L): Adeptrix COVID-19 Diagnostic Test update | Diaceutics (DXRX.L): New contract win
Companies: Avacta Group plc (AVCT:LON)Diaceutics Plc (DXRX:LON)
FY20 results reflect a year of trading in-line with earlier expectations, until being significantly interrupted in Q4/20 by the impact of Covid-19. Despite this, 1pm remained profitable throughout, despite accepting forbearance requests and prudently lifting bad debt provisions for the future. Post-period, there has been a noticeable pick-up in trading as the UK economy recovers, which 1pm is currently positioning itself for. A P/TNAV of 0.55x materially undervalues 1pm, hence we remain at “Buy”.
Companies: 1 PM Plc
Interim results to 30 June reflected a step-up in research activity post-June fundraise as it seeks to take its first pre|CISION targeted chemotherapy into clinical trials in early 2021. With period-end cash of £54.5m, Avacta has a cash runway into 2023, providing the necessary working capital to deliver a rapid SARS-CoV2 antigen test, take AVA6000 into the clinic, as well as its first Affimer immunotherapy and the next pre|CISION pro-drug into the clinic. Avacta is aiming to have validated its rapid SARS-CoV-2 antigen test in Q4 2020, the exact timing of which is dependent on pilot batch product from BBI Solutions. However, it is increasingly clear that there is a need for mass screening tests to isolate and remove infectious people, with Avacta’s test at the forefront. We have made changes to FY 2020 forecasts, introduce FY 2021 forecasts and a target price of 310p with a range of 211-796p.
Companies: Avacta Group plc
RELX issued a fairly sound 9 month trading statement despite the Exhibitions division remaining highly impacted by the current pandemic. More than 4/5 of the business are continuing to hold up well, which we consider a positive.
The FY20e outlook is unchanged for the three largest divisions while Exhibitions continue to suffer.
Some downgrade adjustments are expected to our forecasts, mostly due to Exhibitions, but we intend to reiterate a positive recommendation on the stock.
Companies: RELX PLC
Rentokil bounced back strongly in Q3 FY20, supported by a strong recovery in demand for its core pest control and hygiene services, and the ongoing need for disinfection solutions amidst the COVID-19 pandemic. Moreover, management sounded confident about the positive momentum to be sustained in Q4 FY20 and, hence, expects to meet full-year expectations and to announce a dividend during the preliminary results.
Companies: Rentokil Initial plc
The H1 results were well flagged in the 15th April update. H1 PBT is significantly ahead of last year at £1.3m (H1’19: £0.8m). Driver traded profitably through April to June. Whilst guidance is suspended, with the pipeline maintained, we believe the Group will continue to trade profitably through H2. As flagged in the H1 update, there is no interim dividend, with management seeking to preserve cash. The balance sheet is strong, with net cash of £3.3m at 31st March (improved to c.£5.5m post period end). We believe the medium term outlook is positive, with new CEO Mark Wheeler focused on improving profitability and growing the business. Delays in construction projects as a result of COVID-19 should support near term levels of dispute work, whilst an expected increase in infrastructure spending supports the medium term outlook.
Elixirr was founded 11 years ago to provide clients with an alternative to the traditional, stagnant consulting models that the large consulting firms provide. The entrepreneurial culture and focus on helping clients build businesses, new products and customer experiences are key differentiators, supporting +32% sales CAGR since 2012, +27% since 2017 and EBITDA margins approaching 30%. The ability to react quickly is embedded in the culture and has meant that the sudden need for clients to focus on remote working and digital delivery, due to the COVID-19 pandemic, has supported continued strong trading. Elixirr has raised £20m new money at 217p to accelerate its growth strategy by acquisition, continue its impressive growth into the US and broaden its base of expertise. We initiate with a 312p price target, representing a calendar 2020E EV/EBIT of 16.3x. This is on a par with the small/mid cap market despite our forecast of 19% EBIT CAGR over the next two years, significantly ahead of the market’s current 4%. As the cash raised is invested into enhancing acquisitions, upgrades will follow.
Companies: Elixirr International Plc