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While the pandemic continues to disrupt normal economic activity, the hazardous waste market has proved relatively resilient. Augean faces a shift in challenges in H220 as North Sea decommissioning activity declines and waste flows return towards more normal levels following H120 shutdowns. Encouragingly, cash flow remains strong and we anticipate a positive net cash balance at the year end.
Companies: Augean PLC
TP Group (TPG) has announced that it has completed the disposal of its loss-making Manchester-based subsidiary (TPG Engineering Ltd) for a nominal sum of £1 to private equity firm Rcapital. This disposal will improve the group's margins, and allow it focus on its core markets. Given the uncertainty caused by the pandemic, we continue to withhold forecasts from the market, and our rating remains Under Review.
Companies: TP Group Plc
H1’20 saw a step-up in revenue driven by successful customer product launches incorporating Itaconix’ sustainable ingredients. These tend to be consumable products (e.g. dishwasher tablets), representing a solid base of recurring revenues on which to build. Today’s statement again highlights the near term goal of sustaining revenue growth to reach profitability, which the recent $2.2m fundraise should help to support. Itaconix looks set to close out FY20 in a position of relative strength with revenue momentum going into FY21.
Companies: Itaconix plc
Spectra Systems Corporation, a leader in machine-readable high speed banknote authentication, brand protection technologies, and gaming security software, has announced that it has executed a comprehensive services contract with a ‘long standing' central bank customer for the development, manufacture and servicing of a sensor system. The initial development phases underpin our FY2021E estimates (with risk likely to the upside), but moreover, the balance of development work, comprising supply of sensors (estimated value up to $34m in 2024-25), servicing revenues ($7.5m) and resultant high margin material sales through to at least 2035, provides significant underpinning of future prospects. Our updated Sum-of-the-Parts valuation (reflecting higher than anticipated development revenues and margins) indicates a risked fair value of 240p (from 200p).
Companies: Spectra Systems Corporation
Seeing Machines has announced that it has signed a non-binding Memorandum of Understanding with global aerospace and defence technology company L3Harris Technologies. The MOU frames the intent to enter into a global non-exclusive license agreement to enhance pilot training technology with Seeing Machines's dedicated precision eye-tracking system for flight crew training in the full flight simulator (FFS) environment. A license arrangement is currently in advanced discussions between the parties and subject to the negotiation and execution of definitive, binding licensing and other legal agreements. Further announcements regarding the progress of the negotiations in relation to such binding documentation will be made when appropriate.
Companies: Seeing Machines Limited
We have today released a new note on The Ince Group plc - this is the first of a series of "explainer notes" that take an in-depth look at the various aspects of the Ince investment case our investors have told us require more clarification. This edition examines the partner remuneration model - the headline for which is that this isn't discretionary bonus, it's more of a revenue share that partners are given in lieu of pay. Thus their remuneration is entirely variable, rather than representing a fixed cost.
Companies: Ince Group plc
Inspiration Healthcare has announced its H1/21A results, reporting on a period in which the company completed the transformational acquisition of SLE, supported the NHS response to COVID-19 and moved forward on its development of Project Wave. Financial results were equally strong, with revenue growth of 77% based on 25% underlying growth, acquisition contribution and NHS orders completed in the period. Further, the company has announced its maiden interim dividend. We have introduced FY22E forecasts which we believe highlight the significant undervaluation of Inspiration Healthcare shares at this time. We reiterate our Buy recommendation.
Companies: Inspiration Healthcare Group PLC
The Group has issued a trading update ahead of its interim results due on 12th November 2020. Overall, the first half has seen a strong recovery in activity and the Board now expects to report H1 revenues and operating profit of at least $200m and $20m respectively. This is materially ahead of market expectations and with a high degree of visibility through Q3 FY2021E we are upgrading our operating profit forecasts by 39% and 25% for FY2021E and FY2022E respectively. The Group is seeing strong growth in EV charging cables and bespoke high-performance cabling solutions, and consumer electronics demand has also remained robust. Together with investment in automation and cost efficiencies, the Group operating margin is now 10%, which is a testament to management’s operational and strategic focus. The shares trade on an FY2021E EV/sales multiple of 0.9x which compares to a sector based multiple of c.1.2x for companies with comparable operating margins and growth.
