The Veolia bid for Suez has exposed again the French penchant for boards of the same feather. The irony is Suez’s poison pill relying on a Dutch stichting under the aegis of some of its board members. This is pushing the envelope too far and makes a mockery of shareholders’ fundamental rights.
Companies: Veolia Environnement SA
Veolia has made an offer to acquire 29.9% of the Suez share held by Engie at €15.50/share, representing a substantial 50% premium. The two companies are similar concerning their activities and complementary in terms of their geographical footprint, and this transaction will almost double Veolia’s exposure to Asia. From Engie’s point of view, this would be a major step forward in its plan to refocus its activities on gas and the development of renewables.
The group released a good set of FY19 figures. EBITDA increased by 4.5% to €4bn (3.4% above the consensus), and EBIT by 5.0% to €1.7bn (5.6% above the consensus). The proposed dividend is €1 (versus a consensus at €0.98). The EBITDA guidance for FY20 is c. €4.1bn (5% above the consensus), and 2020-23 targets are higher than our forecasts.
The trend seen in H1 19 persists in Q3 with top-line growth being driven by the Waste and Energy divisions, thanks to resilient volumes and favourable pricing. Still, a marked slowdown in France in Q3 sours the group’s otherwise solid performance. Group EBITDA continues benefiting from Veolia’s cost savings programme, which is well ahead of schedule to reach the €220m target. As the current strategic plan reaches an end, the expectations for the 2020-23 ought to be high.
While Veolia closed a satisfactory H1 19, with revenues boosted by the strong operational performance from its Waste and Energy divisions, the attention was centred on yesterday’s announcement of the disposal of its US district energy assets for $1.25bn.
Starting the year on a solid footing, Veolia posted revenues of €6,785m (+4.8% at CER). A promising performance in the Waste division (+7.6%), which saw volumes increasing in all major geographies, coupled with favourable pricing developments, and expanding international activities notably in Asia (+10.9%) and LatAm (+29.2%) have supported the top-line against headwinds from the adverse weather in Europe and the US. With the cost cutting programme slightly ahead of 2019’s objectives, the company is fully committed to its FY19 outlook.
Veolia released FY18 numbers. Revenues were up 6.5% at CER to €25,911m (and +4.7% comparable), EBITDA up 5.4% and +7.3% at CER to €3,392m, current EBIT 7.1% to €1,604m (+9.7% at CER) and current net income reached €675m and net income €439.3m. Net debt at the end of FY18 was €9.7bn vs. €7.8bn a year ago and €10.5bn in September 18. The dividend proposed will be €0.92 (vs. €0.84 for FY17, i.e. +10%). The outlook for the current year is maintained, calling for the continuation of revenue growth, cost savings of at least €220m, EBITDA between €3.5-€3.6bn (at CER, excluding IFRS16) and a dividend growth in line with that of current net income.
Revenues over nine months reached €18,761m (+4.3%, +6.6% at CER and +4.7% lfl at CER), EBITDA €2,418.1m (+5.1% and +6.9% at CER), current EBIT €1,099.8m (+7.4%, +9.8% at CER) and net result €438.8m (+14.7%, +18.1% at CER excluding capital gains on Industrial Services in the US). Net debt at 30 September reached €10.5bn (vs €10.6 in June, €9.7bn in March €7.7bn at year-end 2017 and €8.43bn a year ago). The group maintains its FY18 target (sustained revenue growth, a higher EBITDA than in FY17, cost savings over €300m) as well as FY19 prospects (EBITDA €3.5-3.7bn including IFRIC12).
H1 18 results: in line and rather positive. Revenues reached €12,564.5m (+3.1%, +6% at CER and +4.1% lfl at CER), EBITDA €1,672.8m (+3.7% and +5.8% at CER), current EBIT €791.7m (+4.2%, +6.8% at CER) and net result €328.9m (+13.6%, +19% at CER and +9.7% excluding capital gains on Industrial Services in the US). Net debt at 30 June reached €10.6bn (vs €9.7bn in March €7.7bn at year-end 2017 and €8.43bn a year ago. The group maintains its FY18 target (sustained revenue growth, a higher EBITDA than in FY17, cost savings over €300m).
