Alfa Laval posted better than expected Q2 20 figures. The recent cost programme implemented by Alfa Laval to protect the group’s profitability is bearing fruit: the EBITA margin improved to 17.2% (+70bp yoy).
Companies: Alfa Laval AB
Alfa Laval reported rather solid results given the current situation, with both orders and revenues remaining resilient. Management decided to withdraw the dividend in order to protect cash and it expects demand in the second quarter to be lower than in the first quarter.
Alfa Laval reported a strong set of Q4 results, with both sales and adjusted EBITA beating consensus (6% above for EBITA). The only downside of this release was on orders which slipped 6% organically (c.2% below consensus), mainly due to Marine. All divisions have contributed to growth. The favourable trend in both Food and Energy end-markets still drives the performance, further propped up now by Marine thanks to the IMO regulation.
The return to growth in Marine was much appreciated when the Q3 figures came out. This was, once again, largely driven by the IMO 2020 sulphur regulation. Now, the question is rather to identify where the industry is going and what level of growth in scrubbers is sustainable.
Alfa Laval reported a strong set of Q3 results, with both sales and adjusted EBITA growing in double-digits. Following a weak momentum in Q2, the Marine division was back in positive territory at record levels. This trend should continue to be supported by the IMI 2020 regulation, and management gave a positive outlook for Q4, with demand expected to be somewhat higher compared to this quarter.
Alfa Laval reported a mixed set of results, with declining orders due to both pumping systems and scrubbers, a better than expected development in Energy and Marine, while Food and Water underperformed and affected the whole group’s performance. The Marine division continues to drive growth thanks to good deliveries and execution. Management remains confident and expects demand to be “somewhat higher” in Q3 compared to Q2.
Alfa Laval reported a good set of results, once again driven by the Marine division which continues to benefit from strong orders for scrubbers PureSOx and, as expected, demand for PureBallast (ramp-up). The only dampener from this release is the cautious Q2 outlook given by management, expecting to be “somewhat lower” than the first quarter.
Order intake and earnings were weaker than expected in Q4. The Energy business reported decreasing margins (-130bp), and FX headwinds have not helped despite strong demand for environmental products. Indeed, in the Marine division (growth driver), we continue to see a positive trend but at a slower pace, while the Energy business dragged down the performance due to overcapacity. Has the peak been reached? What is clear is that growth would continue in the coming quarters, but at a slower pace.
Alfa Laval reported strong Q3 results. Orders intake increased by 35% over the quarter and +26% on an organic basis. Net sales increased +24% to SEK10.1bn, while adjusted EBITA was up +33% to SEK1.7bn (including a positive FX impact of SEK50m). The gross margin progressed to 34% (+20bp), while the adjusted EBITA margin progressed from 16% to 17.1%. Free cash flow increased +12.7% to SEK877m.
Revenues were SEK10.1bn and operating income came in at SEK1.4bn, both are beating consensus expectations.
The order intake increased by 12% to SEK9.7bn, mainly driven by the buoyant Marine division and the continuing positive trend in the Food & Water division during the year.
Outlook 2018: management expects the demand in Marine & Energy division to decrease sequentially in Q1. Meanwhile, Food & Water should continue its upward momentum and be somewhat higher than in Q4 17.
The Q3 17 revenue was SEK8.2bn (-5% yoy), and the adjusted EBITA was SEK1.3bn, both below the consensus expectations but in line with our estimates.
The order intake came in at SEK8.4bn (+12% yoy), mainly driven by the good order intake for environmental applications and improved contracting for the ship made in the Marine division.
Free cash flow from operating activities was SEK1.0bn (15% yoy).
Management expects that demand in Q4 should be higher than in Q3.
Q2 17 net sales were SEK8.9bn, above consensus expectations.
The adjusted EBITA was SEK1.41bn (+1.2% vs 2016), beating consensus by 5%. Net income, at SEK479m, has been impacted by currency effects in the revaluation of loans.
Q1 17 net sales were SEK8.1bn (-1% yoy), somewhat above consensus expectations.
The operating income was SEK1,016m (-5% yoy), beating consensus. The net income, at SEK776m (vs. SEK871m in Q1 16), was also a positive surprise.
Outlook for Q2 17: demand in line or somewhat lower than in Q1.
