GEA exposed a promising mid-term outlook with a double focus on organic sales growth and operational improvements. The 2021 and 2022 outlooks have been confirmed, hence reassuring about the ability of the new management to turn around the company while delivering on its promises. That said, GEA will count on the New Food business, sales efficiency, and service growth to fuel a healthy FCF generation despite higher R&D and capital expenditures. Shareholders should be pleased to see the dividend t
Companies: GEA Group AG
GEA released a mixed bag of results, with sales declining further (9M 20: -3.8% yoy vs H1 20: -2% yoy), EBITDA improving (+17.8% yoy), and net income slightly growing (+2.6% yoy). EBITDA benefited from higher-than-expected overheads and raw material costs, though net income was negatively impacted by impairment losses from the sale of GEA Bock. Consequently, GEA is more confident about its FY20 EBITDA target, raising it from at least €455m to at least €500m.
GEA posted -2% yoy H1 20 revenue, driven by its Food & Healthcare tech (-5.3% yoy) and Farm tech (-5.7% yoy) segments. Limiting this contraction, Separation & Flow tech (GEA’s second largest segment) grew by 2.8% yoy. Furthermore, GEA presented lower COGS (-5.1% yoy) and selling expenses (-7.3% yoy), translating into a +35% yoy net income. For the outlook, the company expects revenue to contract slightly yoy, EBITDA (before restructuring charges) to be €430-480m, and ROCE 12-14%.
Management announced in late January that it has to write-off the purchase price of Italian Pavan. This happened in Q4 last year which has translated into negative EBIT, PBT and net earnings. In spite of this, it proposes an unchanged dividend of €0.85.
GEA acquired Pavan S.p.A., an Italian producer of production lines for the manufacture of fresh and dried pasta, for a total consideration of €254m in late 2017. As the company has not delivered what management had expected, it is now writing off the entire €248m amount of goodwill.
GEA has shown very volatile profit numbers in the last few quarters. From a strong recovery of pre-tax earnings in Q1 19 (+119%) to a collapse in Q2 (-58%). The Q3 number was about unchanged, whereas we had a considerably more cautious view. We hope that this becomes a more normal feature of the new management team.
Clients are reluctant to invest in new machines and plants and this is reflected in GEA’s accounts. Whereas the book-to-bill ratio was at a reasonable 1.12x in Q1, it fell to 0.92x in the last quarter. In fact, this is the lowest quarterly number since 2006 and the 1.01x after six months the lowest since 2009, i.e. since the last financial crisis. This is not a good signal for the quarters to come.
The share price has halved during the last three years as net earnings fell by some 70% from 2015 to 2018 although revenue was up. Management has tried to deal with this by regularly changing the divisional structure, but that has not paid off. Changes in the reporting segments are often an indication that management has a lack of ideas. Hopefully, the new management team will do a better job.
GEA has released some numbers for 2018 and the order inflow and revenue numbers were slightly lower than we had anticipated. However, EBIT fell by 32% to €260m which is considerably below our projected €325m. Finally, EPS collapsed by more than 50% to €0.63 compared to our €1.31. In spite of this, the dividend is, as we had expected, maintained at €0.85.
Ever since GEA moved its HQ away from its labour force to an office space in Düsseldorf in 2011, the group’s profits have been under pressure. The most recent peak EBIT number was reached in 2012 and, ever since, management has had to release regular profit warnings. This might indicate that management has lost contact with the real world.
GEA had reduced its cash flow driver margin for 2018 with the release of its 9M18 numbers. It has now lowered its 2019 outlook. In spite of the currently good volume development, it is less optimistic for 2019. The deteriorating economic development in combination with higher material and personnel costs will have a damaging impact on next year’s earnings, it says.
Supervisory Board member Werner Bauer, a representative of Nestlé Deutschland, has stepped down and is replaced by Colin Hall, a representative of Group Bruxelles Lambert (GBL). GBL made its first investment in GEA in August 2018 and the share price has fallen by some 30% ever since.
We have argued for quite a while that the previous management was not able to bring GEA back onto a sound footing and it had to release regular profit warnings. Consequently, the CEO decided in March 2018 not to pr
Order inflow increased by 13% to €1.2bn in the last quarter, bringing the ytd number to €3.68bn, an increase of 7%. Simultaneously, the respective revenue growth rates were 5.1% to €1.19bn and +5.6% to €3.46bn. Whereas the group’s H1 profit numbers had been dismal, they recovered strongly in Q3. EBITDA was up by 14% to €138m, EBIT by 9% to €85m, and net earnings by 38% to €60m. While turnover was in line with our expectations, the profit numbers were higher.
As a consequence of a continuously difficult situation for products for milk processors, management is reducing its 2018 guidance. Revenue growth is now expected to be in the vicinity of 4% instead of 5-6% and the EBITDA margin at around 11% instead of 12-13%.
Management also argues that demand for new machinery (with relatively low margins) continues growing faster than service revenue (with higher profit margins).
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The forthcoming UN Climate Change Conference (known as COP26) should result in an acceleration of governments’ actions to reduce CO2 emissions. This will result in an acceleration of customer end-user adoption rates which would be positive for AFC Energy which is developing zero-emission solutions for the EV-charging, construction, data centre and marine markets.
