The group has released a very strong year-end trading performance, especially in Asia Pacific. The better than expected revenue growth (9.6% lfl vs. consensus of 7.4%) in Q4 has led the group to finish the year with 8.0% lfl top-line growth and an improved operating margin of 18.6%.
Following an annual lfl revenue growth of 25.5%, Asia Pacific (32.3%) has overtaken Europe in becoming the group’s biggest region in terms of sales contribution.
L’Oréal has unexpectedly announced the best quarterly growth in more than a decade, after a slowing Q2 19, by showing strong business resilience.
Although the sluggish demand in the US make-up market has persisted, we believe that the strong appetite of Chinese consumers for luxury cosmetics and the booming dermo-cosmetics market could offset the weakness in the US.
Most importantly, we are upbeat about China’s rising demand for fragrances.
L’Oréal has slowed down in Q2 due to lacklustre demand for make-up in the US. These tough conditions are expected to persist in H2. L’Oréal intends to acquire Mugler and Azzaro.
L’Oréal has reported better than expected sales in Q1. Organic growth reached 7.7%, boosted by 14.2% lfl growth in luxury products, 13% growth in active cosmetics and a 23.2% increase in Asia.
L’Oréal has accelerated its organic growth in Q4 to 7.7%. Full-year sales were up 7.1% at CER (+3.5% reported) to €26.9bn. The recurring operating margin increased by 30bp to 18.3% and the underlying operating profit edged up 5.3% to reach €4.9bn. The group will distribute a dividend of €3.85 per share.
The appetite of Chinese consumers for luxury cosmetics delivered the highest quarterly growth rate in a decade for L’Oréal. Sales were up 7.5% lfl in Q3. Ytd sales increased by 6.8% lfl (+1.8% reported) to €19,864m.
Despite contrasting divisional results, L’Oréal reported 6.6% yoy sales growth and an increasing operating margin (+30bp to 19.2%). The Consumer Product division’s sales failed to convince. The Luxury and Active Cosmetics divisions picked up the growth baton.
L’Oréal delivered 6.8% lfl growth in Q1 while reported sales were down 1% due to a negative currency impact. Luxury products were the growth driver thanks to booming demand in China.
L’Oréal ramped up its organic growth in Q4 to 5.5%. Full-year sales have grown by 4.8% lfl thanks to a booming demand for luxury cosmetics in China. New markets were definitely the growth driver. L’Oréal is ready to buy Nestlé’s stake in the company (23.1%) if the latter decides to sell. In this case, L’Oréal’s stake in Sanofi will also be sold.
Another dull quarter from L’Oreal. Group sales were up 5.1% lfl in Q3 to €6,098m. The performance was consistently differentiated between divisions and fuelled mainly by new markets. Luxury products edged up by a double-digit 11.2% lfl in Q3 to reach €2,024m. Consumer products, the largest contributor to sales, reported a modest rise of 2.3% lfl to €2,819m. Active cosmetics made a small step up, growing by 6.2% lfl to €475.7m. Professional Products edged up by a poor 0.5% lfl. For the first nine months, sales amounted to €19,510m (+4.5% lfl). Luxury stepped up 10.8% lfl ytd to €6,173m. Consumer products increased to €9,208m (+2% lfl). Professional products slowed down 0.3% lfl ytd to €2,519m. Active cosmetics were up 5% lfl to €1,611m.
By region, growth was driven by new markets and particularly Asia Pacific which was up 14.7% to €1,421m. Western Europe and North America grew at low single-digit rates of 2.6% and 1.3% respectively.