The group’s top-line was quite solid while cost-cutting enabled the group to post very decent growth in EBITDA. The group confirmed its full-year guidance which is in line with our own expectations. Note the hybrid bond has been repaid, thus the reported debt is now comparable to our own debt forecast (we had already considered hybrid as debt).
Veolia released a rather robust set of full-year results, marked by a positive momentum in Q4 driven by France and non-EU countries, higher dividends and the confirmation of the 2018-19 guidance.
Veolia reported its nine-month results.
Revenue up 3.7%, to €18,221m (+4.4% cc)
EBITDA up 1.3%, to €2,359m (+1.7% cc)
Net debt down €464m, to €8,419m
Capex broadly stable at €982m
Veolia released H1 17 numbers. Revenues reached €12,346m (+4.3% and +4.4% comparable at CER), EBITDA €1651.4m (+0.3% and +0.4% comparable), EBIT €773.8m (+0.3% and +0.6% comparable) and net income €295.2m (-8.6% and +4.2% excluding capital gains on divestitures). Net debt at the end of H1 was €8,561m vs €8,430m at the end of Q1 and €7,811m at the end of FY16. The group confirmed its guidance for FY17 (resumption of revenue growth, stable or moderate increase in EBITDA, cost savings of over €250m).
Q1 17 revenues reached €6.270m (+4.6%, +4.5% at CER, and +3.1% comparable at CER), EBITDA €863m (+0.9% and +0.9% at CER), EBIT €431m (+5.9%, +6.1% at CER) and net result €156m (+8.1%, +7% at CER). Net debt at 30 March stood at €8.43bn (vs €7.811bn at year-end 2016 and €8.26bn a year ago. The group is maintaining its FY17 targets (resumption of revenue growth, stable or moderate increase in EBITDA, cost savings of over €250m).
Veolia released FY16 numbers. Revenues were down 2.3% to €24,390m (and -0.4% at CER), EBITDA up 2% to €3,056m (+4.3%), current EBIT up 5.2% to €1,384m (+8.5% at CER) and net income reached €382.2m. Net debt at the end of FY16 was €7,811m vs €8,170m a year ago and €8,880m in Q3. The dividend proposed is €0.80 (vs €0.73 for FY15). The outlook for the current year calls for a resumption of revenue growth, stable to slightly increasing EBITDA and cost savings of at least €250m, with a stronger EBITDA growth in FY18 and FY19 leading to an EBITDA of €3.3-3.5bn.
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Strix has announced the strategic acquisition of LAICA a family owned business in Vicenza, Italy for €19.6m in a mixture of cash and shares. It will be earnings accretive in FY21 and is scheduled to complete by the end of FY20, with just Italian government approval outstanding. ZC operating profit estimates are unchanged in FY20 but increase by c. 8% in FY21 to reflect the contribution from the deal, the impact on earnings is smaller due to the issue of shares and higher tax in Italy. Management believe significant synergies, both cost and revenue, will be derived from the deal over the next 2-5 years. The interim results had been well flagged in the comprehensive trading update in late July and today’s statement confirms that profitability remains in line with the guidance of achieving a flat performance yoy in FY20. The interim dividend of 2.6p is in line with last year and in keeping with the commitment to at least meet the 7.7p paid in FY19. Unlike most peers, Strix has maintained guidance as well as its commitment to pay a dividend and today’s acquisition unpins the continuing strategy of diversifying the business into areas offering greater growth.
Companies: Strix Group Plc
Strix has published reassuring interims and announced the acquisition of LAICA, conditional upon approval from the Council of Ministers in Italy. Against a backdrop of global disruption caused by COVID 19, Strix’s H1 performance is in line with expectations. Net sales down 21% YoY, with a much smaller impact on net profits on the back of strong cost management. Encouragingly, FY 20 profit expectations are now underpinned, at around £28.9m PAT. Taking into account the LAICA deal, we provisionally upgrade FY 21 PAT/EPS by 6%. The shares are already up materially YTD, but the Strix growth story remains compelling.
