Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Engie. We currently have 14 research reports from 1 professional analysts.
Engie reported a robust set of Q1 18 results, marked by the high winds and hydro output in France, strong activities in the Americas and the robust performance of the gas midstream activities. The group confirmed its 2018 objectives.
• 2017 results within expectations adjusted for all the multiple one-offs. • 2018 guidance and dividend payment reassuring as reshuffling strategy pays off. • Major M&A denied. Suez stake confirmed. French infrastructure law under review.
Engie’s Q3 results are slightly better than expected with adjusted revenues (including E&P as discounted operations) at €46.8bn for the nine months, which implies a 2.9% increase. In line with revenue growth, the company achieved a +3.8% increase in the adjusted EBITDA to €6.6bn. The group maintains its full-year guidance with adjusted net income of €2.4-2.6bn in the mid-range of the target. EBITDA, on the other hand, is expected to be in the lower range of expectations. The group has confirmed the disposal of its LNG upstream and midstream activities to Total for $2.04bn, including an earn-out of up to $550m. Engie will keep the downstream activities, including regasification infrastructure and retail customer sales. The completion of the deal is expected in 2018.
Engie reported an encouraging set of results for the first half, showing an acceleration of organic growth during the second quarter after the weak Q1. H1 revenues rose by 1.6% to €33.1bn (+2.6% org.). EBITDA was flat at €5.0bn (+4.0% org.), while net recurring income amounted to €1.5bn, a 4.2% increase (+15.5% org.). The group continued to improve its financial structure with a net debt reduction of €2.1bn ytd (corresponding to €22.7bn in net debt) on the back of the portfolio rotation programme. The interim dividend came to €0.35/share, to be paid in October 2017. Following the positive H1 results, management confirmed its FY2017 financial targets: Net recurring income of €2.4-2.6bn, expected at mid-range Net debt/EBITDA ratio <2.5x Cash dividend of €0.70/share with respect to 2017 Note, the disposal of the E&P activities is now treated as discontinued operations, with retroactive impacts on the P&L and cash flow statements. Thus, the 2016 figures have been entirely restated.
Engie has published its Q1-17 trading update. The figures were below expectations as, despite the 3.2% increase in revenues to €19.5bn, EBITDA declined by 3.6% to €3.3bn and operating income declined by 4.6% to €2.2bn mainly driven by low hydro production in France and the shutdown of one nuclear reactor since September 2016. The earnings results were below market expectations. Despite the weak Q1 earnings performance, the group confirmed the full year guidance (EBITDA of €10.7-11.3bn and net income of €2.4-2.6bn) as the first quarter was impacted by multiple timing impacts. However, the company’s financial situation is seeing a substantial improvement as net debt decreased by 17.7% ytd with positive operating cash flows, improving the credit ratios. This positive effect was visible despite the decrease in earnings.
The company has presented poor results, but with decreases that are lower than expected. Revenues decreased 4.6% yoy to €66.6bn, EBITDA was down 5.2% yoy to €10.7bn with a 2.7% yoy decrease organically, and adjusted net income at €2.5bn (-4.3% yoy). On a reported basis, the group finished once again in the red with reported net income at -€0.4bn driven by €3.8bn of impairments in power plants, nuclear assets and merchant activities. The dividend is maintained within expectations at €1/share for 2016 and €0.7/share for 2017 and 2018. The good news comes from the guidance, as the group expects to return to growth with EBITDA reaching €10.7-11.3bn and net income in the €2.4-2.6bn range, despite the erosion effect from the disposal of assets already achieved.
Engie, through a consortium with the Saudi Electric Company (SEC) and Saudi Aramco, has won a contract to build a 1.5GW cogeneration power plant using CCGT technology in Saudi Arabia For a total investment of $1.2bn, this would take the achieved cost of the project to $1.25m/MW, which is extremely competitive. Engie would hold a 40% stake in the project, with SEC holding 30% and Saudi Aramco the remaining 30%, which implies that Engie would have a $480m investment envelope in the project. The construction contract is attached to two 20-year contracts, whereby SEC would buy the electricity and Saudi Aramco would buy the steam and hot water produced, reducing the exposure of the project to wholesale price movements, although the achieved price for the contracts have not been disclosed. The power plant is expected to be commissioned in 2019, with the operation and maintenance of the power plant being transferred to SEC in 2018.