L’Oréal experienced a slight deceleration in its pace of growth in Q2. Sales were up 4.3% lfl (+3.5% reported) to €6,564m. Reported figures exclude The Body Shop’s revenue which was accounted as held for sale business. Aside The Body Shop, operational divisions grew by 6.8% on a reported basis. The outperformance is driven by L’Oreal Luxe and Active Cosmetics which jumped by 8.9% and 6.7% lfl to €1,991m and €532m respectively. Consumer products were up 2.4% lfl to €3,160m. Professional products remained almost flat lfl at €881m. New markets were the growth drivers during the quarter, where Asia Pacific, Latin America and Eastern Europe edged up by 9.2%, 7.1% and 6% lfl to €1,464m, €510.3m and €427.1m respectively. Western Europe and North America grew by low single-digit rates lfl. H1 sales amounted to €13,412m (+4.3% lfl and 4% reported). L’Oréal Luxe generated sales of €4,149m (+10.5% lfl). Revenue of consumer products reached €6,389m (+1.9% lfl). The gross margin scaled back by 60bp to 71.8% with a gross profit of €9,631m. The operating margin inched up 60bp to 18.9% and operating profit amounted €2,530m (+7.1%). L’Oréal Luxe has consolidated its operating margin by 210bp to 23.4%. For the remaining divisions, margins have slowed down. Consumer products generated an operating profit of €1,267m followed by L’Oréal Luxe with €970m. Net profit was up 37.3% to €2,035m. Gross cash edged up by 6.8% to €2,634m. Investments amounted to €641m, i.e. 4.8% of sales, and net debt reached €1,492m.
L’Oreal managed to deliver healthy growth in Q1. Sales were up 5.1% at CER (+7.5% reported) to €7,045m. Organic growth was lower at 4.2%. A surprising dynamism in luxury products’ consumption has raised the sales of L’Oréal Luxe by 12.2% lfl to reach €2,157m. Active cosmetics displayed a modest performance of 2.8% lfl to €603.2m. Poor growth was posted by the mainstay consumer products (+1.4% lfl) to €3,229m. Professional products experienced a depressed momentum and retreated slightly by 1.8% lfl to €858.2m. As regards geographies, Eastern Europe and Asia experienced favourable market dynamism, edging up by 12.7% and 7.1% lfl respectively. Sales in Africa and the Middle East were cut 18.8% to €166.5m. Americas posted mid single-digit growth rates at 4.6% in Latin America (€474.7m) and 3.8% in the North America (€1,917m). Western Europe was the most depressed market, growing by 2.8% lfl (€2,136m). The Body Shop’s sales were up 2.3% lfl to €197.2m. The company is expanding its e-commerce which grew by 27% in Q1, contributing 6.8% to total sales.
Sales in Q4 edged up 4.8% lfl (4.4% reported) to €6,789m. Growth was led by L’Oréal Luxe products and Active cosmetics growing by respectively 7.1% and 6.5% lfl. Consumer products sales increased by 4.2% and Professional products posted a modest 2.1% rise. The full-year sales were up 4.7% lfl to €25,837m (+5.1% at CER and +2.3% reported). Professional products edged up by low single-digit rate to €3,400m. Consumer products increased by a modest 4.4% lfl to €11,993m. Luxe products surged by 6.9% to €7,662m. Active cosmetics were up 5.7% to €1,861m. Body Shop products remained almost flat on a lfl basis at €920.8m (down 4.8% reported).
Growth was driven by a favourable sales momentum in North America increasing by 5.8% to €7,099m and Asia Pacific edging up by 3.6% to €5,635m. The strong dynamism in Latin America and Eastern Europe raised sales to €1,838m (+11.1% lfl) and €1,571m (+10.4% lfl) respectively. The gross margin gained 40bp to 71.6% with a gross profit at €18,495m. Operating profit was up 3.5% to €4,540m, i.e. an operating margin of 17.6%. Most segments raised their operating margins, led by L’Oréal Luxe which increased its margin to 21.2% (€1,623m). Consumer products generated an operating profit of €2,417m. All regions raised their profit, led by North America where the operating profit was up by 10.8% to €1,392m. Western Europe generated an operating profit of €1,831m, still the highest margin at 22.9%. Dividends received from Sanofi increased slightly by 2.8% to €346.5m. Net profit retreated by 5.8% to €3,106m due to non-recurring charges of €541m net of tax, which corresponds mainly to the Magic and Clarisonic impairment impact. Gross cash surged by 7.2% to €4,717m. WCR remained almost flat and investments were consolidated to 5.4% of sales at €1,386m. The financial position remains strong with a positive net cash of €481m. The proposed dividend is €3.3, i.e. an increase of 6.45%.