Judges Scientific is focused on acquiring and developing companies in the scientific instrument sector. Given the backdrop of H1, and the global nature of Judges' customer base, we see this morning's results as a significant achievement when set against the backdrop of significant COVID related headwinds. Revenue decreased by 6.8% (organic -12%) to £37.4m (H1-19: £40.2m) which, after the sensible management of the cost base, yielded an adjusted pre-tax profit of £6.4m (H1-19 £8.4m), a 22% reduction, and adjusted fully diluted EPS of 82.5p (H1-19: 107.0p). However, reflecting a commitment to its progressive dividend policy, and confidence in the business, the interim DPS is increased by 10% to 16.5p. With respect to H2, COVID related business risks remain, none of which are unique to Judges. However, given the relative strength of H1 (albeit at some expense to the order book), management flag ‘cautious confidence' in achieving full year market expectations. As such, our FY 2020E adjusted PBT and EPS estimates are unchanged this morning.
Companies: Judges Scientific Plc
Byotrol’s FY 2020 full-year results are inconsequential, given the dramatic and positive impact that the COVID-19 pandemic has had to product sales since the year-end. However, year-end cash was £0.1m above forecast at £1.7m and when combined with positive cashflow since year-end, Byotrol is well-resourced to finance its ongoing operations and steady growth. With the order-book remaining strong (c.£1.1m at 31 August), despite summer lull, and demand likely to persist for some time, given the emerging second wave of coronavirus, we upgrade EBITDA to reflect lower costs and higher licensing income. If, as we suspect, the demand curve has shifted sustainably to the right, this leaves room for further upgrades. Consequently, we raise our target price to 11p, at which level the stock would trade on EV/Sales and EV/EBITDA of 4.1x and 26.9x, respectively. Future revenues and milestones from licensing deals will be largely additive.
Companies: Byotrol Plc
Augean has reported interims to 30 June 2020. With the first half bearing the full impact of Covid-19, adjusted PBT decreased by 11% to £8.5m, which is in line with our expectation. With radioactive wastes, biomass for EfW and construction impacted by lockdown and depressed activity levels in its North Sea services, due to the low oil price, the results demonstrate the resilience of the Group and also the benefit of its key position in its markets with strategically located hazardous waste treatment and disposal facilities in the UK. Whilst the statement highlights that full year results are expected to be broadly in-line with market expectations, we have conservatively reduced forecasts. Nevertheless, with strong cash generation and sustained growth EV/EBITDA falls to 5.3x and 4.1x for FY21E and FY22E, a level that is substantially below sector constituents and transaction valuations.
Companies: Augean Plc
Directa Plus is a commercially proven graphene supplier with a unique production process that creates high quality materials that are already used in a wide array of products internationally across multiple verticals. We expect the company to reach EBITDA positive in FY22 with existing cash reserves, leaving material upside in our expectations from some of its recently developed products such as the Co-Mask and Gipave.
We see Directa Plus as an underappreciated, undervalued and more mature and lower risk play in the UK listed graphene and speciality nanomaterials space and initiate with a Buy recommendation and 122p target price.
Companies: Directa Plus Plc
Today’s AGM Statement highlights further progress during H1. As anticipated at the final results on 6th August, trading has now returned to pre-COVID levels, with a particularly strong recovery in housing market activity. As at 31st August, the order book has increased by 5% to £69.4m from £66.2m at 31st, with contracts secured across the Group’s end markets. The Company has invested in its sales team and back office functions in order to support the recovery, though management continues to monitor costs given the near term uncertainty presented by COVID-19. In the absence of more restrictive lockdown measures, we would expect activity to continue to improve in the near term and the medium term prospects of the Group remain encouraging, supported by the UK’s net-zero target, which will require substantial investment in the UK’s utility networks. Fulcrum has also announced the appointment of Jennifer Cutler as CFO from 19th October, whose most recent role was Direct of Finance at Harworth Group Plc. The shares have justifiably outperformed since the full year results and today’s statement is supportive of this increase. Forecast guidance continues to be withdrawn given near term COVID uncertainties, but we anticipate reintroducing forecasts at the interim results.
Companies: Fulcrum Utility Services Ltd.