Engie has published its 9M trading update with revenue falling 11.1% yoy and 10.3% in organic terms ro reach €47.5bn, with EBITDA falling 5.4% yoy and -2% organically to €7.7bn. Nevertheless, operating cash flows decreased by 8.3% yoy to €6.8bn. Net debt fell by €1.9bn (-6.8% ytd), but the net debt/EBITDA ratio improved (2.38x). The results were negatively affected by commodity prices and compensated by higher infrastructure tariffs. The group confirmed its 2016 financial targets: adjusted net income group at the low end of the range of €2.4-2.7bn and EBITDA of €10.8-11.4bn.
The difficult half year of the group has been confirmed, mainly at the top-line level as it misses expectations with revenues decreasing 11.9% yoy to €33.5bn. However, the impact has been reduced due to an optimisation of the cost base with EBITDA reaching €5,651m (-7.8% yoy), mainly affected by lower commodity prices (with achieved prices), and a reduction in gas margins. Lower depreciation expenses and a reduction in impairment charges were achieved so that the operating profit increased 5.2% yoy to €3.38bn, pushing upwards in its path net income to an 11.3% yoy increase to €1,237m. On an adjusted basis, operating profit fell by 3.5% yoy to €3.5bn, providing a 1.9% organic growth, while net income decreased by 7% yoy to €1.5bn, which is in line with expectations. A €0.5/share interim dividend in cash will be paid. On the cash flow side, on top of lower earnings, the group had a negative one-off of €1.1bn of margin calls and derivatives which plunged the operating cash flow towards a 32% yoy decrease to €4.79bn. The decrease, added to the 9.6% yoy increase in capex and besides the €1.45bn from disposals and the repayment of €1.43bn of outstanding debt, made free cash flow finish in negative territory at -€657m. Despite the difficult results, the group has confirmed the full-year results with EBITDA at €10.8–11.4bn and adjusted net income in the €2.4-2.7bn range. Following the new strategy of the company, Engie has a new segment reporting in line with the new organisational structure.
Engie has provided mixed results as revenues reached €18.9bn, which is a 14.3% yoy decrease and falls short of expectations by 12%. However, given the conditions, EBITDA was strong as it fell by 1.7% yoy to €3.5bn, although on an adjusted basis it grew 2.3% where the positive results were supported by the restart of 3 reactors in Belgium and cost-cutting measures, which is in line with consensus. Moreover, operating income increased 0.4% yoy to €2.4bn and +5.9% on an adjusted basis, beating forecasts by 2%. On the other hand, operating cash flows decreased by 55% yoy, but this was mainly driven by WC movements due to the use of derivatives to cover the fall in commodity prices, and higher gas inventories. It is expected that the negative WC movements will be reversed over the year. Net debt decreased by €0.7bn due to cash generation and the first effects of the disposal programme. Following this publication, the group confirmed all its FY16 guidance: EBITDA between €10.8bn and €11.4bn, adjusted net income between €2.4bn and €2.7bn, a 2.5x net debt/EBITDA ratio and an A credit rating and a €1/share dividend to be paid in cash. The group has confirmed its intention to issue an IPO on Electrabel in 2017 (the Belgian subsidiary). The process has been started as the separation of the management of the subsidiary has already been achieved and the group is currently in legally creating an independent and separate entity.
Weak top-line performance as both revenues and EBITDA miss estimates. Revenues decreased 6.4% yoy to €69.88bn, 4% short of the forecast, with EBITDA having a similar decrease as sales (-6.6% yoy), missing forecasts by 1.2%. Adjusted operating income decreased by 11.6% yoy to €6.32bn, but the 4% fall is less dramatic than expected; however, on a reported basis it finished in negative territory due to impairments (-€8.7bn) and restructuring costs (-€870m), pushing the reported EBIT into negative territory to -€3.24bn. Due to this, the company had a reported net loss of -€4.62bn but, on an adjusted basis, net income reached €2.6bn, representing a €17% yoy decrease, 1% above estimates. Cash flows remained strong despite the decrease in EBITDA, as operating cash flows increased by 18.6% yoy helped by a substantial improvement in working capital (+€1.16bn). The improvement allowed Engie to cover a 58% increase in net capex and its dividend payments. A €1/share dividend has been proposed, to be paid in cash with a similar one expected for 2016, while dividends have been cut for 2017 and 2018 to €0.7/share to provide investors with visibility during the transition process. A radical transformation process has been put in place with €15bn of asset disposals, an increase in investment objectives, in addition to a move towards a lighter capital-intensive model with a more decentralised approach. On 2016 guidance, the group expects to achieve EBITDA between €10.8bn and €11.4bn with net income between €2.4bn and €2.7bn. An A credit rating is targeted with a 2.5x net debt/EBITDA ratio.
