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The key takeaway from Continental’s Q3 23 was the confirmation of the FY23 Automotive margin guidance (2.0-2.5%) on the back of the retroactive compensation for cost inflation and R&D reimbursements. This is clearly reassuring since it calls for a huge step-up in the division’s profitability to a >5% Adjusted EBIT margin (vs. 1.0% in 9M 23). We expect limited changes to the consensus and our estimates, and see the upcoming CMD as a positive catalyst.
Companies: Continental AG
AlphaValue
Since Continental’s Q2 23 results had already been pre-released, the focus was on the FY23 guidance update. The group mainly confirmed what the market was already pricing following peers’ publications: a weakening tyre market triggering a cut to the revenue target and a raised auto production expectation supporting the Automotive division guidance. The latter looks supportive for the Conti’ equity story, which overwhelmingly relies on the growth of auto supplier activity.
Continental posted Q1 23 results that beat consensus on the adj. EBIT across all the divisions with Tyres’ margins remaining strong and Automotive profitability at last returning to the the black. This is likely to offset the negative surprise at the FCF level dragged down by higher than-expected capex, high inventories and still-high receivable. Overall, as with its peers, the management confirmed its FY23 guidance and market outlook, calling for minor changes to our and consensus’ forecasts an
With FY22 figures already known, all eyes were on the FY23 outlook and FY22 dividend proposal. Neither disappointed! The dividend proposal came in 8% above expectations, highlighting the confidence for FY23 after a weak FY22. The newly-released guidance was more optimistic than consensus with profitability in line in relative terms, therefore calling for upgrades to FY23 EPS. With Conti’s Automotive unit seen as a tracker of the group’s long-awaited progress, we especially welcome the consensus-
Continental posted robust Q3 22 results overall with consensus-beating adjusted EBIT margins on both Automotive and Tires. A c.€500m goodwill impairment was booked as a result of rising interest rates. FCF came in fully in line with expectation and the FY22 guidance was confirmed. Going forward we would like to flag the good performance of the Automotive unit. This together with the c. €6bn order intake in Q3 22 (already announced) might foreshadow the beginning of the long-awaited ramp-up of Co
The FY21 results came in strong, at the upper end of the guidance and close to consensus, which has not been the case for a while now. EPS was ahead of expectations due to a one-time positive effect from discontinued activities. As a result, the dividend came in ahead of expectations at €2.20. Looking into FY22, the newly-issued guidance appears far from being realistic, as it excludes any impact from the Russia-Ukraine war. Splitting the group is not planned.
Conti’s powertrain division, to be spun-off in H2 21, held a CMD to announce its mid-term strategy. The next five years will be a transition phase to exit from non-core non-profitable activities and focus on growing the Electrified Technologies segment to reach breakeven by 2024. The 2025 horizon outlook looks reachable, but the visibility remains low on the timeline of the transition in the years to come.
Conti released a FY20 operational performance which was in line with its guidance (organic sales down 12.7% yoy and adjusted EBIT margin of 3.5%), while restructuring charges weighed on the bottom line. The company’s guidance for 2021 looks cautious and uncorrelated to mid-term targets, as more time and further restructuring and R&D expenses are required to reach its cruising speed towards 2025 horizon objectives.
Continental reported its Q3 20 figures with surprising results coming from the Rubber and Powertrain divisions. Most of the group’s recovery comes from the Rubber division due to its significant exposure to the replacement tyre market. In the Powertrain division, a huge spike in EV sales helped with its recovery, while its profitability, although low, benefited from a weak comparison base. It is now up to Nikolai SETZER (the new CEO) to drive Conti towards FY20 outlook’s positive FCF.
Companies: CTT CON CTTAF CON CNT CONTEUR 1CON CONN
Continental posted a mixed set of H1 20 results with shrinking revenue (-25.9% yoy) dragged down by the non-rubber business (-28.3% yoy). This revenue contraction translated into a -€448.8m profitability hit (margin of -2.7% vs. 4.8% in H1 19). As such, FCF was affected (-75.7% yoy) though benefiting from favorable working capital and lower capex (-35% yoy). Despite the lack of an official outlook, the company expects an improvement in the automotive market for Q3 20.