Q4 16 net sales were SEK9.9bn (-8% yoy), above consensus expectations.
The operating income was SEK820m (vs. SEK1,483m in Q4 15), missing consensus. Net income at SEK 616m (vs. SEK935m in Q4 15) was also below expectations.
On the other hand, the order intake, at SEK8.7bn, beat estimates.
Outlook for Q1 17: demand somewhat lower than in Q4.
The company reduced its annual average growth to 5% (from 8%).
Other targets are confirmed:
- capex at or below 2.0% of sales;
- R&D spending at 2.0-2.5% or sales;
- tax rate rate at 28%;
- pay-out ratio at 40-50%.
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The group has released a positive trading update, signalling a strong H2 and performance ahead of expectations. The new guidance points to a 6.7% upgrade to revenues and a 10.5% upgrade to EBITDA. Cash generation has been notably strong, at about $26m, which will drive an increase in supplemental dividends with a dividend yield of 7.1%. We raise our TP from 255p to 285p, based on a target P/E of 14x, giving decent upside to the current 11.6x.
Companies: Somero Enterprises, Inc.
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Less than a fortnight after a major new contract announcement in West Africa, Capital has announced the expansion of its operations at Barrick Gold’s Bulyanhulu Gold Mine in Tanzania. The contracts include a five-year laboratory services contract for MSALABS, together with a two-year underground grade control drilling contract. Capital commenced operations at Bulyanhulu in February 2020, undertaking a deep hole delineation drilling program. The successful execution of this resulted in an expansion of services, with two underground rigs added to operations from May. The new contract will expand the underground fleet to four, utilising two rigs from the existing fleet and including the acquisition of a further two rigs.
Companies: Capital Limited
Trading to date in FY 2021 has been positive, with no sign of an adverse impact from the second national UK lockdown. Net new business across both divisions is described by management as encouraging and the new business pipeline remains very healthy. With volumes better than expected and margins improving DX is on track to perform materially better than market expectations and we have, consequently, upgraded FY 2021 EPS by 29% and FY 2022 by 15%, driven by stronger assumptions in DX Freight. We have also raised our FCF-based target price from 29p to 33p and reiterate our view that the group is in a strong position to rebuild profitability by winning new business and improving efficiency, productivity and margins.
Companies: DX (Group) Plc
Management is delivering right on cue to its resumed guidance as per the 1 October trading update. H2 revenue recovery is back close to pre-pandemic levels and operating margins have returned to target 3% in quick time – and are sustainable at that level too. Having upheld dividends through this challenging period and actually extended the order book (up 17% YoY and also c3% higher than last reported), TClarke is firmly re-establishing a growth trend on arguably more solid foundations. The share price is 10% higher since the last trading update but in our view remains significantly undervalued against a prospective FY21E EV/EBITDA ratio of 3x, a PE of c6x, yield 4.6% and double-digit FCF yield.
Companies: TClarke plc
We release prudent FY20E and FY21E forecasts as Xpediator continues to gain momentum and operations revert to pre-COVID levels. The Group has made strategic progress year to date. It has implemented a strict cost reduction programme which should drive annualised cost saving of over £0.5m, restructured and strengthened its management team and further integrated acquisitions. Additionally, it is in the process of consolidating its site portfolio, driving further costs out of the business. We believe the market continues to undervalue Xpediator's geographically diverse revenue base, flexible low fixed cost operating model and positive financial outlook. Accordingly, we move our recommendation from Under Review to Buy.
Companies: Xpediator Plc
Directa Plus has announced that in the October collaboration agreement with NexTech Batteries, it has achieved above 400 Wh/kg (watt-hours per kilogram, the usual measure of energy density) in a practical system. NexTech produced several full-scale pouch format cell prototypes using its proprietary cathode and electrolyte materials (with Directa plus graphene) producing 410Wh/kg of specific energy at a weight only slightly below 30g. For comparison, standard Lithium-Ion batteries have an energy density of 100-265 Wh/kg.