The Q3 trading update has confirmed that 2015 is a difficult year for the group. Sales fell by 1.5% ytd to €53.5bn and -4.6% on an organic basis. Gas and LNG revenues decreased by 38% ytd and Europe by 2.1% ytd, offset by strong performances in International (+10.4%), Infrastructure (+7.7%) and Energy services (4.1%). EBITDA reached €8.1bn, a 7.5% ytd decrease, mainly due to lower power and commodity prices and the effects on E&P and LNG activities, in addition to the unavailability of Belgium nuclear plants. Despite this, operating cash flow remains strong at €7.4bn, 8% above the previous year's levels, being able to withstand the capex increase. Nevertheless, investment has been adjusted to growth opportunities, as there has been a further reduction of €200m in E&P (an additional 10% decrease). Impairments are expected on the FY results due to worsening market conditions, with a downward adjustment of the carrying values of certain assets, although the amount has not been stated. However, it is important to remember the group has a robust balance sheet, one of the strongest in the sector. The group maintains its full-year guidance: EBITDA between €11.5bn and €12bn and adjusted net income €2.75-3.05bn, although it now expects the latter towards the lower end of the range. The dividend policy is maintained, with no objective to change it as cash flow generation remains strong.
Less dramatic than expected H1 results, as the group continues to feel the downward pressure from both electricity and commodity markets. Revenues decreased 2% yoy to €38.52bn, which is in line with expectations. EBITDA decreased by 4.79% yoy to €6.12bn, although the decrease is less than expected. The operating profit of the group decreased by 13% yoy to €3.61bn, but is still 4% above consensus. But the best results are provided on the bottom line, as adjusted net income reached €1.8bn, which was a 28.2% yoy decrease, but still 20.2% above consensus. The reported net income nonetheless reached €1.11bn due to the €700m impairment on gas assets. Net debt decreased by €700m ytd to reach €26.8bn, which is 3.18% better than consensus (net of hybrids), with a decrease in the effective interest rate to 3.0% from 3.14% in December 2014. The group will pay an interim dividend of €0.5 per share and confirmed its FY 2015 guidance: adjusted net income of between €2.85bn and €3.15bn and a dividend payout of 65-75% of the adjusted net income with a minimum payment of €1 per share. Furthermore, an agreement has been reached with the Belgian government confirming the extension life of two nuclear reactors (Doel 1 and 2). Furthermore, concerning the nuclear contribution settlements in dispute for overpaid nuclear taxes, the group has also achieved an agreement concerning the nuclear tax payments: €200m for 2015, €130m for 2016 and a 40% margin from 2017 onwards.
The restructuring of the group is gaining momentum. Engie has just acquired a 95% stake in SolaireDirect with 100% of the voting rights for something just below €200m. With this, the group becomes the leader in French solar power and increases its renewable footprint worldwide as SolaireDirect already has a presence in 15 different countries. The news follows the possible IPO of the group's Belgian generation production as it expects to list its Belgian nuclear assets under the Electrabel name.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Engie. We currently have 14 research reports from 1 professional analysts.
Hardman & Co recently welcomed Milan Radia to our roster of established, industry expert analysts. Milan has 25 years of equity market experience at major investment banks and in asset management, and has worked on many high-profile successful IPOs. In 2017, he was ranked the No.1 earnings estimator in the UK for his sector in the Thomson Starmine Awards. Milan has also been techMARK Analyst of the Year and achieved top three Institutional Investor sector rankings for his coverage of the software and telecoms sectors. In our lead article this month he gives an insight into his thinking on some key themes in the sector.
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
When we last published the FTSE 100 was reaching an all-time high of 7877. We have subsequently seen increased volatility and some of the previous progress made by markets surrendered. The escalation of the potential trade war between the US and China and the imposition of more tariffs has unnerved markets. At home, we have continued to see M&A activity. While company results have largely been as anticipated, the outlook in some sectors looks less promising. In Share News & Views, we comment on Aortech*, ECSC*, Location Sciences*, Norcros, NWF, Tricorn* and Warpaint London*.
