Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on GEMALTO. We currently have 8 research reports from 1 professional analysts.
Gemalto released its Q3 trading update, showing revenues of €751m which corresponded to a 0.2% decrease yoy on a reported basis (+3.4% at constant exchange rates). Payment & Identity came in at €481m, up 3% yoy, while Mobile showed a 5.6% decrease at €269m. Within these two businesses, the biggest down-movers were again Payment (€199m, -17.4%) and SIM (€129m, -15.1%). At the other end of the spectrum, Government Programs (€169m, +55%) and M2M (€88m, +8.6%) displayed strong growth, the former benefiting from €50m of the recently-acquired Identity Management Business. Platform & Services came in flat (€52m) and Enterprise slightly negative (€113m, -3.4%). By main activities, Embedded software & Products came in at €493m (-2% yoy at constant exchange rates) and Platforms & Services at €257m (+15%). Guidance for FY17 has been left unchanged: stable revenues yoy in H2 17, with a PFO of about €200-230m.
Gemalto released its Q2 earnings release, showing revenues of €742m which corresponded to a 7.8% decrease yoy on a reported basis (-9% at constant exchange rates). Payment & Identity came in at €471m, down 6.5% yoy; within the business, Payment was strongly down and worsening (€215m, -20.4% vs. -14.2% in Q1), Enterprise flat (€112m, -1.8%) and Government Programs strongly up (€144m, +20%) thanks to the integration of €22m from the 3M Identity Management acquisition (it would have been up 1.6% otherwise). Mobile showed a 9.7% decrease to €270m. The SIM business accelerated its fall (€121m, -18.8% vs. -11.3% in Q1), as well as Platforms and Services (€58m, -19.4% vs. +6%), while M2M showed a substantial rebound (€91m, +16.7% vs. flat). By main activities, Embedded software & Products came in at €937m in H1 (-9% yoy at constant exchange rates) and Platforms & Services at €453m (-8%). H1 gross margin came in at 31.6% (down 500bp yoy), leading to a profit from operations (PFO) of €92.7m. The IFRS net profit was also impacted by a €425m goodwill impairment charge related to the deteriorated perspectives in the SIM market. After the profit warning in July, the company confirmed its downgraded outlook: PFO is expected to be €200-230m, leading to a full-year PFO of €293-323m. The announcement of the new strategic plan has also been postponed to H1 18 from H2 17.
Gemalto released its Q1 trading update, showing revenues of €651m which corresponded to a 6% decrease yoy on a reported basis (-8% at constant exchange rates). Payment & Identity came in at €404m, down 7% yoy, while Mobile showed a 5% decrease at €246m. Within these two businesses, the biggest down movers were Payment (€200m, -14%) and SIM (€118m, -11%), the other units being flattish or in the low single-digit with the exception of Platforms & Services (€53m, +6%). By main activities, Embedded software & Products came in at €439m (-8% yoy at constant exchange rates) and Platforms & Services at €212m (-7%). After the previous downgrade from 22 March (profit from operations at a similar level to 2016, i.e. c. €450m), the company downgraded again its 2017 adjusted operating profit objective: H1 PFO is expected to be at €90-100m, and H2 at €300-350m including a minor contribution from 3M, bringing the total to €420m at the midpoint. A €50m savings plan has also been announced.
Gemalto has announced the acquisition of the identity management business of 3M, for a total of $850m. The acquired business is composed of biometric solutions with a focus in civil identification, border control and law enforcement, as well as 3M’s Document Reader and Secure Materials Businesses. It generated revenues of about $215m (in June 2016 TTM), with an operating margin of c. 27%, and is expected to grow by 10% per year until 2020. 450 people will join Gemalto and reinforce the Government Programs business unit, which recorded revenues of €391m in 2015. The acquisition is EPS accretive, will be funded through existing credit lines and cash, but the net debt/EBITDA ratio is expected to remain below 1.5x. The closing of the deal is expected during H1 17, after regulatory approval.
Gemalto released its Q3 trading update, showing revenues of €753m which corresponded to a 2% decrease yoy on a reported basis (-1% excluding currency effects). Payment & Identity came in at €467m, flat yoy, while Mobile showed a 5% decrease at €285m. By main activities, Embedded software & Products came in at €522m (-2% yoy) and Platforms & Services at €231m (flat yoy). The company downgraded its 2017 adjusted operating profit objective and now expects c. €500-520m instead of €660m previously. The objective of reaching €1bn of revenues in the Platforms & Services business unit remains unchanged.