Q1 20 numbers were heavily impacted by production slowdowns, mainly in China. Production seems to be a persistent issue that will affect the Q2 results as COVID-19 fully reflects its impact in Europe and North America. Despite the above expectations, results in Q1, the adjusted EBIT experienced a huge contraction, falling by 47% yoy, and paving the way to a tough FY20.
Management had to release five profit warnings since spring 2018. In spite of that, the final 2019 accounts showed a much higher than expected net loss of €1.23bn. We had expected a net loss of €175m, while the consensus (based on Continental’s own survey) was at €-493m. However, the dividend was only cut from €4.75 paid for 2018 to €4.00, whereas we had expected €3.75.
Management has turned rather cautious for the next five years and does not expect a material recovery after an expected 6% fall for the current year. For 2020, it expects the production of passenger cars and vans to be unchanged, at best.
Continental acquired VDO for more than €11bn in 2007. At that time, VDO generated annual turnover of probably €8bn, but these activities have generated rather small profit margins ever since and Powertrain suffered the occasional loss. Management has now pulled the plug and has written €2.5bn off.
The Management and Supervisory Boards have discussed Continental’s 2030 strategy and the structural transformation programme for the years 2019-29. All of this will lead to one or more plant closures (primarily in Germany and the USA) and to a good 5,000 lay-offs (2% of the worldwide workforce).
Research Tree provides access to ongoing research coverage, media content and regulatory news on Continental AG. We currently have 1 research reports from 3 professional analysts.
Watkin Jones’s guidance for FY24E is unchanged in its trading update for the first half to 31 March. We maintain our forecasts for the full year and introduce half-year estimates, in line with reiterated guidance that performance will be significantly H2 weighted. The group confirms a continuing gradual recovery in appetite among institutional investors to forward fund its build-to-rent (BTR) and student developments. We believe this should gather pace as the direction of interest rates becomes
Companies: Watkin Jones Plc
Progressive Equity Research
Ceres Power Holdings’ innovative technology uses electrolysis to produce green hydrogen and solid oxide fuel cells to generate power. In a year where it moved to the Main Market of the London Stock Exchange, it recorded revenue growth of 13% and gross margin expansion to 61% (the highest in the sector, according to management), but is yet to record an operating profit (FY23 operating loss of £59.4m versus £54.0m in FY22). Ceres continued its strategy to drive innovation and technology across sol
Companies: Ceres Power Holdings plc
Edison
Sanderson Design Group (SDG) has announced its FY24 full-year results, which are in line with the headline figures from its February trading update. A record year for Licensing and a strong performance in the key North America market helped to offset a challenging consumer environment in other geographies, most notably the UK. While this backdrop is set to persist in FY25E, the group will continue to focus on its strategic growth drivers, notably North America and Licensing, to deliver sharehold
Companies: Sanderson Design Group PLC
On 9 January last year, we set out our ten top stock picks for 2023, for what turned out to be another relatively poor twelve months for UK equities due to two wars, stubbornly high inflation and further tightening of monetary policy. This was even as other major markets, such as the US, largely recovered in the year. In the 2023 calendar year, the AIM All-Share index fell 8.2% and is still 42% off its 2021 high. From the release of our 2023 top picks note, the average total return (assuming div
Companies: PTAL GHH IGP MSLH PINE NXQ EQLS NXR AXL
Zeus Capital
Gooch has issued a positive update for H1. Trading has started to recover with stocking levels normalising at industrial and medical devices customers. The outlook is positive with growth returning, and management has confirmed our full year estimates (adjusted for the disposal of EM4). The order book and order flow appear healthy, and net debt is comfortable. Gooch clearly still has plenty to do to lift operating margins from a lacklustre 8.1%, but the transformation plan appears to be back on
Companies: Gooch & Housego PLC
SCE is raising £16m through a placing (and up to a further £3m through open offer) to fund substantial expansion and additional working capital. This will enable the Group to grow to £75m revenue capacity in the near term, commence the build and equipping of a new factory and then (with internally generated free cash flow) scale to £150m revenue capacity and beyond. With a contracted order book of £190m and a prospective pipeline of £400m, this is clearly the time to seize the opportunity. The e
Companies: Surface Transforms PLC
Cavendish
Solid State’s trading update affirms the sustained strength in demand throughout H224, resulting in record FY24 revenue and adjusted PBT ahead of prior consensus of £155m and £12.5m, respectively. This is attributable to the earlier-than-expected delivery of a NATO contract. As a result, consensus FY24 revenue and adjusted PBT estimates have been raised by c 6% and c 20%, with respective FY25 estimates declining commensurately.
