Faurecia posted a -23.7% yoy 9M 20 sales contraction driven by Clarion Electronics (-40.1% yoy in Q3 20) and Clean Mobility (-8.2% yoy in Q3 20). Geographically, South America and Europe led the contraction (-42.9% yoy and -7.9% yoy, respectively, in Q3 20), with China softening the fall (+15.4% yoy in Q3 20). Despite this contraction, Faurecia experienced some recovery in 9M 20 vs. H1 20 (-23.7% yoy and -31.2% yoy, respectively) encouraging the company to raise its guidance.
Companies: Faurecia SA
Faurecia’s posted revenue that was down 31.2% yoy, with Europe and North America (largest geographical markets) shrinking the most (though showing recovery signs in June). Due to cost savings in R&D and staff, net income fell to “only” €-432.6m (-7% margin vs. 3.9% in H1 19). As for the H2 20 outlook, the company seeks to reach €7.6bn in sales and a 4.5% operating margin (based on a global automotive production of 64m vehicles).
Faurecia’s reported revenue was down 13.5% yoy, including a positive scope effect of €268m from the Clarion and SAS consolidation. Such revenue contraction happened in a quarter that saw worldwide automotive production down by 23.6% (according to IHS Markit). Furthermore, IHS Markit expects worldwide automotive production to be down 45% in Q2 and -34% in H1. Therefore, and taking into account Faurecia’s geographical sales composition, we expect a more severe revenue contraction yoy in Q2.
Faurecia’s organic revenue growth was -3.0% and its profit numbers were slightly down, whereas the dividend was raised from last year’s €1.25 to €1.30. We had expected this dividend increase although revenue and net earnings were slightly below our projections. Management sees organic 2020 revenue growth of -1% to -2% compared to a 3% fall of worldwide automotive production. However, the reported number will be up as the full consolidation of Clarion and the JV with Continental will both contribute.
After organic revenue growth of 10.6% and 5.5% in the last two years and an expected fall of 3% in 2019, management sees turnover increasing by an annual rate of more than 5% through to 2022. By then, management sees consolidated revenue surpassing €20.5bn and the EBIT margin to reach 8% compared to more than 7% projected for 2019.
Management has maintained its full-year guidance for both revenue and operating profits, although revenue of €4.19bn was slightly below consensus projections of €4.27bn and our projection of €4.33bn. It continues to see sales (ex currencies) outperforming car production by between 150bp and 350bp and the EBIT margin to reach at least 7%.
SAS is a 50/50 joint-venture between the two companies that produces full cockpit modules and both supply it with various components. The cockpit modules then go directly to the production lines of the car producers.
Faurecia’s revenue fell by an ‘organic’ number of 2.8%, whereas the reported number was down by 0.2% to just below €9.0bn. The discrepancy is explained by a positive 0.9pp contribution from currencies (primarily from Nafta) plus the first-time consolidation of Japanese Clarion from 1 April. These numbers have translated into a stable EBIT of €645m, but pre-tax earnings were down by more than 12% to €447m, whereas net earnings were up by 1% to €346m.
Faurecia’s reported revenue was up by 0.2% to €4.33bn in the last quarter, but it fell by 1.1% on a currency-adjusted basis. Excluding several new but small consolidations, organic growth was probably in the vicinity of -3.3%. The full-year reported growth rate will be much stronger as Japanese Clarion will be consolidated starting in Q2 and we expect it to contribute some €1.05bn alone.
The two announced that they will jointly control Symbio which had been acquired in full by Michelin earlier this year. The joint-venture will develop hydrogen fuel cells and eventually produce and market them. They are intended for all sorts of vehicles including electric vehicles to extend their ranges. Another partner in this joint-venture (but not a shareholder) is Engie, the French integrated utility. Faurecia will continue to produce high-pressure hydrogen tanks. This will not be part of the joint-venture but is believed to help in getting closer ties to the vehicle manufacturers. Several vehicle manufacturers are currently testing hydrogen-powered cars. It remains to be seen whether this is an alternative to both combustion engines and electric vehicles. On one hand, emissions are about zero when driving the car and, simultaneously, the driving range is much longer than for current electric vehicles. However, to produce hydrogen a huge amount of power is necessary and only if this electricity is generated with green resources will it contribute positively to the environment.