Gemalto published its H1 16 results, with revenues of €1.5bn mostly flat vs. the previous year, i.e. up 1% at constant exchange rates but down 1% in reported figures. By businesses, similarly to Q1, the Payment & Identity business was strongly up (+11% reported, +7% at constant exchange rates) while Mobile was down (-5% reported, -7% lfl). The SIM business fell down substantially (-26%), while all the other businesses delivered growth: Payment +11%, Enterprise +12%, Government +25%, M2M +9%, Mobile Platforms & Services +3%. By activities, Embedded Software & Products decreased by 4% in H1 (€1,010m) while Platform & Services grew by 20% (€484m), now accounting for 32% of revenues (vs. 27% a year ago). The adj. gross margin was slightly up yoy by 92bp (39.2%), while the adj. EBIT came in at €172m, slightly up yoy, corresponding to an 11.5% margin (up 90bp yoy). The IFRS EBIT reached €108m, corresponding to a 7.2% margin (up 500np yoy), leading to a net profit of €59m. The company confirmed its 2016 objective of a 150bp improvement in the gross margin. The 2017 target of €1bn revenue from Platforms & Services may also be reached early, possibly as soon as this year. Finally, Gemalto confirmed that the company was interested in acquiring Safran’s Morpho, with a detailed offer due mid-September.
Gemalto published its FY 2015 results, with revenues reaching €3,122m, corresponding to 16% growth at constant exchange rates and 27% at historical exchange rates. SafeNet accounted for 12% of the growth, as 2015 was the first year of full consolidation, and currency effects represented a 9% boost to the top-line. At constant rates, Payment & Identity grew by 45% to €1,818m, while Mobile witnessed a 10% decrease to €1,279m. On a transversal basis, Platform & Services reached €898m, a 70% yoy increase, and now accounts for 29% of revenues vs. 20% in 2014. The gross margin came in at 36.5% (-180bp yoy), and profit from operations reached €423m (of which €172m for Mobile and €239m for Payment & Identity), corresponding to a 13.5% margin (-200bp yoy). EBIT came in at €203m, corresponding to a 6.5% margin, leading to a net profit of €137m. The company announced a dividend of €0.47 per share, and expects the 2016 gross margin to increase by 150bp; the 2017 objectives have been confirmed, that is to say €1bn of revenues in Platform & Services, and a profit from operations at €660m.
Gemalto’s stock dropped a sharp 12% yesterday to return to its level at the end of 2014 when we had switched our opinion from negative to positive after the stock had already slumped as investors worried that Apple's new SIM card for its latest iPads could threaten part of Gemalto's business. Even if this time the sharp drop is just following the release of its H1 results and could therefore be interpreted as a logical response to bad results, we instead believe that the real reason for the drop has once again to be rooted in the mistrust of investors. Although Gemalto’s H1 results are quite as expected and management remains confident of delivering on its 2017 objectives, major concerns exist among investors about the actual achievement of these 2017 objectives. And we share these concerns!
Research Tree provides access to ongoing research coverage, media content and regulatory news on GEMALTO. We currently have 8 research reports from 1 professional analysts.
|31Jan18 06:00||GNW||Gemalto's Discovery Service boosts on-demand connectivity activation for consumer devices worldwide|
|16Jan18 06:00||GNW||Gemalto and Ponemon Institute Study: Big gaps emerge between countries on attitudes towards data protection in the cloud|
|04Jan18 06:00||GNW||Gemalto launches the first biometric EMV card for contactless payments|
|17Dec17 07:00||GNW||Thales and Gemalto create a world leader in digital security|
|14Dec17 06:00||GNW||Gemalto research reveals hardware technology companies see 11% increase in earnings following shift to software-based revenue models|
|13Dec17 19:11||GNW||Gemalto rejects unsolicited and conditional proposal by Atos|
|12Dec17 06:00||GNW||Gemalto in the process of reviewing the unsolicited and conditional proposal by Atos|
The AA strategy update has set out an ambitious plan for the business to move into the future; taking it from “a company helping when you break down to one actually predicting when you might break down in the first place”, flagging game-changing growth drivers in the areas of Connected Car and insurance. The key element enabling this refocused strategy will be its Car Genie product (provided by Trakm8) and it is set to see an extended rollout to “tens of thousands” of existing clients. We thus see significant upside in Trakm8 forecasts from FY 2019 for additional AA orders.