Billington provides structural steel and safety solutions to the construction industry. After record results in FY 2019, Billington's interim results to June 2020 reflect the anticipated disruption of Covid-19. However, the Group remained profitable in the period (revenue £32.8m, adjusted PBT £0.6m) and the balance sheet retained its significant cash backed strength. Further, although pricing pressure is still a significant feature in the market, as the announcement of £21m of orders yesterday demonstrated, there is still plenty of business to be won in less competitive segments. Our FY 2020E estimates remain suspended, but all other things being equal, it is not beyond the bounds of possibility that Billington could deliver a similar performance in H2 as reported in H1. The present order book is supportive of such a scenario. The outturn for FY 2021E is harder to determine, but there again, Billington is exposed to a number of verticals where investment continues and where competition is less pronounced. With its strong balance sheet likely a significant comfort to clients, the medium-term prospects for Billington, in our view, continue to be strong.
Companies: Billington Holdings Plc
Spectra Systems, a leading provider of advanced technology solutions for banknote and product authentication markets, has announced a solid set of interim results. Moreover, significant H2 visibility, notably from central banking customers, yields upgrades to our FY 2020 and FY 2021 estimates with adjusted PTP increasing 17% and 16% to $5.8m and $6.1m respectively. In terms of H1 numbers, revenues increased marginally to $6.5m (H1-19: $6.4m), and adjusted pre-tax profit came in flat at $2.3m. The balance sheet retains its robust state which, even after the $4.1m FY 2019 dividend, distributed June 2020, still holds $10.9m (H1-19: $11.1m) of net cash (excluding restricted cash of $1.3m, H1-19 $1.1m). Our Sum-of-the-Parts valuation indicates a risked fair value more than 200p.
Companies: Spectra Systems Corp.
Newmark Security (AIM:NWT) specialises in products and services in the security and data sectors. The company has two operating divisions:1) People & Data Management consists of two sub-segments – Human Capital Management and Access ControlThe Human Capital Management (HCM) segment provides edg
Companies: Newmark Security Plc
Today's news & views, plus announcements from VOD, POLY, SMDS, BLND, BYG, WEIR, DC, SNR, SHI, INTU, IHR, CNC, ARE, INCE
Companies: INTU SHI INCE
Who would have thought when reporting pre-tax losses of £10m after the first half to end June that Breedon would emerge so strongly from lockdown to trade through July-August (and into September) with LFL revenues ahead of comparative 2019 and expected H2 EBIT broadly in line with the equivalent 2019, resulting in a reinstatement of guidance ahead of current FY20 consensus. That is a mark of confidence as much in the group's operating capabilities as market recovery itself – a feature of Breedon's management quality over a consistent period of time. Investors will be impressed by the short-term recovery but also encouraged that the longer-term outlook remains positive with an emphasis to infrastructure markets in GB and Ireland plus, of course, its unrivalled ability to utilise its asset base very efficiently and to add to that platform with accretive acquisitions. The shares hit a COVID ‘low' of 63p but were trading as high as 100p in February. We would see that upper level as the more likely direction of travel for the shares with 90p justified by a forward 2022E rating of 7.5x EV/EBITDA, c14x PE, commencement of dividends and significant deleveraging through high net cash flow generation.
Companies: Breedon Group Plc
2G Energy’s product portfolio of CHP systems positions it to benefit from the transition from coal and nuclear-powered electricity generation to increasing use of wind and solar sources augmented by natural gas to balance supply and demand. In the longer term, 2G has proven technology to address the potential switch from natural gas to hydrogen. However, there still will be significant demand for 2G’s bio-gas and natural gas powered systems if adoption of hydrogen as an energy storage medium is delayed or derailed.
Companies: 2G Energy AG
Xeros has announced interim results for the 6 months to June 2020. This marks a period when the company has completed its transition to an asset-light, IP licensing business model through the disposal of all direct operations. A strong cash position coupled with substantially reduced costs should enable Xeros to reach profitability in H2 FY2022E. Despite COVID, commercial progress is tracking as we would expect. Hence we are not changing forecasts for the current (or future) years and our target price remains 2p/share.
Companies: Xeros Technology Group Plc
H1’20 was a period of significant revenue growth (+200% to €2.8m), driven by the Setcar acquisition, now fully integrated. Underlying progress was constrained by COVID, but the Group rose to the challenge, exemplified by the launch of the G+ enhanced Co-Mask (orders of €400k received to date). Good commercial progress has also been made with Gipave during the period, with three installations now in place. In our view, Directa is well positioned to deliver strong growth over the medium term as awareness of the performance and value of its technology continues to build.