Companies: Volex plc
As legendary investor Warren Buffet succinctly puts it: “it is better to buy great companies at fair prices, rather than fair companies at great prices”. Today, we think Mpac has done exactly that by acquiring Ohio based Switchback Group, Inc. for a maximum of $15m in cash (£11.4m). Equivalent to modest takeover multiples of 7.1x EV/EBIT and 1.1x EV/sales – with $13m of the consideration paid upfront, and the rest structured as a $2m earnout depending on EBITDA performance over the next 24 months.
Companies: Mpac Group PLC
XP Power’s Q3 trading update confirmed that production volumes grew rapidly in its Asian facilities, allowing the company to satisfy some of the orders placed in H120. As expected, bookings returned to a more normal level in Q3. XP reported 28% y-o-y growth in revenues for Q3, prompting upgrades to our FY20/21 revenue and EPS forecasts. The company also announced that CEO Duncan Penny will retire at the end of the year, to be replaced by current CFO Gavin Griggs from 1 January 2021.
Companies: XP Power Ltd.
Powerhouse Energy’s interim results reflect a period of major progress with the company now on a more stable financial footing and development of the company’s first DMG waste-to-hydrogen project now underway. Powerhouse has laid the foundations to take its technology to commercial reality in our view.
Companies: Powerhouse Energy Group PLC
OPG has produced a strong set of full year results. Revenue increased 9.5% YoY to £154.0m whilst strong free cash flow generation enabled material debt repayments. Post period end, the Group continued to make debt repayments and favourably refinanced a portion of its debt. Management swiftly implemented a COVID-19 cost reduction strategy and capitalised on financial stimulus provided by the Government and the Reserve Bank of India. Importantly, September 2020 showed signs of a recovery as Chennai plant load factors increased to 63% (H1/21A 46%). We believe the long-term structural growth dynamics in the Indian power production sector remain compelling.
Companies: OPG Power Ventures Plc
Rolls-Royce reported a better-than-expected set of FY19 results, beating expectations on the operating profit and FCF lines. The performance was largely driven by Aerospace. Management reaffirmed its £1bn FCF guidance for 2020. We were given litle detail about the 2019-nCoV outbreak, except an unquantified impact on air traffic growth in the near term. All in all, a good development in H2 19, but uncertainties remain in our view.
Companies: Rolls-Royce Holdings plc
OTAQ has reported impressive FY2020 results ahead of expectations, with revenue increasing +117% to £3.42m (2019: £1.58m) and +73% organically. Within this, Aquaculture continued its impressive growth at +43% with £1.9m from product rentals and a further £0.2m from product sales while the new divisions Offshore contributed £0.62m and Connectors £0.70m. The Group's Sealfence product increased its market-leading position in Scotland to a 40%+ share and has made inroads into the sizable Chilean market (c.6x the size of Scotland) with c.150 units on rental at year end. In Scotland, OTAQ has rapidly rolled out its Sealfence product with units deployed increasing from 12 in March 2016 to 1,014 at March 2020. The Group is focused on innovation and R&D to broaden the Company's reach through the development of an active biomass measurement system and a plankton/ algal bloom early detection system which would sit alongside Sealfence in a 'one-stop shop', cloud-based solution for farmers. We take confidence from the recurring revenue model of the Sealfence product and believe the Group can continue to win market share in the key Scottish (currently 40%+ share) and Chilean (currently 1.4% share) markets.
Companies: OTAQ plc
Macfarlane has reported exceptionally resilient 2020 interim results, reflecting the diversification of the business and strong management of the operations and cost base. The Group's ongoing communication has been highly effective for updating investors with key trends in the business and recent share price strength demonstrates an acknowledgement of this. We reinstate our forecasts and buy recommendation following these strong results
Companies: Macfarlane Group PLC