Companies: AOR APC BMS CRPR DMTR ECSC ESC EUSP FDM GETB LSAI SNX SPRP TCN W7L
Elektron Technology’s AGM update has revealed a strong start to the year, with performance ahead of expectations. This has been driven by Bulgin, which is trading strongly across all territories. Management now expects Bulgin to report H1 19 sales of at least £13.5m (up c.8%) and anticipates modest sales growth for the business for FY19, despite a tough H2 comparative. Meanwhile Checkit continues to make good progress in driving adoption of its real-time operations management and monitoring solution, and Elektron Eye Technology is trading in line with expectations. We have increased our forecasts for Bulgin in line with updated guidance, driving an upgrade to adjusted group PBT and EPS of 20% for FY19, followed by 5% for FY20.
Companies: Elektron Technology
Trifast delivered another record financial performance. FY18 results were modestly ahead of market expectations, but significantly ahead of expectations at the start of the year. Management is now launching Project Atlas to integrate its management, customer-facing and manufacturing processes through a £15m investment over the next three years. By maintaining leading customer service and quality levels, the move is a clear support for the invest and grow strategy. Following the recent acquisition of Precision Technology Supplies (PTS) in the UK, the company retains adequate resources to pursue additional M&A should appropriate opportunities arise.
With growth in Continental Europe and the US exceeding our expectations, underlying gross profit growth of 13% in 2Q18 was materially better than we had hoped. With the outlook for these businesses remaining strong, and signs that the UK may have reached a point of inflection, we believe that the company is well positioned to deliver attractive growth in FY18.
The company has announced several new exploration and delineation contracts. The contracts are in existing areas of operation and leverage existing capabilities, raising rig utilisation rates. Management comments that there has been an increase in demand for exploration rigs over recent months. Management has raised its guidance and accordingly we increase our revenue by 4.7%, significant drop through results in an increase in our adjusted EPS of 13.7% to 3.6ȼ. The shares have started to see the start of a recovery, having been deeply oversold due to Tanzanian risks. We still see significant upside from current levels towards our 85p target, driven by positive trading.
Companies: Capital Drilling
FY18 saw a return to growth, albeit modest at +1%. Adj. EBIT increased 26% as cost savings were delivered. The £36m placing has allowed for further consolidation of the cable assemblies market as well as strengthening the balance sheet in anticipation of the next deal.
1Spatial recently held its first capital markets day for a number of years. We see this as a positive signal that, following a substantial transformation programme, management is confident in its strategy and prospects. The recovery programme has been based on three fundamental principles – get the strategy right, assemble a strong team and build closer customer relationships. The capital markets day indicated that the company has made good progress on all three fronts.
discoverIE reported strong FY18 results: organic growth of 6% was boosted by acquisitions and currency to generate reported revenue growth of 14.7% and normalised EPS growth of 15.8%. The company is making good progress in its strategy to grow the Design & Manufacturing (D&M) business through a combination of organic growth and recent acquisitions. We expect further accretive acquisitions to move the company towards its target of generating 75% of revenues from the D&M business, and view progress towards this target as the key driver of share price performance.
Companies: Discoverie Group
This ominous-sounding term originated from the work of famed Swedish meteorologist, Tor Bergeron (1897-1977), but it only entered popular vernacular this year – and there have been ample opportunities in 2018 to use it.
Companies: ABBY BDEV BWY BKG BVS CRN CSP CRST GLE INL MCS PSN RDW SPR TW/ TEF WJG
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.
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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.
Xpediator has announced that it has acquired Anglia Forwarding Group (‘Anglia’), its third purchase since IPO last year. We anticipate strong scope for integration benefits, some of which are likely to emerge in the very short-term, not least the move of the Group’s export freight consolidation base into Anglia’s main warehouse facility.
The company has announced an important order worth £4.3m for the supply of power units for autonomous robots. This is significant as it is with a new customer in a potentially high growth area, plus the size is significant, compared with annual revenues of £47m. No change to existing forecasts, but the contract provides a much greater degree of confidence in expectations for FY 2019 and should provide some upside to the shares, which had previously come under pressure after the last trading update.
Companies: Solid State
Keywords’ acquisition of Blindlight for up to $10m gives the group the ability to apply Hollywood movie production resources to the games industry. Factoring in Blindlight and the May acquisition of Fire without Smoke, EPS is enhanced by 2% and 4% for FY18 and FY19 respectively. With the €75m revolving credit now secured, with scope to extend to €105m, the company has plenty of headroom to continue its consolidation strategy while enhancing earnings.
Companies: Keywords Studios