PROACTIS’ interim trading statement provides the first opportunity to gauge performance since Perfect was consolidated. The overall picture looks healthy: revenue of £26.3m has more than doubled yoy and EBITDA of £8.5m is ahead our expectations (£8.0m). While customer activity is not quantified, it is described as strong, and the target of £5m in annualised synergies by the end of FY18 is confirmed. We believe PROACTIS can deliver £20m in EBITDA in FY18 and leave our forecasts unchanged.
Since our last missive, we have continued to experience volatility but there have been some signs recently of increasing stabilisation, although some nervousness clearly still persists. We have a Spring Statement from the Chancellor of Exchequer on 13 March where he will respond to the forecasts from the Office for Budget Responsibility. We have the prospect of a rise in interest rates in the short run, with further increases likely over the medium term with negative implications for ‘defensives’. In Share News & Views, we comment on Hargreaves Services, RWS Holdings, Staffline and Synectics*.
Companies: APC BMS CRPR ECSC EUSP FDM GETB PCF SNX SPRP TCN W7L
Steve Brown is stepping down from the CEO role and will be replaced by Paul Noland, current President and CEO of the International Association of Amusement Parks and Attractions ("IAAPA”), when he joins the accesso Board on 9 April. Mr Noland has extensive industry experience having previously held senior leadership and operational roles at Walt Disney Parks and Resorts and Marriott International. While news of Mr Brown’s departure may disappoint the market initially given that he was viewed as a quality operator, his replacement’s extensive industry experience will be invaluable to accesso’s next phase of growth and global ambitions. Reassurance is also provided by the fact that Mr Brown will serve as an advisor to both Mr Noland and the Board throughout 2018.
Companies: Accesso Technology Group
CloudCall is a cloud-based unified communications provider. We believe deepening channel partnerships, a new unified platform roll-out and the recent equity placement have positioned CloudCall for a substantial acceleration that is yet to be fully appreciated by investors. Our forecasts expect short-term sales growth of c.33% FY17-20E to outpace the market. We initiate coverage with a Buy rating and a PT of 300p, implying 107% upside potential, based on the peer group’s trading multiples. Our cost analysis and the board’s experience with similar, highly successful companies (dotdigital, AIM: DOTD) underpin our conviction. In our view, the shares could reach 400p under more bullish scenarios.
Companies: Cloudcall Group
Bacanora Lithium—Readmission. No new money. Mkt cap £140m. Due 21 March. the new holding company for Bacanora Minerals Ltd | Stirling Industries—Acquisition vehicle focusing on industrials. Offer TBA. Due 5 March | GRC International Group— holding company for a group of companies providing a range of products and services to address the IT governance, risk management and compliance requirements of organisations. Offer TBC, expected 5 March 2018 | Core Industrial REIT—established to invest in Irish-based industrial properties, predominantly located in the Greater Dublin Area . Vendor placing and new funds to a total of €225m, Target gross proceeds €207m. expected 21 Feb | Polarean - Medical drug-device combination company operating in the high resolution medical imaging market. Offer TBC. Due 22 Feb | Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC
Companies: RRL TMT CNC GHH EVRH IHC BILB EUSP VRS SBTX
First Derivatives has announced that it has signed a contract with a FTSE 100 gaming company for the use of Kx technology to provide data analytics services. While no financials are disclosed, we believe this contract will generate healthy and growing annual licence revenue. More significantly, it is FD’s first win in retail analytics and provides an important reference for further penetration of what are potentially highly lucrative markets. We make no changes to our forecasts, recommendation and target price.
Companies: First Derivatives
PROACTIS has released a positive H1 trading update. This indicates that trading in the first six months is in line with management expectations on the back of new customers wins and increased cross-selling, strong growth from the Perfect Commerce acquisition (c£13.5m of revenue and c£3.7m of EBITDA), and the realisation of £3.3m of the targeted £5m of cost synergies post acquisition. This is a reassuring statement given that there was some concern over assets (Hubwoo) within Perfect Commerce and the impact that integration of two geographically diverse businesses could have on trading. Dollar strengthening remains a risk to our revenue estimates, but we believe there is sufficient headroom within our cost assumptions to offset this. Based on this evidence, the shares look undervalued versus peers.
