Great 9M23, guidance maintained but headwinds to come in Q4

A solid 9M23 with a cumulated €7.8bn of EBITDA that represents about 90% of the maintained full year €8.6-€8.8bn guidance. While we found this guidance relatively cautious at the end of the H1, E.ON decided to maintain it by announcing several headwinds in Q4, citing increased volatility against a backdrop of geopolitical tension and price reductions for electricity and gas consumers.

H1 23: Above expectations and upwards revision to the 2023 guidance

A very good first semester with strong growth and contributions from the two main businesses of networks and energy supply. E.ON revised upwards its FY23 guidance with the EBITDA outlook increased by €800m (c.10%) in the back of the strong operating performance, one-off effects from market risk buffers release and improved visibility by the end of the year.

Q1-23: Normalization in energy prices gives E.On a breath of fresh air

A good start to the year for the leading German networks operator, which reported strong operational growth, with a normalization in energy prices supporting both the networks and customer solutions segments. The capex and investment policy seems to be bearing fruit, enabling the group to remain confident in its ability to meet its 2023 outlook through to 2027, although it remains cautious in that the European energy crisis is far from over, highlighting the group’s sensitivity to a potential ri

FY2022: A reassuring recovery in Q4-2022 after a disappointing third quarter

After a disappointing Q3-2022, which failed to beat estimates, E.On managed to meet its guidance and delivered a stronger-than-expected operational performance amidst a disruptive 2022, driven by energy networks and customer solutions. These solid results confirmed the robust and resilient business model of the German networks operator that has decided to strengthen its strong position in the energy networks and infrastructures business by increasing its investment plans by €6bn by 2027.

Q3 22: Damage limitation from the robust business model

E.ON posted another fall in its quarterly results, with a 3% drop in EBITDA. The challenging environment created by the energy crisis prevented E.ON from beating estimates even if the group remains confident in its ability to achieve its FY2022 outlook, despite a temporary earnings shift in the energy networks segment. However, thanks to its resilient model, the group managed to limit the damage and increase the EBITDA in its core business.

H1 22: slightly reassuring but not out of the woods yet

E.ON released a relatively reassuring set of half-year results. While the op. performance was still down yoy, the group’s damage control initiatives saw net income come in c.6% above the consensus. The ability to pass-through procurements costs in subsequent quarters will be key and is the focus of attention. In this context, E.ON confirmed all the FY22 guidance. This fits with our current estimates. Our positive view is confirmed but caution is advised.

Q1 22: trust is the key to the E.ON / market couple

E.ON’s Q1 22 exhibited relatively weak results due to the inability to pass on higher energy costs fully to end-customers. But the group made a point of showing confidence in its ability to recover these losses in subsequent quarters. Our view is rather cautious, but management’s pitch is convincing and, at least for now, backed by fragile visibility amid regulatory uncertainties. Full-year guidance is confirmed, but one thing is clear: no margin for error in the rest of 2022.

FY21: lack of visibility undermines confidence in the stock

A rather solid set of FY21 results, higher than the consensus but slightly lower than our estimates, is not enough to offset the uncertainties to come. The impact of network losses and a risky exposure to the supply business are likely to tip the balance into negative territory regarding the exposure to soaring energy prices in 2022. Added to the Russian-linked uncertainties (NS1, gas supply), E.ON should remain the persona non grata of cautious investors’ portfolios until there is more visibili

CMD: business as usual

E.ON unveiled its 2026 roadmap. The focus was on capex and network expansion to offset the lower regulated returns in the coming years. In all, nothing surprising, which from a market point of view means disappointment. The fnancial targets are in line with expectations while funding issues prevent further aggressiveness. E.ON is staying the course, business as usual. And this consequently lengthens the road to a rerating.

9M 21: improvement in indebtedness two weeks before the CMD

E.ON released a set of strong but expected 9M 21 results, with adjusted EBIT up by 46%. Positive effects from favourable weather conditions were the main driver. It allows the group to confirm its FY21 guidance, upgraded in H1. Note a substantial improvement on the net debt, even if several one-offs have contributed. Next trigger: the CMD on 23 November 2021.

Nuke optionality

What if the best solution for the energy transition were … nuclear power? Nuke is back at the heart of political debates in the context of the current energy crisis and massive but insufficient investments in renewables. This short review provides an overview of nuclear power in Europe and speculates on options. This ‘nuke optionality’, hinging on a favourable green taxonomy, is a game-changer for EDF, Centrica, Fortum but also Engie, Iberdrola, Enel and EDP.