Faurecia achieved revenue of €17.5bn in 2018, an increase of 3.3% (+7% in constant currencies). At the same time, EBIT increased by 9% to €1.27bn and net earnings by 15% to €701m. These numbers were about in-line with consensus expectations but higher than our projections. We had forecasted revenue of just below €17.0bn, EBIT of €1.17bn and net profit of €610m. The dividend proposal is €1.25 compared to €1.10 paid for 2017 while we had anticipated €1.30.
Faurecia had announced in late October (see our Latest dated 26 October 2018) that it intends to acquire Clarion, the Japanese producer of cockpit electronics. Hitachi (63.8% shareholder of Clarion) had already given its approval and now that the relevant anti-trust authorities have given their approval, the tender offer starts on 30 January and lasts until 28 February. Faurecia offers Y2,500 per share and it eventually intends to squeeze potentially remaining shares out.
The two companies have formed a partnership for the development of innovative interior lighting solutions. Whereas Faurecia is a supplier of complete vehicle interiors, Hella is specialised in lighting. The aim of the partnership is to develop surface-lighting and dynamic-lighting solutions for a more personalised cockpit environment. Whether this cooperation will eventually lead to more than just this interior lighting partnership remains to be seen.
Management has agreed with Hitachi and Clarion to buy the latter. Hitachi currently controls 63.8% of Clarion, a Japanese supplier of in-vehicle-infotainment and digital audio systems. The purchase price is €1.1bn for revenue of €1.4bn. According to management, this translates into a Price/EBITDA of 5.7x. As Clarion did not show any sizeable amount of net debt at the end of March 2018 (c. €79m), the EV/EBITDA multiple is comparable.
Faurecia’s revenue was up by 5.9% to just above €4.0bn (+8.3% currency-adjusted) which brought the 9M number to €13.0bn (+5.4%). The quarterly number is almost in line with our projected €4.05bn and marginally ahead of the consensus number of just below €4.0bn. Unlike other companies, Faurecia is not revising its full-year guidance, i.e. EPS is expected to come in at just above €5.00 while we have a projection of €5.09.
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Boohoo has delivered strong results over the peak trading period for the four months ended 31 December 2020. Group revenue is +40% YOY, with robust growth seen across all brands and regions. The Agenda for Change programme is progressing at pace, demonstrating the Group’s commitment to setting a new standard for ethical supply chains in the fashion industry.
Companies: boohoo group Plc
Today's news & views, plus announcements from JET, PSN, SONG, HWDN, MSLH, PAGE, WMH, ASC, BGO, CUSN, CAY
Companies: Bango plc (BGO:LON)Persimmon Plc (PSN:LON)
Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
Companies: AVO ARBB ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Following forecast upgrades in December, Gleeson’s H1 update is again stronger than expected. Gleeson Homes will report volume growth of 17% in H1 to 951 completions. This represents 56% of our FY forecast. In a normal year, this probably would have prompted further forecast upgrades but we make no changes at this stage. This is a prudent position just one week into lockdown 3 but we note that (unlike in lockdown 1) building and sales can continue. The full year outturn is therefore likely to be at least in line with expectations. Gleeson Strategic Land, meanwhile, has completed its first transactions since the onset of the pandemic, which is an encouraging sign with medium and large housebuilders returning to the market. Next year’s 2,000 home target has been reiterated and we remain highly confident in growth prospects thereafter.
Companies: MJ Gleeson PLC
Cenkos Securities plc has terminated coverage of RA International Group Plc. Our previous recommendation (BUY) and forecasts can no longer be relied upon. Please contact Cenkos for further information.
Companies: RA International Group Plc
A positive Y/E trading update from Portmeirion this morning with the full year outcome comfortably ahead of market expectations. There is a c7% revenue beat vs our forecast which flows through to us upgrading our FY20 PBT from £0.2m to £1.2m - a highly pleasing outcome in the context of our deep value/recovery/new management thesis. The outperformance was led by the UK/USA where trading proved robust in H2 despite lockdown due to strong online momentum. We keep our outer year profit forecasts unchanged at this stage given the CV19/macro backdrop, but understand current trading is positive with both factories open and the order-book healthy. Management is fully focused on executing the strategic growth plan outlined at the time of the June’20 fund raise and we expect a fuller update at the March finals. Overall, today’s update is a step in the right direction in building confidence in the growth / online plan and should be well received by investors
Companies: Portmeirion Group PLC
Accrol has delivered strong H1 results, with underlying EBITDA +69% YOY driven by stronger than expected gross margins as mix benefits continue to come through. We maintain earnings forecasts for now, albeit believe these to be well underpinned by margin improvements, synergies and growth. We believe Accrol is well positioned to emerge as a £35-40m EBITDA business over the medium term, in what we see as an exciting period for the Group.