Companies: AFC Energy plc
Companies: SigmaRoc Plc
Longspur Research and Radnor Capital Partners have launched the Active Net Zero Clean Energy Index to allow investors to measure the performance of companies actively enabling climate solutions.The key emphasis is on the word “active”. This pan-European index eliminates greenwashing by penalising fossil fuel activities and focuses on actual achievement and positive contribution, rather than promises for the future. Our proprietary selection methodology is systematic, rules based and quantifiable
Companies: DRX ITM PHE SAE SIT STRLNG VLS
ITM Power is leading the world in PEM electrolyser manufacturing, and we believe it can use this to build sustainable advantage and grow market share in a rapidly growing hydrogen economy. The company is funded to add capacity and over time this should enable ITM to keep up with market growth to maintain a strong market share. The product is itself world leading which again creates competitive advantage. Demand itself appears secure with the IEA suggesting a major supply deficit by 2030. We init
Companies: ITM Power PLC
Strix has announced the commercial launch of two products Aurora, an appliance that dispenses instant hot and chilled water, and Dual Flo, a product with the usual characteristics of kettle but is able to deliver a single cup of boiling water. Both products fit with Strix’s sustainability strategy by saving water, energy, reducing the overall impact on the environment and bringing tangible benefits to consumers. The announcement is evidence of the organic growth strategy outlined at the Capital
Companies: Strix Group PLC
We see the UK Government’s Net Zero Strategy as being overall helpful but not especially definitive. Amongst our coverage group, Drax Group (DRX LN) and Velocys (VLS LN) benefit from the Humberside CCS cluster prioritisation and Velocys from SAF support. The amount of renewables is likely to boost the need for flexibility solutions where Drax, Gore Street (GSF LN) and SIMEC Atlantis (SAE LN) can benefit. Hydrogen companies ITM (ITM LN) and Powerhouse Energy (PHE LN) are likely to find support. T
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Oil posted the longest stretch of weekly advances since 2015 as OPEC+ producers only modestly supply the market and as US crude supplies shrink.
Crude futures rose 1.5% Friday in New York, up for a ninth straight week. President Joe Biden said Thursday night that Americans should expect high gasoline prices to continue into next year because of supply being withheld by OPEC and other foreign oil producers. Stockpiles at the biggest US storage hub are draining to levels last seen when crude pr
Companies: FO 88E DEC EME GTC TRIN UOG WEN
The group continues to experience strong underlying market conditions, with some supply chain shortages and transport constraints causing price rises. These issues are not expected to improve in the short term, but the group is confident of progress and results are anticipated to be in line with expectations. No change to forecasts. We retain our price target of 315p, which still offers good upside despite the strong outperformance by the shares over the year. The shares remain attractive on a s
Companies: Alumasc Group plc
Tungsten West (TUN.L) has joined AIM. Tungsten West is the 100% owner and operator of the historical Hemerdon tungsten and tin mine located near Plymouth in southern Devon. Hemerdon represents the world's third largest tungsten mineral resource, with a JORC (2012) compliant Mineral Resource Estimate of approximately 325Mt at 0.12 WO3. Capital raised on Admission: £39m. Anticipated Mkt Cap: £106.2m.
Future Metals NL (ASX:FME, FME.L) (formerly named Red Emperor Resources NL) had joined AIM
Companies: SOLI RBD ALU ATQT BBI CWR DRV ORCP WATR
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Arrow Exploration Corp. (AIM: AXL ; TSXV: AXL) , the oil and gas exploration and production company, has conditionally raised approximately £8.8m and is due to complete its dual listing on AIM on 25 Oct. Market cap c£13.1m.
Devolver Digital to join AIM, an award-winning digital video games publisher and developer in the indie games space. Recently awarded indie 'Publisher of the Year 2021' by GamesIndustry.biz.
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LTHM announced the acquisition of the entire share capital of Sarcon (No 155) Ltd (“Sarcon”) and its subsidiary companies for ~£4.0m +/- a net asset adjustment.
Companies: James Latham Plc
Arrow Exploration Corp. (AIM:AXL; TSXV:AXL), the high-growth operator with a portfolio of assets across key Colombian hydrocarbon basins, has joined AIM, alongside a fundraise of approximately £8.8m.
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ATOM headquartered in Leeds, focussed on the large-scale production of green hydrogen and ammonia intends to join AIM towards the end of the year. ATOME intends to be spun-out from AIM-listed President Energy Plc, an oil and gas com
Companies: SPA ECR KP2 SAR SYM
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ATOM headquartered in Leeds, focussed on the large-scale production of green hydrogen and ammonia intends to join AIM towards the end of the year. ATOME intends to be spun-out from AIM-listed President Energy Plc, an oil and gas company which has incubated and financially supported ATOME to date, by way of a dividend in specie and flotation.
Devolver Digital to join AIM, an award-winning digital video games pu
Companies: SAE HMI MNO MSMN NSCI OMG PCA
eEnergy has increased its ownership of eEnergy Insights Ltd (EIL) from 37.5% to 51%. EIL is the entity holding the Group’s MY ZeERO smart metering and analytics platform, which we consider an important differentiator for the Group. EIL has completed the development of its next generation of intelligent smart meters, which are now ready for commercial launch. eEnergy has placed an order for a number of these meters, which are expected to be rolled out in the coming months. Management is said to b
Companies: eEnergy Group PLC
Empresaria has experienced continued strong trading momentum, increasing into H2 as the Group continues to realise the benefits from operational initiatives and the improved economic environment. As a result, full year NFI is expected to be in the range of £57m-£59m with adj. PBT in the range of £7.4m-£7.9m. We take the mid-point and increase our PBT forecast by 14% to £7.7m. Given recent progress, the outlook looks increasingly positive for the Group, with an improving end market backdrop and c
Companies: Empresaria Group plc