Companies: Directa Plus Plc
Volex has reported interim results that are in-line with expectations following a strong trading update in mid-October. Of far greater significance is today’s announcement of the proposed acquisition of DEKA for a consideration of up to €61.8m on a debt free basis. DEKA is a leading and highly profitable power cord manufacturer, strategically located in Turkey, that serves leading European white goods manufacturers. The acquisition should close in early CY2021, subject to expected Turkish Competition Authority approval. We foresee 15% earnings enhancement in FY2022E with further opportunities for revenue synergies with Volex in the Far East as its operations also vertically integrate, production efficiencies increase and the cost of production falls. The statement highlights that pro forma net debt/EBITDA remains under 0.4x and this provides scope for further bolt-on acquisitions alongside a new $70m RCF and $30m accordion, also announced with the interims.
Companies: Volex plc
Xpediator has delivered a healthy trading update, breaking several revenue records during H2 2020. Furthermore, the outlook for FY21 remains promising, reflecting recovery to more normal levels in Transport Services, a full-year impact of the Nidd acquisition, the turnaround of underperforming businesses, and new ventures. The £6m PBT forecast for FY20 highlights an improving margin, albeit this represents a shortfall from FY18. In our opinion management actions, plus recovering markets, can take the Group to peak margins over the next 18-24 months: delivering a marked increase in profitability.
Brick and concrete products group Forterra has raised its guidance for FY 2020E to above the current consensus range and reinstated dividends following trading in Autumn which exceeded its previous expectations and which has continued strongly despite the second lockdown. We have increased our FY 2020E revenue, EBITDA and EPS estimates by 3%, 14% and 46% respectively, and cut our net debt projection. We have introduced FY 2021E estimates showing further strong expected growth.
Companies: Forterra Plc
SThree has released a brief update ahead of the scheduled Q4 trading update expected on 12th December. The key headline is that an improving trading backdrop over the last few months has driven a better than expected profit performance. Market consensus was clearly too light with the company now guiding for an FY’20 outcome above the top end of the range of expectations. We have updated our forecasts accordingly and now look for FY’20 PBT and EPS of £28.1m / 13.3p respectively – a PBT upgrade of +53% on our previous estimate. Although the company has not formally reinstated full guidance, we are taking this opportunity to publish our estimates for FY’21. SThree has shown good resilience through this pandemic. The combination of STEM industry specialism and the inherently higher short term visibility of the contract focus has afforded SThree management a greater degree of flexibility when it came to aligning the necessary cost actions with the strategic ambitions of building market share in the key, global STEM markets. Costs and headcount have been cut, but they have been targeted and selective. The net result has been an increasingly positive tone in trading commentary, culminating in yesterday’s explicit upgrade. Has this been fully priced in by the market? To an extent yes, with the shares now standing +57% above the May 2020 lows and outperforming the peer group year to date. However, despite this outperformance (share price and operational) SThree still stands at a material valuation discount to its peers. We continue to find the extent of this valuation gap hard to justify.
Companies: SThree plc
The new ammendments to the UK CfD renewable energy support scheme opens up an opportunity for tidal energy to compete against floating offshore wind. We think the two technologies can deliver similar costs but that tidal, and specifically the already permitted capacity at Atlantis’s MeyGen site, has a marginal advantage in terms of readiness.
Companies: SIMEC Atlantis Energy Ltd.
H1F21 revenue was £107m, down 14.8% y/y (H1F20: £125.6m) and down 11.9% sequentially (H2F20: £121.5m). Q2F21 revenue was up 5.3% y/y, indicating a trend to recovery in the post-lockdown period across both, Ireland and the UK. The strength of LTHM's business model is supported by the diversity of its customer base and the expanse of its product offering, allowing it to withstand fluctuations in demand across market sectors. We believe LTHM stock is a relatively low risk investment given the strong cash position (131.6p/share), no debt and a stable yield. The stock trades at 8x EBITDA, compared to its peer average of ~11.1x, on what are more compelling metrics.
Companies: James Latham Plc
Macfarlane has released a strong trading update for the 4 months to October 31 2020 highlighting second half revenue and PBT to date being ahead of 2019 and the expectation that 2020 PBT will be broadly in line with 2019, a strong recovery from the uncertain position at the interim results. Separately, the Group has announced that CFO John Love will be stepping down from his role and the Board to be replaced by Ivor Gray, current Group Financial Controller and Company Secretary. We expect this to be a seamless transition given Ivor's experience in the Group and represents very well managed succession planning by the Board. Reiterate buy rating.
Companies: Macfarlane Group PLC (MACF:LON)Macfarlane Group PLC (5K6:FRA)
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