Pushed by sales and supply activities

The network giant beat estimates by 6% to reach €1.66bn in terms of EBIT (+14% yoy). Indeed, as the main growth driver, E.ON can be fully satisfied with its restructuring plan in the UK which pushed the Customer Solutions business up to return to profitability. Furthermore, all short and mid-term guidances are confirmed. Strengthened by a good start to the year, we stand at the top of targets. Positive view reiterated.

Good year, better outlook: all lights are green

E.on released slightly above expectations FY20 figures, but were globally in line with our estimates. Net income is better but the dividend slightly worse. The impact of COVID-19 remains limited and should be recovered. The good news comes from targets for the next three years that are revised upward. A good point is also on the initiated deleveraging process from 6x to 4.8-5.2x net debt/EBITDA. Our positive view is confirmed.

Lower voltage expected for FY20

Compared to H1 19 pro forma, adjusted EBIT was down by 7%, to €2.7bn, due to lower volumes (related to lockdowns) and lower regulated WACC in Sweden. The group revised downwards its FY20 EBIT and net income guidance, the mid-points are down respectively 7% and 11%. However, assuming no further severe lockdowns, the dividend policy as well as the 2022 targets are confirmed. We confirm our positive long-term recommendation on the back of the RAB’s growth potential and expected synergies.

Q1 20 - in line

EBIT decreased by 6% to €1.5bn due to lower allowed WACC for assets in Sweden, mild weather in Europe and higher depreciation. In Q1, the impact of COVID-19 was limited. Following EBIT, adjusted net income was down 8% to €691m. In short, the figures are roughly in line with expectations and the group is showing great resilience in the face of current uncertainties.

Supreme (SUP LN) - Record performance, EBITDA ~doubled

Supreme’s FY24 trading update confirms a record performance in the 12 months to 31 March 2024. Organic revenue and profit growth across all four divisions has driven Group revenue +45% YOY to £225m, with FY24 adj. EBITDA almost doubling to ‘at least £38m’, driving record levels of cash generation. Supreme is actively exploring complementary M&A, supported by a debt free balance sheet. Trading on an undemanding FY25 PE of just 6.7x, with a 3.4% yield, we believe downside risks are more than price

Morning Note – 22 April 2024

Supreme+ (SUP, House Stock at 125p) - Supreme, Supreme!

Morning Note – 25 April 2024

Vianet Group: FY24 trading update, strategic contract win

Vianet has published a positive trading update for FY24 with turnover up 7.6% to £15.18m, a 3.5 percentage point increase in gross margin YoY, and adjusted EBITA ahead of market expectations. Net debt continues to fall and closed FY24 at £1.52m (£2.1m at 30 September 2023), demonstrating strong free cash flow generation, even without the benefit of the £0.9m tax receipt received in 1H24, which augers well for a final dividend. The company reported a new contract with Wilcomatic Wash Systems, the

SP Angel Spec Sits: FY Trading Update (LTHM)

Vianet - FY24 ahead, strategic forecourt customer win

Vianet’s FY24 trading update shows FY24 revenue +1% ahead of our previous forecast, adjusted EBITA +2% ahead, EFCF and net debt +£0.6m ahead, and a strategic new customer win with prominent forecourt operator Wilcomatic. A robust FY25 pipeline and outlook leads us to reiterate our FY25E forecasts at this point, with the update highlighting: strong progress renewing and winning new customers on 3-5 year contracts as they migrate from 3G to Vianet’s advanced 4G LTE solutions; the successful integr

Headlam Group - Strategy for growth in tougher market

Headlam Group has laid out an ambitious long-term revenue target of between £900m and £1bn, as it seeks to grow its share of the UK floor coverings distributor market. Despite a challenging backdrop due to the low level of residential housing transactions, management is seeking to expand each of its sales channels: Trade Counters, Larger Customers, Regional Distribution and Europe & Other. The FY23 results reflected the more challenging environment and the group trades at a discount to its long-

Renewi - Solid trading and better cash generation

Renewi’s FY24 trading update was in line with management’s expectations and its improved cash generation is reassuring for investors. Attention is now likely to turn the strategic review of the UK Municipals with management stating that they remain on track to update markets by the end of June. This could lead to an exit of key liabilities and leave Renewi as an attractive circular economy investment with strong market positions and organic growth plans, which should assist in generating value,

Norcros (NXR LN) - Sale of Johnson Tiles UK streamlines the business and improves operating margin

Norcros has announced the sale of its Johnson Tiles UK business to the current management team for a consideration of £1.0m, with a further modest earnout based on the equity value of the business, both payable in April 2028.

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

SP Angel Morning View: Copper prices hit $9,700/t as China smelts concentrates for zero charge Tc/Rc

Hybridan Small Cap Feast - 24 April 24

24th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

LIBERUM: Ilika: CMD confirms operational progression

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