BCA Marketplace and stevia sweeteners developer Purecircle are the latest former AIM companies to be moving into the FTSE 250 index. The changes take place on 18 December and will take the number of former AIM companies in the FTSE 250 to 20 – although Booker and Paysafe are being taken over.
Companies: CITY TRAK bmn BXP TRCS SND
A look back at our 2017 ideas In aggregate our analyst picks outperformed the FTSE All Share last year by 9% and the cumulative performance of our portfolio over 6 years would have given a total return of 300% (almost double the return on the FTSE All Share). In addition, many of our top-down themes played out very well such as our focus on secular growth in Tech, Life Sciences, Healthcare and Financials, an increase in M&A, our cautious stance on the Consumer and especially our bet on continued strength in the Industrials last year and solid growth in the global economy. What does 2018 have in store? We continue to play ongoing secular growth themes in Tech, Life Sciences, Healthcare and Financials. In addition, we tap into domestic areas of cyclical strength such as regional construction and house building, plus self-help initiatives and potential market share gains. We maintain a favourable view of Industrials given the global economic backdrop but think this could moderate during the year. Other changes of nuance include the potential for a better H2 in the Consumer sectors, which remain under pressure for now, and a better outlook in Media from a mini-quadrennial year in 2018.
Companies: AMO AVG CBP CVSG DNLM EKF FENR IOM SAA GLE RLM SFR PGIT RLM SFR SOG VRP
Typically strong interims are in line with the November trading update. Revenue growth of 43% to £17.2m delivered 48% of mildly lifted full-year expectations (increased from £34.9m to £35.9m), alongside 43% of EBITDA (full-year expectations unchanged at £11.0m). Recurring revenues grew 60% to hit 63% of group revenue (1H17: 56%), including 22% SaaS revenue, which had grown 122% year-on-year. With consistently strong cash generation and momentum, increased investment in product development and international sales is accompanied by 15% dividend growth, describing management confidence for 2H18 and beyond. Target 120p (108p).
In the February 2018 edition of the Hardman Monthly Newsletter, Nigel Hawkins addresses the issue of the UK's infrastructure expenditure, much of which is energy-related.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY GDR INL MCL MUR NSF OBT OXB PPH NIPT PHP RE/ REDX SCLP SCE SIXH TRX TON VAL
The latest Office for National Statistics (ONS) survey, ‘Ownership of UK quoted shares: 2016’, shows that retail investors are more important than most company managements realise or most capital markets professionals admit. When it is also appreciated that the data shows that retail investors set the share price for most quoted companies, most days, it becomes clear that engaging with such an audience enhances a company’s standing, whilst ignoring them courts disaster.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GDR INL MCL MUR NSF OBT ODX OXB PPH NIPT RE/ REDX SCLP SCE SIXH TRX TON VAL
A customarily solid set of results from Craneware, in line / slightly ahead of our estimates. The core business looks to be trading well and the migration to the group’s new cloud-based platform Trisus is underway. This should enable a more rapid roll out of new modules and services to its customer base and, ultimately, support a further acceleration of growth. We make no changes to our forecasts at this stage and Craneware remains a top pick for growth and quality. It’s current valuation means we stay at Hold for now, but we see medium term upside as the story further develops.
As shown in the trading update earlier this month, the interims are in line with LY and leave Quartix well set to meet FY forecasts. In fact, we nudge our revenue expectations up by £0.3m to £23.5m to reflect the return of some Insurance business in H2, although any additional profits will be reinvested into Fleet growth. Otherwise, the previously announced focus on Fleet operations has seen that business continue to grow strongly (revenue up 15% YoY to £8.3m), while the refusal to chase low-priced Insurance telematics has seen that side decline (down 26% YoY to £3.2m). This leaves H1 largely unchanged on LY in terms of revenue and earnings, although the change in mix is very encouraging for the future; Fleet business is much higher quality being recurring revenue, and in time it offers higher margins as the cost of customer acquisition, unit and installation drop away. The change in mix from 62% Fleet H1 LY to 72% in H1 2017 is thus building better revenue for the future. Furthermore, Insurance business will be stronger from H2 as underwriters are discovering that low-cost rivals cannot match Quartix’s quality and service.