L’Oreal experienced favourable market momentum in Q3 across all regions and all product categories. Group sales accelerated with organic growth of 5.6% to reach €6,153m (+4% on a reported basis). As regards products, Cosmetics edged up 5.6% lfl (€5,952m), underpinned by the outperformance of L’Oréal Luxe which surged 9.3% lfl to reach €1,858m. Consumer products’ sales amounted to €2,859m, i.e. a rise of 4.7%. Professional products posted almost flat sales (+0.9% lfl) at €808.5m. Active cosmetics’ sales were up 6.5% to reach €425.7m. The Body Shop division grew 2.8% lfl to €200.9m. By geography, the strong momentum in North America, which is the second largest market for L’Oreal, has underpinned the group’s performance with 7.5% organic growth and sales worth €1,755m. Sales in Western Europe grew slightly by 2.2%, while in Eastern Europe they jumped 11.7%. In Asia, sales posted a single-digit growth rate of 3.2% to reach €1,324m. Over the first nine months, group revenues amounted to €19,048m, i.e. an increase of 4.7% lfl (+4.9% at CER and +1.6% on a reported basis). E-commerce sales edged up 32%.
Q1 sales were up 4.2% lfl (vs +4% in Q1 15). Revenues were up 1.8% on a reported basis (+4.6% at CER). On a comparable basis, sales increased 6.1% in new markets, 4.3% in North America and 2% in Europe.
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
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Full year results slightly ahead; improving trend in trading since April
Walker Greenbank is a higher end interior furnishings business with well-established global brand names and manufacturing facilities in the UK. The Group has this morning released full year results to 31 January 2020, slightly ahead of our forecasts at the PBT and EPS levels. During the year, and against what was already a challenging wider market backdrop, brands such as Morris & Co as well as the group's core licensing revenue stream largely offset wider weakness in the UK and US markets. As would be expected, trading since year-end has been extremely difficult, with product sales c.35% down in the first five months of the current financial year. Encouragingly, product sales in the last four weeks are reported to have been 31% below the comparative period, reflecting a steadily improving trend since the beginning of April. At this stage we leave our forecasts under review but it is encouraging to see the more recent improvement in trading patterns, whilst internal actions and the refocused strategy continue to improve the outlook for the group.
Companies: Walker Greenbank
Warpaint has issued a brief, but positive, update alongside its AGM today. Sales have been at a higher level than anticipated in H1, albeit significantly below the prior year due to the pandemic. In line with management’s original ambitions, there has been an improvement in gross margin. Together with lower costs, which the furlough scheme has contributed towards, this has helped the group deliver a positive EBITDA in the half, with no erosion of cash. This is a good outcome and ahead of general market expectations, we believe, albeit there is no guidance or consensus for the year ahead.
Companies: Warpaint London
Full year results – corrective actions taken to protect the business
Immotion is a leading UK-based ‘out of home' Virtual Reality (VR) experience provider. This morning, the group has released full year results to 31 December 2019, broadly in line with our forecasts. Post year-end and reacting to COVID-19, management took the previously reported actions to reduce the company's cash burn, including salary reductions and the furloughing of staff, whilst the two successful fundraisings in recent months have provided additional liquidity of some £4.0m. Reflecting the high degree of uncertainty at this point in time given the present backdrop, driven by the timing of easing of restrictions in Immotion's core territories and then consumer behaviour once this has eased, our forecasts remain under review for the time being. Whilst changes will no doubt need to be made at Partner sites, we believe that the out of home VR opportunity has not gone away once a degree of normality returns
Companies: Immotion Group
Two of the pivotal issues flagged in recent research have now been firmly addressed. Gross margin gains & cost efficiencies have been stronger + quicker than expected, driving a record EBITDA margin in H2 (7.2%, +500bps). Capacity has also been created, which will supports future growth with only modest further investment. At the same time G4M has pivoted from cash burn to cash generation. After a strong start to FY21, helped in part by lock-down, and with last year’s initiatives yet to annualise, confidence is running high. Valuation is extremely undemanding for this growth play.