Companies: Accrol Group Holdings plc
Recent news has been positive. Notably, the Group announced a ground-breaking £27.5m contract award with a new OEM customer in mid-September. Trading has been more resilient than we expected at the start of the Covid-19 pandemic, demonstrated by the positive full year pre-close update issued today. Revenue for the year to 31 December (£2m) is in-line with our forecast but gross cash is better, by c.£250k. Operational developments continue apace, and reflecting a healthy pipeline and expanding workforce, a dedicated HR executive has been hired. Confidence in the medium-term demand for the Group’s products has improved with recent contract wins; management now believes its Knowsley factory, when fully built-out, will be able to generate £75m of revenue each year against £50m, previously. Our estimates are unchanged pending the full May statement but with a stronger medium-term outlook, we lift our valuation to 65p from 57p.
Companies: Surface Transforms plc
Victoria has issued a trading update highlighting that the strong performance it announced in H1 has continued, with the Group achieving record revenue and operating profit for Q3 to end December. Group revenue was ahead by more than 10% in Q3, in part due the acquisition of the business and assets of Ascot in February 2020. We see the statement as reenforcing the positive messages made at the time of the interim results at the end of November that demonstrated the resilience of the Group. Performance is benefiting from strategic investment in logistics and service in 2019, operational efficiencies, consumers focusing on refurbishing their homes and maintained production and deliveries to satisfy demand. As in November, there will be a UK lockdown impact in Q4, albeit the Board believes Victoria is well placed to meet this headwind. We have no formal forecasts and will initiate In due course.
Companies: Victoria PLC
Boohoo has announced meaningful progress in its Agenda for Change Programme, to deliver long lasting change to its supply chain and business practices. Sir Brian Leveson PC has been appointed to provide independent oversight of the programme, with KPMG engaged to provide additional resource, expertise and independence, working alongside the Group’s internal responsible sourcing and compliance team, as well as with external supply chain audit specialists Bureau Veritas and Verisio. We believe the calibre of the appointments reflects the Group’s unwavering commitment to implementing in full, and with complete transparency, all recommendations of the Independent Review.
Games Workshop Group’s (GAW’s) H121 trading update highlights that it has enjoyed a stronger end to the period than expected by management: H121 PBT will be not less £90m (y-o-y growth of c 54%), £10m higher than indicated in the 7 November trading statement (see our recent update note). Therefore, GAW’s PBT in H121 is greater than that for the whole of FY20. The strong performance leads to a 40% increase in the year-to-date dividend, as the company continues to distribute truly surplus cash. We upgrade our PBT forecasts for FY21 by a further 6%. Following the relative weakness in the share price in recent weeks, and the upgrade to our forecasts, the P/E multiple of 28.9x for FY21e is back below recent highs.
Companies: Games Workshop Group PLC
MobilityOne Ltd* (MBO.L, 9.5p/£10.1m) | Maestrano plc (MNO.L, 7.0p/£5.6m) | GetBusy plc (GETB.L, 86p/£41.6m) | Solid State plc (SOLI.L, 580p/£49.5m)
Companies: MBO MNO GETB SOLI
We initiate on Portmeirion and argue that it is in a better position than the current market valuation suggests. It has delivered a resilient first half and, following a strategy reset under the new CEO, it has much more enhanced capabilities with an improving model and profit outlook. Furthermore, Portmeirion is well funded with no balance sheet concerns. The shares trade on low spot multiples of 10x FY21 P/E with and 5x EV/EBITDA with a 9% FCF yield. A SOTP analysis based on peer/corporate deal metrics shows fair value towards 650p. Patient deep value investors should take a much closer look.
Although CV19 rounded off a disappointing year, BAR was just profitable in FY20 and ended the period with £21m cash. After a challenging transition post the disposal of manufacturing, a new and experienced leadership team is now in place which has laid out clear future growth plans. Through a combination of organic growth, brand focus, productivity gains and selective acquisitions, BAR aims to grow sales to £50m over the medium term. The business model is inherently high margin and cash generative and, if these characteristics are borne out, future value could increase several fold compared to today’s £20m.
Companies: Brand Architekts Group plc
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.
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