Companies: Solid State plc
Subsector price performance: In the fourth quarter to 29 December 2023 all but the AAA publishers and platform subsector saw share price declines. The UK PC and Console focused subsector was again the worst performing subsector (-26.2%) over the quarter and LTM (-70.1%).
Companies: TBLD FDEV DEVO
Surface Transforms has issued new revenue guidance for FY24, with the company now expecting revenues in the range £17.5-22m. We are withdrawing our previous forecasts for FY24 and withdrawing our price target while we review the impact of the new guidance.
Companies: IG Design Group plc
Canaccord Genuity
We are initiating coverage of a.k.a. Brands Holding Corp. ("a.k.a. Brands" or the "company"), a leading owner of primarily online apparel-based brands focused on Generation Z and Millennial consumers, with a Buy rating and $14.00 price target, or 10.9X our 2025 EBITDA projection of $20.2 million. The company's brands include: 1) Princess Polly, focusing on 15 to 25 year-old women; 2) Petal & Pup, which offers feminine styles for 25 to 34 year-old women; 3) Culture Kings, a street wear destinatio
Companies: GPS URBN ITX AEO AEO GES GES ITX GPS ANF 0R32 URBN
Small Cap Consumer Research LLC
Banquet Buffet*** Abingdon Health 9.25p £11.3m (ABDX.L) The lateral flow contract development and manufacturing organisation announces its unaudited interim results for the six months ended 31 December 2023. Revenue increased 117% to £2.4m (H1 2023: £1.1m). The Adjusted EBITDA loss decreased 47% to £1.2m (H1 2023: £2.2m). Furthermore, reduction in operating loss of 50% to £1.2m (H1 2023: £2.4m). The Board therefore expects that H2 2024 revenue will be significantly improved compared with H1 2024
Companies: CPX SLP FA/ FIPP ECR ETP ORCA
Hybridan
AFC has unveiled a groundbreaking modular ammonia cracker system demonstrating viable and scaleable production of hydrogen in the UK using this method. The cracker system is designed to deliver 140 tonnes of fuel cell grade hydrogen each year. Hydrogen from the plant will initially be targeted for sale into AFC’s UK H-Power Generator deployments, including those with Speedy Hydrogen Solutions. Along with the recent purchase of the mobile storage and distribution assets of Octopus Hydrogen, AFC c
Companies: AFC Energy plc
Sanderson Design Group (SDG) continues to deliver on its key strategic initiatives and growth drivers despite a challenging global backdrop. The group’s FY23 performance showed flat revenue, with adjusted underlying PBT rising £0.1m to £12.6m. Net cash dropped back to £15.4m, with the total dividend maintained at 3.5p. The star performers were Licensing (reported revenue +25%), the Morris & Co brand (+16%) and the US market (+20%). Our forecast revisions assume more modest sales progression, wit
Sanderson Design Group has delivered its full-year trading update to 31 January 2024. Group revenue has eased back 3.1% to £108.5m on a reported basis, following the 2% decline in H1. The strongest performances were delivered by the strategic growth cornerstones of Licensing and North America, offset by challenging market conditions in the UK, Europe and the Rest of the World. A strong balance sheet saw year-end cash rise to £16.2m, compared with £15.4m at year-end FY23. Having traded in line wi
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