Gear4music’s FY2020 results reflect the positive momentum of the company’s announcements so far this calendar year. The data re-confirm brisk sales growth but in our view improved profits and profitability is the salient story. Moreover, with an online distribution focus, a well sourced product range and clear evidence that its logistics are being run more efficiently, the company’s ability to deliver positive newsflow looks increasingly sustainable. FY2021 started on an exceptionally strong note.
Red Dwarf, the very British sci-fi comedy franchise, ran for 11 seasons – most recently in 2017; and The Promised Land is a feature-length TV movie – out this year. Yes, the programme is an acquired taste. Strangely, too, many episodes are impacted by a virus or three (physiological, not main-frame).
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GaaS and eSports a welcome boost; Buy
The company provided a solid update, stating that trading was “comfortably in line with market expectations”. Sumo plans to accelerate acquisitions since recruitment is expected to “remain challenging for some time”. We believe the change is marginal and see acquisitions well supported by Sumo's disciplined acquisition criteria, proven integration process and balanced earnout structures. Sumo remains focused on delivering earnings accretive acquisitions. We make no changes to forecasts and continue to highlight Sumo’s low valuation multiples relative to peers.
Companies: Sumo Group
AGM statement: upbeat
A strong finish to FY20
Companies: Frontier Developments
Immotion Group (IMMO) – Corporate – Full year results – corrective actions taken to protect the business
Market Cap £10.0m Share Price 2.7p
Immotion is a leading UK-based ‘out of home' Virtual Reality (VR) experience provider. This morning, the group has released full year results to 31 December 2019, broadly in line with our forecasts. Post year-end and reacting to COVID-19, management took the previously reported actions to reduce the company's cash burn, including salary reductions and the furloughing of staff, whilst the two successful fundraisings in recent months have provided additional liquidity of some £4.0m.
Thalassa (THAL) – Corporate – Full year results
Market Cap £7.9m Share Price 48.5p
Thalassa is a holding company. Following a relatively quiet period of newsflow in 2019, this morning, the group has released full year results to 31 December 2019, illustrating loss after tax of $3.0m. As at 31 December, the book value per share is reported to have been $1.69/128p whilst the net cash position stood at $16.2m/76p per share (more recently standing at $10.5m/52p per share).
Ascent Resources (AST) – Corporate – 2019 Final Results and Corporate Update
Market Cap £1.3m Share Price 2.2p
In March 2020, Ascent Resources announced a complete restructuring of its business, including the appointment of a new board and management team, alongside new funding and the launch of an international growth strategy; therefore, the 2019 financial results are of little materiality. Nevertheless, the results provide an important platform for the company to highlight its recent achievements and most importantly to provide an outlook for what shareholders might expect from the company over the remainder of the year and into 2021.
Companies: AST IMMO THAL
Autins has reported interim results consistent with its trading and COVID update at the end of March 2020. The first five months performance was ahead of management expectations and Q2 saw the Group achieve the majority of its targeted £2m p.a. cost savings, materially lowering the Group’s breakeven point. Automotive deliveries have restarted after a significant fall off in demand - all Autins’ sites were closed on 22nd March 2020 - and with PPE equipment orders building, 50% of the workforce has returned. The term sheet for a £2.75m CBILS loan has been agreed and the Group’s modelling of potential downside scenarios, including £1m of permanent liquidity headroom, shows that Autins could withstand an extended downturn along with the impact of other identified risks. The Group’s liquidity headroom looks to have improved further with the extension of UK & overseas support schemes, growing PPE sales and current trading volumes ahead of its downside scenario. Guidance remains withdrawn with FY2020 results set to be impacted by a significant reduction in H2 revenue. Nevertheless, with costs reduced and an opportunity pipeline of over £40m (incl. Neptune £30m) and a building conversion rate, Autins is now positioned to deliver a strong recovery in profitability.
Companies: Autins Group
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
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Games Workshop’s (GAW) interim results are ahead of expectations. The highest rates of revenue growth were achieved in the channels with the highest operating margins, ie Trade (40% margin) and Online (64% margin). This has produced a strong improvement in free cash flow generation and ROCE has improved from 96% to 111%. We upgrade our forecasts for FY20 and FY21 by a further 3% following the 9% upgrade in November. Our DCF-based valuation increases by 11% to 5,748p.
Companies: Games Workshop Group